<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
1999 Semiannual Report
EQUITY I FUND - CLASS E AND I SHARES
EQUITY II FUND - CLASS E AND I SHARES
EQUITY III FUND - CLASS E AND I SHARES
EQUITY Q FUND - CLASS E AND I SHARES
INTERNATIONAL FUND - CLASS E AND I SHARES
EMERGING MARKETS FUND - CLASS C, E, AND S SHARES
REAL ESTATE SECURITIES FUND - CLASS C, E, AND S SHARES
SHORT TERM BOND FUND - CLASS C, E, AND S SHARES
FIXED INCOME I FUND - CLASS E AND I SHARES
FIXED INCOME III FUND - CLASS E AND I SHARES
JUNE 30, 1999
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
Frank Russell Investment Company
is a "series mutual fund" with 27
different investment portfolios.
These financial statements report
on ten 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, 1999 (UNAUDITED)
TABLE OF CONTENTS
Page
Equity I Fund..................................................... 2
Equity II Fund.................................................... 16
Equity III Fund................................................... 34
Equity Q Fund..................................................... 42
International Fund................................................ 54
Emerging Markets Fund............................................. 72
Real Estate Securities Fund....................................... 88
Short Term Bond Fund.............................................. 96
Fixed Income I Fund............................................... 108
Fixed Income III Fund............................................. 126
Notes to Financial Statements..................................... 141
Manager, Money Managers and Service Providers..................... 153
FRANK RUSSELL INVESTMENT COMPANY - INSTITUTIONAL FUNDS
Copyright (C) Frank Russell Company 1999. 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% off average managed assets will reduce a 10.0%
Semiannual return to 9.8%). The performance quoted represents past performance
and 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.
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>
EQUITY I FUND
STATEMENT OF NET ASSETS
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
COMMON STOCKS - 94.9%
AUTO AND TRANSPORTATION - 4.3%
AMR Corp. (a) 38,300 2,614
AutoZone, Inc. (a) 114,000 3,434
Burlington Northern, Inc. 147,600 4,576
Comair Holdings, Inc. 5,400 112
Continental Airlines, Inc. Class B (a) 83,500 3,142
Cooper Tire & Rubber Co. 216,200 5,108
CSX Corp. 9,600 435
Delphi Automotive Systems Corp. 8,317 154
Delta Air Lines, Inc. 77,200 4,449
Eaton Corp. 7,000 644
FDX Corp. (a) 63,000 3,418
Ford Motor Co. 192,600 10,870
General Motors Corp. 88,800 5,861
Genuine Parts Co. 18,900 662
Goodyear Tire & Rubber Co. 7,100 418
Harley-Davidson, Inc. 13,200 718
Kansas City Southern Industries, Inc. 8,700 555
KLM Royal Dutch Airlines 77,391 2,210
Lear Corp. (a) 35,900 1,786
Meritor Automotive, Inc. 9,000 230
Navistar International Corp. (a) 14,100 705
Norfolk Southern Corp. 153,800 4,633
Northwest Airlines Corp. Class A (a) 17,600 570
PACCAR, Inc. 18,700 998
Trinity Industries, Inc. 14,500 486
TRW, Inc. 37,800 2,074
UAL Corp. (a) 41,000 2,664
Union Pacific Corp. 61,700 3,597
-----------
67,123
-----------
CONSUMER DISCRETIONARY - 14.0%
Abercrombie & Fitch Co. Class A (a) 81,300 3,902
AC Nielsen Corp. (a) 3,100 94
Amazon.com, Inc. (a) 3,300 413
American Greetings Corp. Class A 8,600 259
AT&T Corp. - Liberty Media Group
Class A (a) 142,800 5,248
Avon Products, Inc. 23,400 1,299
Bed Bath & Beyond, Inc. (a) 108,500 4,164
Belo (A.H.) Corp. Class A 13,800 272
Best Buy Co. (a) 35,700 2,410
BJ's Wholesale Club, Inc. (a) 10,200 307
Brinker International, Inc. (a) 43,500 1,183
Browning-Ferris Industries, Inc. 17,700 761
Brunswick Corp. 21,700 605
Callaway Golf Co. 16,600 243
CBS Corp. (a) 61,800 2,684
Central Newspapers, Inc. Class A 600 23
Chancellor Media Corp. (a) 75,900 4,179
Circuit City Stores, Inc. 7,300 679
Clear Channel
Communications, Inc. (a) 65,500 4,515
Costco Cos., Inc. (a) 122,800 9,824
Darden Restaurants, Inc. 45,200 986
Dayton Hudson Corp. 106,800 6,942
Deluxe Corp. 22,100 861
Dillard's, Inc. Class A 17,000 597
Disney (Walt) Co. 46,000 1,417
Eastman Kodak Co. 53,889 3,651
Electronic Arts, Inc. (a) 16,200 875
Federated Department Stores, Inc. (a) 13,400 709
Fortune Brands, Inc. 18,500 765
Gap, Inc. 332,950 16,772
Harcourt General, Inc. 17,600 908
Harrah's Entertainment, Inc. (a) 28,400 625
Hasbro, Inc. 138,650 3,874
Hollinger International, Inc. Class A 10,000 119
Home Depot, Inc. (The) 291,200 18,764
Intimate Brands, Inc. Class A 7,350 348
JC Penney & Co., Inc. 10,000 486
Kmart Corp. (a) 245,600 4,037
Kohl's Corp. (a) 60,600 4,678
Limited, Inc. (The) 40,402 1,833
Lowe's Cos., Inc. 221,400 12,551
Manpower, Inc. 7,100 161
Mattel, Inc. 222,703 5,888
May Department Stores Co. 49,350 2,017
Maytag Corp. 11,300 787
McDonald's Corp. 44,900 1,855
MediaOne Group, Inc. (a) 178,300 13,261
Meredith Corp. 200 7
Metro-Goldwyn-Mayer, Inc. (a) 2,600 47
Mirage Resorts, Inc. (a) 62,400 1,045
Modis Professional Services, Inc. (a) 19,300 265
Neiman-Marcus Group, Inc. (a) 4,400 113
New York Times Co. Class A 103,000 3,792
Newell Rubbermaid, Inc. 2,477 115
Nielsen Media Research (a) 10,299 301
Office Depot, Inc. (a) 31,100 686
Ogden Corp. 2,400 65
Omnicom Group, Inc. 30,700 2,456
Payless ShoeSource, Inc. (a) 5,200 278
Premark International, Inc. 3,400 128
Premier Parks, Inc. (a) 4,800 176
Promus Hotel Corp. (a) 4,325 134
QUALCOMM, Inc. (a) 9,800 1,406
Royal Caribbean Cruises, Ltd. 79,700 3,487
Russell Corp. 5,100 99
Saks, Inc. (a) 19,800 572
2 Equity I Fund
<PAGE>
EQUITY I FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Sears Roebuck & Co. 79,100 3,525
Shaw Industries, Inc. (a) 32,600 538
Starbucks Corp. (a) 34,700 1,297
Starwood Hotels & Resorts Worldwide,
Inc. 6,300 193
TCI Music, Inc. Class A (a) 1,800 64
Time Warner, Inc. 114,900 8,445
TJX Cos., Inc. 71,300 2,375
Toys "R" Us, Inc. (a) 33,000 683
Tribune Co. 44,100 3,842
Tricon Global Restaurants, Inc. (a) 10,700 579
Tupperware Corp. 16,800 428
Univision Communications, Inc.
Class A (a) 2,100 139
USA Networks, Inc. (a) 67,600 2,708
V.F. Corp. 73,200 3,129
Valassis Communications, Inc. (a) 12,300 450
Viacom, Inc. Class B (a) 136,300 5,997
Viad Corp. 41,400 1,281
Wal-Mart Stores, Inc. 269,100 12,984
Whirlpool Corp. 46,000 3,404
Young & Rubicam, Inc. 1,500 67
-----------
216,131
-----------
CONSUMER STAPLES - 5.0%
Albertson's, Inc. 61,825 3,188
Anheuser-Busch Cos., Inc. 29,500 2,093
Clorox Co. 14,000 1,495
Coca-Cola Co. (The) 81,900 5,119
Coca-Cola Enterprises, Inc. 31,800 946
Colgate-Palmolive Co. 30,800 3,042
ConAgra, Inc. 77,800 2,071
Coors (Adolph) Co. Class B 1,100 54
CVS Corp. 104,500 5,303
Dole Food Co., Inc. 3,200 94
Flowers Industries, Inc. 38,000 824
General Mills, Inc. 15,500 1,246
Gillette Co. 41,000 1,681
Hannaford Brothers Co. 3,200 171
Heinz (H.J.) Co. 22,800 1,143
Hormel Foods Corp. 17,600 708
IBP, Inc. 36,900 876
International Flavors
& Fragrances, Inc. 6,900 306
Interstate Bakeries Corp. 17,600 395
Keebler Foods Co. (a) 8,300 252
Kroger Co. (a) 184,800 5,163
Nabisco Holdings Corp. Class A 12,700 549
PepsiCo, Inc. 234,100 9,057
Philip Morris Cos., Inc. 264,100 10,614
Procter & Gamble Co. 86,100 7,684
Quaker Oats Co. 23,000 1,527
R.J. Reynolds Tobacco
Holdings, Inc. (a) 7,267 229
Rite Aid Corp. 37,700 928
Safeway, Inc. (a) 87,100 4,311
SuperValu, Inc. 44,900 1,153
SYSCO Corp. 1,200 36
Tyson Foods, Inc. Class A 38,000 855
Unilever NV (a) 17,767 1,239
Universal Corp. 13,000 370
UST Corp. 33,400 977
Walgreen Co. 43,200 1,270
Weis Markets, Inc. 2,200 87
-----------
77,056
-----------
FINANCIAL SERVICES - 19.2%
AFLAC, Inc. 154,000 7,373
Allstate Corp. 332,432 11,926
Ambac Financial Group, Inc. 39,300 2,245
American Express Co. 31,100 4,047
American Financial Group, Inc. 21,900 746
American General Corp. 11,900 897
American International Group, Inc. 134,861 15,787
Ameritrade Holding Corp. Class A (a) 600 64
AmSouth Bancorp 84,775 1,966
Associates First Capital Corp. Class A 164,622 7,295
Astoria Financial Corp. 29,100 1,277
Automatic Data Processing, Inc. 207,800 9,143
Bank of America Corp. 240,241 17,613
Bank of New York Co., Inc. 17,300 635
Bank One Corp. 91,000 5,420
BankBoston Corp. 75,900 3,880
BB&T Corp. 11,700 429
Bear Stearns Cos., Inc. 13,220 618
Berkshire Hathaway, Inc. Class A (a) 1 69
Berkshire Hathaway, Inc. Class B (a) 287 643
Capital One Financial Corp. 41,600 2,317
Centura Banks, Inc. 700 39
Charter One Financial, Inc. 59,865 1,661
Chase Manhattan Corp. 170,684 14,786
Chubb Corp. (The) 9,700 674
CIGNA Corp. 8,000 712
Citigroup, Inc. 211,250 10,034
City National Corp. 2,000 75
Comerica, Inc. 24,700 1,468
Commerce Bancshares, Inc. 27,179 1,092
Concord EFS, Inc. (a) 25,500 1,079
Conseco, Inc. 235,944 7,182
Countrywide Credit Industries, Inc. 14,100 603
Dime Bancorp, Inc. 66,000 1,328
Dow Jones & Co., Inc. 27,500 1,459
Equity I Fund 3
<PAGE>
EQUITY I FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
DST Systems, Inc. (a) 15,600 981
Dun & Bradstreet Corp. 6,100 216
Edwards (A.G.), Inc. 1,341 43
Everest Reinsurance Holdings, Inc. 19,100 623
Federal Home Loan Mortgage Corp. 158,700 9,205
Federal National Mortgage Association 123,100 8,417
Fifth Third Bancorp 21,300 1,418
First Data Corp. 105,500 5,163
First Union Corp. 15,800 743
Firstar Corp. 18,100 507
FirstMerit Corp. 1,900 53
Fleet Financial Group, Inc. 155,400 6,896
Foundation Health Systems, Inc. (a) 21,800 327
Franklin Resources, Inc. 74,600 3,031
Fremont General Corp. 32,400 612
Fulton Financial Corp. 500 10
Golden State Bancorp, Inc. (a) 4,500 99
Golden West Financial Corp. 26,400 2,587
Goldman Sachs Group, Inc. (a) 28,800 2,081
Hartford Financial Services
Group, Inc. (The) 63,200 3,685
Hibernia Corp. Class A 2,500 39
Highwoods Properties, Inc. 1,900 52
Huntington Bancshares, Inc. 1,000 35
Jefferson-Pilot Corp. 48,850 3,233
KeyCorp 14,800 475
Lehman Brothers Holdings, Inc. 40,900 2,546
Lincoln National Corp. 2,200 115
M & T Bank Corp. 400 220
Marshall & Ilsley Corp. 1,100 71
MBIA, Inc. 92,400 5,983
MBNA Corp. 587,268 17,985
Merrill Lynch & Co., Inc. 29,500 2,358
MGIC Investment Corp. 143,600 6,983
Morgan (J.P.) & Co., Inc. 36,000 5,058
Morgan Stanley Dean Witter & Co. 207,590 21,278
National City Corp. 31,500 2,063
National Commerce Bancorp 1,300 28
Newcourt Credit Group, Inc. 139,200 1,801
North Fork Bancorp., Inc. 17,700 377
Old Kent Financial Corp. 9,067 380
Old Republic International Corp. 136,075 2,356
Pacific Century Financial Corp. 30,700 662
PaineWebber Group, Inc. 400 19
Patriot American Hospitality, Inc. 1,499 7
Paychex, Inc. 79,450 2,523
Peoples Heritage Financial Group 62,000 1,166
PMI Group, Inc. (The) 1,200 75
PNC Bank Corp. 9,300 536
Post Properties, Inc. 1,200 49
Price (T. Rowe) & Associates, Inc. 1,700 65
Provident Cos., Inc. 8,100 324
Providian Financial Corp. 30,700 2,870
Regions Financial Corp. 2,500 95
Republic of New York Corp. 8,100 552
Ryder System, Inc. 69,100 1,797
SAFECO Corp. 12,900 569
Schwab (Charles) Corp. 30,400 3,340
SEI Corp. 200 18
SLM Holding Corp. 8,100 371
SouthTrust Corp. 11,350 435
Sovereign Bancorp, Inc. 50,200 612
Spieker Properties, Inc. 1,200 47
Summit Bancorp 13,800 577
SunGard Data Systems (a) 16,900 583
SunTrust Banks, Inc. 22,000 1,528
TCF Financial Corp. 1,100 31
Torchmark Corp. 17,400 594
Transamerica Financial Corp. 4,400 330
Transatlantic Holdings, Inc. 1,400 105
Travelers Property Casualty Corp.
Class A 11,800 462
Trustmark Corp. 500 11
U.S. Bancorp 112,200 3,815
U.S. Trust Corp. 900 83
UnionBanCal Corp. 29,100 1,051
UNUM Corp. 4,800 263
Valley National Bancorp 800 23
Waddell & Reed Financial, Inc.
Class A 2,600 71
Washington Mutual, Inc. 211,464 7,480
Wells Fargo Co. 178,300 7,621
Zions Bancorp 4,000 253
-----------
297,728
-----------
HEALTH CARE - 10.6%
Aetna, Inc. 38,400 3,434
Allergan, Inc. 11,100 1,232
ALZA Corp. (a) 54,500 2,773
American Home Products Corp. 138,500 7,964
Amgen, Inc. (a) 53,300 3,241
Andrx Corp. (a) 700 54
AstraZeneca Group PLC - ADR 36,611 1,435
Bausch & Lomb, Inc. 5,800 444
Baxter International, Inc. 100,600 6,099
Becton, Dickinson & Co. 1,900 57
Bergen Brunswig Corp. Class A 42,600 735
Biomet, Inc. 66,800 2,647
Bristol-Myers Squibb Co. 287,920 20,280
Cardinal Health, Inc. 54,554 3,498
Columbia/HCA Healthcare Corp. 301,900 6,887
4 Equity I Fund
<PAGE>
EQUITY I FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
DENTSPLY International, Inc. 1,500 43
Express Scripts, Inc. Class A (a) 9,900 596
Guidant Corp. 3,400 175
HCR Manor Care, Inc. (a) 20,400 493
HEALTHSOUTH Corp. (a) 10,300 154
ICN Pharmaceuticals, Inc. 14,800 476
IVAX Corp. (a) 23,900 338
Johnson & Johnson 116,200 11,388
Lilly (Eli) & Co. 40,100 2,872
Lincare Holdings, Inc. (a) 300 8
Mallinckrodt, Inc. 75,100 2,732
McKesson HBOC, Inc. 135,736 4,361
Meditrust Cos. 3,300 43
Medtronic, Inc. 22,000 1,713
Merck & Co., Inc. 190,000 14,060
Mylan Laboratories, Inc. 201,000 5,327
Oxford Health Plans, Inc. (a) 11,300 175
PacifiCare Health Systems, Inc.
Class B (a) 30,500 2,194
Pfizer, Inc. 130,300 14,300
Pharmacia & Upjohn, Inc. 113,300 6,437
Quintiles Transnational Corp. (a) 45,700 1,917
Schering-Plough Corp. 252,600 13,388
St. Jude Medical, Inc. (a) 7,500 267
Tenet Healthcare Corp. (a) 9,500 176
Triad Hospitals, Inc. (a) 7,210 97
United Healthcare Corp. 1,800 113
Warner-Lambert Co. 286,100 19,847
-----------
164,470
-----------
INTEGRATED OILS - 3.0%
Amerada Hess Corp. 62,500 3,719
Ashland, Inc. 52,200 2,095
Atlantic Richfield Co. 8,600 719
Chevron Corp. 8,200 781
Coastal Corp. 67,400 2,696
Exxon Corp. 145,420 11,216
Kerr-McGee Corp. 10,600 532
Mobil Corp. 31,300 3,099
Phillips Petroleum Co. 38,400 1,932
Royal Dutch Petroleum Co. 17,100 1,030
Texaco, Inc. 120,300 7,519
Unocal Corp. 93,400 3,700
USX-Marathon Group 206,100 6,710
-----------
45,748
-----------
MATERIALS AND PROCESSING - 6.3%
Air Products & Chemicals, Inc. 54,800 2,206
Albemarle Corp. 2,300 53
Alcan Aluminum, Ltd. 10,600 339
Alcoa, Inc. 42,500 2,630
American Standard Cos., Inc. (a) 8,800 422
Archer-Daniels-Midland Co. 45,000 695
Armstrong World Industries, Inc. 6,800 393
Avery Dennison Corp. 12,400 749
Boise Cascade Corp. 15,858 680
Cabot Corp. 17,200 416
Centex Corp. 35,700 1,341
Champion International Corp. 8,400 402
Consolidated Papers, Inc. 11,900 318
Crompton & Knowles Corp. 1,100 22
Crown Cork & Seal Co., Inc. 14,300 408
Dow Chemical Co. 35,000 4,441
du Pont (E.I.) de Nemours & Co. 44,300 3,026
Eastman Chemical Co. 12,500 647
Ecolab, Inc. 300 13
Engelhard Corp. 29,400 665
Fluor Corp. 14,300 579
FMC Corp. (a) 11,700 799
Fort James Corp. 70,900 2,685
Freeport-McMoRan Copper
& Gold, Inc. Class B 13,600 244
Georgia-Pacific Group 31,000 1,469
Goodrich (B.F.) Co. 48,900 2,078
Great Lakes Chemical Corp. 23,700 1,092
Harsco Corp. 18,500 592
Illinois Tool Works, Inc. 33,800 2,772
IMC Global, Inc. 55,300 975
International Paper Co. 112,274 5,670
Lafarge Corp. 15,600 553
Louisiana Pacific Corp. 23,100 549
Lubrizol Corp. 9,000 245
Millennium Chemicals, Inc. 10,600 250
Minnesota Mining
& Manufacturing Co. 6,200 539
Monsanto Co. 109,800 4,330
Nalco Chemical Co. 8,800 457
Nucor Corp. 22,000 1,044
Owens Corning 64,600 2,221
Owens-Illinois, Inc. (a) 13,800 451
Pentair, Inc. 5,100 233
Phelps Dodge Corp. 62,500 3,871
Praxair, Inc. 61,900 3,029
Reynolds Metals Co. 47,600 2,808
Rohm & Haas Co. 4,600 197
Sealed Air Corp. New (a) 26,400 1,713
Sherwin-Williams Co. 172,400 4,784
Sigma Aldrich Corp. 14,000 482
Smurfit-Stone Container Corp. (a) 24,800 508
Solutia, Inc. 1,400 30
Sonoco Products Co. 49,990 1,497
Equity I Fund 5
<PAGE>
EQUITY I FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Southdown, Inc. 2,200 141
Temple-Inland, Inc. 18,800 1,283
Tyco International, Ltd. 248,158 23,513
Union Carbide Corp. 11,100 541
USG Corp. 16,300 913
USX-U.S. Steel Group 2,300 62
Valspar Corp. 1,100 42
Vulcan Materials Co. 9,300 449
W.R. Grace & Co. New (a) 51,400 944
Waters Corp. (a) 7,600 404
Westvaco Corp. 11,500 333
Willamette Industries, Inc. 9,600 441
Witco Corp. 14,400 287
-----------
97,965
-----------
MISCELLANEOUS - 0.2%
AMB Property Corp. 900 21
Archstone Communities Trust 800 18
Arden Realty Group, Inc. 2,300 57
Avalonbay Communities, Inc. 2,100 78
CarrAmerica Realty Corp. 2,500 63
Convergys Corp. NPV (a) 15,700 302
Crestline Capital Corp. (a) 3,320 56
Duke Realty Investments, Inc. 49,800 1,124
Equity Office Properties Trust 4,300 110
FBR Asset Investment Corp. (a) 31,600 427
Host Marriott Corp. 44,784 532
HRPT Properties Trust 3,900 60
Prison Realty Corp. 2,361 23
ProLogis Trust 2,400 49
Public Storage, Inc. 3,000 84
Safety-Kleen Corp. (a) 8,300 150
ServiceMaster Co. 12,300 230
-----------
3,384
-----------
OTHER ENERGY - 1.6%
Apache Corp. 28,400 1,108
BEC Energy 4,500 186
BP Amoco PLC - ADR 56,242 6,102
Burlington Resources, Inc. 7,300 316
Conoco, Inc. Class A 137,700 3,838
Constellation Energy Group, Inc. 75,500 2,237
El Paso Energy Corp. 25,400 894
Enron Oil & Gas Co. 21,500 435
ENSCO International, Inc. 24,600 490
Noble Drilling Corp. (a) 9,200 181
Occidental Petroleum Corp. 30,800 651
R&B Falcon Corp. (a) 18,800 176
Santa Fe Snyder Corp. (a) 2,600 20
Sempra Energy 46,300 1,048
Sunoco, Inc. 69,900 2,110
Tidewater, Inc. 27,599 842
Tosco Corp. 75,000 1,945
Transocean Offshore, Inc. 49,700 1,305
Ultramar Diamond Shamrock Corp. 32,800 715
Union Pacific Resources Group, Inc. 26,600 433
-----------
25,032
-----------
PRODUCER DURABLES - 6.2%
Allied Waste Industries, Inc. (a) 4,700 93
AlliedSignal, Inc. 3,600 227
Applied Materials, Inc. (a) 104,700 7,735
Briggs & Stratton Corp. 7,200 416
Caterpillar, Inc. 149,100 8,946
Cordant Technologies, Inc. 3,700 167
Crane Co. 17,700 556
Cummins Engine Co., Inc. 11,200 640
Deere & Co. 103,100 4,085
Emerson Electric Co. 900 57
General Electric Co. 176,800 19,978
Gulfstream Aerospace Corp. (a) 16,800 1,135
Honeywell, Inc. 15,300 1,773
Ingersoll-Rand Co. 94,700 6,120
Johnson Controls, Inc. 22,200 1,539
KLA Instruments Corp. (a) 31,000 2,009
Lexmark International Group, Inc.
Class A (a) 11,000 727
Litton Industries, Inc. (a) 14,700 1,055
Lockheed Martin Corp. 170,600 6,355
Miller (Herman), Inc. 3,500 73
Molex, Inc. 3,625 134
National Service Industries, Inc. 5,800 209
Northrop Grumman Corp. 36,600 2,427
Novellus Systems, Inc. (a) 15,700 1,071
Pall Corp. 21,200 470
Parker-Hannifin Corp. 22,800 1,043
Pitney Bowes, Inc. 18,800 1,208
Pulte Corp. 5,600 129
Rockwell International Corp. 6,300 383
Snap-On Tools Corp. 4,800 174
Solectron Corp. (a) 11,000 734
Teradyne, Inc. (a) 9,100 653
Thermo Instrument Systems, Inc. (a) 4,200 67
Thomas & Betts Corp. 7,300 345
Uniphase Corp. (a) 9,600 1,594
United Technologies Corp. 95,400 6,839
Waste Management, Inc. 57,800 3,107
WESCO International, Inc. (a) 5,000 99
Xerox Corp. 198,000 11,693
York International Corp. 3,400 145
-----------
96,210
-----------
6 Equity I Fund
<PAGE>
EQUITY I FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
TECHNOLOGY - 16.1%
3Com Corp. (a) 8,700 232
Adaptec, Inc. (a) 1,300 46
ADC Telecommunications, Inc. (a) 10,500 478
Adobe Systems, Inc. 6,600 542
Altera Corp. (a) 44,400 1,632
America Online, Inc. (a) 61,200 6,763
American Management
Systems, Inc. (a) 300 10
Apple Computer, Inc. (a) 65,200 3,020
Arrow Electronics, Inc. (a) 31,800 604
Ask Jeeves, Inc. (a) 400 6
At Home Corp. Series A (a) 2,600 140
Avnet, Inc. 5,400 251
BMC Software, Inc. (a) 45,700 2,465
Cadence Design Systems, Inc. (a) 14,900 190
CIENA Corp. (a) 1,800 54
Cisco Systems, Inc. (a) 473,900 30,537
Citrix Systems, Inc. (a) 4,200 236
CNET, Inc. (a) 1,000 58
COMPAQ Computer Corp. 215,000 5,093
Computer Associates
International, Inc. 90,000 4,950
Computer Sciences Corp. (a) 400 28
Compuware Corp. (a) 79,600 2,527
Conexant Systems, Inc. (a) 1,300 75
Cooper Industries, Inc. 11,100 577
Dell Computer Corp. (a) 497,600 18,380
DoubleClick, Inc. (a) 100 9
EarthLink Network, Inc. (a) 21,000 1,290
Electronic Data Systems Corp. 75,426 4,266
EMC Corp. (a) 193,400 10,637
Galileo International, Inc. 21,500 1,149
Gateway, Inc. (a) 1,200 71
General Instrument Corp. (a) 12,600 536
General Motors Corp. Class H (a) 4,100 231
Hewlett-Packard Co. 64,400 6,472
IMS Health, Inc. 107,000 3,344
Inktomi Corp. (a) 5,700 750
Intel Corp. 416,928 24,781
International Business
Machines Corp. 195,100 25,217
Juniper Networks, Inc. (a) 1,500 223
Koninklijke (Royal) Philips Electronics
NV (a) 32,172 3,245
L-3 Communications
Holdings, Inc. (a) 2,500 121
Loral Space &
Communications, Ltd. (a) 21,900 394
LSI Logic Corp. (a) 46,700 2,154
Lucent Technologies, Inc. 308,300 20,772
Metromedia Fiber Network, Inc.
Class A (a) 2,600 93
Micron Technology, Inc. (a) 39,100 1,576
Microsoft Corp. (a) 315,700 28,452
MindSpring Enterprises, Inc. (a) 36,000 1,595
Motorola, Inc. 10,000 948
National Semiconductor Corp. (a) 32,400 820
New Era of Networks, Inc. (a) 4,700 206
Nortel Networks Corp. 37,200 3,229
Novell, Inc. (a) 19,400 514
Oracle Systems Corp. (a) 158,350 5,879
Parametric Technology Corp. (a) 6,400 89
PMC - Sierra, Inc. (a) 2,800 165
Quantum Corp. (a) 25,100 602
Qwest Communications
International, Inc. (a) 4,600 152
RealNetworks, Inc. (a) 200 14
SCI Systems, Inc. (a) 5,500 261
Scientific-Atlanta, Inc. 51,700 1,861
Seagate Technology (a) 50,200 1,286
Sterling Commerce, Inc. (a) 3,400 124
Sterling Software, Inc. (a) 15,800 422
Sun Microsystems, Inc. (a) 50,200 3,458
Synopsys, Inc. (a) 9,200 507
Tandy Corp. 1,200 59
Tech Data Corp. (a) 7,200 275
Tellabs, Inc. (a) 18,100 1,223
Texas Instruments, Inc. 37,500 5,438
Textron, Inc. 33,900 2,790
Unisys Corp. (a) 23,100 899
Vishay Intertechnology, Inc. (a) 21,681 455
Yahoo!, Inc. (a) 2,600 447
-----------
248,395
-----------
UTILITIES - 8.4%
Aliant Communications, Inc. 200 9
Allegheny Energy, Inc. 19,600 628
Alliant Energy Corp. (a) 4,000 114
Ameren Corp. 16,100 618
American Electric Power Co., Inc. 8,700 327
American Tower Corp. Class A (a) 14,900 358
American Water Works, Inc. 13,700 421
Ameritech Corp. 9,200 676
AT&T Corp. 178,229 9,947
Bell Atlantic Corp. 229,300 14,990
BellSouth Corp. 20,500 961
Calpine Corp. (a) 1,600 86
Carolina Power & Light Co. 300 13
Central & Southwest Corp. 52,800 1,234
CenturyTel, Inc. 95,850 3,810
Cinergy Corp. 16,700 534
Equity I Fund 7
<PAGE>
EQUITY I FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Comcast Corp. Class A 4,000 143
Comcast Corp. Special Class A 98,400 3,782
Comsat Corp. Series 1 12,200 397
Consolidated Edison, Inc. 65,700 2,973
Consolidated Natural Gas Co. 100 6
Cox Communications, Inc. Class A (a) 38,000 1,399
Crown Castle International Corp. (a) 15,500 322
Dominion Resources, Inc. 14,000 606
DTE Energy Co. 24,200 968
Edison International 32,500 869
Energy East Corp. 31,200 811
FirstEnergy Corp. 41,300 1,280
Florida Progress Corp. 7,400 306
FPL Group, Inc. 31,400 1,715
Frontier Corp. 4,533 267
GPU, Inc. 33,400 1,409
GTE Corp. 46,900 3,553
Kansas City Power & Light Co. 10,300 263
KeySpan Corp. (a) 6,580 174
Level 3 Communications, Inc. (a) 5,800 349
MCI WorldCom, Inc. (a) 268,424 23,084
Montana Power Co. 2,200 155
National Fuel & Gas Co. 800 39
New Century Energies, Inc. 3,000 116
Nextel Communications, Inc.
Class A (a) 40,000 2,008
Nokia Corp. - ADR 227,900 20,867
OGE Energy Corp. 1,100 26
Paging Network, Inc. (a) 103,200 497
Peco Energy Co. 43,600 1,826
PG&E Corp. 95,600 3,107
Pinnacle West Capital Corp. 24,000 966
Potomac Electric Power Co. 18,400 542
PP&L Resources, Inc. 5,800 178
Public Service Enterprise Group, Inc. 28,200 1,153
Questar Corp. 26,000 497
RCN Corp. (a) 8,500 354
Reliant Energy, Inc. NPV 18,100 500
SBC Communications, Inc. 104,000 6,032
Sprint Corp. 38,000 2,007
Texas Utilities Co. 10,500 433
U.S. West, Inc. 48,300 2,838
Unicom Corp. 67,500 2,603
United States Cellular Corp. (a) 400 21
UtiliCorp United, Inc. 14,850 361
Vodafone Group PLC - ADR 4,500 887
VoiceStream Wireless Corp. NPV (a) 900 26
Western Resources, Inc. 11,000 293
Western Wireless Corp.
NPV Class A (a) 2,700 73
Williams Cos. (The) 35,700 1,519
WinStar Communications, Inc. (a) 5,700 278
Wisconsin Energy Corp. 18,200 456
-----------
130,060
-----------
TOTAL COMMON STOCKS
(cost $1,065,268) 1,469,302
-----------
PREFERRED STOCKS - 0.1%
Sealed Air Corp.
Series A New (conv.) 28,200 1,763
-----------
TOTAL PREFERRED STOCKS
(cost $1,027) 1,763
-----------
PRINCIPAL
AMOUNT
(000)
$
-----------
SHORT-TERM INVESTMENTS - 4.3%
Frank Russell Investment Company Money
Market Fund,
due on demand (b) 61,012 61,012
United States Treasury Notes
5.875% due 07/31/99 (b)(c)
5,750 5,755
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $66,767) 66,767
-----------
TOTAL INVESTMENTS - 99.3%
(identified cost $1,133,062) 1,537,832
OTHER ASSETS AND LIABILITIES,
NET - 0.7% 11,090
-----------
NET ASSETS - 100.0% 1,548,922
===========
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Held as collateral in connection with futures contracts purchased
by the Fund.
Abbreviations:
ADR - American Depositary Receipt
NPV - No Par Value
NV - Nonvoting
See accompanying notes which are an integral part of the financial statements.
8 Equity I Fund
<PAGE>
EQUITY I FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
----------- ----------------
FUTURE CONTRACTS
S&P 500 Index
expiration date 09/99 205 $ 2,725
----------------
Total Unrealized Appreciation
(Depreciation) on Open Futures $ 2,725
Contracts Purchased ================
See accompanying notes which are an integral part of the financial statements.
Equity I Fund 9
<PAGE>
EQUITY I FUND
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
<S> <C> <C>
ASSETS
Investments at market (identified cost $1,133,062) ................................................. $ 1,537,832
Cash ............................................................................................... 717
Foreign currency holdings (identified cost $29) .................................................... 23
Receivables:
Dividends and interest ............................................................................ 1,702
Investments sold .................................................................................. 16,659
Fund shares sold .................................................................................. 17,435
Daily variation margin on futures contracts ....................................................... 1,318
-----------
Total Assets .................................................................................... 1,575,686
LIABILITIES
Payables:
Investments purchased ........................................................... $ 13,608
Fund shares redeemed ............................................................ 12,386
Accrued fees to affiliates ...................................................... 758
Other accrued expenses .......................................................... 12
-----------
Total Liabilities ............................................................................... 26,764
-----------
NET ASSETS ......................................................................................... $ 1,548,922
===========
NET ASSETS CONSIST OF:
Undistributed net investment income ................................................................ $ 2,493
Accumulated net realized gain (loss) ............................................................... 143,456
Unrealized appreciation (depreciation) on:
Investments ....................................................................................... 404,770
Futures contracts ................................................................................. 2,725
Foreign currency-related transactions ............................................................. (6)
Shares of beneficial interest ...................................................................... 398
Additional paid-in capital ......................................................................... 995,086
-----------
NET ASSETS ......................................................................................... $ 1,548,922
===========
NET ASSET VALUE, offering and redemption price per share:
Class E ($24,304,755 divided by 624,239 shares of $.01 par
value shares of beneficial interest outstanding) ................................................ $ 38.94
===========
Class I ($1,524,616,853 divided by 39,142,763 shares of $.01
par value shares of beneficial interest outstanding) ............................................ $ 38.95
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
10 Equity I Fund
<PAGE>
EQUITY I FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME
Dividends ......................................................................................... $ 8,165
Dividends from Money Market Fund .................................................................. 1,206
Interest .......................................................................................... 115
-----------
Total Investment Income ......................................................................... 9,486
EXPENSES
Advisory fees ................................................................... $ 3,902
Administrative fees ............................................................. 357
Custodian fees .................................................................. 173
Transfer agent fees ............................................................. 199
Professional fees ............................................................... 20
Registration fees - Class I ..................................................... 42
Shareholder servicing fees - Class E ............................................ 7
Trustees' fees .................................................................. 3
Miscellaneous ................................................................... 58
-----------
Total Expenses .................................................................................. 4,761
-----------
Net investment income .............................................................................. 4,725
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ..................................................................... 111,728
Futures contracts ............................................................... 4,690 116,418
-----------
Net change in unrealized appreciation (depreciation) on:
Investments ..................................................................... 39,634
Futures contracts ............................................................... 967
Foreign currency-related transactions ........................................... (3) 40,598
----------- -----------
Net realized and unrealized gain (loss) ............................................................ 157,016
-----------
Net increase (decrease) in net assets resulting from operations .................................... $ 161,741
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Equity I Fund 11
<PAGE>
EQUITY I FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
---------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income ..................................................... $ 4,725 $ 10,430
Net realized gain (loss) .................................................. 116,418 122,357
Net change in unrealized appreciation (depreciation) ...................... 40,598 155,425
----------------- -------------
Net increase (decrease) in net assets resulting from operations ......... 161,741 288,212
----------------- -------------
DISTRIBUTIONS
From net investment income
Class I ................................................................. (2,232) (10,430)
In excess of net investment income
Class I ................................................................. -- (64)
From net realized gain on investments
Class I ................................................................. (9,808) (92,776)
----------------- -------------
Net decrease from distributions ....................................... (12,040) (103,270)
----------------- -------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ............. 17,517 60,389
----------------- -------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ................................ 167,218 245,331
NET ASSETS
Beginning of period ....................................................... 1,381,704 1,136,373
----------------- -------------
End of period (including undistributed net investment income of
$2,493 at June 30, 1999) ............................................... $ 1,548,922 $ 1,381,704
================= =============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
12 Equity I Fund
<PAGE>
EQUITY I FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1999*
----------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............................................................... $ 38.01
----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) ........................................................................ .02
Net realized and unrealized gain (loss) on investments ............................................ .91
----------
Total Income From Investment Operations ......................................................... .93
----------
NET ASSET VALUE, END OF PERIOD ..................................................................... $ 38.94
==========
TOTAL RETURN (%)(a) ............................................................................... 2.45
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ....................................................... 24,305
Ratios to average net assets (%)(d):
Operating expenses .............................................................................. --
Net investment income ........................................................................... --
Portfolio turnover rate (%)(b) ................................................................... 98.21
</TABLE>
* For the period May 14, 1999 (commencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) Average month-end shares outstanding were used for this calculation.
(d) The ratios are not meaningful due to the Class's short period of operations.
Equity I Fund 13
<PAGE>
EQUITY I FUND
FINANCIAL HIGHLIGHTS - CLASS I
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------
1999* 1998 1997 1996 1995 1994
------------- ------------ ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ...... $ 35.17 $ 30.51 $ 30.34 $ 28.00 $ 23.32 $ 24.91
------------- ------------ ----------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d) ................ .12 .27 .34 .42 .52 .62
Net realized and unrealized gain (loss) on
investments ............................ 3.98 7.10 8.89 5.96 7.71 (.41)
------------- ------------ ----------- ---------- ---------- ----------
Total Income From Investment Operations 4.10 7.37 9.23 6.38 8.23 .21
------------- ------------ ----------- ---------- ---------- ----------
DISTRIBUTIONS
From net investment income ............... (.06) (.27) (.34) (.42) (.52) (.62)
From net realized gain on investments .... (.26) (2.44) (8.72) (3.62) (3.03) (1.18)
------------- ------------ ----------- ---------- ---------- ----------
Total Distributions .................. (.32) (2.71) (9.06) (4.04) (3.55) (1.80)
------------- ------------ ----------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD ............ $ 38.95 $ 35.17 $ 30.51 $ 30.34 $ 28.00 $ 23.32
============= ============ =========== ========== ========== ==========
TOTAL RETURN (%)(a)(c) .................... 11.72 25.10 32.02 23.58 35.94 .79
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) 1,524,617 1,381,704 1,136,373 961,953 751,497 547,242
Ratios to average net assets (%)(b)(c):
Operating expenses ..................... .67 .70 .70 .71 .59 .12
Net investment income .................. .67 .82 .96 1.38 1.91 2.52
Portfolio turnover rate (%)(b) .......... 98.21 100.68 110.75 99.51 92.04 75.02
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 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) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
14 Equity I Fund
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
COMMON STOCKS - 95.2%
AUTO AND TRANSPORTATION - 5.3%
AAR Corp. 40,000 908
ABC Rail Products Corp. (a) 7,000 142
Airborne Freight Corp. 25,400 703
AirNet Systems, Inc. (a) 9,100 123
Alaska Air Group, Inc. (a) 20,100 839
Alexander & Baldwin, Inc. 5,000 111
America West Holding Corp.
Class B (a) 47,700 900
American Freightways Corp. (a) 35,200 686
Arvin Industries, Inc. 14,900 564
Avis Rent A Car, Inc. (a) 74,400 2,167
Bandag, Inc. 6,300 219
Borg-Warner Automotive, Inc. 500 28
Budget Group, Inc. Class A (a) 9,500 117
Carey International, Inc. New (a) 7,500 185
Coach USA, Inc. (a) 36,500 1,531
Coachmen Industries, Inc. 79,600 1,851
Consolidated Freightways Corp. (a) 57,100 732
Continental Airlines, Inc. Class B (a) 30,700 1,155
Covenant Transport, Inc. Class A (a) 14,400 227
Dollar Thrifty Automotive
Group, Inc. (a) 43,700 1,016
Fleetwood Enterprises, Inc. 37,300 986
Hawker Pacific Aerospace (a) 5,300 12
Hertz Corp. Class A 18,300 1,135
Keystone Automotive
Industries, Inc. (a) 6,000 104
Landair Corp. (a) 22,000 88
Landstar Systems, Inc. (a) 27,400 986
Lear Corp. (a) 27,900 1,388
M.S. Carriers, Inc. (a) 1,300 39
Mark VII, Inc. (a) 8,000 130
Midas, Inc. 10,800 306
Monaco Coach Corp. (a) 6,500 275
Monro Muffler Brake, Inc. (a) 15,000 118
MotivePower Industries, Inc. (a) 51,200 909
Myers Industries, Inc. 11,700 234
National R.V. Holdings, Inc. (a) 45,900 1,113
Navistar International Corp. (a) 27,500 1,375
Offshore Logistics, Inc. (a) 51,400 559
PACCAR, Inc. 15,750 841
Polaris Industries, Inc. 25,700 1,118
Roadway Express, Inc. 3,000 58
Skywest, Inc. 48,350 1,197
Swift Transportation Co., Inc. (a) 9,450 207
Tower Automotive, Inc. (a) 66,900 1,702
Transport Corp. of America (a) 10,000 124
Trinity Industries, Inc. 72,200 2,418
USA Truck, Inc. (a) 11,000 100
USFreightways Corp. 26,300 1,210
Varlen Corp. 9,725 390
Werner Enterprises, Inc. 5,300 110
Wynn's International, Inc. 3,750 68
Yellow Corp. (a) 20,800 362
----------
33,866
----------
CONSUMER DISCRETIONARY - 19.0%
Aaron Rents, Inc. 2,500 56
Abacus Direct Corp. (a) 20,500 1,844
Abercrombie & Fitch Co. Class A (a) 39,200 1,882
ACT Networks, Inc. (a) 31,500 536
Activision, Inc. New (a) 7,600 110
Ambassadors International, Inc. (a) 5,300 78
AMERCO (a) 3,500 78
American Eagle Outfitters, Inc.
NPV (a) 3,200 146
American Greetings Corp. Class A 65,700 1,979
AnnTaylor Stores Corp. (a) 88,450 3,980
Applebee's International, Inc. 5,300 160
Authentic Fitness Corp. 4,400 77
Aztar Corp. (a) 15,600 143
BHC Communications, Inc. Class A 2,500 325
BJ's Wholesale Club, Inc. (a) 38,000 1,142
Bob Evans Farms, Inc. 8,200 162
BOLDER Technologies Corp. (a) 14,000 121
Bowne & Co., Inc. 27,100 352
Brinker International, Inc. (a) 10,500 285
Brown Shoe Co., Inc. 8,600 187
Brunswick Corp. 44,500 1,240
Capstar Broadcasting Corp.
Class A (a) 65,000 1,779
Cato Corp. Class A 7,700 89
Cavanaughs Hospitality Corp. (a) 14,000 118
CBRL Group, Inc. 23,700 409
CDI Corp. (a) 9,800 334
CEC Entertainment, Inc. (a) 76,950 3,251
Central Newspapers, Inc. Class A 72,700 2,735
Central Parking Corp. 31,500 1,079
Championship Auto Racing
Teams, Inc. (a) 6,700 201
Chicos Fas, Inc. (a) 21,500 505
Children's Comprehensive
Services, Inc. (a) 19,000 128
Chris Craft Industries, Inc. (a) 18,849 888
Claire's Stores, Inc. 76,600 1,963
Cole National Corp. Class A (a) 12,000 95
Cornell Corrections, Inc. (a) 5,000 82
Correctional Services Corp. (a) 3,850 29
Cost Plus, Inc. (a) 11,650 529
CPI Corp. 3,300 109
16 Equity II Fund
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
CSS Industries, Inc. (a) 5,700 160
Dan River, Inc. Class A (a) 16,000 118
Danka Business Systems - ADR (a) 157,300 850
Darden Restaurants, Inc. 14,600 318
Data Processing Corp. (a) 5,300 125
Department 56, Inc. (a) 36,400 978
DeVry, Inc. (a) 70,000 1,566
Diamond Technology
Partners, Inc. (a) 20,000 446
EduTrek International, Inc.
Class A (a) 13,000 62
Elder-Beerman Stores Corp. New (a) 68,950 504
Electronics Boutique
Holdings Corp. (a) 7,000 100
Emmis Broadcasting Corp.
Class A (a) 22,000 1,085
Ethan Allen Interiors, Inc. 8,250 311
Extended Stay America, Inc. (a) 17,800 214
Family Dollar Stores, Inc. 39,450 947
Footstar, Inc. (a) 16,900 628
Fossil, Inc. (a) 87,625 4,217
Franklin Covey Co. (a) 5,200 38
Friedman's, Inc. Class A 4,500 39
Funco, Inc. (a) 7,000 129
Furniture Brands International, Inc. (a) 66,200 1,845
G & K Services, Inc. Class A 20,000 1,046
General Nutrition Cos., Inc. (a) 23,600 549
Genesco, Inc. (a) 6,500 95
Gibson Greetings, Inc. (a) 3,400 22
Gray Communications Systems, Inc. NPV 5,400 108
Grey Advertising, Inc. 5,070 1,668
GTECH Holdings Corp. (a) 19,700 464
Guitar Center, Inc. (a) 7,100 74
Handleman Co. (a) 89,300 1,055
Harland (John H.) Co. 39,700 792
Haverty Furniture Co., Inc. 3,300 116
Hearst-Argyle Television, Inc. (a) 36,500 876
Hollinger International, Inc. Class A 7,000 83
Hollywood Entertainment Corp. (a) 13,900 271
Hollywood Park, Inc. (a) 54,500 927
Houghton Mifflin Co. 12,300 579
IHOP Corp. New (a) 9,120 219
Interim Services, Inc. (a) 34,200 705
Iron Mountain, Inc. (a) 4,000 115
ITT Educational Services, Inc. (a) 52,000 1,355
Jones Apparel Group, Inc. (a) 4,600 158
K2, Inc. 5,500 49
Kellwood Co. 3,500 95
King World Productions, Inc. (a) 3,600 125
Knight-Ridder, Inc. 26,000 1,428
La-Z-Boy Inc. 15,800 363
Lamar Advertising Co. Class A (a) 40,000 1,635
Learning Tree International, Inc. (a) 13,000 142
Lee Enterprises, Inc. 39,500 1,205
Legato Systems, Inc. (a) 21,300 1,230
Linens 'N Things, Inc. (a) 49,300 2,157
Lithia Motors, Inc., Class A (a) 6,100 125
Lone Star Steakhouse & Saloon (a) 27,500 266
Mail-Well, Inc. (a) 6,900 112
Mandalay Resort Group (a) 119,000 2,514
Manpower, Inc. 5,500 124
Maxim Group, Inc. (a) 14,000 122
Mazel Stores, Inc. (a) 10,000 101
McClatchy Co. Class A 51,500 1,706
McGraw-Hill, Inc. 17,500 944
Media General, Inc. Class A 13,800 704
MeriStar Hospitality Corp. REIT 70,900 1,591
MeriStar Hotels & Resorts, Inc. (a) 37,500 129
Metzler Group, Inc. (a) 56,700 1,563
Michaels Stores, Inc. (a) 11,700 355
Micro Warehouse, Inc. (a) 6,300 111
Movado Group, Inc. 2,400 62
Musicland Stores Corp. (a) 8,900 79
Nielsen Media Research (a) 40,000 1,170
O'Charleys, Inc. (a) 12,000 192
O'Sullivan Industries
Holdings, Inc. (a) 9,500 162
OfficeMax, Inc. (a) 72,800 874
Ogden Corp. 13,100 353
On Assignment, Inc. (a) 44,000 1,144
Oshkosh B' Gosh, Inc. Class A 14,000 290
Outback Steakhouse, Inc. (a) 200 8
Pacific Sunwear of California (a) 93,300 2,274
Packaged Ice, Inc. (a) 20,000 119
Payless ShoeSource, Inc. (a) 9,300 498
Penton Media, Inc. 52,961 1,284
Pep Boys - Manny, Moe & Jack 500 11
Petco Animal Supplies, Inc. (a) 10,500 165
Pierce Leahy Corp. (a) 5,000 123
Pixar, Inc. NPV (a) 55,250 2,383
Plantronics, Inc. (a) 1,700 111
Playboy Enterprises, Inc. Class B (a) 3,800 101
Polo Ralph Lauren Corp.
Class A New (a) 44,800 851
Pomeroy Computer
Resources, Inc. (a) 15,500 216
Pre-paid Legal Services, Inc. (a) 25,000 680
Premark International, Inc. 23,100 866
Priceline.com, Inc. (a) 9,550 1,103
Quicksilver, Inc. (a) 102,300 2,666
Rainforest Cafe, Inc. (a) 19,000 96
Equity Fund II 17
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- -------
RCM Technologies, Inc. (a) 8,000 103
RDO Equipment Co. Class A (a) 12,000 113
Reebok International, Ltd. (a) 35,400 659
Regis Corp. 36,000 689
RemedyTemp, Inc. Class A (a) 7,000 95
Rent-Way, Inc. (a) 55,210 1,360
Reynolds & Reynolds Co. Class A 51,500 1,201
Ross Stores, Inc. 59,900 3,006
Rubio's Restaurants, Inc. (a) 11,700 179
Ruby Tuesday, Inc. 10,700 203
Rural/Metro Corp. (a) 11,500 109
Russell Corp. 10,800 211
Ryan's Family Steak Houses, Inc. (a) 115,500 1,335
Saga Communications Class A (a) 7,812 145
Salton, Inc. (a) 13,700 685
SBS Broadcasting SA (a) 5,200 165
Schultz Sav-o Stores, Inc. 61,750 988
SCP Pool Corp. (a) 12,000 311
Scripps (E.W.) Co. Class A 26,000 1,237
Shaw Industries, Inc. (a) 55,600 917
ShopKo Stores, Inc. (a) 15,800 573
Specialty Equipment Cos., Inc. (a) 2,000 59
Sport Supply Group, Inc. (a) 16,000 162
Springs Industries, Inc. 18,700 816
Stage Stores, Inc. (a) 21,000 137
Station Casinos, Inc. (a) 22,200 452
Steinway Musical Instruments, Inc. (a) 4,000 106
Talbots, Inc. 13,400 511
TETRA Technologies, Inc. New (a) 31,250 516
Tiffany & Co. 27,500 2,654
Timberland Co. Class A (a) 5,100 347
Tommy Hilfiger Corp. (a) 18,500 1,360
Toro Co. 6,700 264
TRM Copy Centers Corp. (a) 10,000 60
United Stationers, Inc. (a) 6,900 152
United Television, Inc. 11,000 1,154
Urban Outfitters, Inc. (a) 7,400 183
USinternetworking, Inc. (a) 16,600 696
Valassis Communications, Inc. (a) 38,600 1,413
Wackenhut Corp. 2,800 82
Washington Post Co. Class B 3,700 1,990
West Marine, Inc. (a) 8,900 130
WestPoint Stevens, Inc. 30,000 893
Wet Seal, Inc. Class A (The)(a) 5,800 163
Wiley (John) & Son Inc. Class A 4,000 71
Wilsons The Leather Experts, Inc. (a) 11,000 181
World Color Press, Inc. (a) 30,600 842
Zale Corp. (a) 30,700 1,228
----------
122,846
----------
CONSUMER STAPLES - 2.3%
Aurora Foods, Inc. (a) 60,000 1,050
Block Drug Co., Inc. Class A 18,970 791
Canandaigua Brands Inc. Class A (a) 8,500 445
Church and Dwight Co., Inc. 7,800 339
Coca-Cola Bottling Co. Consolidated 18,200 1,019
Coors (Adolph) Co. Class B 16,400 812
Corn Products International, Inc. 15,200 463
Earthgrains Co. 32,000 826
Golden State Vintners, Inc. Class B (a) 18,000 110
Hormel Foods Corp. 25,300 1,018
IBP, Inc. 91,600 2,176
International Multifoods Corp. 4,600 104
Nature's Sunshine Products, Inc. 9,600 102
Pepsi Bottling Group, Inc. (The) 43,300 999
Performance Food Group Co. (a) 2,100 57
Pilgrim's Pride Corp. 2,800 84
Ralcorp Holdings, Inc. (a) 19,600 315
Robert Mondavi Corp. Class A (a) 4,600 167
Schweitzer-Mauduit
International, Inc. 7,000 105
Standard Commercial Corp. 16,700 98
SuperValu, Inc. 48,100 1,236
Tootsie Roll Industries, Inc. 28,810 1,113
U.S. Foodservice (a) 18,700 796
Universal Foods Corp. 21,300 450
----------
14,675
----------
FINANCIAL SERVICES - 16.7%
1st Source Corp. 9,460 303
Advanta Corp. Class A 16,600 300
Advest Group, Inc. (The) 3,700 74
Affiliated Computer Services, Inc. Class
A (a) 11,400 577
Alleghany Corp. (a) 700 130
American Bankers Insurance
Group, Inc. 2,600 142
American Financial Group, Inc. 8,200 279
American National Insurance Co. 1,100 78
Ameritrade Holding Corp. Class A (a) 2,800 298
Amplicon, Inc. 15,900 219
Amresco, Inc. (a) 8,400 54
Amwest Insurance Group, Inc. 12,000 111
Andover Bancorp, Inc. 1,600 50
ARM Financial Group, Inc. Class A 9,500 81
Astoria Financial Corp. 78,100 3,427
BancFirst Corp. 3,300 113
BancWest Corp. New 3,300 123
Bank United Corp. Class A 11,300 453
18 Equity II Fund
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
BankAtlantic Bancorp, Inc. 48,000 387
Bankatlantic Bancorp, Inc. Class A 69,040 501
Banknorth Group, Inc. 6,900 226
Bay View Capital Corp. 40,900 838
Bear Stearns Cos., Inc. 57,238 2,676
BISYS Group, Inc. New (a) 43,300 2,533
BOK Financial Corp. (a) 8,600 215
Brookline Bancorp., Inc. 3,200 37
Capstead Mortgage Corp. 30,100 164
Centris Group, Inc. 112,000 1,134
Centura Banks, Inc. 6,800 383
Charter One Financial, Inc. 36,750 1,020
Chartwell Re Corp. 10,900 203
Chicago Title Corp. 7,000 250
Citizens Banking Corp. 1,500 45
City National Corp. 37,300 1,396
Clark/Bardes Holdings, Inc. (a) 12,800 243
CNA Surety Corp. 5,000 77
Colonial BancGroup, Inc. 87,000 1,213
Commerce Bancorp, Inc. 6,300 269
Commerce Bancshares, Inc. 9,970 401
Commonwealth Bancorp, Inc. 3,400 61
Community Bank System, Inc. 30,700 779
Compass Bancshares, Inc. 3,750 102
Concord EFS, Inc. (a) 17,100 724
Conning Corp. New 7,500 118
CORT Business Services Corp. (a) 4,900 117
Cullen Frost Bankers, Inc. 26,800 739
Dain Rauscher Corp. 17,900 969
Data Transmission Network Corp. (a) 6,000 169
Delphi Financial Group, Inc. (a) 5,938 213
Delta Financial Corp. (a) 12,000 77
Dime Bancorp, Inc. 119,200 2,399
Dime Community Bancorp, Inc. 3,500 81
Donaldson, Lufkin & Jenrette, Inc. 32,400 1,952
Donegal Group, Inc. 71,288 757
Doral Financial Corp. 96,850 1,665
Downey Financial Corp. 10,600 233
DST Systems, Inc. (a) 40,600 2,553
Duke Realty Investments, Inc. 42,000 948
DVI, Inc. (a) 2,700 46
E.W. Blanch Holdings, Inc. 8,800 600
Edwards (A.G.), Inc. 33,500 1,080
Enhance Financial Services
Group, Inc. 9,500 188
Everest Reinsurance Holdings, Inc. 29,200 953
FBL Financial Group, Inc. Class A 6,500 127
Fidelity National Financial 5,940 125
Financial Security Assurance Holdings,
Ltd. 10,500 546
FINOVA Group, Inc. 3,900 205
First American Financial Corp. 47,100 842
First Indiana Corp. 6,000 128
First Republic Bank (a) 8,700 252
First Tennessee National Corp. 25,900 992
First Washington Bancorp, Inc. 2,530 51
FirstFed Financial Corp. (a) 9,800 189
FirstMerit Corp. 1,800 50
Flagstar Bancorp, Inc. 13,600 342
FPIC Insurance Group, Inc. (a) 26,000 1,255
Freedom Securities Corp. 9,000 154
Fremont General Corp. 76,300 1,440
Golden State Bancorp, Inc. (a) 17,600 387
Greenpoint Financial Corp. 14,500 476
Hambrecht & Quist Group (a) 12,300 457
Hamilton Bancorp, Inc. (a) 5,300 127
HCC Insurance Holdings, Inc. 9,600 218
HealthCare Financial Partners, Inc. (a) 24,700 846
Heller Financial, Inc. Class A 10,300 286
Hibernia Corp. Class A 33,500 526
Hoenig Group, Inc. (a) 7,400 73
Home Port Bancorp, Inc. 200 5
Horace Mann Educators Corp. 35,000 952
Imperial Credit Industries, Inc. (a) 6,016 42
Insurance Management Solutions Group,
Inc. (a) 13,000 111
Intercontinental Life Corp. (a) 10,800 100
Investors Financial Services Corp. 51,800 2,069
IPC Holdings, Ltd. 55,000 1,093
Irwin Financial Corp. 3,600 71
Itla Cap Corp. (a) 5,500 84
Jack Henry & Assocociates, Inc. 18,000 702
Jeffries Group, Inc. New 2,200 66
JSB Financial, Inc. 4,000 204
Keystone Financial, Inc. 9,300 274
Klamath First Bancorp, Inc. 7,000 105
LandAmerica Financial Group, Inc. 14,300 411
Legg Mason, Inc. 72,600 2,795
Lehman Brothers Holdings, Inc. 23,500 1,463
Leucadia National Corp. 36,000 914
Liberty Financial Cos., Inc. 5,700 166
LINC Capital, Inc. (a) 10,000 88
Litchfield Financial Corp. 6,000 102
M & T Bank Corp. 200 110
MAF Bancorp, Inc. 2,400 58
Markel Corp. (a) 6,500 1,216
Medical Assurance, Inc. (a) 2,800 79
Mercantile Bankshares Corp. 18,800 664
Metris Companies, Inc. 52,400 2,135
Mississippi Valley Bancshares, Inc. 6,700 221
Mutual Risk Management, Ltd. 15,000 501
National City Bancorporation 9,300 191
Equity II Fund 19
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
National Commerce Bancorp 31,400 687
National Data Corp. 20,000 855
National Western Life Insurance Co.
Class A (a) 3,500 337
Nationwide Financial Services, Inc.
Class A 33,000 1,493
Net.B@nk, Inc. (a) 11,700 445
Northrim Bank 11,000 120
Ocean Financial Corp. 4,600 83
Ohio Casualty Corp. 6,100 220
Old National Bancorp 6,075 182
One Valley Bancorp
of West Virginia, Inc. 3,500 131
Orion Capital Corp. 14,000 502
Pacific Century Financial Corp. 18,100 390
Pacific Gulf Properties, Inc. 5,000 113
Paychex, Inc. 47,000 1,492
Penn Treaty American Corp. (a) 10,900 262
Pennsylvania Real Estate Investment
Trust 5,000 105
Peoples Heritage Financial Group 64,024 1,204
PFF Bancorp, Inc. (a) 3,100 58
PMI Group, Inc. (The) 21,600 1,357
Price (T. Rowe) & Associates, Inc. 40,000 1,533
Profit Recovery Group
International, Inc. (The)(a) 31,500 1,488
Protective Life Corp. 40,550 1,338
Provident Bankshares Corp. 11,337 263
Provident Financial Group, Inc. 4,700 200
PXRE Corp. 36,786 667
Queens County Bancorp 8,997 291
Radian Group, Inc. (a) 42,500 2,075
Reinsurance Group Of America 6,600 233
Reliance Bancorp, Inc. 6,400 177
Reliance Group Holdings, Inc. 59,500 443
RenaissanceRe Holdings, Ltd. 33,500 1,240
Resource Bancshares Mortgage Group 9,000 91
Richmond County Financial Corp. 6,900 132
Riggs National Corp. 19,500 396
Rollins Truck Leasing Corp. 14,400 160
Roslyn Bancorp, Inc. 36,000 619
Ryder System, Inc. 28,600 744
Scottish Annuity & Life
Holdings, Ltd. 12,000 129
SCPIE Holdings, Inc. 2,000 65
Seacoast Financial Services Corp. (a) 11,000 124
Selective Insurance Group, Inc. 54,800 1,041
Silicon Valley Bancshares (a) 15,800 391
Sky Financial Group, Inc. 35,000 947
Smith (Charles E.) Residential
Realty, Inc. 36,600 1,242
Southwest Securities Group, Inc. 4,000 287
Sovereign Bancorp, Inc. 104,727 1,276
Sovran Self Storage, Inc. 32,600 878
Staten Island Bancorp, Inc. 14,000 251
Stewart Information Services Corp. 76,300 1,611
SunGard Data Systems (a) 41,500 1,431
Transatlantic Holdings, Inc. 17,300 1,295
Trustmark Corp. 44,600 1,020
UICI (a) 5,000 137
UMB Financial Corp. 1,500 63
Union Planters Corp. 24,502 1,094
United Fire & Casualty Co. 25,575 658
Washington Federal, Inc. 18,955 423
Webster Financial Corp. 57,100 1,548
Westamerica Bancorporation 38,000 1,384
WesterFed Financial Corp. 6,000 97
White Mountain Insurance Group, Inc. 1,000 140
XL Capital, Ltd. Class A 19,000 1,073
Zions Bancorp 15,400 977
----------
107,340
----------
HEALTH CARE - 7.7%
Affymetrix, Inc. NPV (a) 21,500 1,054
Alkermes, Inc. (a) 30,000 686
Allergan, Inc. 17,400 1,931
Alpharma, Inc. Class A 57,750 2,054
American Dental
Partners, Inc. New (a) 80,000 890
AmeriSource Health Corp. Class A (a) 44,600 1,137
AmSurg Corp. Class A (a) 18,000 136
Anesta Corp. (a) 48,200 976
Apria Healthcare Group, Inc. (a) 38,900 661
ARV Assisted Living, Inc. (a) 25,000 100
Assisted Living Concepts, Inc. (a) 25,000 72
Ballard Medical Products 5,300 124
Bard (C.R.), Inc. 4,300 206
Bergen Brunswig Corp. Class A 20,600 355
Beverly Enterprises, Inc. New (a) 42,800 345
Bindley Western Industries, Inc. 52,363 1,208
Biosite Diagnostics, Inc. (a) 13,400 134
Cephalon, Inc. (a) 76,100 1,294
Cor Therapeutics, Inc. (a) 38,300 560
CorVel Corp. (a) 5,000 106
Express Scripts, Inc. Class A (a) 21,950 1,321
First Health Group Corp. (a) 50,000 1,075
Hanger Orthopedic Group, Inc. (a) 41,500 589
Health Management Associates
Class A (a) 55,000 619
Healthcare Services Group, Inc. (a) 12,200 119
IDEC Pharmaceuticals Corp. (a) 27,600 2,125
Immucor Corp. (a) 15,000 204
20 Equity II Fund
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- -------
Immunex Corp. (a) 7,950 1,013
IVAX Corp. (a) 67,150 948
Jones Pharma, Inc. 54,400 2,139
Laser Vision Centers, Inc. (a) 16,500 1,037
Lincare Holdings, Inc. (a) 83,800 2,095
Lunar Corp. (a) 16,100 127
Maxxim Medical, Inc. (a) 7,300 170
Medicis Pharmaceutical Corp.
Class A. (a) 35,900 911
MedImmune, Inc. (a) 47,900 3,257
Medquist, Inc. (a) 25,000 1,092
Millennium Pharmaceuticals, Inc. (a) 16,650 598
Natural Alternatives
International, Inc. (a) 25,000 84
NBTY, Inc. (a) 18,000 116
New American Healthcare Corp. (a) 50,000 116
OEC Medical Systems, Inc. (a) 37,400 916
Owens & Minor, Inc., Holding Co. 10,100 111
Oxford Health Plans, Inc. (a) 54,750 849
PacifiCare Health Systems, Inc.
Class B (a) 31,300 2,252
Patterson Dental Co. (a) 8,300 288
Priority Healthcare Corp. Class B (a) 20,909 721
ProMedCo Management Co. (a) 21,200 81
Protocol Systems, Inc. (a) 12,000 102
Quest Diagnostics, Inc. (a) 10,300 282
Renal Care Group, Inc. (a) 60,475 1,561
ResMed, Inc. (a) 3,400 113
Respironics, Inc. (a) 7,200 108
Roberts Pharmaceutical Corp. (a) 25,000 606
Sepracor, Inc. (a) 15,000 1,215
STAAR Surgical Co. New (a) 13,000 171
Steris Corp. (a) 50,000 969
Sunrise Assisted Living, Inc. (a) 30,000 1,043
Techne Corp. (a) 4,000 102
Trigon Healthcare, Inc. (a) 30,100 1,095
U.S. Vision, Inc. New (a) 7,700 40
United Payors & United Providers, Inc.
(a) 4,600 107
Universal Health Services, Inc.
Class B (a) 17,600 840
UroCor, Inc. (a) 18,000 88
Veterinary Centers
of America, Inc. (a) 6,000 82
VISX, Inc. (a) 23,400 1,854
Zoll Medical Corp. (a) 10,000 118
----------
49,498
----------
INTEGRATED OILS - 0.4%
Cross Timbers Oil Co. 77,525 1,153
Equitable Resources, Inc. 4,500 170
Giant Industries, Inc. 63,600 632
Houston Exploration Co. (The)(a) 4,700 89
TransMontaigne, Inc. (a) 21,000 264
----------
2,308
----------
MATERIALS AND PROCESSING - 8.7%
ACX Technologies, Inc. (a) 11,100 180
Agrium, Inc. 76,500 674
AK Steel Holding Corp. 30,800 693
Albany International Corp. Class A (a) 9,826 204
Albemarle Corp. 7,100 164
AMCOL International Corp. 4,100 59
Ameron, Inc. 5,600 247
Applied Extrusion
Technologies, Inc. (a) 18,000 135
AptarGroup, Inc. 59,800 1,794
Ball Corp. 36,300 1,534
Banta Corp. 43,800 920
Boise Cascade Corp. 72,700 3,117
Bowater, Inc. 7,900 373
Brady Corp. Class A 4,900 159
Brush Wellman, Inc. 1,100 20
Building Materials Holding Corp. (a) 12,000 137
BWay Corp. (a) 7,000 100
Cambrex Corp. 12,200 320
Carbide/Graphite
Group, Inc. (The)(a) 8,000 114
Centex Construction Products, Inc. 41,200 1,406
Centex Corp. 70,000 2,629
Channell Commercial Corp. (a) 8,000 77
Chemed Corp. 4,400 146
Chesapeake Corp. 19,200 719
Citation Corp. (a) 9,400 151
Cleveland-Cliffs, Inc. 7,300 236
Commercial Metals Co. 11,400 325
Dayton Superior Corp. Class A (a) 4,400 82
Dexter Corp. 8,000 327
Easco, Inc. 11,000 116
Engle Homes, Inc. 8,300 113
Ennis Business Forms, Inc. 79,000 676
Ethyl Corp. 21,200 127
Florida Rock Industries, Inc. 3,800 173
Fuller (H.B.) Co. 3,100 212
Geon Co. 21,000 677
Giant Cement Holding, Inc. (a) 4,000 90
Granite Construction, Inc. 10,300 302
Great Lakes Chemical Corp. 24,500 1,129
Hanna (M.A.) Co. 23,400 385
Hexcel Corp. (a) 12,100 123
Hughes Supply, Inc. 12,200 362
Hussmann International, Inc. 12,300 204
Equity II Fund 21
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- -------
IMC Global, Inc. 4,400 78
IMCO Recycling, Inc. 12,200 209
Insituform Technologies, Inc.
Class A (a) 5,100 109
Intermet Corp. 14,000 210
International Specialty
Products, Inc. (a) 7,000 71
Ionics, Inc. (a) 3,200 117
Jacob's Engineering Group, Inc. (a) 12,600 479
Kaydon Corp. 30,000 1,009
Lafarge Corp. 33,700 1,194
Lesco, Inc. 9,600 179
Lone Star Industries, Inc. 25,300 950
Louisiana Pacific Corp. 66,200 1,572
Lubrizol Corp. 33,800 921
MacDermid, Inc. 20,000 930
Meritage Corp. (a) 8,000 88
Millennium Chemicals, Inc. 40,300 950
Minerals Technologies, Inc. 27,900 1,557
Mississippi Chemical Corp. New 15,400 151
Mohawk Industries, Inc. (a) 15,700 477
Morrison Knudsen Corp. (a) 8,900 92
Mueller Industries, Inc. (a) 21,600 733
National Steel Corp. Class B 14,000 117
NCI Building Systems, Inc. (a) 21,400 457
NN Ball & Roller, Inc. 18,000 104
Nortek, Inc. (a) 26,500 830
Northland Cranberries, Inc. Class A 7,000 59
Olin Corp. 27,500 363
OM Group 8,100 279
Pan Pacific Retail Properties, Inc. 7,000 136
Penford Corp. 8,000 128
Pentair, Inc. 10,600 485
Phelps Dodge Corp. 13,500 836
Plum Creek Timber Co. L.P. 29,500 918
Potlatch Corp. 13,200 580
Precision Castparts Corp. 5,000 213
Primex Technologies, Inc. 7,200 155
Quaker Fabric Corp. New (a) 25,000 105
Quanex Corp. 7,100 202
Rayonier, Inc. 3,200 159
Reliance Steel & Aluminum Co. 3,600 140
Rock of Ages Corp. Class A (a) 12,000 122
Rock-Tenn Co. Class A 14,700 245
RPM, Inc. (Ohio) 22,700 322
Ryerson Tull, Inc. 25,900 584
Schulman (A.), Inc. 42,500 723
Scotts Co. (The) Class A (a) 12,900 614
Shaw Group, Inc. (The)(a) 6,100 97
SIFCO Industries 57,000 470
Simpson Manufacturing Co., Inc. (a) 3,700 176
Southdown, Inc. 23,500 1,510
Spartech Corp. 5,900 187
SPS Technologies, Inc. (a) 2,100 79
St. Joe Co. (The) 42,500 1,148
Stone & Webster, Inc. 1,700 45
Synthetic Industries, Inc. (a) 1,600 47
Texas Industries, Inc. 39,000 1,511
Thomas Industries, Inc. 700 14
Timken Co. 27,800 542
TJ International, Inc. 3,000 92
Universal Forest Products, Inc. 12,000 257
USG Corp. 60,100 3,366
USX-U.S. Steel Group 43,700 1,180
Valley National Gases, Inc. (a) 19,300 80
Waters Corp. (a) 9,000 478
Webb (Del E.) Corp. 48,000 1,146
Wellman, Inc. 11,000 175
Wellsford Real Properties, Inc. (a) 10,000 108
Westvaco Corp. 22,900 664
Wolverine Tube, Inc. (a) 4,300 107
Worthington Industries, Inc. 10,100 164
----------
56,326
----------
MISCELLANEOUS - 1.4%
Agribrands International, Inc. (a) 6,500 257
ChoicePoint, Inc. (a) 20,000 1,343
Griffon Corp. (a) 83,800 655
IndyMac Mortgage Holdings, Inc. 36,900 590
International Telecommunication Data
Systems, Inc. (a) 53,700 852
Labor Ready, Inc. New (a) 14,100 458
LNR Property Corp. 53,000 1,133
MAXIMUS, Inc. (a) 47,000 1,351
Quest Education Corp. (a) 12,000 126
Rental Service Corp. (a) 9,200 263
Safety-Kleen Corp. New (a) 28,000 508
URS Corp. (a) 56,900 1,668
----------
9,204
----------
OTHER ENERGY - 3.8%
Apache Corp. 7,000 273
Arch Coal, Inc. 2,600 36
BJ Services Co. (a) 73,000 2,149
Coho Energy, Inc. (a) 17,181 9
Cooper Cameron Corp. (a) 61,050 2,263
Devon Energy Corp. 28,900 1,033
Dynegy, Inc. 11,400 232
Enron Oil & Gas Co. 9,600 194
Global Industries, Inc. (a) 124,650 1,597
Global Marine, Inc. (a) 88,600 1,368
22 Equity II Fund
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- -------
Helmerich & Payne, Inc. 48,200 1,148
Horizon Offshore, Inc. (a) 22,300 170
Hugoton Royalty Trust 92,000 937
Marine Drilling Co, Inc. (a) 12,000 164
MidAmerican Energy Holdings Co. New (a) 23,600 817
Mitcham Industries, Inc. (a) 20,000 79
Northwestern Corp. 6,600 160
Oceaneering International, Inc. (a) 7,700 124
OMNI Energy Services Corp. New (a) 24,400 85
ONEOK, Inc. 14,200 451
Pool Energy Services Co. (a) 68,300 1,387
Rowan Cos., Inc. (a) 60,500 1,115
Santa Fe International Corp. 82,500 1,898
Seacor Holdings, Inc. (a) 17,600 942
Seitel, Inc. (a) 42,100 681
Sunoco, Inc. 38,400 1,159
Supreme Industries, Inc. Class A (a) 12,981 126
Tidewater, Inc. 4,000 122
Titan Exploration, Inc. New (a) 24,700 124
Transocean Offshore, Inc. 24,000 630
Ultramar Diamond Shamrock Corp. 47,100 1,027
Unit Corp. (a) 18,000 146
Valero Energy Corp. 36,700 787
Veritas DGC, Inc. (a) 25,000 458
Vintage Petroleum, Inc. 76,450 822
Willbros Group, Inc. (a) 6,000 52
----------
24,765
----------
PRODUCER DURABLES - 7.6%
Advanced Lighting
Technologies, Inc. (a) 14,800 130
AFC Cable Systems, Inc. (a) 5,000 176
Ag-Chem Equipment Co., Inc. (a) 10,000 100
AGCO Corp. 12,700 144
American Homestar Corp. (a) 18,000 122
ANTEC Corp. (a) 40,000 1,275
Applied Power, Inc., Class A 4,250 116
Astec Industries, Inc. (a) 16,700 681
Belden, Inc. 19,600 469
Briggs & Stratton Corp. 37,500 2,166
C&D Technologies, Inc. 7,700 236
C-COR Electronics, Inc. (a) 4,900 137
Cascade Corp. 8,000 112
CFM Technologies, Inc. (a) 12,400 121
Champion Enterprises, Inc. (a) 44,500 829
Chart Industries, Inc. 12,400 98
Cohu, Inc. 33,400 1,182
Columbus McKinnon Corp. 39,000 917
CommScope, Inc. (a) 5,600 172
Cordant Technologies, Inc. 6,900 312
Crane Co. 25,150 791
Cummins Engine Co., Inc. 22,000 1,257
D.R. Horton, Inc. 96,700 1,608
Detroit Diesel Corp. 14,300 352
Donaldson Co., Inc. 9,300 228
EG&G, Inc. 9,300 331
Electroglas, Inc. (a) 59,500 1,179
FARO Technologies, Inc. (a) 20,000 95
Farr Co. (a) 13,500 142
FLIR Systems, Inc. (a) 9,000 135
Gardner Denver Machinery, Inc. (a) 9,000 145
Gemstar International Group, Ltd. (a) 13,000 848
GenCorp, Inc. 10,000 253
GenRad, Inc. (a) 38,700 805
Gleason Corp. 16,500 277
Helix Technology Corp. 6,000 144
Holophane Corp. (a) 3,200 122
Itron, Inc. (a) 10,000 83
Kaman Corp. Class A 5,900 92
Kaufman & Broad Home Corp. 38,400 955
Kellstrom Industries, Inc. (a) 4,100 75
Kennametal, Inc. 29,500 915
KLA Instruments Corp. (a) 16,100 1,043
Lennar Corp. 58,500 1,404
Litton Industries, Inc. (a) 39,000 2,798
M.D.C. Holdings, Inc. 24,300 522
Manitowoc Co., Inc. 7,650 318
Middleby Corp. (The)(a) 22,000 138
Moog, Inc. (a) 7,500 258
MTS Systems Corp. 17,600 212
NACCO Industries, Inc. Class A 3,600 265
National Service Industries, Inc. 33,600 1,210
Newmark Homes Corp. (a) 15,000 77
NVR, Inc. (a) 31,200 1,628
OmniQuip International, Inc. 12,000 95
Optical Coating Laboratory, Inc. 15,000 1,253
OYO Geospace Corp. (a) 8,000 105
Pittway Corp. Class A 41,322 1,413
Plexus Corp. (a) 5,000 148
Powell Industries, Inc. (a) 12,000 111
Power-One, Inc. (a) 6,000 147
Pulte Corp. 72,600 1,674
RTI International Metals (a) 6,600 97
Ryland Group, Inc. (The) 62,700 1,861
Smith (A.O.) Corp. 1,500 42
Spectra-Physics Lasers, Inc. (a) 14,400 117
SPX Corp. (a) 2,100 175
Starrett (L.S.) Co. Class A 25,200 677
Superior TeleCom, Inc. 325 8
TB Wood's Corporation 8,000 87
Tecumseh Products Co. Class A 18,700 1,131
Equity II Fund 23
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- -------
Teradyne, Inc. (a) 14,600 1,048
Terex Corp. (a) 89,200 2,715
Thomas & Betts Corp. 22,000 1,040
Toll Brothers, Inc. (a) 55,200 1,183
TransTechnology Corp. 4,300 85
TriStar Aerospace Co. (a) 14,000 115
U.S. Home Corp. (a) 18,900 670
Uniphase Corp. (a) 12,000 1,991
Worldtex, Inc. (a) 45,000 106
York International Corp. 12,800 547
----------
48,841
----------
TECHNOLOGY - 17.3%
Adaptec, Inc. (a) 90,200 3,180
Advanced Digital Information (a) 30,300 1,225
Allaire Corp. (a) 25,700 1,749
Alliant Techsystems, Inc. (a) 4,000 346
Alloy Online, Inc. (a) 4,800 55
Alpha Industries, Inc. (a) 29,700 1,414
American Management
Systems, Inc. (a) 40,900 1,309
American Xtal Technology, Inc. (a) 21,850 512
Anixter International, Inc. (a) 14,700 268
Apple Computer, Inc. (a) 2,200 102
Ardent Software, Inc. (a) 35,150 745
ARIS Corp. NPV (a) 12,000 100
Arrow Electronics, Inc. (a) 142,900 2,715
AstroPower, Inc. (a) 8,000 136
Avnet, Inc. 44,700 2,079
Bell & Howell Co. (a) 9,500 359
BindView Development Corp. (a) 42,250 1,001
Broadcom Corp. Class A (a) 5,400 780
Business Objects SA - ADR (a) 41,800 1,526
Cable Design Technologies Corp. (a) 53,600 827
Celeritek, Inc. (a) 20,200 124
CFI ProServices, Inc. (a) 8,800 97
Citrix Systems, Inc. (a) 26,700 1,500
Clarify, Inc. (a) 24,300 1,002
CNET, Inc. (a) 31,400 1,807
Coherent, Inc. (a) 9,800 182
Comverse Technology, Inc. (a) 31,150 2,348
Conexant Systems, Inc. (a) 8,800 510
Cotelligent Group, Inc. (a) 10,300 80
Covad Communications
Group, Inc. (a) 34,600 1,842
Dallas Semiconductor Corp. 13,900 702
Digital Link Corp. (a) 17,400 131
DII Group, Inc. (The)(a) 5,400 200
DSET Corp. (a) 11,000 153
DSP Group, Inc. (a) 20,000 719
E-Tek Dynamics, Inc. (a) 17,900 851
Electronics For Imaging, Inc. (a) 72,450 3,722
EMCORE Corp. NPV (a) 5,500 111
EMS Technologies, Inc. (a) 9,000 127
Exar Corp. (a) 8,000 198
Excel Technology, Inc. (a) 15,000 198
Exodus Communications, Inc. (a) 12,000 1,439
Extreme Networks, Inc. (a) 31,800 1,846
Fairchild Corp. (The) Class A (a) 13,600 173
Flycast Communications Corp. (a) 3,100 59
Go2Net, Inc. (a) 13,300 1,222
Harmon Industries, Inc. 5,000 97
Harmonic Lightwaves, Inc. (a) 15,400 884
Imation Corp. (a) 23,900 593
InfoSpace.com, Inc. (a) 7,700 362
Integrated Silicon Solution, Inc. (a) 117,500 676
InterVoice, Inc. (a) 67,600 972
IntraNet Solutions, Inc. (a) 43,500 367
ISS Group, Inc. (a) 45,000 1,693
ITI Technologies, Inc. (a) 17,100 385
Key Tronic Corp. (a) 24,000 132
Kronos, Inc. (a) 3,150 137
LCC International, Inc. Class A (a) 14,800 67
LSI Logic Corp. (a) 89,300 4,119
Lycos, Inc. (a) 11,000 1,011
Macromedia, Inc. (a) 46,750 1,660
Mechanical Dynamics, Inc. (a) 20,000 118
Media Metrix, Inc. (a) 15,000 795
Mercury Interactive Corp. (a) 87,550 3,097
Microchip Technology, Inc. (a) 6,400 303
Micromuse, Inc. (a) 32,050 1,594
Micron Electronics, Inc. (a) 15,200 152
Microsemi Corp. (a) 15,000 141
MKS Instruments, Inc. NPV (a) 65,000 1,211
MMC Networks, Inc. (a) 47,600 2,124
MRV Communications, Inc. (a) 15,000 195
National Instruments Corp. (a) 27,450 1,101
Network Appliance, Inc. (a) 20,000 1,118
Network Solutions, Inc. Class A (a) 13,400 1,059
nFront, Inc. NPV (a) 2,000 30
NorthPoint Communications
Group, Inc. (a) 23,600 861
OrCad, Inc. (a) 9,500 121
Ortel Corp. (a) 10,000 104
OSI Systems, Inc. New (a) 22,300 112
Par Technology Corp. (a) 15,000 111
Park Electrochemical Corp. 9,100 262
Peregrine Systems, Inc. (a) 27,200 697
Pericom Semiconductor Corp.
New (a) 14,000 158
Pioneer-Standard Electronics, Inc. 3,400 41
PMC - Sierra, Inc. (a) 15,000 884
24 Equity II Fund
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- -------
Polycom, Inc. (a) 25,500 988
Progress Software Corp. (a) 34,100 963
Proxicom, Inc. (a) 7,800 198
Proxim, Inc. (a) 24,250 1,407
PSINET, Inc. (a) 40,000 1,748
QLogic Corp. (a) 15,600 2,059
Ramp Networks, Inc. (a) 11,700 167
Rational Software Corp. New (a) 102,250 3,368
RealNetworks, Inc. (a) 15,700 1,081
REMEC, Inc. (a) 9,000 143
RF Micro Devices, Inc. (a) 6,700 500
RF Monolithics, Inc. (a) 13,800 129
Safeguard Scientifics, Inc. (a) 11,400 707
ScanSource, Inc. (a) 6,000 129
Scientific-Atlanta, Inc. 50,500 1,818
SDL, Inc. (a) 3,900 199
SeaChange International, Inc. (a) 15,000 272
SERENA Software, Inc. (a) 10,000 134
Silicon Graphics, Inc. (a) 45,400 743
Siliconix, Inc. (a) 7,600 253
Smith-Gardner & Associates, Inc. (a) 35,150 281
Sterling Software, Inc. (a) 68,000 1,815
Stoneridge, Inc. (a) 11,000 149
Symbol Technologies, Inc. 15,600 575
Tech-Sym Corp. (a) 33,500 796
Tekelec, Inc. (a) 10,000 122
THQ, Inc. (a) 38,200 1,096
TranSwitch Corp. (a) 33,750 1,597
Triquint Semiconductor, Inc. (a) 6,500 369
TSI International Software, Ltd. (a) 22,900 650
Vantive Corp. (The)(a) 10,000 113
Verio, Inc. (a) 35,700 2,479
Veritas Software Corp. (a) 20,300 1,927
Verity, Inc. (a) 43,150 2,335
Vishay Intertechnology, Inc. (a) 39,200 823
Vitesse Semiconductor Corp. (a) 44,400 3,014
WebTrends Corp. NPV (a) 13,200 608
Whittman-Hart, Inc. (a) 47,600 1,511
Xilinx, Inc. (a) 28,400 1,626
Xircom, Inc. (a) 33,200 997
----------
111,204
----------
UTILITIES - 5.0%
AGL Resources, Inc. 17,300 319
Alliant Energy Corp. (a) 19,300 548
Amdocs, Ltd. (a) 58,700 1,335
American Tower Corp. Class A (a) 9,800 235
American Water Works, Inc. 10,300 317
Aquarion Co. 3,900 136
Associated Group, Inc. (The)
Class A (a) 8,800 571
Aware, Inc. (a) 34,150 1,567
Black Hills Corp. 3,200 74
Calpine Corp. (a) 33,100 1,787
Central Hudson Gas & Electric Corp. 5,500 231
Citizens Utilities Co. Class B (a) 51,500 573
Cleco Corp. 4,600 140
Commonwealth Telephone Enterprises, Inc.
(a) 8,400 339
Conectiv, Inc. 27,600 674
Copper Mountain Networks, Inc. (a) 14,400 1,109
Dycom Industries, Inc. (a) 5,600 314
E'town Corp. 1,600 73
Energen Corp. 6,200 115
General Communication, Inc.
Class A (a) 16,000 109
Global TeleSystems Group, Inc. (a) 17,000 1,376
GST Telecommunications, Inc. (a) 10,000 131
Hawaiian Electric Industries, Inc. 31,700 1,125
Idacorp, Inc. 8,000 252
Illinova Corp. 13,900 379
Indiana Energy, Inc. 2,466 53
IXC Communications, Inc. (a) 25,000 978
Jones Intercable, Inc. Class A (a) 35,500 1,740
Laclede Gas Co. 3,900 91
MDU Resources Group, Inc. 9,450 216
Metrocall, Inc. (a) 24,000 65
Midcoast Energy Resources, Inc. 7,500 121
Minnesota Power, Inc. 21,800 433
Nevada Power Co. 15,900 398
New Jersey Resources Corp. 2,600 97
Niagara Mohawk Holdings, Inc. (a) 70,800 1,137
NICOR, Inc. 13,200 502
NiSource, Inc. NPV 10,300 266
Northeast Utilities (a) 44,100 780
Northwest Natural Gas Co. 6,400 154
NUI Corp. 3,100 78
OGE Energy Corp. 6,900 164
Peoples Energy Corp. 9,800 369
Piedmont Natural Gas Co., Inc. 6,605 206
Pinnacle Holdings, Inc. (a) 6,000 146
Primus Telecommunications
Group, Inc. (a) 8,000 179
Public Service Co. of New Mexico 70,700 1,405
Rochester Gas & Electric Corp. 16,600 441
RSL Communications, Ltd.
Class A (a) 40,000 773
SBA Communications Corp. (a) 13,900 136
SCANA Corp. 25,500 596
Sierra Pacific Resources 9,000 327
SIG Corp., Inc. 2,500 71
South Jersey Industries, Inc. 3,700 105
Equity II Fund 25
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- -------
Southwest Gas Corp. 15,200 435
TNP Enterprises, Inc. 9,100 330
UGI Corp. 15,400 311
United Illuminating Co. 7,800 331
United States Cellular Corp. (a) 51,100 2,733
UtiliCorp United, Inc. 60,600 1,472
Western Resources, Inc. 30,500 811
Wisconsin Energy Corp. 6,600 164
----------
32,443
----------
TOTAL COMMON STOCKS
(cost $516,338) 613,316
----------
PRINCIPAL
AMOUNT
(000)
$
-----------
LONG-TERM INVESTMENTS - 0.2%
Getty Images, Inc. (conv.)
4.750% due 06/01/03 700 665
Res-Care, Inc.
6.000% due 12/01/04 100 124
Titan Corp. (conv.)
8.250% due 11/01/03 55 166
Veterinary Centers
of America, Inc.
5.250% due 05/01/06 100 73
----------
TOTAL LONG-TERM INVESTMENTS
(cost $964) 1,028
----------
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -------
SHORT-TERM INVESTMENTS - 5.2%
Frank Russell Investment Company Money
Market Fund,
due on demand (b) 30,795 30,795
United States Treasury Notes
5.875% due on 07/31/99 (b)(c) 2,850 2,853
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $33,648) 33,648
----------
TOTAL INVESTMENTS - 100.6%
(identified cost $550,950) 647,992
OTHER ASSETS AND LIABILITIES,
NET - (0.6%) (3,777)
----------
NET ASSETS - 100.0% 644,215
==========
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Held as collateral in connection with futures contracts purchased by the
Fund.
Abbreviations:
ADR - American Depository Receipt
NPV - No Par Value
REIT - Real Estate Investment Trust
See accompanying notes which are an integral part of the financial statements.
26 Equity II Fund
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
----------- ----------------
FUTURES CONTRACTS
S&P 500 Midcap Index
expiration date 09/99 108 $ 738
S&P 500 Index
expiration date 09/99 31 364
---------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ 1,102
===============
See accompanying notes which are an integral part of the financial statements.
Equity II Fund 27
<PAGE>
EQUITY II FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
ASSETS
Investments at market (identified cost $550,950) $ 647,992
Receivables:
Dividends and interest....................................... 515
Investments sold............................................. 6,118
Fund shares sold............................................. 1,357
Daily variation margin on futures contracts.................. 288
--------------
Total Assets............................................... 656,270
LIABILITIES
Payables:
Investments purchased........................ $ 10,516
Fund shares redeemed......................... 1,043
Accrued fees to affiliates................... 446
Other accrued expenses....................... 50
--------------
Total Liabilities......................................... 12,055
--------------
NET ASSETS................................................... $ 644,215
==============
NET ASSETS CONSIST OF:
Undistributed net investment income.......................... $ 308
Accumulated net realized gain (loss)......................... 16,856
Unrealized appreciation (depreciation) on:
Investments................................................. 97,042
Futures contracts........................................... 1,102
Shares of beneficial interest................................ 196
Additional paid-in capital................................... 528,711
--------------
NET ASSETS $ 644,215
==============
NET ASSET VALUE, offering and redemption price per share:
Class E ($13,584,237 divided by 414,086 shares of $.01 par
value shares of beneficial interest outstanding)............ $ 32.81
==============
Class I ($630,630,454 divided by 19,219,222 shares of $.01
par value shares of beneficial interest outstanding)........ $ 32.81
==============
See accompanying notes which are an integral part of the financial statements.
28 Equity II Fund
<PAGE>
EQUITY II FUND
STATEMENT OF OPERATIONS
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
INVESTMENT INCOME
Dividends..................................................... $ 2,466
Dividends from Money Market Fund.............................. 831
Interest...................................................... 108
------------
Total Investment Income..................................... 3,405
EXPENSES
Advisory fees................................... $ 1,942
Administrative fees............................. 140
Custodian fees.................................. 200
Transfer agent fees............................. 231
Professional fees............................... 18
Registration fees - Class I..................... 47
Shareholder servicing fees - Class E............ 4
Trustees' fees.................................. 3
Miscellaneous................................... 40
--------------
Total Expenses.............................................. 2,625
------------
Net investment income.......................................... 780
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments..................................... 17,276
Futures contracts............................... 4,999 22,275
--------------
Net change in unrealized appreciation
(depreciation) on:
Investments..................................... 24,809
Futures contracts............................... (1,936) 22,873
-------------- ------------
Net realized and unrealized gain (loss)........................ 45,148
------------
Net increase (decrease) in net assets resulting
from operations............................................... $ 45,928
============
See accompanying notes which are an integral part of the financial statements.
Equity II Fund 29
<PAGE>
EQUITY II FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
------------------- -------------------
<S> <C> <C>
OPERATIONS
Net investment income............................. $ 780 $ 1,453
Net realized gain (loss).......................... 22,275 29,064
Net change in unrealized appreciation
(depreciation).................................. 22,873 (25,411)
------------------- -------------------
Net increase (decrease) in net assets
resulting from operations..................... 45,928 5,106
------------------- -------------------
DISTRIBUTIONS
From net investment income
Class I......................................... (650) (1,505)
From net realized gain on investments
Class I......................................... (4,365) (31,338)
In excess of net realized gain on investments
Class I......................................... -- (1,054)
------------------- -------------------
Net decrease from distributions............... (5,015) (33,897)
------------------- -------------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from
share transactions.............................. 69,483 80,451
------------------- -------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS........ 110,396 51,660
NET ASSETS
Beginning of period............................... 533,819 482,159
------------------- -------------------
End of period (including undistributed net
investment income of $308 and $178,
respectively)................................... $ 644,215 $ 533,819
=================== ===================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
30 Equity II Fund
<PAGE>
EQUITY II FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
---------
NET ASSET VALUE, BEGINNING OF PERIOD................................ $ 31.37
---------
INCOME FROM INVESTMENT OPERATIONS
Net realized and unrealized gain (loss) on investments........... 1.44
---------
NET ASSET VALUE, END OF PERIOD...................................... $ 32.81
=========
TOTAL RETURN (%)(a)................................................. 4.59
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands)........................ 13,584
Ratios to average net assets (%)(c):
Operating expenses.............................................. --
Net investment income (loss).................................... --
Portfolio turnover rate (%)(b).................................... 122.13
* For the period May 14, 1999 (commencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) The ratios are not meaningful due to the Class's short period of operations.
Equity II Fund 31
<PAGE>
EQUITY II FUND
FINANCIAL HIGHLIGHTS - CLASS I
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
YEARS ENDED DECEMBER 31,
--------------------------------------------
1999* 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- --------
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 30.94 $ 32.96 $ 30.05 $ 28.88 $ 25.00 $ 26.58
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income
(d)................. .04 .09 .11 .16 .27 .36
Net realized and
unrealized gain
(loss) on
investments......... 2.11 .04 8.11 4.96 6.80 (.86)
-------- -------- -------- -------- -------- --------
Total Income From
Investment
Operations.......... 2.15 .13 8.22 5.12 7.07 (.50)
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS
From net investment
income.............. (.03) (.10) (.11) (.16) (.29) (.31)
From net realized gain
on investments...... (.25) (2.05) (5.20) (3.79) (2.90) (.77)
-------- -------- -------- -------- -------- --------
Total Distributions. (.28) (2.15) (5.31) (3.95) (3.19) (1.08)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD................. $ 32.81 $ 30.94 $ 32.96 $ 30.05 $ 28.88 $ 25.00
======== ======== ======== ======== ======== ========
TOTAL RETURN (%)(a)(c). 7.09 .70 28.66 18.51 28.67 (2.60)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of
period ($ in
thousands).......... 630,631 533,819 482,159 365,955 279,566 202,977
Ratios to average net
assets (%)(b)(c):
Operating expenses.. .94 .91 .92 .95 .83 .23
Net investment
income.............. .28 .29 .35 .52 .97 1.46
Portfolio turnover
rate (%)(b)......... 122.13 128.87 103.00 120.78 89.31 58.04
* For the six months ended June 30, 1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) For periods prior to April 1, 1995, Fund performances, operating expenses
and net investment income do not include any management fees paid to the
Manager or money managers. For periods therefter, they are reported net of
investment management fees but gross of any investment services fees. See
Note 4.
(d) For the periods subsequent to Decmeber 31, 1997, average month-end shares
outstanding were used for this calculation.
32 Equity II Fund
<PAGE>
EQUITY III FUND
STATEMENT OF NET ASSETS
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
COMMON STOCKS - 92.9%
AUTO AND TRANSPORTATION - 5.9%
AMR Corp. (a) 10,900 744
Delta Air Lines, Inc. 37,200 2,144
Ford Motor Co. 51,000 2,878
General Motors Corp. 55,200 3,643
TRW, Inc. 8,400 461
UAL Corp. (a) 18,300 1,189
Union Pacific Corp. 23,200 1,353
----------
12,412
----------
CONSUMER DISCRETIONARY - 7.5%
Brinker International, Inc. (a) 13,200 359
Browning-Ferris Industries, Inc. 7,200 310
CBS Corp. (a) 37,800 1,642
Chris Craft Industries, Inc. (a) 8,961 422
Dayton Hudson Corp. 6,700 436
Deluxe Corp. 25,300 985
Eastman Kodak Co. 19,293 1,307
Fortune Brands, Inc. 7,800 323
Harcourt General, Inc. 6,700 345
Harrah's Entertainment, Inc. (a) 8,400 185
Hasbro, Inc. 12,700 355
Kmart Corp. (a) 75,400 1,239
Knight-Ridder, Inc. 14,000 769
May Department Stores Co. 3,500 143
MediaOne Group, Inc. (a) 12,600 937
Premark International, Inc. 22,000 825
Sears Roebuck & Co. 22,000 980
Shaw Industries, Inc. (a) 15,500 256
Tribune Co. 11,500 1,002
Viacom, Inc. Class B (a) 42,300 1,861
Whirlpool Corp. 12,900 955
----------
15,636
----------
CONSUMER STAPLES - 2.9%
Albertson's, Inc. 20,096 1,036
ConAgra, Inc. 20,100 535
Flowers Industries, Inc. 10,800 234
Heinz (H.J.) Co. 9,200 461
IBP, Inc. 79,900 1,898
Interstate Bakeries Corp. 15,000 337
PepsiCo, Inc. 15,600 604
SuperValu, Inc. 5,000 128
Weis Markets, Inc. 22,800 892
----------
6,125
----------
FINANCIAL SERVICES - 26.9%
AFLAC, Inc. 4,800 230
Allstate Corp. 69,062 2,478
Ambac Financial Group, Inc. 33,700 1,925
American Financial Group, Inc. 12,300 419
American General Corp. 10,400 784
AmSouth Bancorp 48,200 1,118
Associates First Capital Corp. Class A 8,348 370
Astoria Financial Corp. 18,400 807
Bank of America Corp. 46,313 3,395
Bank One Corp. 26,500 1,578
BB&T Corp. 11,800 433
Bear Stearns Cos., Inc. 31,200 1,459
Chase Manhattan Corp. 70,776 6,131
Citigroup, Inc. 7,400 352
Comerica, Inc. 30,700 1,825
Conseco, Inc. 32,100 977
Countrywide Credit Industries, Inc. 25,800 1,103
Dime Bancorp, Inc. 37,700 759
Dow Jones & Co., Inc. 9,900 525
Everest Reinsurance Holdings, Inc. 9,600 313
Federal National Mortgage Association 21,600 1,477
First American Financial Corp. 35,700 638
First Data Corp. 11,200 548
Fleet Financial Group, Inc. 90,000 3,994
Fremont General Corp. 16,000 302
Golden West Financial Corp. 17,000 1,666
Greenpoint Financial Corp. 4,100 135
Hartford Financial Services Group, Inc.
(The) 22,000 1,283
Hartford Life, Inc. Class A 6,800 358
Household International Corp. 10,200 483
Jefferson-Pilot Corp. 11,500 761
Lehman Brothers Holdings, Inc. 6,300 392
Leucadia National Corp. 24,200 614
Lincoln National Corp. 2,600 136
M & T Bank Corp. 2,500 1,375
Morgan (J.P.) & Co., Inc. 7,700 1,082
Morgan Stanley Dean Witter & Co. 23,400 2,399
National City Corp. 1,300 85
Old Republic International Corp. 54,500 944
Pacific Century Financial Corp. 5,400 116
Paine Webber Group, Inc. 3,900 182
Ryder System, Inc. 27,000 702
SouthTrust Corp. 8,300 318
Sovereign Bancorp, Inc. 53,800 656
SunTrust Banks, Inc. 10,000 694
Trustmark Corp. 13,000 297
U.S. Bancorp 33,800 1,149
UnionBanCal Corp. 39,200 1,416
Unitrin, Inc. 28,400 1,152
Washington Mutual, Inc. 71,638 2,534
Wells Fargo Co. 28,100 1,201
----------
56,070
----------
34 Equity III Fund
<PAGE>
EQUITY III FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- --------
HEALTH CARE - 3.5%
Aetna, Inc. 11,500 1,029
Baxter International, Inc. 17,400 1,055
Bergen Brunswig Corp. Class A 25,000 431
Bristol-Myers Squibb Co. 13,800 972
Columbia/HCA Healthcare Corp. 57,400 1,309
Mallinckrodt, Inc. 25,400 924
McKesson HBOC, Inc. 18,200 585
PacifiCare Health Systems, Inc.
Class B (a) 12,900 928
----------
7,233
----------
INTEGRATED OILS - 7.5%
Amerada Hess Corp. 21,000 1,250
Ashland, Inc. 23,700 951
Chevron Corp. 8,900 847
Coastal Corp. 23,100 924
Conoco, Inc. Class A 42,200 1,176
Enron Oil & Gas Co. 21,600 437
Exxon Corp. 94,600 7,296
Mobil Corp. 8,600 851
Texaco, Inc. 16,700 1,044
Unocal Corp. 23,800 943
----------
15,719
----------
MATERIALS AND PROCESSING - 7.2%
Alcoa, Inc. 33,700 2,085
Avery Dennison Corp. 5,400 326
Centex Corp. 14,500 545
Dow Chemical Co. 12,700 1,611
du Pont (E.I.) de Nemours & Co. 13,400 915
FMC Corp. (a) 6,800 464
Fort James Corp. 24,700 936
Georgia-Pacific Corp. (Timber Group) 29,500 745
Georgia-Pacific Group 10,400 493
Goodrich (B.F.) Co. 19,500 829
Harsco Corp. 11,400 365
International Paper Co. 37,800 1,909
Mead Corp. 1,600 67
Mohawk Industries, Inc. (a) 13,700 416
Reynolds Metals Co. 12,900 761
Sonoco Products Co. 11,700 350
Temple-Inland, Inc. 4,600 314
USG Corp. 12,000 672
Vulcan Materials Co. 25,000 1,206
----------
15,009
----------
MISCELLANEOUS - 0.4%
Duke Realty Investments, Inc. 17,700 399
FelCor Lodging Trust, Inc. 16,500 343
----------
742
----------
OTHER ENERGY - 1.8%
Constellation Energy Group 42,200 1,250
El Paso Energy Corp. 4,600 162
Sempra Energy 27,200 615
Tidewater, Inc. 12,900 394
Tosco Corp. 38,100 988
Ultramar Diamond Shamrock Corp. 15,500 338
----------
3,747
----------
PRODUCER DURABLES - 6.8%
AlliedSignal, Inc. 9,400 592
Briggs & Stratton Corp. 5,900 341
Caterpillar, Inc. 23,700 1,422
Crane Co. 8,900 280
Deere & Co. 35,900 1,422
Ingersoll-Rand Co. 27,800 1,796
Johnson Controls, Inc. 11,300 783
Litton Industries, Inc. (a) 16,000 1,148
Lockheed Martin Corp. 20,200 752
Northrop Grumman Corp. 16,800 1,114
Raytheon Co. Class B 17,900 1,260
Tecumseh Products Co. Class A 19,200 1,162
Xerox Corp. 19,300 1,140
York International Corp. 24,400 1,045
----------
14,257
----------
TECHNOLOGY - 6.5%
Electronic Data Systems Corp. 26,267 1,486
General Dynamics Corp. 10,800 740
Hewlett-Packard Co. 10,900 1,095
Intel Corp. 21,056 1,251
International Business Machines Corp. 64,500 8,337
Textron, Inc. 8,600 708
----------
13,617
----------
UTILITIES - 16.0%
Associated Group, Inc. (The)
Class A (a) 3,100 201
AT&T Corp. 55,600 3,103
Bell Atlantic Corp. 84,468 5,522
BellSouth Corp. 50,200 2,353
CenturyTel, Inc. 32,500 1,292
Consolidated Edison, Inc. 15,900 720
DTE Energy Co. 24,900 996
Energy East Corp. 13,800 359
FirstEnergy Corp. 27,900 865
Florida Progress Corp. 8,900 368
FPL Group, Inc. 300 16
GPU, Inc. 28,000 1,181
GTE Corp. 31,200 2,363
Equity III Fund 35
<PAGE>
EQUITY III FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
MCI WorldCom, Inc. (a) 19,500 1,677
Minnesota Power, Inc. 28,600 569
National Fuel Gas Co. 17,600 854
Peco Energy Co. 14,300 599
PG&E Corp. 53,500 1,739
Questar Corp. 24,300 465
SBC Communications, Inc. 73,500 4,263
Texas Utilities Co. 7,500 309
U.S. West, Inc. 38,400 2,256
Unicom Corp. 26,300 1,014
United States Cellular Corp. (a) 6,400 342
----------
33,426
----------
TOTAL COMMON STOCKS
(cost $162,591) 193,993
----------
PRINCIPAL
AMOUNT
(000)
$
-----------
SHORT-TERM INVESTMENTS - 6.1%
Frank Russell Investment Company Money
Market Fund,
due on demand (b) 11,142 11,142
United States Treasury Notes (b)(c)
5.875% due 07/31/99 1,500 1,502
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $12,644) 12,644
----------
TOTAL INVESTMENTS - 99.0%
(identified cost $175,235) 206,637
OTHER ASSETS AND LIABILITIES,
NET - 1.0% 2,071
----------
208,708
NET ASSETS - 100.0% ==========
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Held as collateral in connection with futures contracts purchased by the
Fund.
FUTURES CONTRACTS
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
----------- ----------------
S&P Barra Value Index
expiration date 09/99 35 $ 119
S&P 500 Index
expiration date 09/99 19 290
----------
Total Unrealized Appreciation
(Depreciation) on Open Futures $ 409
Contracts Purchased ==========
See accompanying notes which are an integral part of the financial statements.
36 Equity III Fund
<PAGE>
EQUITY III FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
ASSETS
Investments at market (identified cost $175,235).............. $ 206,637
Receivables:
Dividends and interest....................................... 381
Investments sold............................................. 6,151
Fund shares sold............................................. 808
Daily variation margin on futures contracts.................. 225
--------------
Total Assets............................................... 214,202
LIABILITIES
Payables:
Investments purchased........................ $ 5,268
Fund shares redeemed......................... 86
Accrued fees to affiliates................... 123
Other accrued expenses....................... 17
--------------
Total Liabilities.......................................... 5,494
--------------
NET ASSETS.................................................... $ 208,708
==============
NET ASSETS CONSIST OF:
Undistributed net investment income........................... $ 650
Accumulated net realized gain (loss).......................... 11,479
Unrealized appreciation (depreciation) on:
Investments.................................................. 31,402
Futures contracts............................................ 409
Shares of beneficial interest................................. 69
Additional paid-in capital.................................... 164,699
--------------
NET ASSETS.................................................... $ 208,708
==============
NET ASSET VALUE, offering and redemption price per share:
Class E ($4,694,662 divided by 154,730 shares of $.01 par
value shares of beneficial interest outstanding)........... $ 30.34
==============
Class I ($204,013,451 divided by 6,721,932 shares of $.01 par
value shares of beneficial interest outstanding)........... $ 30.35
==============
See accompanying notes which are an integral part of the financial statements.
Equity III Fund 37
<PAGE>
EQUITY III FUND
STATEMENT OF OPERATIONS
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
INVESTMENT INCOME
Dividends.................................................... $ 1,895
Dividends from Money Market Fund............................. 207
Interest..................................................... 41
--------------
Total Investment Income.................................... 2,143
EXPENSES
Advisory fees................................. $ 547
Administrative fees........................... 50
Custodian fees................................ 69
Transfer agent fees........................... 57
Professional fees............................. 13
Registration fees - Class I................... 31
Shareholder servicing fees - Class E.......... 1
Trustees' fees................................ 3
Miscellaneous................................. 24
--------------
Total Expenses............................................. 795
--------------
Net investment income......................................... 1,348
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments.................................. 9,447
Futures contracts............................ 1,676 11,123
---------------
Net change in unrealized appreciation
(depreciation) on:
Investments.................................. 1,018
Futures contracts............................ (139) 879
--------------- --------------
Net realized and unrealized gain (loss)....................... 12,002
--------------
Net increase (decrease) in net assets
resulting from operations..................................... $ 13,350
==============
See accompanying notes which are an integral part of the financial statements.
38 Equity III Fund
<PAGE>
EQUITY III FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
------------------- -----------------
OPERATIONS
Net investment income.................... $ 1,348 $ 3,613
Net realized gain (loss)................. 11,123 28,478
Net change in unrealized appreciation
(depreciation)........................... 879 (9,816)
------------- --------------
Net increase (decrease) in net assets
resulting from operations.............. 13,350 22,275
------------- --------------
DISTRIBUTIONS
From net investment income
Class I................................ (770) (3,541)
From net realized gain on investments
Class I................................ (4,363) (25,167)
------------- --------------
Net decrease from distributions...... (5,133) (28,708)
------------- --------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from
share transactions....................... (10,000) (25,188)
------------- --------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS (1,783) (31,621)
NET ASSETS
Beginning of period...................... 210,491 242,112
------------- --------------
End of period (including undistributed net
investment income of $650 and $72,
respectively).......................... $ 208,708 $ 210,491
============= ==============
See accompanying notes which are an integral part of the financial statements.
Equity III Fund 39
<PAGE>
EQUITY III FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
--------
NET ASSET VALUE, BEGINNING OF PERIOD............................... $ 30.27
--------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c)......................................... .04
Net realized and unrealized gain (loss) on investments............ .03
--------
Total Income From Investment Operations......................... .07
--------
NET ASSET VALUE, END OF PERIOD..................................... $ 30.34
========
TOTAL RETURN (%)(a)................................................ .23
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands)........................ 4,695
Ratios to average net assets (%)(d):
Operating expenses.............................................. --
Net investment income........................................... --
Portfolio turnover rate (%)(b).................................... 139.05
* For the period May 14, 1999 (commencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) Average month-end shares outstanding were used for this calculation.
(d) The ratios are not meaningful due to the Class's short period of operations.
40 Equity III Fund
<PAGE>
EQUITY III FUND
FINANCIAL HIGHLIGHTS - CLASS I
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
YEARS ENDED DECEMBER 31,
--------------------------------------------
1999* 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- --------
NET ASSET VALUE,........ $ 29.12 $ 29.80 $ 29.68 $ 29.11 $ 24.18 $ 27.05
BEGINNING OF PERIOD..... -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment
income (d)............. .19 .47 .60 .70 .82 .93
Net realized and
unrealized gain
(loss) on
investments.......... 1.66 2.75 8.69 5.10 7.73 (.85)
-------- -------- -------- -------- -------- --------
Total Income From
Investment
Operations........... 1.85 3.22 9.29 5.80 8.55 .08
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS
From net investment
income............... (.11) (.47) (.61) (.71) (.83) (.91)
From net realized gain
on investments....... (.51) (3.43) (8.56) (4.52) (2.79) (2.04)
-------- -------- -------- -------- -------- --------
Total Distributions.. (.62) (3.90) (9.17) (5.23) (3.62) (2.95)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD.................. $ 30.35 $ 29.12 $ 29.80 $ 29.68 $ 29.11 $ 24.18
======== ======== ======== ======== ======== ========
TOTAL RETURN (%)(a)(c).. 6.92 11.53 33.13 20.90 35.96 1.16
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of
period ($ in
thousands)........... 204,013 210,491 242,112 221,778 222,541 177,807
Ratios to average net
assets (%)(b)(c):
Operating expenses... .79 .74 .78 .79 .65 .17
Net investment
income............... 1.35 1.54 1.77 2.23 2.90 3.39
Portfolio turnover
rate (%)(b).......... 139.05 135.53 128.86 100.78 103.40 85.92
* For the six months ended June 30, 1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 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) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
Equity III Fund 41
<PAGE>
EQUITY Q FUND
STATEMENT OF NET ASSETS
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
COMMON STOCKS - 98.0%
AUTO AND TRANSPORTATION - 2.9%
AMR Corp. (a) 9,700 662
AutoNation, Inc. (a) 120,800 2,152
AutoZone, Inc. (a) 26,100 786
Burlington Northern, Inc. 31,800 986
CNF Transportation, Inc. 14,700 564
Consolidated Freightways Corp. (a) 1,200 15
Cooper Tire & Rubber Co. 5,700 135
CSX Corp. 20,400 924
Dana Corp. 26,500 1,221
Delphi Automotive Systems Corp. 69,125 1,283
Delta Air Lines, Inc. 69,500 4,005
Eaton Corp. 9,300 856
FDX Corp. (a) 37,200 2,018
Ford Motor Co. 142,200 8,025
General Motors Corp. 32,600 2,152
Genuine Parts Co. 2,300 81
Goodyear Tire & Rubber Co. 22,800 1,341
Kansas City Southern Industries, Inc. 55,100 3,516
Lear Corp. (a) 13,900 692
Meritor Automotive, Inc. 31,400 801
Modine Manufacturing Co. 3,000 98
Navistar International Corp. (a) 9,900 495
PACCAR, Inc. 1,800 96
Trinity Industries, Inc. 6,300 211
TRW, Inc. 27,100 1,487
Union Pacific Corp. 37,200 2,169
Wisconsin Central
Transportation Corp. (a) 3,200 58
-----------
36,829
-----------
CONSUMER DISCRETIONARY - 12.0%
Abercrombie & Fitch Co. Class A (a) 94,600 4,541
Amazon.com, Inc. (a) 4,700 588
AT&T Corp. - Liberty Media
Group Class A (a) 50,200 1,845
Best Buy Co. (a) 91,700 6,190
BHC Communications, Inc. Class A 1,900 247
BJ's Wholesale Club, Inc. (a) 2,600 78
Bob Evans Farms, Inc. 500 10
Browning-Ferris Industries, Inc. 14,600 628
Brunswick Corp. 101,700 2,835
Buffets, Inc. (a) 6,800 78
Callaway Golf Co. 29,000 424
Cendant Corp. (a) 371,600 7,618
Cintas Corp. 8,000 537
Circuit City Stores, Inc. 6,400 595
Corporate Express, Inc. (a) 16,900 118
Costco Cos., Inc. (a) 10,900 872
Darden Restaurants, Inc. 33,800 737
Dayton Hudson Corp. 108,500 7,053
Dillard's, Inc. Class A 18,600 653
Disney (Walt) Co. 123,400 3,802
Donnelley (R.R.) & Sons Co. 82,600 3,061
Eastman Kodak Co. 53,700 3,638
Enesco Group, Inc. 10,400 241
Extended Stay America, Inc. (a) 12,300 148
Federated Department Stores, Inc. (a) 63,400 3,356
Fortune Brands, Inc. 36,600 1,514
Fruit of The Loom, Inc. Class A (a) 11,900 116
Furniture Brands International, Inc. (a) 8,300 231
Gap, Inc. 9,300 468
General Nutrition Cos., Inc. (a) 14,000 326
Harrah's Entertainment, Inc. (a) 2,700 59
Hilton Hotels Corp. 64,600 917
Home Depot, Inc. (The) 147,900 9,530
Huffy Corp. 10,300 144
International Game Technology 43,500 805
Interpublic Group Cos., Inc. 12,100 1,048
JC Penney & Co., Inc. 31,700 1,539
Jones Apparel Group, Inc. (a) 16,803 577
Kmart Corp. (a) 287,000 4,718
Knight-Ridder, Inc. 20,300 1,115
La-Z-Boy Inc. 9,800 225
Leggett & Platt, Inc. 34,400 957
Lowe's Cos., Inc. 22,300 1,264
Mandalay Resort Group (a) 43,200 913
Manpower, Inc. 16,700 378
Mattel, Inc. 55,200 1,459
May Department Stores Co. 500 20
MediaOne Group, Inc. (a) 110,300 8,204
Mirage Resorts, Inc. (a) 43,300 725
New York Times Co. Class A 40,700 1,498
Newell Rubbermaid, Inc. 4,729 220
Ogden Corp. 21,800 587
Payless ShoeSource, Inc. (a) 1,100 59
Premark International, Inc. 18,500 694
QUALCOMM, Inc. (a) 71,000 10,189
Reebok International, Ltd. (a) 9,500 177
Reynolds & Reynolds Co. Class A 10,900 254
Sears Roebuck & Co. 68,200 3,039
Service Corp. International 72,000 1,386
Shaw Industries, Inc. (a) 94,800 1,564
Springs Industries, Inc. 2,700 118
Starwood Hotels & Resorts
Worldwide, Inc. 44,200 1,351
Sunglass Hut International, Inc. (a) 38,600 661
Time Warner, Inc. 92,700 6,813
Times Mirror Co. Series A 5,600 332
TJX Cos., Inc. 48,100 1,602
42 Equity Q Fund
<PAGE>
EQUITY Q FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Toys "R" Us, Inc. (a) 53,200 1,101
Tribune Co. 12,000 1,046
Tricon Global Restaurants, Inc. (a) 102,600 5,553
Tupperware Corp. 22,600 576
V.F. Corp. 6,500 278
Viacom, Inc. Class B (a) 104,400 4,594
Viad Corp. 83,900 2,596
Wal-Mart Stores, Inc. 383,000 18,480
Washington Post Co. Class B 600 323
Whirlpool Corp. 5,100 376
-----------
152,612
-----------
CONSUMER STAPLES - 6.9%
Albertson's, Inc. 15,623 806
Anheuser-Busch Cos., Inc. 34,400 2,440
Bestfoods 24,200 1,198
Campbell Soup Co. 14,300 663
Coca-Cola Co. (The) 82,100 5,131
ConAgra, Inc. 212,500 5,658
Fleming Cos., Inc. 18,800 219
General Mills, Inc. 40,600 3,263
Gillette Co. 9,600 394
Hannaford Brothers Co. 5,100 273
Heinz (H.J.) Co. 26,000 1,303
Hershey Foods Corp. 4,300 255
Hormel Foods Corp. 53,300 2,145
IBP, Inc. 230,400 5,472
International Flavors
& Fragrances, Inc. 16,900 750
Pepsi Bottling Group, Inc. (The) 11,100 256
PepsiCo, Inc. 130,200 5,037
Philip Morris Cos., Inc. 393,500 15,814
Procter & Gamble Co. 98,300 8,773
Quaker Oats Co. 58,400 3,876
Ralston-Purina Group 3,900 119
Safeway, Inc. (a) 153,150 7,581
Sara Lee Corp. 89,100 2,021
Seagram Co., Ltd. 112,800 5,682
Suiza Foods Corp. (a) 4,500 188
SuperValu, Inc. 13,300 342
Tyson Foods, Inc. Class A 10,900 245
Unilever NV (a) 115,382 8,048
Universal Corp. 20,000 570
-----------
88,522
-----------
FINANCIAL SERVICES - 18.6%
Allstate Corp. 135,900 4,875
Ambac Financial Group, Inc. 17,800 1,017
American Express Co. 800 104
American General Corp. 11,500 867
American International Group, Inc. 200,625 23,486
American National Insurance Co. 3,300 235
AmSouth Bancorp 63,675 1,476
AON Corp. 23,200 957
Associated Banc-Corp. 5,500 228
Associates First Capital Corp. Class A 80,468 3,566
Astoria Financial Corp. 5,800 254
Automatic Data Processing, Inc. 10,700 471
BancWest Corp. New 4,500 167
Bank of America Corp. 428,299 31,400
Bank One Corp. 43,841 2,611
BankBoston Corp. 26,700 1,365
BB&T Corp. 2,300 84
Bear Stearns Cos., Inc. 34,181 1,598
Block (H&R) Co., Inc. 14,700 735
CarrAmerica Realty Corp. 19,500 488
Charter One Financial, Inc. 15,400 427
Chase Manhattan Corp. 9,000 780
Chubb Corp. (The) 1,500 104
CIGNA Corp. 4,200 374
CIT Group, Inc. (The) 7,500 217
Citigroup, Inc. 534,175 25,373
City National Corp. 8,800 329
Colonial BancGroup, Inc. 4,400 61
Comerica, Inc. 36,100 2,146
Compass Bancshares, Inc. 9,900 270
Conseco, Inc. 77,700 2,365
Dime Bancorp, Inc. 52,400 1,055
Dow Jones & Co., Inc. 4,900 260
DST Systems, Inc. (a) 2,200 138
Duke Realty Investments, Inc. 52,200 1,178
Dun & Bradstreet Corp. 7,000 248
Equifax, Inc. 34,400 1,228
Equitable Cos., Inc. 13,900 931
Everest Reinsurance Holdings, Inc. 1,400 46
Federal Home Loan Mortgage Corp. 155,800 9,036
Federal National
Mortgage Association 50,500 3,453
Fifth Third Bancorp 800 53
Financial Security Assurance
Holdings, Ltd. 600 31
FINOVA Group, Inc. 31,300 1,647
First American Corp. 17,300 719
First Data Corp. 40,900 2,002
First Security Corp. 53,900 1,465
First Union Corp. 114,900 5,400
First Virginia Banks, Inc. 12,800 629
Firstar Corp. 37,800 1,058
FirstMerit Corp. 8,400 235
Fleet Financial Group, Inc. 106,138 4,710
Fremont General Corp. 9,000 170
Equity Q Fund 43
<PAGE>
EQUITY Q FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Golden State Bancorp, Inc. (a) 59,500 1,309
Golden West Financial Corp. 16,000 1,568
Goldman Sachs Group, Inc. (a) 31,800 2,298
Greenpoint Financial Corp. 18,300 600
Hibernia Corp. Class A 13,700 215
Household International Corp. 31,800 1,507
Huntington Bancshares, Inc. 1,100 38
KeyCorp 41,700 1,340
Lehman Brothers Holdings, Inc. 5,400 336
Lincoln National Corp. 12,600 659
M & T Bank Corp. 300 165
Marsh & McLennan Cos., Inc. 89,900 6,787
MBIA, Inc. 22,200 1,437
MBNA Corp. 78,100 2,392
Mellon Bank Corp. 3,600 131
Mercantile Bankshares Corp. 5,400 191
Mercury General Corp. 7,200 245
Merrill Lynch & Co., Inc. 29,000 2,318
Metris Companies, Inc. 9,732 397
Morgan (J.P.) & Co., Inc. 9,200 1,293
Morgan Stanley Dean Witter & Co. 143,807 14,740
National City Corp. 18,600 1,218
North Fork Bancorp., Inc. 41,400 882
Ocwen Financial Corp. (a) 4,200 37
Ohio Casualty Corp. 1,100 40
Old Kent Financial Corp. 9,345 391
Pacific Century Financial Corp. 64,400 1,389
PaineWebber Group, Inc. 3,200 150
Peoples Heritage Financial Group 8,400 158
PMI Group, Inc. (The) 19,100 1,200
PNC Bank Corp. 70,750 4,077
Provident Cos., Inc. 7,500 300
Provident Financial Group, Inc. 3,000 128
Providian Financial Corp. 34,850 3,258
Regions Financial Corp. 42,000 1,599
Ryder System, Inc. 6,300 164
Schwab (Charles) Corp. 12,100 1,329
SouthTrust Corp. 155,850 5,971
Sovereign Bancorp, Inc. 12,100 147
Spieker Properties, Inc. 2,000 78
St. Paul Cos., Inc. 14,900 474
Summit Bancorp 15,200 636
SunGard Data Systems (a) 88,200 3,043
SunTrust Banks, Inc. 123,160 8,552
TCF Financial Corp. 7,600 212
Torchmark Corp. 8,700 297
Travelers Property
Casualty Corp. Class A 39,700 1,553
Trustmark Corp. 1,900 43
U.S. Bancorp 56,700 1,928
U.S. Trust Corp. 500 46
Union Planters Corp. 12,500 559
UnionBanCal Corp. 53,151 1,920
UNUM Corp. 37,200 2,037
Waddell & Reed Financial, Inc.
Class A 1,000 27
Waddell & Reed Financial, Inc.
Class B 4,400 119
Washington Federal, Inc. 4,900 110
Washington Mutual, Inc. 74,816 2,647
Wells Fargo Co. 140,800 6,019
Zions Bancorp 18,600 1,181
-----------
238,007
-----------
HEALTH CARE - 10.6%
Abbott Laboratories 68,400 3,112
Aetna, Inc. 20,500 1,833
Allergan, Inc. 88,900 9,868
ALZA Corp. (a) 62,400 3,175
American Home Products Corp. 142,800 8,211
Amgen, Inc. (a) 8,100 493
Apria Healthcare Group, Inc. (a) 6,600 112
Bergen Brunswig Corp. Class A 41,400 714
Bristol-Myers Squibb Co. 276,260 19,459
Cardinal Health, Inc. 63,326 4,061
Chiron Corp. (a) 46,200 956
Columbia/HCA Healthcare Corp. 156,400 3,568
DENTSPLY International, Inc. 1,700 49
Forest Labs, Inc. (a) 62,500 2,891
Genzyme Corp. (a) 58,200 2,819
Genzyme Surgical Products (a) 10,418 46
Guidant Corp. 1,400 72
HCR Manor Care, Inc. (a) 13,900 336
Health Management Associates
Class A (a) 29,900 336
HEALTHSOUTH Corp. (a) 126,300 1,887
Humana, Inc. (a) 38,400 497
ICN Pharmaceuticals, Inc. 27,100 872
Immunex Corp. (a) 5,600 713
Johnson & Johnson 145,900 14,298
Lilly (Eli) & Co. 44,200 3,166
Mallinckrodt, Inc. 112,000 4,074
MedImmune, Inc. (a) 25,000 1,700
Medtronic, Inc. 6,200 483
Merck & Co., Inc. 236,614 17,509
Omnicare, Inc. 3,800 48
Oxford Health Plans, Inc. (a) 17,300 268
PacifiCare Health Systems, Inc.
Class B (a) 47,800 3,439
PE Corp. 3,000 344
Pfizer, Inc. 5,200 571
Pharmacia & Upjohn, Inc. 106,400 6,045
44 Equity Q Fund
<PAGE>
EQUITY Q FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Schering-Plough Corp. 157,600 8,353
Tenet Healthcare Corp. (a) 46,400 861
United Healthcare Corp. 14,300 896
Warner-Lambert Co. 57,900 4,017
Watson Pharmaceuticals, Inc. (a) 34,200 1,199
Wellpoint Health Networks, Inc.
Class A (a) 26,600 2,257
-----------
135,608
-----------
INTEGRATED OILS - 4.0%
Chevron Corp. 4,400 419
Coastal Corp. 62,500 2,500
Enron Corp. 72,300 5,911
Exxon Corp. 222,900 17,191
Kerr-McGee Corp. 35,400 1,777
Lyondell Petrochemical Co. 18,400 380
Mobil Corp. 128,800 12,751
Phillips Petroleum Co. 7,900 397
Royal Dutch Petroleum Co. 133,200 8,025
Tenneco, Inc. 32,200 769
Texaco, Inc. 500 31
USX-Marathon Group 29,500 960
-----------
51,111
-----------
MATERIALS AND PROCESSING - 5.8%
Albemarle Corp. 1,200 28
Alcan Aluminum, Ltd. 11,300 361
Alcoa, Inc. 19,600 1,213
Allegheny Teldyne, Inc. 30,700 695
Archer-Daniels-Midland Co. 800 12
Banta Corp. 2,100 44
Bowater, Inc. 3,800 180
Dow Chemical Co. 140,800 17,864
Engelhard Corp. 40,700 921
FMC Corp. (a) 1,800 123
Fort James Corp. 8,400 318
Freeport-McMoRan Copper
& Gold, Inc. Class B 43,200 775
Georgia Gulf Corp. 2,200 37
Georgia-Pacific Group 95,000 4,501
Goodrich (B.F.) Co. 2,800 119
Great Lakes Chemical Corp. 36,400 1,677
Hanna (M.A.) Co. 5,900 97
IMC Global, Inc. 32,300 569
International Paper Co. 44,900 2,267
Johns Manville Corp. 15,400 200
Kimberly-Clark Corp. 175,100 9,981
Lafarge Corp. 27,900 989
Louisiana Pacific Corp. 4,000 95
Lubrizol Corp. 3,600 98
Minnesota Mining
& Manufacturing Co. 12,300 1,069
Monsanto Co. 176,600 6,965
Nalco Chemical Co. 1,100 57
Owens Corning 27,700 952
PPG Industries, Inc. 4,200 248
Reynolds Metals Co. 800 47
Rohm & Haas Co. 58,000 2,487
RPM, Inc. (Ohio) 1,700 24
Sherwin-Williams Co. 40,100 1,113
Smurfit-Stone Container Corp. (a) 40,200 824
Solutia, Inc. 46,700 995
Southdown, Inc. 800 51
Teleflex, Inc. 500 22
Temple-Inland, Inc. 7,500 512
Tyco International, Ltd. 88,500 8,385
Unifi, Inc. (a) 10,000 213
Union Carbide Corp. 19,500 951
USEC, Inc. 9,300 138
USG Corp. 88,600 4,962
W.R. Grace & Co. New (a) 21,800 400
Worthington Industries, Inc. 49,700 813
-----------
74,392
-----------
MISCELLANEOUS - 0.3%
Avalonbay Communities, Inc. 2,500 93
Convergys Corp. NPV (a) 31,100 599
Crestline Capital Corp. (a) 9,770 164
Host Marriott Corp. 156,674 1,861
Liberty Property Trust REIT 50,200 1,248
Public Storage, Inc. 6,100 170
-----------
4,135
-----------
OTHER ENERGY - 1.0%
Apache Corp. 68,500 2,672
Conoco, Inc. Class A 5,900 164
Constellation Energy Group, Inc. 16,200 480
Cooper Cameron Corp. (a) 3,400 126
Diamond Offshore Drilling, Inc. 6,900 196
El Paso Energy Corp. 13,100 461
ENSCO International, Inc. 32,700 652
Global Marine, Inc. (a) 17,000 262
Input/Output, Inc. (a) 2,800 21
Noble Drilling Corp. (a) 15,500 305
ONEOK, Inc. 7,800 248
Pioneer Natural Resources Co. 87,400 961
R&B Falcon Corp. (a) 19,200 180
Smith International, Inc. (a) 3,000 130
Tidewater, Inc. 5,500 168
Tosco Corp. 76,600 1,987
Equity Q Fund 45
<PAGE>
EQUITY Q FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Transocean Offshore, Inc. 35,700 937
Ultramar Diamond Shamrock Corp. 42,500 927
Union Pacific Resources Group, Inc. 68,300 1,114
Valero Energy Corp. 7,800 168
-----------
12,159
-----------
PRODUCER DURABLES - 5.4%
Allied Waste Industries, Inc. (a) 5,500 109
AlliedSignal, Inc. 39,700 2,501
Applied Materials, Inc. (a) 59,200 4,373
Boeing Co. 400 18
Boston Scientific Corp. (a) 5,900 259
Briggs & Stratton Corp. 14,100 814
Coltec Industries, Inc. (a) 12,900 280
Cordant Technologies, Inc. 6,800 307
Cummins Engine Co., Inc. 2,200 126
Deere & Co. 31,000 1,228
Emerson Electric Co. 37,700 2,370
General Electric Co. 197,000 22,261
Grainger (W.W.), Inc. 500 27
Honeywell, Inc. 4,800 556
Hubbell, Inc. Class B 7,000 316
Ingersoll-Rand Co. 110,200 7,122
ITT Industries, Inc. 17,600 671
Johnson Controls, Inc. 17,700 1,227
Lexmark International
Group, Inc. Class A (a) 85,200 5,629
Lockheed Martin Corp. 95,900 3,572
Milacron, Inc. 4,200 78
Miller (Herman), Inc. 3,100 65
Pall Corp. 2,000 44
Raytheon Co. Class A 11,400 785
Rockwell International Corp. 45,200 2,746
Sensormatic Electronics Corp. (a) 15,400 215
Solectron Corp. (a) 20,500 1,367
Teradyne, Inc. (a) 47,700 3,422
Uniphase Corp. (a) 7,400 1,228
Waste Management, Inc. 85,500 4,596
Xerox Corp. 16,400 969
-----------
69,281
-----------
TECHNOLOGY - 18.8%
3Com Corp. (a) 24,500 652
Adaptec, Inc. (a) 2,300 81
Adobe Systems, Inc. 21,700 1,782
America Online, Inc. (a) 94,000 10,387
Anixter International, Inc. (a) 4,000 73
Apple Computer, Inc. (a) 91,600 4,242
BMC Software, Inc. (a) 32,400 1,748
Cadence Design Systems, Inc. (a) 38,800 495
Cisco Systems, Inc. (a) 453,600 29,229
CNET, Inc. (a) 1,800 104
CompUSA, Inc. (a) 15,400 115
Computer Associates
International, Inc. 141,000 7,755
Compuware Corp. (a) 84,600 2,686
Comverse Technology, Inc. (a) 42,450 3,200
Cooper Industries, Inc. 16,700 868
Dell Computer Corp. (a) 4,900 181
Electronic Data Systems Corp. 91,500 5,175
EMC Corp. (a) 225,900 12,425
Exodus Communications, Inc. (a) 2,500 300
Galileo International, Inc. 5,300 283
Gateway, Inc. (a) 35,700 2,106
General Dynamics Corp. 27,800 1,904
General Instrument Corp. (a) 50,200 2,134
Harris Corp. 15,200 596
Hewlett-Packard Co. 49,400 4,965
Intel Corp. 469,500 27,906
International Business
Machines Corp. 137,700 17,798
Intuit, Inc. (a) 6,800 613
Lucent Technologies, Inc. 254,724 17,178
Microsoft Corp. (a) 271,200 24,442
Motorola, Inc. 97,800 9,267
National Semiconductor Corp. (a) 15,600 395
NCR Corp. (a) 8,700 425
Nortel Networks Corp. 75,900 6,589
Oracle Systems Corp. (a) 144,000 5,346
Quantum Corp. (a) 12,200 293
Seagate Technology (a) 260,400 6,673
Sterling Commerce, Inc. (a) 3,400 124
Sun Microsystems, Inc. (a) 101,800 7,011
Sybase, Inc. (a) 24,800 271
Symbol Technologies, Inc. 6,900 254
Synopsys, Inc. (a) 8,500 469
Tellabs, Inc. (a) 71,400 4,824
Texas Instruments, Inc. 87,400 12,673
Unisys Corp. (a) 18,000 701
Veritas Software Corp. (a) 10,700 1,016
Vitesse Semiconductor Corp. (a) 7,500 508
Xilinx, Inc. (a) 9,100 520
Yahoo!, Inc. (a) 5,500 946
-----------
239,728
-----------
UTILITIES - 11.7%
Allegheny Energy, Inc. 18,300 587
Alliant Energy Corp. (a) 1,500 43
Ameren Corp. 1,600 61
Ameritech Corp. 41,500 3,050
AT&T Corp. 102,800 5,738
46 Equity Q Fund
<PAGE>
EQUITY Q FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Bell Atlantic Corp. 316,004 20,659
BellSouth Corp. 345,575 16,199
Central & Southwest Corp. 69,200 1,618
Cinergy Corp. 17,700 566
CMS Energy Corp. 13,100 549
Columbia Energy Group 9,400 589
Comcast Corp. Special Class A 87,000 3,344
Consolidated Edison, Inc. 54,200 2,453
Consolidated Natural Gas Co. 5,100 310
Cox Communications, Inc. Class A (a) 18,400 677
Dominion Resources, Inc. 21,500 931
DTE Energy Co. 36,700 1,468
Edison International 156,900 4,197
Energy East Corp. 25,600 666
Entergy Corp. 27,900 872
Florida Progress Corp. 25,200 1,041
FPL Group, Inc. 55,900 3,054
Frontier Corp. 2,000 118
GTE Corp. 131,300 9,946
K N Energy, Inc. 6,600 88
Kansas City Power & Light Co. 2,400 61
Level 3 Communications, Inc. (a) 33,800 2,034
LG&E Energy Corp. 51,800 1,088
MCI WorldCom, Inc. (a) 308,509 26,532
Northeast Utilities (a) 5,600 99
Northern States Power Co. 16,500 399
OGE Energy Corp. 42,600 1,012
PG&E Corp. 253,500 8,239
Pinnacle West Capital Corp. 21,200 853
PP&L Resources, Inc. 36,600 1,125
Public Service Enterprise Group, Inc. 51,200 2,093
Puget Sound Energy, Inc. 23,300 559
RCN Corp. (a) 2,300 96
Reliant Energy, Inc. NPV 55,700 1,539
SBC Communications, Inc. 191,528 11,109
Southern Co. 119,200 3,159
Sprint Corp. 21,000 1,109
TECO Energy, Inc. 14,700 334
Texas Utilities Co. 62,100 2,562
U.S. West, Inc. 83,200 4,888
UtiliCorp United, Inc. 8,700 212
Vodafone Group PLC - ADR 3,100 610
Wisconsin Energy Corp. 43,500 1,089
-----------
149,625
-----------
TOTAL COMMON STOCKS
(cost $873,485) 1,252,009
-----------
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
-------- --------
SHORT-TERM INVESTMENTS - 2.6%
Frank Russell Investment Company
Money Market Fund,
due on demand (b) 30,443 30,443
United States Treasury Notes
5.875% due 07/31/98 (b)(c) 2,500 2,502
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $32,945) 32,945
----------
TOTAL INVESTMENTS - 100.6%
(identified cost $906,431) 1,284,954
OTHER ASSETS AND LIABILITIES,
NET - (0.6%) (8,066)
----------
1,276,888
NET ASSETS - 100.0% ==========
(a) Nonincome-producing security
(b) At cost, which approximates market
(c) Held as collateral in connection with futures contracts purchased by the
Fund
Abbreviations:
ADR-American Depository Receipt
NPV-No Par Value
NV-Nonvoting
REIT-Real Estate Investment Trust
See accompanying notes which are an integral part of the financial statements.
Equity Q Fund 47
<PAGE>
EQUITY Q FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
----------- ----------------
FUTURES CONTRACTS
S&P 400 Midcap Index
expiration date 09/99 24 $ 169
S&P 500 Index
expiration date 09/99 55 701
----------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ 870
================
See accompanying notes which are an integral part of the financial statements.
48 Equity Q Fund
<PAGE>
EQUITY Q FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
ASSETS
Investments at market (identified cost $906,431)............... $ 1,284,954
Receivables:
Dividends and interest........................................ 1,718
Investments sold.............................................. 4,250
Fund shares sold.............................................. 3,632
Daily variation margin on futures contracts................... 365
--------------
Total Assets................................................ 1,294,919
LIABILITIES
Payables:
Investments purchased.......................... $ 5,010
Fund shares redeemed........................... 12,277
Accrued fees to affiliates..................... 680
Other accrued expenses......................... 64
--------------
Total Liabilities.......................................... 18,031
--------------
NET ASSETS.................................................... $ 1,276,888
==============
NET ASSETS CONSIST OF:
Undistributed net investment income........................... $ 2,806
Accumulated net realized gain (loss).......................... 137,657
Unrealized appreciation (depreciation) on:
Investments.................................................. 378,523
Futures contracts............................................ 870
Shares of beneficial interest................................. 288
Additional paid-in capital.................................... 756,744
--------------
NET ASSETS.................................................... $ 1,276,888
==============
NET ASSET VALUE, offering and redemption price per share:
Class E ($11,197,691 divided by 252,604 shares of $.01 par
value shares of beneficial interest outstanding)........... $ 44.33
==============
Class I ($1,265,690,589 divided by 28,546,897 shares of $.01
par value shares of beneficial interest outstanding)......... $ 44.34
==============
See accompanying notes which are an integral part of the financial statements.
Equity Q Fund 49
<PAGE>
EQUITY Q FUND
STATEMENT OF OPERATIONS
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
INVESTMENT INCOME
Dividends.................................................... $ 8,518
Dividends from Money Market Fund............................. 385
Interest..................................................... 90
--------------
Total Investment Income.................................... 8,993
EXPENSES
Advisory fees................................. $ 3,265
Administrative fees........................... 298
Custodian fees................................ 226
Transfer agent fees........................... 278
Professional fees............................. 27
Registration fees - Class I................... 49
Shareholder servicing fees - Class E.......... 3
Trustees' fees................................ 3
Miscellaneous................................. 47
--------------
Total Expenses............................................. 4,196
--------------
Net investment income......................................... 4,797
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments................................... 108,520
Futures contracts............................. 2,476 110,996
--------------
Net change in unrealized appreciation
(depreciation) on:
Investments................................... 34,016
Futures contracts............................. 40 34,056
----------- --------------
Net realized and unrealized gain (loss)....................... 145,052
--------------
Net increase (decrease) in net assets
resulting from operations..................................... $ 149,849
==============
See accompanying notes which are an integral part of the financial statements.
50 Equity Q Fund
<PAGE>
EQUITY Q FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
------------------- -----------------
OPERATIONS
Net investment income.................... $ 4,797 $ 9,340
Net realized gain (loss)................. 110,996 153,911
Net change in unrealized appreciation
(depreciation)......................... 34,056 87,859
------------------- -----------------
Net increase (decrease) in net assets
resulting from operations.............. 149,849 251,110
------------------- -----------------
DISTRIBUTIONS
From net investment income
Class I................................ (2,031) (9,349)
From net realized gain on investments
Class I................................ (28,355) (117,001)
------------------- -----------------
Net decrease from distributions...... (30,386) (126,350)
------------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets
from share transactions................ (18,475) 63,380
------------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET
ASSETS................................... 100,988 188,140
NET ASSETS
Beginning of period...................... 1,175,900 987,760
------------------- -----------------
End of period (including undistributed
net investment income of $2,806 and
$40, respectively)....................... $ 1,276,888 $ 1,175,900
================== ================
See accompanying notes which are an integral part of the financial statements.
Equity Q Fund 51
<PAGE>
EQUITY Q FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
--------
NET ASSET VALUE, BEGINNING OF PERIOD................................. $ 42.99
--------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b)........................................... .04
Net realized and unrealized gain (loss) on investments.............. 1.30
--------
Total Income From Investment Operations........................... 1.34
--------
NET ASSET VALUE, END OF PERIOD....................................... $ 44.33
========
TOTAL RETURN (%)(a).................................................. 3.12
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands).......................... 11,198
Ratios to average net assets (%)(d):
Operating expenses................................................ --
Net investment income............................................. --
Portfolio turnover rate (%)(c)...................................... 114.94
* For the period May 14, 1999 (commencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) Average month-end shares outstanding were used for this calculation.
(c) The ratios for the period ended June 30, 1999 are annualized.
(d) The ratios are not meaningful due to the Class's short period of
operations.
52 Equity Q Fund
<PAGE>
EQUITY Q FUND
FINANCIAL HIGHLIGHTS - CLASS I
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1999* 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............. $ 40.22 $ 35.90 $ 32.94 $ 30.40 $ 24.43 $ 26.03
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d)......................... .17 .32 .44 .58 .59 .69
Net realized and unrealized gain
(loss) on investments.......................... 5.02 8.53 10.01 6.33 8.52 (.41)
--------- --------- --------- --------- --------- ---------
Total Income From Investment Operations....... 5.19 8.85 10.45 6.91 9.11 .28
--------- --------- --------- --------- --------- ---------
DISTRIBUTIONS
From net investment income....................... (.07) (.32) (.44) (.59) (.61) (.69)
From net realized gain on investments............ (1.00) (4.21) (7.05) (3.78) (2.53) (1.19)
--------- --------- --------- --------- --------- ---------
Total Distributions............................ (1.07) (4.53) (7.49) (4.37) (3.14) (1.88)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD.................... $ 44.34 $ 40.22 $ 35.90 $ 32.94 $ 30.40 $ 24.43
========= ========= ========= ========= ========= =========
TOTAL RETURN (%)(a)(c)............................ 13.21 25.98 33.07 23.67 37.91 .99
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands)....... 1,265,690 1,175,900 987,760 818,281 620,259 430,661
Ratios to average net assets (%)(b)(c):
Operating expenses............................. .70 .69 .68 .71 .58 .11
Net investment income.......................... .81 .85 1.17 1.80 2.07 2.74
Portfolio turnover rate (%)(b)................... 114.94 74.56 94.89 74.59 74.00 45.87
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 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) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
Equity Q Fund 53
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ---------
COMMON STOCKS - 94.4%
AUSTRALIA - 3.2%
Amcor, Ltd. 883,265 4,903
AMP, Ltd. 44,800 489
Australia & New Zealand Bank
Group, Ltd. 1,062,126 7,800
Boral, Ltd. 86,196 146
Brambles Industries, Ltd. 14,936 393
BRL Hardy, Ltd. 7,279 31
Broken Hill Proprietary Co. 50,980 590
Cable & Wireless Optus, Ltd. NPV (a) 1,466,100 3,334
Coles Myer, Ltd. 19,491 113
Commonwealth Bank of Australia 3,700 59
CRA, Ltd. 4,400 72
CSR, Ltd. 959,600 2,740
F.H. Faulding & Co., Ltd. 4,200 26
Foster's Brewing Group, Ltd. 929,000 2,615
Goodman Fielder Wattie 954,527 850
Harvey Norman Holdings, Ltd. NPV 8,000 70
Leighton Holdings, Ltd. Class A 5,700 22
Lend Lease Corp. 37,200 510
Macquarie Bank, Ltd. NPV 2,000 27
National Australia Bank, Ltd. 227,600 3,761
National Mutual Holdings, Ltd. 16,900 25
News Corp., Ltd. 42,053 358
Orica, Ltd. 181,000 987
Pacific Dunlop, Ltd. 641,095 924
Pioneer International, Ltd. 96,772 246
PMP Communications, Ltd. 196,000 402
Smith (Howard), Ltd. 4,158 32
Smorgon Steel Group, Ltd. NPV (a) 20,000 30
Southcorp Holdings, Ltd. 81,900 330
Telstra Corp., Ltd. NPV 162,400 929
Western Mining Corp., Ltd. 15,000 64
Westfield Holdings, Ltd. NPV 12,400 76
Westfield Trust 457,057 924
Westpac Banking Corp. 30,100 196
Woodside Petroleum, Ltd. 8,500 58
Woolworth's, Ltd. 16,700 56
---------
34,188
---------
AUSTRIA - 0.4%
Bank Austria AG 62,141 3,267
EVN AG 2,800 409
VA Technologie AG (BR) 3,260 295
Voest-Alpine Stahl AG 13,000 405
Wienerberger Baustoffindustrie AG
NPV (a) 12,800 332
---------
4,708
---------
BELGIUM - 0.4%
Delhaize-Le Lion NPV 2,000 170
Electrabel NPV 5,900 1,904
Tractebel Investments International
NPV 6,086 853
Union Miniere 45,800 1,889
---------
4,816
---------
CANADA - 2.9%
Alberta Energy Co., Ltd. 4,759 153
Alcan Aluminum, Ltd. 4,360 138
ATI Technologies, Inc. NPV (a) 3,900 63
Bank of Montreal 2,852 104
Bank of Nova Scotia 11,817 257
Barrick Gold Corp. NPV 12,500 241
BCE, Inc. 146,175 7,123
Bombardier, Inc. Class B 31,407 480
Canadian Imperial Bank of Commerce 20,565 490
Canadian National Railway Co. 1,575 106
Canadian National Railway Co. NPV 310 21
Canadian Natural Resources, Ltd. (a) 3,967 78
Canadian Pacific, Ltd. 9,700 231
Canadian Tire Corp. Class A 1,915 56
Celestica, Inc. (a) 1,300 56
CGI Group, Inc. Class A (a) 36,570 770
Cinar Corp. Class B (a) 630 15
Cinar Corp. Class B Sub Voting (a) 1,070 26
Dofasco, Inc. NPV 35,651 577
EdperBrascan Corp. Class A 22,000 335
Enbridge, Inc. 7,434 170
Euro-Nevada Mining Corp., Ltd. 1,827 22
Falconbridge, Ltd. New 1,600 23
Imasco, Ltd. 18,660 503
Imperial Oil, Ltd. 16,092 306
Inco, Ltd. 69,031 1,243
Inco, Ltd. NPV 2,900 52
JDS Fitel, Inc. (a) 2,061 173
Laidlaw, Inc. 286,300 2,111
Loblaw Cos., Ltd. 2,016 51
MacMillan Bloedel, Ltd. 2,340 42
Magna International, Inc. Class A 790 45
Mitel Corp. NPV (a) 125,000 832
National Bank of Canada 34,700 455
Newbridge Networks Corp. (a) 7,990 228
Noranda, Inc. 15,364 202
Nortel Networks Corp. 6,390 555
Nortel Networks Corp. NPV 14,100 1,207
NOVA Chemicals Corp. NPV 4,700 110
NS Power Holdings, Inc. 20,200 228
Petro-Canada 4,300 59
Placer Dome, Inc. 4,987 58
54 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ---------
Poco Petroleum, Ltd. (a) 7,400 60
Power Corp. of Canada 61,400 1,176
QLT PhotoTherapeutics, Inc. (a) 21,670 1,177
Rogers Communications, Inc.
Class B (a) 5,291 85
Royal Bank of Canada 15,815 698
Seagram Co., Ltd. 73,678 3,670
Seagram Co., Ltd. NPV 170 9
Shaw Communications, Inc. Class B NPV 2,997 119
Slocan Forest Products, Ltd. (a) 5,060 37
Suncor, Inc. NPV 10,507 431
TD Waterhouse Group, Inc. (a) 5,500 136
Teleglobe, Inc. 50,600 1,497
Thomson Corp. (The) 17,980 543
Toronto Dominion Bank (The) New 7,116 323
Torstar Corp. Class B 36,800 414
TransCanada Pipelines, Ltd. 15,700 221
United Dominion Industries, Ltd. 1,500 37
Westcoast Energy, Inc. 29,004 569
---------
31,197
---------
DENMARK - 0.3%
Danisco 6,084 274
Great Nordic Store Nord AS 5,000 168
ISS International Series B (a) 19,540 1,043
Jyske Bank AS (Regd) 14,141 1,343
Ratin A/S Series B 3,769 442
Sydbank A/S 3,699 154
---------
3,424
---------
FINLAND - 1.9%
Enso OY Series A 46,000 493
Fortum Corp. 257,400 1,244
Helsinki Telephone Corp. Series E 94,500 4,481
Huhtamaki OY Series I Free 3,000 109
KCI Konecranes International PLC 6,002 206
Kesko Oyj 105,700 1,422
Merita, Ltd. Series A 51,100 290
Metsa-Serla Oyj Series B 72,000 612
Nokia Corp. - ADR 24,000 2,198
Nokia Oyj 56,081 4,914
OY Tamro AB 41,300 170
Pohjola Series B 7,300 374
Rauma Group (The) 11,500 136
Rautaruukki Oyj 28,500 172
Sampo Insurance Co., Ltd. Series A 17,707 513
Sonera Group Oyj 82,700 1,807
UPM-Kymmene Oyj 12,955 371
Valmet Corp. Series A 14,700 168
---------
19,680
---------
FRANCE - 10.3%
Accor SA 11,618 2,916
Alcatel Alsthom 37,555 5,284
Alstom (a) 194,359 6,111
Alstom - ADR New (a) 26,730 855
Assurances Generales de France 21,640 1,042
AXA - UAP 8,543 1,042
Banque Nationale Paris 47,414 3,949
Bongrain SA 2,510 947
Bouygues 10,854 2,868
Bouygues SA New (a) 10,854 29
Canal Plus 440 123
Cap Gemini Sogeti 32,699 5,137
Carrefour SA (a) 15,980 2,347
Castorama Dubois 1,000 237
Chargeurs International SA (a) 4,200 234
Christian Dior SA 4,270 695
Cie de St. Gobain 15,114 2,407
CNP Assurances (a) 21,637 591
Coflexip SA 24,340 2,089
Credit Commercial de France 4,671 505
Dexia France 12,823 1,716
Dexia France New 2,955 395
Elf Aquitaine - ADR 28,900 2,126
Elf Aquitaine SA 33,122 4,859
Eridania Beghin-Say SA 1,843 264
Euro RSCG 1,000 215
France Telecom SA 8,800 664
Galeries Lafayette (a) 6,000 794
Groupe Danone 13,325 3,434
Imetal 701 104
L'Air Liquide 14,325 2,252
Lafarge SA 8,173 777
Lafarge SA (BR) 14,670 1,394
Lagardere Groupe (Regd) 69,770 2,596
Legris Industries SA 4,600 188
LVMH Moet-Hennessy 2,400 702
LVMH New (a) 2,400 70
Michelin (Cie Gen) Class B (Regd) 35,957 1,470
Paribas 8,941 1,002
Pechiney International Class A 33,600 1,444
Peugeot SA 12,265 1,934
Renault 3,100 135
Rhodia SA 14,507 275
Rhone-Poulenc SA Class A - ADR 42,480 1,940
Sanofi-Synthelabo SA (a) 12,931 549
International Fund 55
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ---------
Schneider SA 7,840 440
Scor SA 6,000 298
Sefimeg (Regd) 2,100 146
SEITA 9,897 571
Sidel SA 3,450 419
Simco (Regd) 3,900 330
Societe BIC SA 41,000 2,162
Societe Generale 29,662 5,226
Sodexho 3,200 551
Suez Lyonnaise des Eaux 33,996 6,129
Sylea 2,800 178
Thomson-CSF 48,718 1,692
Total Co. SA Class B (a) 52,284 6,743
TV Francaise (TFI) 7,040 1,641
Usinor Sacilor 130,153 1,939
Vallourec (Usin) 460 18
Vivendi (a) 119,632 9,688
---------
108,878
---------
GERMANY - 8.1%
Allianz AG (Regd) 1,367 379
AMB Aachener & Muenchener
Beteiligungs AG 2,130 216
BASF AG 33,474 1,479
Bayer AG 128,620 5,357
Bayerische Motoren Werk AG 4,200 2,888
Bayerische Vereinsbank AG 69,700 4,527
BHF - Bank AG 9,277 317
Bilfinger & Berger BAU AG 4,900 121
Commerzbank AG 40,400 1,226
Continental AG 94,551 2,242
DaimlerChrysler AG 37,011 3,205
Deutsche Bank AG 50,959 3,107
Deutsche Lufthansa AG 60,000 1,087
Deutsche Pfandbrief &
Hypothekenbank AG 8,000 726
Deutsche Telekom AG 34,871 1,463
Dresdner Bank AG 9,250 361
Fresenius Medical Care AG 1,688 101
GEA AG (a) 42,520 1,280
Gerresheimer Glas AG 11,350 177
Hannover Rueckversicherungs AG 7,492 599
Hoechst AG 143,241 6,482
IKB Deutsche Industriebank AG 2,250 42
Karstadt AG 7,151 3,435
KM Europa Metal AG 11,170 581
Mannesmann AG 71,987 10,738
Mannheimer Aktiengesellschaft (a) 500 257
Merck KGAA 58,900 1,915
Meto AG New NPV (a) 14,800 73
Metro AG 2,900 180
Muenchener Rueckversicherungs-
Gesellschaft AG NPV 3,834 709
Phoenix AG 11,000 183
Preussag AG (a) 15,400 827
RWE AG 49,200 2,277
SAP AG 1,019 345
Schering AG 5,857 621
Schmalbach Lubeca AG 5,323 834
SGL Carbon AG (a) 2,000 155
Siemens AG 142,329 10,975
SKW Trostberg AG 7,600 173
Software AG NPV (a) 33,500 1,071
Stinnes AG NPV (a) 17,227 268
Tarkett AG 22,184 197
Veba AG 156,612 9,201
Viag AG 4,194 1,980
Volkswagen AG 20,460 1,310
---------
85,687
---------
HONG KONG - 1.7%
Asia Satellite Telecommunications
Holdings, Ltd. 11,000 26
Cathay Pacific Airways 211,000 324
Cheung Kong Holdings, Ltd. 93,200 829
China Telecom (Hong Kong), Ltd. (a) 13,900 39
CLP Holdings, Ltd. 161,300 784
Dairy Farm International
Holdings, Ltd. (a) 26,000 31
Dao Heng Bank Group, Ltd. 95,000 426
First Pacific Co. 5,434 5
Giordano International, Ltd. 50,000 35
Great Eagle Holdings 644,849 1,139
Hang Lung Development Co. 250,000 309
Hang Seng Bank 13,500 151
Henderson Investment, Ltd. 1,460,000 1,016
Hong Kong & China Gas Co., Ltd. 77,770 113
Hong Kong Electric Holding, Ltd. 962,814 3,102
Hong Kong Telecommunications, Ltd. 217,900 566
HSBC Holdings (UK Regd) PLC 24,181 882
Hutchison Whampoa, Ltd. 111,800 1,012
Jardine Matheson
Holdings, Ltd. - ADR (a) 232,700 1,164
Jardine Strategic
Holdings, Ltd. - ADR (a) 279,000 725
JCG Holdings, Ltd. NPV 140,800 67
Johnson Electric Holdings, Ltd. 19,400 80
Li & Fung, Ltd. 17,700 42
National Mutual Asia 60,200 48
New World Development Co., Ltd. 33,200 99
Orient Overseas International Ltd. (a) 188,000 69
QPL International Holdings, Ltd. (a) 640,000 196
56 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ---------
SmarTone Telecommunications
Holdings, Ltd. 65,900 234
Sun Hung Kai Properties, Ltd. 104,600 954
Swire Pacific, Ltd. Class A 12,400 61
Tai Cheung Holdings 73,000 22
Television Broadcast 8,000 38
Vitasoy International Holdings, Ltd. 500,000 176
Wharf Holdings 912,300 2,846
Wing Hang Bank, Ltd. 21,900 70
---------
17,680
---------
IRELAND - 0.3%
Bank of Ireland 23,082 389
CRH PLC 58,299 1,032
Greencore Group PLC 50,000 155
Irish Life & Permanent PLC 112,915 1,176
Jefferson Smurfit Group PLC 95,700 225
---------
2,977
---------
ITALY - 3.6%
Assicurazioni Generali SPA 18,126 628
Banca Commerciale Italiana 283,000 2,065
Banca Nazionale del Lavoro (a) 801,489 2,520
Banca Pop di Milano 55,343 427
Banca Popolaire di Bergamo CV 42,500 933
Banco Fideuram SPA 116,000 676
Bulgari SPA 112,000 753
Class Editori SPA 181,400 1,449
ENI SPA - ADR 34,000 2,040
Ente Nazionale Idrocarburi
SPA (Regd) 330,278 1,971
Fiat SPA di Risp 264,358 451
Finmeccanica SPA (a) 608,534 560
Gruppo Editoriale L'Espresso 55,300 895
Istituto Bancario San Paolo
di Torino - ADR 21,945 603
Istituto Mobiliare Italiano SPA 219,880 2,992
Italgas (Soc. Ital.) 78,139 328
Luxottica Group SPA - ADR 70,000 1,089
Magneti Marelli SPA 73,500 97
Mediaset SPA 468,935 4,167
Mediolanum SPA 37,900 291
Mondadori (Arnoldo) Editore SPA 142,200 2,463
Monte dei Paschi Siena SPA (a) 23,234 103
Montefibre di Risp 90,000 47
Olivetti Group SpA (a) 211,059 507
Pirelli SPA 395,800 1,077
Telecom Italia Mobile SPA di Risp 85,384 315
Telecom Italia SPA (a) 571,442 3,099
Telecom Italia SPA di Risp (a) 595,329 6,187
---------
38,733
---------
JAPAN - 21.3%
Able, Inc. 28,000 1,435
ADERANS Co., Ltd. 2,300 98
Advantest 1,600 176
Aiful Corp. 11,120 1,362
Alps Electric Co. 11,000 258
Aoki International 27,000 125
Aoyama Trading Co. 45,000 1,421
Aruze Corp. NPV 2,000 197
Asahi Bank, Ltd. 75,000 360
Asahi Glass Co. 20,000 130
Bank of Tokyo - Mitsubishi, Ltd. 128,000 1,823
Banyu Pharmaceutical 9,000 149
Belluna Co., Ltd. 79,000 2,273
Bridgestone Tire Corp. 27,000 817
Canon Chemicals, Inc. 1,000 8
Canon, Inc. 328,000 9,436
Chichibu Onoda Cement Corp. 32,000 92
Chugai Pharmaceutical Co., Ltd. 110,000 1,186
Citizen Watch Co., Ltd. 44,000 382
Credit Saison Co. 92,000 1,924
Dai Ichi Kangyo Bank 16,000 103
Dai Ichi Pharmaceutical Co. 21,000 326
Dai Nippon Printing, Ltd. 18,000 288
Dai-Tokyo Fire & Marine 418,000 1,503
Daifuku Machinery Co. 1,000 7
Daikin Industries, Ltd. 14,000 163
Daito Trust Construction 59,990 669
Daiwa Kosho Lease Co., Ltd. 104,000 456
Daiwa Securities 137,000 906
DDI Corp. 107 666
Deodeo Corp. 18,000 260
East Japan Railway Co. 385 2,069
Ebara Corp. 16,000 190
Eisai Co. 104,100 2,052
Ezaki Glico Co. 76,000 455
Fanuc Co. 7,800 419
Fuji Bank, Ltd. 334,000 2,330
Fuji Heavy Industries, Ltd. 373,000 2,880
Fuji Machine Manufacturing Co. 50,000 1,542
Fuji Photo Film Co. 18,000 681
Fuji Seal, Inc. 7,000 972
Fuji Soft ABC, Inc. 1,900 113
Fujitsu Support and Service, Inc. 20,000 3,029
Fujitsu, Ltd. 57,000 1,147
Funai Electric Co., Ltd. 1,100 218
Furukawa Electric Co. 36,000 165
General Sekiyu KK 32,000 102
International Fund 57
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ---------
Heiwa Corp. 25,100 452
Hikari Tsushin, Inc. 1,200 371
Hitachi Software
Engineering Co., Ltd. 2,500 124
Hitachi, Ltd. 1,086,000 10,189
Hokkaido Electric Power Co., Inc. 24,400 359
Honda Motor Co., Ltd. 69,000 2,926
Hoya Corp. 3,000 169
Inax Corp. 11,000 67
Industrial Bank of Japan, Ltd. 15,000 119
ITO EN, Ltd. 1,100 74
Ito-Yokado Co., Ltd. 71,000 4,754
Itochu Corp. (a) 200,000 498
Japan Telecom Co., Ltd. 6 85
Japan Tobacco, Inc. 441 4,885
Kaneka Corp. 21,000 198
Kao Corp. 216,000 6,071
Kawasaki Steel Corp. 239,000 447
Keyence Corp. 700 123
Kinki Coca-Cola Bottling 32,000 556
Kirin Brewery Co. 268,000 3,212
Kissei Pharmaceutical Co. 35,000 696
Koa Fire & Marine 97,000 307
Kojima Co., Ltd. 38,800 1,293
Kokusai Denshin Denwa 3,400 244
Konami Co., Ltd. 7,500 310
Koyo Seiko Co., Ltd. 1,000 9
Kuraray Co., Ltd. 6,000 72
Kurimoto Iron Works 97,000 265
Kyocera Corp. 8,400 493
Kyowa Exeo Corp. 8,000 68
Kyushu Electric Power 13,100 201
Laox 12,000 104
Mabuchi Motor Co., Ltd. 27,500 2,557
Makita Corp. 106,000 1,200
Marubeni Corp. 935,000 1,955
Maruichi Steel Tube 51,000 667
Matsumotokiyoshi 35,000 2,098
Matsushita Communication 2,000 143
Matsushita Electric
Industrial Co., Ltd. 469,000 9,111
Matsushita-Kotobuki
Electric Co., Ltd. 4,000 113
Meiwa Estate Co., Ltd. 38,800 1,620
Mikuni Coca-Cola Bottling 4,000 81
Minebea Co., Ltd. 232,000 2,589
Minolta Camera Co. 15,000 77
Mitsubishi Chemical 171,000 592
Mitsubishi Corp. 47,000 319
Mitsubishi Electric Corp. 215,000 826
Mitsubishi Estate Co., Ltd. 43,000 420
Mitsubishi Heavy Industries 374,000 1,518
Mitsui Mining & Smelting 27,000 139
Mitsui O.S.K. Lines 156,000 335
Mitsui Petrochemical Industry 4,000 26
Mitsui Trust & Banking Co., Ltd. 82,000 131
Mitsukoshi (a) 288,000 1,252
Mitsumi Electric Co. 4,000 112
Murata Manufacturing Co., Ltd. 56,000 3,685
Namco 62,100 1,668
NEC Corp. 173,000 2,152
NHK Spring Co. 12,000 67
Nichicon Corp. 11,000 160
Nichido Fire & Marine 188,400 970
Nichiei Co., Ltd. 31,400 2,751
NIDEC Corp. 1,600 241
Nihon Unisys 11,000 239
Nikko Securities Co., Ltd. 268,000 1,730
Nintendo Co., Ltd. 28,600 4,022
Nippon Comsys Corp. 8,000 130
Nippon Denso Co. 5,000 102
Nippon Fire & Marine 113,000 383
Nippon Meat Packers, Inc. 6,000 78
Nippon Steel Corp. 141,000 328
Nippon System Development 23,500 1,399
Nippon Telegraph & Telephone Corp. 651 7,588
Nippon Yusen 281,000 1,082
Nippon Zeon Co., Ltd. 24,000 175
Nishimatsu Construction 259,000 1,486
Nissan Chemical Industries, Ltd. 15,000 91
Nissan Motor Co., Ltd. (a) 691,000 3,302
Nitto Denko Corp. 9,000 189
Nomura Securities Co., Ltd. 159,000 1,862
NTT Mobile Communication
Network, Inc. 115 1,559
NTT Mobile Communications
Network, Inc. NPV New (a) 468 6,267
Orix Corp. 3,300 295
Osaka Gas Co. 85,000 289
Otsuka Kagu 900 163
Paris Miki, Inc. 3,600 196
Ricoh Co., Ltd. 49,000 675
Rinnai Corp. 78,000 1,793
Rohm Co. 33,000 5,169
Ryohin Keikaku Co., Ltd. 5,500 1,384
Sakura Bank, Ltd. 745,000 2,827
Sanden Corp. 16,000 128
Sangetsu Co. 29,000 617
Sanki Engineering Co. 11,000 74
Sankyo Co., Ltd. 71,000 1,790
Sankyo Co., Ltd. GUNMA 52,100 2,494
Secom Co. 18,000 1,875
58 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ---------
Sekisui Chemical Co., Ltd. 248,000 1,439
Sekisui House, Ltd. 48,000 518
Sharp Corp. 75,000 887
Shimano, Inc. 1,200 28
Shin-Etsu Chemical Co. 14,400 482
Shionogi & Co. 188,000 1,487
Shohkoh Fund & Co., Ltd. 4,370 3,136
Skylark Co. 54,300 1,167
SMC Corp. 600 67
Snow Brand Milk 15,000 73
Softbank Corp. 3,600 729
Sony Corp. 63,500 6,850
Sony Music Entertainment, Inc. 10,800 920
Sumitomo Bakelite Co., Ltd. 16,000 123
Sumitomo Bank 103,000 1,278
Sumitomo Rubber Industries 235,000 1,663
Sundrug Co., Ltd. 17,400 820
Suzuki Motor Corp. 16,000 255
Tadano 45,000 127
Takeda Chemical Industries 68,000 3,154
Takefuji Corp. 14,100 1,458
TDK Corp. 33,000 3,020
Terumo Corp. 13,000 290
THK Co., Ltd. 2,800 65
Toc Co. 50,000 424
Toda Corp. 5,000 24
Toho Bank 100,000 335
Tohoku Electric Power 19,700 298
Tokai Bank 24,000 137
Tokyo Electric Power 11,800 249
Tokyo Electronics 2,000 136
Tokyo Gas Co. 107,000 264
Tokyo Seimitsu Co., Ltd. 3,700 236
Toppan Forms Co., Ltd. 7,000 133
Toppan Printing 17,000 190
Toshiba Corp. 413,000 2,946
Tostem Corp. 16,000 308
Toyo Seikan Kaisha, Ltd. 98,000 2,204
Toyota Motor Corp. 116,000 3,673
Trend Micro, Inc. 500 84
Uni-Charm Corp. 2,500 108
UNY Co., Ltd. 6,000 90
West Japan Railway Co. 569 2,182
World Co., Ltd. 2,500 182
Yakult Honsha Co., Ltd. 8,000 73
Yamanouchi Pharmaceutical 64,000 2,450
Yamato Kogyo Co. 42,000 306
Yamato Transport 7,000 122
Yodogawa Steel Works, Ltd. 71,000 293
Yonekyu Corp. 3,000 41
York-Benimaru Co., Ltd. 2,900 110
Yoshitomi Pharmaceutical 4,000 50
---------
226,144
---------
MALAYSIA - 0.3%
Berjaya Leisure Berhad 60,000 35
Carlsberg Brewery Malaysia Berhad 170,000 434
Commerce Asset Holdings 180,000 400
Golden Hope Plantation 50,000 39
Kumpulan Guthrie 392,000 234
Malayan Banking Berhad 233,000 628
Malaysian Airline System 50,000 61
Oriental Holdings Berhad 30,000 74
Perlis Plantations 216,000 227
Resorts World Berhad 543,000 1,148
Technical Resource Industries Berhad 396,000 290
---------
3,570
---------
NETHERLANDS - 6.4%
ABN Amro Holdings NV 130,065 2,816
Aegon NV 3,100 225
AKZO Nobel NV 43,200 1,817
AKZO Nobel NV - ADR 34,600 1,466
Benckiser NV Class B 2,725 145
Buhrmann NV 67,634 1,091
Elsevier NV 128,000 1,484
Equant NV (a) 29,400 2,767
Equant NV NPV (a) 16,499 1,521
European Vinyls Corp.
International NV 7,200 61
Fortis (NL) NV 10,964 339
Getronics NV 5,812 223
Heineken Holding NV Class A 15,624 588
Heineken NV 6,550 335
Hollandsche Beton Groep NV 70,402 900
Hunter Douglas NV 54,176 1,860
ING Groep NV 125,861 6,812
Koninklijke (Royal) Philips
Electronics NV (a) 25,926 2,556
Koninklijke (Royal) Philips
Electronics NV NY Reg Share NPV (a) 14,130 1,425
Koninklijke Ahold NV 70,918 2,442
Koninklijke KPN NV 206,134 9,668
Koninklijke KPN NV- ADR 37,523 1,801
Koninklijke Numico NV 8,286 293
Laurus NV 25,117 583
Pakhoed Kon NV CVA 12,631 299
Royal Dutch Petroleum Co. 122,723 7,186
STMicroelectronics (a) 23,440 1,561
Stork NV 59,443 1,354
International Fund 59
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ---------
TNT Post Group NV 5,337 127
Unilever NV (a) 12,513 843
United Pan-Europe Communications
NV (a) 48,979 2,656
Vedior 44,165 751
Vendex NV 185,492 4,952
Verenigde Nederlandse
Uitgeversbedrijven Verenigd Bezit 91,726 3,664
Wereldhave NV 10,338 530
Wolters Kluwer NV (a) 32,060 1,277
---------
68,418
---------
NEW ZEALAND - 0.7%
Carter Holt Harvey 773,300 925
Fletcher Challenge Paper 1,155,909 863
Lion Nathan, Ltd. 13,000 31
Telecom Corp. of New Zealand, Ltd.
NPV 1,408,291 6,040
Warehouse Group (The), Ltd. NPV 5,300 20
---------
7,879
---------
NORWAY - 0.2%
Christiania Bank OG Kreditkasse 45,000 162
Norsk Hydro AS 10,999 415
Norske Skogindustrier AS Class A 4,000 147
Nycomed Amersham PLC 27,900 198
Orkla ASA Class A 30,000 466
Orkla ASA Class B 29,732 404
---------
1,792
---------
PORTUGAL - 0.7%
Banco Pinto & Sotto Mayor SA 89,096 1,582
Electricidade de Portugal SA 8,500 153
Portugal Telecom SA 87,798 3,570
Portugal Telecom SA New (a) 56,959 1
Telecel-Comunicacaoes Pessoaissa 14,029 1,807
---------
7,113
---------
RUSSIA - 0.3%
Global TeleSystems Group, Inc. (a) 33,720 2,729
---------
SINGAPORE - 0.7%
City Developments 18,700 120
Creative Technology, Ltd. 22,000 290
Datacraft Asia, Ltd. (a) 13,000 57
Development Bank of Singapore, Ltd.
(Alien Market) 280,900 3,433
Natsteel Electronics, Ltd. 365,000 1,598
Overseas Chinese Banking
(Alien Market) 18,400 154
Overseas Union Bank (Alien Market) 14,410 69
Singapore Airlines, Ltd. (Alien
Market) 11,300 108
Singapore Land 46,000 135
Singapore Press Holdings, Ltd. 10,700 182
Singapore Technologies
Engineering, Ltd. 36,400 41
Singapore Telecommunications, Ltd. 83,400 143
Straits Steamship Land, Ltd. 110,000 207
United Overseas Bank, Ltd.
(Alien Market) 63,400 443
Venture Manufacturing (Singapore),
Ltd. 17,000 131
---------
7,111
---------
SOUTH KOREA - 0.2%
Samsung Electronics Co. - GDR 39,124 2,085
---------
SPAIN - 4.3%
Argentaria, Caja Postal y Banco
Hipotecario de Espana SA - ADR 24,200 1,113
Banco Popular Espanol SA 50,942 3,663
Banco Santander Central Hispano
SA (a) 515,840 5,371
Corporacion Bancaria de Espana
SA (Regd) 303,504 6,899
Endesa SA 97,318 2,075
Gas Y Electricidad SA Series 2 19,741 1,557
Grupo Dragados SA (a) 19,800 234
Iberdrola SA 190,781 2,903
Indra Sistemas SA 120,866 1,302
Repsol SA (a) 12,900 265
Repsol SA - ADR 95,100 1,932
Superdiplo SA (a) 45,000 997
Tabacalera SA Class A (Regd) 347,061 7,012
Telefonica SA (a) 205,319 9,912
Transportes Azkar SA 2,900 30
Union Electrica Fenosa SA 43,000 562
Vallehermoso SA 17,403 167
---------
45,994
---------
SWEDEN - 1.3%
ABB, Ltd. (a) 2,159 202
Assa Abloy AB Series B (a) 49,888 541
Assa Abloy AB Series B New (a) 49,888 11
Autoliv, Inc. 57,356 1,750
Electrolux AB Series B 65,025 1,363
Enator AB 85,200 2,559
60 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ---------
Modern Times Group MTG AB
Series B (a) 58,800 1,278
Skandia Forsakrings AB 81,009 1,517
Stora Enso Oyj Class R 32,066 348
Svenska Celluosa Series B 19,000 492
Svenska Handelsbanken AB
Series A (a) 51,699 621
Telefonaktiebolaget Ericsson (LM)
Series B 62,089 1,993
Tornet Fastighets AB 52,000 708
---------
13,383
---------
SWITZERLAND - 3.4%
ABB, Ltd. (a) 1,621 153
Baer Holdings AG (BR) 1,130 3,219
Baloise Holding, Ltd. 925 754
Barry Callebaut AG (Regd) 8,885 1,360
Bobst AG (BR) 300 356
Credit Suisse Group (Regd) 1,984 343
Forbo Holding AG (Regd) 3,380 1,343
Geberit International AG (a) 690 157
Gretag Imaging Group 11,080 1,071
Holderbank Financiere
Glarus AG (BR) 150 177
Kuoni Reisen AG Series B 141 544
Nestle SA (Regd) 735 1,324
Novartis AG (Regd) 4,951 7,227
Richemont Series A (BR) 94 181
Roche Holdings Genusscheine AG NPV 132 1,356
Schweiz Ruckversicher (Regd) 676 1,287
Schweizerische Lebensversicherungs-
und Rentenanstalt 4,030 2,439
SGS Holding (BR) (a) 120 124
Sulzer AG (Regd) (a) 2,400 1,458
Swisscom AG (Regd) 11,809 4,442
Swisslog Holding AG 8,858 1,072
UBS AG 16,563 4,942
Valora Holding AG (Regd) 1,200 276
Zurich Allied AG 1,096 623
---------
36,228
---------
UNITED KINGDOM - 21.4%
3i Group PLC 41,215 455
Abbey National PLC 124,380 2,336
Alliance & Leicester PLC 144,500 1,953
Allied Zurich PLC 310,760 3,906
Anglian Water PLC 209,916 2,323
Arjo, Wiggins, Appleton PLC 450,000 1,564
Arriva PLC 27,900 164
ASDA-MFI Group PLC 173,076 593
Ashtead Group PLC 275,390 760
Associated British Foods PLC 293,000 1,935
AstraZeneca Group PLC 6,843 267
Bank of Scotland
Governor & Co. PLC 51,462 688
Barclays Bank PLC 190,163 5,530
Barratt Development PLC 110,295 619
Bass PLC 195,914 2,841
BBA Group PLC 122,682 940
BG PLC 396,500 2,419
Billiton PLC 144,600 506
Blue Circle Industries PLC 353,000 2,354
BOC Group PLC 107,986 2,114
Boots Co. PLC 175,000 2,077
British Aerospace PLC 630,357 4,104
British Airways PLC 812,126 5,607
British Airways PLC - ADR 8,270 591
British American Tobacco PLC 393,526 3,712
British Petroleum Co. PLC 362,002 6,482
British Sky Broadcasting Group PLC 151,448 1,405
British Steel PLC 343,600 890
British Telecom PLC 221,125 3,702
Bunzl PLC 405,500 2,010
Burmah Castrol PLC (a) 27,916 529
Cable & Wireless Communications
PLC (a) 232,815 2,239
Cable & Wireless PLC 274,000 3,494
Cadbury Schweppes PLC (a) 46,600 297
Carlton Communications PLC 25,700 213
Centrica PLC (a) 604,900 1,421
Coats Viyella PLC 290,000 233
Commercial Union Assurance Co.
PLC 223,829 3,223
Compass Group PLC 53,700 533
Courtaulds Textile Co. PLC 130,000 334
Diageo PLC 791,183 8,312
Dixon Group PLC 28,170 528
Enterprise Oil PLC 442,900 2,826
Fairview Holdings PLC 79,719 171
Gallaher Group PLC 176,306 1,087
General Electric Co. PLC 19,900 202
GKN PLC 176,000 3,004
Glaxo Wellcome PLC 383,364 10,653
Glynwed International PLC 93,100 305
Granada Group PLC 175,000 3,241
Great University Stores PLC 395,940 4,416
Hanson PLC 47,100 423
Hays PLC 27,400 289
Hillsdown Holdings PLC 89,438 203
HSBC Holdings PLC 115,722 4,101
International Fund 61
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ---------
Hyder PLC 86,346 1,019
IMI PLC 26,700 108
Imperial Chemical Industries PLC 172,439 1,703
Invensys PLC 311,025 1,471
Kingfisher PLC 85,000 992
Laird Group PLC 260,830 1,081
LASMO PLC 430,000 969
Lloyds TSB Group PLC 351,062 4,767
Medeva PLC 303,965 493
MEPC PLC 167,286 1,362
MFI Furniture Group PLC 177,841 113
Mirror Group News PLC 491,000 1,915
Morgan Crucible PLC 391,188 1,668
National Grid Group PLC 102,758 716
National Power PLC 73,145 532
Newsquest PLC 120,000 863
Northern Foods PLC 63,700 131
Northern Rock PLC 29,900 228
Nycomed Amersham PLC 74,367 520
Ocean Group PLC 13,500 222
Orange PLC (a) 238,810 3,505
Pearson PLC 23,700 482
Pen & Orient DFD PLC 115,200 1,728
Pilkington Brothers PLC 142,900 195
Powell Duffryn PLC 68,000 542
PowerGen PLC 392,128 4,222
Premier Consolidated Oil PLC (a) 613,971 179
Prudential Corp. PLC 40,400 595
Racal Electronics PLC 60,000 366
Railtrack Group PLC 368,096 7,525
Reed International PLC 268,300 1,785
Rentokil Initial PLC 19,000 74
Reuters Group PLC 20,600 271
Rexam PLC 346,000 1,402
Rio Tinto Corp. PLC (Regd) 308,953 5,177
RMC Group PLC 13,200 212
Royal & Sun Alliance Insurance
Group PLC (a) 613,437 5,497
Royal Bank of Scotland Group PLC 100,500 2,059
Safeway PLC 491,722 1,961
Sainsbury (J.) PLC 70,132 442
Scottish Hydro-Electric PLC 257,895 2,634
Select Appointments
Holdings PLC (a) 11,100 132
Shell Transportation & Trading PLC
(Regd) 847,603 6,360
SkyePharma PLC (a) 1,187,000 926
Smith & Nephew PLC 752,400 2,277
SmithKline Beecham PLC 172,863 2,248
Somerfield PLC 1,348,272 6,323
South West Water PLC 119,169 1,999
Storehouse PLC 604,237 1,286
Sun Life and Provincial Holdings PLC 85,859 613
Tarmac, Ltd. PLC 1,057,747 1,984
Tate & Lyle, Ltd. PLC 70,400 438
Tesco Store Holdings PLC 50,700 131
Thames Water PLC 30,250 480
Thistle Hotels PLC (a) 142,222 392
TI Group PLC 18,400 124
Tomkins PLC 722,290 3,131
Trinity PLC 40,000 355
Unilever PLC (a) 38,785 344
United Biscuits (Holdings) PLC 200,000 599
Vickers PLC 66,033 170
Vodafone Group PLC 690,418 13,582
Williams PLC 25,000 165
Wimpey (George), Ltd. PLC 150,000 357
Wolseley PLC 191,000 1,438
Woolwich PLC 56,400 330
WPP Group PLC 193,300 1,635
Zeneca Group PLC 20,800 803
---------
227,472
---------
UNITED STATES - 0.1%
MIH, Ltd. (a) 22,900 604
---------
TOTAL COMMON STOCKS
(cost $891,712) 1,002,490
---------
PREFERRED STOCKS - 0.8%
AUSTRALIA - 0.1%
News Corp., Ltd. 97,666 743
Sydney Harbour Casino Holdings, Ltd. 807,670 785
---------
1,528
---------
GERMANY - 0.7%
Draegerwerk AG 750 11
Dyckerhoff AG 250 76
Grohe (Friedrich) AG 1,700 480
Hugo Boss 892 1,195
Krones AG NPV (a) 14,000 433
M.A.N. AG (a) 2,500 57
Porsche AG 1,060 2,491
ProSieben Media AG NV 2,755 125
Rheinmetall AG 68,500 1,228
Volkswagen AG 19,128 707
Wella AG 1,128 820
---------
7,623
---------
62 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ---------
ITALY - 0.0%
Fiat SPA 31,397 50
---------
JAPAN - 0.0%
Sanwa International Financial
Bermuda Trust (conv.) 39,000,000 334
---------
TOTAL PREFERRED STOCKS
(cost $10,006) 9,535
---------
PRINCIPAL
AMOUNT
(000)
$
----------
LONG-TERM INVESTMENTS - 0.1%
JAPAN - 0.1%
Yamanouchi Pharmaceutical (conv.)
1.250% due 03/13/14 JPY 40,000 803
---------
TOTAL LONG-TERM INVESTMENTS
(cost $434) 803
---------
SHORT-TERM INVESTMENTS - 3.8%
UNITED STATES - 3.8%
Frank Russell Investment Company Money
Market Fund,
due on demand (b) 34,882 34,882
United States Treasury Notes
5.875% due 07/31/99 (b)(c) 5,000 5,005
---------
TOTAL SHORT-TERM INVESTMENTS
(cost $39,887) 39,887
---------
MARKET
VALUE
(000)
$
---------
TOTAL INVESTMENTS - 99.1%
(identified cost $942,039) 1,052,715
OTHER ASSETS AND LIABILITIES,
NET - 0.9% 9,106
---------
NET ASSETS - 100.0% 1,061,821
=========
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Held as collateral in connection with futures contracts purchased
by the Fund.
Abbreviations:
ADR - American Depositary Receipt
BR - Bearer
GDR - Global Depositary Receipt
NPV - No Par Value
NV - Nonvoting
Foreign Currency Abbreviations:
CAD - Canadian dollar
DKK - Danish krone
EUR - Euro dollar
GBP - British pound
JPY - Japanese yen
SEK - Swedish krone
USD - U.S. dollar
See accompanying notes which are an integral part of the financial statements.
International Fund 63
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
--------- --------------
FUTURES CONTRACTS
CAC-40 Index (France)
expiration date 09/99 177 $ 214
DAX Index (Germany)
expiration date 09/99 62 75
FTSE - 100 Index (UK)
expiration date 09/99 132 (382)
TOPIX Index (Japan)
expiration date 09/99 89 470
--------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ 377
==============
MARKET
% OF VALUE
NET (000)
INDUSTRY DIVERSIFICATION ASSETS $
- ------------------------------------ ---------- ---------
Auto & Transportation 6.0% 64,011
Consumer Discretionary 15.5 165,373
Consumer Staples 6.7 71,278
Financial Services 17.2 182,144
Health Care 5.0 52,617
Integrated Oils 1.5 15,625
Materials & Processing 11.0 117,229
Miscellaneous 2.2 22,989
Other Energy 3.8 40,875
Producer Durables 8.4 89,291
Technology 5.4 57,089
Utilities 12.5 133,504
Short-Term Investments 3.8 39,887
Long-Term Investments 0.1 803
---------- ---------
Total Investments 99.1 1,052,715
Other Assets and Liabilities, Net 0.9 9,106
---------- ---------
NET ASSETS 100.0% 1,061,821
========== =========
MARKET
% OF VALUE
NET (000)
Geographic Diversification ASSETS $
- ------------------------------------ ---------- ---------
Europe 42.6% 452,234
Japan 21.4 227,281
United Kingdom 21.4 227,472
Pacific Basin 6.9 74,041
Short-Term Investments 3.8 39,887
Other 3.0 31,800
---------- ---------
Total Investments 99.1 1,052,715
Other Assets and Liabilities, Net 0.9 9,106
---------- ---------
NET ASSETS 100.0% 1,061,821
========== =========
See accompanying notes which are an integral part of the financial statements.
64 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
FOREIGN CURRENCY EXCHANGE SPOT CONTRACTS
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION
DELIVER FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
- ------------ ----------- ---------- --------------
USD 95 DKK 681 07/01/99 $ --
USD 1,240 EUR 1,197 07/01/99 (6)
USD 1,660 EUR 1,604 07/02/99 (6)
USD 196 EUR 189 07/15/99 (1)
USD 4,153 EUR 3,997 07/30/99 (32)
USD 274 GBP 173 07/0199 (2)
USD 2,038 GBP 1,285 07/02/99 (13)
USD 337 JPY 40,675 07/01/99 (1)
USD 44 SEK 369 07/02/99 --
JPY 179,124 EUR 1,434 07/02/99 (1)
CAD 1,535 USD 1,040 07/06/99 (2)
EUR 3,161 USD 3,271 07/01/99 12
EUR 92 USD 95 07/01/99 --
EUR 819 USD 855 07/02/99 11
EUR 124 USD 128 07/06/99 --
EUR 3,130 USD 3,259 07/30/99 32
GBP 927 USD 1,460 07/06/99 (1)
JPY 124,086 USD 1,023 07/01/99 (3)
JPY 2,141 USD 18 07/02/99 --
SEK 1,995 USD 235 07/01/99 --
--------------
$ (13)
==============
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION
DELIVER FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
- ------------- -------------- ---------- --------------
USD 24,138 EUR 23,000 09/17/99 $ (288)
USD 7,946 GBP 5,026 07/30/99 (22)
USD 16,980 GBP 10,650 09/17/99 (182)
USD 8,830 JPY 1,038,188 08/05/99 (203)
USD 13,857 JPY 1,650,000 09/17/99 (58)
EUR 2,500 USD 2,603 09/17/99 11
GBP 5,026 USD 8,130 07/30/99 206
JPY 1,038,188 USD 7,500 08/05/99 (1,126)
JPY 200,000 USD 1,673 09/17/99 --
--------------
$ (1,662)
==============
See accompanying notes which are an integral part of the financial statements.
International Fund 65
<PAGE>
INTERNATIONAL FUND
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
<S> <C> <C>
ASSETS
Investments at market (identified cost $942,039) ................................................ $ 1,052,715
Foreign currency holdings (identified cost $11,232) ............................................. 11,148
Forward foreign currency exchange contracts (cost $91,656) ...................................... 90,903
Foreign currency exchange spot contracts (cost $22,160) ......................................... 22,097
Receivables:
Dividends and interest .......................................................................... 2,457
Investments sold ................................................................................ 15,426
Fund shares sold ................................................................................ 2,669
Foreign taxes recoverable ....................................................................... 1,551
-----------
Total Assets .................................................................................. 1,198,966
LIABILITIES
Payables:
Investments purchased ......................................................... $ 17,415
Fund shares redeemed .......................................................... 3,990
Accrued fees to affiliates .................................................... 716
Other accrued expenses ........................................................ 223
Daily variation margin on futures contracts ................................... 126
Forward foreign currency exchange contracts (cost $91,656) ..................... 92,565
Foreign currency exchange spot contracts (cost $22,160) ....................... 22,110
-----------
Total Liabilities ............................................................................. 137,145
-----------
NET ASSETS ....................................................................................... $ 1,061,821
===========
NET ASSETS CONSIST OF:
Undistributed net investment income .............................................................. $ 4,989
Accumulated net realized gain (loss) ............................................................ 64,067
Unrealized appreciation (depreciation) on:
Investments ..................................................................................... 110,676
Futures contracts ............................................................................... 377
Foreign currency-related transactions ........................................................... (1,811)
Shares of beneficial interest .................................................................... 266
Additional paid-in capital ....................................................................... 883,257
-----------
NET ASSETS ....................................................................................... $ 1,061,821
===========
NET ASSET VALUE, offering and redemption price per share:
Class E ($22,894,950 divided by 574,706 shares of $.01 par value
shares of beneficial interest outstanding) ................................................... $ 39.84
===========
Class I ($1,038,926,275 divided by 26,071,889 shares of $.01 par value
shares of beneficial interest outstanding) ................................................... $ 39.85
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
66 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME
Dividends ....................................................................................... $ 14,797
Dividends from Money Market Fund ................................................................ 1,192
Interest ........................................................................................ 243
Less foreign taxes withheld ..................................................................... (1,689)
-----------
Total Investment Income ....................................................................... 14,543
EXPENSES
Advisory fees ................................................................. $ 3,551
Administrative fees ........................................................... 255
Custodian fees ................................................................ 776
Transfer agent fees ........................................................... 243
Professional fees ............................................................. 36
Registration fees - Class I ................................................... 46
Shareholder servicing fees - Class E .......................................... 7
Trustees' fees ................................................................ 3
Miscellaneous ................................................................. 62
-----------
Total Expenses ................................................................................ 4,979
-----------
Net investment income ............................................................................ 9,564
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ................................................................... 63,209
Futures contracts ............................................................. 7,216
Foreign currency-related transactions ......................................... (8,078) 62,347
-----------
Net change in unrealized appreciation (depreciation) on:
Investments ................................................................... (15,045)
Futures contracts ............................................................. (1,418)
Foreign currency-related transactions ......................................... 714 (15,749)
----------- -----------
Net realized and unrealized gain (loss) .......................................................... 46,598
-----------
Net increase (decrease) in net assets resulting from operations .................................. $ 56,162
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
International Fund 67
<PAGE>
INTERNATIONAL FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
------------------- -----------------
<S> <C> <C>
OPERATIONS
Net investment income ...................................... $ 9,564 $ 14,307
Net realized gain (loss) .................................. 62,347 39,005
Net change in unrealized appreciation (depreciation) ...... (15,749) 73,399
----------- -----------
Net increase (decrease) in net assets
resulting from operations ................................ 56,162 126,711
----------- -----------
DISTRIBUTIONS
From net investment income
Class I .................................................. (403) (8,064)
In excess of net investment income
Class I .................................................. -- (7,643)
From net realized gain on investments
Class I .................................................. (6,729) (16,426)
----------- -----------
Net decrease from distributions ........................ (7,132) (32,133)
----------- -----------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions (888) (53,634)
----------- -----------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ................. 48,142 40,944
NET ASSETS
Beginning of period ........................................ 1,013,679 972,735
----------- -----------
End of period (including undistributed net investment income
of $4,989 and accumulated distributions in excess of
net investment income of $4,172, respectively) ........... $ 1,061,821 $ 1,013,679
=========== ===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
68 International Fund
<PAGE>
INTERNATIONAL FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
----------
NET ASSET VALUE, BEGINNING OF PERIOD ............................. $ 39.07
----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c)........................................ .25
Net realized and unrealized gain (loss) on investments........... .52
----------
Total Income From Investment Operations........................ .77
----------
NET ASSET VALUE, END OF PERIOD.................................... $ 39.84
==========
TOTAL RETURN (%)(a)............................................... 1.97
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands)....................... 22,895
Ratios to average net assets (%)(d):
Operating expenses............................................. --
Net investment income.......................................... --
Portfolio turnover rate (%)(b)................................... 139.82
* For the period May 14, 1999 (commencement of sale) to June 30,
1999(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) Average month-end shares outstanding were used for this calculation.
(d) The ratios are not meaningful due to the Class's short period of
operations.
International Fund 69
<PAGE>
INTERNATIONAL FUND
FINANCIAL HIGHLIGHTS - CLASS I
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
1999* 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............. $ 38.03 $ 34.60 $ 37.39 $ 36.26 $ 34.28 $ 37.34
----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d) ....................... .35 .52 .46 .44 .48 .61
Net realized and unrealized gain (loss)
on investments ................................ 1.74 4.10 (.28) 2.41 3.16 .65
----------- ----------- ----------- ----------- ----------- -----------
Total Income From Investment Operations ....... 2.09 4.62 .18 2.85 3.64 1.26
----------- ----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS
From net investment income ...................... (.02) (.59) (.55) (.35) (.72) (.36)
From net realized gain on investments ........... (.25) (.60) (2.42) (1.37) (.94) (3.96)
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions ........................... (.27) (1.19) (2.97) (1.72) (1.66) (4.32)
----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD ................... $ 39.85 $ 38.03 $ 34.60 $ 37.39 $ 36.26 $ 34.28
=========== =========== =========== =========== =========== ===========
TOTAL RETURN (%)(a)(c) ........................... 5.55 13.52 .58 7.98 10.71 5.38
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ...... 1,038,926 1,013,679 972,735 944,380 796,777 674,180
Ratios to average net assets (%)(b)(c):
Operating expenses, net ....................... .97 .98 1.00 1.04 .88 .32
Operating expenses, gross ..................... .97 .98 1.00 1.05 .89 .34
Net investment income ......................... 1.85 1.38 1.14 1.20 1.41 1.63
Portfolio turnover rate (%)(b)................... 139.82 64.47 79.45 42.69 36.78 71.09
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 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) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
70 International Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- ---------
COMMON STOCKS - 84.6%
ARGENTINA - 3.2%
Banco de Galicia y Buenos Aires
Class B - ADR 57,190 1,151
Banco Frances Rio PL 26,000 169
Central Costanera Class B 140,200 404
Central Puerto SA Class B 120,000 270
Corcemar SA Class B 26,987 128
Dalmine Siderca SA 128,000 168
Inversiones Y Representaciones 93,401 288
Naviera Perez Companc Class B 374,131 2,152
Nobleza Piccardo 53,900 178
Perez Companc SA Class B - ADR 83,370 967
Quilmes Industrial (Regd)(a) 71,000 621
Siderar SA Series A 58,800 177
Telecom Argentina Class B 170,122 936
Telecom Argentina SA Class B - ADR 13,500 361
Telefonica de Argentina Class B 340,000 1,054
Telefonica de Argentina
Class B - ADR 61,900 1,942
Transportadora de Gas del Sur SA
Class B 535,284 1,006
---------
11,972
---------
AUSTRALIA - 0.4%
Lihir Gold, Ltd. (a) 1,016,000 766
Orogen Minerals, Ltd. 800,000 867
---------
1,633
---------
BRAZIL - 2.4%
Aracruz Celulose SA NPV - ADR 43,670 950
Centrais Eletricas Brasileiras SA NPV 65,751,000 1,239
Companhia Brasileira de Distribuicao
Grupo Pao de
Acucar (Regd) - GDR 9,400 176
Companhia Cervejaria Brahma - ADR 21,900 248
Companhia Energetica de Minas
Gerais SA - ADR 23,547 491
Embratel Participacoes SA (a) 26,714,000 199
Forca E Luz (Cia Paul) NPV 15,747,000 1,014
Light Servicos de Eletricidade
SA NPV 3,880,000 309
Light Servicos Eletricidade
SA NPV (a) 1,372,914 109
Makro Atacadista - GDR (a) 60,000 623
Makro Atacadista SA - GDR 60,800 631
Petroleo Brasileiro Petrobras
SA - ADR 24,000 370
Sider Nacional cia NPV 8,700,000 227
Souza Cruz NPV 45,400 319
Tele Centro Sul Participacoes
SA NPV (a) 45,625,000 241
Tele Norte Leste Participacoes
SA NPV 38,355,000 351
Telecomunicacoes Brasileiras
NPV (a) 27,360,000 1
Telesp Celular Participacoes SA NPV 34,060,000 183
Telesp Participacoes SA NPV 39,612,000 510
Uniao de Bancos Brasileiros
SA - (Units) 7,170,000 324
Uniao de Bancos Brasileiros
SA - GDR 14,900 359
White Martins SA NPV 331,407 153
---------
9,027
---------
CHILE - 4.0%
Administradora de Fondos de
Pensiones Provida SA - ADR 17,470 384
Antofagasta Holdings PLC 308,636 1,416
Banco BHIF - ADR 4,700 68
Banco de A. Edwards Series A - ADR 7,800 113
Banco Santander Chile
Series A - ADR 16,400 254
Banco Santiago - ADR 20,000 384
Chilectra SA - ADR 14,300 302
Compania de Telecomunicaciones de
Chile SA - ADR 41,344 1,023
Distribucion y Servicio D&S
SA - ADR 143,800 2,624
Embotelladora Andina SA - ADR
Series A 62,900 1,258
Embotelladora Andina SA - ADR
Series B 58,000 885
Embotelladora Arica SA ADR (a) 78,000 963
Enersis SA - ADR 45,602 1,043
Gener SA - ADR 64,897 1,152
Laboratorio Chile SA - ADR 30,000 540
Maderas y Sinteticos SA - ADR 103,000 1,082
Quinenco SA 143,100 1,342
Sociedad Quimica Y Minera de Chile
SA - ADR 5,500 194
---------
15,027
---------
CHINA - 2.0%
Beijing Datang Power Generation
Company, Ltd. 1,020,000 329
Beijing Enterprises Holdings, Ltd. 118,000 243
China Telecom (Hong Kong), Ltd. (a) 646,000 1,794
China Telecom (Hong Kong), Ltd. -
ADR (a) 12,000 684
72 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Guangdong Kelon Elec Holdings 320,000 373
Huaneng Power International, Inc.
Series N - ADR 145,500 2,492
Jiangsu Expressway Co., Ltd. Class H 4,590,000 994
Jilin Chemical Industrial
Company, Ltd. Class H 1,800,000 218
Yanzhou Coal Mining Co., Ltd.
Series H 1,270,000 454
Zhejiang Expressway Co., Ltd.
Series H 420,000 84
---------
7,665
---------
COLOMBIA - 0.2%
Bancolombia SA - ADR 167,500 796
---------
CROATIA - 0.3%
Pliva d.d (a) 11,600 173
Pliva d.d. - GDR 65,600 984
---------
1,157
---------
CZECH REPUBLIC - 0.7%
Central European Media
Enterprises, Ltd. Class A (a) 33,000 208
Ceske Radiokomunikace - GDR (a) 10,000 349
Komercni Banka AS - ADR (a) 87,700 544
SPT Telecom AS (a) 40,700 660
SPT Telecom AS - GDR (a) 13,000 208
Tabak AS 3,500 832
---------
2,801
---------
ECUADOR - 0.1%
La Cement National - GDR (a) 3,700 266
La Cemento Nacional - GDR (a) 700 50
---------
316
---------
EGYPT - 1.2%
Al-Ahram Beverages Co. S.A.E. (a) 8,700 485
Al-Ahram Beverages Co. S.A.E.
- GDR (a) 40,000 1,115
Al-Ahram Beverages Co. S.A.E.
- GDR (144A)(a) 14,765 415
Egyptian Mobile Phone Network (a) 58,896 1,327
Orascom Construction (a) 27,000 364
Paints & Chemical Industry Co.
- GDR (a) 52,000 335
Paints & Chemical Industry Co.
- GDR (144A)(a) 10,000 65
Suez Cement Co. (Regd) - GDR 31,900 456
---------
4,562
---------
FRANCE - 0.0%
Elf Gabon SA 243 24
---------
GREECE - 3.3%
Alpha Credit Bank SA (a) 3,003 193
Aluminum Co. of Greece Industrial
and Commercial (Regd) 11,800 466
Athens Medical Center SA (Regd) 11,310 282
Attica Enterprises SA 13,063 149
Bank Of Greece SA (a) 1,539 101
Chipita International SA 9,040 236
Commercial Bank of Greece (Regd) 29,186 2,085
Credit Bank (Regd) 35,349 2,275
Hellenic Bottling Co. SA 23,847 575
Hellenic Telecommunication
Organization SA - ADR 5,600 62
Hellenic Telecommunication
Organization SA - GDR 119,082 2,548
Intracom SA 8,414 542
National Bank of Greece (Regd) 18,519 1,210
Panafon Hellenic Telecom SA (a) 3,310 80
Piraeus Bank SA 6,870 198
STET Hellas Telecommunications
SA - ADR (a) 9,000 200
Titan Cement Co. SA 15,758 1,449
---------
12,651
---------
HONG KONG - 0.8%
Chen Hsong Holding 1,900,000 323
China Merchants Holdings
International Co. Ltd. 298,000 261
Cosco Pacific, Ltd. 200,000 166
Goldlion Holdings, Ltd. 76,000 12
New World Infrastructure, Ltd. (a) 1,168,100 2,198
---------
2,960
---------
HUNGARY - 3.0%
BorsodChem - GDR 42,000 1,019
BorsodChem Rt. 12,000 292
Gedeon Richter 10,500 456
Gedeon Richter, Ltd. - GDR 36,248 1,577
Magyar Olaj Es Gas 18,100 436
Magyar Tavkozlesi Rt - ADR 54,370 1,495
Magyar Tavkozlesi Rt. (Regd) 281,576 1,521
Mol Magyar Olaj-Es Gazipari Rt. - GDR 145,600 3,459
Mol Magyar Olay-Es Gazipari - GDR 16,266 386
OTP Bank Rt. 12,060 503
Synergon Information
Systems, Ltd. - GDR (a) 3,000 35
---------
11,179
---------
Emerging Markets Fund 73
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- ---------
INDIA - 4.3%
Bajaj Auto, Ltd. - GDR 21,520 346
BSES, Ltd. (a) 22,800 225
BSES Ltd. - GDR (a) 27,000 266
Genesis India Investment Co. (a) 640,030 6,586
Hindalco Industries, Ltd. - GDR 17,000 327
ICICI, Ltd. - GDR (a) 22,000 228
Indo Gulf Corp., Ltd. - GDR (a) 70,000 81
Indo Gulf Fertilizers
& Chemicals - GDR (a) 200,000 220
Infosys Technologies, Ltd. - ADR 3,200 185
ITC, Ltd. - GDR (a) 65,500 1,827
Larsen & Toubro, Ltd. - GDR 32,250 489
Mahanagar Telephone Nigam, Ltd. - GDR 92,100 790
Mahindra & Mahindra - GDR (a) 39,000 257
Perusahaan Persero Telekom - ADR 93,528 1,163
Reliance Industries, Ltd. - GDS (a) 69,711 697
State Bank of India - GDR 30,100 366
State Bank of India - GDR (a) 40,000 486
Tata Engineering & Locomotive Co. -
GDR (a) 95,400 525
Videsh Sanchar Nigam Ltd. - GDR 104,857 1,324
---------
16,388
---------
INDONESIA - 1.7%
Freeport-McMoRan Copper &
Gold, Inc. Class B 27,300 490
Gulf Indonesia Resources, Ltd. (a) 82,400 948
Indah Kiat Pulp & Paper
(Alien Market)(a) 334,000 154
Perusahaan Per Ind Sat Cor - ADR 21,000 410
PT Astra International, Inc. (a) 361,000 164
PT Bank Internasional Indonesia
(Alien Market)(a) 5,965,000 172
PT Gudang Garam Tbk 320,000 864
PT Hanjaya Mandala Sampoerna (a) 125,000 285
PT Indofood Sukses Makmur Tbk (a) 255,000 346
PT Matahari Putra Prima Tbk (a) 2,000,000 260
PT Ramayana Lestari Sentosa 1,450,000 1,026
PT Unilever Indonesia 19,000 110
Semen Gresik 532,000 1,152
---------
6,381
---------
ISRAEL - 2.3%
Bank Hapoalim, Ltd. 354,210 908
Bank Leumi Le-Israel 597,723 1,129
Bezeq Israeli Telecommunication
Corp., Ltd. (a) 317,711 1,279
Clal Industries, Ltd. 21,200 169
Discount Investment Corp. (Regd) 8,911 348
ECI Telecom, Ltd. 24,131 796
Elbit Systems, Ltd. 13,243 232
Israel Chemicals, Ltd. 143,324 175
Israel Discount Bank Series A (a) 300,000 360
Koor Industries 4,707 543
Koor Industries, Ltd. - ADR 25,000 584
Supersol, Ltd. 228,310 670
Tecnomatix Technologies, Ltd. (a) 41,500 721
Teva Pharmaceutical
Industries, Ltd. - ADR 17,820 878
---------
8,792
---------
JORDAN - 0.3%
Arab Bank Group 3,510 994
Housing Bank (The) 42,000 129
---------
1,123
---------
LEBANON - 0.2%
Solidere - GDR 70,000 620
---------
LUXEMBOURG - 0.4%
Millicom International Cellular SA (a) 43,000 1,349
---------
MALAYSIA - 1.8%
Commerce Asset Holdings 4,000 9
Genting Berhad 178,000 610
Golden Hope Plantation 454,000 350
IJM Corp. Berhad 101,000 79
IOI Corporated Berhad 35,000 20
Lion Corp. Berhad 6,400 6
London & Pacific
Insurance Co. Berhad 2,600 3
Malakoff Berhad 1,000 2
Malayan Banking Berhad 130,000 350
Malaysian International Shipping
Corp. (Alien Market) 130,000 214
Malaysian Pacific 475,000 1,190
Malaysian Tobacco 243,000 319
Nestle Berhad 55,000 195
O.Y.L. Industries Berhad 104,800 253
Petronas Gas Berhad 198,000 421
Public Bank Berhad 311,000 212
Public Bank Berhad (Alien Market) 229,000 215
Resorts World Berhad 230,000 487
RHB Captial Berhad (a) 177,000 205
Rothmans of Pall Mall (Malaysia) Berhad 52,000 353
Shell Refining (Malaysia) 147,000 175
Sime Darby Berhad 417,000 491
Telekom Malaysia 87,000 292
Tenaga Nasional Berhad 83,000 172
YTL Corporation Berhad 55,000 104
---------
6,727
---------
74 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- ---------
MEXICO - 12.2%
Alfa SA de CV Class A NPV
Apasco SA de CV NPV 141,200 586
Carso Global Telecom 28,000 183
Series A1 NPV (a)
Cemex SA de CV Class B NPV 324,000 2,051
Cemex SA de CV NPV 151,400 750
Cifra SA de CV Series C NPV (a) 853,885 4,206
Cifra SA de CV Series V NPV (a) 667,500 1,222
Compania Cervecerias Unidas 480,000 957
SA - ADR
Controladora Comercial Mexicana 42,900 1,228
SA de CV NPV
Corporacion GEO SA de CV 804,500 839
Series B NPV (a)
Corporacion Interamericana de 41,000 174
Entretenimiento SA
Series B NPV (a)
Cydsa SA Series A NPV 157,300 512
Desc SA de CV Series C - ADR 87,000 125
Desc Sociedad de Fomento Industrial SA 85,700 1,939
de CV Series B NPV
Empaques Ponderosa (a) 230,000 251
Empresa Nacional de Electric - ADR 381,000 275
Fomento Economico Mexicano 19,684 239
SA de CV
Fomento Economico Mexicano SA de CV 172,500 690
Series B - ADR
Grupo Carso Series A NPV (a) 71,200 2,839
Grupo Continental SA 301,500 1,397
Grupo Financiero Banamex Accival SA de 149,000 234
Series O (a)
Grupo Financiero Bancomer SA de CV NPV 484,083 1,232
Series O (a)
Grupo Financiero Banorte 519,839 188
SA de CV NPV (a)
Grupo Industrial Bimbo 170,000 249
SA de CV Series A NPV
Grupo Industrial Durango 224,000 499
SA de CV - ADR (a)
Grupo Industrial Saltillo 17,250 184
SA de CV NPV
Grupo Mexico SA Series B NPV 108,500 391
Grupo Modelo SA Series C 108,000 459
Grupo Television 227,000 647
SA de CV - GDR (a)
Hylsamex SA de CV Series B NPV (a) 56,500 2,532
Kimberly-Clark, Mexico 25,000 77
Class A NPV
Organizacion Soriana SA de CV Series B 814,500 3,351
NPV
Panamerican Beverages, Inc. Class A 99,000 465
Seguros Comercial America 107,000 2,548
NPV Series B (a)
Telefonos de Mexico SA 87,000 327
Series L - ADR
Tubos de Acero de Mexico SA 138,277 11,175
TV Azteca SA de CV - ADR (a) 19,000 207
159,700 828
---------
46,056
---------
NETHERLANDS - 0.1%
Ceteco Holding NV CVA (a)
42,042 371
---------
PAKISTAN - 0.0%
Adamjee Insurance
Pakistan State Oil 820 1
Pakistan Telecommunications Co., Ltd. 36,875 66
- GDR
2,777 55
---------
122
---------
PANAMA - 0.3%
Banco Latinoamericano de Exportaciones
SA Class E 40,000 1,070
---------
PAPUA NEW GUINEA - 0.3%
Oil Search, Ltd. (Australia Regd)(a)
800,000 1,185
---------
PERU - 1.1%
Cementos Norte Pacasmayo
SA Series T
Compania de Minas Buenaventura Series 285,841 350
B - ADR
Credicorp, Ltd. 44,500 681
Enrique Ferreyros 23,200 255
Ferreyros SA - ADR 344,046 226
Minas Buenaventura 14,260 175
Minas Buenaventura Series B 5,600 43
Telefonica Del Peru 22,000 168
SA Class B - ADR
146,238 2,211
---------
4,109
---------
PHILIPPINES - 2.5%
Ayala Corp.
Ayala Land, Inc. 840,600 276
Bank of the Philippine Islands 1,184,013 373
Benpres Holdings Corp. (a) 39,800 142
First Philippine Holdings Class B 971,700 230
Manila Electric Co. Class B 695,560 786
Metropolitan Bank & Trust Co. 667,200 2,401
Philippine Commercial 41,300 412
International Bank
88,400 604
Emerging Markets Fund 75
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- ---------
Philippine Long Distance
Telephone Co. 1,100 34
Philippine Long Distance
Telephone Co. - ADR 133,995 4,037
San Miguel Corp. Class B 97,500 213
---------
9,508
---------
POLAND - 1.5%
Agora SA - GDR (a) 9,157 107
Bank Handlowy W. Warszawie
SA - GDR (a) 18,250 285
Bank Handlowy W. Warszawie
SA - GDR (144A)(a) 22,495 357
Bank Slaski SA 3,400 166
Bank Slaski SA w Katowicach (a) 5,870 287
Elektrim SA 67,401 953
Elektrim Spolka Akcyjna SA 34,096 482
KGHM Polska Miedz SA - GDR (a) 13,390 179
Prokom Software SA - GDR (a) 29,010 469
Softbank SA - GDR 6,100 224
Telekomunikacja Polska SA
Series A - GDR (a) 190,870 1,337
WBK 83,100 487
Zywiec (a) 2,634 304
---------
5,637
---------
PORTUGAL - 0.5%
BPI-SGPS SA (a) 23,068 484
Cimpor Cimentos de Portugal 7,000 180
Electricidade de Portugal SA 18,300 329
Mundial Confianca (a) 5,500 217
Portugal Telecom SA 8,560 348
Sonae Investimentos SA 7,300 248
---------
1,806
---------
RUSSIA - 0.8%
Lukoil Oil Co. - ADR 32,900 1,301
Surgutneftegaz - ADR 138,900 1,102
Unified Energy Systems - GDR 55,200 483
Vimpel-Communications - ADR (a) 3,350 78
---------
2,964
---------
SINGAPORE - 0.5%
Asia Pulp & Paper Co., Ltd. - ADR (a) 77,300 744
Datacraft Asia, Ltd. (a) 250,000 1,090
---------
1,834
---------
SLOVAKIA - 0.0%
Slovakofarma AS 2,200 111
---------
SOUTH AFRICA - 7.8%
Amalgamated Banks of South Africa 219,400 1,242
Amalgamated Beverage
Industries, Ltd. 50,000 410
Anglo American PLC (a) 41,100 1,921
AngloGold, Ltd. 21,210 914
Ashanti Goldfields, Ltd. - ADR 214,219 1,486
Barlow, Ltd. 96,737 558
De Beers Centenary AG 57,500 1,378
Dimension Data Holdings, Ltd. (a) 234,400 1,037
Fedsure Holdings, Ltd. 28,800 301
FirstRand, Ltd. 654,600 749
Forbes Group, Ltd. 482,000 1,262
Imperial Holdings, Ltd. (a) 43,400 432
Investec Group, Ltd. 8,500 356
Iscor 1,949,600 611
JD Group, Ltd. 61,600 377
Liberty International PLC (a) 24,639 163
Liberty Life Association of Africa 52,845 677
Lonrho Africa PLC 437,204 317
Lonrho PLC 234,676 2,182
Metro Cash and Carry, Ltd. NPV 499,000 413
MIH, Ltd. NPV (a) 10,000 264
Nampak, Ltd. 90,000 249
Nedcor, Ltd. 43,300 980
PepsiCo International, Inc. (a) 1,190 10
Real Africa Holdings, Ltd. (a) 90,400 180
Rembrandt Group, Ltd. 305,400 2,546
Rustenberg Platinum Holdings, Ltd. 21,200 495
Sanlam, Ltd. (a) 1,062,300 1,259
Sappi, Ltd. 76,300 559
Sasol NPV 425,663 3,037
South African Breweries PLC (a) 104,420 907
South African Breweries PLC (144A)(a) 140,000 1,229
Tongaat-Hulett Group, Ltd. 68,000 416
Truworths International, Ltd. 552 1
Wooltru, Ltd. Class N 464,281 754
Woolworths Holdings, Ltd. 892 1
---------
29,673
---------
SOUTH KOREA - 10.6%
Daewoo Corp. 65,000 295
Daewoo Heavy Industries 46,000 160
Honam Petrochem Corp. 20,500 478
Housing & Commercial Bank,
Korea (a) 44,000 1,387
Housing & Commercial Bank,
Korea - GDR (a) 10,000 307
Hyundai Merchant Marine 22,250 290
Kookmin Bank 79,500 1,614
76 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- ---------
Korea Electric Power Corp. 81,238 3,376
Korea Electric Power Corp. - ADR 82,800 1,697
Korea Telecom Corp. 21,100 1,400
Korea Telecom Corp. - ADR (a) 29,640 1,186
LG Chemical, LTD. 34,270 933
LG Electronics 16,380 453
Medison Co. 61,540 978
Pohang Iron & Steel Co., Ltd. 25,121 3,018
Pohang Iron & Steel Co., Ltd. - ADR 19,900 669
S1 Corp. 4,223 814
S1 Corp. Rights (a) 287 13
Samsung Co. (a) 87,900 2,066
Samsung Display Devices Co.
- GDR (a) 66,750 849
Samsung Electro-Mechanics Co. 12,300 425
Samsung Electronics 76,372 8,379
Samsung Electronics Co. - GDR 16,396 874
Samsung Electronics, Ltd. - GDS 52,319 1,400
Samsung Fire & Marine Insurance 500 352
Seoul City Gas Co., Ltd. 5,000 160
Shin Han Bank 141,500 1,589
Shinhan Bank - GDR (a) 23,900 532
Sindo Ricoh Co. 151 8
SK Corp. 11,000 316
SK Telecom Co., Ltd. (a) 219 115
SK Telecom Co., Ltd. - ADR 3,100 53
SK Telecomm Co., Ltd. 896 1,212
Ssangyong Oil Refining Co., Ltd. 69,440 1,800
Tae Young Corp. 16,000 912
---------
40,110
---------
SRI LANKA - 0.1%
Aitken Spence & Co., Ltd. 11,600 16
Ceylon Theatre 13,660 38
Development Finance Corp. of Ceylon 97,221 134
Hayleys, Ltd. 21,280 33
John Keells Holdings, Ltd. 43,535 95
Keells Food Products, Ltd. (a) 8,707 19
National Development Bank, Ltd. 9,800 12
---------
347
---------
SWITZERLAND - 0.5%
Holderbank Financiere
Glarus AG (BR) 1,447 1,707
UBS AG 2000 Warrants (a) 4,500 298
---------
2,005
---------
TAIWAN - 5.6%
Acer, Inc. - GDR (a) 119,550 1,485
Advanced Semiconductor
Engineering - GDR (a) 15,000 338
Asia Cement Corp. - GDR (a) 108,718 976
Asustek Computer, Inc. - GDR (Regd) 107,440 1,526
China Steel Corp. - GDR 151,352 2,315
Delta Electronics PLC 50,000 420
Evergreen Marine Corp. - GDR (a) 81,372 1,485
Fubon Insurance Co., Ltd. - GDR 139,480 1,691
ROC Taiwan Fund 76,500 617
Siliconware Precision
Industries Co. - GDR (a) 92,659 1,232
Standard Foods Taiwan Ltd.
(Regd) - GDR (a) 180,742 1,080
Synnex Technolog
International Corp. 23,417 525
Synnex Technology International Corp.
(Regd) - GDR 79,560 1,782
Taiwan Semiconductor Manufacturing
Co., Ltd. 2000 Warrants (a) 234,146 1,101
Taiwan Semiconductor Manufacturing
Co., Ltd - ADR (a) 94,340 3,208
Windbond Electronics Corp.
- GDR (a) 37,900 421
Yageo Corp. - GDR (a) 201,030 971
---------
21,173
---------
THAILAND - 2.3%
Advanced Information Services
(Alien Market)(a) 35,000 475
Ban Pu Coal (Alien Market)(a) 79,900 159
Bangkok Bank (Alien Market)(a) 581,000 2,174
Bangkok Expressway PLC
(Alien Market)(a) 248,000 170
BEC World PLC (Alien Market) 69,939 436
Electricity Generating PLC
(Alien Market) 225,000 430
Grammy Entertainment PLC
(Alien Market) 42,000 147
Hana Microelectronic
(Alien Market)(a) 145,000 436
Jasmine International PLC
(Alien Market)(a) 700,000 494
National Petrochemical PLC
(Alien Market)(a) 410,000 378
PTT Exploration and Production PLC
(Alien Market)(a) 77,500 593
Siam Cement Co. (Alien Market)(a) 11,581 352
Siam City Cement PLC (a) 45,000 185
TelecomAsia (Alien Market)(a) 200,000 202
Thai Farmers Bank (Alien Market)(a) 733,200 2,267
---------
8,898
---------
Emerging Markets Fund 77
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- ---------
TURKEY - 3.9%
Akbank 65,576,210 963
Aksigorta AS 4,190,000 117
Arcelik (a) 8,700,000 309
EGE Biracilik Ve Malt Sanayii 5,400,000 403
Ford Otomotiv Sanayi AS (a) 21,546,000 347
Haci Omer Sabanci Holding AS 54,810,490 1,221
Haci Omer Sabanci Holding AS - ADR (a) 32,100 174
Migros 2,759,240 3,432
Tupras 2,339,250 155
Turkiye Is Bankasi 43,033,500 765
Yapi ve Kredi Bankasi AS 304,282,396 4,397
Yapi ve Kredi Bankasi AS Non Tradeable
Receipts (a) 165,628,215 2,393
---------
14,676
---------
UNITED KINGDOM - 0.4%
Genesis Smaller Companies Fund (a) 147,886 1,684
---------
VENEZUELA - 0.9%
C.A. La Electricidad
de Caracas - ADR 34,459 680
Companhia Anonima Nacional Telefonos
de Venezuela - ADR 76,146 2,075
Electricidad de Caracas (Regd) 7,135 3
Mavesa SA - ADR 151,875 494
Siderurgica Venezolana
Sivensa - ADR 65,833 197
Siderurgica Venezolana
Sivensa - GDR 5,984 20
---------
3,469
---------
ZIMBABWE - 0.1%
Delta Corp. 967,350 275
---------
TOTAL COMMON STOCKS
(cost $293,725) 320,233
---------
PREFERRED STOCKS - 7.4%
ARGENTINA - 0.4%
Quilmes Industrial Quinsa 122,200 1,513
Societe - ADR ---------
BRAZIL - 6.7%
Banco Bradesco SA NPV 136,418,000 693
Banco do Estado de Sao Paulo NPV 34,016,000 1,451
Banco Itau SA NPV 3,116,418 1,602
Brasmotor SA NPV 12,140,000 959
CIA Energetica De Minas Gerais 87,077,148 1,820
Companhia Energetica de Minas Gerais -
ADR 25,356 529
Companhia Paranaense
de Energia - Copel 157,282,000 1,262
Companhia Paranaense de Energia Copel
Class B - ADR 15,800 132
Companhia Paulista de
Forca e Luz NPV 60,090 4
Companhia Siderurgica de Tubarao 25,000,000 270
Companhia Vale Do Rio Doce
Series A NPV 59,200 1,164
Companmia Cervejaria Brahma NPV 758,000 428
Coteminas (Cia Tec) NPV 6,075,105 508
Electrobras Series B NPV 6,349,000 128
Eletropaulo Metropolitana NPV (a) 11,388,000 508
Embratel Participacoes SA - ADR 43,334 601
Embratel Participacoes SA NPV 12,591,500 175
Itausa Investimentos Itau SA 1,682,000 893
Marcopolo SA NPV 521,000 1
Petro Ipiranga (cia) NPV 73,261,000 538
Petroleo Brasileiro SA NPV 14,088,000 2,189
Tele Centro Sul Participacoes
SA - ADR 5,700 316
Tele Centro Sul Participacoes
SA NPV 64,487,000 710
Tele Norte Leste Participacoes
SA - ADR 45,113 837
Tele Norte Leste Participacoes
SA NPV 25,545,000 465
Tele Sudeste Celular Participacoes SA 51,957,000 295
Telecomunicacoes Brasileiras NPV 5,909,000 524
Telecomunicacoes de Sao Paulo
SA (a) 113,697 12
Telecomunicacoes de Sao Paulo
SA NPV 16,900,351 2,005
Telemig Celular SA Class C NPV (a) 3,825,489 34
Telesp Celular Participacoes SA NPV 17,818,176 187
Telesp Celular SA Class B NPV 33,122,841 1,648
Telesp Participacoes SA - ADR 18,200 416
Telesp Participacoes SA NPV 36,660,000 859
Usinas Siderurgicas de Minas
Gerais SA NPV (a) 221,100 744
Votorantim Celulose
e Papel SA - ADR 20,700,000 596
---------
25,503
---------
COLOMBIA - 0.0%
Gran Cadena de Almacenes
Class B - ADR (a) 38,320 48
---------
PORTUGAL - 0.1%
Filmes Lusomundo-SGPS SA 39,842 406
---------
78 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- ---------
RUSSIA - 0.1%
Lukoil Holding Oil Co. - ADR 73,200 513
---------
THAILAND - 0.1%
Siam Commercial Bank (a) 180,000 256
---------
TOTAL PREFERRED STOCKS
(cost $33,515) 28,239
---------
PRINCIPAL
AMOUNT
(000)
$
---------
LONG-TERM INVESTMENTS - 0.2%
BRAZIL - 0.0%
Casa Anglo Series 2 (a)
1.000% due 11/01/99 (conv.) BRL 3 22
---------
INDONESIA - 0.0%
Modernland Realty (a)
6.000% due 01/04/03 (conv.) IDR 30 6
---------
SOUTH KOREA - 0.2%
Shinwon Corp.(a)
0.500% due 12/31/99 (conv.) USD 520 655
---------
TOTAL LONG-TERM INVESTMENTS
(cost $850) 683
---------
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- ---------
SHORT-TERM INVESTMENTS - 5.5%
UNITED STATES - 5.5%
Frank Russell Investment Company Money
Market Fund,
due on demand (b) 20,927 20,927
---------
TOTAL SHORT-TERM INVESTMENTS
(cost $20,927) 20,927
---------
TOTAL INVESTMENTS - 97.7%
(identified cost $349,017) 370,082
OTHER ASSETS AND LIABILITIES,
NET - 2.3% 8,640
---------
NET ASSETS - 100.0% 378,722
=========
(a) Nonincome-producing security.
(b) At cost, which approximates market.
Abbreviations:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
GDS - Global Depositary Share
NPV - No Par Value
NV - Nonvoting
144A - Represents private placement security for qualified buyers according to
rule 144A of the Securities Act of 1933.
Foreign Currency Abbreviations:
ARS - Argentine peso
BRL - Brazilian real
EUR - Euro dollar
GRD - Greek drachma
HKD - Hong Kong dollar
IDR - Indonesian rupiah
MXN - Mexican peso
SGD - Singapore dollar
USD - U.S. dollar
ZAR - South African rand
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 79
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
% OF VALUE
INDUSTRY DIVERSIFICATION NET (000)
(Unaudited) ASSETS $
- --------------------------------- --------- ---------
Auto & Transportation 1.4% 5,417
Consumer Discretionary 7.1 26,943
Consumer Staples 8.2 31,137
Financial Services 18.6 70,397
Health Care 1.2 4,644
Integrated Oils 2.5 9,419
Material & Processing 13.4 50,654
Miscellaneous 3.8 14,339
Other Energy 3.9 14,764
Producer Durables 4.6 17,554
Technology 5.7 21,478
Utilities 21.6 81,726
Short-Term Investments 5.5 20,927
Long-Term Investments 0.2 683
--------- ---------
Total Investments 97.7 370,082
Other Assets and Liabilities, Net 2.3 8,640
--------- ---------
Net Assets 100.0% 378,722
========= =========
MARKET
% OF VALUE
GEOGRAPHIC DIVERSIFICATION NET (000)
(Unaudited) ASSETS $
- --------------------------------- --------- ---------
Latin America 31.4% 118,907
Pacific Basin 28.6 108,333
Europe 11.3 42,764
Middle East 11.1 42,068
Africa 9.1 34,508
Other 0.5 1,892
Short-Term Investments 5.5 20,927
Long-Term Investments 0.2 683
--------- ---------
Total Investments 97.7 370,082
Other Assets and Liabilities, Net 2.3 8,640
--------- ---------
NET ASSETS 100.0% 378,722
========= =========
FOREIGN CURRENCY EXCHANGE SPOT CONTRACTS
SOLD CONTRACTS BOUGHT IN UNREALIZED
TO DELIVER EXCHANGE APPRECIATION
OUT FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
- ------------------ -------------- -------------- ------------------
USD 50 ARS 50 07/01/99 $ --
USD 156 HKD 1,209 07/02/99 --
USD 78 IDR 520,950 07/02/99 (3)
USD 293 ZAR 1,775 07/01/99 1
USD 56 ZAR 339 07/06/99 --
BRL 30 USD 17 07/0199 --
EUR 97 USD 100 07/01/99 --
GRD 89,371 USD 283 07/01/99 --
GRD 6,272 USD 20 07/01/99 --
HKD 346 USD 45 07/02/99 --
IDR 1,944 USD 1 07/01/99 --
MXN 182 USD 19 07/01/99 --
MXN 1,344 USD 142 07/01/99 --
SGD 3 USD 2 07/01/99 --
ZAR 236 USD 39 07/01/99 --
------------------
$ (2)
==================
See accompanying notes which are an integral part of the financial statements.
80 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments at market (identified cost $349,017) ............................ $ 370,082
Cash ........................................................................ 7,854
Foreign currency holdings (identified cost $4,010) .......................... 3,991
Foreign currency exchange spot contracts (cost $1,301) ...................... 1,299
Receivables:
Dividends and interest ..................................................... 1,350
Investments sold ........................................................... 4,100
Fund shares sold ........................................................... 712
---------
Total Assets ............................................................. 389,388
LIABILITIES
Payables:
Investments purchased ........................................ $ 7,482
Fund shares redeemed ......................................... 1,155
Accrued fees to affiliates ................................... 600
Other accrued expenses ....................................... 128
Foreign currency exchange spot contracts (cost $1,301)......... 1,301
---------
Total Liabilities ........................................................ 10,666
---------
NET ASSETS .................................................................. $ 378,722
=========
NET ASSETS CONSIST OF:
Undistributed net investment income ......................................... $ 690
Accumulated net realized gain (loss) ........................................ (82,095)
Unrealized appreciation (depreciation) on:
Investments ................................................................ 21,065
Foreign currency-related transactions ...................................... (87)
Shares of beneficial interest ............................................... 364
Additional paid-in capital .................................................. 438,785
---------
NET ASSETS .................................................................. $ 378,722
=========
NET ASSET VALUE, offering and redemption price per share:
Class C ($500,452 divided by 48,330 shares of $.01 par value
shares of beneficial interest outstanding) ............................... $ 10.35
=========
Class E ($5,001,439 divided by 481,607 shares of $.01 par value
shares of beneficial interest outstanding) ............................... $ 10.38
=========
Class S ($373,219,955 divided by 35,906,567 shares of $.01 par value
shares of beneficial interest outstanding) ............................... $ 10.39
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 81
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF OPERATIONS
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Dividends .................................................................. $ 4,972
Dividends from Money Market Fund ........................................... 395
Interest ................................................................... 46
Less foreign taxes withheld ................................................ (408)
---------
Total Investment Income .................................................. 5,005
EXPENSES
Advisory fees ................................................ $ 1,866
Administrative fees .......................................... 82
Custodian fees ............................................... 423
Distribution fees - Class C .................................. 1
Transfer agent fees .......................................... 613
Professional fees ............................................ 32
Registration fees - Class S .................................. 35
Shareholder servicing fees - Class E ......................... 1
Trustees' fees ............................................... 3
Miscellaneous ................................................ 35
---------
Total Expenses ........................................................... 3,091
---------
Net investment income ....................................................... 1,914
---------
NET REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on:
Investments .................................................. (9,857)
Foreign currency-related transactions ........................ (1,310) (11,167)
---------
Net change in unrealized appreciation (depreciation) on:
Investments .................................................. 82,067
Foreign currency-related transactions ........................ (83) 81,984
--------- ---------
Net realized and unrealized gain (loss) .................................... 70,817
---------
Net increase (decrease) in net assets resulting from operations ............. $ 72,731
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
82 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
------------------- ------------------
<S> <C> <C>
OPERATIONS
Net investment income .................................................$ 1,914 $ 4,050
Net realized gain (loss) ............................................. (11,167) (57,573)
Net change in unrealized appreciation (depreciation) ................. 81,984 (57,066)
------------------- ------------------
Net increase (decrease) in net assets resulting from operations ..... 72,731 (110,589)
------------------- ------------------
DISTRIBUTIONS
From net investment income
Class S ............................................................. (1,719) (2,472)
------------------- ------------------
Net decrease from distributions ................................... (1,719) (2,472)
------------------- ------------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ......... 13,322 74,397
------------------- ------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ............................ 84,334 (38,664)
NET ASSETS
Beginning of period ................................................... 294,388 333,052
------------------- ------------------
End of period (including undistributed net investment income of
$690 and $495, respectively) .......................................$ 378,722 $ 294,388
=================== ==================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 83
<PAGE>
EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
-------
NET ASSET VALUE, BEGINNING OF PERIOD ............................. $ 8.07
-------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) ...................................... .02
Net realized and unrealized gain (loss) on investments .......... 2.31
-------
Total Income From Investment Operations ....................... 2.33
-------
DISTRIBUTIONS
From net investment income ...................................... (.05)
-------
NET ASSET VALUE, END OF PERIOD ................................... $ 10.35
=======
TOTAL RETURN (%)(a) .............................................. 29.01
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ..................... 501
Ratios to average net assets (%)(b):
Operating expenses ............................................ 3.43
Net investment income ......................................... .55
Portfolio turnover rate (%)(b) ................................. 112.76
* For the period January 27, 1999 (commencement of operations) to June 30,
1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) Average month-end shares outstanding were used for this calculation.
84 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1999* 1998**
--------- ---------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ...................... $ 8.48 $ 7.37
--------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d) ............................... .06 (.02)
Net realized and unrealized gain (loss) on investments ... 1.89 1.13
--------- ---------
Total Income From Investment Operations ................ 1.95 1.11
--------- ---------
DISTRIBUTIONS
From net investment income ............................... (.05) --
--------- ---------
NET ASSET VALUE, END OF PERIOD ............................ $ 10.38 $ 8.48
========= =========
TOTAL RETURN (%)(a) ...................................... 23.11 15.06
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) .............. 5,001 39
Ratios to average net assets (%)(b)(c):
Operating expenses ..................................... 2.20 --
Net investment income .................................. 1.30 --
Portfolio turnover rate (%)(b) .......................... 112.76 59.35
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
** For the period September 22, 1998 (commencement of operations) to December
31, 1998.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) These ratios for the period ended December 31, 1998 are not meaningful due
to the Class's short period of operation.
(d) Average month-end shares outstanding were used for this calculation.
Emerging Markets Fund 85
<PAGE>
EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------
1999* 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ...... $ 8.48 $ 11.79 $ 12.35 $ 11.16 $ 12.25 $ 13.90
----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d) ................ .05 .12 .14 .10 .11 .15
Net realized and unrealized gain (loss) on
investments ............................ 1.91 (3.35) (.56) 1.26 (1.12) (1.24)
----------- ----------- ----------- ----------- ----------- -----------
Total Income From Investment Operations 1.96 (3.23) (.42) 1.36 (1.01) (1.09)
----------- ----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS
From net investment income ............... (.05) (.08) (.14) (.17) (.05) (.20)
From net realized gain on investments .... -- -- -- -- (.03) (.36)
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions .................... (.05) (.08) (.14) (.17) (.08) (.56)
----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD ............ $ 10.39 $ 8.48 $ 11.79 $ 12.35 $ 11.16 $ 12.25
=========== =========== =========== =========== =========== ===========
TOTAL RETURN (%)(a)(c) .................... 23.24 (27.57) (3.45) 12.26 (8.21) (5.83)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) 373,220 294,349 333,052 271,490 172,673 127,271
Ratios to average net assets (%)(b)(c):
Operating expenses, net ................ 1.89 1.75 1.64 1.71 1.75 .80
Operating expenses, gross .............. 1.89 1.75 1.64 1.72 1.80 .83
Net investment income .................. 1.17 1.20 .87 .77 .88 1.10
Portfolio turnover rate (%)(b) ........... 112.76 59.35 50.60 34.62 71.16 57.47
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 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 advisory fees. See Note 4.
(d) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
86 Emerging Markets Fund
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF NET ASSETS
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- ---------
COMMON STOCKS (B) - 95.8%
APARTMENTS - 18.6%
Apartment Investment &
Management Co. Class A 690,415 29,515
Archstone Communities Trust 402,424 8,828
Avalonbay Communities, Inc. 798,030 29,527
Brookfield Properties Corp. 195,300 2,539
Camden Property Trust 235,429 6,533
Equity Residential Properties Trust 268,538 12,101
Essex Property Trust, Inc. 222,000 7,853
Post Properties, Inc. 207,346 8,501
Smith (Charles E.) Residential
Realty, Inc. 383,750 13,024
Summit Properties, Inc. 160,600 3,172
---------
121,593
---------
HEALTH CARE - 5.0%
American Retirement Corp. (a) 238,700 2,984
HCR Manor Care, Inc. (a) 397,400 9,612
Health Care Property Investors, Inc. 307,700 8,885
Nationwide Health Properties, Inc. 587,000 11,190
---------
32,671
---------
HOTELS/LEISURE - 8.2%
FelCor Lodging Trust, Inc. 141,150 2,929
Golf Trust of America, Inc. 56,300 1,376
Hospitality Properties Trust 172,600 4,682
Host Marriott Corp. 120,100 1,426
Interstate Hotels Corp. (a) 1,617 7
Marriot International, Inc. Class A 272,700 10,192
RFS Hotel Investors, Inc. 17,300 217
Starwood Hotels & Resorts
Worldwide, Inc. 1,036,800 31,687
Wyndham International, Inc.
Class A (a) 202,000 859
---------
53,375
---------
LEASING - 0.3%
Entertainment Properties Trust 79,800 1,406
Prison Realty Corp. 80,200 787
---------
2,193
---------
OFFICE/INDUSTRIAL - 39.5%
AMB Property Corp. 1,075,000 25,263
Arden Realty Group, Inc. 893,650 22,006
Boston Properties, Inc. 161,050 5,778
Cabot Industrial Trust 113,900 2,420
CarrAmerica Realty Corp. 195,100 4,878
Catellus Development Corp. (a) 238,700 3,700
Cornerstone Properties, Inc. 313,300 4,974
Cousins Properties, Inc. 238,300 8,058
Crescent Operating, Inc. (a) 47,900 326
Crescent Real Estate Equities, Inc. 188,200 4,470
Duke Realty Investments, Inc. 84,550 1,908
Equity Office Properties Trust 1,042,548 26,714
First Industrial Realty Trust, Inc. 285,800 7,842
Highwoods Properties, Inc. 813,500 22,320
Kilroy Realty Corp. 166,600 4,061
Liberty Property Trust 183,900 4,575
Mack-Cali Realty Corp. 899,250 27,820
Prentiss Properties Trust 114,800 2,698
ProLogis Trust 938,618 19,007
PS Business Parks, Inc. 235,800 5,748
Reckson Associates Realty Corp. 500,400 11,759
Reckson Services Industries, Inc. (a) 322,600 4,879
SL Green Realty Corp. 333,600 6,818
Spieker Properties, Inc. 566,600 22,026
TriNet Corporate Realty Trust, Inc. 40,700 1,127
Trizec Hahn Corp. 170,200 3,468
Weeks Corp. 107,550 3,280
---------
257,923
---------
OUTLET CENTERS - 0.6%
Prime Retail, Inc. 192,700 1,674
Tanger Factory Outlet Centers, Inc. 85,500 2,223
---------
3,897
---------
REGIONAL MALLS - 9.1%
General Growth Properties, Inc. 389,300 13,820
J.P. Realty, Inc. 60,100 1,236
Macerich Co. (The) 481,100 12,629
Rouse Co. (The) 420,700 10,675
Simon Property Group, Inc. 613,850 15,576
Taubman Centers, Inc. 224,900 2,966
Urban Shopping Centers, Inc. 65,800 2,073
---------
58,975
---------
SELF STORAGE - 3.2%
Public Storage, Inc. 639,656 17,910
Shurgard Storage Centers, Inc.
Class A 110,500 2,998
---------
20,908
---------
SHOPPING CENTERS - 11.3%
Bradley Real Estate, Inc. 220,500 4,575
Developers Diversified Realty Corp. 443,700 7,377
Glimcher Realty Trust 156,600 2,545
Kimco Realty Corp. 482,300 18,870
Kranzco Realty Trust 21,900 290
88 Real Estate Securities Fund
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- ---------
Philips International Realty Corp. 98,100 1,655
Regency Realty Corp. 116,800 2,562
Vornado Realty Trust 1,022,600 36,111
---------
73,985
---------
TOTAL COMMON STOCKS
(cost $596,090) 625,520
---------
PRINCIPAL
AMOUNT
(000)
$
---------
SHORT-TERM INVESTMENTS - 3.6%
Frank Russell Investment Company
Money Market Fund, 23,743 23,743
due on demand (c) ---------
TOTAL SHORT-TERM INVESTMENTS
(cost $23,743) 23,743
---------
TOTAL INVESTMENTS - 99.4%
(identified cost $619,833) 649,263
OTHER ASSETS AND LIABILITIES,
NET - 0.6% 3,624
---------
NET ASSETS - 100.0% 652,887
=========
(a) Nonincome-producing security.
(b) All common stocks held are Real Estate Investment Trusts (REIT) with the
exception of the following:
American Retirement Corp.
Crescent Operating, Inc.
HCR Manor Care, Inc.
Interstate Hotels Corp.
Marriot International, Inc. Class A
Reckson Services Industries, Inc.
Rouse Co. (The)
Starwood Hotels & Resorts Worldwide, Inc.
Trizec Hahn Corp.
Wyndham International, Inc. Class A
(c) At cost, which approximates market.
See accompanying notes which are an integral part of the financial statements.
Real Estate Securities Fund 89
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments at market (identified cost $619,833) ........................... $ 649,263
Receivables:
Dividends ................................................................. 3,563
Investments sold .......................................................... 1,172
Fund shares sold .......................................................... 1,519
---------
Total Assets ............................................................ 655,517
LIABILITIES
Payables:
Investments purchased ........................................ $ 556
Fund shares redeemed ......................................... 1,390
Accrued fees to affiliates ................................... 668
Other accrued expenses ....................................... 16
---------
Total Liabilities ....................................................... 2,630
---------
NET ASSETS ................................................................. $ 652,887
=========
NET ASSETS CONSIST OF:
Undistributed net investment income ........................................ $ 7,561
Accumulated distributions in excess of net realized gain ................... (14,802)
Unrealized appreciation (depreciation) on investments ...................... 29,430
Shares of beneficial interest .............................................. 254
Additional paid-in capital ................................................. 630,444
---------
NET ASSETS ................................................................. $ 652,887
=========
NET ASSET VALUE, offering and redemption price per share:
Class C ($896,794 divided by 35,217 shares of $.01 par value
shares of beneficial interest outstanding) ................. $ 25.46
=========
Class E ($5,767,067 divided by 225,316 shares of $.01 par value
shares of beneficial interest outstanding) ................. $ 25.60
=========
Class S ($646,223,217 divided by 25,111,761 shares of $.01 par value
shares of beneficial interest outstanding) ................. $ 25.73
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
90 Real Estate Securities Fund
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF OPERATIONS
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
INVESTMENT INCOME
Dividends ........................................................ $ 17,825
Dividends from Money Market Fund ................................. 728
---------
Total Investment Income ........................................ 18,553
EXPENSES
Advisory fees .......................................... $ 2,424
Administrative fees .................................... 153
Custodian fees ......................................... 104
Distribution fees - Class C ............................ 1
Transfer agent fees .................................... 676
Professional fees ...................................... 20
Registration fees - Class S ............................ 46
Shareholder servicing fees - Class E ................... 3
Trustees' fees ......................................... 3
Miscellaneous .......................................... 29
---------
Total Expenses ................................................. 3,459
---------
Net investment income ............................................. 15,094
---------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investments ........................... (12,322)
Net change in unrealized appreciation
(depreciation) on investments ..................................... 41,197
---------
Net realized and unrealized gain (loss) ........................... 28,875
---------
Net increase (decrease) in net assets resulting from operations.... $ 43,969
=========
See accompanying notes which are an integral part of the financial statements.
Real Estate Securities Fund 91
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
------------------- -----------------
OPERATIONS
Net investment income ................................................ $ 15,094 $ 30,253
Net realized gain (loss) ............................................ (12,322) (1,281)
Net change in unrealized appreciation (depreciation) ................. 41,197 (137,901)
------------------- -----------------
Net increase (decrease) in net assets resulting from operations .... 43,969 (108,929)
------------------- -----------------
DISTRIBUTIONS
From net investment income
Class C ............................................................ (4) --
Class E ............................................................ (13) (26)
Class S ............................................................ (10,828) (26,915)
From net realized gain on investments
Class E ............................................................ -- (5)
Class S ............................................................ -- (7,019)
In excess of net realized gain on investments
Class E ............................................................ -- (2)
Class S ............................................................ -- (2,469)
------------------- -----------------
Net decrease from distributions .................................. (10,845) (36,436)
------------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ........ 42,594 106,663
------------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ........................... 75,718 (38,702)
NET ASSETS
Beginning of period .................................................. 577,169 615,871
------------------- -----------------
End of period (including undistributed net investment income of
$7,561 and $3,312, respectively) .................................. $ 652,887 $ 577,169
=================== =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
92 Real Estate Securities Fund
<PAGE>
REAL ESTATE SECURITIES FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
-------
NET ASSET VALUE, BEGINNING OF PERIOD ............................... $ 24.13
-------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) ........................................ .44
Net realized and unrealized gain (loss) on investments ............ 1.31
-------
Total Income From Investment Operations ......................... 1.75
-------
DISTRIBUTIONS
From net investment income ........................................ (.42)
-------
NET ASSET VALUE, END OF PERIOD ..................................... $ 25.46
=======
TOTAL RETURN (%)(a) ............................................... 7.45
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ....................... 897
Ratios to average net assets (%)(b):
Operating expenses .............................................. 2.53
Net investment income ........................................... 5.32
Portfolio turnover rate (%)(b) ................................... 40.63
* For the period January 27, 1999 (commmencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) Average month-end shares outstanding were used for this calculation.
Real Estate Securities Fund 93
<PAGE>
REAL ESTATE SECURITIES FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1999* 1998 1997 1996**
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ...................... $ 24.27 $ 31.02 $ 29.18 $ 26.67
--------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) ............................... .50 1.26 1.14 .24
Net realized and unrealized gain (loss) on investments ... 1.20 (6.12) 3.95 3.85
--------- --------- --------- ---------
Total Income From Investment Operations ................ 1.70 (4.86) 5.09 4.09
--------- --------- --------- ---------
DISTRIBUTIONS
From net investment income ............................... (.37) (1.43) (1.04) (.32)
From net realized gain on investments .................... -- (.46) (2.21) (1.26)
--------- --------- --------- ---------
Total Distributions .................................... (.37) (1.89) (3.25) (1.58)
--------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD ............................ $ 25.60 $ 24.27 $ 31.02 $ 29.18
========= ========= ========= =========
TOTAL RETURN (%)(a) ...................................... 7.15 (16.25) 18.20 15.75
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) .............. 5,767 843 388 101
Ratios to average net assets (%)(b):
Operating expenses ..................................... 1.41 1.47 1.71 1.77
Net investment income .................................. 4.36 4.90 3.94 5.31
Portfolio turnover rate (%)(b) .......................... 40.63 42.58 49.40 51.75
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
** For the period November 4, 1996 (commencement of sale) to December 31,
1996.
(a) Periods less than one year are not annualized.
(b) The ratios for the periods ended June 30, 1999 and December 31, 1996 are
annualized.
(c) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
94 Real Estate Securities Fund
<PAGE>
REAL ESTATE SECURITIES FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1999* 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............. $ 24.44 $ 30.86 $ 29.19 $ 23.51 $ 22.53 $ 22.76
----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) ...................... .61 1.34 1.36 1.39 1.32 1.25
Net realized and unrealized gain (loss) on
investments ................................... 1.12 (6.13) 3.93 6.89 1.03 .40
----------- ----------- ----------- ----------- ----------- -----------
Total Income From Investment Operations ....... 1.73 (4.79) 5.29 8.28 2.35 1.65
----------- ----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS
From net investment income ...................... (.44) (1.17) (1.41) (1.34) (1.35) (1.23)
From net realized gain on investments ........... -- (.46) (2.21) (1.26) -- (.65)
Tax return of capital ........................... -- -- -- -- (.02) --
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions ........................... (.44) (1.63) (3.62) (2.60) (1.37) (1.88)
----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD ................... $ 25.73 $ 24.44 $ 30.86 $ 29.19 $ 23.51 $ 22.53
=========== =========== =========== =========== =========== ===========
TOTAL RETURN (%)(a) ............................. 7.25 (15.94) 18.99 36.81 10.87 7.24
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ..... 646,223 576,326 615,483 445,619 290,990 209,208
Ratios to average net assets (%)(b):
Operating expenses ............................ 1.13 1.05 1.02 1.04 1.04 1.05
Net investment income ......................... 4.95 4.93 4.57 5.64 6.10 5.65
Portfolio turnover rate (%)(b) ................. 40.63 42.58 49.40 51.75 23.49 45.84
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
Real Estate Securities Fund 95
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF NET ASSETS
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- --------
FIXED INCOME INVESTMENTS - 93.8%
ASSET-BACKED SECURITIES - 32.0%
ABFS Equipment Contract Trust
6.100% due 10/15/05 610 610
American Express Credit Account
Master Trust
Series 1997-1, Class A
6.400% due 04/15/05 7,500 7,526
Amresco Residential Securities
Mortgage Loan Trust
Step Up Bond
Series 1998-2 Class B1A
6.070% due 06/25/28 (b) 2,000 1,872
Arcadia Automobile
Receivables Trust
Series 1998-B Class A3
5.950% due 11/15/02 1,000 1,002
Series 1998-C Class A3
5.670% due 08/15/06 1,400 1,372
Banc One Auto Grantor Trust
Series 1997-A Class A
6.270% due 11/20/03 2,828 2,845
Banc One Credit Card Master Trust
Series 1995-A Class A
6.150% due 07/15/02 1,400 1,406
Barnett Auto Trust
Series 1997-A Class A3
6.030% due 11/15/01 1,935 1,940
California Infrastructure PG&E
Series 1997-1 Class A3
6.150% due 06/25/02 1,600 1,603
Captec Franchise Trust
Series 1999-1 Class A1
6.504% due 05/25/05 (b) 1,481 1,471
Case Equipment Loan Trust
Series 1997-B Class C
6.410% due 09/15/04 127 127
Chase Manhattan Auto Owner Trust
Series 1998-B Class A4
5.800% due 02/17/03 2,000 1,986
Chase Manhattan Credit
Card Master Trust
Series 1996-3 Class A
7.040% due 02/15/05 10,000 10,134
Chemical Master Credit Card Trust I
Series 1996-1 Class A
5.550% due 09/15/03 8,000 7,952
Chevy Chase Auto Receivables Trust
Series 1996-2 Class A
5.900% due 07/15/03 722 722
Series 1997-1 Class A
6.500% due 10/15/03 1,121 1,129
Series 1997-2 Class A
6.350% due 01/15/04 369 371
Series 1997-3 Class A
6.200% due 03/20/04 (b) 728 731
Citibank Credit Card Master Trust I
6.550% due 02/15/04 11,500 11,579
Copelco Capital Funding Corp.
Series 1997-A Class A3
6.270% due 04/20/05 859 861
Series 1999-A Class A2
5.500% due 03/15/01 1,400 1,395
Series 1999-A Class A3
5.665% due 03/15/02 750 742
Series 1999-A Class A5
5.950% due 06/15/04 1,250 1,227
Cox Enterprises, Inc.
6.250% due 08/26/99 2,400 2,403
Dayton Hudson Credit
Card Master Trust
Series 1997-1 Class A
6.250% due 08/25/05 800 793
Delta Funding Home
Equity Loan Trust
Series 1998-1 Class A2A
5.130% due 05/25/30 (b) 310 310
Discover Card Master Trust I
Series 1999-1 Class B
5.550% due 08/15/04 (b) 650 635
Series 1994-2, Class A
5.340% due 10/16/04 (b) 3,000 3,011
EQCC Home Equity Loan Trust
Series 1998-1 Class A3F
6.225% due 12/15/12 900 897
First Security Auto Grantor Trust
Series 1997-A, Class A
6.300% due 08/15/03 543 546
First Security Automobile
Owner Trust
Series 1999-2 Class A3
6.000% due 10/15/03 1,750 1,741
First USA Credit Card Master Trust
Series 1997-6 Class A
6.420% due 03/17/05 1,375 1,381
96 Short Term Bond Fund
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ---------
<S> <C> <C>
FMAC Loan Receivables Trust
Series 1998-CA Class A1
5.990% due 11/15/04 754 732
Franchise Loan Trust
Series 1998-I Class A1
6.240% due 07/15/04 706 689
Green Tree Financial Corp.
Series 1998-6 Class A2
5.910% due 01/01/07 905 906
Series 1998-1 Class A3
5.950% due 04/01/13 1,250 1,249
Green Tree Home Improvement
Loan Trust
Series 1997-A Class HIA3
7.050% due 08/15/23 1,080 1,090
Series 1998-D Class HIA4
6.200% due 06/15/29 1,125 1,114
Green Tree Recreational, Equipment &
Consumer Loan Trust
Series 1998-C Class A4
6.170% due 02/15/11 1,000 992
Series 1997-C Class A1
6.490% due 02/15/18 700 689
Greenpoint Manufactured Housing
Series 1999-1 Class A2
6.010% due 08/15/15 1,000 985
IMC Home Equity Loan Trust
Series 1998-1 Class A3
6.410% due 04/20/18 1,050 1,043
Nationsbank Credit Card Master Trust
Series 1995-1 Class A
6.450% due 04/15/03 8,150 8,209
Navistar Financial Corp. Owner Trust
Series 1999-A Class A3
5.950% due 04/15/03 1,675 1,661
Newcourt Equipment Trust Securities
Series 1998-2 Class A3
5.450% due 10/15/02 600 597
Series 1998-1 Class A3
5.240% due 12/20/02 1,375 1,365
Series 1998-2 Class D
7.210% due 09/15/07 (b) 700 695
NPF VI Inc.
Series 1998-1A, Class A
6.220% due 06/01/02 1,000 989
Olympic Automobile
Receivables Trust
Series 1996-B Class A4
6.700% due 03/15/02 1,250 1,257
Series 1996-D Class CTFS
6.125% due 04/15/02 3,297 3,271
Onyx Acceptance Auto Trust
Series 1999-B Class A3
5.780% due 04/15/03 (b) 2,025 2,024
Paragon Automobile
Receivables Owner Trust
Series 1999-A Class A
5.950% due 11/15/05 566 561
PBG Equipment Trust
Series 1A Class A
6.270% due 01/20/12 1,137 1,120
Peco Energy Transition Trust
Series 1999-A Class A2
5.630% due 03/01/05 8,000 7,830
PNC Student Loan Trust I
Series 1997-2 Class A3
6.314% due 01/25/01 8,500 8,510
Premier Automobile Trust
Series 1999-1 Class A3
5.690% due 11/08/02 8,500 8,442
Series 1999-3 Class A3
6.270% due 04/08/03 1,675 1,674
Series 1999-3 Class A4
6.430% due 03/08/04 (b) 1,600 1,612
Ryder Vehicle Lease Trust
Series 1998-A, Class A
6.100% due 09/15/08 (b) 694 690
Sears Credit Account Master Trust
Series 1995-5 Class A
8.100% due 06/15/04 3,404 3,465
Series 1998-1 Class A
5.800% due 08/15/05 1,500 1,493
Series 1995-2 Class A
6.050% due 01/15/08 1,000 984
Standard Credit Card Master Trust I
Series 1995-3 Class A
7.850% due 02/07/02 1,025 1,038
Team Fleet Financing Corp.
Series 1998-2A Class A
6.070% due 07/25/02 1,125 1,114
The Money Store Auto Grantor Trust
Series 1997-4 Class A2
6.350% due 03/20/04 529 532
</TABLE>
Short Term Bond Fund 97
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ---------
The Money Store Residential Trust
Series 1997-I Class A3
6.680% due 08/15/12 900 902
The Money Store Small Business
Administration Loan Trust
Series 1996-2 Class A
5.640% due 04/15/24 (b) 879 879
Series 1997-1 Class A
5.540% due 01/15/25 (b) 1,209 1,201
Series 1997-1 Class B
6.020% due 01/15/25 (b) 806 800
UCFC Home Equity Loan
Series 1993-B1 Class A-1
6.075% due 07/25/14 51 50
WFS Financial Owner Trust
Series 1996-D Class A3
6.050% due 07/20/01 (b) 1,597 1,599
Wilshire Funding Corp.
Series 1998-WFC2 Class A3
7.000% due 12/28/37 861 849
World Omni Automobile Lease
Securitization Trust
Series 1996-B Class A3
6.250% due 11/15/02 1,743 1,747
Series 1997-A Class A2
6.750% due 06/25/03 (b) 7,741 7,790
Series 1997-A Class A4
6.900% due 06/25/03 2,376 2,395
Series 1997-B Class A1
6.070% due 11/25/03 271 273
---------
159,427
---------
CORPORATE BONDS AND NOTES - 28.8%
Ahmanson (H.F.)
9.875% due 11/15/99 2,185 2,217
Aristar, Inc.
6.125% due 12/01/00 1,225 1,223
Associates Corp. of North America
6.375% due 08/15/00 9,500 9,538
5.750% due 11/01/03 1,000 973
AT&T Capital Corp.
6.250% due 05/15/01 (MTN) 1,750 1,730
Banco De Latinoamerica
6.500% due 04/02/01 2,200 2,199
Bank of America Corp.
9.500% due 04/01/01 2,000 2,107
Bear Stearns Cos., Inc.
9.375% due 06/01/01 2,000 2,103
Business Loan Center, Inc.
Series 1998-1A
6.750% due 04/02/05 1,100 1,102
Carramerica Realty Corp.
6.625% due 10/01/00 1,575 1,564
Caterpillar Financial Services
6.100% due 07/15/99 (MTN) 500 500
Chase Manhattan Corp.
10.125% due 11/01/00 2,009 2,111
5.313% due 12/05/09 (b) 1,000 951
Chrysler Financial Corp.
6.610% due 06/16/00 (MTN) 2,000 2,015
CIT Group Holdings, Inc.
6.125% due 12/15/00 (MTN) 8,100 8,094
CIT Group, Inc.
6.500% due 06/14/02 (MTN) 3,800 3,807
Coca-Cola Put Asset Trust
6.000% due 03/15/01 1,950 1,941
Comdisco, Inc.
6.000% due 01/30/02 2,000 1,972
Conseco, Inc.
6.400% due 06/15/01 1,850 1,812
Donaldson Lufkin & Jenrette
5.875% due 04/01/02 1,150 1,130
El Paso Energy Corp.
12.000% due 12/15/00 1,925 2,050
Enron Corp.
6.450% due 11/15/01 950 949
ERAC USA Finance Co.
6.375% due 05/15/03 1,900 1,850
Finova Capital Corp.
6.625% due 09/15/01 2,000 2,009
First Bank South Dakota
5.070% due 12/20/00 (b) 500 503
First USA Bank NA
6.125% due 06/25/01 2,750 2,735
Fleet Credit Card, LLC
6.450% due 10/30/00 250 251
Fleet Financial Group, Inc.
6.875% due 03/01/03 700 707
Ford Motor Credit Co.
6.500% due 02/28/02 12,000 12,029
Franchise Finance Corp.
7.000% due 11/30/00 1,575 1,568
General Electric Capital Corp. (MTN)
6.120% due 08/15/00 5,500 5,518
5.430% due 02/25/02 4,000 3,913
General Motors Acceptance Corp.
6.850% due 04/17/01 (MTN) 750 752
8.500% due 01/01/03 1,500 1,592
7.012% due 04/01/20 (b) 1,890 1,896
Hertz Corp.
6.500% due 04/01/00 450 451
6.625% due 07/15/00 900 904
98 Short Term Bond Fund
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ---------
Homeside Lending, Inc. (MTN)
6.875% due 05/15/00 2,025 2,039
6.875% due 06/30/02 2,000 2,003
Household Finance Corp.
6.125% due 07/15/02 (MTN)(b) 450 446
IMC Global, Inc.
7.400% due 11/01/02 1,550 1,564
International Lease Finance Corp.
6.125% due 11/01/99 225 225
Lehman Brothers Holdings, Inc.
6.000% due 02/26/01 (MTN) 2,500 2,477
MBNA Corp.
Series B
6.500% due 09/15/00 (MTN) 1,375 1,379
Midlantic Corp.
9.250% due 09/01/99 825 830
9.200% due 08/01/01 1,123 1,177
Morgan Stanley Dean Witter & Co.
5.625% due 01/20/04 (MTN) 1,750 1,687
Nabisco, Inc.
6.000% due 02/15/01 415 411
National Westminster Bank PLC
9.450% due 05/01/01 1,500 1,584
News America Holdings, Inc.
7.450% due 06/01/00 775 784
Norwest Financial, Inc.
6.375% due 09/15/02 1,000 1,001
Panamsat Corp.
6.000% due 01/15/03 1,100 1,068
Paramount Communications, Inc.
7.500% due 01/15/02 875 894
Popular North America, Inc.
Series D
6.875% due 06/15/01 (MTN) 1,100 1,102
Procter & Gamble
9.625% due 01/14/01 6,920 7,275
Salomon Smith Barney Holdings, Inc.
6.625% due 07/01/02 75 75
6.500% due 10/15/02 300 300
Salomon, Inc.
7.750% due 05/15/00 1,000 1,015
Sears Credit Account Master Trust II
Series 1996-4 Class A
6.450% due 10/16/06 5,000 5,005
Sears Roebuck
Acceptance Corp. (MTN)
6.160% due 09/20/00 3,500 3,507
Series II
6.690% due 04/30/01 1,800 1,817
Series III
6.820% due 10/17/02 6,000 5,998
Sovereign Bancorp, Inc. (Regd)
6.750% due 07/01/00 1,875 1,883
Tele-Communications, Inc.
8.250% due 01/15/03 2,000 2,119
Travelers Group, Inc.
6.700% due 07/05/00 500 503
TRW, Inc.
6.500% due 06/01/02 1,325 1,320
Walt Disney Co.
Series E
5.125% due 12/15/03 (MTN) 1,100 1,047
Wellsford Residential Property Trust
5.369% due 11/24/99 (MTN)(b) 2,150 2,150
Williams Companies, Inc.
6.125% due 02/01/01 285 284
---------
143,735
---------
EURODOLLAR BONDS - 0.8%
American Express Travel
5.098% due 10/24/01 (b) 1,500 1,497
Diageo Capital PLC
6.625% due 06/24/04 545 542
St. George Bank, Ltd.
Series E
5.168% due 11/29/01 (MTN)(b) 2,000 1,998
---------
4,037
---------
MORTGAGE-BACKED SECURITIES - 6.3%
Asset Securitization Corp.
Series 1997-D5 Class A1A
6.500% due 02/14/41 983 984
Bayview Financial Acquisition Trust
Series 1998-1 Class A1
7.010% due 05/25/29 1,062 1,050
Bear Stearns Mortgage Securities, Inc.
Series 1996-6 Class A2
7.000% due 11/25/27 562 561
Chase Commercial Mortgage Securities
Corp.
Series 1997-2 Class A1
6.450% due 12/19/04 1,966 1,951
Deutsche Mortgage & Asset Receiving
Corp.
Series 1998-C1 Class A1
6.220% due 09/15/07 443 432
DLJ Mortgage Acceptance Corp.
Series 1996-CF2 Class A1A
6.860% due 11/12/21 713 716
Short Term Bond Fund 99
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ---------
Federal Home Loan Mortgage Corp.
Participation Certificate
7.500% due 2000 66 66
7.500% due 2002 33 33
9.000% due 2005 225 230
6.250% due 2007 50 49
Federal National Mortgage Association
7.000% due 2004 848 852
8.750% due 2004 33 34
6.500% due 2008 1,693 1,675
5.500% due 2009 8,399 8,079
8.000% due 2009 595 609
7.500% due 2014 1,562 1,592
8.500% due 2025 3 4
Government National
Mortgage Association
7.250% due 2006 1,529 1,551
8.250% due 2009 790 832
9.000% due 2017 1,717 1,829
9.500% due 2017 700 752
Series 1994-1 Class PE
7.500% due 07/16/22 1,150 1,174
Series 1997-11 Class M
8.000% due 05/16/24 1,200 1,223
Morgan Stanley Capital I
Series 1998-CF1 Class A1
6.330% due 10/15/07 426 420
Prudential Home Mortgage Securities
Series 1994-19, Class A2
7.050% due 05/25/24 456 458
Residential Accredited Loans, Inc.
Series 1997-QS7 Class A1
7.500% due 07/25/27 244 246
Residential Asset Securitization Trust
Series 1997-A9 Class A1
7.250% due 11/26/27 6 6
Series 1998-A1 Class A1
7.000% due 03/25/28 223 223
Series 1998-A2 Class A1
6.750% due 04/25/28 557 555
Residential Funding Mortgage Securities
Series 1998-NS1 Class A2
6.375% due 01/25/09 962 959
Resolution Trust Corp. Mortgage
Pass-thru Certificate
Series 1995-2 Class C1
7.450% due 05/25/29 (b) 400 395
Union Planters Mortgage Finance Corp.
Series 1998-A, Class A1
6.350% due 01/25/28 649 645
Series 1999-1 Class A1
6.250% due 04/01/29 634 630
Wilshire Funding Corporation
Series 1997-WFC1 Class AI
7.250% due 08/25/27 692 695
---------
31,510
---------
MUNICIPAL BONDS - 0.5%
Missouri Higher Education
Loan Authority
Series 97 Class P
5.120% due 07/25/08 (b) 1,098 1,090
Philadelphia, Pennsylvania, Authority
for Industrial Development
Series 1997 Class A
6.488% due 06/15/04 1,395 1,374
---------
2,464
---------
UNITED STATES GOVERNMENT
AGENCIES - 1.0%
Federal Farm Credit Bank
5.220% due 09/11/01 1,250 1,233
Federal National Mortgage Association
Series B
5.750% due 06/07/01 (MTN) 3,000 2,990
Tennessee Valley Authority
Series D
6.000% due 11/01/00 750 752
---------
4,975
---------
UNITED STATES GOVERNMENT TREASURIES - 22.6%
United States Treasury Bonds
8.750% due 11/15/08 5,117 5,650
United States Treasury Notes
5.625% due 11/30/00 2,350 2,356
5.000% due 02/28/01 5,715 5,670
5.750% due 06/30/01 61,600 61,860
6.500% due 08/31/01 605 616
6.250% due 10/31/01 4,500 4,564
6.250% due 02/28/02 3,490 3,542
6.625% due 04/30/02 2,650 2,720
3.625% due 07/15/02 25,589 25,317
5.750% due 12/31/02 635 634
---------
112,929
---------
100 Short Term Bond Fund
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ---------
<S> <C> <C>
YANKEE BONDS - 1.8%
Edperbrascan Corp.
7.375% due 10/01/02 2,000 1,999
Noranda Forest, Inc.
8.875% due 10/15/99 450 453
Quebec, Province of
13.250% due 09/15/14 900 954
Tyco International Group SA
6.125% due 06/15/01 3,600 3,587
Westpac Banking, Ltd.
7.875% due 10/15/02 2,006 2,072
---------
9,065
---------
TOTAL FIXED INCOME INVESTMENTS
(cost $471,697) 468,142
---------
SHORT-TERM INVESTMENTS - 7.0%
Federal Home Loan Bank Corp.
Discount Note
4.490% due 07/01/99 (a) 4,475 4,475
Federal Home Loan Mortgage
Discount Note
4.760% due 07/22/99 (a) 1,600 1,595
Frank Russell Investment Company
Money Market Fund,
due on demand (a) 28,851 28,851
---------
TOTAL SHORT-TERM INVESTMENTS
(cost $34,921) 34,921
---------
TOTAL INVESTMENTS - 100.8%
(cost $506,618) 503,063
OTHER ASSETS AND LIABILITIES,
NET - (0.8%) (4,164)
---------
NET ASSETS - 100.0% 498,899
=========
</TABLE>
(a) At cost, which approximates market.
(b) Adjustable or floating rate security.
Abbreviations:
MTN - Medium Term Note
See accompanying notes which are an integral part of the financial statements.
Short Term Bond Fund 101
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $506,618) ........................... $ 503,063
Receivables:
Dividends and interest ..................................................... 4,667
Investments sold ........................................................... 1,005
Fund shares sold ........................................................... 1,024
---------
Total Assets ............................................................. 509,759
LIABILITIES
Payables:
Investments purchased ........................................ $ 9,553
Fund shares redeemed ......................................... 829
Accrued fees to affiliates ................................... 341
Other accrued expenses ....................................... 137
---------
Total Liabilities ........................................................ 10,860
---------
NET ASSETS .................................................................. $ 498,899
=========
NET ASSETS CONSIST OF:
Undistributed net investment income ......................................... $ 3,519
Accumulated net realized gain (loss) ....................................... (18,467)
Unrealized appreciation (depreciation) on investments ....................... (3,555)
Shares of beneficial interest ............................................... 273
Additional paid-in capital .................................................. 517,129
---------
NET ASSETS .................................................................. $ 498,899
=========
NET ASSET VALUE, offering and redemption price per share:
Class C ($183,116 divided by 10,015 shares of $.01 par value
shares of beneficial interest outstanding) .............................. $ 18.28
=========
Class E ($9,267,388 divided by 505,792 shares of $.01 par
value shares of beneficial interest outstanding) ........................ $ 18.32
=========
Class S ($489,448,494 divided by 26,747,046 shares of $.01 par
value shares of beneficial interest outstanding) ........................ $ 18.30
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
102 Short Term Bond Fund
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF OPERATIONS
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Interest ................................................................... $ 11,582
Dividends from Money Market Fund ........................................... 538
Dividends .................................................................. 24
---------
Total Investment Income .................................................. 12,144
EXPENSES
Management fees .............................................. $ 1,068
Administrative fees .......................................... 120
Custodian fees ............................................... 131
Distribution fees - Class C .................................. 1
Transfer agent fees .......................................... 264
Professional fees ............................................ 57
Registration fees - Class E .................................. 1
Registration fees - Class S .................................. 82
Shareholder servicing fees - Class E ......................... 3
Trustees' fees ............................................... 6
Miscellaneous ................................................ 124
---------
Total Expenses ........................................................... 1,857
---------
Net investment income ....................................................... 10,287
---------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investments ..................................... (2,324)
Net change in unrealized appreciation (depreciation) on investments ......... (4,715)
---------
Net realized and unrealized gain (loss) .................................... (7,039)
---------
Net increase (decrease) in net assets resulting from operations ............. $ 3,248
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Short Term Bond Fund 103
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
------------------- -----------------
OPERATIONS
Net investment income ........................................... $ 10,287 $ 13,185
Net realized gain (loss) ........................................ (2,324) 1,126
Net change in unrealized appreciation (depreciation) ............ (4,715) 355
------------------- -----------------
Net increase (decrease) in net assets resulting from operations 3,248 14,666
------------------- -----------------
DISTRIBUTIONS
From net investment income
Class C ....................................................... (4) --
Class E ....................................................... (7) --
Class S ....................................................... (7,420) (13,149)
------------------- -----------------
Net decrease from distributions ............................. (7,431) (13,149)
------------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ... 242,543 29,552
------------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ...................... 238,360 31,069
NET ASSETS
Beginning of period ............................................. 260,539 229,470
------------------- -----------------
End of period (including undistributed net investment income of
$3,519 and $621, respectively) ................................ $ 498,899 $ 260,539
=================== =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
104 Short Term Bond Fund
<PAGE>
SHORT TERM BOND FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
--------
NET ASSET VALUE, BEGINNING OF PERIOD ....................... $ 18.36
--------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) ................................ .25
Net realized and unrealized gain (loss) on investments .... (.16)
--------
Total Income From Investment Operations ................. .09
--------
DISTRIBUTIONS
From net investment income ................................ (.17)
--------
NET ASSET VALUE, END OF PERIOD ............................. $ 18.28
========
TOTAL RETURN (%)(a) ....................................... .48
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ............... 183
Ratios to average net assets (%)(b):
Operating expenses ...................................... 1.95
Net investment income ................................... 3.77
Portfolio turnover rate (%)(b) ........................... 168.49
* For the period March 3, 1999 (commencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) Average month-end shares outstanding were used for this calculation.
Short Term Bond Fund 105
<PAGE>
SHORT TERM BOND FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
---------
NET ASSET VALUE, BEGINNING OF PERIOD ....................... $ 18.51
---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) ................................ .25
Net realized and unrealized gain (loss) on investments .... (.14)
---------
Total Income From Investment Operations ................. .11
---------
DISTRIBUTIONS
From net investment income ................................ (.30)
---------
NET ASSET VALUE, END OF PERIOD ............................. $ 18.32
=========
TOTAL RETURN (%)(a) ....................................... .60
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ............... 9,267
Ratios to average net assets (%)(b):
Operating expenses ...................................... 1.35
Net investment income ................................... 4.45
Portfolio turnover rate (%)(b) ........................... 168.49
* For the period February 18, 1999 (commencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) Average month-end shares outstanding were used for this calculation.
106 Short Term Bond Fund
<PAGE>
SHORT TERM BOND FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1999* 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD .................... $ 18.46 $ 18.35 $ 18.36 $ 18.55 $ 17.98 $ 18.99
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d) ............................. .39 .99 1.08 1.04 1.16 1.21
Net realized and unrealized gain (loss) on investments . (.21) .11 -- (.19) .59 (1.07)
---------- ---------- ---------- ---------- ---------- ----------
Total Income From Investment Operations .............. .18 1.10 1.08 .85 1.75 .14
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS
From net investment income ............................. (.34) (.99) (1.09) (1.04) (1.18) (1.15)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD .......................... $ 18.30 $ 18.46 $ 18.35 $ 18.36 $ 18.55 $ 17.98
========== ========== ========== ========== ========== ==========
TOTAL RETURN (%)(a)(b) .................................. .98 6.09 6.02 4.76 9.95 .82
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ............ 489,448 260,539 229,470 222,983 183,577 144,030
Ratios to average net assets (%)(b)(c):
Operating expenses ................................... .88 .66 .66 .70 .58 .19
Net investment income ................................ 4.90 5.37 5.70 5.70 6.41 6.52
Portfolio turnover rate (%)(c) ........................ 168.49 129.85 213.14 264.40 269.31 233.75
</TABLE>
* For the six months ended June 30, 1999 (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 mangement 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 period ended June 30, 1999 are annualized.
(d) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
Short Term Bond Fund 107
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- --------
LONG-TERM INVESTMENTS - 98.7%
ASSET-BACKED SECURITIES - 9.1%
AFC Home Equity Loan Trust
Series 1996-2 Class 1 A3
7.590% due 09/25/27 342 341
Arcadia Automobile Receivables Trust
Series 1998-B Class A3
5.950% due 11/15/02 765 766
Series 1999-A Class A4
5.940% due 08/15/03 1,885 1,873
ARG Funding Corp.
Series 1999-1A Class A3
6.020% due 05/20/04 1,400 1,369
Associates Manufactured Housing
Pass-through Certificates
Series 1997-2 Class A3
6.275% due 03/15/28 1,602 1,606
BankAmerica Manufactured Housing Contract
Series 1997-1 Class A4
6.195% due 06/10/10 (c) 1,000 1,002
Centex Home Equity
Series 1999-2 Class A3
6.260% due 07/25/25 1,305 1,282
Circuit City Credit Card Master Trust
Series 1994-2 Class A
8.000% due 11/15/03 2,340 2,363
Citibank Credit Card Master Trust I
Series 1997-3 Class A
6.839% due 02/10/04 (c) 1,097 1,101
Series 1998-6 Class A
5.850% due 04/10/03 2,150 2,142
First Omni Credit Card Master Trust
Series 1996-A Class A
6.650% due 09/15/03 2,235 2,251
First Sierra Receivables
Series 1999-1 Class A4
5.730% due 07/15/04 2,400 2,348
First USA Credit Card Master Trust
Series 1997-6 Class A
6.420% due 03/17/05 1,700 1,708
Series 1999-3 Class C
6.450% due 01/19/07 1,750 1,683
Fleetwood Credit Corporation Grantor Trust
Series 1997-B Class A
6.400% due 05/15/13 (c) 2,762 2,773
Ford Credit Automobile Owner Trust
Series 1999-B Class A4
5.800% due 06/15/02 2,910 2,895
Green Tree Financial Corp.
Series 1994-1 Class A4
7.200% due 04/15/19 1,905 1,932
Series 1994-2 Class A5
8.300% due 05/15/19 1,670 1,744
Series 1997-2 Class A6
7.240% due 06/15/28 1,350 1,356
Green Tree Home Improvement Loan Trust
Series 1998-D Class HIA2
5.940% due 06/15/29 755 755
Series 1998-E Class HIA1
5.907% due 08/15/07 529 530
Green Tree Lease Finance
Series 1998-1 Class A4
5.740% due 01/20/04 610 597
Green Tree Recreational, Equipment
& Consumer Loan Trust
Series 1998-A Class A1C
6.180% due 06/15/19 432 432
Series 1998-C Class A4
6.170% due 02/15/11 465 466
Heller Equipment Asset Receivables Trust
Series 1999-1 Class A3
5.500% due 07/13/03 3,465 3,415
Ikon Receivables, L.L.C.
Series 1999-1 Class A3
5.990% due 05/15/05 2,500 2,489
IMC Home Equity Loan Trust
Series 1997-5 Class M1
7.080% due 11/20/28 (c) 1,500 1,496
Indymac Home Equity Loan Trust
Step Up Bond
Series 1998-A Class AF4
6.310% due 10/25/29 855 834
MBNA Master Credit Card Trust II
Series 1999-A Class B
5.357% due 07/17/06 (c) 1,250 1,245
Metris Master Trust
Series 1996-1 Class A
6.450% due 02/20/02 1,097 1,098
Series 1997-1 Class A
6.870% due 10/20/05 3,350 3,406
Newcourt Equipment Trust Securities
Series 1998-1 Class A4
5.393% due 05/20/04 4,000 3,839
Oakwood Mortgage Investors, Inc.
Series 1998-A Class A2
6.100% due 05/15/28 771 770
Series 1999-B Class A2
6.190% due 12/15/13 1,275 1,260
108 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
---------- --------
Onyx Acceptance Grantor Trust
Series 1997-1 Class A
6.550% due 09/15/03 (c) 780 786
Series 1998-A Class A3
5.850% due 08/15/02 2,280 2,276
Series 1998-C Class A2
5.550% due 09/15/01 329 328
Option One Mortgage Loan Trust
Series 1999-2 Class A4
6.340% due 05/25/29 1,095 1,061
PacificAmerica Home Equity Loan
Step Up Bond
Series 1998-2 Class AF
6.590% due 06/26/28 1,625 1,622
Peco Energy Transition Trust
Series 1999-A Class A4
5.800% due 03/01/07 715 692
Pemex Finance, Ltd.
Series 2A Class A1
6.125% due 11/15/03 2,000 2,003
Preferred Credit Corp.
Series 1997-1 Class A6
7.590% due 07/25/26 1,050 1,075
Premier Auto Trust
Series 1998-5 Class A4
5.190% due 04/08/03 1,760 1,715
Series 1999-2 Class A4
5.590% due 02/09/04 825 810
Providian Master Trust
Series 1997-4 Class A
6.250% due 06/15/07 2,330 2,313
Residential Funding Mortgage
Securities II, Inc.
Series 1999-HI1 Class A3
6.310% due 09/25/29 2,700 2,680
Resolution Trust Corp. Mortgage
Pass-thru Certificate
Series 1994-C2 Class D
8.000% due 04/25/25 273 276
Saxon Asset Securities Trust Co.
Series 1997-1 Class AF2
7.085% due 07/25/20 858 859
Series 1998-4 Class AF3
6.265% due 07/25/23 1,490 1,474
Sears Mortgage Securities Corp.
Series 1992 Class A
7.587% due 10/25/22 (c) 1,163 1,176
Team Fleet Financing Corp.
Series 1997-1 Class A
7.350% due 05/15/03 1,975 2,005
The Money Store Home Equity Loan Trust
Series 1998-A Class AF5
6.370% due 12/15/23 1,420 1,414
UCFC Home Equity Loan
Series 1996-B1 Class A4
7.525% due 12/15/17 860 867
Union Acceptance Corp.
Series 1998-B Class A4
5.900% due 02/09/04 1,670 1,661
USAA Auto Loan Grantor Trust
Series 1998-1 Class A
5.800% due 01/15/05 1,783 1,789
Vanderbilt Mortgage & Finance, Inc.
Series 1999-A Class 1A3
6.080% due 12/07/15 530 517
Series 1999-B Class 1A3
6.280% due 03/07/13 880 872
WFS Financial Owner Trust
Series 1999-A Class A4
5.700% due 11/20/03 890 871
World Financial Network
Credit Card Master Trust
Series 1996-A Class A
6.700% due 02/15/04 (c) 2,895 2,922
World Omni Automobile Lease
Securitization Trust
Series 1996-B Class A2
6.200% due 11/15/02 388 388
Series 1996-B Class A3
6.250% due 11/15/02 2,421 2,426
Series 1997-A Class A2
6.750% due 06/25/03 (c) 1,720 1,731
Series 1997-A Class B
6.490% due 06/25/03 842 851
--------
94,627
--------
BANKERS ACCEPTANCE NOTES - 0.1%
Mellon Bank, NA
7.625% due 09/15/07 510 529
--------
CORPORATE BONDS AND NOTES - 19.5%
Ahold Finance USA, Inc.
6.250% due 05/01/09 2,070 1,952
Air Products & Chemicals, Inc.
8.750% due 04/15/21 300 338
Allegiance Corp.
7.300% due 10/15/06 900 904
7.000% due 10/15/26 100 100
America West Airlines
Series A
6.850% due 07/02/09 569 552
Fixed Income I Fund 109
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- --------
American Financial Group, Inc.
7.125% due 04/15/09 1,500 1,396
American Health Properties, Inc.
7.050% due 01/15/02 650 637
American Stores Co.
8.000% due 06/01/26 875 941
Analog Devices, Inc.
6.625% due 03/01/00 225 226
Appalachian Power Co.
6.800% due 03/01/06 1,250 1,239
Archer Daniels Co.
8.375% due 04/15/17 900 1,003
Aristar, Inc.
6.000% due 05/15/02 1,935 1,910
Associates Corp. of North America
5.500% due 02/15/04 2,000 1,906
6.500% due 10/15/02 400 402
Series H
7.090% due 04/11/03 (MTN) 400 406
AT&T Corp.
8.625% due 12/01/31 440 460
Atlantic Richfield Co.
9.125% due 08/01/31 700 860
Avco Financial Services, Inc.
6.000% due 08/15/02 400 396
Baltimore Gas & Electric Co.
6.500% due 02/15/03 550 553
Banco De Latinoamerica
6.500% due 04/02/01 1,400 1,399
BankAmerica Corp.
6.850% due 03/01/03 425 432
6.625% due 06/15/04 1,500 1,483
Bank of New York, Inc.
7.875% due 11/15/02 500 522
Bank One Corp.
8.100% due 03/01/02 415 431
7.250% due 08/01/02 790 810
7.375% due 12/01/02 195 200
Series A
5.625% due 02/17/04 (MTN) 1,350 1,294
BankBoston Corp. (MTN)
6.125% due 03/15/02 1,200 1,189
Barnett Bank, Inc.
6.900% due 09/01/05 665 665
Baxter International, Inc.
6.630% due 02/15/28 1,150 1,021
Bear Stearns Cos., Inc.
5.200% due 02/16/01 (MTN)(c) 1,800 1,796
6.150% due 03/02/04 1,475 1,421
Bell Telephone Co. of Pennsylvania
8.350% due 12/15/30 645 730
BellSouth Telecommunications, Inc.
7.000% due 12/01/95 295 281
Beneficial Corp.
8.400% due 05/15/08 757 823
Burlington Northern Santa Fe
7.082% due 05/13/29 1,100 1,082
Camden Property Trust
7.000% due 04/15/04 700 685
Campbell Soup Co.
8.875% due 05/01/21 500 587
Carolina Power & Light Co.
6.875% due 08/15/23 250 237
Case Corp.
7.250% due 08/01/05 395 391
7.250% due 01/15/16 400 383
Caterpillar Financial Services Corp. (MTN)
9.500% due 02/06/07 80 92
Caterpillar, Inc.
8.000% due 02/15/23 750 796
Central Fidelity Banks, Inc.
8.150% due 11/15/02 280 294
Central Power & Light Co.
Series FF
6.875% due 02/01/03 550 557
Champion International Corp.
6.400% due 02/15/26 570 550
Chase Manhattan Corp.
6.000% due 02/15/09 1,105 1,024
Chesapeake & Potomac Telephone Co.
8.375% due 10/01/29 405 459
Choice Hotels International, Inc.
7.125% due 05/01/08 1,250 1,177
Chrysler Financial Co., L.L.C.
6.080% due 03/12/01 (MTN) 1,550 1,547
Cincinnati Gas & Electric Co.
7.200% due 10/01/23 250 238
CIT Group, Inc.
6.150% due 12/15/02 (MTN) 300 296
5.625% due 10/15/03 2,100 2,023
Citicorp
5.147% due 05/24/01 (MTN)(c) 2,000 1,997
5.172% due 05/24/01 (MTN)(c) 3,000 3,000
9.500% due 02/01/02 195 210
7.125% due 06/01/03 485 494
Citigroup, Inc.
6.875% due 02/15/98 920 823
City National Bank
6.375% due 01/15/08 575 542
Coca Cola Enterprises, Inc.
7.000% due 10/01/26 665 672
110 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
---------- --------
Colonial Realty L.P. (MTN)
6.980% due 09/26/05 500 471
Comcast Cable Communications
8.375% due 05/01/07 300 321
6.200% due 11/15/08 950 884
Comerica Bank
7.250% due 06/15/07 700 707
6.000% due 10/01/08 275 256
Commercial Credit Group, Inc.
7.875% due 07/15/04 500 527
6.500% due 06/01/05 300 297
8.700% due 06/15/10 795 896
Commonwealth Edison Co.
Series 85
7.375% due 09/15/02 1,120 1,146
Conagra, Inc. (MTN)
8.100% due 05/20/02 300 312
Conoco, Inc.
6.950% due 04/15/29 800 749
Countrywide Home Loan (MTN)
Series H
6.250% due 04/15/09 1,300 1,197
Cox Communications, Inc.
6.500% due 11/15/02 600 599
6.690% due 09/20/04 (MTN) 500 495
Crown Cork & Seal Finance PLC
7.000% due 12/15/06 850 831
CSX Corp.
7.900% due 05/01/17 500 515
DaimlerChrysler AG
7.450% due 03/01/27 990 996
Dana Corp.
6.250% due 03/01/04 5,000 4,922
Delta Air Lines, Inc. (MTN)
Series C
6.650% due 03/15/04 1,200 1,177
Dillards Inc.
6.430% due 08/01/04 1,175 1,125
Duke Energy Corp.
6.875% due 08/01/23 600 544
7.000% due 07/01/33 1,030 928
Duke Realty, Ltd. Partnership
6.800% due 02/12/09 800 747
EOP Operating, L.P.
6.500% due 01/15/04 1,825 1,778
Federal Express Corp.
7.600% due 07/01/97 400 368
Federated Department Stores Inc.
6.125% due 09/01/01 1,100 1,093
Fifth Third Bank
6.750% due 07/15/05 900 889
Fifth Third Capital Trust I
Series A
8.136% due 03/15/27 365 380
Finova Capital Corp.
5.875% due 10/15/01 600 593
7.125% due 05/01/02 1,100 1,117
First Bank Systems, Inc.
8.000% due 07/02/04 1,050 1,105
First Chicago Corp. (MTN)
5.100% due 11/14/01 (c) 3,000 2,967
First Interstate Bancorp (MTN)
9.375% due 01/23/02 225 240
First Tennessee Bank
Series BKNT
5.750% due 12/01/08 1,325 1,191
First Union Corp.
6.625% due 06/15/04 665 665
First Union Institutional Capital Trust I
8.040% due 12/01/26 100 101
First Union National Bank (MTN)
7.125% due 10/15/06 555 563
Fleet Financial Group, Inc.
6.875% due 03/01/03 350 354
8.125% due 07/01/04 675 717
Ford Motor Credit Co.
6.125% due 04/28/03 690 680
6.750% due 05/15/05 425 424
Fort James Corp.
6.625% due 09/15/04 1,225 1,224
6.875% due 09/15/07 400 394
Fortune Brands, Inc.
7.875% due 01/15/23 400 424
General Electric Capital Corp.
8.300% due 09/20/09 470 526
General Motors Acceptance Corp.
5.480% due 12/16/02 (MTN) 3,075 2,980
6.750% due 03/15/03 5,000 5,033
Goldman Sachs Group
5.180% due 01/16/01 (c) 1,500 1,499
Series A
5.260% due 02/20/01 (MTN)(c) 3,000 3,001
Grand Metropolitan Investment Corp.
7.450% due 04/15/35 425 451
GTE California, Inc.
6.750% due 05/15/27 600 565
Harrahs Operating Co., Inc.
7.500% due 01/15/09 1,300 1,260
Heller Financial, Inc.
6.440% due 10/06/02 1,100 1,099
Fixed Income Fund 111
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- ----------
Hertz Corp.
7.625% due 08/01/02 450 462
9.000% due 11/01/09 390 439
Hilton Hotels Corp.
7.000% due 07/15/04 1,410 1,384
Household Finance Corp.
6.125% due 07/15/02 (MTN) 1,450 1,438
5.875% due 02/01/09 880 800
Illinois Power
7.500% due 06/15/09 1,500 1,522
IMC Global, Inc.
6.500% due 08/01/03 1,000 978
International Business Machines Corp.
7.125% due 12/01/96 1,200 1,150
International Paper Co.
9.400% due 06/01/02 600 646
IRT Property Co.
7.250% due 08/15/07 1,325 1,233
ITT Financial Corp.
7.400% due 11/15/25 1,165 1,005
JPM Capital Trust I
7.540% due 01/15/27 285 272
Kern River Funding Corp.
Series B
6.720% due 09/30/01 1,025 1,032
Key Bank Corp.
6.500% due 04/15/08 325 309
KeyCorp
8.000% due 07/01/04 200 211
7.500% due 06/15/06 875 898
Knight-Ridder, Inc.
6.875% due 03/15/29 700 648
Kroger Co.
6.800% due 12/15/18 650 605
Liberty Mutual Insurance Co.
7.697% due 10/15/97 1,850 1,698
Lincoln National Corp.
7.250% due 05/15/05 450 454
6.500% due 03/15/08 250 240
7.000% due 03/15/18 600 571
Loral Corp.
7.000% due 09/15/23 900 815
Lowes Cos., Inc.
6.875% due 02/15/28 1,020 953
Manufacturers & Traders Trust Co.
7.000% due 07/01/05 525 519
Marsh & McLennan Cos., Inc.
6.625% due 06/15/04 1,500 1,502
Martin Marietta Corp.
7.000% due 03/15/11 325 325
Mattel, Inc.
6.000% due 07/15/03 1,100 1,072
MCI WorldCom, Inc.
6.400% due 08/15/05 600 587
6.950% due 08/15/28 1,300 1,232
Mercantile Bancorp
7.050% due 06/15/04 1,000 1,013
Merrill Lynch & Co., Inc.
6.000% due 02/12/03 550 542
Mirage Resorts, Inc.
6.625% due 02/01/05 1,070 992
Morgan, J.P. & Co., Inc.
5.750% due 02/25/04 1,250 1,203
Morgan Stanley Dean Witter
& Co. (MTN)
5.625% due 01/20/04 575 554
Nabisco, Inc.
6.375% due 02/01/35 1,000 958
Natexix Ambs Co., LLC
Series A
8.440% due 12/29/49 325 310
National City Corp.
5.750% due 02/01/09 1,200 1,092
New England Telephone & Telegraph Co.
7.875% due 11/15/29 430 461
Newcourt Credit Group, Inc.
6.875% due 02/16/05 1,525 1,492
News America Holdings, Inc.
8.875% due 04/26/23 575 635
7.750% due 01/20/24 600 587
Northwestern Bell Telephone Co.
7.750% due 05/01/30 455 464
Norwest Corp. (MTN)
Series H
6.750% due 06/15/07 150 148
Norwest Financial, Inc.
6.375% due 11/15/01 750 752
6.250% due 11/01/02 425 423
6.375% due 11/15/03 650 647
NRG Energy, Inc.
7.500% due 06/01/09 680 663
NYNEX Corp.
9.550% due 05/01/10 500 560
Occidental Petroleum Corp.
8.500% due 11/09/01 (MTN) 295 304
10.125% due 11/15/01 255 274
Paine Webber Group, Inc.
6.375% due 05/15/04 300 292
Panamsat Corp.
6.125% due 01/15/05 700 653
Pennsylvania Power & Light Co.
112 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
---------- ----------
6.875% due 03/01/04 1,200 1,217
Philip Morris Cos., Inc.
6.150% due 03/15/00 2,900 2,912
7.000% due 07/15/05 1,700 1,701
6.950% due 06/01/06 380 384
7.200% due 02/01/07 2,000 2,002
7.650% due 07/01/08 395 406
Pitney Bowes Credit Corp.
8.550% due 09/15/09 780 875
PNC Funding Corp.
6.875% due 07/15/07 1,100 1,081
Praxair, Inc.
6.850% due 06/15/05 880 863
Prologis Trust
6.700% due 04/15/04 750 732
Provident Cos., Inc.
6.375% due 07/15/05 1,200 1,170
Ralston Purina Co.
7.875% due 06/15/25 845 862
Raytheon Co.
6.300% due 03/15/05 1,020 1,001
Realty Income Corp.
7.750% due 05/06/07 1,500 1,424
Republic of New York Corp.
9.750% due 12/01/00 130 136
8.250% due 11/01/01 240 250
7.875% due 12/12/01 300 310
Rite Aid Corp.
6.700% due 12/15/01 1,100 1,095
Safeco Capital Trust I
8.072% due 07/15/37 300 285
Safeco Corp. (MTN)
7.020% due 09/18/02 1,050 1,063
Safeway, Inc.
6.050% due 11/15/03 500 489
Salomon Smith Barney Holdings, Inc.
6.250% due 06/15/05 1,000 969
Sears Roebuck Acceptance Corp.
7.030% due 06/04/03 (MTN) 800 811
6.750% due 01/15/28 950 859
Series II
6.690% due 04/30/01 (MTN) 975 984
Security Capital Group, Inc.
6.950% due 06/15/05 700 654
Service Corp. International
6.750% due 06/01/01 400 399
7.375% due 04/15/04 800 803
Shopping Center Associates
6.750% due 01/15/04 750 734
Societe Generale
7.850% due 04/29/49 (f) 675 661
Societe Generale Real Estate Co., L.L.C.
7.640% due 12/29/49 (f) 540 510
Southern California Edison Co.
6.375% due 01/15/06 415 409
Spieker Properties (MTN)
8.000% due 07/19/05 800 816
Sprint Capital Corp.
6.125% due 11/15/08 1,100 1,015
6.900% due 05/01/19 1,385 1,282
Star Banc Corp.
5.875% due 11/01/03 350 339
Summit Properties Partnership, L.P.
7.200% due 08/15/07 550 513
Suntrust Banks, Inc.
6.250% due 06/01/08 160 153
7.375% due 07/01/0 575 591
TCI, Inc.
9.800% due 02/01/2 425 519
Temple Inland, Inc.
7.250% due 09/15/04 575 576
Texaco Capital, Inc.
9.750% due 03/15/20 225 288
8.875% due 09/01/21 440 525
Time Warner, Inc.
7.975% due 08/15/04 450 470
8.110% due 08/15/06 900 943
8.180% due 08/15/07 900 951
6.875% due 06/15/18 1,050 976
TRW, Inc.
7.125% due 06/01/09 750 728
Union Carbide Chemicals & Plastics
7.875% due 04/01/23 835 830
Union Oil Co. (MTN)
9.400% due 02/15/11 390 449
Union Pacific Corp.
7.600% due 05/01/05 350 361
Union Pacific Railroad Trust
Pass-thru Certificate
Series 1996-A2
7.060% due 05/15/03 450 454
Union Planters Bank
6.500% due 03/15/18 700 662
United Technologies Corp.
8.750% due 03/01/21 445 518
US Bank National - Minnesota
5.110% due 12/19/01 (c) 3,000 3,012
5.625% due 11/30/05 1,000 941
USX Marathon Group
8.500% due 03/01/23 930 988
Fixed Income I Fund 113
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ---------
Virginia Electric & Power Co.
8.750% due 04/01/21 335 343
Wachovia Corp.
6.700% due 06/21/04 1,250 1,256
6.800% due 06/01/05 280 276
Wal-Mart Stores, Inc.
Series 1994-B3
8.800% due 12/30/14 360 430
Walt Disney Co.
Series E (MTN)
5.125% due 12/15/03 325 308
Waste Management, Inc.
6.375% due 12/01/03 750 743
Wells Fargo & Co.
6.875% due 04/01/06 500 501
Westdeutsche Landesbank NY
6.050% due 01/15/09 5,000 4,663
Willamette Industries, Inc.
7.850% due 07/01/26 750 770
Wisconsin Central Transportation Corp.
6.625% due 04/15/08 1,190 1,130
World Financial Properties Tower
Series 1996 WBF-B
6.910% due 09/01/13 1,269 1,243
---------
203,790
---------
EURODOLLAR BONDS - 1.9%
Australian Gas Light Co.
6.400% due 04/15/08 1,350 1,268
Bear Stearns Cos., Inc. (MTN)
5.551% due 03/18/05 (c) 2,000 1,977
Diageo Capital PLC
6.625% due 06/24/04 1,250 1,244
Korea Development Bank
7.125% due 09/17/01 2,000 1,976
Merita Bank, Ltd.
7.150% due 12/29/49 (f) 250 248
7.500% due 12/29/49 (f) 675 655
Merrill Lynch & Co. (MTN)
5.150% due 10/01/03 (c) 5,250 5,222
Nationsbank Corp. (MTN)
5.293% due 06/17/02 (c) 3,000 2,995
Ontario, Province of
7.375% due 01/27/03 450 466
5.500% due 10/01/08 1,325 1,219
SCL Term Aereo Santiago SA
6.950% due 07/01/12 3,000 2,794
Skandinaviska Enskilda Banken
8.125% due 09/06/49 (f) 375 366
---------
20,430
---------
MORTGAGE-BACKED SECURITIES - 39.5%
ACLC Franchise Loan Receivables 1997
Pass-thru Class A1
Series 1997 Class A
7.120% due 03/15/12 870 864
Capital Equipment Receivables Trust
Series 1996-1 Class A4
6.280% due 06/15/00 706 707
Chase Commercial Mortgage Securities Corp.
Series 1997-1 Class E
6.490% due 12/19/07 (c) 1,800 1,672
COMM Mortgage Trust
Series 1999-1 Class A1
6.145% due 02/15/08 4,917 4,822
Commercial Mortgage Acceptance Corp.
Series 1997-ML1 Class A1
6.500% due 11/15/04 (c) 1,285 1,283
Series 1998-C2 Class A1
5.800% due 03/15/06 18 18
DLJ Commercial Mortgage Corp.
Series 1998-CF2 Class A1A
5.880% due 11/12/31 1,108 1,070
Series 1999-CG1 Class A1A
6.080% due 08/10/08 (c) 1,511 1,474
Federal Home Loan Mortgage Corp. (d)
6.500% 15 Year TBA 8,245 8,132
6.000% 15 Year Gold TBA 6,195 5,990
5.000% 30 Year TBA 380 376
5.500% 30 Year TBA 6,570 6,250
6.000% 30 Year TBA 1,205 1,133
6.000% 30 Year Gold TBA 8,100 7,618
6.500% 30 Year TBA 9,730 9,392
6.500% 30 Year TBA 3,800 3,669
Federal Home Loan Mortgage Corp.
Series K Class 5
7.760% due 05/01/12 1,086 1,124
Federal Home Loan Mortgage Corp.
Participation Certificate
6.500% due 2003 300 299
7.000% due 2003 9 9
7.500% due 2007 157 159
7.000% due 2008 313 315
6.500% due 2009 316 313
7.500% due 2009 1,092 1,113
7.500% due 2009 (c) 95 97
8.000% due 2009 99 102
6.000% due 2010 214 208
6.500% due 2010 65 65
7.000% due 2010 1,541 1,552
8.000% due 2010 50 51
8.000% due 2010 326 336
114 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -----------
6.000% due 2011 2,117 2,053
7.000% due 2011 178 179
7.500% due 2011 28 29
6.000% due 2012 172 167
7.500% due 2012 786 800
6.000% due 2013 1,054 1,019
12.000% due 2014 167 183
9.000% due 2016 888 937
12.500% due 2016 91 100
9.000% due 2017 25 26
9.000% due 2018 1,364 1,447
9.000% due 2020 819 878
6.500% due 2024 3,989 3,870
7.500% due 2024 103 105
8.000% due 2025 6,146 6,315
8.500% due 2025 598 625
9.000% due 2025 529 559
7.500% due 2026 58 59
9.000% due 2026 12 12
7.000% due 2027 772 764
8.500% due 2027 1,687 1,763
6.500% due 2028 776 749
7.000% due 2028 683 676
7.500% due 2028 104 105
Federal Housing Authority
Project 68
7.430% due 06/27/21 1,186 1,208
Federal National Mortgage
Association Pools
7.000% due 1999 289 289
7.500% due 1999 (c) 78 80
7.500% due 1999 3,971 4,011
7.000% due 2000 271 272
8.000% due 2002 439 444
7.000% due 2003 319 321
7.500% due 2003 592 596
8.000% due 2003 196 199
6.500% due 2004 159 158
8.000% due 2004 48 49
8.000% due 2005 15 16
7.200% due 2007 979 1,009
6.500% due 2008 931 922
6.500% due 2009 6,821 6,755
6.500% due 2010 298 294
10.500% due 2010 3 3
6.500% due 2011 599 591
8.000% due 2011 126 129
6.500% due 2012 743 732
7.000% due 2012 31 31
7.500% due 2012 361 367
6.000% due 2013 81 78
6.500% due 2013 1,280 1,261
7.000% due 2013 333 334
5.500% due 2014 2,111 1,997
6.000% due 2014 1,057 1,021
6.500% due 2014 3,717 3,662
7.500% due 2017 22 22
8.000% due 2017 33 34
9.000% due 2017 317 335
6.500% due 2024 3,738 3,625
7.500% due 2024 1,494 1,509
8.000% due 2024 2,420 2,485
8.500% due 2024 424 443
7.000% due 2025 1,216 1,202
8.500% due 2025 1,041 1,087
9.000% due 2025 2,651 2,798
7.000% due 2026 1,508 1,491
8.500% due 2026 1,889 1,974
7.000% due 2027 1,801 1,780
7.500% due 2027 6,919 6,988
9.000% due 2027 21 22
6.000% due 2028 4,199 3,944
6.500% due 2028 7,138 6,886
7.000% due 2028 2,477 2,448
7.500% due 2028 4,178 4,220
6.000% due 2029 (g) 19,241 18,078
6.500% due 2029 6,869 6,626
7.000% due 2029 4,508 4,456
Federal National Mortgage Association (d)
6.000% 15 Year TBA 4,680 4,521
5.500% 30 Year TBA 5,000 4,516
6.000% 30 Year TBA 5,315 4,993
6.500% 30 Year TBA 35,500 34,246
7.000% 30 Year TBA 12,000 11,861
8.000% 30 Year TBA 3,470 3,564
Federal National Mortgage Association
REMIC
Series 1992-158 Class ZZ
7.750% due 08/25/22 502 511
Series 1997-55 Class ZA
7.000% due 04/18/27 5,648 5,394
Federal National Mortgage Association
- Aces
6.250% due 01/25/08 1,250 1,215
Series 1997-M5 Class B
6.650% due 08/25/07 1,720 1,726
Federal National Mortgage Association
Principal Only Strip
Zero Coupon due 03/01/20 109 88
Fixed Income I Fund 115
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- ----------
First Union Commercial Mortgage Trust
Series 1999-C1 Class A1
5.730% due 10/15/35 1,659 1,593
First Union Lehman Brothers
Commercial Mortgage Trust
Series 1997-C1 Class A3
7.380% due 04/18/07 1,670 1,689
Series 1997-C1 Class C
7.440% due 04/18/07 950 958
First Union-Chase
Commercial Mortgage
Series 1999-C2 Class A1
6.363% due 06/15/08 24 24
GMAC Commercial Mortgage
Securities, Inc.
Series 1999-C1 Class A1
5.830% due 05/15/33 3,240 3,104
Series 1999-C2 Class A1
6.570% due 09/15/33 6,300 6,310
Government National Mortgage
Association
8.500% due 2005 36 37
6.500% due 2008 77 77
6.500% due 2009 625 622
6.500% due 2010 142 141
7.000% due 2011 137 138
9.000% due 2016 1,170 1,247
9.500% due 2016 111 119
8.000% due 2017 69 71
9.000% due 2017 2,448 2,607
9.000% due 2020 5 5
10.500% due 2020 591 637
10.500% due 2021 65 70
7.000% due 2022 175 173
8.500% due 2022 41 43
6.125% due 2023 (c) 1,922 1,950
6.500% due 2023 729 705
7.000% due 2023 5,660 5,606
7.500% due 2023 5,753 5,816
6.125% due 2024 1,914 1,943
7.000% due 2024 10,537 10,428
7.500% due 2024 2,433 2,459
8.000% due 2024 932 960
8.000% due 2025 829 853
6.500% due 2026 3,411 3,289
7.000% due 2026 910 898
6.500% due 2027 117 112
7.000% due 2027 222 219
6.000% due 2028 4,803 4,474
6.500% due 2028 3,540 3,404
7.000% due 2028 11,634 11,477
8.000% due 2028 330 339
8.500% due 2028 542 568
6.500% due 2029 5,811 5,588
7.000% due 2029 7,913 7,807
Government National Mortgage
Association (d)
6.000% 30 Year TBA 2,400 2,233
6.500% 30 Year TBA 16,670 16,023
7.000% 30 Year TBA 12,390 12,223
8.000% 30 Year TBA 7,920 8,138
Greenwich Capital Acceptance, Inc.
Mortgage Pass-thru Certificate
Series 1993 Class LB-1
6.628% due 04/25/23 (c) 340 340
GS Mortgage Securities Corp. II
Series 1997-GL Class A2A
6.940% due 07/13/30 380 385
Series 1997-GL Class A2B
6.860% due 07/13/30 1,500 1,500
Series 1998-GLII Class A1
6.312% due 04/13/31 (c) 992 978
Guaranteed Export Trust
Series 1996-A
6.550% due 06/15/04 650 652
Housing Securities, Inc.
Series 1994-2 Class A1
6.500% due 07/25/09 795 781
Merrill Lynch Mortgage Investors, Inc.
Series 1995-C2 Class D
7.945% due 06/15/21 (c) 503 505
Series 1996-C2 Class A1
6.690% due 11/21/28 503 505
Series 1998-C3 Class A1
5.650% due 12/15/30 1,454 1,394
Morgan Stanley Capital I, Inc.
Series 1999-FNV1 Class A2
6.530% due 03/15/31 930 896
Mortgage Capital Funding, Inc.
Series 1996-MC1 Class A2B
7.900% due 02/15/06 950 1,015
Prudential Home Mortgage Securities Co.
Series 1992-38 Class A8
6.950% due 11/25/22 1,640 1,569
Series 1993-52 Class A1
7.998% due 11/25/23 (c) 507 511
116 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- --------
Residential Accredited Loans, Inc.
Series 1996-QS1 Class A4
6.900% due 01/25/26 2,223 2,125
Residential Funding Mortgage
Securities I
REMIC
Series 1997-S17 Class A5
7.000% due 11/25/27 5,000 4,917
Resolution Trust Corp.
Series 1994-C1 Class C
8.000% due 06/25/26 1,200 1,221
Series 1995 - C1 Class D
6.900% due 02/25/27 900 870
Salomon Brothers Mortgage
Securities VII, Inc.
Mortgage Pass-thru Certificate
Series 1994-16 Class A
7.730% due 11/25/24 (d) 671 681
Structured Asset Mortgage
Investments, Inc.
REMIC
Series 1998-9 Class 1A3
6.250% due 11/25/28 5,000 4,554
Structured Asset Securities Corp.
Series 1997-LLI Class A1
6.790% due 06/12/04 2,390 2,411
United States Department
of Veteran Affairs
REMIC
Series 1992-1 Class 2-E
7.750% due 03/15/16 775 784
WFS Financial Owner Trust
Series 1998-A Class A4
5.950% due 05/20/03 2,350 2,347
------------
413,668
------------
UNITED STATES GOVERNMENT
AGENCIES - 8.1%
Federal Home Loan Bank
5.625% due 03/19/01 9,400 9,378
6.450% due 03/13/02 2,625 2,631
5.790% due 04/27/09 3,980 3,741
Federal Home Loan Mortgage Corp.
5.750% due 07/15/03 3,075 3,036
Federal National Mortgage Association
6.100% due 10/06/00 (MTN) 1,910 1,910
6.250% due 11/20/02 (MTN) 1,955 1,944
5.750% due 04/15/03 2,975 2,942
6.010% due 07/17/03 (MTN) 2,000 1,976
5.125% due 02/13/04 6,000 5,753
5.875% due 04/23/04 360 352
7.780% due 09/29/06 (MTN) 255 255
6.940% due 03/19/07 (MTN) 1,550 1,544
6.470% due 08/13/07 (MTN) 5,000 4,973
6.900% due 08/21/07 (MTN) 3,650 3,632
6.500% due 04/29/09 2,825 2,732
6.400% due 05/14/09 3,000 2,907
6.375% due 06/15/09 13,710 13,594
6.080% due 09/01/28 (MTN) 2,475 2,274
6.250% due 05/15/29 185 176
6.210% due 08/06/38 3,445 3,201
Government Backed Trust Certificates
Class 1-C
9.250% due 11/15/01 1,121 1,171
Series T-3
9.625% due 05/15/02 (c) 598 623
Resolution Funding Corp.
8.875% due 07/15/20 2,275 2,883
8.625% due 01/15/21 880 1,092
8.625% due 01/15/30 240 309
Tennessee Valley Authority
Series A
6.375% due 06/15/05 3,260 3,273
Series C
6.000% due 03/15/13 3,150 2,979
Series E
6.250% due 12/15/17 640 615
6.750% due 11/01/25 3,320 3,307
------------
85,203
------------
UNITED STATES GOVERNMENT
TREASURIES - 17.8%
United States Treasury Bond
Principal Strip
8.875% due 02/15/19 8,300 2,413
United States Treasury Bonds
10.750% due 02/15/03 555 644
10.750% due 05/15/03 1,740 2,036
10.750% due 08/15/05 610 758
8.750% due 11/15/08 2,225 2,457
10.375% due 11/15/09 2,130 2,544
11.750% due 02/15/10 1,760 2,229
10.000% due 05/15/10 2,365 2,817
12.750% due 11/15/10 14,490 19,534
13.875% due 05/15/11 3,365 4,818
14.000% due 11/15/11 1,590 2,326
10.375% due 11/15/12 3,300 4,205
12.000% due 08/15/13 6,385 8,965
13.250% due 05/15/14 2,670 4,055
12.500% due 08/15/14 415 611
11.750% due 11/15/14 200 285
10.625% due 08/15/15 465 669
Fixed Income I Fund 117
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- --------
9.250% due 02/15/16 785 1,022
7.500% due 11/15/16 5,250 5,917
8.875% due 08/15/17 9,740 12,443
8.875% due 02/15/19 13,395 17,265
8.125% due 08/15/19 70 85
8.125% due 05/15/21 (g) 6,500 7,916
8.000% due 11/15/21 8,650 10,430
6.875% due 08/15/25 945 1,024
6.500% due 11/15/26 1,680 1,745
6.625% due 02/15/27 (g) 2,350 2,482
6.375% due 08/15/27 7,930 8,126
United States Treasury Notes
6.375% due 03/31/01 4,240 4,301
6.250% due 04/30/01 8,600 8,709
6.500% due 05/31/01 13,020 13,248
7.875% due 08/15/01 3,655 3,822
6.250% due 10/31/01 395 401
5.875% due 11/30/01 75 75
6.125% due 12/31/01 85 86
6.250% due 02/28/02 1,200 1,218
6.625% due 04/30/02 4,190 4,301
5.875% due 09/30/02 275 277
5.750% due 12/31/02 5,585 5,579
5.250% due 08/15/03 360 354
7.875% due 11/15/04 2,260 2,472
6.500% due 05/15/05 210 216
6.875% due 05/15/06 5,145 5,417
3.375% due 01/15/07 1,864 1,787
6.625% due 05/15/07 425 443
3.625% due 01/15/08 4,228 4,107
------------
186,634
------------
YANKEE BONDS - 2.7%
Abbey National PLC
6.700% due 06/29/49 (f) 2,325 2,168
Abitibi-Consolidated, Inc.
7.500% due 04/01/28 2,125 1,921
African Development Bank
9.750% due 12/15/03 425 477
6.750% due 10/01/04 400 403
6.875% due 10/15/15 775 758
8.800% due 09/01/19 535 645
Asian Development Bank
8.000% due 04/30/01 295 305
8.500% due 05/02/01 295 308
6.250% due 10/24/05 400 398
Canadian National Railway Co.
6.800% due 07/15/18 555 518
Canadian Occidental Petroleum, Ltd.
7.400% due 05/01/28 1,050 954
Carter Holt Harvey, Ltd.
8.875% due 12/01/04 350 367
Diageo Capital PLC
6.125% due 08/15/05 2,200 2,124
Hydro Quebec
Series GH
8.250% due 04/15/26 605 667
International American Development
Bank
6.950% due 08/01/26 425 440
Korea Development Bank
6.250% due 05/01/00 2,000 2,032
7.375% due 09/17/04 2,000 1,942
Manitoba, Province of
Series CD
9.250% due 04/01/20 335 419
National Westminster Bank PLC
7.750% due 04/29/49 (f) 2,225 2,210
New Brunswick, Province of
7.125% due 10/01/02 500 513
9.750% due 05/15/20 320 412
Newfoundland, Province of
10.000% due 12/01/20 150 195
Noranda Forest, Inc.
6.875% due 11/15/05 350 328
Nova Scotia, Province of
9.125% due 05/01/21 685 835
Quebec, Province of
7.125% due 02/09/24 1,145 1,115
Royal Caribbean Cruises, Ltd.
7.250% due 03/15/18 1,100 1,026
7.500% due 10/15/27 200 188
Saskatchewan, Province of
6.625% due 07/15/03 100 101
8.000% due 07/15/04 1,290 1,382
Trans-Canada Pipelines, Ltd.
7.150% due 06/15/06 1,000 1,004
Tyco International Group SA
6.375% due 06/15/05 800 783
United News & Media PLC
7.250% due 07/01/04 1,300 1,299
------------
28,237
------------
TOTAL LONG-TERM INVESTMENTS
(cost $1,048,817) 1,033,118
------------
118 Fixed Income I Fund
<PAGE>
Fixed Income I Fund
Statement of Net Assets, continued
June 30, 1999 (Unaudited)
NOTIONAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- --------
OPTIONS PURCHASED- 0.0%
United States Treasury 10 Year Notes (a)*
Aug 99.37 Call 2,723 13
Sept 96.73 Call 1,867 39
Sept 97.19 Call 1,420 53
Sept 98.13 Call 1,147 13
Nov 100.11 Call 3,100 31
Dec 90.58 Put 1,500 50
Dec 90.66 Put 1,500 51
United States Treasury 30 Year Bonds (a)*
Aug 100.41 Call 1,800 4
Dec 90.16 Put 1,500 46
------------
TOTAL OPTIONS PURCHASED
(cost $400) 300
------------
NUMBER
OF
SHARES
---------
PREFERRED STOCKS - 0.2%
Banco Bilbao Vizcaya
International - ADR 10,000 266
Credit Lyonnais Capital S.C.A.-ADR 40,000 1,020
Equity Office Property Trust
Series B 27,800 1,186
------------
TOTAL PREFERRED STOCKS
(cost $2,759) 2,472
------------
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- --------
SHORT-TERM INVESTMENTS - 12.6%
Federal Home Loan Mortgage
Discount Note
4.860% due 08/12/99 (b)(e) 2,075 2,063
Federal National Mortgage Association
Discount Note
4.790% due 07/08/99 (b)(e) 1,825 1,824
Frank Russell Investment Company
Money Market Fund,
due on demand (b) 127,527 127,527
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $131,414) 131,414
------------
TOTAL INVESTMENTS - 111.5%
(identified cost $1,183,390) 1,167,304
OTHER ASSETS AND LIABILITIES,
NET, INCLUDING OPTIONS WRITTEN - (11.5%) (120,182)
------------
NET ASSETS - 100.0% 1,047,122
============
* $100,000 notional amount represents 1 contract.
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Adjustable or floating rate security.
(d) Forward commitment.
(e) Rate noted is yield-to-maturity.
(f) Perpetual floating rate note.
(g) Held as collateral in connection with options written by the Fund.
Abbreviations:
ADR - American Depositary Receipt
MTN - Medium Term Note
REMIC - Real Estate Mortgage Investment Conduit
TBA - To Be Announced Security
See accompanying notes which are an integral part of the financial statements.
Fixed Income I Fund 119
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
NOTIONAL MARKET
AMOUNT VALUE
(000) (000)
$ $
-------- --------
OPTIONS WRITTEN
Federal National Mortgage Association**
Aug 95.78 Call 4,700 6
Aug 95.95 Call 3,175 4
Sept 94.20 Call 2,475 17
Sept 94.47 Call 1,700 8
Sept 96.06 Call 2,800 22
United States Treasury 10 Year Notes*
Nov 102.62 Call 3,100 14
Nov 96.09 Put 3,100 41
Dec 97.88 Put 2,800 64
Dec 97.95 Put 2,800 65
Dec 98.08 Put 2,800 67
United States Treasury 30 Year Bonds*
Feb 104.36 Call 2,000 1
Jul 105.25 Call 2,800 --
Feb 93.80 Put 2,000 70
Feb 93.84 Put 2,000 70
--------
Total Liability for Options Written
(premiums received $492) 449
========
* $100,000 notional amount represents 1 contract.
** Represents 1 OTC contract
See accompanying notes which are an integral part of the financial statements.
120 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
ASSETS
Investments at market (identified cost $1,183,390)................ $ 1,167,304
Cash.............................................................. 776
Receivables:
Dividends and interest........................................... 11,321
Investments sold................................................. 29,581
Fund shares sold................................................. 1,124
------------
Total Assets................................................... 1,210,106
LIABILITIES
Payables:
Investments purchased (regular settlement)........... $ 16,709
Investments purchased (delayed settlement)........... 145,023
Fund shares redeemed................................. 470
Accrued fees to affiliates........................... 277
Other accrued expenses............................... 56
Options written, at market value (premiums
received $492)....................................... 449
----------
Total Liabilities.............................................. 162,984
------------
NET ASSETS........................................................ $ 1,047,122
============
NET ASSETS CONSIST OF:
Undistributed net investment income............................... $ 14,951
Accumulated net realized gain (loss).............................. (6,996)
Unrealized appreciation (depreciation) on:
Investments...................................................... (16,086)
Options written.................................................. 43
Shares of beneficial interest..................................... 496
Additional paid-in capital........................................ 1,054,714
------------
NET ASSETS........................................................ $ 1,047,122
============
NET ASSET VALUE, offering and redemption price per share:
Class E ($25,934,879 divided by 1,229,142 shares of $.01 par
value shares of beneficial interest outstanding)............... $ 21.10
============
Class I ($1,021,186,679 divided by 48,391,798 shares of $.01
par value shares of beneficial interest outstanding)........... $ 21.10
============
See accompanying notes which are an integral part of the financial statements.
Fixed Income I Fund 121
<PAGE>
FIXED INCOME I FUND
STATEMENT OF OPERATIONS
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
INVESTMENT INCOME
Interest......................................................... $ 28,605
Dividends from Money Market Fund................................. 2,609
Dividends........................................................ 332
------------
Total Investment Income........................................ 31,546
EXPENSES
Advisory fees........................................ $ 1,207
Administrative fees.................................. 252
Custodian fees....................................... 205
Transfer agent fees.................................. 177
Professional fees.................................... 23
Registration fees - Class I.......................... 52
Shareholder servicing fees - Class E................. 8
Trustees' fees....................................... 3
Miscellaneous........................................ 34
----------
Total Expenses................................................. 1,961
------------
Net investment income............................................. 29,585
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments.......................................... (9,172)
Options written...................................... 251 (8,921)
----------
Net change in unrealized appreciation
(depreciation) on:
Investments.......................................... (36,552)
Options written...................................... 3 (36,549)
---------- ------------
Net realized and unrealized gain (loss)........................... (45,470)
------------
Net increase (decrease) in net assets resulting from operations... $ (15,885)
============
See accompanying notes which are an integral part of the financial statements.
122 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
------------------- -----------------
<S> <C> <C>
OPERATIONS
Net investment income ................................................... $ 29,585 $ 54,878
Net realized gain (loss) ................................................ (8,921) 19,960
Net change in unrealized appreciation (depreciation)..................... (36,549) (1,058)
------------------- -----------------
Net increase (decrease) in net assets resulting from operations........ (15,885) 73,780
------------------- -----------------
DISTRIBUTIONS
From net investment income
Class I ............................................................... (14,634) (55,645)
From net realized gain on investments
Class I ............................................................... -- (9,092)
In excess of net realized gain on investments
Class I ............................................................... (859) --
------------------- -----------------
Net decrease from distributions ..................................... (15,493) (64,737)
------------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ........... 100,009 171,196
------------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS .............................. 68,631 180,239
NET ASSETS
Beginning of period ..................................................... 978,491 798,252
------------------- -----------------
End of period (including undistributed net investment income of
$14,951 at June 30, 1999) ............................................. $ 1,047,122 $ 978,491
==================== =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Fixed Income I Fund 123
<PAGE>
FIXED INCOME I FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
----------
NET ASSET VALUE, BEGINNING OF PERIOD .............................. $ 21.25
----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d) ........................................ .13
Net realized and unrealized gain (loss) on investments ........... (.28)
----------
Total Income From Investment Operations ........................ (.15)
----------
NET ASSET VALUE, END OF PERIOD .................................... $ 21.10
==========
TOTAL RETURN (%)(a) ............................................... (0.71)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ....................... 25,935
Ratios to average net assets (%)(b):
Operating expenses ............................................. --
Net investment income .......................................... --
Portfolio turnover rate (%)(c) ................................... 147.23
* For the period May 14, 1999 (commencement of operations) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) These ratios for the period ended June 30, 1999 are not meaningful due to
the Class's short period of operation.
(c) The ratio for the period ended June 30, 1999 is annualized.
(d) Average month-end shares outstanding were used for this calculation.
124 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
FINANCIAL HIGHLIGHTS - CLASS I
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------
1999* 1998 1997 1996 1995 1994
--------- --------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ....................... $ 21.76 $ 21.51 $ 20.99 $ 21.59 $ 19.59 $ 21.74
--------- --------- -------- ---------- --------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d) ................................. .63 1.32 1.37 1.38 1.42 1.46
Net realized and unrealized gain (loss) on investments..... (.96) .45 .54 (.62) 2.02 (2.06)
--------- --------- -------- ---------- --------- --------
Total Income From Investment Operations ................. (.33) 1.77 1.91 .76 3.44 (.60)
--------- --------- -------- ---------- --------- --------
DISTRIBUTIONS
From net investment income ................................ (.31) (1.31) (1.39) (1.36) (1.44) (1.44)
From net realized gain on investments ..................... (.02) (.21) -- -- -- (.11)
--------- --------- -------- ---------- --------- --------
Total Distributions ..................................... (.33) (1.52) (1.39) (1.36) (1.44) (1.55)
--------- --------- -------- ---------- --------- --------
NET ASSET VALUE, END OF PERIOD ............................. $ 21.10 $ 21.76 $ 21.51 $ 20.99 $ 21.59 $ 19.59
========= ========= ======== ========== ========= ========
TOTAL RETURN (%)(a)(c) ..................................... (1.56) 8.37 9.42 3.75 18.03 (2.97)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ................ 1,021,187 978,491 798,252 662,899 638,317 496,038
Ratios to average net assets (%)(b)(c):
Operating expenses....................................... .39 .39 .42 .42 .35 .10
Net investment income.................................... 5.86 6.03 6.54 6.57 6.82 7.06
Portfolio turnover rate (%)(b) ........................... 147.23 226.70 165.81 147.31 138.05 173.97
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 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 advisory fees. See Note 4.
(d) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
Fixed Income I Fund 125
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- ---------
<S> <C> <C>
LONG-TERM INVESTMENTS - 103.0%
ASSET-BACKED SECURITIES - 4.3%
American Express Credit Account
Master Trust
Series 1997-1, Class A
6.400% due 04/15/05 850 853
Cityscape Home Equity Loan Trust
Pass-thru Certificate
Series 1996-2 Class A2
7.200% due 04/25/11 227 229
Contimortgage Home Equity Loan Trust
Series 1996-4 Class A8
7.220% due 01/15/28 315 315
Delta Funding Home Equity Loan Trust
Series 1998-4 Class A4F
6.340% due 04/15/26 1,250 1,192
First Plus Home Loan Trust
Step Up Bond
Series 1998-5 Class A3
6.060% due 09/10/11 (b) 5,000 4,969
Fund America Investors Corp. II
Pass-thru Certificate
Series 1993-F Class A-1
5.400% due 09/25/09 40 40
Green Tree Financial Corp.
Series 1995-6 Class A3
6.650% due 09/15/26 6 6
Series 1998-2 ClassM1
6.940% due 02/01/30 1,650 1,568
Series 1998-6 Class M1
6.630% due 06/01/30 (b) 1,700 1,601
Series 1998-8 Class B1
7.690% due 09/01/30 1,875 1,801
Green Tree Recreational, Equipment
& Consumer Loan Trust
Series 1998-B Class A3
6.050% due 10/15/10 750 752
Greenwich Capital Acceptance, Inc.
Series 1994 Class A-1
8.040% due 11/25/24 (b) 54 54
New Century Home Equity Loan Trust
Series 1997-NC6 Class A4
6.730% due 07/25/22 260 260
Peco Energy Transition Trust
Series 1999-A Class A6
6.050% due 03/01/09 500 479
Series 1999-A Class A7
6.130% due 03/01/09 1,010 960
Student Loan Marketing Association
Series 1997-3 Class A1
5.110% due 04/25/06 (b) 2,160 2,149
Student Loan Marketing Association
Loan Trust
Series 1996-4, Class A1
4.990% due 07/25/04 (b) 2,106 2,097
UCFC Home Equity Loan
Series 1996-B1 Class A7
8.200% due 09/15/27 270 278
UCFC Home Equity Loan Trust
Series 1998-A Class A7
6.870% due 07/15/29 280 275
Vanderbilt Mortgage Finance
Series 1998-C Class 1A6
6.750% due 10/07/28 1,000 917
---------
20,795
---------
CORPORATE BONDS AND NOTES - 31.9%
A.H. Belo Corp.
6.875% due 06/01/02 850 850
Adelphia Communications Corp.
9.250% due 10/01/02 175 177
8.375% due 02/01/08 100 96
Series B
8.375% due 02/01/08 200 192
Ahold Finance USA, Inc.
6.250% due 05/01/09 350 330
6.875% due 05/01/29 425 394
AK Steel Corp.
7.875% due 02/15/09 125 120
Allied Waste North America, Inc.
Series B
7.875% due 01/01/09 265 246
American Airlines, Inc.
9.710% due 01/02/07 (a) 299 317
Series 90-P
10.600% due 03/04/09 1,013 1,224
American General Institutional Capital
Series B
8.125% due 03/15/46 1,045 1,102
American Standard Co.
7.375% due 04/15/05 1,550 1,480
AmeriServe Food Distribution, Inc.
8.875% due 10/15/06 100 91
AMR Corp.
9.950% due 03/07/01 (MTN) 1,000 1,051
Amresco, Inc.
Series 98-A
9.875% due 03/15/05 575 443
Aramark Corp.
6.750% due 08/01/04 1,365 1,315
Archibald Candy Corp.
10.250% due 07/01/04 225 225
</TABLE>
126 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED)
Principal Market
Amount Value
(000) (000)
$ $
----------- --------
<S> <C> <C>
AT&T Capital Corp. (MTN)
6.410% due 08/13/99 290 290
6.470% due 12/03/99 400 401
6.480% due 12/03/99 1,050 1,054
Banesto Delaware, Inc.
8.250% due 07/28/02 1,000 1,039
Bank of America Corp.
5.175% due 03/05/01 (MTN)(b) 5,000 4,990
Bank United Corp.
8.875% due 05/01/07 1,050 1,045
Bay View Capital Corp.
9.125% due 08/15/07 595 559
Beaver Valley Funding Corp.
9.000% due 06/01/17 1,295 1,421
BellSouth Capital Funding Corp.
6.040% due 11/15/26 (a) 600 601
Beneficial Corp.
5.559% due 04/02/02 (MTN)(b) 2,000 2,001
Building Materials Corp.
8.000% due 10/15/07 1,325 1,259
Chancellor Media Corp.
Charter Communications Holdings LLC
8.250% due 04/01/07 (b) 575 548
8.625% due 04/01/09 (b) 110 106
Step Up Bond
8.000% due 11/01/08 90 88
Zero Coupon due 04/01/11 (b) 100 62
Chase Manhattan Corp.
6.750% due 09/15/06 (MTN) 230 229
7.250% due 06/01/07 190 194
6.375% due 04/01/08 110 105
Chase Manhattan Corp. New
6.500% due 08/01/05 100 99
Circus Circus Enterprise, Inc.
9.250% due 12/01/05 220 223
Citicorp
5.090% due 08/13/02 (MTN)(b) 2,000 1,996
6.375% due 11/15/08 (MTN) 800 759
Classic Cable, Inc.
9.875% due 08/01/08 85 88
Cleveland Electric Illumination Co.
7.430% due 11/01/09 230 228
Coastal Corp.
6.200% due 05/15/04 1,000 977
Colonial Realty LP
7.500% due 07/15/01 825 826
Columbia/HCA Healthcare Corp.
8.020% due 08/05/02 (MTN) 2,000 1,951
8.360% due 04/15/24 330 310
Conmed Corp.
9.000% due 03/15/08 300 300
Connecticut Light & Power Co.
7.750% due 06/01/02 175 179
7.875% due 10/01/24 855 892
Conseco Finance Trust III
8.796% due 04/01/27 675 617
Conseco Financing Trust II
8.700% due 11/15/26 800 721
Continental Airlines, Inc.
9.500% due 12/15/01 1,295 1,350
Crescent Real Estate Equities
6.625% due 09/15/02 850 777
7.125% due 09/15/07 925 795
Crown Central Petroleum Corp.
10.875% due 02/01/05 85 82
CSC Holdings, Inc.
7.875% due 12/15/07 585 586
7.250% due 07/15/08 305 291
7.625% due 07/15/18 1,000 928
Delco Remy International, Inc.
10.625% due 08/01/06 120 124
Deutsche Bank Capital Funding Trust I
7.872% due 12/29/49 (b) 700 674
Dresdner Funding Trust I
8.151% due 06/30/31 275 272
Dresser Industries, Inc.
7.600% due 08/15/96 780 787
Echostar DBS Corp.
9.250% due 02/01/06 230 234
EOP Operating, LP
6.500% due 01/15/04 975 950
EOP Operating, Ltd.
6.376% due 02/15/02 550 542
ERAC USA Finance Co.
6.350% due 01/15/01 (MTN) 800 795
Exide Corp.
2.900% due 12/15/05 625 380
Extendicare Health Services, Inc.
9.350% due 12/15/07 900 671
First Republic Bancorp
7.750% due 09/15/12 700 653
First Security Corp.
5.875% due 11/01/03 3,500 3,364
Fleet Credit Card, LLC
6.450% due 10/30/00 825 828
Ford Motor Credit Co.
5.316% due 03/05/01 (MTN)(b) 5,000 5,008
5.800% due 01/12/09 1,290 1,179
Fox/Liberty Networks, LLC
8.875% due 08/15/07 840 874
Fred Meyer, Inc.
7.375% due 03/01/05 275 279
</TABLE>
Fixed Income III Fund 127
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- --------
Fugi JGB Investment LLC
9.870% due 12/31/49 (e) 2,070 1,801
Global Crossings Holdings, Ltd.
9.625% due 05/15/08 750 810
Golden State Holdings
7.125% due 08/01/05 1,175 1,134
Goldman Sachs Group
5.278% due 02/22/02 (MTN)(b) 5,000 5,005
Granite Broadcasting Corp.
8.875% due 05/15/08 150 146
Grove Holdings, LLC Step Up Bond
Zero Coupon due 05/01/09 (b) 250 75
Grove Worldwide, LLC
9.250% due 05/01/08 150 135
GS Escrow Corp.
7.000% due 08/01/03 1,725 1,688
GTE Corp.
6.840% due 04/15/18 435 415
6.940% due 04/15/28 480 454
GTE North, Inc.
6.900% due 11/01/08 165 166
Gulf States Steel
13.500% due 04/15/03 60 11
Haven Capital Trust I
10.460% due 02/01/27 200 188
Hayes Lemmerz International, Inc.
11.000% due 07/15/06 40 43
8.250% due 12/15/08 160 152
Health Care REIT, Inc.
7.625% due 03/15/08 725 689
HMH Properties, Inc.
Series C
8.450% due 12/01/08 150 142
Hollywood Park, Inc.
Series B
9.500% due 08/01/07 120 119
Horseshoe Gaming Holding
8.625% due 05/15/09 895 866
IMC Global, Inc.
7.400% due 11/01/02 800 807
7.625% due 11/01/05 800 814
Imperial Capital Trust I
Series B
9.980% due 12/31/26 250 242
Integrated Health Services, Inc.
5.750% due 01/01/01 250 161
Intermedia Communications, Inc.
Series B
8.500% due 01/15/08 140 128
Interpool Capital Trust
Series B
9.875% due 02/15/27 500 448
ITC Deltacom, Inc.
11.000% due 06/01/07 120 129
ITT Corp.
6.250% due 11/15/00 3,000 2,933
Jackson Products, Inc.
9.500% due 04/15/05 200 197
James Cable Partners, LP
10.750% due 08/15/04 180 187
K Mart Corp.
7.820% due 01/02/02 (MTN) 700 691
7.840% due 01/02/02 (MTN) 800 790
7.770% due 07/02/02 (MTN) 700 685
7.470% due 07/31/02 (MTN) 400 388
9.780% due 01/05/20 800 820
Kaufman and Broad Home Corp.
7.750% due 10/15/04 325 323
Lear Corp.
7.960% due 05/15/05 1,525 1,475
Lehman Brothers Holdings, Inc.
6.625% due 04/01/04 1,440 1,403
7.625% due 06/01/06 450 462
Series E
5.900% due 04/02/02 (MTN)(b) 3,000 3,017
Series F
7.000% due 05/15/03 (MTN) 470 467
Level 3 Communications, Inc.
9.125% due 05/01/08 340 334
Long Island Savings Bank
7.000% due 06/13/02 500 502
Lyondell Chemical Co.
9.625% due 05/01/07 70 72
9.875% due 05/01/07 70 72
MCI WorldCom, Inc.
6.125% due 04/15/02 (b) 605 601
8.875% due 01/15/06 900 958
7.750% due 04/01/07 1,050 1,100
McLeodUSA, Inc.
8.375% due 03/15/08 750 703
8.125% due 02/15/09 1,015 939
Merck & Co., Inc.
Series B
5.760% due 05/03/37 (MTN) 2,410 2,415
Merita Bank, Ltd.
7.150% due 12/29/49 (e) 1,200 1,192
Merrill Lynch & Co., Inc.
6.375% due 10/15/08 2,000 1,908
6.875% due 11/15/18 430 403
128 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS,CONTINUED
JUNE 30,1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
---------- --------
Metromedia Fiber Network
10.000% due 11/15/08 95 98
Metromedia Fiber Network, Inc.
Series B
10.000% due 11/15/08 50 51
MMI Capital Trust I
Series B
7.625% due 12/15/27 1,300 1,073
Morgan Stanley Dean Witter
Series C
5.820% due 06/19/00 (MTN)(b) 3,000 2,977
Motors and Gears, Inc.
Series D
10.750% due 11/15/06 275 278
Natexix Ambs Co., LLC
Series A
8.440% due 12/29/49 (e) 400 382
National Westminster Bank
9.375% due 11/15/03 260 287
News America, Inc.
7.625% due 11/30/28 1,200 1,150
Nextel Communications, Inc.
9.750% due 08/15/04 1,275 1,294
9.950% due 02/15/08 305 210
Step Up Bond
Zero Coupon due 01/15/04 (b) 140 142
Zero Coupon due 09/15/07 (b) 475 344
NEXTLINK Communications, Inc.
9.625% due 10/01/07 65 63
10.750% due 11/15/08 1,155 1,187
Step Up Bond
Zero Coupon due 06/01/09 (b) 2,750 1,605
Zero Coupon due 04/15/08 (b) 575 345
Niagara Mohawk Power Corp.
8.750% due 04/01/22 430 458
Series B
7.000% due 10/01/00 3,000 3,011
Norfolk Southern Corp.
7.700% due 05/15/17 440 452
7.050% due 05/01/37 890 904
Series A
7.400% due 09/15/06 (MTN) 230 236
North Atlantic Energy Corp.
Series A
9.050% due 06/01/02 644 662
Northwest Airlines Inc.
7.625% due 03/15/05 2,080 1,903
Ocwen Capital Trust
10.875% due 08/01/27 500 390
Ocwen Federal Bank
12.000% due 06/15/05 325 319
Ocwen Financial Corp.
11.875% due 10/01/03 650 626
Optel, Inc.
Series B
11.500% due 07/01/08 350 247
Oxford Automotive, Inc.
10.125% due 06/15/07 40 39
Series D
10.125% due 06/15/07 50 50
Paging Network, Inc.
8.875% due 02/01/06 110 75
10.125% due 08/01/07 155 113
10.000% due 10/15/08 720 497
Paine Webber Group, Inc.
6.450% due 12/01/03 400 390
6.375% due 05/15/04 350 340
Pantry, Inc.
10.250% due 10/15/07 215 219
Pathmark Stores
9.625% due 05/01/03 90 92
Paxson Communications Corp.
11.625% due 10/01/02 450 465
Premier Parks, Inc.
Step Up Bond,
Zero Coupon due 04/01/08 (b) 350 232
Prime Succession Acquisition Co.
10.750% due 08/15/04 400 331
Providian Capital I
Series A
9.525% due 02/01/27 250 236
Prudential Insurance Co. of America
6.875% due 04/15/03 700 702
6.375% due 07/23/06 235 229
Psinet, Inc.
11.500% due 11/01/08 125 131
Public Service Co. New Mexico
7.100% due 08/01/05 500 493
PX Escrow Corp.
Step Up Bond
Zero Coupon due 02/01/06 (b) 1,225 747
Qwest Communications International, Inc.
7.250% due 11/01/08 170 166
Regal Cinemas, Inc.
9.500% due 06/01/08 225 212
Republic Services, Inc.
7.125% due 05/15/09 250 244
Revlon Worldwide
Series B
Zero Coupon due 03/15/01 (b) 2,275 1,519
Rose Hills Corp.
9.500% due 11/15/04 475 429
Fixed Income III Fund 129
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
---------- ----------
Salomon Smith Barney Holdings
7.980% due 03/01/00 325 330
Seagate Technology, Inc.
7.450% due 03/01/37 680 632
Simon Debartolo Group LP
6.625% due 06/15/03 425 416
Simon Debartolo Group LP
6.750% due 07/15/04 875 853
Societe Generale
7.850% due 04/29/49 (e) 300 294
Societe Generale Real Estate Co. LLC
Series A
7.640% due 12/29/49 (e) 175 165
Spieker Properties, LP
6.950% due 12/15/02 500 496
6.800% due 05/01/04 500 489
Summit Properties Partnership
7.200% due 08/15/07 575 536
TCI Communications, Inc.
5.985% due 09/11/00 (MTN)(b) 2,000 1,993
6.340% due 02/01/02 495 496
6.375% due 05/01/03 40 40
9.650% due 03/31/27 590 668
Tenet Healthcare Corp.
7.875% due 01/15/03 50 49
6.000% due 12/01/05 1,250 959
7.625% due 06/01/08 250 236
Time Warner, Inc.
7.975% due 08/15/04 375 392
8.110% due 08/15/06 1,225 1,284
8.180% due 08/15/07 750 792
7.480% due 01/15/08 45 46
8.050% due 01/15/16 865 899
6.850% due 01/15/26 1,700 1,690
Tokai Preferred Capital Co. LLC
9.980% due 12/29/49 (b) 1,500 1,380
Toledo Edison Co.
8.700% due 09/01/02 500 514
Toll Brothers Corp.
7.750% due 09/15/07 1,200 1,149
Trenwick Capital Trust I
8.820% due 02/01/37 575 522
Tricon Global Restaurants, Inc.
7.450% due 05/15/05 775 773
TV Guide, Inc.
8.125% due 03/01/09 220 208
TXU Electric Capital V
8.175% due 01/30/37 710 715
U.S. Bancorp
Series J
6.000% due 05/15/04 (MTN) 775 754
Union Planters Bank
6.500% due 03/15/18 400 378
United Companies Financial Corp.
8.375% due 07/01/05 575 29
United Technologies Corp.
8.875% due 11/15/19 170 199
US Air, Inc.
9.625% due 02/01/01 900 919
USF&G Corp.
8.375% due 06/15/01 250 259
Valero Energy
6.750% due 12/15/02 695 679
Walt Disney Co.
Series E
5.125% due 12/15/03 (MTN) 825 785
Waste Management, Inc.
6.875% due 05/15/09 500 487
Webster Capital Trust I
9.360% due 01/29/27 225 226
Wellsford Residential Property Trust
9.375% due 02/01/02 475 505
Wheeling-Pittsburgh Corp.
9.250% due 11/15/07 175 169
----------
153,089
----------
EURODOLLAR BONDS - 7.8%
Amvescap PLC
6.600% due 05/15/05 675 649
Argentina, Republic of
11.447% due 04/10/05 (b) 2,370 2,109
Series 10
5.688% due 04/01/00 167 166
Series L
5.938% due 03/31/05 (b) 1,460 1,243
Auxiliaire Credit Foncier
5.000% due 09/25/02 (b) 915 864
Citicorp
5.050% due 06/27/02 (MTN) 3,000 2,988
Credit Lyonnais
5.063% due 07/10/00 (b) 4,000 3,980
6.438% due 09/19/49 (e) 1,040 959
Ford Motor Credit Co. (b)
5.125% due 01/17/02 1,500 1,494
5.813% due 02/13/03 2,000 1,990
Household Bank Nevada NA
5.188% due 10/22/03 (MTN)(b) 4,000 3,980
Korea Electric Power Corp.
6.375% due 12/01/03 150 140
Morgan Stanley Dean Witter
5.287% due 03/11/03 (MTN)(b) 2,000 1,993
130 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
---------- --------
Nacional Financiera SNC
8.000% due 06/19/00 420 421
Okobank
6.450% due 10/29/49 (b) 50 50
Series E
5.599% due 09/29/49 (MTN) 700 703
Philippines, Republic of
9.875% due 01/15/19 580 568
Poland, Republic of
Step-Up Bond
4.000% due 10/27/14 (b) 330 290
5.000% due 10/27/14 (b) 2,810 2,473
SCL Term Aereo Santiago SA
6.950% due 07/01/12 2,000 1,862
Skandinaviska Enskilda Banken (e)
6.625% due 03/29/49 (MTN)(b) 790 778
7.500% due 03/29/49 45 42
8.125% due 09/06/49 475 463
6.500% due 12/29/49 1,890 1,798
Sumitomo Bank International Finance NV
8.500% due 06/15/09 390 391
Telefonica De Argentina SA
9.125% due 05/07/08 650 571
United Mexican States
6.250% due 12/31/19 4,005 2,954
Venezuela, Republic of
9.250% due 09/15/27 2,090 1,361
--------
37,280
--------
MORTGAGE-BACKED SECURITIES - 49.2%
Bear Stearns Mortgage Securities Inc.
Series 1998-2 Class B
6.750% due 04/30/30 (b) 1,522 1,491
Chase Commercial Mortgage
Securities Corp.
Series 1997-2 Class D
6.600% due 12/19/07 1,325 1,229
Commercial Mortgage Asset Trust
Series 1999-C1 Class A3
6.640% due 09/17/10 1,740 1,680
DLJ Mortgage Acceptance Corp.
Series 1996-CF2 Class A1B
7.290% due 11/12/21 1,525 1,543
Federal Home Loan Mortgage Corp.
6.000% 30 Year TBA Gold (d) 3,200 3,010
6.500% 30 Year TBA Gold (d) 8,270 7,984
Series 1037, Class Z
9.000% due 02/15/21 838 877
Series 2006 Class B
6.500% due 08/15/23 5,348 5,343
Federal Home Loan Mortgage Corp.
Participation Certificate
7.000% due 2009 315 317
8.500% due 2017 688 723
8.500% due 2025 399 417
7.500% due 2026 1 1
8.500% due 2027 1,961 2,049
Federal National Mortgage Association
6.000% 15 Year TBA (d) 6,515 6,293
6.500% 15 Year TBA (d) 3,350 3,301
6.000% 30 Year TBA (d) 16,600 15,594
6.500% 30 Year TBA (d) 7,725 7,452
6.500% 30 Year TBA (d) 14,185 13,684
7.000% 30 Year TBA (d) 7,150 7,067
8.000% 30 Year TBA (d) 14,525 14,920
6.000% due 2003 201 198
10.000% due 2005 149 157
6.500% due 2014 4,336 4,273
6.325% due 2024 (b) 59 59
9.000% due 2025 1,413 1,491
7.718% due 2026 (b) 2,625 2,691
6.000% due 2029 13,915 12,918
6.000% due 2029 (f) 3,014 3,014
6.500% due 2029 5,088 4,908
Series 1997-77 Class G
6.500% due 05/18/23 2,671 2,664
Zero Coupon due 02/25/23 850 540
Federal National Mortgage Association
REMIC
Series 1992-10, Class ZD
8.000% due 11/25/21 1,806 1,837
GMAC Commercial Mortgage
Securities, Inc.
Series 1997-C1 Class A2
6.850% due 09/15/06 (b) 200 202
Series 1998-C2 Class A1
6.150% due 11/15/07 1,910 1,865
Government National Mortgage Association
6.000% 30 Year TBA (d) 1,450 1,355
6.500% 30 Year TBA (d) 41,930 40,308
8.000% 30 Year TBA (d) 5,675 5,829
9.000% due 2017 2,895 3,083
6.125% due 2023 (b) 577 585
6.125% due 2023 (b) 404 410
6.625% due 2023 (b) 372 376
6.125% due 2024 (b) 1,340 1,360
6.125% due 2024 (b) 1,171 1,189
7.000% due 2024 (b) 2,394 2,421
7.500% due 2024 312 316
7.000% due 2025 1,103 1,090
8.000% due 2025 627 645
Fixed Income III Fund 131
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS,CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
-------- --------
7.000% due 2026 (b) 3,159 3,165
8.000% due 2026 509 524
6.375% due 2027 (b) 2,203 2,231
6.500% due 2027 (b) 2,890 2,920
7.000% due 2027 2,457 2,424
7.000% due 2028 10,393 10,254
6.500% due 2029 1,591 1,530
7.000% due 2029 1,302 1,285
Heller Financial Commercial
Mortgage Asset Co.
Series 1999-PH1 Class A2
6.847% due 05/15/31 1,000 993
Kidder Peabody Acceptance Corp.
Series 1994-C1, Class B
6.850% due 02/01/06 1,050 1,062
MBNA Master Credit Card Trust
Series 1994-B, Class B
5.120% due 01/15/02 (b) 2,000 2,000
Merrill Lynch Mortgage Investors, Inc.
Series 1995-C2, Class D
8.164% due 06/15/21 (b) 1,442 1,447
Morgan Stanley Capital I, Inc.
Series 1998-XL1 Class A3
6.480% due 05/03/08 2,050 1,980
Nomura Asset Securities Corp.
6.590% due 03/17/28 1,650 1,604
Norwest Asset Securities Corp.
Series 1997-21 Class A2
7.000% due 01/25/28 2,616 2,614
Series 1999-2 Class A16
6.500% due 02/25/29 2,000 1,908
Residential Funding Mortgage
Securities II
Series 1997-HS5 Class M1
7.010% due 05/25/27 1,368 1,359
Resolution Trust Corp.
Series 1994-C2 Class G
8.000% due 04/25/25 259 260
Series 1994-1 Class M-2
7.750% due 09/25/29 377 379
Resolution Trust Corp. Mortgage
Pass-thru Certificate
Series 1995-1, Class 2-C
7.500% due 10/25/28 (b) 120 120
Salomon Brothers Mortgage
Securities VII
Series 1999-NC3 Class A
5.518% due 07/25/29 5,000 5,000
Salomon Brothers Mortgage
Securities VII, Inc.
Mortgage Pass-thru Certificate
Series 1994-16, Class A
7.730% due 11/25/24 (b) 268 272
Structured Asset Securities Corp.
Mortgage Pass-thru Certificate
Series 1996-CFL, Class C
6.525% due 02/25/28 300 297
--------
236,387
--------
UNITED STATES GOVERNMENT
AGENCIES - 0.1%
Federal National Mortgage Association
5.125% due 02/13/04 725 695
--------
UNITED STATES GOVERNMENT
TREASURIES -7.3%
United States Treasury Bond
Principal Strip
8.750% due 05/15/17 4,400 1,427
8.875% due 02/15/19 7,100 2,064
United States Treasury Bonds
8.125% due 08/15/19 240 290
8.125% due 05/15/21 (f) 1,375 1,674
8.000% due 11/15/21 4,530 5,462
6.625% due 02/15/27 (f) 2,325 2,455
3.875% due 04/15/29 2,300 2,268
United States Treasury Notes
5.250% due 05/31/01 625 622
6.625% due 04/30/02 (f) 4,800 4,927
3.625% due 07/15/02 (f) 1,600 1,583
5.750% due 11/30/02 98 100
5.750% due 11/30/02 (f) 1,027 1,027
7.250% due 05/15/04 760 807
3.375% due 01/15/07 3,432 3,290
6.250% due 02/15/07 2,720 2,771
3.625% due 01/15/08 2,233 2,170
4.750% due 11/15/08 2,120 1,948
---------
34,885
---------
YANKEE BONDS - 2.4%
Amvescap PLC
6.600% due 05/15/05 200 189
Asia Pulp & Paper Finance IX, Ltd.
9.060% due 10/04/01 (b) 1,000 746
Bangko Sentral Philipinas
8.600% due 06/15/27 1,010 783
Colombia, Republic of
9.705% due 08/13/05 (b) 730 635
132 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
---------- --------
Colt Telecom Group PLC
Step Up Bond
Zero Coupon due 12/15/06 (b) 500 413
Crown Packaging Enterprise, Ltd.
Step Up Bond
Zero Coupon due 08/01/06 (b) 300 15
Diamond Cable Communications PLC
Step Up Bond
Zero Coupon due 02/15/07 (b) 420 326
Ecuador, Republic of
6.000% due 02/27/15 (b) 289 93
Edperbrascan Corp.
7.125% due 12/16/03 775 750
Empresa Nacional de Electricidad SA
8.125% due 02/01/97 515 415
Grupo Televisa SA
Step Up Bond
Zero Coupon due 05/15/08 (b) 950 770
HMV Media Group PLC
Series B
10.250% due 05/15/08 135 136
Indah Kiat Finance Mauritius
10.000% due 07/01/07 290 202
Korea Electric Power Corp.
7.000% due 10/01/02 540 523
7.000% due 02/01/27 215 198
6.750% due 08/01/27 1,150 1,058
National Westminster Bank PLC
7.750% due 04/29/49 (b) 475 472
Royal Caribbean Cruises, Ltd.
7.500% due 10/15/27 1,325 1,243
Santander Finnish Issuances
6.088% due 09/30/49 (b) 500 459
St. George Bank, Ltd.
7.150% due 10/01/05 775 764
TFM SA de CV
Step Up Bond
Zero Coupon due 06/15/09 (b) 1,410 840
YPF Sociedad Anonima
7.250% due 03/15/03 250 241
8.000% due 02/15/04 230 223
--------
11,494
--------
TOTAL LONG-TERM INVESTMENTS
(cost $502,173) 494,625
--------
OPTIONS PURCHASED - 0.1%
Japan Government Bond (c)
Jul 99.38 Put JPY 813,050 9
Japan Government Bonds 10 Year (c)
Feb 96.03 Put JPY 1,534,750 83
United States Treasury Bonds (c)
Aug 100.41 Call 1,800 4
Sept 98.13 Call 3,500 11
United States Treasury Notes (c)
Aug 99.37 Call 2,723 13
Sept 96.73 Call 2,133 44
Sept 97.19 Call 800 30
Sept 98.13 Call 2,194 26
Nov 100.11 Call 3,100 31
Dec 90.16 Put 1,500 46
Dec 90.58 Put 1,500 50
Dec 90.66 Put 1,500 51
--------
TOTAL OPTIONS PURCHASED
(cost $932) 398
--------
NUMBER
OF
SHARES
----------
PREFERRED STOCKS - 1.6%
American RE Capital 18,000 460
Australia & New Zealand Banking
Group, Ltd. 7,200 197
California Federal Preferred Capital
Corp. Series A 94,050 2,463
Centaur Funding Corp. 495 532
Citigroup, Inc. 15,000 728
Equity Office Property Trust 15,000 639
Lehman Brothers Holdings, Inc. 17,400 741
NB Capital Corp. 24,000 603
Pinto Totta International Finance, Ltd. 1,175 1,105
--------
TOTAL PREFERRED STOCKS
(cost $7,673) 7,468
--------
PRINCIPAL
AMOUNT
(000)
$
------------
SHORT-TERM INVESTMENTS - 18.9%
Bellsouth Telecomm Inc
4.950% due 07/09/99 3,100 3,097
Federal Home Loan Mortgage
Discount Note
5.030% due 09/17/99 (g) 50 49
Fixed Income III Fund 133
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- --------
Federal National Mortgage
Association Discount Note (a)(g)
4.920% due 07/06/99 3,600 3,598
4.790% due 07/08/99 3,575 3,572
Frank Russell Investment Company
Money Market Fund,
due on demand (a) 77,868 77,868
United States Treasury Bills
4.605% due 09/16/99 (g) 490 481
4.605% due 09/16/99 (f)(g) 475 475
US West Capital Funding Commercial
Paper
5.957% due 03/24/00 (g) 2,000 1,911
--------
TOTAL SHORT-TERM INVESTMENTS
(cost $91,051) 91,051
--------
TOTAL INVESTMENTS - 123.6%
(cost $601,829) 593,542
OTHER ASSETS AND LIABILITIES, NET,
INCLUDING OPTIONS WRITTEN - (23.6%) (113,464)
--------
NET ASSETS - 100.0% 480,078
========
* Each contract represents $100,000 notional value.
(a) At cost, which approximates market.
(b) Adjustable or floating rate security.
(c) Nonincome-producing security.
(d) Forward commitment.
(e) Perpetual floating rate note.
(f) Held as collateral in connection with futures contracts purchased
(sold) and options written by the Fund.
(g) Rate noted is yield-to-maturity.
Abbreviations:
ADR - American Depositary Receipt
CMO - Collateralized Mortgage Obligation
MTN - Medium Term Note
REIT - Real Estate Investment Trust
REMIC - Real Estate Mortgage Investment Conduit
TBA - To Be Announced Security
Foreign Currency Abbreviations:
JPY - Japanese yen
USD - U.S. dollar
See accompanying notes which are an integral part of the financial statements.
134 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS* (000)
------------- ---------------
FUTURES CONTRACTS
LONG POSITIONS
Eurodollar Financial
expiration date 12/99 15 $ (29)
expiration date 03/00 15 (34)
expiration date 06/00 15 (37)
expiration date 03/01 3 (4)
expiration date 06/01 3 (4)
expiration date 09/01 10 (16)
expiration date 09/02 18 (41)
United States Treasury Notes 10 Year Futures
expiration date 09/99 262 119
United States Treasury Notes 5 Year Futures
expiration date 09/99 9 10
United States Treasury Bond Futures
expiration date 09/99 135 52
SHORT POSITIONS
United States Treasury Notes 10 Year Futures
expiration date 09/99 140 124
United States Treasury Notes 5 Year Futures
expiration date 09/99 51 (40)
---------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts $ 100
===============
NOTIONAL MARKET
AMOUNT VALUE
(000) (000)
$ $
------------- ---------------
OPTIONS WRITTEN
Eurodollar Futures*
Dec 94.25 Put 7 2
Federal National Mortgage Association*
Aug 95.78 Put 4,700 6
Aug 95.95 Call 3,175 4
Sept 94.47 Call 3,250 16
Sept 94.20 Call 1,400 9
Sept 96.06 Call 3,200 25
United States Treasury Bonds*
Sept 91.47 Put 3,500 39
Sept 98.77 Call 3,500 1
Feb 93.80 Put 2,300 80
Feb 93.84 Put 2,300 81
Feb 104.36 Call 2,300 2
United States Treasury Notes*
Sept 102.62 Call 3,100 14
Nov 96.09 Put 3,100 41
Dec 98.08 Put 2,800 67
Dec 97.95 Put 2,800 65
Dec 97.88 Put 2,800 64
United States Treasury Bond Futures*
Aug 112.00 Put 3 2
Aug 114.00 Put 47 53
Aug 126.00 Call 35 1
---------------
Total Liability for Options Written
(premiums received $632) 572
===============
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION
DELIVER FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
- ------------ ------------ ----------- ---------------
JPY 13,813 USD 116 09/17/99 $ 1
JPY 2,642 USD 22 09/17/99 --
---------------
$ 1
===============
See accompanying notes which are an integral part of the financial statements.
Fixed Income III Fund 135
<PAGE>
FIXED INCOME III FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
ASSETS
Investments at market (identified cost $601,829) ................ $ 593,542
Cash ............................................................. 240
Forward foreign currency exchange contracts (cost $138) ......... 138
Receivables:
Dividends and interest .......................................... 4,652
Investments sold (regular settlement) .......................... 8,582
Investments sold (delayed settlement) .......................... 4,163
Fund shares sold ................................................ 1,222
Daily variation margin on futures contracts ..................... 233
-----------
Total Assets .................................................. 612,772
LIABILITIES
Payables:
Investments purchased (delayed settlement) .......... $ 130,992
Fund shares redeemed ................................. 743
Accrued fees to affiliates ........................... 220
Other accrued expenses ............................... 30
Forward foreign currency exchange contracts (cost
$138) ................................................ 137
Options written, at market value (premiums
received $632) ....................................... 572
----------
Total Liabilities ............................................. 132,694
-----------
NET ASSETS ....................................................... $ 480,078
===========
NET ASSETS CONSIST OF:
Undistributed net investment income .............................. $ 6,813
Accumulated net realized gain (loss) ............................ (8,695)
Unrealized appreciation (depreciation) on:
Investments ..................................................... (8,287)
Futures contracts ............................................... 100
Options written ................................................. 60
Shares of beneficial interest .................................... 478
Additional paid-in capital ....................................... 489,609
-----------
NET ASSETS ....................................................... $ 480,078
===========
NET ASSET VALUE, offering and redemption price per share:
Class E ($2,381,640 divided by 237,189 shares of $.01 par
value shares of beneficial interest outstanding)............... $ 10.04
===========
Class I ($477,696,244 divided by 47,591,230 shares of $.01 par
value shares of beneficial interest outstanding)............... $ 10.04
===========
See accompanying notes which are an integral part of the financial statements.
136 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
STATEMENT OF OPERATIONS
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
INVESTMENT INCOME
Interest ......................................................... $ 13,196
Dividends from Money Market Fund ................................. 1,629
Dividends ........................................................ 372
-----------
Total Investment Income ........................................ 15,197
EXPENSES
Advisory fees ....................................... $ 1,122
Administrative fees ................................. 116
Custodian fees ...................................... 115
Transfer agent fees ................................. 128
Professional fees ................................... 14
Registration fees - Class I ......................... 32
Shareholder servicing fees - Class E ................ 1
Trustees' fees ...................................... 3
Miscellaneous ....................................... 19
------------
Total Expenses.................................................. 1,550
-----------
Net investment income.............................................. 13,647
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments.......................................... (6,413)
Futures contracts.................................... (1,401)
Options written...................................... 237
Foreign currency-related transactions................ 11 (7,566)
------------
Net change in unrealized appreciation
(depreciation) on:
Investments.......................................... (8,500)
Futures contracts.................................... 594
Options written...................................... (98)
Foreign currency-related transactions................ 6 (7,998)
------------ -----------
Net realized and unrealized gain (loss)............................ (15,564)
-----------
Net increase (decrease) in net assets resulting from operations.... $ (1,917)
===========
See accompanying notes which are an integral part of the financial statements.
Fixed Income III Fund 137
<PAGE>
FIXED INCOME III FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
------------------- -----------------
<S> <C> <C>
OPERATIONS
Net investment income ............................................... $ 13,647 $ 26,279
Net realized gain (loss) ........................................... (7,566) 9,736
Net change in unrealized appreciation (depreciation) ................ (7,998) (6,742)
------------------ ----------------
Net increase (decrease) in net assets resulting from operations.... (1,917) 29,273
------------------ ----------------
DISTRIBUTIONS
From net investment income
Class I ........................................................... (6,689) (26,251)
In excess of net investment income
Class I ........................................................... -- (390)
From net realized gain on investments
Class I ........................................................... -- (10,618)
In excess of net realized gain on investments
Class I ........................................................... -- (1,252)
------------------ ----------------
Net decrease from distributions ................................. (6,689) (38,511)
------------------ ----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions........ 26,494 88,995
------------------ ----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS .......................... 17,888 79,757
NET ASSETS
Beginning of period ................................................. 462,190 382,433
------------------ ----------------
End of period (including undistributed net investment income of
$6,813 and accumulated distributions in excess
of net investment income of $145, respectively).................... $ 480,078 $ 462,190
================== ================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
138 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
----------
NET ASSET VALUE, BEGINNING OF PERIOD .............................. $ 10.12
----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) ....................................... .07
Net realized and unrealized gain (loss) on investments ........... (.15)
----------
Total Income From Investment Operations ........................ (.08)
----------
NET ASSET VALUE, END OF PERIOD .................................... $ 10.04
==========
TOTAL RETURN (%)(a) .............................................. (.79)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ...................... 2,382
Ratios to average net assets (%)(d):
Operating expenses ............................................. --
Net investment income .......................................... --
Portfolio turnover rate (%)(b) .................................. 123.31
* For the period May 14, 1999 (commencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) Average month-end shares outstanding were used for this calculation.
(d) The ratios are not meaningful due to the Class's short period of
operations.
Fixed Income III Fund 139
<PAGE>
FIXED INCOME III FUND
FINANCIAL HIGHLIGHTS - CLASS I
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------
1999* 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD .................. $ 10.22 $ 10.42 $ 10.17 $ 10.34 $ 9.37 $ 10.44
----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d)............ .30 .62 .63 .64 .67 .66
Net realized and unrealized gain
(loss) on investments ............. (.33) .08 .32 (.16) .97 (1.07)
----------- ----------- ----------- ----------- ----------- -----------
Total Income From Investment
Operations ...................... (.03) .70 .95 .48 1.64 (.41)
----------- ----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS
From net investment income........... (.15) (.62) (.64) (.65) (.67) (.66)
From net realized gain on
investments ....................... -- (.28) (.06) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions ............... (.15) (.90) (.70) (.65) (.67) (.66)
----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD........ $ 10.04 $ 10.22 $ 10.42 $ 10.17 $ 10.34 $ 9.37
=========== =========== =========== =========== =========== ===========
TOTAL RETURN (%)(a)(c) ............... (.34) 6.80 9.64 4.88 17.99 (3.89)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in
thousands) ........................ 477,696 462,190 382,433 292,077 252,465 166,620
Ratios to average net assets
(%)(b)(c):
Operating expenses ................ .67 .67 .70 .73 .61 .20
Net investment income.............. 5.90 5.91 6.13 6.32 6.83 7.02
Portfolio turnover rate (%)(b)....... 123.31 342.49 274.84 144.26 141.37 134.11
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 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) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
140 Fixed Income III Fund
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 (Unaudited)
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company") is a series
mutual fund with 27 different investment portfolios, referred to as "Funds."
These financial statements report on ten 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.
On February 26, 1999, the Fixed Income II Fund acquired all the net assets of
the Volatility Constrained Bond Fund (one of the Funds of the Investment
Company not presented herein) pursuant to a plan of reorganization approved
by the Volatility Constrained Bond Fund shareholders. The acquisition was
accomplished by a tax-free exchange of 8,934,738 shares of the Fixed Income
II Fund (valued at $163,684,403) for the 8,932,673 shares of the Volatility
Constrained Bond Fund on February 26, 1999. The Volatility Constrained Bond
Fund's net assets of $163,684,403, including $495,615 of unrealized
appreciation, were combined with those of the Fixed Income II Fund to form
the new Short Term Bond Fund. The aggregate net assets of the Fixed Income II
Fund and the Volatility Constrained Bond Fund immediately before the
acquisition were $320,262,776 and $163,684,403, respectively.
In addition, the Short Term Bond Fund made a reclassification among certain
of its capital accounts to reflect the acquisition of the Volatility
Constrained Bond Fund, without impacting its net asset value. The following
reclassification has been made for the period ended June 30, 1999:
<TABLE>
<CAPTION>
UNDISTRIBUTED NET ACCUMULATED NET ADDITIONAL
INVESTMENT INCOME REALIZED GAIN (LOSS) PAID-IN CAPITAL
----------------- -------------------- ---------------
<S> <C> <C> <C>
Short Term Bond Fund $ 42,226 $ (9,588,387) $ 9,546,161
</TABLE>
As of May 14, 1999, the Equity I, Equity II, Equity III, Equity Q,
International, Fixed Income I, and Fixed Income III Funds have available
Class I and Class E shares. As of January 27, 1999, the Emerging Markets and
Real Estate Securities Funds have available Class S, Class E, and Class C
shares. In addition, the Short Term Bond Fund made available Class E shares
on February 18, 1999, and Class C shares on March 3, 1999. 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 and fees that relate specifically
to that particular Class. Class E shares are charged a shareholder servicing
fee of 0.25% of average net assets. Class C shares are charged a shareholder
servicing fee of 0.25% and a distribution fee of 0.75%. Class I shares are
charged no such fees.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles ("GAAP") 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.
Short-term investments 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.
Notes to Financial Statements 141
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1999 (Unaudited)
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 specific identified cost incurred by each money manager within a
particular fund.
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 of
capital by the trusts are treated by the Funds, respectively, as realized
capital gains or an adjustment to 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: All premiums and discounts, including original
issue discounts, for the Funds 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.
At December 31, 1998 the following 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 12/31/05 12/31/06 Totals
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Emerging Markets $ -- $ 2,887,175 $ 348,806 $ -- $ 56,335,864 $ 59,571,845
Real Estate Securities -- -- -- -- 2,693,062 2,693,062
Short Term Bond 3,290,212 698,949 1,746,912 574,853 -- 6,310,926
</TABLE>
The aggregate cost of investments and the composition of gross unrealized
appreciation and depreciation of investment securities for federal income tax
purposes as of June 30, 1999 are as follows:
<TABLE>
<CAPTION>
NET
GROSS GROSS UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Equity I $ 1,104,123,327 $ 452,750,086 $ (19,041,026) $ 433,709,060
Equity II 552,012,262 117,060,623 (21,080,902) 95,979,721
Equity III 174,369,674 36,930,635 (4,663,560) 32,267,075
Equity Q 869,608,590 435,070,459 (19,725,174) 415,345,285
International 941,249,755 151,226,450 (39,760,739) 111,465,711
Emerging Markets 346,608,590 61,263,767 (37,808,648) 23,455,119
Real Estate Securities 616,728,829 58,145,464 (25,611,753) 32,533,711
Short Term Bond 506,891,563 597,673 (4,426,481) (3,828,808)
Fixed Income I 1,181,148,998 4,775,989 (18,621,207) (13,845,218)
Fixed Income III 602,935,773 2,697,672 (12,092,499) (9,394,827)
</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.
142 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1999 (Unaudited)
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations which
may differ from 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, and when appropriate each Class, will pay their own
expenses other than those expressly assumed by Frank Russell Investment
Management Company ("FRIMCo" or "Advisor"). 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 E and Class C shares will pay shareholder
servicing fees along with other expenses that may be attributable to that
Class. Class C shares will pay 12b-1 distribution fees along with other
expenses that may be attributable to that Class.
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.
FOREIGN CURRENCY EXCHANGE CONTRACTS: In connection with portfolio purchases and
sales of securities denominated in a foreign currency, certain Funds may enter
into 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, Emerging Markets, Fixed Income I 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
Notes to Financial Statements 143
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1999 (Unaudited)
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, 1999, 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 (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.
INVESTMENT IN EMERGING MARKETS: Investing in Emerging Markets may involve
special risks and considerations for the Emerging Markets Fund 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.
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 call and put options on foreign currencies. The domestic
equity Funds may utilize options to equitize liquidity reserve balances.
When a Fund writes a covered call or a 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.
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.
144 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1999 (Unaudited)
3. INVESTMENT TRANSACTIONS
SECURITIES: During the period ended June 30, 1999, 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 $ 664,856,166 $ 673,635,678 Emerging Markets $ 166,474,010 $ 170,552,418
Equity II 401,206,823 312,963,017 Real Estate Securities 161,190,310 115,668,847
Equity III 131,218,165 147,011,115 Short Term Bond 144,058,885 101,048,843
Equity Q 420,541,551 483,569,439 Fixed Income I 182,473,245 177,044,515
International 683,364,587 666,503,475 Fixed Income III 80,702,023 77,584,503
</TABLE>
Purchases and sales of U.S. Government and Agency obligations (excluding
short-term investments, options, futures and repurchase agreements) were as
follows:
PURCHASES SALES
-------------- --------------
Short Term Bond $ 299,236,606 $ 225,901,231
Fixed Income I 1,195,233,126 1,072,728,567
Fixed Income III 840,055,907 814,225,411
WRITTEN OPTIONS CONTRACTS: Fund transactions in written options contracts for
the period ended June 30, 1999 were as follows:
FIXED INCOME I WRITTEN OPTIONS
NUMBER OF PREMIUMS
CONTRACTS (1) RECEIVED
--------------- -------------
Outstanding December 31, 1998 191 $ 260,000
Opened 265 720,090
Closed (22) (281,875)
Expired (51) (205,906)
--------------- -------------
Outstanding June 30, 1999 383 492,309
=============== =============
FIXED INCOME III WRITTEN OPTIONS
NUMBER OF PREMIUMS
CONTRACTS (1) RECEIVED
--------------- -------------
Outstanding December 31, 1998 180 $ 205,189
Opened 312 1,038,971
Closed (37) (414,299)
Expired (12) (198,896)
--------------- -------------
Outstanding June 30, 1999 443 630,965
=============== =============
(1) The aggregate face value of contracts is computed on the date each
contract was opened.
4. RELATED PARTIES
ADVISOR: Frank Russell Investment Management Company ("FRIMCo" or "Advisor")
operates and administers all of the Funds which comprise the Investment
Company, and advises the Money Market and the U.S. Government Money Market
Funds (the Money Market and the U.S. Government Money Market Funds are funds
of the Investment Company that are not presented in this report). FRIMCo is a
wholly owned subsidiary of Frank Russell Company, a wholly owned subsidiary
of The Northwestern Mutual Life Insurance Company. Frank Russell Company
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 period ended June 30, 1999, the advisory fee paid to FRIMCo, for the
Funds listed below, in accordance with the Investment Company's Advisory
Agreement with that firm, amounted to $20,894,644 before waivers. Such fee is
payable monthly
Notes to Financial Statements 145
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1999 (Unaudited)
and is equal to the annual rate, by Fund, shown in the table below, of the
average daily net assets of the applicable Fund. Effective December 1, 1998,
the advisory fee annual rates were reduced by the Administrator fee of .05%;
the new rates are:
ANNUAL RATE ANNUAL RATE
------------- -------------
Equity I 0.55% Emerging Markets 1.15%
Equity II 0.70 Real Estate Securities 0.80
Equity III 0.55 Short Term Bond 0.45
Equity Q 0.55 Fixed Income I 0.25
International 0.70 Fixed Income III 0.50
FRIMCo calculates its advisory fee based on average daily net assets for each
Fund less any advisory fee incurred on the funds assets invested in the Money
Market Fund (see Note 5) thereby eliminating any duplication of fees.
In accordance with the special servicing agreement entered into in February
1999 by the Advisor, the LifePoints Funds and the three Funds listed below,
the ("Underlying Funds") in which the LifePoints Funds invest, expenses from
the operation of the LifePoints Funds are borne by the Underlying Funds based
on each Underlying Fund's proportionate share of assets owned by the
LifePoints Funds. No Underlying Funds will be charged expenses that exceed the
estimated savings to each respective Underlying Fund. These estimated savings
result from the elimination of separate shareholder accounts which either
currently are or have potential to be invested in the Underlying Funds. In the
event that the financial benefits to the Underlying Funds do not exceed
aggregate expenses of any LifePoints Fund, the Advisor will reimburse certain
costs on behalf of the respective LifePoint Fund.
For the period ended June 30, 1999, the special servicing expense charged to
the Underlying Funds amounted to:
AMOUNT
UNDERLYING FUND PAID
-------------------------- ------------
Emerging Markets $ 13,599
Real Estate Securities 22,298
Short-Term Bond 86,827
ADMINISTRATOR: Effective December 1, 1998, the Investment Company & Board of
Trustees approved a plan to pay a .05% fee of the average daily net assets of
the Fund, to FRIMCo, in accordance with the Investment Company's Advisory
Agreement with that firm. The fee paid to FRIMCo for the Funds reported herein
for the period ended June 30, 1999 was $1,822,416 before waivers.
ANALYTIC SERVICES: Fees for analytic services provided to the Funds are paid
or accrued to Russell/Mellon Analytical Services, an affiliate of the
Investment Company. Russell/Mellon Analytical Services provides its TruVP
System to the Funds, pursuant to a written Service Agreement. The TruVP System
provides analytics used by the investment department.
TRANSFER AGENT: The Funds have a contract with FRIMCo, to provide transfer
agent services to the Investment Company. Total fees for the period ended June
30, 1999 were $2,950,016.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has a
Distribution Plan pursuant to Rule 12b-1 (the "Plan") under the 1940 Act.
Under this Plan, the Investment Company was authorized to make payments to the
Russell Fund Distributors (the "Distributor") which is a wholly-owned
subsidiary of FRIMCo, 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 were primarily intended to result in the sale of the Class C
shares subject to the Distribution Plan. The 12b-1 distribution payments shall
not exceed 0.75% of the average daily net assets of a Fund's Class C shares on
an annual basis.
In addition, the Investment Company has adopted a Shareholder Services Plan
(the "Services Plan") under which the Funds 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 E and Class C shares of the Funds. The shareholder
servicing payments shall not exceed 0.25% of the average daily net assets of a
Fund's Class E and Class C shares on an annual basis.
146 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1999 (Unaudited)
ACCRUED FEES PAYABLE TO AFFILIATES AS OF JUNE 30, 1999 WERE AS FOLLOWS:
<TABLE>
<CAPTION>
ADVISORY ADMINISTRATION ANALYTIC TRANSFER
FEES FEES SERVICE FEES AGENT FEES
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Equity I ........................ $ 674,764 $ 61,774 $ 7,709 $ 9,230
Equity II ....................... 353,923 25,460 8,429 55,099
Equity III ...................... 91,413 8,396 3,649 18,154
Equity Q ........................ 554,897 50,697 3,974 68,137
International ................... 606,648 43,574 11,801 49,301
Emerging Markets ................ 388,196 15,264 5,603 189,553
Real Estate Securities .......... 467,771 27,021 649 170,630
Short Term Bond ................. 182,476 20,494 -- 135,745
Fixed Income I .................. 203,108 42,687 -- 25,659
Fixed Income III ................ 188,830 19,586 -- 10,625
----------------- ----------------- ----------------- -----------------
$ 3,712,026 $ 314,953 $ 41,814 $ 732,133
================= ================= ================= =================
<CAPTION>
SHAREHOLDER
SERVICING AND
DISTRIBUTION FEES TOTALS
----------------- -----------------
Equity I ........................ $ 4,794 $ 758,271
Equity II ....................... 2,679 445,590
Equity III ...................... 943 122,555
Equity Q ........................ 2,216 679,921
International ................... 4,666 715,990
Emerging Markets ................ 1,356 599,972
Real Estate Securities .......... 1,818 667,889
Short Term Bond ................. 2,142 340,857
Fixed Income I .................. 5,324 276,778
Fixed Income III ................ 487 219,528
----------------- -----------------
$ 26,425 $ 4,827,351
================= =================
</TABLE>
BROKERAGE COMMISSIONS: The Funds may effect portfolio transactions through
Frank Russell Securities, Inc., an affiliate of the Advisor, 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 reimbursement for research services provided to FRIMCo. Amounts
retained by Frank Russell Securities, Inc. for the period ended June 30, 1999
were as follows:
Equity I $ 103,848 Equity Q $ 15,620
Equity II 47,917 International 91,579
Equity III 30,803 Emerging Markets 26,414
Additionally, the Funds paid brokerage commissions to non-affiliated brokers
who provided brokerage and research services to the Advisor.
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 for the period ended June 30, 1999 were
$31,532, and were allocated to each Fund on a pro rata basis, including 17
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 (funds of Frank Russell
Investment Company not presented herein). As of June 30, 1999, $447,190,000
of the Money Market Fund's net assets represents investments by these Funds
and $407,375,000 represents the investments of other affiliated funds not
presented herein.
Notes to Financial Statements 147
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1999 (Unaudited)
6. FUND SHARE TRANSACTIONS
Share transactions for the period ended June 30, 1999 and the year ended
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
-------------------------------- --------------------------------
1999 1998 1999 1998
EQUITY I -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
CLASS I
Proceeds from shares sold 7,352,750 11,649,184 $ 270,669 $ 382,855
Proceeds from reinvestment of distributions 298,604 2,804,239 10,584 91,198
Payments for shares redeemed (7,789,599) (12,417,244) (287,469) (413,664)
-------------- -------------- -------------- --------------
Net increase (decreased) (138,245) 2,036,179 (6,216) 60,389
-------------- -------------- -------------- --------------
CLASS E (c)
Proceeds from shares sold 637,905 -- 24,245 --
Proceeds from reinvestment of distributions -- -- -- --
Payments for shares redeemed (13,665) -- (512) --
-------------- -------------- -------------- --------------
Net increase (decrease) 624,240 -- 23,733 --
-------------- -------------- -------------- --------------
Total net increase (decrease) 485,995 2,036,179 $ 17,517 $ 60,389
============== ============== ============== ==============
EQUITY II
CLASS I
Proceeds from shares sold 4,953,203 6,590,024 $ 148,301 $ 209,065
Proceeds from reinvestment of distributions 156,754 1,013,507 4,469 30,141
Payments for shares redeemed (3,146,413) (4,974,795) (96,279) (158,755)
-------------- -------------- -------------- --------------
Net increase (decreased) 1,963,544 2,628,736 56,491 80,451
-------------- -------------- -------------- --------------
CLASS E (c)
Proceeds from shares sold 429,720 -- 13,480 --
Proceeds from reinvestment of distributions -- -- -- --
Payments for shares redeemed (15,633) -- (488) --
-------------- -------------- -------------- --------------
Net increase (decreased) 414,087 -- 12,992 --
-------------- -------------- -------------- --------------
Total net increase (decreased) 2,377,631 2,628,736 $ 69,483 $ 80,451
============== ============== ============== ==============
EQUITY III
CLASS I
Proceeds from shares sold 1,128,114 1,912,599 $ 32,600 $ 57,633
Proceeds from reinvestment of distributions 149,091 832,353 4,101 23,877
Payments for shares redeemed (1,782,926) (3,641,754) (51,386) (106,698)
-------------- -------------- -------------- --------------
Total net increase (decrease) (505,721) (896,802) (14,685) (25,188)
-------------- -------------- -------------- --------------
CLASS E (c)
Proceeds from shares sold 158,087 -- 4,785 --
Proceeds from reinvestment of distributions -- -- -- --
Payments for shares redeemed (3,356) -- (100) --
-------------- -------------- -------------- --------------
Net increase (decrease) 154,731 -- 4,685 --
-------------- -------------- -------------- --------------
Total net increase (decrease) (350,990) (896,802) $ (10,000) $ (25,188)
============== ============== ============== ==============
</TABLE>
(c) Share transactions for Class E for the period ended June 30, 1999 are for
the period May 14, 1999 (commencement of sale of shares) to June 30, 1999.
148 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
-------------------------------- --------------------------------
1999 1998 1999 1998
EQUITY Q -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
CLASS I
Proceeds from shares sold 4,440,417 7,788,647 $ 186,626 $ 298,739
Proceeds from reinvestment of distributions 675,760 2,920,742 26,782 109,535
Payments for shares redeemed (5,804,330) (8,992,387) (242,746) (344,894)
-------------- -------------- -------------- --------------
Total net increase (decrease) (688,153) 1,717,002 (29,338) 63,380
-------------- -------------- -------------- --------------
CLASS E (c)
Proceeds from shares sold 259,171 -- 11,142 --
Proceeds from reinvestment of distributions -- -- -- --
Payments for shares redeemed (6,567) -- (279) --
-------------- -------------- -------------- --------------
Net increase (decrease) 252,604 -- 10,863 --
-------------- -------------- -------------- --------------
Total net increase (decrease) (435,549) 1,717,002 $ (18,475) $ 63,380
============== ============== ============== ==============
INTERNATIONAL
CLASS I
Proceeds from shares sold 4,381,301 8,855,148 $ 168,740 $ 330,798
Proceeds from reinvestment of distributions 173,857 756,486 6,353 27,770
Payments for shares redeemed (5,139,152) (11,065,451) (198,435) (412,202)
-------------- -------------- -------------- --------------
Total net increase (decrease) (583,994) (1,453,817) (23,342) (53,634)
-------------- -------------- -------------- --------------
CLASS E (c)
Proceeds from shares sold 581,560 -- 22,721 --
Proceeds from reinvestment of distributions -- -- -- --
Payments for shares redeemed (6,854) -- (267) --
-------------- -------------- -------------- --------------
Net increase (decrease) 574,706 -- 22,454 --
-------------- -------------- -------------- --------------
Total net increase (decrease) (9,288) (1,453,817) $ (888) $ (53,634)
============== ============== ============== ==============
EMERGING MARKETS
CLASS S
Proceeds from shares sold 9,239,080 22,508,124 $ 81,722 $ 221,964
Proceeds from reinvestment of distributions 179,941 188,272 1,447 2,070
Payments for shares redeemed (8,221,643) (16,241,312) (75,159) (149,675)
-------------- -------------- -------------- --------------
Total net increase (decrease) 1,197,378 6,455,084 8,010 74,359
-------------- -------------- -------------- --------------
CLASS E (a)
Proceeds from shares sold 506,630 4,558 5,149 38
Proceeds from reinvestment of distributions 57 -- 1 --
Payments for shares redeemed (29,637) -- (291) --
-------------- -------------- -------------- --------------
Total net increase (decrease) 477,050 4,558 4,859 38
-------------- -------------- -------------- --------------
</TABLE>
(a) Effective May 18, 1998, Class C was renamed Class E.
(c) Share transactions for Class E for the period ended June 30, 1999 are for
the period May 14, 1999 (commencement of sale of shares) to June 30, 1999.
Notes to Financial Statements 149
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
-------------------------------- --------------------------------
EMERGING MARKETS, CONTINUED 1999 1998 1999 1998
Class C (b) -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Proceeds from shares sold 48,797 -- 458 --
Proceeds from reinvestment of distributions 44 -- -- --
Payments for shares redeemed (511) -- (5) --
-------------- -------------- -------------- --------------
Net increase (decrease) 48,330 -- 453 --
-------------- -------------- -------------- --------------
Total net increase (decrease) 1,722,758 6,459,642 $ 13,322 $ 74,397
============== ============== ============== ==============
REAL ESTATE SECURITIES
CLASS S
Proceeds from shares sold 5,500,637 9,286,206 $ 135,765 $ 254,637
Proceeds from reinvestment of distributions 374,033 1,114,356 8,769 30,226
Payments for shares redeemed (4,346,794) (6,759,461) (107,866) (178,741)
-------------- -------------- -------------- --------------
Total net increase (decrease) 1,527,876 3,641,101 36,668 106,122
-------------- -------------- -------------- --------------
CLASS E (a)
Proceeds from shares sold 204,129 28,391 5,391 715
Proceeds from reinvestment of distributions 320 375 7 9
Payments for shares redeemed (13,894) (6,530) (353) (183)
-------------- -------------- -------------- --------------
Total net increase (decrease) 190,555 22,236 5,045 541
-------------- -------------- -------------- --------------
CLASS C (b)
Proceeds from shares sold 36,689 -- 918 --
Proceeds from reinvestment of distributions 138 -- 3 --
Payments for shares redeemed (1,610) -- (40) --
-------------- -------------- -------------- --------------
Net increase (decrease) 35,217 -- 881 --
-------------- -------------- -------------- --------------
Total net increase (decrease) 1,753,648 3,663,337 $ 42,594 $ 106,663
============== ============== ============== ==============
SHORT TERM BOND
CLASS S
Proceeds from shares sold 8,531,591 6,088,176 $ 158,419 $ 112,707
Shares issued in connection with
acquisition of Volatility
Constrained Bond Fund 8,934,738 -- 163,684 --
Proceeds from reinvestment of distributions 309,836 604,269 5,675 11,141
Payments for shares redeemed (5,140,183) (5,088,094) (94,696) (94,296)
-------------- -------------- -------------- --------------
Total net increase (decrease) 12,635,982 1,604,351 233,082 29,552
-------------- -------------- -------------- --------------
CLASS E (d)
Proceeds from shares sold 518,225 -- 9,502 --
Proceeds from reinvestment of distributions 387 -- 7 --
Payments for shares redeemed (12,820) -- (235) --
-------------- -------------- -------------- --------------
Total net increase (decrease) 505,792 -- 9,274 --
-------------- -------------- -------------- --------------
</TABLE>
(a) Effective May 18, 1998, Class C was renamed Class E.
(b) Share transactions for Class C for the period ended June 30, 1999 are for
the period January 27, 1999 (commencement of sale of shares) to June 30,
1999.
(d) Share transactions for Class E for the period ended June 30, 1999 are for
the period February 18, 1999 (commencement of sale of shares) to June 30,
1999.
150 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
-------------------------------- --------------------------------
SHORT TERM BOND, CONTINUED 1999 1998 1999 1998
CLASS C (e) -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Proceeds from shares sold 30,044 -- 553 --
Proceeds from reinvestment of distributions 216 -- 4 --
Payments for shares redeemed (20,244) -- (370) --
-------------- -------------- -------------- --------------
Net increase (decrease) 10,016 -- 187 --
-------------- -------------- -------------- --------------
Total net increase (decrease) 13,151,790 1,604,351 $ 242,543 $ 29,552
============== ============== ============== ==============
FIXED INCOME I
CLASS I
Proceeds from shares sold 10,014,805 18,203,608 $ 220,088 $ 398,149
Proceeds from reinvestment of distributions 624,947 2,497,093 13,376 54,549
Payments for shares redeemed (7,219,573) (12,833,370) (159,578) (281,502)
-------------- -------------- -------------- --------------
Total net increase (decrease) 3,420,179 7,867,331 73,886 171,196
-------------- -------------- -------------- --------------
CLASS E (c)
Proceeds from shares sold 1,247,297 -- 26,505 --
Proceeds from reinvestment of distributions -- -- -- --
Payments for shares redeemed (18,155) -- (382) --
-------------- -------------- -------------- --------------
Net increase (decrease) 1,229,142 -- 26,123 --
-------------- -------------- -------------- --------------
Total net increase (decrease) 4,649,321 7,867,331 $ 100,009 $ 171,196
============== ============== ============== ==============
FIXED INCOME III
CLASS I
Proceeds from shares sold 11,533,864 20,310,407 $ 118,166 $ 212,963
Proceeds from reinvestment of distributions 623,588 3,397,977 6,324 35,268
Payments for shares redeemed (9,778,198) (15,209,804) (100,397) (159,236)
-------------- -------------- -------------- --------------
Total net increase (decrease) 2,379,254 8,498,580 24,093 88,995
-------------- -------------- -------------- --------------
CLASS E (c)
Proceeds from shares sold 246,555 -- 2,495 --
Proceeds from reinvestment of distributions -- -- -- --
Payments for shares redeemed (9,366) -- (94) --
-------------- -------------- -------------- --------------
Net increase (decrease) 237,189 -- 2,401 --
-------------- -------------- -------------- --------------
Total net increase (decrease) 2,616,443 8,498,580 $ 26,494 $ 88,995
============== ============== ============== ==============
</TABLE>
(c) Share transactions for Class E for the period ended June 30, 1999 are for
the period May 14, 1999 (commencement of sale of shares) to June 30, 1999.
(e) Share transactions for Class C for the period ended March 3, 1999
(commencement of sale of shares) to June 30, 1999.
Notes to Financial Statements 151
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 (Unaudited)
7. DIVIDENDS
On July 1, 1999 the Board of Trustees declared the following dividends from
net investment income payable on July 6, 1999, to shareholders of record on
July 2, 1999.
<TABLE>
<S> <C> <C> <C>
Equity I - Class I $ 0.0630 Short Term Bond - Class S $ 0.2118
Equity I - Class E 0.0477 Short Term Bond - Class E 0.2062
Equity II - Class I 0.0159 Short Term Bond - Class C 0.1077
Equity II - Class E 0.0071 Fixed Income I - Class I 0.3016
Equity III - Class I 0.0948 Fixed Income I - Class E 0.2939
Equity III - Class E 0.0894 Fixed Income III - Class I 0.1433
Equity Q - Class I 0.0970 Fixed Income III - Class E 0.1396
Real Estate Securities - Class S 0.2982
Real Estate Securities - Class E 0.2893
Real Estate Securities - Class C 0.2594
</TABLE>
8. BENEFICIAL INTEREST
As of June 30, 1999, the following Funds have one or more shareholders with
shares of beneficial interest of greater than 10% of the total outstanding
shares of each respective Fund or Class:
<TABLE>
<CAPTION>
CLASS I CLASS E CLASS C
------------------- ---------------------- ---------------------
<S> <C> <C> <C>
Equity I 13.8% 13.9% --
Equity II -- 16.8% --
Equity III 14.2% 26.0%, 10.9% --
Equity Q 16.4% 19.3%, 12.0% --
International 16.1% 15.9%, 11.8% --
Emerging Markets -- 20.4%, 10.4% --
Real Estate Securities -- 20.4% --
Short Term Bond -- 38.6% 52.5%, 22.4%, 12.1%
Fixed Income I 14.1% 23.5%, 14.5% --
Fixed Income III 17.7% 33.9%, 17.4%, 16.5%, --
15.4%
</TABLE>
152 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 832-6688
In Washington (253) 627-7001
TRUSTEES
Lynn L. Anderson
Paul E. Anderson
Paul Anton, PhD
William E. Baxter
Lee C. Gingrich
Eleanor W. Palmer
TRUSTEES EMERITUS
George F. Russell, Jr., Chairman
OFFICERS
Lynn L. Anderson, President and Chief Executive Officer
Peter Apanovitch, Manager of Short Term Investment Funds
Mark E. Swanson, Treasurer and Chief Accounting Officer
Randall P. Lert, Director of Investments
Karl Ege, Secretary and General Counsel
MANAGER, TRANSFER AND DIVIDEND PAYING 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
PricewaterhouseCoopers LLP
1001 4th Avenue Plaza
Suite 4200
Seattle, WA 98154
DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
MONEY MANAGERS
EQUITY I FUND
Alliance Capital Management L.P., Minneapolis, MN
Barclays Global Investors, San Francisco, CA
Equinox Capital Management, LLC, New York, NY
INVESCO Capital Management, Inc., Atlanta, GA
Jacobs Levy Equity Management, Inc., Roseland, NJ
Lincoln Capital Management Company, Chicago, IL
Marsico Capital Management, LLC, Denver, CO
Morgan Stanley Dean Witter Investment
Management, Inc., New York, NY
Peachtree Asset Management, Atlanta, GA
Sanford C. Bernstein & Co., Inc., New York, NY
Suffolk Capital Management, Inc., New York, NY
Trinity Investment Management Corporation, Boston, MA
EQUITY II FUND
Delphi Management, Inc., Boston, MA
Fiduciary Trust Company 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
Westpeak Investment Advisors, L.P., Boulder, CO
EQUITY III FUND
Equinox Capital Management, LLC, New York, NY
Trinity Investment Management Corporation, Boston, MA
Westpeak Investment Advisors, L.P., Boulder, CO
EQUITY Q FUND
Barclays Global Investors, San Francisco, CA
Franklin Portfolio Associates, LLC, Boston, MA
Jacobs Levy Equity Management, Inc., Roseland, NJ
J.P. Morgan Investment Management, Inc., New York, NY
INTERNATIONAL FUND
Delaware International Advisers Limited, London, England
Fidelity Management Trust Company, Boston, MA
J.P. Morgan Investment Management, Inc., New York, NY
Mastholm Asset Management, LLC, Bellevue, WA
Montgomery Asset Management, LLC, San Francisco, CA
Oechsle International Advisors, L.P., Boston, MA
Sanford C. Bernstein & Co., Inc., New York, NY
The Boston Company Asset Management, Inc., Boston, MA
EMERGING MARKETS FUND
Foreign & Colonial Emerging Markets, London, England
Genesis Asset Managers Limited, London, England
J.P. Morgan Investment Management, Inc., New York, NY
Montgomery Asset Management, LLC, San Francisco, CA
Nicholas Applegate Capital Management, San Diego, CA
Sanford C. Bernstein & Co., Inc., New York, NY
Schroder Capital Management
International Limited, New York, NY
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.
Manager, Money Managers and Service Providers 153
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 832-6688
In Washington (253) 627-7001
REAL ESTATE SECURITIES FUND
AEW Capital Management, L.P., Boston, MA
Cohen & Steers Capital Management, Inc., New York, NY
SHORT TERM BOND FUND
BlackRock Financial Management, Inc., New York, NY
Standish, Ayer & Wood, Inc., Boston, MA
STW Fixed Income Management California, Santa Barbara, CA
FIXED INCOME I FUND
Lincoln Capital Management Company, Chicago, IL
Pacific Investment Management Company, Newport Beach, CA
Standish, Ayer & Wood, Inc., Boston, MA
FIXED INCOME III FUND
Credit Suisse Asset Management, 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.
154 Manager, Money Managers and Service Providers
<PAGE>
[LOGO OF FRANK RUSSELL INVESTMENT COMPANY]
Frank Russell Investment Company
909 A Street
Tacoma, Washington 98402
253-627-7001
800-787-7354
Fax: 253-591-3495
www.russell.com A-5424(699) 36-08-068(6/99)
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
1999 Semiannual Report
CLASS S SHARES
MONEY MARKET FUND
US GOVERNMENT MONEY MARKET FUND
TAX FREE MONEY MARKET FUND
JUNE 30, 1999
[LOGO OF FRANK RUSSEL INVESTMENT COMPANY]
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
Frank Russell Investment Company is a "series mutual
fund" with 27 different investment portfolios. These
financial statements report on three 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
MONEY MARKET FUNDS
SEMIANNUAL REPORT
JUNE 30, 1999 (UNAUDITED)
TABLE OF CONTENTS
Page
Money Market Fund ............................ 2
U.S. Government Money Market Fund ............ 10
Tax Free Money Market Fund ................... 16
Notes to Financial Statements ................ 28
Manager, Money Managers and Service Providers. 31
FRANK RUSSELL INVESTMENT COMPANY - MONEY MARKET FUNDS
Copyright (C) Frank Russell Company 1999. 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>
MONEY MARKET FUND
STATEMENT OF NET ASSETS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
----------- -------- ----------- ---------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES - 32.4%
American Express Centurion Bank (a) 20,000 4.970 06/08/00 20,000
Associates Corp. of North America 25,000 6.375 06/15/00 25,212
Credit Suisse First Boston, Inc. (a) 30,000 4.970 06/07/00 30,000
Credit Suisse First Boston, Inc. (MTN)(a) 25,000 4.990 06/09/00 25,000
First National Bank of Chicago 20,000 5.485 06/05/00 19,994
FCC National Bank 30,000 5.550 01/18/00 30,000
General Electric Capital Corp. Series A (MTN)(a) 30,000 4.950 04/12/00 30,000
General Motors Acceptance Corp. (a) 25,000 5.020 03/13/00 25,000
General Motors Acceptance Corp. (a) 25,000 5.020 03/14/00 25,000
General Motors Acceptance Corp. (a) 25,000 5.020 03/17/00 25,000
Gien Raven MLS, Inc. (a) 40,000 5.220 05/01/14 40,000
Grantor Trust Series 1996-2 (a) 7,627 5.160 12/23/06 7,626
Grantor Trust Series 1997-11 (a) 37,592 5.066 12/01/04 37,592
Grantor Trust Series 1998-TG7 (a) 22,325 5.066 07/01/04 22,325
Gulf States Paper Corp. Series 1998 (a) 40,000 5.220 11/01/18 40,000
Metropolis of Tokyo 9,820 8.700 10/05/99 9,912
Morgan (J.P.) & Co., Inc. (MTN) 25,000 5.030 02/07/00 25,000
Morganite Industries Series 1998-A (a) 50,000 5.220 07/01/18 50,000
Norwest Financial, Inc. (a) 50,000 4.925 07/07/00 49,966
Presbyterian Homes & Services Series B2 (a) 21,955 5.486 12/01/28 21,955
Providian Life + Health (a) 25,000 5.094 11/12/99 25,000
SALTS III (Cayman) 50,000 5.322 07/23/99 50,000
---------
TOTAL CORPORATE BONDS AND NOTES (cost $634,582) 634,582
---------
EURODOLLAR CERTIFICATES OF DEPOSIT - 2.8%
Strategic Money Market Trust Series 1999-B 35,000 5.449 03/15/00 35,000
Westpac Banking Corp. 20,000 5.200 03/01/00 19,994
---------
TOTAL EURODOLLAR CERTIFICATES OF DEPOSIT (cost $54,994) 54,994
---------
YANKEE CERTIFICATES OF DEPOSIT - 18.9%
Bank of Nova Scotia 25,000 5.120 02/16/00 24,995
Bank of Nova Scotia 20,000 5.400 06/01/00 19,993
Bayerische Hypo-Und Vereinsbank AG 25,000 5.270 05/22/00 24,987
Bayerische Hypo-Und Vereinsbank AG 25,000 5.350 05/22/00 24,987
Commerzbank AG 25,000 5.090 02/16/00 24,995
Commerzbank AG 25,000 5.160 02/25/00 24,994
Commerzbank AG 20,000 5.295 05/19/00 19,991
Commerzbank AG 20,000 5.640 06/15/00 19,994
Deutsche Bank AG 10,000 5.000 01/06/00 9,995
Deutsche Bank AG 10,000 5.060 02/08/00 9,998
Deutsche Bank AG 25,000 5.250 05/18/00 24,989
Deutsche Bank AG 15,000 5.570 06/12/00 14,995
First Union Corp. (a) 25,000 4.980 06/26/00 24,998
Lloyds Bank PLC 25,000 4.920 09/27/99 25,000
</TABLE>
2 Money Market Fund
<PAGE>
MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
----------- -------- ----------- ---------
<S> <C> <C> <C> <C>
UBS AG 20,000 5.410 06/01/00 19,993
UBS AG 10,000 5.600 06/26/00 9,989
UBS AG 25,000 5.660 06/26/00 24,991
Union Bank of Switzerland AG 20,000 5.080 01/13/00 19,998
---------
TOTAL YANKEE CERTIFICATES OF DEPOSIT (cost $369,882) 369,882
---------
DOMESTIC COMMERCIAL PAPER - 48.3%
Atlantis One Funding Corp. 13,014 5.030 07/02/99 13,012
Atlantis One Funding Corp. 28,540 4.840 07/27/99 28,440
Banco Nacional de Comercio Exterior 30,000 4.840 07/12/99 29,956
Banco Nacional de Comercio Exterior 22,905 4.830 07/20/99 22,847
Banco Nacional de Mexico S.A. 20,000 4.830 07/28/99 19,928
Bavaria TRR Corp. 20,200 5.020 07/12/99 20,169
Bavaria TRR Corp. 34,400 4.850 07/15/99 34,335
Citibank Capital Markets 20,000 4.830 07/14/99 19,965
Certain Funding Corp. 16,680 4.830 08/10/99 16,590
Gotham Funding Corp. 19,626 5.120 07/22/99 19,567
Intrepid Funding Series C 33,860 4.830 09/27/99 33,460
Irish Permanent Treasury PLC 35,000 4.820 10/25/99 34,456
Jefferson-Pilot Corp. 16,450 4.860 07/01/99 16,450
Konica Finance USA Corp. 13,200 5.150 07/22/99 13,160
KZH-KMS Corp. 31,495 4.860 07/07/99 31,469
KZH-KMS Corp. 25,000 4.820 08/04/99 24,886
Minebea Capital, Inc. 15,000 5.130 07/02/99 14,998
Mitsubishi Motors Credit of America 20,000 5.150 07/07/99 19,983
Mitsubishi Motors Credit of America 20,000 5.170 07/07/99 19,983
Park Avenue Receivables Corp. 44,505 4.840 07/22/99 44,379
Special Purpose Accounts Receivable Co. 30,000 4.830 07/27/99 29,895
Special Purpose Accounts Receivable Co. 25,000 4.830 07/29/99 24,906
Stellar Funding Group 10,000 5.050 07/09/99 9,989
Stellar Funding Group 18,446 4.830 07/27/99 18,382
Stellar Funding Group 20,000 4.830 07/30/99 19,922
Stellar Funding Group 14,185 4.835 08/06/99 14,116
Swiss RE Financial Products Corp. 24,600 4.840 07/08/99 24,577
Taiheiyo USA 21,000 4.880 07/21/99 20,943
Thames Asset Global Securitization 22,453 5.100 07/08/99 22,431
Thames Asset Global Securitization 20,505 4.840 07/13/99 20,472
Thames Asset Global Securitization 21,813 5.100 07/21/99 21,751
Three Rivers Funding 25,000 5.030 07/06/99 24,983
Trident Capital Finance, Inc. 50,000 4.830 07/29/99 49,812
Westways Funding I Ltd. 52,723 4.860 07/27/99 52,538
Westways Funding II Ltd. 11,341 5.050 07/07/99 11,331
Westways Funding II Ltd. 15,000 5.090 07/07/99 14,987
Westways Funding II Ltd. 20,000 4.860 07/12/99 19,970
Westways Funding II Ltd. 10,000 4.860 07/14/99 9,982
Westways Funding II Ltd. 10,000 5.100 07/14/99 9,982
Westways Funding II Ltd. 29,258 4.850 08/03/99 29,128
Westways Funding II Ltd. 20,000 4.860 08/10/99 19,893
---------
TOTAL DOMESTIC COMMERCIAL PAPER (cost $948,023) 948,023
---------
</TABLE>
Money Market Fund 3
<PAGE>
MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
----------- -------- ----------- ---------
<S> <C> <C> <C> <C>
UNITED STATES GOVERNMENT AGENCIES - 1.1%
Aid to Chile Guaranteed Note (LIBOR Floater)(a) 10,429 5.562 06/01/05 10,437
Aid to INH Portugal Guaranteed Note (LIBOR Floater)(a) 11,563 5.565 12/01/17 11,744
---------
TOTAL UNITED STATES GOVERNMENT AGENCIES (cost $22,181) 22,181
---------
TOTAL INVESTMENTS - 103.5% (amortized cost $2,029,662)(b) 2,029,662
OTHER ASSETS AND LIABILITIES, NET - (3.5%) (68,195)
---------
NET ASSETS - 100.0% 1,961,467
=========
</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
See accompanying notes which are an integral part of the financial statements.
4 Money Market Fund
<PAGE>
MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
ASSETS
Investments at amortized cost which approximates market........ $ 2,029,662
Interest receivable............................................ 8,577
--------------
Total Assets................................................ 2,038,239
LIABILITIES
Payables:
Due to Custodian............................... $ 46,122
Dividends...................................... 287
Investments purchased.......................... 30,000
Accrued fees to affiliates..................... 204
Other accrued expenses......................... 159
--------------
Total Liabilities........................................... 76,772
--------------
NET ASSETS..................................................... $ 1,961,467
==============
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss)........................... $ (9)
Shares of beneficial interest.................................. 19,615
Additional paid-in capital..................................... 1,941,861
--------------
NET ASSETS..................................................... $ 1,961,467
==============
NET ASSET VALUE, offering and redemption price per share:
($1,961,466,535 divided by 1,961,475,820 shares of $.01 par
value shares of beneficial interest outstanding)............ $ 1.00
==============
See accompanying notes which are an integral part of the financial statements.
Money Market Fund 5
<PAGE>
MONEY MARKET FUND
STATEMENT OF OPERATIONS
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
INVESTMENT INCOME
Interest..................................................... $51,673
EXPENSES
Advisory fees.................................. $ 2,018
Administrative fees............................ 505
Custodian fees................................. 264
Transfer agent fees............................ 267
Professional fees.............................. 25
Registration fees.............................. 96
Trustees' fees................................. 3
Miscellaneous.................................. 44
-------
Expenses before reductions..................... 3,222
Expense reductions............................. (1,514)
-------
Total Expenses............................................... 1,708
-------
Net investment income........................................ 49,965
NET REALIZED GAIN (LOSS)
Net realized gain (loss) on investments...................... (6)
-------
Net increase in net assets resulting from operations......... $49,959
=======
See accompanying notes which are an integral part of the financial statements.
6 Money Market Fund
<PAGE>
MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
--------------------- -------------------
<S> <C> <C>
OPERATIONS
Net investment income.......................................... $ 49,965 $ 60,214
Net realized gain (loss)....................................... (6) (3)
--------------------- -------------------
Net increase in net assets resulting from operations......... 49,959 60,211
--------------------- -------------------
DISTRIBUTIONS
From net investment income..................................... (49,965) (60,214)
--------------------- -------------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions.. 356,447 678,746
--------------------- -------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS..................... 356,441 678,743
NET ASSETS
Beginning of period............................................ 1,605,026 926,283
--------------------- -------------------
End of period.................................................. $ 1,961,467 $ 1,605,026
===================== ===================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Money Market Fund 7
<PAGE>
MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------
1999* 1998 1997 1996 1995 1994
--------- --------- -------- -------- -------- --------
<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....................... .0245 .0553 .0563 .0549 .0601 .0447
--------- --------- -------- -------- -------- --------
DISTRIBUTIONS
From net investment income.................. (.0245) (.0553) (.0563) (.0549) (.0601) (.0447)
--------- --------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD............... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========= ========= ======== ======== ======== ========
TOTAL RETURN (%)(a)(b)....................... 2.48 5.69 5.79 5.63 6.19 4.57
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands).. 1,961,467 1,605,026 926,283 496,932 533,643 502,302
Ratios to average net assets (%)(b)(c):
Operating expenses, net (d)............... .17 .16 .08 .05 .06 .05
Operating expenses, gross (d)............. .32 .31 .30 .30 .26 .05
Net investment income..................... 4.95 5.54 5.65 5.49 6.01 4.49
</TABLE>
* For the six months ended June 30, 1999 (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, 1999 are annualized.
(d) See Note 4 for current period amounts.
8 Money Market Fund
<PAGE>
U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF NET ASSETS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
------------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
UNITED STATES GOVERNMENT
AGENCIES - 80.4%
Aid to Chile Guaranteed Note (LIBOR Floater)(a) 4,901 5.562 06/01/05 4,904
Aid to Sri Lanka Guaranteed Note (LIBOR Floater)(a) 3,250 5.565 06/15/12 3,279
Federal Farm Credit Bank 1,100 4.770 08/02/99 1,099
Federal Farm Credit Bank (MTN) 5,000 5.800 11/03/99 5,011
Federal Farm Credit Bank (MTN)(a) 10,000 4.810 06/22/00 9,997
Federal Home Loan Bank 12,725 4.940 10/27/99 12,723
Federal Home Loan Bank 4,650 5.000 10/27/99 4,650
Federal Home Loan Bank 10,000 4.950 02/17/00 9,997
Federal Home Loan Bank 5,000 5.050 03/03/00 4,984
Federal Home Loan Bank 3,000 5.150 05/19/00 2,998
Federal Home Loan Bank Discount Notes 10,000 5.945 11/12/99 10,032
Federal Home Loan Bank Discount Notes (b) 6,000 4.854 11/30/99 5,879
Federal National Mortgage Association 5,005 4.627 02/07/00 4,859
Federal National Mortgage Association (MTN) 5,000 4.830 01/11/00 4,991
Federal National Mortgage Association (MTN) 8,000 5.770 06/28/00 8,001
Student Loan Marketing Association (MTN)(a) 2,000 5.173 07/12/99 2,000
Student Loan Marketing Association Discount Notes (a) 21,829 5.109 08/02/99 21,825
-----------
TOTAL UNITED STATES GOVERNMENT AGENCIES 117,229
-----------
TOTAL INVESTMENTS - 80.4% (amortized cost $117,229) 117,229
-----------
REPURCHASE AGREEMENT - 18.6%
Agreement with HSBC Securities and Chase Bank (Tri-Party) of $27,190
acquired June 30, 1999 at 5.040% to be repurchased at $27,194 on July 1, 1999, collateralized by:
$28,490 United States Treasury Obligations, valued at $27,734. 27,190
-----------
TOTAL REPURCHASE AGREEMENT (identified cost $27,190) 27,190
-----------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENT - 99.0% (cost $144,419)(c) 144,419
OTHER ASSETS AND LIABILITIES, NET - 1.0% 1,380
-----------
NET ASSETS - 100.0% 145,799
===========
</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) Guaranteed by the Global Debt Program.
(c) The identified cost for federal income tax purposes is the same as shown
above.
Abbreviations:
LIBOR - London Interbank Offered Rate
MTN - Medium Term Note
See accompanying notes which are an integral part of the financial statements.
10 U.S. Government Money Market Fund
<PAGE>
U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
ASSETS
Investments at amortized cost which approximates market ........ $ 117,229
Repurchase agreement (identified cost $27,190) ................ 27,190
Interest receivable ............................................ 1,416
---------
Total Assets ................................................ 145,835
LIABILITIES
Payables:
Dividends ............................................ $ 20
Accrued fees to affiliates ........................... 15
Other accrued expenses ............................... 1
--------
Total Liabilities ........................................... 36
---------
NET ASSETS ..................................................... $ 145,799
=========
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) .......................... $ (1)
Shares of beneficial interest .................................. 1,458
Additional paid-in capital ..................................... 144,342
---------
NET ASSETS ..................................................... $ 145,799
=========
NET ASSET VALUE, offering and redemption price per share:
($145,798,863 divided by 145,799,633 shares of $.01 par value
shares of beneficial interest outstanding) .................. $ 1.00
=========
See accompanying notes which are an integral part of the financial statements.
U.S. Goverment Money Market Fund 11
<PAGE>
U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF OPERATIONS
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
INVESTMENT INCOME
Interest .......................................................... $ 4,040
EXPENSES
Advisory fees ........................................... $ 162
Administrative fees ..................................... 41
Custodian fees .......................................... 25
Transfer agent fees ..................................... 141
Professional fees ....................................... 6
Registration fees ....................................... 28
Trustees' fees .......................................... 3
Miscellaneous ........................................... 14
-------
Expenses before reductions .............................. 420
Expense reductions ...................................... (177)
-------
Expenses, net ................................................... 243
---------
Net investment income .............................................. 3,797
NET REALIZED GAIN (LOSS)
Net realized gain (loss) on investments ............................ (1)
---------
Net increase in net assets resulting from operations ............... $ 3,796
=========
See accompanying notes which are an integral part of the financial statements.
12 U.S. Government Money Market Fund
<PAGE>
U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
For The Six Months For The Year
Ended June 30, 1999 Ended
(Unaudited) December 31, 1998
------------------- -----------------
<S> <C> <C>
OPERATIONS
Net investment income .......................... $ 3,797 $ 7,756
Net realized gain (loss) ....................... (1) --
------------------- -----------------
Net increase in net assets resulting from
operations ................................... 3,796 7,756
------------------- -----------------
DISTRIBUTIONS
From net investment income ..................... (3,797) (7,756)
------------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share
transactions ................................... (20,424) (21,188)
------------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ..... (20,425) (21,188)
NET ASSETS
Beginning of period ............................ 166,224 187,412
------------------- -----------------
End of period .................................. $ 145,799 $ 166,224
=================== =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
U.S. Government Money Market Fund 13
<PAGE>
U.S. GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------
1999* 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------
<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 ........................... .0232 .0520 .0545 .0526 .0580 .0380
---------- ---------- ---------- ---------- ---------- ---------
DISTRIBUTIONS
From net investment income ...................... (.0232) (.0520) (.0545) (.0526) (.0580) (.0380)
---------- ---------- ---------- ---------- ---------- ---------
NET ASSET VALUE, END OF PERIOD ................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========== ========== ========== ========== ========== =========
TOTAL RETURN (%)(a) ............................. 2.35 5.34 5.59 5.40 5.98 3.87
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ..... 145,799 166,224 187,412 239,725 149,941 112,077
Ratios to average net assets(%)(b):
Operating expenses, net (c) .................. .30 .32 .20 .25 .32 .57
Operating expenses, gross (c) ................ .52 .55 .41 .50 .51 .57
Net investment income ......................... 4.68 5.20 5.44 5.27 5.82 3.91
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) See Note 4 for current period amounts.
14 U.S. Government Money Market Fund
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
----------- -------- ---------- --------
MUNICIPAL BONDS - 101.2%
ALABAMA - 6.6%
Alabama Housing Financing Authority
Multi-family Housing Residential
Development, Series B, weekly
demand 1,725 3.650 (2) 12/01/14 1,725
Birmingham, Alabama Private
Educational Building Authority
Revenue, weekly demand 5,500 3.700 (2) 04/01/13 5,500
Childersburg, Alabama Industrial
Development Board Pollution Control
Revenue 680 7.400 11/15/99 691
Mobile, Alabama Industrial
Development Board Pollution Control
Revenue, weekly demand 3,000 3.825 (2) 06/01/04 3,000
Tuscaloosa, Alabama Industrial
Development Board Revenue, weekly
demand 1,100 3.550 (2) 12/01/99 1,100
----------
12,016
----------
ARIZONA - 2.1%
Chandler, Arizona Industrial
Development Authority Revenue,
monthly demand 2,955 3.350 (3) 12/15/09 2,955
Maricopa County, Arizona Industrial
Development Authority Revenue,
weekly demand 550 3.850 (2) 10/01/04 550
Pinal County, Arizona Industrial
Development Authority Pollution
Control Revenue, daily demand 400 3.550 (1) 12/01/09 400
----------
3,905
----------
ARKANSAS - 0.1%
Greystone Tax-Exempt Certificate
Trust Revenue, Series 1998-1,
weekly demand (f) 210 3.780 (2) 05/01/28 210
----------
COLORADO - 2.0%
Central Platte Valley Metropolitan
District, Colorado Special
Obligation Revenue, Series 98 (a) 495 3.550 10/01/99 495
Colorado Housing Financing Authority
Multi-family Housing Revenue,
weekly demand 1,150 3.450 (2) 06/01/05 1,150
Colorado Housing Financing Authority
Multi-family Housing Revenue,
weekly demand 600 3.550 (2) 05/01/15 600
Denver, Colorado City and County
Multi-family Housing Revenue, daily
demand 1,350 3.550 (1) 12/01/09 1,350
----------
3,595
----------
DELAWARE - 0.4%
Delaware State Economic Development
Authority Multi-family Revenue,
weekly demand 650 3.600 (2) 12/01/15 650
----------
DISTRICT OF COLUMBIA - 2.2%
District of Columbia General
Obligation, Series B-1, daily
demand 1,200 3.700 (1) 06/01/03 1,200
District of Columbia General
Obligation, Series B-3, daily
demand 800 3.700 (1) 06/01/03 800
District of Columbia Revenue, weekly
demand 2,100 3.450 (2) 07/01/22 2,100
----------
4,100
----------
FLORIDA - 6.4%
Alachua County, Florida Industrial
Development Revenue, Series A,
monthly demand 375 3.500 (3) 01/01/12 375
Broward County, Florida Finance
Authority Multi-family Housing
Revenue, weekly demand 700 3.750 (2) 02/01/09 700
Fort Pierce, Florida Health Facility
Revenue, weekly demand 1,725 3.750 (2) 10/01/17 1,725
16 Tax Free Money Market Fund
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
----------- -------- ---------- --------
Greystone Tax-Exempt Certificate
Trust Revenue, Series 1998-1,
weekly demand (f) 318 3.780 (2) 05/01/28 318
Orange County, Florida Educational
Facilities Authority Revenue,
Series 1998, weekly demand 300 3.750 (2) 05/01/25 300
Orange County, Florida Industrial
Development Authority Revenue,
monthly demand 1,100 4.250 (3) 01/01/11 1,100
Orange County, Florida Industrial
Development Authority Revenue,
seminannual demand 3,055 3.200 (5) 10/01/15 3,055
Orange County, Florida Industrial
Development Authority Revenue,
Series A, weekly demand 1,000 3.750 (2) 02/01/16 1,000
Orange County, Florida Multi-family
Housing Finance Authority Revenue,
seminannual demand 1,800 3.550 (5) 10/01/07 1,800
Palm Beach County, Florida Economic
Development Revenue, weekly demand 1,200 3.750 (2) 01/01/24 1,200
----------
11,573
----------
GEORGIA - 6.8%
Cobb County, Georgia Housing
Authority Multi-family Housing
Revenue, weekly demand 1,000 3.350 (2) 06/01/25 1,000
Fulton County, Georgia Development
Authority Revenue, weekly demand 600 3.750 (2) 12/01/16 600
Georgia State Hospital Financing
Authority Revenue, daily demand 200 3.550 (1) 03/01/01 200
Greystone Tax-Exempt Certificate
Trust Revenue, Series 1998-1,
weekly demand (f) 1,064 3.780 (2) 05/01/28 1,064
Gwinnett County, Georgia Development
Authority Revenue, weekly demand 135 3.750 (2) 03/01/17 135
La Grange, Georgia Water & Sewage
Revenue (pre-refunded 01/01/00)(b) 1,000 7.375 01/01/12 1,040
Marietta, Georgia Housing Authority
Multi-family Housing Revenue,
weekly demand 2,500 3.475 (2) 01/01/08 2,500
Municipal Electric Authority,
Georgia Revenue, weekly demand 3,400 3.500 (2) 01/01/22 3,400
Residential Apartments I Portfolio
CERT Trust 1996, Series A,
weekly demand (e) 720 3.800 (2) 12/01/02 720
Savannah, Georgia Housing Authority
Multi-family Housing Revenue,
Series B, weekly demand 1,000 3.350 (2) 06/15/26 1,000
Walton County, Georgia Development
Authority Industrial Development
Revenue, Series B, weekly demand 800 3.750 (2) 06/01/04 800
----------
12,459
----------
ILLINOIS - 10.0%
De Kalb, Illinois Industrial
Development Revenue, Series C,
weekly demand 500 3.650 (2) 02/01/01 500
East Peoria, Illinois Multi-family
Housing Authority, weekly demand 1,690 3.950 (2) 06/01/08 1,690
Hoffman Estates, Illinois Park
District General Obligation 855 4.150 12/01/99 857
Illinois Development Finance
Authority Revenue, quarterly demand 700 3.500 (4) 08/01/25 700
Illinois Development Finance
Authority Revenue, weekly demand 2,048 3.650 (2) 09/01/26 2,048
Illinois Educational Facilities
Authority Revenue, weekly demand 200 3.700 (2) 03/01/27 200
Illinois Health Facilities Authority
Revenue, Series A, weekly demand 4,000 3.600 (2) 02/15/16 4,000
Illinois Health Facilities Authority
Revenue, Series B, weekly demand 2,000 3.400 (2) 08/15/22 2,000
Illinois State Certificate of
Participation (a) 1,005 4.500 07/01/00 1,013
Illinois State Certificate of
Participation, Series A (a) 540 4.900 07/01/99 540
St. Clair County, Illinois
Industrial Development Board
Revenue, Series 94, weekly demand 1,000 3.850 (2) 10/01/15 1,000
Troy Grove, Illinois Revenue, weekly
demand 750 4.572 (2) 05/01/10 750
Tax Free Money Market Fund 17
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
---------- -------- ----------- --------
<S> <C> <C> <C> <C>
Winnebago & Boone Counties, Illinois School District Number 205 Tax
Anticipation Warrants 3,000 5.400 10/29/99 3,009
----------
18,307
----------
INDIANA - 3.5%
Fort Wayne, Indiana Economic Development Revenue, Series 83,
weekly demand 1,000 3.825 (2) 12/01/03 1,000
Indiana Secondary Market Educational Loans, Inc. Revenue 500 5.300 09/01/99 502
Indiana Secondary Market Educational Loans, Inc. Revenue, Series A (a) 500 7.000 12/01/99 507
Indiana State Educational Facilities Authority Revenue, Series B, weekly
demand 800 3.700 (2) 06/01/28 800
Mishawaka, Indiana Waterworks Revenue Bond Anticipation Notes,
Series A 2,000 4.200 08/12/99 2,000
Penn Harris Madison, Indiana School
Corporation 850 3.350 12/31/99 850
Residential Apartments I Portfolio
CERT Trust 1996, Series A,
weekly demand (e) 740 3.800 (2) 12/01/02 740
----------
6,399
----------
IOWA - 1.9%
Residential Apartments I Portfolio CERT Trust 1996, Series A,
weekly demand (e) 540 3.800 (2) 12/01/02 540
Storm Lake, Iowa Private College
Revenue, weekly demand 2,900 3.750 (2) 12/01/03 2,900
----------
3,440
----------
KANSAS - 1.4%
Derby, Kansas Waterworks Utility System Revenue, Series 1 1,450 4.500 01/15/00 1,450
Greystone Tax-Exempt Certificate Trust Revenue, Series 1998-1,
weekly demand (f) 158 3.780 (2) 05/01/28 158
Kansas State Development Finance Authority Health Facilities
Revenue, Series M, daily demand (a) 1,000 3.650 (1) 11/15/23 1,000
----------
2,608
----------
KENTUCKY - 1.4%
Elsmere, Kentucky Industrial
Building Revenue, seminannual demand 530 3.350 (5) 02/01/06 530
Kentucky Area Development Districts Financing Lease Program Revenue,
Sereis E2, weekly demand 490 3.850 (2) 12/01/31 490
Kentucky Development Finance Authority Revenue 845 6.000 11/01/99 853
Louisville, Kentucky Industrial Development Revenue, weekly demand 750 3.600 (2) 09/01/01 750
----------
2,623
----------
MARYLAND - 2.5%
Anne Arundel County, Maryland Industrial Development Revenue,
Series C, weekly demand 2,260 3.650 (2) 02/01/01 2,260
Maryland State Health & Higher Educaitonal Facilities Authority
Revenue, Series B, weekly demand 1,400 3.400 (2) 04/01/35 1,400
Montgomery County, Maryland Industrial Development Revenue,
monthly demand 800 4.250 (3) 04/01/14 800
----------
4,460
----------
MASSACHUSETTS - 1.8%
New England Educational Loan
Marketing Corporation, Massachusetts Revenue, Series E 3,190 5.000 07/01/99 3,190
----------
</TABLE>
18 Tax Free Money Market Fund
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
MICHIGAN - 4.7%
Cedar Springs, Michigan Public
School District State Aid Notes, General Obligation 1,700 4.500 08/23/99 1,701
Lansing, Michigan Economic
Development Corporation, semiannual demand 1,925 3.250 (5) 05/01/15 1,925
Livonia, Michigan Economic
Development Corporation, semiannual demand 240 3.800 (5) 11/15/04 240
McDonald Tax-Exempt Mortgage Bond
Trust, thirteen month demand (d) 101 3.450 (7) 01/15/09 101
Meridian, Michigan Economic
Development, monthly demand 455 3.350 (3) 11/15/14 455
Michigan State Housing Development
Authority Limited Obligation
Revenue, weekly demand 800 3.825 (2) 06/01/04 800
Michigan State Job Development
Authority Revenue, monthly demand 1,300 3.500 (3) 11/01/14 1,300
Northville Township, Michigan Economic Development Corporation,
Limited Obligation Revenue, Series P, weekly demand 500 3.825 (2) 05/01/14 500
Oakland County, Michigan Economic Development Corporation, Limited
Obligation Revenue, semiannual demand 520 3.400 (5) 08/01/15 520
Parchment, Michigan School District
State Anticipation Notes 1,000 4.250 08/26/99 1,000
----------
8,542
----------
MINNESOTA - 7.4%
Burnsville, Minnesota Industrial Development Revenue, Series C,
weekly demand 350 3.650 (2) 02/01/01 350
Capital Realty Investment Tax-Exempt
Fund, Series 96-1, weekly demand 8,535 3.760 (2) 12/01/04 8,535
Mendota Heights, Minnesota Commercial Development, weekly demand 1,550 3.750 (2) 12/01/15 1,550
Minnesota State Revenue, Series A (a) 980 5.000 06/30/00 993
St. Paul, Minnesota Port Authority Industrial Development Revenue,
Series 1, weekly demand 2,000 3.800 (2) 06/01/19 2,000
----------
13,428
----------
MISSISSIPPI - 0.2%
DeSoto County, Mississippi Industrial Development Revenue,
weekly demand 400 4.572 (2) 12/01/08 400
----------
MISSOURI - 4.9%
Clayton, Missouri Industrial Development Authority Revenue, weekly demand 1,000 3.900 (2) 01/01/09 1,000
Kansas City, Missouri Industrial Development Authority Multi-family
Housing Revenue, weekly demand 3,900 3.850 (2) 10/01/15 3,900
St. Charles County, Missouri Industrial Development Authority
Revenue, weekly demand 2,300 3.720 (2) 12/01/27 2,300
St. Louis, Missouri Industrial
Development Authority Revenue, Series C, weekly demand 965 3.650 (2) 02/01/01 965
St. Louis, Missouri Industrial
Development Authority Revenue, Series C-1, weekly demand 700 4.150 (2) 08/30/99 700
----------
8,865
----------
NEBRASKA - 0.2%
Douglas County, Nebraska Data
Equipment Corporation Equipment Revenue 275 3.750 11/01/99 275
----------
NEVADA - 0.7%
Reno, Nevada Hospital Revenue,
Series B (pre-refunded 01/01/00) (b) 1,100 7.750 07/01/15 1,142
Washoe County, Nevada General Obligation (a) 100 8.250 06/01/00 104
----------
1,246
----------
</TABLE>
Tax Free Money Market Fund 19
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
----------- -------- ---------- --------
<S> <C> <C> <C> <C>
NEW HAMPSHIRE - 0.6%
New Hampshire Higher Education &
Health Facilities Authority Revenue
(pre-refunded 12/01/99)(b) 1,000 9.750 12/01/19 1,058
----------
NEW JERSEY - 0.5%
North Hudson Sewer Authority, New
Jersey Tax-Exempt Notes 900 4.250 03/31/00 900
----------
NEW YORK - 1.0%
North Hempstead, New York Bond
Anticipation Notes 1,800 4.000 07/29/99 1,800
----------
NORTH CAROLINA - 0.2%
Beaufort County, North Carolina
Industrial Facility & Pollution
Control Revenue, Series 85, weekly
demand 300 3.800 (2) 12/01/00 300
----------
OHIO - 5.1%
Bellevue, Ohio Hospital Facilities
Revenue, quarterly demand 330 3.250 (4) 03/01/17 330
Buckeye, Ohio Tax-Exempt Mortgage
Bond Trust, seminannual demand 265 3.400 (5) 02/01/05 265
Cincinnati & Hamilton County, Ohio
Port Authority Economic Development
Revenue, quarterly demand 760 3.100 (4) 09/01/99 760
Clermont County, Ohio Economic
Development Revenue, semiannual
demand 425 3.300 (5) 12/01/09 425
Clermont County, Ohio Economic
Development Revenue, semiannual
demand 560 3.100 (5) 05/01/12 560
Clermont County, Ohio Hospital
Facilities Revenue, Series A
(pre-refunded 09/01/99)(a)(b) 700 7.500 09/01/19 719
Columbus, Ohio Electric System
Revenue, monthly demand 1,300 3.000 (3) 09/01/09 1,300
East Muskingum, Ohio Water Revenue
Anticipation Notes 1,000 4.320 06/22/00 1,003
Franklin County, Ohio Industrial
Development Revenue, seminannual
demand 140 3.300 (5) 11/01/15 140
Mahoning County, Ohio Industrial
Development Revenue, Series A,
weekly demand 5 3.650 (2) 10/01/00 5
Mahoning County, Ohio Industrial
Development Revenue, Series B,
weekly demand 25 3.650 (2) 10/01/00 25
McDonald Tax-Exempt Mortgage Bond
Trust, thirteen month demand (d) 473 3.450 (7) 01/15/09 473
Ohio State Higher Educational
Facilities Community College
Revenue,
weekly demand 585 3.550 (2) 09/01/20 585
Scioto County, Ohio Health Care
Facilities Revenue, semiannual
demand 670 3.250 (5) 12/01/15 670
Stark County, Ohio Health Care
Facilities, quarterly demand 1,595 3.050 (4) 09/15/16 1,595
Trumbull County, Ohio Industrial
Development Rvenue, Series A,
weekly demand 420 3.650 (2) 04/01/04 420
----------
9,275
----------
OKLAHOMA - 1.8%
Muskogee, Oklahoma Industrial Trust
Revenue, weekly demand 1,990 3.700 (2) 12/01/15 1,990
Tulsa County, Oklahoma Industrial
Authority Health Care Revenue,
semiannual demand 1,250 3.350 (5) 12/15/08 1,250
----------
3,240
----------
OREGON - 3.9%
Hillsboro, Oregon Revenue, weekly
demand 1,850 3.650 (2) 08/01/11 1,850
Medford, Oregon Hospital Facilities
Authority Revenue, weekly demand 5,300 3.625 (2) 05/15/27 5,300
----------
7,150
----------
</TABLE>
20 Tax Free Money Market Fund
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
PENNSYLVANIA - 2.6%
Berks County, Pennsylvania
Industrial Development Authority,
weekly demand 1,750 3.825 (2) 12/01/04 1,750
McDonald Tax-Exempt Mortgage Bond
Trust, thirteen month demand (d) 101 3.450 (7) 01/15/09 101
Northampton County, Pennsylvania
Higher Education Authority Revenue
(pre-refunded 11/15/99)(a)(b) 860 7.100 11/15/09 889
Shaler Township, Pennsylvania Tax
Anticipation Notes 2,000 3.200 12/31/99 2,000
----------
4,740
----------
SOUTH CAROLINA - 0.3%
Edgefield County, South Carolina
School District General Obligation 565 5.750 02/01/00 573
----------
SOUTH DAKOTA - 0.8%
Sioux Falls, South Dakota Industrial
Development Revenue, weekly demand 1,470 3.550 (2) 06/01/06 1,470
----------
TENNESSEE - 3.6%
Franklin County, Tennessee Health &
Educational Facilities Revenue,
monthly demand 1,610 4.250 (3) 09/01/10 1,610
Greystone Tax-Exempt Certificate
Trust Revenue, Series 1998-1,
weekly demand (f) 1,190 3.780 (2) 05/01/28 1,190
Knox County, Tennessee Industrial
Development Revenue, monthly demand 2,700 3.450 (3) 12/01/14 2,700
Tusculum, Tennessee Health
Educational & Housing Facilities
Revenue,
weekly demand 1,000 3.750 (2) 07/01/15 1,000
----------
6,500
----------
TEXAS - 3.5%
Big Spring, Texas Independent School
District General Obligation 260 8.250 08/15/99 262
Burleson, Texas Independent School
District General Obligation 240 7.500 08/01/99 241
Harlingen, Texas Construction
Independent School District General
Obligation (pre-refunded
08/15/99)(a)(b) 300 6.750 08/15/04 301
Harris County, Texas Health
Facilities Development Corporation
Revenue,
Series A, weekly demand 700 3.500 (2) 11/01/25 700
Houston, Texas Hotel Occupancy
Revenue, Series A (a) 500 7.000 07/01/99 500
Hurst, Euless & Bedford, Texas
Independent School District General
Obligation, Series 1991
(pre-refunded 08/15/99)(b) 620 6.500 08/15/04 635
Tarrant County, Texas Housing
Finance Coporation Revenue, daily
demand 3,770 3.600 (1) 12/01/07 3,770
----------
6,409
----------
VIRGINIA - 3.4%
Greystone Tax-Exempt Certificate
Trust Revenue, Series 1998-1,
weekly demand (f) 560 3.780 (2) 05/01/28 560
Harrisonburg, Virginia Redevelopment
& Housing Authority Multi-family
Housing Revenue, annual demand 1,000 3.200 (6) 02/01/26 1,000
Harrisonburg, Virginia Redevelopment
& Housing Authority Multi-family
Housing Revenue, Series A, annual
demand 3,495 3.200 (6) 02/01/26 3,495
Norfolk, Virginia Industrial
Development Authority Industrial
Development Revenue, weekly demand 1,075 3.825 (2) 03/01/16 1,075
----------
6,130
----------
</TABLE>
Tax Free Money Market Fund 21
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
WASHINGTON - 1.9%
King County, Washington School
Distrcit Number 403 Renton General
Obligation 680 4.000 12/01/99 682
Washington State Housing Finance
Commission Nonprofit Housing
Revenue, daily demand 100 4.150 (1) 01/01/27 100
Washington State Housing Finance
Commission Nonprofit Housing
Revenue, daily demand 900 4.700 (1) 05/01/27 900
Washington State Housing Finance
Commission Nonprofit Housing
Revenue, weekly demand 685 3.750 (2) 07/01/11 685
Washington State Public Power Supply
System Nuclear Project Number 1
Revenue, Series B (pre-refunded
01/01/00)(b) 1,000 7.250 07/01/03 1,040
----------
3,407
----------
WEST VIRGINIA - 0.6%
Marshall County, West Virginia
Pollution Control Revenue, weekly
demand 1,000 3.800 (2) 03/01/26 1,000
----------
WISCONSIN - 4.2%
Fall Creek, Wisconsin School
District Tax & Revenue Anticipation
Notes 890 3.810 09/30/99 890
Hartford, Wisconsin Joint School
District Number 1, Tax & Revenue
Anticipation Promisory Notes 1,000 3.530 10/29/99 1,000
Minocqua, Hazelhurst and Lake
Tomahawk, Wisconsin Joint School
District Number 1, Tax & Revenue
Anticipation Promisory Notes 850 3.820 08/31/99 850
Northern Ozaukee School District,
Wisconsin Bond Anticipation Notes 1,500 3.400 02/01/00 1,500
Richfield, Wisconsin Joint School
District Number 1, Tax & Revenue
Anticipation Promisory Notes 400 3.680 10/29/99 400
Wisconsin School Districts Temporary
Borrowing Program Certificate
Participation, Series B2 1,000 3.900 10/08/99 1,000
Wittenberg-Birnamwood, Wisconsin
School District Tax & Revenue
Anticipation Promisory Note 2,000 3.920 09/30/99 2,000
----------
7,640
----------
TOTAL INVESTMENTS - 101.2%
(amortized cost $183,883)(c) 183,883
OTHER ASSETS AND LIABILITIES, NET - (2,246)
(1.2%) ----------
NET ASSETS - 100.0% 181,637
==========
</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. The rate noted is
for descriptive purposes; effective yield may vary.
(c) The cost for federal income tax purposes is the same as shown
above.
(d) Multi-State bond issue including Michigan, Ohio and
Pennssylvania.
(e) Multi-State bond issue including Georgia, Indiana, and Iowa.
(f) Multi-State bond including Arkansas, Florida, Georgia,
Kansas, Tennessee, Virgina.
* All securities with a maturity date greater than thirteen months have a
demand feature, or an optional or madatory 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) Annual
(7) Thirteen-month
See accompanying notes which are an integral part of the financial statements.
22 Tax Free Money Market Fund
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
QUALITY RATINGS AS A % OF MARKET VALUE++
VMIG1 or SP-1 73%
P1 27
------
100%
======
ECONOMIC SECTOR EMPHASIS AS A % OF MARKET VALUE
Housing Revenue 22%
General Obligation 21
Industrial Revenue Bonds 19
Education Revenue 18
Healthcare Revenue 13
Utility Revenue 4
Pollution Control Revenue 3
------
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."
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."
See accompanying notes which are an integral part of the financial statements.
Tax Free Money Market Fund 23
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
ASSETS
Investments at amortized cost which approximates market ......... $ 183,883
Receivables
Interest ....................................................... 1,610
Investments sold ............................................... 39
-------------
Total Assets ................................................. 185,532
LIABILITIES
Payables:
Dividends ....................................... $ 18
Due to Custodian ................................ 100
Investments purchased ........................... 3,642
Accrued fees to affiliates ...................... 68
Other accrued expenses .......................... 67
--------------
Total Liabilities ............................................ 3,895
-------------
NET ASSETS ...................................................... $ 181,637
=============
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) ............................ $ (5)
Shares of beneficial interest ................................... 1,816
Additional paid-in capital ...................................... 179,826
-------------
NET ASSETS ...................................................... $ 181,637
=============
NET ASSET VALUE, offering and redemption price per share:
($181,637,110 divided by 181,642,296 shares of $.01 par value
shares of beneficial interest outstanding) ................... $ 1.00
=============
See accompanying notes which are an integral part of the financial statements.
24 Tax Free Money Market Fund
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF OPERATIONS
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
INVESTMENT INCOME
Interest ....................................................... $ 3,092
EXPENSES
Advisory fees ................................... $ 185
Administrative fees ............................. 46
Custodian fees .................................. 24
Transfer agent fees ............................. 58
Professional fees ............................... 6
Registration fees ............................... 30
Trustees' fees .................................. 3
Miscellaneous ................................... 8
--------------
Expenses before reductions ...................... 360
Expense reductions .............................. (92)
--------------
Expenses, net ................................................ 268
-------------
Net investment income ........................................... 2,824
-------------
Net increase in net assets resulting from operations ............ $ 2,824
=============
See accompanying notes which are an integral part of the financial statements.
Tax Free Money Market Fund 25
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
--------------------- -----------------------
OPERATIONS
<S> <C> <C>
Net investment income ............................. $ 2,824 $ 5,654
Net realized gain (loss) ......................... -- (5)
--------------------- -----------------------
Net increase in net assets resulting from
operations ..................................... 2,824 5,649
--------------------- -----------------------
DISTRIBUTIONS
From net investment income ....................... (2,824) (5,654)
--------------------- -----------------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share (13,026) 63,943
transactions .....................................
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ....... (13,026) 63,938
NET ASSETS
Beginning of period .............................. 194,663 130,725
--------------------- -----------------------
End of period .................................... $ 181,637 $ 194,663
===================== =======================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
26 Tax Free Money Market Fund
<PAGE>
TAX FREE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1999* 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- --------
<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................................... .0152 .0331 .0355 .0329 .0370 .0279
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS
From net investment income.............................. (.0152) (.0331) (.0355) (.0329) (.0370) (.0279)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD
$ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ======== ======== ======== ========
TOTAL RETURN (%)(a)...................................... 1.53 3.36 3.61 3.35 3.76 2.83
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands)
181,637 194,663 130,725 102,207 78,000 100,819
Ratios to average net assets (%)(b):
Operating expenses, net (c)........................... .29 .34 .28 .42 .48 .40
Operating expenses, gross (c)......................... .39 .44 .38 .42 .48 .40
Net investment income................................. 3.06 3.29 3.55 3.28 3.69 2.84
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) See Note 4 for current period amounts.
Tax Free Money Market Fund 27
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 (Unaudited)
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company") is a series
mutual fund with 27 different investment portfolios, referred to as "Funds."
These financial statements report on three 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 ("GAAP") 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: The Money Market, U.S. Government Money Market and the
Tax Free Money Market Funds' portfolio investments are valued in accordance
with Rule 2a-7 of the Investment Company Act of 1940, as amended, 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. 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 specific identified cost incurred by each money manager within a
particular fund.
INVESTMENT INCOME: Interest income is recorded on the accrual basis.
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.
At December 31, 1998, 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>
12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 TOTALS
-------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Money Market $ -- $ 41,009 $ 814 $ -- $ 3,245 $ 45,068
U.S. Government Money Market 1,309 4,913 3,331 1,570 762 11,885
Tax Free Money Market -- -- -- 1,583 4,102 5,685
</TABLE>
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: 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.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations which
may differ from 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 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 will pay their own expenses other than those expressly
assumed by the Management Company. Most expenses can be directly attributed
the individual Funds. Expenses which cannot be directly attributed are
allocated among all Funds principally based on their relative net assets.
28 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1999 (Unaudited)
REPURCHASE AGREEMENTS: The Funds may engage in repurchase agreements with
several financial institutions whereby a Fund, through its custodian,
receives delivery of underlying securities as collateral. 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%.
3.INVESTMENT TRANSACTIONS
SECURITIES: Money Market purchases, sales and maturities of securities
(excluding U.S. Government and Agency obligations and repurchase agreements)
were $16,575,393,675, $203,011,363 and $15,896,000,293, respectively.
U.S. Government Money Market purchases, sales and maturities of U.S.
Government and Agency obligations (excluding repurchase agreements) were
$178,880,583, $1,698,490 and $211,924,685, respectively.
Tax Free Money Market purchases, sales and maturities of short-term tax-
exempt obligations were $158,108,197, $160,355,000 and $15,475,000,
respectively.
4. RELATED PARTIES
ADVISOR: FRIMCo operates and administers all of the Funds which comprise the
Investment Company, and advises the Money Market and U.S. Government Money
Market Funds. FRIMCo is a wholly owned subsidiary of Frank Russell Company, a
wholly owned subsidiary of The Northwestern Mutual Life Insurance Company.
Frank Russell Company 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 period ended June 30,1999,the advisory fee paid to FRIMCo, for the
Funds listed below, in accordance with the Investment Company's Advisory
Agreement with that firm, amounted to $2,365,283 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. Effective
December 1, 1998, the advisory fee annual rates were reduced by the
Administrator fee of .05%, the new rates are:
ANNUAL RATE
-------------
Money Market 0.20%
U.S. Government Money Market 0.20
Tax Free Money Market 0.20
The Advisor has contractually agreed to waive 0.15% of its 0.20% management
fee for the Money Market Fund. The amount of such waiver for the period ended
June 30, 1999 was $1,513,617.
Prior to June 15, 1998, the Advisor contractually agreed to waive 0.13% of
its 0.20% advisory fee for the U.S. Government Money Market Fund. Effective
June 15, 1998, the Advisor has contractually agreed to waive its advisory
fee, up to the full amount of that fee, equal to the amount by which the
Fund's total operating expenses exceed 0.30% of the Fund's average daily net
assets on an annual basis. The amount of such waiver for the period ended
June 30, 1999 was $143,078.
The Advisor has contractually agreed to waive 0.10% of its 0.20% advisory fee
for the Tax Free Money Market Fund. The amount of such waiver for the period
ended June 30, 1999 was $92,438.
ADMINISTRATOR: Effective December 1, 1998, the Investment Company's Board of
Trustee approved a plan to pay a 0.05% fee of the average daily net assets of
the fund to FRIMCo, in accordance with the Investment Company's Advisory
agreement with that firm. The fee paid to FRIMCo for the Funds listed for the
period ended June 30, 1999 were $591,321 before waivers.
ANALYTIC SERVICES: Fees for analytic services provided to the Funds are paid
or accrued to Russell/Mellon Analytical Services, an affiliate of the
Investment Company. Russell/Mellon Analytical Services provides TruVP System
to the Funds, pursuant to a written Service Agreement. The TruVP System
provides analytics used by the investment department.
TRANSFER AGENT: The Funds have a contract with FRIMCo to provide transfer
agent services to the Investment Company,Total fees for the Funds listed for
the period ended June 30, 1999 were $466,754.
Notes to Financial Statements 29
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1999 (Unaudited)
ACCRUED FEES PAYABLE TO AFFILIATES AS OF JUNE 30, 1999 WERE AS FOLLOWS:
<TABLE>
<CAPTION>
ADVISORY ADMINISTRATION TRANSFER
FEES FEES AGENT FEES TOTALS
---------- ---------------- ------------ ----------
<S> <C> <C> <C> <C>
Money Market $ 83,989 $ 83,989 $ 35,644 $ 203,622
U.S. Government
Money Market -- -- 15,035 15,035
Tax Free Money Market 14,672 7,336 46,099 68,107
-----------------------------------------------------------
$ 98,661 $ 91,325 $ 96,778 $ 286,764
========== ================ ============ =========
</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 for the Funds listed for the period ended
June 30, 1999 were $8,105 and were allocated to each Fund, where appropriate,
on a pro rata basis, including 24 other affiliated Funds not presented
herein.
5. MONEY MARKET FUND
The Investment Company 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, 1999, $854,565,000 represents the investments of other
affiliated Funds not presented herein.
6. FUND SHARE TRANSACTIONS
Share transactions for the period ended June 30, 1999 and year ended December
31, 1998 were as follows:
ON A CONSTANT DOLLAR BASIS (000)
---------------------------------
1999 1998
MONEY MARKET ------------- -------------
Proceeds from shares sold 9,826,947 12,024,641
Proceeds from reinvestment
of distributions 24,779 17,841
Payments for shares redeemed (9,495,279) (11,363,736)
------------- -------------
Total net increase (decrease) 356,447 678,746
============= =============
U.S. GOVERNMENT MONEY MARKET
Proceeds from shares sold 247,304 431,194
Proceeds from reinvestment
of distributions 3,981 6,807
Payments for shares redeemed (271,709) (459,189)
----------- ----------
Total net increase (decrease) (20,424) (21,188)
=========== ==========
TAX FREE MONEY MARKET
Proceeds from shares sold 135,346 367,890
Proceeds from reinvestment
of distributions 2,180 3,258
Payments for shares redeemed (150,552) (307,205)
----------- ---------
Total net increase (decrease) (13,026) 63,943
=========== =========
7. BENEFICIAL INTEREST
As of June 30, 1999, the following Fund has one or more shareholders with
shares of beneficial interest of greater than 10% of the total outstanding
shares of each respective Fund:
Tax Free Money Market 38.0%
30 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 832-6688
In Washington (253) 627-700
TRUSTEES
Lynn L. Anderson
Paul E. Anderson
Paul Anton, PhD
William E. Baxter
Lee C. Gingrich
Eleanor W. Palmer
TRUSTEES EMERITUS
George F. Russell, Jr., Chairman
OFFICERS
Lynn L. Anderson, President and Chief Executive Officer
Peter Apanovitch, Manager of Short Term Investment Funds
Mark E. Swanson, Treasurer and Chief Accounting Officer
Randall P. Lert, Director of Investments
Karl Ege, Secretary and General Counsel
MANAGER, TRANSFER AND DIVIDEND PAYING 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, MA 02109
DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
MONEY MANAGERS
MONEY MARKET FUND
Frank Russell Investment Management Co., Tacoma, WA
U.S. GOVERNMENT MONEY MARKET FUND
Frank Russell Investment Management Co., Tacoma, WA
Standish, Ayer & Wood, Inc., Boston, MA
TAX FREE MONEY MARKET FUND
Weiss, Peck & Greer, LLC, New York, NY
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.
Manager, Money Managers and Service Providers 31
<PAGE>
[LOGO OF FRANK RUSSELL INVESTMENT COMPANY]
Frank Russell Investment Company
909 A Street
Tacoma, Washington 98402
253-627-7001
800-787-7354
Fax: 253-591-3495
www.russell.com A-5424(699) 36-08-070(6/99)
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
1999 Semiannual Report
CLASS C, D, AND E SHARES
EQUITY AGGRESSIVE STRATEGY FUND*
AGGRESSIVE STRATEGY FUND
BALANCED STRATEGY FUND
MODERATE STRATEGY FUND
CONSERVATIVE STRATEGY FUND
JUNE 30, 1999
*Prior to May 1, 1999, this Fund was known as the Equity Balanced Strategy Fund.
[LOGO OF FRANK RUSSELL INVESTMENT COMPANY]
<PAGE>
Frank Russell Investment
Company
Frank Russell Investment Company is a
"series mutual fund" with 27 different
investment portfolios. These financial
statements report on five 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
LifePoints(R)Funds
Semiannual Report
June 30, 1999 (Unaudited)
Table of Contents
Page
Equity Aggressive Strategy Fund......................... 2
Aggressive Strategy Fund................................ 8
Balanced Strategy Fund.................................. 14
Moderate Strategy Fund.................................. 20
Conservative Strategy Fund.............................. 26
Notes to Financial Statements........................... 32
Manager, Money Managers and Service Providers........... 40
Frank Russell Investment Company - LifePoints(R)Funds
Copyright(L)Frank Russell Company 1999. 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 preceeded 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 performances and 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. 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>
Equity Aggressive Strategy Fund
Statement of Net Assets
June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Number Market
of Value
Shares $
----------- -----------
<S> <C> <C>
Investments
Portfolios of the Frank Russell Investment
Company Series Mutual
Fund - Class S Shares
Domestic Equities - 75.2%
Diversified Equity Fund 917,308 52,011,349
Quantitative Equity Fund 1,096,584 51,901,314
Real Estate Securities Fund 325,100 8,364,814
Special Growth Fund 378,592 17,506,102
------------
129,783,579
------------
International Equities - 24.6%
Emerging Markets Fund 828,289 8,605,919
International Securities Fund 529,857 33,942,666
------------
42,548,585
------------
Short-Term Investments - 1.3%
Money Market Fund
due on demand (a) 2,218,000 2,218,000
------------
Total Investments - 101.1%
(identified cost $155,015,191) 174,550,164
------------
Other Assets and Liabilities
Deferred organization expenses 21,007
Other assets 1,755,397
Other liabilities (3,636,021)
------------
Total Other Assets and Liabilities,
Net - (1.1%) (1,859,617)
------------
Net Assets - 100.0% 172,690,547
============
Market
Value
$
-----------
Net Assets consist of:
Undistributed net investment income 403,121
Accumulated distributions in excess
of net realized gain (819,265)
Unrealized appreciation 19,534,973
(depreciation) on investments
Shares of beneficial interest 162,957
Additional paid-in capital 153,408,761
------------
Net Assets 172,690,547
============
Net Asset Value, offering and redemption price
per share:
Class C ($2,069,012 divided by 195,542
shares of $.01 par value shares of
beneficial interest outstanding) $10.58
============
Class D ($5,350,305 divided by 505,086
shares of $.01 par value shares of
beneficial interest outstanding) $10.59
============
Class E ($165,271,230 divided by 15,595,042
shares of $.01 par value shares of
beneficial interest outstanding) $10.60
============
(a) At cost, which approximates market.
</TABLE>
See accompanying notes, which are an integral part of the financial statements.
2 Equity Aggressive Strategy Fund
<PAGE>
Equity Aggressive Strategy Fund
Statement of Operations
For the Six Months Ended June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income
Income distributions from Underlying Funds ................................................ $ 1,480,072
Expenses
Advisory fees .......................................................... $ 135,080
Administrative fees .................................................... 33,770
Custodian fees ......................................................... 29,602
Distribution fees - Class C ............................................ 4,024
Distribution fees - Class D ............................................ 6,229
Transfer agent fees .................................................... 39,946
Professional fees ...................................................... 3,028
Registration fees - Class C ............................................ 43
Registration fees - Class D ............................................ 200
Registration fees - Class E ............................................ 5,175
Shareholder servicing fees - Class C ................................... 1,341
Shareholder servicing fees - Class D ................................... 6,229
Shareholder servicing fees - Class E ................................... 161,279
Trustees' fees ......................................................... 461
Amortization of deferred organization expenses ......................... 3,234
Miscellaneous .......................................................... 2,590
-------------
Expenses before reductions ............................................. 432,231
Expense reductions ..................................................... (253,128)
-------------
Expenses, net .......................................................................... 179,103
-------------
Net investment income ........................................................................ 1,300,969
-------------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ............................................................ (1,044,773)
Capital gain distributions from Underlying Funds ....................... 811,002 (233,771)
-------------
Net change in unrealized appreciation (depreciation) on investments .......................... 14,003,425
-------------
Net realized and unrealized gain (loss) ...................................................... 13,769,654
-------------
Net increase (decrease) in net assets resulting from operations .............................. $ 15,070,623
=============
</TABLE>
See accompanying notes, which are an integral part of the financial statements.
Equity Aggressive Strategy Fund 3
<PAGE>
Equity Aggressive Strategy Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six Months For the Year
Ended June 30, 1999 Ended
(Unaudited) December 31,1998
------------------- ----------------
<S> <C> <C>
Operations
Net investment income .................................................. $ 1,300,969 $ 161,484
Net realized gain (loss) ............................................... (233,771) 2,538,657
Net change in unrealized appreciation (depreciation) ................... 14,003,425 5,748,823
------------- -------------
Net increase (decrease) in net assets resulting from operations ..... 15,070,623 8,448,964
------------- -------------
Distributions
From net investment income
Class C ............................................................. (6,823) --
Class D ............................................................. (27,770) (2,101)
Class E ............................................................. (862,455) (158,583)
In excess of net investment income
Class D ............................................................. -- (11,526)
Class E ............................................................. -- (869,817)
From net realized gain on investments
Class C ............................................................. (3,451) --
Class D ............................................................. (36,878) (23,598)
Class E ............................................................. (889,768) (430,626)
In excess of net realized gain on investments
Class C ............................................................. (3,040) --
Class D ............................................................. (32,484) --
Class E ............................................................. (783,741) --
------------- -------------
Net decrease from distributions .................................. (2,646,410) (1,496,251)
------------- -------------
Share Transactions
Net increase (decrease) in net assets from share transactions .......... 63,883,996 86,444,463
------------- -------------
Total Net Increase (Decrease) in Net Assets ............................... 76,308,209 93,397,176
Net Assets
Beginning of period .................................................... 96,382,338 2,985,162
------------- -------------
End of period (including undistributed net investment income of
$403,121 and accumulated distributions in excess of
net investment income of $800, respectively)......................... $ 172,690,547 $ 96,382,338
============= =============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
4 Equity Aggressive Strategy Fund
<PAGE>
Equity Aggressive Strategy Fund
Financial Highlights - Class C
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
--------
Net Asset Value, Beginning of Period......................... $ 9.80
--------
Income From Investment Operations
Net investment income (d).................................. .02
Net realized and unrealized gain (loss) on investments..... .95
--------
Total Income From Investment Operations.................. .97
--------
Distributions
From net investment income................................. (.06)
From net realized gain on investments...................... (.13)
--------
Total Distributions...................................... (.19)
--------
Net Asset Value, End of Period............................... $10.58
========
Total Return (%)(a).......................................... 10.07
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands)................. 2,069
Ratios to average net assets (%):
Operating expenses, net (b)(c)............................. 1.00
Operating expenses, gross (c)(e)........................... --
Net investment income (b).................................. .59
Portfolio turnover rate (%)(b)............................... 108.61
* For the period February 11, 1999 (commencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) See Note 4 for current period amounts.
(d) Average month-end shares outstanding were used for this calculation.
(e) The ratio for the period ended June 30, 1999 is not meaningful due to the
Class's short period of operation.
Equity Aggressive Strategy Fund 5
<PAGE>
Equity Aggressive Strategy Fund
Financial Highlights - Class D
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
1999* 1998**
-------- --------
Net Asset Value, Beginning of Period....................... $ 9.81 $ 9.92
-------- --------
Income From Investment Operations
Net investment income (d)............................... .09 .01
Net realized and unrealized gain (loss) on investments.. .88 .10
-------- --------
Total Income From Investment Operations.............. .97 .11
-------- --------
Distributions
From net investment income.............................. (.06) (.17)
From net realized gain on investments................... (.13) (.05)
-------- --------
Total Distributions.................................. (.19) (.22)
-------- --------
Net Asset Value, End of Period............................. $10.59 $9.81
======== =========
Total Return (%)(a)........................................ 10.07 1.17
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands).............. 5,350 4,923
Ratios to average net assets (%)(b):
Operating expenses, net (c).......................... .50 .50
Operating expenses, gross (c)........................ .87 .89
Net investment income................................ 1.74 .01
Portfolio turnover rate (%)(b).......................... 108.61 73.95
* For the six months ended June 30, 1999 (Unaudited).
** For the period March 24, 1998 (commencement of sale) to December 31, 1998.
(a) Periods less than one year are not annualized.
(b) The ratios for the periods ended June 30, 1999 and December 31, 1998 are
annualized.
(c) See Note 4 for current amounts.
(d) Average month-end shares outstanding were used for this calculation.
6 Equity Aggressive Strategy Fund
<PAGE>
Equity Aggressive Strategy Fund
Financial Highlights - Class E
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1999* 1998 1997**
--------- --------- ---------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period...................... $ 9.80 $ 8.83 $ 10.00
--------- --------- ---------
Income From Investment Operations
Net investment income (f).............................. .10 .03 .09
Net realized and unrealized gain (loss) on investments. .89 1.18 (.33)
--------- --------- ---------
Total Income From Investment Operations............. .99 1.21 (.24)
--------- --------- ---------
Distributions
From net investment income............................. (.06) (.19) (.33)
From net realized gain on investments.................. (.13) (.05) (.60)
--------- --------- ---------
Total Distributions................................. (.19) (.24) (.93)
--------- --------- ---------
Net Asset Value, End of Period............................ $ 10.60 $9.80 $8.83
========= ========= =========
Total Return (%)(a)....................................... 10.35 13.75 (2.42)
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands)............. 165,271 91,459 2,985
Ratios to average net assets (%)(b):
Operating expenses, net (c)......................... .25 .25 .25
Operating expenses, gross (c)(d).................... .63 .62 --
Net investment income (e)........................... 1.95 .28 .45
Portfolio turnover rate (%)(b)......................... 108.61 73.95 48.30
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
** For the period September 30, 1997 (commencement of operations) to December
31, 1997.
(a) Periods less than one year are not annualized.
(b) The ratios for the periods ended June 30, 1999 and December 31, 1997 are
annualized.
(c) See Note 4 for current amounts.
(d) The ratio for the period ended December 31, 1997 is not meaningful due to
the Class's short period of operation.
(e) The ratio for the period ended December 31, 1997 has not been annualized
due to the Class's short period of operation.
(f) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
Equity Aggressive Strategy Fund 7
<PAGE>
Aggressive Strategy Fund
Statement of Net Assets
Number Market
of Value
Shares $
-------- ------------
Investments
Portfolios of the Frank Russell
Investment Company Series
Mutual Fund - Class S Shares
Domestic Equities - 57.7%
Diversified Equity Fund 470,247 26,663,009
Quantitative Equity Fund 561,623 26,581,634
Real Estate Securities Fund 240,000 6,175,188
Special Growth Fund 301,883 13,959,083
------------
73,378,914
------------
International Equities - 23.3%
Emerging Markets Fund 603,893 6,274,448
International Securities Fund 364,804 23,369,336
------------
29,643,784
------------
Bonds - 17.5%
Multistrategy Bond Fund 2,264,197 22,166,485
------------
Short-Term Investments - 0.7%
Money Market Fund
due on demand (a) 941,000 941,000
------------
Total Investments - 99.2%
(identified cost $117,483,683) 126,130,183
------------
Other Assets and Liabilities
Deferred organization expenses 20,777
Other assets 1,420,767
Liabilities (446,105)
------------
Total Other Assets and Liabilities,
Net - 0.8% 995,439
------------
Net Assets - 100.0% 127,125,622
============
Net Assets consist of:
Undistributed net investment income 268,845
Accumulated distributions in excess
of net realized gain (628,615)
Unrealized appreciation 8,646,500
(depreciation) on investments
Shares of beneficial interest 120,958
Additional paid-in capital 118,717,934
------------
Net Assets 127,125,622
============
Net Asset Value, offering and redemption price
per share:
Class C ($2,895,612 divided by 276,222
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.48
============
Class D ($3,588,713 divided by 341,322
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.51
============
Class E ($120,641,297 divided by 11,478,295
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.51
============
(a) At cost, which approximates market.
See accompanying notes, which are an integral part of the financial statements.
8 Aggressive Strategy Fund
<PAGE>
Aggressive Strategy Fund
Statement of Operations
For the Six Months Ended June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income
Income distributions from Underlying Funds ......................................... $ 965,636
Expenses
Advisory fees .................................................... $ 94,606
Administrative fees .............................................. 23,651
Custodian fees ................................................... 27,653
Distribution fees - Class C ...................................... 4,946
Distribution fees - Class D ...................................... 4,994
Transfer agent fees .............................................. 37,306
Professional fees ................................................ 2,828
Registration fees - Class C ...................................... 71
Registration fees - Class D ...................................... 214
Registration fees - Class E ...................................... 4,776
Shareholder servicing fees - Class C ............................. 1,649
Shareholder servicing fees - Class D ............................. 4,994
Shareholder servicing fees - Class E ............................. 111,614
Trustees' fees ................................................... 431
Amortization of deferred organization expenses ................... 3,233
Miscellaneous .................................................... 2,421
-------------
Expenses before reductions ....................................... 325,387
Expense reductions ............................................... (197,190)
-------------
Expenses, net ................................................................... 128,197
-------------
Net investment income ................................................................. 837,439
-------------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ...................................................... (494,314)
Capital gain distributions from Underlying Funds ................. 358,936 (135,378)
-------------
Net change in unrealized appreciation (depreciation) on investments ................... 7,555,888
-------------
Net realized and unrealized gain (loss) ............................................... 7,420,510
-------------
Net increase (decrease) in net assets resulting from operations ....................... $ 8,257,949
=============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Aggressive Strategy Fund 9
<PAGE>
Aggressive Strategy Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six For the Year
Months Ended Ended
June 30, 1999 December 31,
(Unaudited) 1998
------------- -------------
<S> <C> <C>
Operations
Net investment income ............................................ $ 837,439 $ 720,772
Net realized gain (loss) ......................................... (135,378) 1,160,217
Net change in unrealized appreciation (depreciation) ............. 7,555,888 1,402,719
------------- -------------
Net increase (decrease) in net assets resulting from operations 8,257,949 3,283,708
------------- -------------
Distributions
From net investment income
Class C ....................................................... (8,886)
Class D ....................................................... (20,483) (38,378)
Class E ....................................................... (543,053) (685,110)
In excess of net investment income
Class D ....................................................... -- (15,889)
Class E ....................................................... -- (283,634)
From net realized gain on investments
Class C ....................................................... (2,668) --
Class D ....................................................... (30,177) (4,399)
Class E ....................................................... (542,502) (73,262)
In excess of net realized gain on investments
Class C ....................................................... (2,915) --
Class D ....................................................... (32,971) --
Class E ....................................................... (592,729) --
------------- -------------
Net decrease from distributions ............................ (1,776,384) (1,100,672)
------------- -------------
Share Transactions
Net increase (decrease) in net assets from share transactions .... 54,807,345 58,346,402
------------- -------------
Total Net Increase (Decrease) in Net Assets ......................... 61,288,910 60,529,438
Net Assets
Beginning of period .............................................. 65,836,712 5,307,274
------------- -------------
End of period (including undistributed net investment income of
$268,845 and $3,828, respectively) ............................ $ 127,125,622 $ 65,836,712
============= =============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
10 Aggressive Strategy Fund
<PAGE>
Aggressive Strategy Fund
Financial Highlights - Class C
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
---------
Net Asset Value, Beginning of Period .................... $ 10.11
---------
Income From Investment Operations
Net investment income (d) ............................ .01
Net realized and unrealized gain (loss) on investments .56
---------
Total Income From Investment Operations ........... .57
---------
Distributions
From net investment income ........................... (.05)
From net realized gain on investments ................ (.15)
---------
Total Distributions ............................... (.20)
---------
Net Asset Value, End of Period .......................... $ 10.48
=========
Total Return (%)(a) ..................................... 5.81
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ........... 2,896
Ratios to average net assets (%):
Operating expenses, net (b)(c) .................... 1.00
Operating expenses, gross (c)(e) --
Net investment income ............................. .50
Portfolio turnover rate (%)(b) ....................... 116.46
* For the period January 29, 1999 (commencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) See Note 4 for current period amounts.
(d) Average month-end shares outstanding were used for this calculation.
(e) The ratio for the period ending June 30, 1999 is not meaningful due to the
Class's short period of operation.
Aggressive Strategy Fund 11
<PAGE>
Aggressive Strategy Fund
Financial Highlights - Class D
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1999* 1998**
--------- ---------
<S> <C> <C>
Net Asset Value, Beginning of Period .................... $ 9.95 $ 10.09
--------- ---------
Income From Investment Operations
Net investment income (d) ............................ .09 .13
Net realized and unrealized gain (loss) on investments .67 (.05)
--------- ---------
Total Income From Investment Operations ........... .76 .08
--------- ---------
Distributions
From net investment income ........................... (.05) (.21)
From net realized gain on investments ................ (.15) (.01)
--------- ---------
Total Distributions ............................... (.20) (.22)
--------- ---------
Net Asset Value, End of Period .......................... $ 10.51 $ 9.95
========= =========
Total Return (%)(a) ..................................... 7.81 .96
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ........... 3,589 3,649
Ratios to average net assets (%)(b):
Operating expenses, net (c) ....................... .50 .50
Operating expenses, gross (c) ..................... .91 .93
Net investment income ............................. 1.77 1.74
Portfolio turnover rate (%)(b) ....................... 116.46 93.08
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
** For the period March 24, 1998 (commencement of sale) to December 31, 1998.
(a) Periods less than one year are not annualized.
(b) The ratios for the periods ended June 30, 1999 and December 31, 1998 are
annualized.
(c) See Note 4 for current period amounts.
(d) Average month-end shares outstanding were used for this calculation.
12 Aggressive Strategy Fund
<PAGE>
Aggressive Strategy Fund
Financial Highlights - Class E
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------
1999* 1998 1997**
--------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period .................... $ 9.94 $ 9.14 $ 10.00
--------- ---------- ----------
Income From Investment Operations
Net investment income (f) ............................ .09 .19 .10
Net realized and unrealized gain (loss) on investments .69 .87 (.11)
--------- ---------- ----------
Total Income From Investment Operations ........... .78 1.06 (.01)
--------- ---------- ----------
Distributions
From net investment income ........................... (.06) (.25) (.31)
From net realized gain on investments ................ (.15) (.01) (.54)
--------- ---------- ----------
Total Distributions ............................... (.21) (.26) (.85)
--------- ---------- ----------
Net Asset Value, End of Period .......................... $ 10.51 $ 9.94 $ 9.14
========= ========== ==========
Total Return (%)(a) ..................................... 7.99 11.69 (.19)
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ........... 120,641 62,188 5,307
Ratios to average net assets (%)(b):
Operating expenses, net (c) ....................... .25 .25 .25
Operating expenses, gross (c)(d) .................. .67 .66 --
Net investment income (e) ......................... 1.79 1.88 .97
Portfolio turnover rate (%)(b) ....................... 116.46 93.08 56.88
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
** For the period September 16, 1997 (commencement of operations) to December
31, 1997.
(a) Periods less than one year are not annualized.
(b) The ratios for the periods ended June 30, 1999 and December 31, 1997 are
annualized.
(c) See Note 4 for current period amounts.
(d) The ratio for the period ended December 31, 1997 is not meaningful due to
the Class's short period of operation.
(e) The ratio for the period ended December 31, 1997 has not been annualized
due to the Class's short period of operation.
(f) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
Aggressive Strategy Fund 13
<PAGE>
Balanced Strategy Fund
Statement of Net Assets
<TABLE>
<CAPTION>
Number Market
of Value
Shares $
-------- -----------
<S> <C> <C>
Investments
Portfolios of the Frank Russell Investment Company
Series Mutual Fund - Class S Shares
Domestic Equities - 42.9%
Diversified Equity Fund 767,138 43,496,696
Quantitative Equity Fund 914,226 43,270,310
Real Estate Securities Fund 511,650 13,164,764
Special Growth Fund 292,543 13,527,195
-----------
113,458,965
-----------
International Equities - 16.8%
Emerging Markets Fund 762,690 7,924,350
International Securities Fund 571,889 36,635,194
-----------
44,559,544
-----------
Bonds - 40.7%
Diversified Bond Fund 2,925,720 65,770,178
Multistrategy Bond Fund 4,293,603 42,034,375
-----------
107,804,553
-----------
Short-Term Investments - 0.5%
Money Market Fund
due on demand (a) 1,376,000 1,376,000
-----------
Total Investments - 100.9%
(identified cost $254,401,780) 267,199,062
-----------
Other Assets and Liabilities
Deferred organization expenses 20,777
Other assets 2,196,096
Liabilities (4,688,546)
-----------
Total Other Assets and Liabilities,
Net - (0.9%) (2,471,673)
-----------
Net Assets - 100.0% 264,727,389
===========
June 30, 1999 (Unaudited)
<CAPTION>
Market
Value
$
-----------
Net Assets consist of:
Undistributed net investment income 1,198,470
Accumulated distributions in excess
of net realized gain (912,539)
Unrealized appreciation
(depreciation) on investments 12,797,282
Shares of beneficial interest 253,807
Additional paid-in capital 251,390,369
-----------
Net Assets 264,727,389
===========
Net Asset Value, offering and redemption price
per share:
Class C ($6,392,667 divided by 614,742
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.40
Class D ($2,930,028 divided by 280,769 ============
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.44
Class E ($255,404,694 divided by 24,485,157 ============
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.43
============
(a) At cost, which approximates market.
</TABLE>
See accompanying notes, which are an integral part of the financial statements.
14 Balanced Strategy Fund
<PAGE>
Balanced Strategy Fund
Statement of Operations
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1999 (Unaudited)
<S> <C> <C>
Investment Income
Income Distributions from Underlying Funds ................................................... $ 3,465,987
Expenses
Advisory fees .............................................................. $ 219,910
Administrative fees ........................................................ 54,977
Custodian fees ............................................................. 44,188
Distribution fees - Class C ................................................ 9,116
Distribution fees - Class D ................................................ 5,317
Transfer agent fees ........................................................ 59,612
Professional fees .......................................................... 4,519
Registration fees - Class C ................................................ 89
Registration fees - Class D ................................................ 157
Registration fees - Class E ................................................ 7,840
Shareholder servicing fees - Class C ....................................... 3,038
Shareholder servicing fees - Class D ....................................... 5,317
Shareholder servicing fees - Class E ....................................... 266,531
Trustees' fees ............................................................. 689
Amortization of deferred organization expenses ............................. 3,234
Miscellaneous .............................................................. 3,867
------------
Expenses before reductions ................................................. 688,401
Expense reductions ......................................................... (399,081)
------------
Expenses, net ............................................................................. 289,320
------------
Net investment income ........................................................................... 3,176,667
------------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ................................................................ (1,339,729)
Capital gain distributions from Underlying Funds ........................... 955,431 (384,298)
------------
Net change in unrealized appreciation (depreciation) on investments ............................. 9,498,704
------------
Net realized and unrealized gain (loss) ......................................................... 9,114,406
------------
Net increase (decrease) in net assets resulting from operations ................................. $ 12,291,073
============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Balanced Strategy Fund 15
<PAGE>
Balanced Strategy Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six Months For the Year
Ended June 30, 1999 Ended
(Unaudited) December 31, 1998
------------------ ------------------
<S> <C> <C>
Operations
Net investment income ........................................................... $ 3,176,667 $ 3,382,872
Net realized gain (loss) ........................................................ (384,298) 3,765,388
Net change in unrealized appreciation (depreciation) ............................ 9,498,704 3,463,095
------------------ ------------------
Net increase (decrease) in net assets resulting from operations .............. 12,291,073 10,611,355
------------------ ------------------
Distributions
From net investment income
Class C ...................................................................... (23,207) -
Class D ...................................................................... (38,835) (55,098)
Class E ...................................................................... (1,921,788) (3,333,407)
In excess of net investment income
Class D ...................................................................... - (23,808)
Class E ...................................................................... - (1,440,336)
From net realized gain on investments
Class C ...................................................................... (1,261)
Class D ...................................................................... (31,483) (15,716)
Class E ...................................................................... (1,352,306) (493,631)
In excess of net realized gain on investments
Class C ...................................................................... (831) -
Class D ...................................................................... (20,742) -
Class E ...................................................................... (890,966) -
------------------ ------------------
Net decrease from distributions ........................................... (4,281,419) (5,361,996)
------------------ ------------------
Share Transactions
Net increase (decrease) in net assets from share transactions ................... 90,656,132 157,257,748
------------------ ------------------
Total Net Increase (Decrease) in Net Assets ........................................ 98,665,786 162,507,107
Net Assets
Beginning of period ............................................................. 166,061,603 3,554,496
------------------ ------------------
End of period (including undistributed net investment income of
$1,198,470 and $5,633, respectively) ......................................... $ 264,727,389 $ 166,061,603
================== ==================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
16 Balanced Strategy Fund
<PAGE>
Balanced Strategy Fund
Financial Highlights - Class C
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
------------
Net Asset Value, Beginning of Period .................... $ 10.26
------------
Income From Investment Operations
Net investment income (d) ............................ .03
Net realized and unrealized gain (loss) on investments .31
------------
Total Income From Investment Operations ........... .34
------------
Distributions
From net investment income ........................... (.08)
From net realized gain on investments ................ (.12)
------------
Total Distributions ............................... (.20)
------------
Net Asset Value, End of Period .......................... $ 10.40
============
Total Return (%)(a) ..................................... 3.41
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ........... 6,393
Ratios to average net assets (%):
Operating expenses, net (b)(c) .................... 1.00
Operating expenses, gross (c)(e) .................. -
Net investment income ............................. 1.17
Portfolio turnover rate (%)(b) ....................... 97.31
* For the period January 29, 1999 (commencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) See Note 4 for current period amounts.
(d) Average month-end shares outstanding were used for this calculation.
(e) The ratio for the period ending June 30, 1999 is not meaningful due to the
Class's short period of operation.
Balanced Strategy Fund 17
<PAGE>
Balanced Strategy Fund
Financial Highlights - Class D
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1999* 1998**
------------ ------------
<S> <C> <C>
Net Asset Value, Beginning of Period .................... $ 10.13 $ 10.22
------------ ------------
Income From Investment Operations
Net investment income (d) ............................ .15 .24
Net realized and unrealized gain (loss) on investments .36 .07
------------ ------------
Total Income From Investment Operations ........... .51 .31
------------ ------------
Distributions
From net investment income ........................... (.08) (.37)
From net realized gain on investments ................ (.12) (.03)
------------ ------------
Total Distributions ............................... (.20) (.40)
------------ ------------
Net Asset Value, End of Period .......................... $ 10.44 $ 10.13
============ ============
Total Return (%)(a) ..................................... 5.11 3.23
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ........... 2,930 4,953
Ratios to average net assets (%)(b):
Operating expenses, net (c) ....................... .50 .50
Operating expenses, gross (c) ..................... .86 .86
Net investment income ............................. 2.92 3.18
Portfolio turnover rate (%)(b) ....................... 97.31 78.85
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
** For the period March 24, 1998 (commencement of sale) to December 31, 1998.
(a) Periods less than one year are not annualized.
(b) The ratios for the periods ended June 30, 1999 and December 31, 1998 are
annualized.
(c) See Note 4 for current period amounts.
(d) Average month-end shares outstanding were used for this calculation.
18 Balanced Strategy Fund
<PAGE>
Balanced Strategy Fund
Financial Highlights - Class E
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1999* 1998 1997**
-------------- -------------- ------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period .................... $ 10.12 $ 9.46 $ 10.00
-------------- -------------- ------------
Income From Investment Operations
Net investment income (f) ............................ .15 .31 .09
Net realized and unrealized gain (loss) on investments .37 .78 .02
-------------- -------------- ------------
Total Income From Investment Operations ........... .52 1.09 .11
-------------- -------------- ------------
Distributions
From net investment income ........................... (.09) (.40) (.24)
From net realized gain on investments ................ (.12) (.03) (.41)
-------------- -------------- ------------
Total Distributions ............................... (.21) (.43) (.65)
-------------- -------------- ------------
Net Asset Value, End of Period .......................... $ 10.43 $ 10.12 $ 9.46
============== ============== ============
Total Return (%)(a) ..................................... 5.17 11.66 1.04
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ........... 255,405 161,108 3,554
Ratios to average net assets (%)(b):
Operating expenses, net (c) ....................... .25 .25 .25
Operating expenses, gross (c)(d) .................. .61 .61 -
Net investment income (e) ......................... 2.91 3.05 1.30
Portfolio turnover rate (%)(b) ....................... 97.31 78.85 29.58
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
** For the period September 16, 1997 (commencement of operations) to December
31, 1997.
(a) Periods less than one year are not annualized.
(b) The ratios for the periods ended June 30, 1999 and December 31, 1997 are
annualized.
(c) See Note 4 for current period amounts.
(d) The ratio for the period ended December 31, 1997 is not meaningful due to
the Class's short period of operation.
(e) The ratio for the period ended December 31, 1997 has not been annualized
due to the Class's short period of operation.
(f) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
Balanced Strategy Fund 19
<PAGE>
Moderate Strategy Fund
Statement of Net Assets
June 30, 1999 (Unaudited)
Number Market
of Value
Shares $
-------- ----------
Investments
Portfolios of the Frank Russell Investment
Company Series Mutual
Fund - Class S Shares
Domestic Equities - 29.0%
Diversified Equity Fund 77,072 4,370,009
Quantitative Equity Fund 91,846 4,347,086
Real Estate Securities Fund 74,779 1,924,058
Special Growth Fund 17,101 790,765
----------
11,431,918
----------
International Equities - 10.8%
Emerging Markets Fund 74,372 772,727
International Securities Fund 54,320 3,479,731
----------
4,252,458
----------
Bonds - 59.4%
Diversified Bond Fund 468,940 10,541,774
Short Term Bond Fund 702,489 12,855,544
----------
23,397,318
----------
Total Investments - 99.2%
(identified cost $37,726,464) 39,081,694
----------
Other Assets and Liabilities
Deferred organization expenses 21,042
Other assets 785,175
Liabilities (501,123)
----------
Total Other Assets and Liabilities,
Net - 0.8% 305,094
----------
Net Assets - 100.0% 39,386,788
==========
Net Assets consist of:
Undistributed net investment income 129,261
Accumulated distributions in excess
of net realized gain (198,400)
Unrealized appreciation 1,355,230
(depreciation) on investments
Shares of beneficial interest 38,042
Additional paid-in capital 38,062,655
----------
Net Assets 39,386,788
==========
Net Asset Value, offering and redemption price
per share:
Class C ($847,981 divided by 81,985
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.34
==========
Class D ($1,885,778 divided by 182,115
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.35
==========
Class E ($36,653,029 divided by 3,540,095
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.35
==========
See accompanying notes which are an integral part of the financial statements.
20 Moderate Strategy Fund
<PAGE>
Moderate Strategy Fund
Statement of Operations
Amounts in thousands
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1999 (Unaudited)
<S> <C> <C>
Investment Income
Income Distributions from Underlying Funds ...................................... $ 557,662
Expenses
Advisory fees .................................................... $ 31,936
Administrative fees .............................................. 7,984
Custodian fees ................................................... 25,668
Distribution fees - Class C ...................................... 1,518
Distribution fees - Class E ...................................... 2,364
Transfer agent fees .............................................. 34,627
Professional fees ................................................ 2,625
Registration fees - Class C ...................................... 60
Registration fees - Class D ...................................... 4,360
Registration fees - Class E ...................................... 278
Shareholder servicing fees - Class C ............................. 506
Shareholder servicing fees - Class D ............................. 37,050
Shareholder servicing fees - Class E ............................. 2,364
Trustees' fees ................................................... 400
Amortization of deferred organization expenses ................... 3,234
Miscellaneous .................................................... 2,245
-----------
Expenses before reductions ....................................... 157,219
Expense reductions ............................................... (113,417)
-----------
Expenses, net ................................................................ 43,802
-----------
Net investment income .............................................................. 513,860
-----------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ...................................................... (102,255)
Capital gain distributions from Underlying Funds ................. 112,288 10,033
-----------
Net change in unrealized appreciation (depreciation) on investments ................ 797,815
-----------
Net realized and unrealized gain (loss) ............................................ 807,848
-----------
Net increase (decrease) in net assets resulting from operations .................... $ 1,321,708
===========
See accompanying notes which are an integral part of the financial statements.
Moderate Strategy Fund 21
</TABLE>
<PAGE>
Moderate Strategy Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
<S> <C> <C>
Operations
Net investment income ............................................ $ 513,860 $ 448,325
Net realized gain (loss) ......................................... 10,033 64,608
Net change in unrealized appreciation (depreciation) ............. 797,815 570,808
------------ ------------
Net increase (decrease) in net assets resulting from operations 1,321,708 1,083,741
------------ ------------
Distributions
From net investment income
Class C ....................................................... (5,198) --
Class D ....................................................... (21,146) (38,395)
Class E ....................................................... (359,000) (411,121)
In excess of net investment income
Class D ....................................................... -- (6,315)
Class E ....................................................... -- (67,616)
From net realized gain on investments
Class D ....................................................... -- (1,557)
Class E ....................................................... -- (16,063)
In excess of net realized gain on investments
Class C ....................................................... (1,904) --
Class D ....................................................... (10,674) --
Class E ....................................................... (167,729) --
------------ ------------
Net decrease from distributions ............................ (565,651) (541,067)
------------ ------------
Share Transactions
Net increase (decrease) in net assets from share transactions .... 18,277,698 19,425,232
------------ ------------
Total Net Increase (Decrease) in Net Assets ......................... 19,033,755 19,967,906
Net Assets
Beginning of period .............................................. 20,353,033 385,127
------------ ------------
End of period (including undistributed net investment income of
$129,261 and $745, respectively) .............................. $ 39,386,788 $ 20,353,033
============ ============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
22 Moderate Strategy Fund
<PAGE>
Moderate Strategy Fund
Financial Highlights - Class C
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1999*
----------
<S> <C>
Net Asset Value, Beginning of Period .................... $ 10.15
----------
Income From Investment Operations
Net investment income (d) ............................ .09
Net realized and unrealized gain (loss) on
investments .......................................... .27
----------
Total Income From Investment Operations ........... .36
----------
Distributions
From net investment income ........................... (.11)
From net realized gain on investments ................ (.06)
----------
Total Distributions ............................... (.17)
----------
Net Asset Value, End of Period .......................... $ 10.34
==========
Total Return (%)(a) ..................................... 3.58
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ........... 848
Ratios to average net assets (%):
Operating expenses, net (b)(c) .................... 1.00
Operating expenses, gross (c)(e) .................. --
Net investment income ............................. 2.95
Portfolio turnover rate (%)(b) ....................... 183.18
</TABLE>
* For the period February 11, 1999 (commencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) See Note 4 for current period amounts.
(d) Average month-end shares outstanding were used for this calculation.
(e) The ratio for the period ending June 30, 1999 is not meaningful due to the
Class's short period of operation.
Moderate Strategy Fund 23
<PAGE>
Moderate Strategy Fund
Financial Highlights - Class D
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1999* 1998**
------------ ------------
<S> <C> <C>
Net Asset Value, Beginning of Period .................... $ 10.15 $ 10.18
------------ ------------
Income From Investment Operations
Net investment income (d) ............................ .15 .26
Net realized and unrealized gain (loss) on investments .22 .09
------------ ------------
Total Income From Investment Operations ........... .37 .35
------------ ------------
Distributions
From net investment income ........................... (.11) (.37)
From net realized gain on investments ................ (.06) (.01)
------------ ------------
Total Distributions ............................... (.17) (.38)
------------ ------------
Net Asset Value, End of Period .......................... $ 10.35 $ 10.15
============ ============
Total Return (%)(a) ..................................... 3.68 3.57
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ........... 1,886 1,780
Ratios to average net assets (%)(b):
Operating expenses, net (c) ....................... .50 .50
Operating expenses, gross (c) ..................... 1.19 1.01
Net investment income ............................. 2.95 3.41
Portfolio turnover rate (%)(b) ....................... 183.18 175.58
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
** For the period March 24, 1998 (commencement of sale) to December 31, 1998.
(a) Periods less than one year are not annualized.
(b) The ratios for periods ended June 30, 1999 and December 31, 1998 are
annualized.
(c) See Note 4 for current period amounts.
(d) Average month-end shares outstanding were used for this calculation.
24 Moderate Strategy Fund
<PAGE>
Moderate Strategy Fund
Financial Highlights - Class E
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1999* 1998 1997**
------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................... $ 10.15 $ 9.61 $ 10.00
----------- ------------ ---------
Income From Investment Operations
Net investment income (f) ............................ .17 .39 .07
Net realized and unrealized gain (loss) on investments .20 .57 (.08)
----------- ------------ ---------
Total Income From Investment Operations ........... .37 .96 (.01)
----------- ------------ ---------
Distributions
From net investment income ........................... (.11) (.41) (.14)
From net realized gain on investments ................ (.06) (.01) (.24)
----------- ------------ ---------
Total Distributions ............................... (.17) (.42) (.38)
Net Asset Value, End of Period .......................... $ 10.35 $ 10.15 $ 9.61
============= ============= ==========
Total Return (%)(a) ..................................... 3.75 10.19 (.06)
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ........... 36,653 18,573 385
Ratios to average net assets (%)(b):
Operating expenses, net (c) ....................... .25 .25 .25
Operating expenses, gross (c)(d) .................. .96 .94 --
Net investment income (e) ......................... 3.25 3.71 1.01
Portfolio turnover rate (%)(b) ....................... 183.18 175.58 9.66
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
** For the period October 2, 1997 (commencement of operations) to December 31,
1997.
(a) Periods less than one year are not annualized.
(b) The ratios for periods ended June 30, 1999 and December 31, 1997 are
annualized.
(c) See Note 4 for current period amounts.
(d) The ratio for the period ended December 31, 1997 is not meaningful due to
the Class's short period of operation.
(e) The ratio for the period ended December 31, 1997 has not been annualized
due to the Class's short period of operation.
(f) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
Moderate strategy Fund 25
<PAGE>
Conservative Strategy Fund
Statement of Net Assets
June 30, 1999 (Unaudited)
Number Market
of Value
Shares $
Investments ------ -------------
Portfolios of the Frank Russell Investment
Company Series Mutual
Fund - Class S Shares
Domestic Equities - 16.6%
Diversified Equity Fund 14,379 815,302
Quantitative Equity Fund 20,578 973,950
Real Estate Securities Fund 30,671 789,162
-------------
2,578,414
-------------
International Equities - 6.1%
Emerging Markets Fund 15,182 157,739
International Securities Fund 12,169 779,532
-------------
937,271
-------------
Bonds - 79.2%
Diversified Bond Fund 126,228 2,837,598
Short Term Bond Fund 514,396 9,413,455
-------------
12,251,053
-------------
Total Investments - 101.9%
(identified cost $15,620,427) 15,766,738
-------------
Other Assets and Liabilities
Other assets 96,176
Liabilities (394,066)
-------------
Total Other Assets and Liabilities,
Net - (1.9%) (297,890)
-------------
Net Assets - 100.0% 15,468,848
=============
Market
Value
$
------------
Net Assets consist of:
Undistributed net investment income 24,027
Accumulated distributions in excess (15,938)
of net realized gain
Unrealized appreciation 146,311
(depreciation) on investments
Shares of beneficial interest 14,985
Additional paid-in capital 15,299,463
------------
Net Assets 15,468,848
============
Net Asset Value, offering and redemption price
per share:
Class C ($89,230 divided by 8,658
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.31
============
Class D ($1,291,798 divided by 125,153
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.32
============
Class E ($14,087,820 divided by 1,364,689
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.32
============
See Accompanying notes which are an integral part of the financial statements.
26 Conservatives Strategy Fund
<PAGE>
Conservative Strategy Fund
Statement of Operations
For the Six Months Ended June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income
Income distributions from Underlying Funds .................................... $ 200,589
Expenses
Advisory fees .................................................. $ 10,980
Administrative fees ............................................ 2,745
Custodian fees ................................................. 40,414
Distribution fees - Class C .................................... 137
Distribution fees - Class D .................................... 1,125
Transfer agent fees ............................................ 54,536
Professional fees .............................................. 4,133
Registration fees - Class C .................................... 25
Registration fees - Class D .................................... 603
Registration fees - Class E .................................... 6,768
Shareholder servicing fees - Class C ........................... 46
Shareholder servicing fees - Class D ........................... 1,125
Shareholder servicing fees - Class E ........................... 12,553
Trustees' fees ................................................. 629
Miscellaneous .................................................. 3,537
---------
Expenses before reductions ..................................... 139,356
Expense reductions ............................................. (124,370)
---------
Expenses, net .............................................................. 14,986
---------
Net investment income ............................................................ 185,603
---------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments .................................................... (17,022)
Capital gain distributions from Underlying Funds ............... 21,525 4,503
---------
Net change in unrealized appreciation (depreciation) on investments .............. 84,808
---------
Net realized and unrealized gain (loss) .......................................... 89,311
---------
Net increase (decrease) in net assets resulting from operations .................. $ 274,914
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Conservative Strategy Fund 27
<PAGE>
Conservative Strategy Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six For the Year
Months Ended Ended
June 30, 1999 December 31,
(Unaudited) 1998
------------- -------------
<S> <C> <C>
Operations
Net investment income ............................................ $ 185,603 $ 112,183
Net realized gain (loss) ......................................... 4,503 10,145
Net change in unrealized appreciation (depreciation) ............. 84,808 61,843
------------- -------------
Net increase (decrease) in net assets resulting from operations 274,914 184,171
------------- -------------
Distributions
From net investment income
Class C ....................................................... (422) --
Class D ....................................................... (10,803) (17,084)
Class E ....................................................... (150,425) (95,177)
In excess of net investment income
Class D ....................................................... -- (1,561)
Class E ....................................................... -- (8,699)
From net realized gain on investments
Class C ....................................................... (3) --
Class D ....................................................... (282) (70)
Class E ....................................................... (3,455) (504)
In excess of net realized gain on investments
Class C ....................................................... (14) --
Class D ....................................................... (1,202) --
Class E ....................................................... (14,722) --
------------- -------------
Net decrease from distributions ............................ (181,328) (123,095)
------------- -------------
Share Transactions
Net increase (decrease) in net assets from share transactions .... 10,346,264 4,945,302
------------- -------------
Total Net Increase (Decrease) in Net Assets ......................... 10,439,850 5,006,378
Net Assets
Beginning of period .............................................. 5,028,998 22,620
------------- -------------
End of period (including undistributed net investment income of
$24,027 and $74, respectively) ................................ $ 15,468,848 $ 5,028,998
============= =============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
28 Conservative Strategy Fund
<PAGE>
Conservative Strategy Fund
Financial Highlights - Class C
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
----------
Net Asset Value, Beginning of Period .................... $ 10.26
----------
Income From Investment Operations
Net investment income (d) ............................ .05
Net realized and unrealized gain (loss) on investments .16
----------
Total Income From Investment Operations ........... .21
----------
Distributions
From net investment income ........................... (.14)
From net realized gain on investments ................ (.02)
----------
Total Distributions ............................... (.16)
----------
Net Asset Value, End of Period .......................... $ 10.31
==========
Total Return (%)(a) ..................................... 2.09
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ........... 89
Ratios to average net assets (%):
Operating expenses, net (b)(c) .................... 1.00
Operating expenses, gross (c)(e) .................. --
Net investment income ............................. 1.73
Portfolio turnover rate (%)(b) ....................... 249.12
* For the period February 11, 1999 (commencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) See Note 4 for current period amounts.
(d) Average month-end shares outstanding were used for this calculation.
(e) The ratio for the period ending June 30, 1999 is not meaningful due to the
Class's short period of operation.
Conservative Strategy Fund 29
<PAGE>
Conservative Strategy Fund
Financial Highlights - Class D
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1999* 1998**
------------ ----------
<S> <C> <C>
Net Asset Value, Beginning of Period .................... $ 10.25 $ 10.20
------------ ----------
Income From Investment Operations
Net investment income (d) ............................ .14 .32
Net realized and unrealized gain (loss) on investments .09 .06
------------ ----------
Total Income From Investment Operations ........... .23 .38
------------ ----------
Distributions
From net investment income ........................... (.14) (.33)
From net realized gain on investments ................ (.02) --
------------ ----------
Total Distributions ............................... (.16) (.33)
------------ ----------
Net Asset Value, End of Period .......................... $ 10.32 $ 10.25
============ ==========
Total Return (%)(a) ..................................... 2.27 3.77
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ........... 1,292 618
Ratios to average net assets (%)(b):
Operating expenses, net (c) ....................... .50 .50
Operating expenses, gross (c) ..................... 2.75 1.73
Net investment income ............................. 2.79 3.99
Portfolio turnover rate (%)(b) ....................... 249.12 169.79
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
** For the period March 24, 1998 (commencement of sale) to December 31, 1998.
(a) Periods less than one year are not annualized.
(b) The ratios for the periods ended June 30, 1999 and December 31, 1998 are
annualized.
(c) See Note 4 for current period amounts.
(d) Average month-end shares outstanding were used for this calculation.
30 Conservative Strategy Fund
<PAGE>
Conservative Strategy Fund
Financial Highlights - Class E
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------
1999* 1998 1997**
------------- ------------ ---------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period .................... $ 10.24 $ 9.88 $ 10.00
------------- ------------ ---------
Income From Investment Operations
Net investment income (f) ............................ .18 .46 .07
Net realized and unrealized gain (loss) on investments .07 .29 .07
------------- ------------ ---------
Total Income From Investment Operations ........... .25 .75 .14
------------- ------------ ---------
Distributions
From net investment income ........................... (.15) (.39) (.10)
From net realized gain on investments ................ (.02) - (.16)
------------- ------------ ---------
Total Distributions ............................... (.17) (.39) (.26)
------------- ------------ ---------
Net Asset Value, End of Period .......................... $ 10.32 $ 10.24 $ 9.88
============= ============ =========
Total Return (%)(a) ..................................... 2.43 7.70 1.36
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ........... 14,088 4,411 23
Ratios to average net assets (%)(b):
Operating expenses, net (c) ....................... .25 .25 .25
Operating expenses, gross (c)(d) .................. 2.50 2.50 --
Net investment income (e) ......................... 3.41 4.41 .67
Portfolio turnover rate (%)(b) ....................... 249.12 169.79 .00
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
** For the period November 7, 1997 (commencement of operations) to
December 31, 1997.
(a) Periods less than one year are not annualized.
(b) The ratios for the periods ended June 30, 1999 and December 31, 1997 are
annualized.
(c) See Note 4 for current period amounts.
(d) The ratio for the period ended December 31, 1997 is not meaningful due to
the Class's short period of operation.
(e) The ratio for the period ended December 31, 1997 has not been annualized
due to the Class's short period of operation.
(f) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
Conservative Strategy Fund 31
<PAGE>
Frank Russell Investment Company
LifePoints(R) Funds
Notes to Financial Statements
June 30, 1999 (Unaudited)
1. Organization
Frank Russell Investment Company (the "Investment Company") is a series
mutual fund with 27 different investment portfolios, referred to as "Funds."
These financial statements report on five LifePoints(R) 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.
Effective May 1, 1999, the Board of Trustees approved the name change of the
Equity Balanced Strategy Fund to the Equity Aggressive Strategy Fund. This
change is designed to more effectively convey the Fund's investment
objective and portfolio composition.
In addition to their Class E and Class D shares, on January 29, 1999 the
Aggressive Strategy and Balanced Strategy Funds, and on February 11, 1999
the Moderate Strategy, Conservative Strategy and Equity Aggressive Strategy
Funds made available 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 E shares are charged a shareholder servicing fee of
0.25%. Class D share are charged a 12b-1 distribution fee of 0.25% and a
shareholder servicing fee of 0.25%. Class C shares are charged a 12b-1
distribution fee of 0.75% and a shareholder servicing fee of 0.25%.
Beginning January 29, 1999, the Aggressive Strategy and Balanced Strategy
Funds made available Class C shares. Beginning February 11, 1999, the
Moderate Strategy, Conservative Strategy and Equity Aggressive Strategy
Funds made available Class C shares. Class C shares are in addition to their
Class E and Class D 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 D shares are charged a 12b-1 distribution fee of 0.25% and a
shareholder servicing fee of 0.25%. Class E shares are charged a shareholder
servicing fee of 0.25%. Class C shares are charged a 12b-1 distribution fee
of 0.75% and a shareholder servicing fee of 0.25%.
Each of the LifePoints Funds allocates its assets by investing in a
combination of Class S shares of the Investment Company's portfolios (the
"Underlying Funds"). Each of the LifePoints Funds will adjust its
investments within set limits based on Frank Russell Investment Management
Company's ("FRIMCo" or "Advisor") outlook for the economy, financial markets
and relative market valuation of the asset classes represented by each
Underlying Fund. However, the LifePoints Funds may deviate from set limits
when, in FRIMCo's opinion, it is necessary to do so to pursue a LifePoints
Fund's investment objective. The amounts allocated to each Underlying Fund
by each LifePoints Fund will generally vary within 10% of the percentages
specified below:
<TABLE>
<CAPTION>
Asset Allocation Ranges
-----------------------------------------------------------------------------------
Equity
Aggressive Aggressive Balanced Moderate Conservative
Strategy Strategy Strategy Strategy Strategy
Asset Class/Underlying Funds Fund Fund Fund Fund Fund
- --------------------------------------- ----------------- ---------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
Equities
US Equities
Diversified Equity 30% 21% 16% 11% 5%
Special Growth 10 11 5 2 --
Quantitative Equity 30 21 16 11 6
Real Estate Equity 5 5 5 5 5
International Equities
International Securities 20 19 14 9 5
Emerging Markets 5 5 3 2 1
</TABLE>
32 Notes to Financial Statements
<PAGE>
Frank Russell Investment Company
Life Points(R) Funds
Notes to Financial Statements, continued
June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Asset Allocation Ranges
------------------------------------------------------------------------------------------
Equity
Aggressive Aggressive Balanced Moderate Conservative
Strategy Strategy Strategy Strategy Strategy
Asset Class/Underlying Funds Fund Fund Fund Fund Fund
- --------------------------------------- --------------------- ----------- ------------ ----------- -----------------
<S> <C> <C> <C> <C> <C>
Bonds
Diversified Bond -- -- 25 27 18
Short-Term Bond -- -- -- 33 60
Multistrategy Bond -- 18 16 -- --
</TABLE>
Objectives of the Underlying Funds:
Diversified Equity Fund: To provide income and capital growth by investing
principally in equity securities.
Special Growth Fund: To maximize total return primarily through capital
appreciation and by assuming a higher level of volatility than is ordinarily
expected from the Diversified Equity Fund, by investing in equity
securities.
Quantitative Equity Fund: To provide a total return greater than the total
return of the US stock market as measured by the Russell 1000(R) Index over
a market cycle of four to six years, while maintaining volatility and
diversification similar to the Index by investing in equity securities.
Real Estate Securities Fund: To achieve a high level of total return
generated through above-average current income, while maintaining the
potential for capital appreciation by investing primarily in the equity
securities of companies in the real estate industry.
International Securities Fund: To provide favorable total return and
additional diversification for US investors by investing primarily in equity
and fixed-income securities of non-US companies, and securities issued by
non-US governments.
Emerging Markets Fund: To maximize total return, primarily through capital
appreciation and by assuming a higher level of volatility than is ordinarily
expected from developed market international portfolios.
Diversified Bond Fund: To provide effective diversification against equities
and a stable level of cash flow by investing in fixed-income securities.
Multistrategy Bond Fund: To provide maximum total return, primarily through
capital appreciation and by assuming a higher level of volatility than is
ordinarily expected from broad fixed-income market portfolios, by investing
in fixed-income securities.
Short-Term Bond Fund: The preservation of capital and the generation of
current income consistent with preservation of capital by investing
primarily in fixed income securities with low-volatility characteristics.
Financial statements of the Underlying Funds can be obtained by calling the
Office of Shareholder Inquiries at (800) RUSSEL4, (800) 787-7354.
2. Significant Accounting Policies
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles ("GAAP") 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: Investments in Underlying Funds are valued at the net
asset value per share of each Underlying Fund as of the close of regular
trading on the New York Stock Exchange. Short-term investments having a
maturity of sixty days or less are valued at amortized cost.
Investment transactions: Securities transactions of the Underlying Funds are
recorded on a trade date basis. Realized gains and losses from securities
transactions are recorded on the basis of specific identified cost.
Investment income: Distributions of income and capital gains from the
Underlying Funds are recorded on the ex-dividend date. Interest income is
recorded on the accrual basis.
Notes to Financial Statements 33
<PAGE>
Frank Russell Investment Company
Life Points(R) Funds
Notes to Financial Statements, continued
June 30, 1999 (Unaudited)
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.
The aggregate cost of investments and the composition of gross unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of June 30, 1999 were as follows:
<TABLE>
<CAPTION>
Net
Gross Gross Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
------------ ------------ -------------- --------------
<S> <C> <C> <C> <C>
Equity Aggressive Strategy $155,600,918 $19,099,265 $(150,020) $18,949,245
Aggressive Strategy 117,976,543 8,917,825 (764,185) 8,153,640
Balanced Strategy 254,930,317 16,974,142 (4,705,397) 12,268,745
Moderate Strategy 37,934,985 1,652,001 (505,292) 1,146,709
Conservative Strategy 15,640,872 268,219 (142,353) 125,866
</TABLE>
Dividends and distributions to shareholders: Income dividends are generally
declared and paid quarterly. 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 GAAP. As a result, net investment income and net
realized gain (or loss) from investment transactions for a reporting period
may differ significantly from distributions during such period. The
differences between tax regulations and GAAP relate primarily to certain
securities sold at a loss. Accordingly, the Funds may periodically make
reclassifications among certain of their capital accounts without impacting
their net asset value.
Expenses: The Funds incur shareholder servicing fees, management fees, and
other operating expenses other than those expressly assumed by FRIMCo.
Certain expenses not directly attributable to any one Fund but applicable to
all Funds, such as Trustee fees, legal and other expenses will be allocated
to each Fund based on each Fund's net assets. In addition, Class E, Class D
and Class C will pay shareholder servicing fees and Class D and Class C will
pay 12b-1 distribution fees. Expenses included in the accompanying financial
statements reflect the expenses of each Fund and do not include any expenses
associated with the Underlying Funds.
Deferred organization expenses: Organization costs of the Funds, except
Conservative Strategy Fund, have been deferred and are being amortized over
60 months on a straight-line basis.
3. Investment Transactions
Securities: During the period ended June 30, 1999, purchases and sales of
the Underlying Funds (excluding Money Market Fund investments) were as
follows:
Purchases Sales
------------ -----------
Equity Aggressive Strategy $137,611,004 $73,298,263
Aggressive Strategy 109,356,657 54,674,181
Balanced Strategy 202,806,101 105,958,466
Moderate Strategy 46,938,285 28,888,270
Conservative Strategy 24,298,673 13,609,391
4. Related Parties
Advisor: The Investment Company has an Advisory Agreement with FRIMCo under
which FRIMCo directs the investments of the Fund in accordance with its
investment objectives, policies, and limitations. FRIMCo is a wholly owned
subsidiary of Frank Russell Company, a wholly owned subsidiary of The
Northwestern Mutual Life Insurance Company. Prior to December 1, 1998, the
Funds were charged an advisory fee equal to 0.25% of average daily net
assets. Beginning December 1, 1998, the Funds were charged an advisory fee
equal to 0.20% of average daily net assets and an Administrative fee equal
to 0.05% of average daily net
34 Notes to Financial Statements
<PAGE>
Frank Russell Investment Company
LifePoints(R) Funds
Notes to Financial Statements, continued
June 30, 1999 (Unaudited)
assets. For the period ended June 30, 1999, the Advisor contractually agreed
to waive both the advisory fee and the administrative fee.
The Advisor has voluntarily agreed to reimburse the Funds for all expenses
excluding advisory fees, shareholder servicing fees and 12b-1 distribution
fees for the period January 1, 1999 to January 31, 1999.
In accordance with the special servicing agreement entered into in February
1999 by the Advisor, the LifePoints Funds and several Funds (the "Underlying
Funds") in which the LifePoints funds invest, expenses from the operation of
the LifePoints Funds are paid by the Underlying Funds based on each
Underlying Fund's proportionate share of assets owned by the LifePoints
Funds. No Underlying Funds will be charged expenses that exceed the
estimated savings to each respective Underlying Fund. These estimated
savings result from the elimination of separate shareholder accounts which
either currently are or have potential to be invested in the Underlying
Funds. In the event that the financial benefits to the Underlying Funds do
not exceed aggregate expenses of any LifePoints Fund, the Advisor will
reimburse certain costs on behalf of the respective LifePoint Fund. For the
period February 1, 1999 to June 30, 1999, there were no such Advisor
reimbursements.
For the period ended June 30, 1999, the waivers and Underlying Funds
payments were as follows:
<TABLE>
<CAPTION>
Advisory and Paid by
Administrative Reimbursed Underlying Total Expense
Fees Waived by FRIMCo Funds Reductions
-------------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Equity Aggressive Strategy $ 168,850 $ 5,407 $ 78,871 $ 253,128
Aggressive Strategy 118,257 5,511 73,422 197,190
Balanced Strategy 274,887 6,313 117,881 399,081
Moderate Strategy 39,920 4,445 69,052 113,417
Conservative Strategy 13,725 3,911 106,734 124,370
</TABLE>
Transfer agent: The Funds have a contract with FRIMCo to provide transfer
agent services to the Investment Company. The Underlying Funds have borne
this expense.
Distributor and Shareholder Servicing: Pursuant to the Distribution
Agreement with the Investment Company, Russell Fund Distributors, Inc.
("Distributor"), a wholly owned subsidiary of FRIMCo, serves as distributor
for all Investment Company portfolio shares, including Class E, Class D, and
Class C shares of the Funds.
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 D and Class C shares subject to
the Distribution Plan. The 12b-1 fee payments shall not exceed 0.25% of the
average daily net assets of a Fund's Class D shares or 0.75% of the average
daily net assets of a Fund's Class C shares on an annual basis.
The Investment Company has adopted a Shareholder Services Plan ("Services
Plan") under which the Funds may make payments to the distributor or any
investment advisors, banks, broker-dealers, financial planners or other
financial institutions ("Servicing Agents") for any activities or expenses
primarily intended to assist, support or service the Servicing Agents'
clients who beneficially own Class E, Class D, and Class C shares of the
Funds. Payments under the Services Plan are calculated daily and paid
quarterly by the Investment Company, at an annual rate of 0.25% of the
average daily net assets of a Fund's Class E, Class D, and Class C shares.
Shareholder Servicing and Distribution fees payable to affiliates as of
June 30, 1999 were as follows:
Equity Aggressive Strategy $ 37,089
Aggressive Strategy 28,844
Balanced Strategy 58,733
Moderate Strategy 8,793
Conservative Strategy 3,236
------------
$ 136,695
============
Notes to Financial Statements 35
<PAGE>
Frank Russell Investment Company
LifePoints(R) Funds
Notes to Financial Statements, continued
June 30, 1999 (Unaudited)
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 $2,608 for the period ended June 30,
1999, and were allocated to each Fund and Class on a pro rata basis,
including 22 other affiliated Funds not presented herein. The Underlying
Funds have paid for this expense.
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, 1999,
$4,535,000 of the Money Market Fund's net assets represents investments by
these Funds and $850,030,000 represents the investments of other affiliated
Funds not presented herein.
6. Fund Share Transactions
Share transactions for the period ended June 30, 1999 and the year ended
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Shares Dollars
-------------------------------- ----------------------------------
Equity Aggressive Strategy 1999 1998 1999 1998
------------ ----------- ------------- -------------
<S> <C> <C> <C> <C>
Class E
Proceeds from shares sold 7,856,434 9,545,046 $ 78,183,156 $ 86,677,483
Proceeds from reinvestment of distributions 255,941 150,876 2,492,957 1,443,025
Payments for shares redeemed (1,848,720) (702,666) (18,770,812) (6,451,225)
------------ ---------- ------------ ------------
Net increase (decrease) 6,263,655 8,993,256 61,905,301 81,669,283
------------ ---------- ------------ ------------
Class D (a)
Proceeds from shares sold 61,568 502,893 625,765 4,784,572
Proceeds from reinvestment of distributions 9,262 3,888 90,162 36,704
Payments for shares redeemed (67,758) (4,767) (664,654) (46,096)
------------ ---------- ------------ ------------
Net increase (decrease) 3,072 502,014 51,273 4,775,180
------------ ---------- ------------ ------------
Class C (c)
Proceeds from shares sold 266,684 -- 2,661,469 --
Proceeds from reinvestment of distributions 1,341 -- 13,128 --
Payments for shares redeemed (72,483) -- (747,175) --
------------ ---------- ------------ ------------
Net increase (decrease) 195,542 -- 1,927,422 --
------------ ---------- ------------ ------------
Total increase (decrease) 6,462,269 9,495,270 $ 63,883,996 $ 86,444,463
============ ========== ============ ============
</TABLE>
(a) Fund share transactions for the period ended December 31, 1998 are for the
period March 24, 1998 (commencement of sale of shares) to December 31,
1998.
(c) Fund share transactions for the period ended June 30, 1999 are for the
period February 11, 1999 (commencement of sale of shares) to June 30, 1999.
36 Notes to Financial Statements
<PAGE>
Frank Russell Investment Company
LifePoints(R) Funds
Notes to Financial Statements, continued
June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Dollars
------------------------------- ----------------------------------
Aggressive Strategy 1999 1998 1999 1998
---------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
Class E
Proceeds from shares sold 5,992,558 6,093,738 $ 60,153,014 $ 58,657,811
Proceeds from reinvestment of distributions 167,929 99,583 1,645,070 955,622
Payments for shares redeemed (938,638) (517,340) (9,481,773) (4,851,956)
---------- ---------- ------------- -------------
Net increase (decrease) 5,221,849 5,675,981 52,316,311 54,761,477
---------- ---------- ------------- -------------
Class D (a)
Proceeds from shares sold 194,461 450,907 1,967,756 4,313,477
Proceeds from reinvestment of distributions 7,272 5,923 71,195 57,363
Payments for shares redeemed (227,177) (90,064) (2,290,356) (785,915)
---------- ---------- ------------- -------------
Net increase (decrease) (25,444) 366,766 (251,405) 3,584,925
---------- ---------- ------------- -------------
Class C (b)
Proceeds from shares sold 344,430 -- 3,443,276 --
Proceeds from reinvestment of distributions 1,455 -- 14,323 --
Payments for shares redeemed (69,663) -- (715,160) --
---------- ---------- ------------- -------------
Net increase (decrease) 276,222 -- 2,742,439 --
---------- ---------- ------------- -------------
Total increase (decrease) 5,472,627 6,042,747 $ 54,807,345 $ 58,346,402
========== ========== ============= =============
Balanced Strategy
Class E
Proceeds from shares sold 10,481,599 17,549,534 $ 106,344,532 $ 172,155,709
Proceeds from reinvestment of distributions 408,478 523,953 4,084,620 5,173,243
Payments for shares redeemed (2,329,392) (2,524,583) (23,847,169) (24,860,635)
---------- ---------- ------------- -------------
Net increase (decrease) 8,560,685 15,548,904 86,581,983 152,468,317
---------- ---------- ------------- -------------
Class D (a)
Proceeds from shares sold 126,144 504,049 1,284,710 4,926,188
Proceeds from reinvestment of distributions 8,896 8,519 89,005 84,433
Payments for shares redeemed (343,466) (23,373) (3,529,028) (221,190)
---------- ---------- ------------- -------------
Net increase (decrease) (208,426) 489,195 (2,155,313) 4,789,431
---------- ---------- ------------- -------------
Class C (b)
Proceeds from shares sold 628,857 -- 6,374,190 --
Proceeds from reinvestment of distributions 2,541 -- 25,516 --
Payments for shares redeemed (16,656) -- (170,244) --
---------- ---------- ------------- -------------
Net increase (decrease) 614,742 -- 6,229,462 --
---------- ---------- ------------- -------------
Total increase (decrease) 8,967,001 16,038,099 $ 90,656,132 $ 157,257,748
========== ========== ============= =============
</TABLE>
(a) Fund share transactions for the period ended December 31, 1998 are for the
period March 24, 1998 (commencement of sale of shares) to December 31,
1998.
(b) Fund share transactions for the period ended June 30, 1999 are for the
period January 29, 1999 (commencement of sale of shares) to June 30, 1999.
Notes to Financial Statements 37
<PAGE>
Frank Russell Investment Company
LifePoints(R) Funds
Notes to Financial Statements, continued
June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Dollars
------------------------------- --------------------------------
Moderate Strategy 1999 1998 1999 1998
----------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Class E
Proceeds from shares sold 2,005,003 2,231,041 $ 20,380,900 $ 22,075,376
Proceeds from reinvestment of distributions 51,026 44,242 515,107 438,860
Payments for shares redeemed (345,916) (485,375) (3,519,013) (4,821,156)
----------- ----------- ------------ ------------
Net increase (decrease) 1,710,113 1,789,908 17,376,994 17,693,080
----------- ----------- ------------ ------------
Class D (a)
Proceeds from shares sold 94,125 195,126 964,899 1,928,847
Proceeds from reinvestment of distributions 3,153 4,649 31,819 46,186
Payments for shares redeemed (90,449) (24,489) (925,657) (242,881)
----------- ----------- ------------ ------------
Net increase (decrease) 6,829 175,286 71,061 1,732,152
----------- ----------- ------------ ------------
Class C (c)
Proceeds from shares sold 107,300 -- 1,091,482 --
Proceeds from reinvestment of distributions 721 -- 7,280 --
Payments for shares redeemed (26,036) -- (269,119) --
----------- ----------- ------------ ------------
Net increase (decrease) 81,985 -- 829,643 --
----------- ----------- ------------ ------------
Total increase (decrease) 1,798,927 1,965,194 $ 18,277,698 $ 19,425,232
=========== =========== ============ ============
Conservative Strategy
Class E
Proceeds from shares sold 1,118,139 511,083 $ 11,484,870 $ 5,168,551
Proceeds from reinvestment of distributions 16,243 9,863 165,427 99,711
Payments for shares redeemed (200,392) (92,535) (2,061,443) (935,823)
----------- ----------- ------------ ------------
Net increase (decrease) 933,990 428,411 9,588,854 4,332,439
----------- ----------- ------------ ------------
Class D (a)
Proceeds from shares sold 70,902 71,083 730,277 722,509
Proceeds from reinvestment of distributions 1,205 1,849 12,288 18,714
Payments for shares redeemed (7,201) (12,685) (74,164) (128,360)
----------- ----------- ------------ ------------
Net increase (decrease) 64,906 60,247 668,401 612,863
----------- ----------- ------------ ------------
Class C (c)
Proceeds from shares sold 13,112 -- 134,645 --
Proceeds from reinvestment of distributions 43 -- 439 --
Payments for shares redeemed (4,497) -- (46,075) --
----------- ----------- ------------ ------------
Net increase (decrease) 8,658 -- 89,009 --
----------- ----------- ------------ ------------
Total increase (decrease) 1,007,554 488,658 $ 10,346,264 $ 4,945,302
=========== =========== ============ ============
</TABLE>
(a) Fund share transactions for the period ended December 31, 1998 are for the
period March 24, 1998 (commencement of sale of shares) to December 31,
1998.
(c) Fund share transactions for the period ended June 30, 1999 are for the
period February 11, 1999 (commencement of sale of shares) to June 30, 1999.
38 Notes to Financial Statements
<PAGE>
Frank Russell Investment Company
LifePoints(R) Funds
Notes to Financial Statements, continued
June 30, 1999 (Unaudited)
7. Dividends
On July 1, 1999 the Board of Trustees declared the following dividends from
net investment income payable on July 6, 1999, to shareholders of record on
July 2, 1999.
<TABLE>
<S> <C> <C> <C>
Equity Aggressive Strategy - Class E $ 0.0127 Moderate Strategy - Class E $ 0.0796
Equity Aggressive Strategy - Class D 0.0063 Moderate Strategy - Class D 0.0727
Equity Aggressive Strategy - Class C 0.0000 Moderate Strategy - Class C 0.0651
Aggressive Strategy - Class E 0.0276 Conservative Strategy - Class E 0.0988
Aggressive Strategy - Class D 0.0198 Conservative Strategy - Class D 0.0933
Aggressive Strategy - Class C 0.0135 Conservative Strategy - Class C 0.0844
Balanced Strategy - Class E 0.0588
Balanced Strategy - Class D 0.0501
Balanced Strategy - Class C 0.0454
</TABLE>
8. Beneficial Interest
As of June 30, 1999, the following Funds have one or more shareholders with
shares of beneficial interest of greater than 10% of the total outstanding
shares of each respective Fund or Class:
<TABLE>
<CAPTION>
Class E Class D Class C
------------------- -------------------- -------------------
<S> <C> <C> <C>
Equity Aggressive Strategy 23.7%, 13.2%, 10.7% 70.9% 22.1%, 18.1%, 16.9%
Aggressive Strategy 12.2% 36.4%, 25.1% 15.0%
Balanced Strategy 22.3% 51.9%, 10.8% 12.0%
Moderate Strategy 25.4%, 12.8%, 10.0% 51.1%, 34.5% 15.5%
Conservative Strategy 15.1%, 10.7% 40.0%, 35.3%, 13.5% --
</TABLE>
Notes to Financial Statements 39
<PAGE>
Frank Russell Investment Company
909 A Street, Tacoma, Washington 98402
(800) 832-6699
In Washington (253) 627-7001
Trustees
Lynn L. Anderson
Paul E. Anderson
Paul Anton, PhD
William E. Baxter
Lee C. Gingrich
Eleanor W. Palmer
Trustees Emeritus
George F. Russell, Jr., Chairman
Officers
Lynn L. Anderson, President and Chief Executive Officer
Peter Apanovitch, Manager of Short Term Investment Funds
Mark E. Swanson, Treasurer and Chief Accounting Officer
Randall P. Lert, Director of Investments
Karl Ege, Secretary and General Counsel
Manager, Transfer and Dividend Paying 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, MA 02109
Distributor
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
Money Managers of Underlying Funds
Diversified Equity Fund
Alliance Capital Management L.P., Minneapolis, MN
Barclays Global Investors, San Francisco, CA
Equinox Capital Management, LLC, New York, NY
INVESCO Capital Management, Inc., Atlanta, GA
Jacobs Levy Equity Management, Inc., Roseland, NJ
Lincoln Capital Management Company, Chicago, IL
Marsico Capital Management, LLC, Denver, CO
Morgan Stanley Dean Witter Investment
Management, Inc., New York, NY
Peachtree Asset Management, Atlanta, GA
Sanford C. Bernstein & Co., Inc., New York, NY
Suffolk Capital Management, Inc., New York, NY
Trinity Investment Management Corporation, Boston, MA
Special Growth Fund
Delphi Management, Inc., Boston, MA
Fiduciary Trust Company 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
Westpeak Investment Advisors, L.P., Boulder, CO
Quantitative Equity Fund
Barclays Global Investors, San Francisco, CA
Franklin Portfolio Associates, LLC, Boston, MA
Jacobs Levy Equity Management, Inc., Roseland, NJ
J.P. Morgan Investment Management, Inc., New York, NY
International Securities Fund
Delaware International Advisers Limited, London, England
Fidelity Management Trust Company, Boston, MA
J.P. Morgan Investment Management, Inc., New York, NY
Mastholm Asset Management, LLC, Bellevue, WA
Montgomery Asset Management, LLC, San Francisco, CA
Oechsle International Advisors, Boston, MA
Sanford C.Bernstein & Co., Inc., New York, NY
The Boston Company Asset Management, Inc.,Boston, MA
Emerging Markets Fund
Foreign & Colonial Emerging Markets, London, England
Genesis Asset Managers Limited, London, England
J.P. Morgan Investment Management, Inc., New York, NY
Montgomery Asset Management, LLC, San Francisco, CA
Nicholas Applegate Capital Management, San Diego, CA
Sanford C. Bernstein & Co., Inc., New York, NY
Schroder Capital Management International Limited,
New York, NY
Real Estate Securities Fund
AEW Capital Management, L.P., Boston, MA
Cohen & Steers Capital Management, Inc., New York, NY
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.
40 Manager, Money Managers and Service Providers
<PAGE>
Frank Russell Investment Company
909 A Street, Tacoma, Washington 98402
(800) 832-6688
In Washington (253) 627-7001
Short Term Bond Fund
BlackRock Financial Management, Inc., New York, NY
Standish, Ayer & Wood, Inc., Boston, MA
STW Fixed Income Management, California, Santa Barbara, CA
Diversified Bond Fund
Lincoln Capital Management Company, Chicago, IL
Pacific Investment Management Company, Newport Beach, CA
Standish, Ayer & Wood, Inc., Boston, MA
Multistrategy Bond Fund
Credit Suisse Asset Management, New York, NY
Pacific Investment Management Company, Newport Beach, CA
Standish, Ayer & Wood, Inc., Boston, MA
This report is prepared for 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.
Manager, Money Managers and Service Providers 41
<PAGE>
[LOGO OF FRANK RUSSELL INVESTMENT COMPANY]
Frank Russell Investment Company
909 A Street
Tacoma, Washington 98402
253-627-7001
800-787-7354
Fax: 253-591-3495
www.russell.com A-5424(699) 36-08-071(6/99)
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
1999 Semiannual Report
CLASS C, E, AND S SHARES
DIVERSIFIED EQUITY FUND
SPECIAL GROWTH FUND
EQUITY INCOME FUND
QUANTITATIVE EQUITY FUND
INTERNATIONAL SECURITIES FUND
EMERGING MARKETS FUND
REAL ESTATE SECURITIES FUND
SHORT TERM BOND FUND
DIVERSIFIED BOND FUND
MULTISTRATEGY BOND FUND
JUNE 30, 1999
[LOGO OF FRANK RUSSELL INVESTMENT COMPANY]
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
Frank Russell Investment Company
is a "series mutual fund" with 27
different investment portfolios.
These financial statements report
on ten 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, 1999 (UNAUDITED)
TABLE OF CONTENTS
Page
Diversified Equity Fund .................................................. 2
Special Growth Fund ...................................................... 16
Equity Income Fund ....................................................... 34
Quantitative Equity Fund ................................................. 44
International Securities Fund ............................................ 58
Emerging Markets Fund .................................................... 76
Real Estate Securities Fund .............................................. 92
Short Term Bond Fund ..................................................... 100
Diversified Bond Fund..................................................... 112
Multistrategy Bond Fund................................................... 132
Notes to Financial Statements............................................. 148
Manager, Money Managers and Service Providers ............................ 161
FRANK RUSSELL INVESTMENT COMPANY - RUSSELL FUNDS
Copyright (C) Frank Russell Company 1999. 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
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.
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>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- -----------
COMMON STOCKS - 93.0%
AUTO AND TRANSPORTATION - 4.3%
AMR Corp. (a) 36,800 2,512
AutoZone, Inc. (a) 130,000 3,916
Burlington Northern, Inc. 150,900 4,678
Comair Holdings, Inc. 1,800 37
Continental Airlines, Inc. Class B (a) 87,700 3,300
Cooper Tire & Rubber Co. 219,000 5,174
CSX Corp. 9,700 440
Delphi Automotive Systems Corp. 8,387 156
Delta Air Lines, Inc. 77,400 4,460
Eaton Corp. 9,400 865
FDX Corp. (a) 69,100 3,749
Ford Motor Co. 190,600 10,757
General Motors Corp. 90,300 5,960
Genuine Parts Co. 16,300 571
Goodyear Tire & Rubber Co. 7,100 418
Harley-Davidson, Inc. 17,700 962
Kansas City Southern Industries, Inc. 7,500 479
KLM Royal Dutch Airlines 72,272 2,064
Lear Corp. (a) 40,100 1,995
Meritor Automotive, Inc. 21,600 551
Navistar International Corp. (a) 11,700 585
Norfolk Southern Corp. 159,500 4,805
Northwest Airlines Corp. Class A (a) 18,700 605
PACCAR, Inc. 14,500 774
Trinity Industries, Inc. 7,500 251
TRW, Inc. 16,900 927
UAL Corp. (a) 37,100 2,412
Union Pacific Corp. 59,500 3,470
-----------
66,873
-----------
CONSUMER DISCRETIONARY - 13.4%
Abercrombie & Fitch Co. Class A (a) 80,700 3,874
AC Nielsen Corp. (a) 4,400 133
Amazon.com, Inc. (a) 3,100 388
American Greetings Corp. Class A 8,900 268
AT&T Corp. - Liberty Media Group Class
A (a) 142,700 5,244
Avon Products, Inc. 24,100 1,338
Bed Bath & Beyond, Inc. (a) 111,000 4,260
Belo (A.H.) Corp. Class A 7,700 152
Best Buy Co. (a) 54,100 3,652
BJ's Wholesale Club, Inc. (a) 9,500 286
Black & Decker Corp. 3,700 234
Brinker International, Inc. (a) 32,600 886
Browning-Ferris Industries, Inc. 17,800 765
Brunswick Corp. 20,900 583
Callaway Golf Co. 14,600 214
CBS Corp. (a) 58,500 2,541
Central Newspapers, Inc. Class A 300 11
Chancellor Media Corp. (a) 75,900 4,179
Circuit City Stores, Inc. 6,700 623
Clear Channel
Communications, Inc. (a) 73,100 5,039
Costco Cos., Inc. (a) 80,600 6,448
Darden Restaurants, Inc. 37,100 809
Dayton Hudson Corp. 100,700 6,546
Deluxe Corp. 25,500 993
Dillard's, Inc. Class A 17,300 608
Disney (Walt) Co. 49,500 1,525
Donnelley (R.R.) & Sons Co. 1,200 44
Eastman Kodak Co. 47,791 3,238
Electronic Arts, Inc. (a) 14,500 783
Federated Department Stores, Inc. (a) 13,700 725
Fortune Brands, Inc. 23,500 972
Gap, Inc. 321,150 16,178
Harcourt General, Inc. 10,200 526
Harrah's Entertainment, Inc. (a) 25,500 561
Hasbro, Inc. 117,600 3,285
Hollinger International, Inc. Class A 9,800 116
Home Depot, Inc. (The) 283,700 18,281
Intimate Brands, Inc. Class A 7,770 368
JC Penney & Co., Inc. 10,200 495
Kmart Corp. (a) 237,300 3,901
Kohl's Corp. (a) 62,800 4,847
Limited, Inc. (The) 31,473 1,428
Lowe's Cos., Inc. 235,400 13,344
Manpower, Inc. 7,100 161
Mattel, Inc. 249,121 6,586
May Department Stores Co. 53,250 2,177
Maytag Corp. 10,500 732
McDonald's Corp. 48,200 1,991
MediaOne Group, Inc. (a) 175,000 13,016
Metro-Goldwyn-Mayer, Inc. (a) 2,700 49
Mirage Resorts, Inc. (a) 67,000 1,122
Modis Professional Services, Inc. (a) 18,700 257
Neiman-Marcus Group, Inc. (a) 3,700 95
New York Times Co. Class A 9,100 335
Newell Rubbermaid, Inc. 2,341 109
Nielsen Media Research (a) 8,833 258
Office Depot, Inc. (a) 35,400 781
Ogden Corp. 900 24
Omnicom Group, Inc. 31,300 2,504
Payless ShoeSource, Inc. (a) 3,200 171
Premark International, Inc. 17,500 656
Premier Parks, Inc. (a) 4,600 169
Promus Hotel Corp. (a) 6,095 189
QUALCOMM, Inc. (a) 8,000 1,148
Royal Caribbean Cruises, Ltd. 65,900 2,883
Russell Corp. 5,100 99
Saks, Inc. (a) 20,000 578
2 Diversified Equity Fund
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Sears Roebuck & Co. 76,600 3,413
Shaw Industries, Inc. (a) 26,200 432
Star Gas Partners, L.P. (a) 1,022 9
Starbucks Corp. (a) 35,100 1,312
Starwood Hotels & Resorts Worldwide,
Inc. 5,900 180
TCI Music, Inc. Class A (a) 1,800 64
Time Warner, Inc. 107,700 7,916
TJX Cos., Inc. 78,700 2,622
Toys "R" Us, Inc. (a) 32,800 679
Tribune Co. 42,400 3,694
Tricon Global Restaurants, Inc. (a) 11,800 639
Tupperware Corp. 16,700 426
Univision Communications, Inc.
Class A (a) 3,000 198
USA Networks, Inc. (a) 55,000 2,203
V.F. Corp. 72,500 3,099
Valassis Communications, Inc. (a) 12,000 440
Viacom, Inc. Class B (a) 119,500 5,258
Viad Corp. 39,400 1,219
Wal-Mart Stores, Inc. 273,800 13,211
Warnaco Group, Inc. Class A 300 8
Whirlpool Corp. 44,600 3,300
Young & Rubicam, Inc. 1,600 73
-----------
207,176
-----------
CONSUMER STAPLES - 5.1%
Albertson's, Inc. 51,208 2,640
Anheuser-Busch Cos., Inc. 29,900 2,121
Clorox Co. 14,000 1,495
Coca-Cola Co. (The) 84,200 5,263
Coca-Cola Enterprises, Inc. 33,600 1,000
Colgate-Palmolive Co. 31,700 3,130
ConAgra, Inc. 75,600 2,013
Coors (Adolph) Co. Class B 800 40
CVS Corp. 107,400 5,451
Dean Foods Co. 7,800 324
Dole Food Co., Inc. 200 6
Flowers Industries, Inc. 45,600 989
General Mills, Inc. 16,000 1,286
Gillette Co. 42,200 1,730
Hannaford Brothers Co. 4,500 241
Heinz (H.J.) Co. 27,900 1,398
Hormel Foods Corp. 18,000 725
IBP, Inc. 37,600 893
International Flavors &
Fragrances, Inc. 6,900 306
Interstate Bakeries Corp. 35,400 794
Keebler Foods Co. (a) 8,900 270
Kroger Co. (a) 193,200 5,398
Nabisco Holdings Corp. Class A 10,300 445
PepsiCo, Inc. 221,600 8,573
Philip Morris Cos., Inc. 264,900 10,646
Procter & Gamble Co. 88,900 7,934
Quaker Oats Co. 19,800 1,314
R.J. Reynolds Tobacco
Holdings, Inc. (a) 7,433 234
Rite Aid Corp. 36,400 896
Safeway, Inc. (a) 85,600 4,237
SuperValu, Inc. 54,500 1,400
SYSCO Corp. 1,400 42
Tyson Foods, Inc. Class A 37,700 848
Unilever NV (a) 18,200 1,269
Universal Corp. 11,300 321
UST Corp. 47,900 1,401
Walgreen Co. 53,800 1,580
Weis Markets, Inc. 800 31
-----------
78,684
-----------
FINANCIAL SERVICES - 18.7%
AFLAC, Inc. 143,000 6,846
Allmerica Financial Corp. 500 30
Allstate Corp. 352,216 12,636
Ambac Financial Group, Inc. 25,100 1,434
American Express Co. 27,600 3,591
American Financial Group, Inc. 21,500 732
American General Corp. 12,000 905
American International Group, Inc. 134,014 15,688
Ameritrade Holding Corp. Class A (a) 300 32
AmSouth Bancorp 47,025 1,090
Associates First Capital Corp. Class A 163,914 7,263
Astoria Financial Corp. 30,400 1,334
Automatic Data Processing, Inc. 212,300 9,341
Bank of America Corp. 238,068 17,453
Bank of New York Co., Inc. 18,700 686
Bank One Corp. 92,400 5,504
BankBoston Corp. 64,700 3,308
BB&T Corp. 6,500 238
Bear Stearns Cos., Inc. 12,730 595
Berkshire Hathaway, Inc. Class B (a) 335 750
Capital One Financial Corp. 42,800 2,383
CCB Financial Corp. 900 48
Centura Banks, Inc. 700 39
Charter One Financial, Inc. 48,620 1,349
Chase Manhattan Corp. 167,300 14,492
Chubb Corp. (The) 10,000 695
CIGNA Corp. 8,200 730
Citigroup, Inc. 200,325 9,515
City National Corp. 9,100 341
Comerica, Inc. 37,800 2,247
Commerce Bancshares, Inc. 29,068 1,168
Concord EFS, Inc. (a) 26,900 1,138
Diversified Equity Fund 3
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Conseco, Inc. 195,968 5,965
Countrywide Credit Industries, Inc. 14,400 616
Dime Bancorp, Inc. 66,100 1,330
Dow Jones & Co., Inc. 25,500 1,353
DST Systems, Inc. (a) 13,500 849
Dun & Bradstreet Corp. 7,300 259
Edwards (A.G.), Inc. 700 23
Equifax, Inc. 1,400 50
Everest Reinsurance Holdings, Inc. 18,500 604
Federal Home Loan Mortgage Corp. 158,600 9,199
Federal National Mortgage Association 101,100 6,913
Fifth Third Bancorp 21,300 1,418
FINOVA Group, Inc. 25,300 1,331
First Data Corp. 110,100 5,388
First Union Corp. 15,900 747
Firstar Corp. 22,172 621
FirstMerit Corp. 1,300 36
Fleet Financial Group, Inc. 151,100 6,705
Foundation Health Systems, Inc. (a) 22,000 330
Franklin Resources, Inc. 60,600 2,462
Fremont General Corp. 29,000 547
Fulton Financial Corp. 600 12
Golden State Bancorp, Inc. (a) 6,200 136
Golden West Financial Corp. 7,600 745
Goldman Sachs Group, Inc. (a) 28,100 2,030
Greenpoint Financial Corp. 3,000 98
Hartford Financial Services
Group, Inc. (The) 60,400 3,522
Hibernia Corp. Class A 2,200 35
Highwoods Properties, Inc. 2,000 55
Household International Corp. 8,100 384
Huntington Bancshares, Inc. 2,000 70
Jefferson-Pilot Corp. 43,100 2,853
KeyCorp 14,800 475
Lehman Brothers Holdings, Inc. 40,300 2,509
Lincoln National Corp. 6,800 356
M & T Bank Corp. 100 55
MBIA, Inc. 95,700 6,197
MBNA Corp. 574,918 17,607
Merrill Lynch & Co., Inc. 29,300 2,342
MGIC Investment Corp. 146,100 7,104
Morgan (J.P.) & Co., Inc. 32,100 4,510
Morgan Stanley Dean Witter & Co. 204,100 20,920
National City Corp. 47,400 3,105
National Commerce Bancorp 400 9
Newcourt Credit Group, Inc. 140,100 1,813
North Fork Bancorp., Inc. 30,600 652
Old Kent Financial Corp. 9,434 395
Old Republic International Corp. 115,900 2,007
Pacific Century Financial Corp. 29,000 625
PaineWebber Group, Inc. 800 37
Patriot American Hospitality, Inc. 1,500 7
Paychex, Inc. 82,850 2,630
Peoples Heritage Financial Group 27,700 521
PMI Group, Inc. (The) 3,000 188
PNC Bank Corp. 9,300 536
Post Properties, Inc. 700 29
Price (T. Rowe) & Associates, Inc. 1,600 61
Provident Cos., Inc. 8,100 324
Providian Financial Corp. 38,850 3,632
Regions Financial Corp. 2,400 91
Republic of New York Corp. 8,500 580
Ryder System, Inc. 60,300 1,568
SAFECO Corp. 13,200 582
Schwab (Charles) Corp. 31,250 3,434
SEI Corp. 200 18
SLM Holding Corp. 7,500 344
SouthTrust Corp. 13,200 506
Sovereign Bancorp, Inc. 17,200 210
Summit Bancorp 14,100 590
SunGard Data Systems (a) 17,000 587
SunTrust Banks, Inc. 22,000 1,528
TCF Financial Corp. 2,800 78
Torchmark Corp. 17,600 601
Transamerica Financial Corp. 4,200 315
Transatlantic Holdings, Inc. 1,400 105
Travelers Property Casualty Corp.
Class A 11,900 466
Trustmark Corp. 1,300 30
U.S. Bancorp 59,500 2,023
U.S. Trust Corp. 1,200 111
UnionBanCal Corp. 27,600 997
UNUM Corp. 4,600 252
Waddell & Reed Financial, Inc.
Class A 2,200 60
Washington Mutual, Inc. 197,108 6,973
Wells Fargo Co. 176,900 7,562
Zions Bancorp 5,100 324
-----------
288,868
-----------
HEALTH CARE - 10.5%
Aetna, Inc. 36,900 3,300
Allergan, Inc. 10,700 1,188
ALZA Corp. (a) 53,600 2,727
American Home Products Corp. 130,400 7,498
Amgen, Inc. (a) 55,500 3,375
Andrx Corp. (a) 400 31
AstraZeneca Group PLC - ADR 38,000 1,489
Bausch & Lomb, Inc. 5,900 451
Baxter International, Inc. 89,600 5,432
Bergen Brunswig Corp. Class A 38,350 662
4 Diversified Equity Fund
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- -----------
Biogen, Inc. (a) 1,200 77
Biomet, Inc. 95,200 3,772
Bristol-Myers Squibb Co. 288,800 20,342
Cardinal Health, Inc. 44,641 2,863
Columbia/HCA Healthcare Corp. 318,300 7,261
DENTSPLY International, Inc. 3,100 90
Express Scripts, Inc. Class A (a) 8,100 488
Guidant Corp. 2,300 118
HCR Manor Care, Inc. (a) 20,600 498
HEALTHSOUTH Corp. (a) 9,800 146
ICN Pharmaceuticals, Inc. 14,500 467
IVAX Corp. (a) 15,700 222
Johnson & Johnson 94,800 9,290
Lilly (Eli) & Co. 35,300 2,528
Lincare Holdings, Inc. (a) 200 5
Mallinckrodt, Inc. 36,700 1,335
McKesson HBOC, Inc. 136,442 4,383
Meditrust Cos. 2,300 30
Medtronic, Inc. 22,000 1,713
Merck & Co., Inc. 190,400 14,090
Mylan Laboratories, Inc. 210,600 5,581
Oxford Health Plans, Inc. (a) 11,700 181
PacifiCare Health Systems, Inc.
Class B (a) 27,700 1,993
Pfizer, Inc. 128,600 14,114
Pharmacia & Upjohn, Inc. 111,200 6,318
Quintiles Transnational Corp. (a) 49,100 2,059
Schering-Plough Corp. 273,300 14,485
St. Jude Medical, Inc. (a) 7,400 264
Tenet Healthcare Corp. (a) 20,900 388
Triad Hospitals, Inc. (a) 8,475 114
United Healthcare Corp. 1,300 81
US Bioscience, Inc. (a) 514 5
Warner-Lambert Co. 282,400 19,592
-----------
161,046
-----------
INTEGRATED OILS - 2.8%
Amerada Hess Corp. 59,900 3,564
Ashland, Inc. 48,200 1,934
Atlantic Richfield Co. 8,600 719
Chevron Corp. 5,200 495
Coastal Corp. 64,000 2,560
Exxon Corp. 138,300 10,666
Kerr-McGee Corp. 10,600 532
Mobil Corp. 29,700 2,940
Phillips Petroleum Co. 38,500 1,937
Royal Dutch Petroleum Co. 17,100 1,030
Texaco, Inc. 109,400 6,838
Unocal Corp. 90,300 3,578
USX-Marathon Group 182,900 5,956
-----------
42,749
-----------
MATERIALS AND PROCESSING - 6.3%
Air Products & Chemicals, Inc. 46,100 1,856
Albemarle Corp. 2,300 53
Alcan Aluminum, Ltd. 10,600 339
Alcoa, Inc. 41,100 2,543
American Standard Cos., Inc. (a) 8,800 422
Archer-Daniels-Midland Co. 45,400 701
Armstrong World Industries, Inc. 7,000 405
Avery Dennison Corp. 11,200 676
Boise Cascade Corp. 15,383 660
Cabot Corp. 17,200 416
Centex Corp. 35,200 1,322
Champion International Corp. 8,400 402
Consolidated Papers, Inc. 11,500 308
Crompton & Knowles Corp. 1,200 23
Crown Cork & Seal Co., Inc. 12,300 351
Dow Chemical Co. 34,000 4,314
du Pont (E.I.) de Nemours & Co. 42,500 2,903
Eastman Chemical Co. 11,100 574
Engelhard Corp. 27,900 631
Fluor Corp. 14,000 567
FMC Corp. (a) 19,800 1,353
Fort James Corp. 67,600 2,560
Freeport-McMoRan Copper &
Gold, Inc. Class B 13,000 233
Georgia-Pacific Group 48,324 2,289
Goodrich (B.F.) Co. 53,200 2,261
Great Lakes Chemical Corp. 26,500 1,221
Harsco Corp. 19,100 611
Illinois Tool Works, Inc. 31,700 2,599
IMC Global, Inc. 70,300 1,239
International Paper Co. 108,074 5,458
Lafarge Corp. 16,700 592
Louisiana Pacific Corp. 20,900 496
Lubrizol Corp. 8,500 232
Mead Corp. 2,100 88
Millennium Chemicals, Inc. 10,800 254
Minnesota Mining &
Manufacturing Co. 6,200 539
Mohawk Industries, Inc. (a) 9,200 279
Monsanto Co. 113,300 4,468
Nalco Chemical Co. 8,800 457
Nucor Corp. 21,000 996
Owens Corning 56,000 1,925
Owens-Illinois, Inc. (a) 14,100 461
Pentair, Inc. 5,500 252
Phelps Dodge Corp. 66,900 4,144
Praxair, Inc. 59,200 2,897
Reynolds Metals Co. 45,700 2,696
Rohm & Haas Co. 1,700 73
Diversified Equity Fund 5
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- -----------
Sealed Air Corp. New (a) 27,900 1,810
Sherwin-Williams Co. 175,200 4,862
Sigma Aldrich Corp. 12,400 427
Smurfit-Stone Container Corp. (a) 25,000 513
Sonoco Products Co. 37,820 1,132
Southdown, Inc. 2,300 148
Temple-Inland, Inc. 12,200 833
Tyco International, Ltd. 244,484 23,165
Union Carbide Corp. 13,700 668
USG Corp. 15,400 862
USX-U.S. Steel Group 3,900 105
Valspar Corp. 1,100 42
Vulcan Materials Co. 9,900 478
W.R. Grace & Co. New (a) 54,900 1,009
Waters Corp. (a) 6,600 351
Westvaco Corp. 11,500 334
Willamette Industries, Inc. 9,700 447
Witco Corp. 10,000 200
-----------
97,525
-----------
MISCELLANEOUS - 0.2%
AMB Property Corp. 500 12
Archstone Communities Trust 800 18
Arden Realty Group, Inc. 2,200 54
Avalonbay Communities, Inc. 2,100 78
CarrAmerica Realty Corp. 2,500 63
Convergys Corp. NPV (a) 11,800 227
Crestline Capital Corp. (a) 3,010 51
Duke Realty Investments, Inc. 38,800 875
Equity Office Properties Trust 3,700 95
Equity Residential
Properties Trust REIT 2,200 99
FBR Asset Investment Corp. (a) 29,600 400
Host Marriott Corp. 40,326 479
HRPT Properties Trust 3,700 57
Prison Realty Corp. 2,012 20
ProLogis Trust 2,200 45
Public Storage, Inc. 2,900 81
Safety-Kleen Corp. (a) 8,200 149
ServiceMaster Co. 11,200 210
Simon Property Group, Inc. 2,700 69
-----------
3,082
-----------
OTHER ENERGY - 1.6%
Apache Corp. 27,200 1,061
Baker Hughes, Inc. 3,200 107
BEC Energy 6,200 256
BP Amoco PLC - ADR 52,933 5,743
Conoco, Inc. Class A 132,500 3,693
Constellation Energy Group, Inc. 75,000 2,222
El Paso Energy Corp. 24,300 855
Enron Oil & Gas Co. 31,700 642
ENSCO International, Inc. 22,200 443
Noble Drilling Corp. (a) 4,700 93
Occidental Petroleum Corp. 31,400 663
PennzEnergy Co. 600 10
R&B Falcon Corp. (a) 15,600 146
Sempra Energy 58,800 1,330
Sunoco, Inc. 55,900 1,687
Tidewater, Inc. 28,800 878
Tosco Corp. 94,200 2,443
Transocean Offshore, Inc. 52,900 1,389
Ultramar Diamond Shamrock Corp. 37,600 820
Union Pacific Resources Group, Inc. 24,900 406
-----------
24,887
-----------
PRODUCER DURABLES - 6.0%
Allied Waste Industries, Inc. (a) 4,200 83
AlliedSignal, Inc. 13,900 876
Applied Materials, Inc. (a) 95,100 7,026
Briggs & Stratton Corp. 12,400 716
Caterpillar, Inc. 150,000 9,000
Cordant Technologies, Inc. 2,500 113
Crane Co. 12,150 382
Cummins Engine Co., Inc. 11,800 674
Deere & Co. 98,300 3,895
Emerson Electric Co. 900 57
General Electric Co. 180,600 20,408
Gulfstream Aerospace Corp. (a) 17,900 1,209
Honeywell, Inc. 11,400 1,321
Ingersoll-Rand Co. 89,750 5,800
Johnson Controls, Inc. 21,500 1,490
KLA Instruments Corp. (a) 30,900 2,003
Lexmark International Group, Inc.
Class A (a) 9,800 647
Litton Industries, Inc. (a) 12,400 890
Lockheed Martin Corp. 173,100 6,448
Miller (Herman), Inc. 5,100 107
Molex, Inc. 2,575 95
National Service Industries, Inc. 5,800 209
Northrop Grumman Corp. 28,700 1,903
Novellus Systems, Inc. (a) 13,000 886
Pall Corp. 21,600 479
Parker-Hannifin Corp. 3,700 169
Pitney Bowes, Inc. 20,100 1,291
Pulte Corp. 5,600 129
Rockwell International Corp. 5,700 346
Snap-On Tools Corp. 4,800 174
Solectron Corp. (a) 10,900 727
Teradyne, Inc. (a) 8,600 617
Thermo Instrument Systems, Inc. (a) 6,000 96
Thomas & Betts Corp. 7,300 345
6 Diversified Equity Fund
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Uniphase Corp. (a) 9,500 1,577
United Technologies Corp. 89,500 6,416
Waste Management, Inc. 47,000 2,526
WESCO International, Inc. (a) 5,200 103
Xerox Corp. 198,700 11,736
-----------
92,969
-----------
TECHNOLOGY - 15.9%
3Com Corp. (a) 6,200 165
Adaptec, Inc. (a) 1,300 46
ADC Telecommunications, Inc. (a) 9,700 441
Adobe Systems, Inc. 5,400 443
Altera Corp. (a) 35,300 1,297
America Online, Inc. (a) 59,200 6,542
American Management
Systems, Inc. (a) 700 22
Apple Computer, Inc. (a) 63,100 2,922
Arrow Electronics, Inc. (a) 34,600 657
Ask Jeeves, Inc. (a) 400 6
At Home Corp. Series A (a) 2,800 151
Avnet, Inc. 5,400 251
BMC Software, Inc. (a) 46,800 2,524
Cadence Design Systems, Inc. (a) 12,100 154
CIENA Corp. (a) 1,900 57
Cisco Systems, Inc. (a) 474,650 30,585
Citrix Systems, Inc. (a) 3,000 169
CNET, Inc. (a) 900 52
COMPAQ Computer Corp. 225,000 5,330
Computer Associates
International, Inc. 92,000 5,060
Computer Sciences Corp. (a) 400 28
Compuware Corp. (a) 83,300 2,645
Conexant Systems, Inc. (a) 1,400 81
Cooper Industries, Inc. 5,800 302
Dell Computer Corp. (a) 507,200 18,735
EarthLink Network, Inc. (a) 21,000 1,290
Electronic Data Systems Corp. 71,938 4,069
EMC Corp. (a) 190,000 10,450
Galileo International, Inc. 20,300 1,085
Gateway, Inc. (a) 700 41
General Instrument Corp. (a) 10,400 442
General Motors Corp. Class H (a) 4,400 248
Hewlett-Packard Co. 66,700 6,703
IMS Health, Inc. 111,600 3,488
Inktomi Corp. (a) 6,100 802
Intel Corp. 409,756 24,355
International Business
Machines Corp. 185,300 23,950
Juniper Networks, Inc. (a) 1,600 238
Koninklijke (Royal) Philips Electronics
NV (a) 26,040 2,627
L-3 Communications
Holdings, Inc. (a) 2,600 126
Loral Space &
Communications, Ltd. (a) 23,400 421
LSI Logic Corp. (a) 46,100 2,126
Lucent Technologies, Inc. 302,765 20,399
Metromedia Fiber Network, Inc.
Class A (a) 2,100 75
Micron Technology, Inc. (a) 41,400 1,669
Microsoft Corp. (a) 322,500 29,065
MindSpring Enterprises, Inc. (a) 36,000 1,595
Motorola, Inc. 10,800 1,023
National Semiconductor Corp. (a) 31,400 795
New Era of Networks, Inc. (a) 4,900 215
Nortel Networks Corp. 29,900 2,596
Novell, Inc. (a) 20,600 546
Oracle Systems Corp. (a) 154,200 5,725
Parametric Technology Corp. (a) 4,800 67
PMC - Sierra, Inc. (a) 2,400 141
Quantum Corp. (a) 25,100 602
Qwest Communications
International, Inc. (a) 5,200 172
SCI Systems, Inc. (a) 4,700 223
Scientific-Atlanta, Inc. 51,700 1,861
Seagate Technology (a) 48,879 1,253
Siebel Systems, Inc. (a) 300 20
Sterling Commerce, Inc. (a) 3,200 117
Sterling Software, Inc. (a) 19,100 510
Sun Microsystems, Inc. (a) 47,600 3,278
Synopsys, Inc. (a) 8,400 463
Tandy Corp. 1,200 59
Tech Data Corp. (a) 7,200 275
Tellabs, Inc. (a) 18,600 1,257
Texas Instruments, Inc. 37,600 5,452
Textron, Inc. 33,400 2,749
Unisys Corp. (a) 22,300 868
Vishay Intertechnology, Inc. (a) 16,544 347
Yahoo!, Inc. (a) 2,400 413
-----------
244,956
-----------
UTILITIES - 8.2%
Aliant Communications, Inc. 200 9
Allegheny Energy, Inc. 19,700 632
Alliant Energy Corp. (a) 2,700 77
Ameren Corp. 16,400 629
American Electric Power Co., Inc. 8,700 327
American Tower Corp. Class A (a) 16,000 384
American Water Works, Inc. 13,500 415
Ameritech Corp. 9,200 676
AT&T Corp. 169,573 9,464
Bell Atlantic Corp. 214,200 14,003
Diversified Equity Fund 7
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- -----------
BellSouth Corp. 21,000 984
Calpine Corp. (a) 1,600 86
Carolina Power & Light Co. 9,900 424
Central & Southwest Corp. 75,800 1,772
CenturyTel, Inc. 92,700 3,685
Cinergy Corp. 17,100 547
Comcast Corp. Class A 4,300 154
Comcast Corp. Special Class A 94,600 3,636
Comsat Corp. Series 1 12,100 393
Consolidated Edison, Inc. 66,400 3,005
Cox Communications, Inc. Class A (a) 38,000 1,399
Crown Castle International Corp. (a) 14,000 291
Dominion Resources, Inc. 14,300 619
DTE Energy Co. 19,400 776
Edison International 11,200 300
Energy East Corp. 31,200 811
FirstEnergy Corp. 41,000 1,271
Florida Progress Corp. 3,800 157
FPL Group, Inc. 25,700 1,404
Frontier Corp. 3,600 212
GPU, Inc. 14,800 624
GTE Corp. 44,700 3,386
Kansas City Power & Light Co. 9,500 242
KeySpan Corp. (a) 4,692 124
Level 3 Communications, Inc. (a) 5,400 325
MCI WorldCom, Inc. (a) 270,700 23,280
MCN Energy Group, Inc. 5,200 108
Montana Power Co. 2,400 169
National Fuel & Gas Co. 800 39
New Century Energies, Inc. 3,000 116
Nextel Communications, Inc.
Class A (a) 40,000 2,008
Nokia Corp. - ADR 226,800 20,766
OGE Energy Corp. 7,100 169
Paging Network, Inc. (a) 148,200 713
Peco Energy Co. 44,000 1,843
PG&E Corp. 93,700 3,045
Pinnacle West Capital Corp. 24,800 998
Potomac Electric Power Co. 18,800 553
PP&L Resources, Inc. 5,800 178
Public Service Enterprise Group, Inc. 26,600 1,087
Questar Corp. 11,500 220
RCN Corp. (a) 8,300 345
Reliant Energy, Inc. NPV 20,700 572
SBC Communications, Inc. 80,700 4,681
Sprint Corp. 38,000 2,007
Texas Utilities Co. 15,400 635
U.S. West, Inc. 57,700 3,390
Unicom Corp. 66,300 2,557
United States Cellular Corp. (a) 400 21
UtiliCorp United, Inc. 13,500 328
Vodafone Group PLC - ADR 4,700 926
VoiceStream Wireless Corp. NPV (a) 700 20
Western Resources, Inc. 11,200 298
Western Wireless Corp. NPV
Class A (a) 2,600 70
Williams Cos. (The) 28,900 1,230
WinStar Communications, Inc. (a) 5,500 268
Wisconsin Energy Corp. 18,600 467
-----------
126,350
-----------
TOTAL COMMON STOCKS
(cost $1,050,202) 1,435,165
-----------
PREFERRED STOCKS - 0.1%
Sealed Air Corp. Series A New (conv.) 1,806
28,900 -----------
TOTAL PREFERRED STOCKS
(cost $1,096) 1,806
-----------
PRINCIPAL
AMOUNT
(000)
$
----------
SHORT-TERM INVESTMENTS - 6.7%
Frank Russell Investment Company Money
Market Fund,
due on demand (b) 96,891 96,891
United States Treasury Notes 6,606
5.875% due 07/31/99 (b)(c) 6,600 -----------
TOTAL SHORT-TERM INVESTMENTS
(cost $103,497) 103,497
-----------
8 Diversified Equity Fund
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
VALUE
(000)
$
-----------
TOTAL INVESTMENTS - 99.8%
(identified cost $1,154,795) 1,540,468
OTHER ASSETS AND LIABILITIES,
NET - 0.2% 3,016
-----------
NET ASSETS - 100.0% 1,543,484
===========
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
----------- --------------
FUTURES CONTRACTS
S&P 500 Index
expiration date 09/99 288 $ 3,524
--------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ 3,524
==============
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Held as collateral in connection with futures contracts purchased by the
Fund.
Abbreviations:
ADR - American Depositary Receipt
NPV - No Par Value
NV - Nonvoting
See accompanying notes which are an integral part of the financial statements.
Diversified Equity Fund 9
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments at market (identified cost $1,154,795) ............... $ 1,540,468
Cash ............................................................. 305
Foreign currency holdings (identified cost $19) .................. 19
Receivables:
Dividends and interest .......................................... 1,645
Investments sold ................................................ 16,969
Fund shares sold ................................................ 2,286
Daily variation margin on futures contracts ..................... 1,832
-------------
Total Assets .................................................. 1,563,524
LIABILITIES
Payables:
Investments purchased ............................. $ 14,555
Fund shares redeemed .............................. 4,498
Accrued fees to affiliates ........................ 983
Other accrued expenses ............................ 4
------------
Total Liabilities ............................................. 20,040
-------------
NET ASSETS ....................................................... $ 1,543,484
=============
NET ASSETS CONSIST OF:
Undistributed net investment income .............................. $ 1,717
Accumulated net realized gain (loss) ............................ 125,377
Unrealized appreciation (depreciation) on:
Investments ..................................................... 385,673
Futures contracts ............................................... 3,524
Shares of beneficial interest .................................... 272
Additional paid-in capital ....................................... 1,026,921
-------------
NET ASSETS ....................................................... $ 1,543,484
=============
NET ASSET VALUE, offering and redemption price per share:
Class C ($6,272,333 divided by 110,941 shares of $.01 par
value shares of beneficial interest outstanding) .............. $ 56.54
=============
Class E ($16,479,781 divided by 290,825 shares of $.01 par
value shares of beneficial interest outstanding) .............. $ 56.67
=============
Class S ($1,520,731,822 divided by 26,820,325 shares of $.01
par value shares of beneficial interest outstanding) .......... $ 56.70
=============
</TABLE>
See accompanying notes which ar in integral part of the financial statements.
10 Diversified Equity Fund
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF OPERATIONS
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Dividends .......................................................... $ 7,914
Dividends from Money Market Fund ................................... 1,727
Interest ........................................................... 161
----------
Total Investment Income .......................................... 9,802
EXPENSES
Advisory fees ........................................... $ 5,197
Administrative fees ..................................... 358
Custodian fees .......................................... 218
Distribution fees - Class C ............................. 8
Transfer agent fees ..................................... 499
Professional fees ....................................... 30
Registration fees - Class S ............................. 66
Shareholder servicing fees - Class C .................... 3
Shareholder servicing fees - Class E .................... 15
Trustees' fees .......................................... 5
Miscellaneous ........................................... 60
----------
Total Expenses ................................................... 6,459
----------
Net investment income ............................................... 3,343
----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ............................................. 103,330
Futures contracts ....................................... 6,908 110,238
----------
Net change in unrealized appreciation (depreciation) on:
Investments ............................................. 42,360
Futures contracts ....................................... 271
Foreign currency-related transactions ................... (1) 42,630
---------- ----------
Net realized and unrealized gain (loss) ............................ 152,868
----------
Net increase (decrease) in net assets resulting from operations ..... $ 156,211
==========
</TABLE>
See accompanying notes which are integral part of the financial statements.
Diversified Equity Fund 11
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
------------------- -----------------
<S> <C> <C>
OPERATIONS
Net investment income ............................................ $ 3,343 $ 7,673
Net realized gain (loss) ......................................... 110,238 92,820
Net change in unrealized appreciation (depreciation) ............. 42,630 174,452
------------------- -----------------
Net increase (decrease) in net assets resulting from operations .. 156,211 274,945
------------------- -----------------
DISTRIBUTIONS
From net investment income
Class C ......................................................... (1) --
Class E ......................................................... (10) (9)
Class S ......................................................... (1,724) (7,563)
From net realized gain on investments
Class C ......................................................... (5) --
Class E ......................................................... (71) (334)
Class S ......................................................... (10,393) (66,093)
------------------ ----------------
Net decrease from distributions .............................. (12,204) (73,999)
------------------ ----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ... 23,454 129,618
------------------ ----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ....................... 167,461 330,564
NET ASSETS
Beginning of period .............................................. 1,376,023 1,045,459
------------------ ----------------
End of period (including undistributed net investment income
of $1,717 and $109, respectively)................................. $ 1,543,484 $ 1,376,023
================== ================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
12 Diversified Equity Fund
<PAGE>
DIVERSIFIED EQUITY FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1999*
---------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD .............................. $ 52.04
---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) ....................................... (.10)
Net realized and unrealized gain (loss) on investments ........... 5.02
---------
Total Income From Investment Operations ........................ 4.92
---------
DISTRIBUTIONS
From net investment income ....................................... (.03)
From net realized gain on investments ............................ (.39)
---------
Total Distributions ............................................ (.42)
---------
NET ASSET VALUE, END OF PERIOD .................................... $ 56.54
=========
TOTAL RETURN (%)(a) .............................................. 9.53
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ...................... 6,272
Ratios to average net assets (%)(b):
Operating expenses ............................................. 1.88
Net investment income .......................................... (.48)
Portfolio turnover rate (%)(b) .................................. 97.51
* For the period January 27, 1999 (commencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) Average month-end shares outstanding were used for this calculation.
</TABLE>
Diversified Equity Fund 13
<PAGE>
DIVERSIFIED EQUITY FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1999* 1998 1997**
------------ ------------ ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........................ $ 51.40 $ 43.64 $ 45.55
------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) ................................. .06 .10 .06
Net realized and unrealized gain (loss) on investments .... 5.64 10.34 7.97
------------ ------------ ------------
Total Income From Investment Operations ................. 5.70 10.44 8.03
------------ ------------ ------------
DISTRIBUTIONS
From net investment income ................................ (.04) (.08) (.07)
From net realized gain on investments ..................... (.39) (2.60) (9.87)
------------ ------------ ------------
Total Distributions ..................................... (.43) (2.68) (9.94)
------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD .............................. $ 56.67 $ 51.40 $ 43.64
------------ ------------ ------------
TOTAL RETURN (%)(a) ......................................... 11.12 24.59 15.99
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ................ 16,480 9,007 2,839
Ratios to average net assets (%)(b):
Operating expenses ...................................... 1.13 1.33 1.63
Net investment income ................................... .23 .21 .10
Portfolio turnover rate (%)(b) ............................ 97.51 100.31 114.11
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
** For the period May 27, 1997 (commencement of sale) to December 31, 1997.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
14 Diversified Equity Fund
<PAGE>
DIVERSIFIED EQUITY FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------
1999* 1998 1997 1996 1995 1994
-------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........... $ 51.39 $ 43.64 $ 41.45 $ 38.62 $ 32.26 $ 34.88
-------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) .................... .12 .30 .37 .48 .60 .58
Net realized and unrealized gain (loss) on
investments................................. 5.64 10.34 12.06 8.15 10.63 (.49)
-------- --------- --------- --------- --------- ---------
Total Income From Investment Operations..... 5.76 10.64 12.43 8.63 11.23 .09
-------- --------- --------- --------- --------- ---------
DISTRIBUTIONS
From net investment income ................... (.06) (.29) (.37) (.48) (.60) (.58)
From net realized gain on investments ........ (.39) (2.60) (9.87) (5.32) (4.27) (2.13)
-------- --------- --------- --------- --------- ---------
Total Distributions ........................ (.45) (2.89) (10.24) (5.80) (4.87) (2.71)
-------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD ................. $ 56.70 $ 51.39 $ 43.64 $ 41.45 $ 38.62 $ 32.26
======== ========= ========= ========= ========= =========
TOTAL RETURN (%)(a) ............................ 11.25 25.11 31.32 23.29 35.17 (.01)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands).... 1,520,732 1,367,016 1,042,620 699,691 530,645 414,036
Ratios to average net assets (%)(b):
Operating expenses ......................... .90 .91 .92 .94 .95 .95
Net investment income ...................... .47 .62 .80 1.18 1.56 1.73
Portfolio turnover rate (%)(b) ............... 97.51 100.31 114.11 99.90 92.53 57.53
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
Diversified Equity Fund 15
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ----------
COMMON STOCKS - 95.9%
AUTO AND TRANSPORTATION - 5.4%
AAR Corp. 50,000 1,134
ABC Rail Products Corp. (a) 10,000 203
Airborne Freight Corp. 29,400 814
AirNet Systems, Inc. (a) 11,800 159
Alaska Air Group, Inc. (a) 20,400 852
Alexander & Baldwin, Inc. 6,200 137
America West Holding Corp.
Class B (a) 46,200 872
American Freightways Corp. (a) 30,300 591
Arvin Industries, Inc. 17,000 644
Avis Rent A Car, Inc. (a) 75,100 2,187
Bandag, Inc. 8,000 278
Borg-Warner Automotive, Inc. 5,300 292
Budget Group, Inc. Class A (a) 12,600 155
Carey International, Inc. New (a) 8,900 219
Coach USA, Inc. (a) 39,300 1,648
Coachmen Industries, Inc. 94,000 2,186
Consolidated Freightways Corp. (a) 38,600 495
Continental Airlines, Inc. Class B (a) 37,800 1,422
Covenant Transport, Inc. Class A (a) 200 3
Dollar Thrifty Automotive
Group, Inc. (a) 46,000 1,070
Federal-Mogul Corp. 8,100 421
Fleetwood Enterprises, Inc. 35,500 939
Hawker Pacific Aerospace (a) 6,200 14
Hertz Corp. Class A 16,400 1,017
Hunt (JB) Transportation
Services, Inc. 200 3
Keystone Automotive
Industries, Inc. (a) 8,000 138
Landair Corp. (a) 25,000 100
Landstar Systems, Inc. (a) 27,300 983
Lear Corp. (a) 23,500 1,169
M.S. Carriers, Inc. (a) 2,500 74
Mark VII, Inc. (a) 8,000 130
Midas, Inc. 9,700 275
Monaco Coach Corp. (a) 14,300 605
Monro Muffler Brake, Inc. (a) 20,000 158
MotivePower Industries, Inc. (a) 33,000 586
Myers Industries, Inc. 7,000 140
National R.V. Holdings, Inc. (a) 51,800 1,256
Navistar International Corp. (a) 17,100 855
Offshore Logistics, Inc. (a) 107,000 1,164
PACCAR, Inc. 15,450 825
Polaris Industries, Inc. 29,100 1,266
Roadway Express, Inc. 14,400 279
Skywest, Inc. 46,250 1,145
Swift Transportation Co., Inc. (a) 14,250 313
Tower Automotive, Inc. (a) 61,700 1,569
Transport Corp. of America (a) 12,000 149
Trinity Industries, Inc. 81,200 2,720
USA Truck, Inc. (a) 14,000 128
USFreightways Corp. 24,900 1,145
Varlen Corp. 5,100 205
Werner Enterprises, Inc. 6,000 124
Wynn's International, Inc. 10,000 183
Yellow Corp. (a) 32,300 562
----------
36,001
----------
CONSUMER DISCRETIONARY - 19.6%
Aaron Rents, Inc. 3,600 80
Abacus Direct Corp. (a) 20,000 1,799
Abercrombie & Fitch Co. Class A (a) 37,500 1,800
ACT Networks, Inc. (a) 29,250 497
Activision, Inc. New (a) 5,500 80
Ambassadors International, Inc. (a) 6,600 97
American Greetings Corp. Class A 80,900 2,437
Ames Department Stores, Inc. (a) 200 9
AnnTaylor Stores Corp. (a) 99,950 4,498
Applebee's International, Inc. 3,800 114
Authentic Fitness Corp. 4,500 79
Aztar Corp. (a) 18,400 169
BHC Communications, Inc. Class A 2,800 364
Big Flower Holdings, Inc. (a) 50,500 1,610
BJ's Wholesale Club, Inc. (a) 47,200 1,419
Blair Corp. 5,100 137
Bob Evans Farms, Inc. 9,500 188
BOLDER Technologies Corp. (a) 18,000 155
Bowne & Co., Inc. 28,100 365
Brinker International, Inc. (a) 8,500 231
Brown Shoe Co., Inc 7,700 167
Brunswick Corp. 50,000 1,394
Capstar Broadcasting Corp.
Class A (a) 100,000 2,738
Cato Corp. Class A 8,600 99
Cavanaughs Hospitality Corp. (a) 18,000 152
CDI Corp. (a) 8,300 283
CEC Entertainment, Inc. (a) 73,950 3,124
Central Newspapers, Inc. Class A 69,100 2,600
Central Parking Corp. 30,000 1,028
Championship Auto Racing
Teams, Inc. (a) 7,000 210
Chicos Fas, Inc. (a) 19,850 466
Children's Comprehensive
Services, Inc. (a) 25,000 169
Chris Craft Industries, Inc. (a) 19,858 936
Claire's Stores, Inc. 100,000 2,563
Cole National Corp. Class A (a) 15,000 119
Cornell Corrections, Inc. (a) 7,000 115
Correctional Services Corp. (a) 4,950 37
16 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Cost Plus, Inc. (a) 12,000 545
Cox Radio, Inc. Class A (a) 1,500 81
CSS Industries, Inc. (a) 3,600 101
Dan River, Inc. Class A (a) 21,000 155
Danka Business Systems - ADR (a) 166,000 897
Darden Restaurants, Inc. 11,700 255
Data Processing Corp. (a) 6,800 160
Department 56, Inc. (a) 36,400 978
DeVry, Inc. (a) 75,000 1,678
Diamond Technology
Partners, Inc. (a) 20,000 446
EduTrek International, Inc.
Class A (a) 20,000 95
Elder-Beerman Stores Corp. New (a) 67,750 495
Electronics Boutique
Holdings Corp. (a) 8,000 114
Emmis Broadcasting Corp.
Class A (a) 25,000 1,233
Ethan Allen Interiors, Inc. 12,800 483
Extended Stay America, Inc. (a) 3,000 36
Family Dollar Stores, Inc. 38,600 926
Foodmaker, Inc. (a) 100 3
Footstar, Inc. (a) 18,500 688
Fossil, Inc. (a) 88,700 4,269
Franklin Covey Co. (a) 6,200 46
Friedman's, Inc. Class A 5,100 44
Funco, Inc. (a) 10,000 184
Furniture Brands International, Inc. (a) 61,200 1,706
G & K Services, Inc. Class A 24,000 1,256
General Nutrition Cos., Inc. (a) 22,400 521
Grey Advertising, Inc. 5,225 1,719
GTECH Holdings Corp. (a) 25,300 596
Guitar Center, Inc. (a) 9,400 98
Handleman Co. (a) 97,300 1,149
Harland (John H.) Co. 41,900 835
Haverty Furniture Co., Inc. 4,700 166
Hearst-Argyle Television, Inc. (a) 44,600 1,070
Hollinger International, Inc. Class A 5,300 63
Hollywood Entertainment Corp. (a) 7,900 154
Hollywood Park, Inc. (a) 55,600 945
Houghton Mifflin Co. 12,400 584
IHOP Corp. New (a) 11,000 264
Interim Services, Inc. (a) 31,300 646
Iron Mountain, Inc. (a) 5,500 157
ITT Educational Services, Inc. (a) 50,000 1,303
K2, Inc. 5,800 52
Kellwood Co. 3,900 106
Knight-Ridder, Inc. 30,700 1,687
La-Z-Boy Inc. 11,000 253
Lamar Advertising Co. Class A (a) 40,000 1,635
Learning Tree International, Inc. (a) 16,000 175
Lee Enterprises, Inc. 50,000 1,525
Legato Systems, Inc. (a) 23,400 1,351
Linens 'N Things, Inc. (a) 49,400 2,161
Lithia Motors, Inc., Class A (a) 7,000 144
Lone Star Steakhouse & Saloon (a) 29,800 289
Mail-Well, Inc. (a) 18,200 295
Mandalay Resort Group (a) 114,500 2,419
Manpower, Inc. 10,600 240
Maxim Group, Inc. (a) 18,000 156
Mazel Stores, Inc. (a) 12,000 122
McClatchy Co. Class A 59,475 1,970
McGraw-Hill, Inc. 19,500 1,052
Media General, Inc. Class A 11,100 566
MeriStar Hospitality Corp. REIT 78,500 1,761
MeriStar Hotels & Resorts, Inc. (a) 45,000 155
Metzler Group, Inc. (a) 53,500 1,475
Michaels Stores, Inc. (a) 8,500 258
Movado Group, Inc. 2,600 67
Musicland Stores Corp. (a) 15,700 139
Nielsen Media Research (a) 40,000 1,170
O'Charleys, Inc. (a) 15,000 240
O'Sullivan Industries
Holdings, Inc. (a) 10,300 175
OfficeMax, Inc. (a) 83,000 996
Ogden Corp. 12,300 331
On Assignment, Inc. (a) 50,000 1,300
Oshkosh B' Gosh, Inc. Class A 15,000 310
Outback Steakhouse, Inc. (a) 1,800 70
Oxford Industries, Inc. 600 17
Pacific Sunwear of California (a) 90,225 2,199
Packaged Ice, Inc. (a) 25,000 148
Penton Media, Inc. 60,117 1,458
Pep Boys - Manny, Moe & Jack 15,800 342
Petco Animal Supplies, Inc. (a) 13,500 213
Pierce Leahy Corp. (a) 6,000 148
Pixar, Inc. NPV (a) 55,900 2,411
Plantronics, Inc. (a) 3,500 228
Playboy Enterprises, Inc. Class B (a) 3,500 93
Pomeroy Computer
Resources, Inc. (a) 12,800 178
Pre-paid Legal Services, Inc. (a) 30,000 816
Premark International, Inc. 22,900 859
Priceline.com, Inc. (a) 9,350 1,080
Quicksilver, Inc. (a) 90,700 2,364
Rainforest Cafe, Inc. (a) 24,500 124
RCM Technologies, Inc. (a) 10,000 129
RDO Equipment Co. Class A (a) 15,000 141
Reebok International, Ltd. (a) 37,200 693
Regis Corp. 45,000 861
RemedyTemp, Inc. Class A (a) 9,000 122
Rent-Way, Inc. (a) 42,500 1,047
Special Growth Fund 17
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ----------
Reynolds & Reynolds Co. Class A 50,200 1,170
Ross Stores, Inc. 69,100 3,468
Rubio's Restaurants, Inc. (a) 11,400 175
Ruby Tuesday, Inc. 11,500 219
Rural/Metro Corp. (a) 16,000 152
Russ Berrie & Co., Inc. 3,900 97
Russell Corp. 11,300 220
Ryan's Family Steak Houses, Inc. (a) 116,800 1,351
Saga Communications Class A (a) 8,300 155
Salton, Inc. (a) 11,300 565
SBS Broadcasting SA (a) 5,150 164
Schultz Sav-o Stores, Inc. 74,500 1,192
SCP Pool Corp. (a) 12,750 330
Scripps (E.W.) Co. Class A 30,900 1,470
Shaw Industries, Inc. (a) 59,600 983
ShopKo Stores, Inc. (a) 13,800 500
Specialty Equipment Cos., Inc. (a) 2,100 62
Spiegel, Inc. Class A (a) 100 1
Sport Supply Group, Inc. (a) 20,000 203
Springs Industries, Inc. 13,600 593
Stage Stores, Inc. (a) 27,000 176
Station Casinos, Inc. (a) 24,200 493
Steinway Musical Instruments, Inc. (a) 5,500 146
Talbots, Inc. 14,000 534
TETRA Technologies, Inc. New (a) 31,250 516
Tiffany & Co. 27,100 2,615
Timberland Co. Class A (a) 6,300 429
Tommy Hilfiger Corp. (a) 13,250 974
Toro Co. 7,300 287
TRM Copy Centers Corp. (a) 12,000 72
United Stationers, Inc. (a) 4,600 101
United Television, Inc. 11,350 1,190
Urban Outfitters, Inc. (a) 9,600 238
USinternetworking, Inc. (a) 15,350 644
Valassis Communications, Inc. (a) 41,950 1,536
Wackenhut Corp. 4,000 119
Wal-Mart Stores, Inc. 1,900 92
Washington Post Co. Class B 4,200 2,259
West Marine, Inc. (a) 11,200 163
WestPoint Stevens, Inc. 22,500 670
Wet Seal, Inc. Class A (The) (a) 6,600 185
Wiley (John) & Son Inc. Class A 4,200 73
Wilsons The Leather Experts, Inc. (a) 15,000 246
World Color Press, Inc. (a) 28,100 772
Zale Corp. (a) 37,900 1,515
----------
128,903
----------
CONSUMER STAPLES - 2.4%
Aurora Foods, Inc. (a) 35,000 613
Block Drug Co., Inc. Class A 24,575 1,024
Canandaigua Brands Inc. Class A (a) 11,200 587
Church and Dwight Co., Inc. 7,700 335
Coca-Cola Bottling Co. Consolidated 21,400 1,198
Coors (Adolph) Co. Class B 18,100 896
Corn Products International, Inc. 19,200 584
Earthgrains Co. 32,800 847
Golden State Vintners, Inc. Class B (a) 23,000 141
Hormel Foods Corp. 26,700 1,075
IBP, Inc. 86,700 2,059
International Multifoods Corp. 5,600 126
Nature's Sunshine Products, Inc. 12,400 132
Pepsi Bottling Group, Inc. (The) 45,700 1,054
Performance Food Group Co. (a) 3,600 98
Pilgrim's Pride Corp. 3,500 105
Ralcorp Holdings, Inc. (a) 21,200 341
Schweitzer-Mauduit
International, Inc. 9,000 135
Smucker (J.M.) Co. 2,700 60
Standard Commercial Corp. 22,300 131
SuperValu, Inc. 58,400 1,500
Tootsie Roll Industries, Inc. 30,900 1,194
U.S. Foodservice (a) 23,400 997
Universal Foods Corp. 20,600 434
----------
15,666
----------
FINANCIAL SERVICES - 17.5%
1st Source Corp. 4,950 158
Advanta Corp. Class A 15,500 280
Affiliated Computer Services, Inc. Class
A (a) 12,000 608
Affiliated Managers Group, Inc. (a) 6,500 196
Alleghany Corp. (a) 900 167
American Financial Group, Inc. 10,500 358
Amplicon, Inc. 10,000 138
Amresco, Inc. (a) 10,300 66
Amwest Insurance Group, Inc. 16,000 148
Andover Bancorp, Inc. 2,000 63
Area Bancshares Corp. 5,400 143
ARM Financial Group, Inc. Class A 11,400 97
Astoria Financial Corp. 78,400 3,440
BancWest Corp. New 2,700 100
Bank United Corp. Class A 10,000 401
Bankatlantic Bancorp, Inc. Class A 130,495 946
Bay View Capital Corp. 38,800 795
Bear Stearns Cos., Inc. 62,266 2,911
Berkley (W.R.) Corp. 35,050 876
BISYS Group, Inc. New (a) 52,200 3,054
BOK Financial Corp. (a) 10,000 250
Brookline Bancorp., Inc. 5,000 58
Capstead Mortgage Corp. 11,700 64
Centris Group, Inc. 138,800 1,405
Centura Banks, Inc. 8,100 457
18 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Charter One Financial, Inc. 42,000 1,166
Chartwell Re Corp. 10,600 197
Chicago Title Corp. 10,100 360
Chittenden Corp. 800 25
Citizens Banking Corp. 1,900 57
City National Corp. 38,700 1,449
Clark/Bardes Holdings, Inc. (a) 11,500 219
Colonial BancGroup, Inc. 96,000 1,338
Commerce Bancorp, Inc. 7,035 301
Commerce Bancshares, Inc. 10,665 429
Commonwealth Bancorp, Inc. 4,200 75
Compass Bancshares, Inc. 3,900 106
Concord EFS, Inc. (a) 16,400 694
Conning Corp. New 9,700 153
CORT Business Services Corp. (a) 5,600 134
Cullen Frost Bankers, Inc. 25,600 706
Dain Rauscher Corp. 20,200 1,093
Data Transmission Network Corp. (a) 5,000 141
Delphi Financial Group, Inc. (a) 20,342 730
Delta Financial Corp. (a) 17,700 113
Dime Bancorp, Inc. 112,600 2,266
Dime Community Bancorp, Inc. 7,900 182
Donaldson, Lufkin & Jenrette, Inc. 36,000 2,169
Doral Financial Corp. 99,250 1,706
Downey Financial Corp. 15,655 343
DST Systems, Inc. (a) 44,500 2,798
E.W. Blanch Holdings, Inc. 8,900 607
Edwards (A.G.), Inc. 35,300 1,138
Enhance Financial Services
Group, Inc. 12,100 239
Everest Reinsurance Holdings, Inc. 29,500 962
FBL Financial Group, Inc. Class A 7,200 140
Fidelity National Financial 6,490 136
Financial Security Assurance
Holdings,Ltd. 12,400 645
FINOVA Group, Inc. 3,000 158
First American Financial Corp. 28,000 501
First Indiana Corp. 8,000 171
First Republic Bank (a) 15,900 460
First Tennessee National Corp. 25,350 971
First Washington Bancorp, Inc. 2,310 46
FirstFed Financial Corp. (a) 10,400 200
Flagstar Bancorp, Inc. 10,000 251
FPIC Insurance Group, Inc. (a) 25,000 1,206
Freedom Securities Corp. 12,000 206
Fremont General Corp. 80,150 1,513
Gables Residential Trust 52,000 1,255
Golden State Bancorp, Inc. (a) 18,900 416
Greenpoint Financial Corp. 25,000 820
Hambrecht & Quist Group (a) 8,200 304
HCC Insurance Holdings, Inc. 12,000 272
HealthCare Financial Partners, Inc. (a) 24,200 829
Hibernia Corp. Class A 12,900 202
Hoenig Group, Inc. (a) 12,400 122
Home Port Bancorp, Inc. 200 5
Horace Mann Educators Corp. 40,000 1,088
Imperial Credit Industries, Inc. (a) 10,162 71
Independence Community Bank Corp. 19,900 264
Insurance Management Solutions
Group,Inc. (a) 16,000 136
Intercontinental Life Corp. (a) 12,800 118
Investors Financial Services Corp. 49,100 1,961
IPC Holdings, Ltd. 57,000 1,133
Itla Cap Corp. (a) 6,900 105
Jack Henry & Assocociates, Inc. 24,000 936
Jeffries Group, Inc. New 2,800 84
JSB Financial, Inc. 2,200 112
Klamath First Bancorp, Inc. 9,000 135
LandAmerica Financial Group, Inc. 21,700 624
Legg Mason, Inc. 94,000 3,619
Lehman Brothers Holdings, Inc. 24,800 1,544
Leucadia National Corp. 38,000 964
Liberty Financial Cos., Inc. 5,400 157
LINC Capital, Inc. (a) 14,000 123
Litchfield Financial Corp. 7,350 124
MAF Bancorp, Inc. 50,900 1,231
Markel Corp. (a) 8,000 1,496
Medical Assurance, Inc. (a) 3,200 90
Mercantile Bankshares Corp. 9,800 346
Metris Companies, Inc. 51,900 2,115
Midland Co. 3,200 81
Mississippi Valley Bancshares, Inc. 3,900 129
Mutual Risk Management, Ltd. 14,250 476
National City Bancorporation 5,500 113
National Commerce Bancorp 30,900 676
National Data Corp. 32,500 1,389
National Western Life Insurance Co.
Class A (a) 2,900 279
Nationwide Financial Services, Inc.
Class A 30,000 1,358
Net.B@nk, Inc. (a) 11,200 426
Northrim Bank 14,000 152
Ocean Financial Corp. 2,800 51
Ohio Casualty Corp. 8,300 299
Old National Bancorp 5,465 164
One Valley Bancorp
of West Virginia, Inc. 4,400 165
Orion Capital Corp. 14,000 502
Pacific Century Financial Corp. 14,300 308
Pacific Gulf Properties, Inc. 7,000 158
Paychex, Inc. 55,000 1,746
Penn Treaty American Corp. (a) 5,400 130
Special Growth Fund 19
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Pennsylvania Real Estate Investment
Trust 7,000 147
Peoples Heritage Financial Group 92,780 1,745
PFF Bancorp, Inc. (a) 3,300 62
PMI Group, Inc. (The) 26,300 1,652
Price (T. Rowe) & Associates, Inc. 50,000 1,916
Profit Recovery Group
International, Inc. (The) (a) 25,000 1,181
Protective Life Corp. 39,700 1,310
Provident Bankshares Corp. 3,000 70
PXRE Corp. 41,959 761
Queens County Bancorp 8,997 291
Radian Group, Inc. (a) 30,000 1,464
Reinsurance Group Of America 10,250 361
Reliance Bancorp, Inc. 7,800 215
Reliance Group Holdings, Inc. 52,300 389
RenaissanceRe Holdings, Ltd. 37,000 1,369
Republic of New York Corp. 26,800 1,827
Resource Bancshares Mortgage Group 18,400 186
Richmond County Financial Corp. 8,900 170
Riggs National Corp. 11,700 238
Roslyn Bancorp, Inc. 37,400 643
Ryder System, Inc. 29,100 757
Scottish Annuity & Life
Holdings, Ltd. 16,000 172
SCPIE Holdings, Inc. 2,100 69
Seacoast Financial Services Corp. (a) 14,000 158
Selective Insurance Group, Inc. 51,800 984
Silicon Valley Bancshares (a) 15,400 381
Sky Financial Group, Inc. 40,000 1,083
Smith (Charles E.) Residential
Realty, Inc. 40,000 1,358
Southwest Securities Group, Inc. 2,400 172
Sovereign Bancorp, Inc. 121,466 1,480
Sovran Self Storage, Inc. 38,200 1,029
Staten Island Bancorp, Inc. 17,600 317
Stewart Information Services Corp. 85,800 1,813
SunGard Data Systems (a) 46,200 1,594
Transatlantic Holdings, Inc. 26,000 1,948
Trustmark Corp. 42,000 961
UICI (a) 5,500 152
UMB Financial Corp. 1,600 68
Union Planters Corp. 31,475 1,406
United Fire & Casualty Co. 27,450 707
Washington Federal, Inc. 20,579 460
Webster Financial Corp. 59,800 1,621
Westamerica Bancorporation 30,000 1,092
WesterFed Financial Corp. 8,000 131
XL Capital, Ltd. Class A 23,464 1,325
Zions Bancorp 19,500 1,237
----------
115,554
----------
HEALTH CARE - 7.3%
Affymetrix, Inc. NPV (a) 25,000 1,225
Alkermes, Inc. (a) 35,000 801
Allergan, Inc. 17,000 1,887
Alpharma, Inc. Class A 56,350 2,004
AmeriSource Health Corp. Class A (a) 42,800 1,091
AmSurg Corp. Class A (a) 24,000 182
Anesta Corp. (a) 47,200 956
Apria Healthcare Group, Inc. (a) 41,100 699
ARV Assisted Living, Inc. (a) 30,000 120
Assisted Living Concepts, Inc. (a) 35,000 101
Ballard Medical Products 3,700 86
Bard (C.R.), Inc. 2,100 100
Bergen Brunswig Corp. Class A 12,000 207
Beverly Enterprises, Inc. New (a) 19,400 156
Bindley Western Industries, Inc. 51,733 1,193
Biosite Diagnostics, Inc. (a) 16,900 169
Cephalon, Inc. (a) 72,100 1,226
ChiRex, Inc. (a) 4,300 138
Cor Therapeutics, Inc. (a) 37,700 551
CorVel Corp. (a) 6,000 128
Express Scripts, Inc. Class A (a) 21,700 1,306
First Health Group Corp. (a) 61,000 1,312
Hanger Orthopedic Group, Inc. (a) 45,000 638
Health Management Associates
Class A (a) 60,000 675
Healthcare Services Group, Inc. (a) 15,200 148
IDEC Pharmaceuticals Corp. (a) 27,700 2,133
Immucor Corp. (a) 16,000 218
Immunex Corp. (a) 7,500 955
IVAX Corp. (a) 66,050 933
Jones Pharma, Inc. 58,600 2,304
Laser Vision Centers, Inc. (a) 14,900 937
Lincare Holdings, Inc. (a) 93,000 2,325
Lunar Corp. (a) 20,400 161
Mallinckrodt, Inc. 1,900 69
Maxxim Medical, Inc. (a) 4,800 112
Medicis Pharmaceutical Corp.
Class A. (a) 37,800 959
MedImmune, Inc. (a) 46,000 3,128
Medquist, Inc. (a) 26,400 1,153
Millennium Pharmaceuticals, Inc. (a) 16,000 575
Natural Alternatives
International, Inc. (a) 30,000 100
NBTY, Inc. (a) 25,000 162
New American Healthcare Corp. (a) 60,000 139
OEC Medical Systems, Inc. (a) 40,500 992
Owens & Minor, Inc., Holding Co. 9,300 102
Oxford Health Plans, Inc. (a) 52,500 814
PacifiCare Health Systems, Inc.
Class B (a) 34,400 2,475
20 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ----------
Patterson Dental Co. (a) 6,800 236
Priority Healthcare Corp. Class B (a) 16,350 564
ProMedCo Management Co. (a) 27,100 103
Protocol Systems, Inc. (a) 20,000 170
Quest Diagnostics, Inc. (a) 11,500 315
Renal Care Group, Inc. (a) 59,200 1,527
Respironics, Inc. (a) 8,400 127
Roberts Pharmaceutical Corp. (a) 9,800 235
Sepracor, Inc. (a) 15,000 1,214
St. Jude Medical, Inc. (a) 700 25
STAAR Surgical Co. New (a) 18,000 237
Steris Corp. (a) 55,000 1,066
Sunrise Assisted Living, Inc. (a) 30,000 1,043
Techne Corp. (a) 3,800 96
Trigon Healthcare, Inc. (a) 27,700 1,008
U.S. Vision, Inc. New (a) 10,800 56
United Payors & United
Providers, Inc. (a) 5,200 121
Universal Health Services, Inc.
Class B (a) 6,200 296
UroCor, Inc. (a) 20,000 98
VISX, Inc. (a) 20,400 1,617
Zoll Medical Corp. (a) 12,000 141
----------
48,140
----------
INTEGRATED OILS - 0.4%
Cross Timbers Oil Co. 89,500 1,331
Equitable Resources, Inc. 7,800 294
Giant Industries, Inc. 48,600 483
Tesoro Petroleum Corp. (a) 8,000 128
TransMontaigne, Inc. (a) 13,300 167
----------
2,403
----------
MATERIALS AND PROCESSING - 8.7%
ACX Technologies, Inc. (a) 11,800 192
AK Steel Holding Corp. 36,800 828
Albany International Corp. Class A (a) 11,158 232
Albemarle Corp. 8,200 190
AMCOL International Corp. 5,000 72
Ameron, Inc. 1,500 66
Applied Extrusion
Technologies, Inc. (a) 22,000 165
AptarGroup, Inc. 68,600 2,058
Ball Corp. 32,900 1,390
Banta Corp. 56,800 1,193
Boise Cascade Corp. 71,500 3,066
Bowater, Inc. 2,000 95
Brady Corp. Class A 5,300 172
Brush Wellman, Inc. 4,100 74
Building Materials Holding Corp. (a) 12,000 137
BWay Corp. (a) 7,500 107
Cambrex Corp. 15,900 417
Carbide/Graphite
Group, Inc. (The) (a) 11,000 157
Centex Construction Products, Inc. 44,500 1,519
Centex Corp. 69,500 2,611
Channell Commercial Corp. (a) 18,000 172
Chemed Corp. 2,400 80
Chesapeake Corp. 7,400 277
Citation Corp. (a) 12,000 193
Cleveland-Cliffs, Inc. 3,500 113
Commercial Metals Co. 12,400 353
Cyprus Amax Minerals Co. 53,800 817
Dayton Superior Corp. Class A (a) 8,000 149
Dexter Corp. 13,800 563
Easco, Inc. 12,000 126
Engle Homes, Inc. 10,200 139
Ethyl Corp. 26,600 160
Florida Rock Industries, Inc. 5,500 250
FMC Corp. (a) 3,900 266
Fuller (H.B.) Co. 3,300 225
Geon Co. 19,000 613
Giant Cement Holding, Inc. (a) 5,000 113
Granite Construction, Inc. 13,000 381
Great Lakes Chemical Corp. 1,800 83
Hanna (M.A.) Co. 10,000 164
Harsco Corp. 9,200 294
Hexcel Corp. (a) 15,100 153
Hussmann International, Inc. 14,800 245
IMC Global, Inc. 4,500 79
IMCO Recycling, Inc. 9,000 154
Insituform Technologies, Inc.
Class A (a) 5,000 107
Intermet Corp. 18,400 276
International Specialty
Products, Inc. (a) 8,200 84
Ionics, Inc. (a) 2,100 77
Jacob's Engineering Group, Inc. (a) 10,800 410
Kaydon Corp. 36,000 1,211
Lafarge Corp. 41,800 1,481
Lesco, Inc. 13,000 242
Lone Star Industries, Inc. 23,200 871
Louisiana Pacific Corp. 53,700 1,275
Lubrizol Corp. 29,600 807
MacDermid, Inc. 25,000 1,163
Meritage Corp. (a) 11,000 120
Millennium Chemicals, Inc. 37,800 891
Minerals Technologies, Inc. 40,500 2,260
Mississippi Chemical Corp. New 7,900 78
Mohawk Industries, Inc. (a) 11,000 334
Morrison Knudsen Corp. (a) 10,800 111
Special Growth Fund 21
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ----------
Mueller Industries, Inc. (a) 23,300 791
NCH Corp. 1,300 64
NCI Building Systems, Inc. (a) 23,600 504
NN Ball & Roller, Inc. 25,000 144
Nortek, Inc. (a) 27,200 852
Northland Cranberries, Inc. Class A 12,000 101
Olin Corp. 20,800 274
OM Group 9,100 314
Oregon Steel Mills, Inc. 15,900 212
Pan Pacific Retail Properties, Inc. 8,000 155
Penford Corp. 10,300 165
Phelps Dodge Corp. 3,300 204
Plum Creek Timber Co. L.P. 35,500 1,105
Potlatch Corp. 15,600 685
Primex Technologies, Inc. 100 2
Quaker Fabric Corp. New (a) 30,000 126
Quanex Corp. 8,400 239
Reliance Steel & Aluminum Co. 6,200 242
Rock of Ages Corp. Class A (a) 15,000 153
Rock-Tenn Co. Class A 5,200 87
RPM, Inc. (Ohio) 28,400 403
Ryerson Tull, Inc. 44,000 993
Schulman (A.), Inc. 45,300 770
Scotts Co. (The) Class A (a) 12,400 591
Shaw Group, Inc. (The) (a) 6,900 110
SIFCO Industries 63,000 520
Simpson Manufacturing Co., Inc. (a) 3,900 185
Southdown, Inc. 24,000 1,542
Spartech Corp. 6,200 196
SPS Technologies, Inc. (a) 2,500 94
St. Joe Co. (The) 59,500 1,607
Stone & Webster, Inc. 3,700 99
Synthetic Industries, Inc. (a) 700 21
Texas Industries, Inc. 34,250 1,327
Timken Co. 31,500 614
TJ International, Inc. 2,000 62
Universal Forest Products, Inc. 8,900 190
USG Corp. 73,400 4,110
USX-U.S. Steel Group 50,200 1,355
Valley National Gases, Inc. (a) 31,100 128
Waters Corp. (a) 5,900 313
Webb (Del E.) Corp. 44,600 1,064
Wellman, Inc. 14,000 223
Wellsford Real Properties, Inc. (a) 18,400 198
Westvaco Corp. 27,200 789
Wolverine Tube, Inc. (a) 7,700 193
Worthington Industries, Inc. 10,900 178
----------
56,995
----------
MISCELLANEOUS - 1.5%
Agribrands International, Inc. (a) 6,600 261
ChoicePoint, Inc. (a) 22,000 1,477
Griffon Corp. (a) 101,800 795
IndyMac Mortgage Holdings, Inc. 43,900 702
International Telecommunication Data
Systems, Inc. (a) 56,700 900
Labor Ready, Inc. New (a) 13,800 449
LNR Property Corp. 65,500 1,400
MAXIMUS, Inc. (a) 40,000 1,150
Quest Education Corp. (a) 18,000 189
Rental Service Corp. (a) 8,400 240
Safety-Kleen Corp. New (a) 37,500 680
URS Corp. (a) 50,800 1,489
----------
9,732
----------
OTHER ENERGY - 3.5%
Apache Corp. 6,300 246
BJ Services Co. (a) 80,000 2,355
Coho Energy, Inc. (a) 35,480 18
Cooper Cameron Corp. (a) 52,850 1,959
Devon Energy Corp. 2,500 89
Dynegy, Inc. 11,900 242
Eagle Geophysical, Inc. (a) 790 1
Enron Oil & Gas Co. 9,400 190
Global Industries, Inc. (a) 119,200 1,527
Helmerich & Payne, Inc. 49,800 1,186
Horizon Offshore, Inc. (a) 27,300 208
Marine Drilling Co, Inc. (a) 15,000 205
MidAmerican Energy Holdings Co. New (a) 30,700 1,063
Mitcham Industries, Inc. (a) 30,000 118
Northwestern Corp. 8,300 201
Oceaneering International, Inc. (a) 9,000 145
OMNI Energy Services Corp. New (a) 29,100 102
ONEOK, Inc. 17,600 559
Pool Energy Services Co. (a) 96,000 1,950
Rowan Cos., Inc. (a) 64,000 1,180
Santa Fe International Corp. 88,000 2,023
Seacor Holdings, Inc. (a) 14,500 776
Seitel, Inc. (a) 42,900 694
Sunoco, Inc. 40,100 1,211
Supreme Industries, Inc. Class A (a) 15,788 153
Titan Exploration, Inc. New (a) 31,800 159
Transocean Offshore, Inc. 30,000 788
Ultramar Diamond Shamrock Corp. 50,500 1,102
Unit Corp. (a) 25,000 203
Valero Energy Corp. 41,200 883
Veritas DGC, Inc. (a) 25,000 458
22 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ----------
Vintage Petroleum, Inc. 90,050 968
Willbros Group, Inc. (a) 12,000 102
----------
23,064
----------
PRODUCER DURABLES - 7.4%
Advanced Lighting
Technologies, Inc. (a) 14,900 131
AFC Cable Systems, Inc. (a) 5,000 176
Ag-Chem Equipment Co., Inc. (a) 12,000 120
AGCO Corp. 23,100 261
American Homestar Corp. (a) 24,000 162
ANTEC Corp. (a) 35,000 1,116
Applied Power, Inc., Class A 5,000 137
Astec Industries, Inc. (a) 20,400 831
Belden, Inc. 18,800 450
Briggs & Stratton Corp. 35,300 2,039
C&D Technologies, Inc. 5,000 153
C-COR Electronics, Inc. (a) 6,600 184
Cascade Corp. 10,000 140
CFM Technologies, Inc. (a) 15,600 152
Champion Enterprises, Inc. (a) 52,200 972
Chart Industries, Inc. 16,200 128
Cohu, Inc. 47,000 1,663
Columbus McKinnon Corp. 47,000 1,105
CommScope, Inc. (a) 9,300 286
Cordant Technologies, Inc. 2,300 104
Crane Co. 9,000 283
Cummins Engine Co., Inc. 27,700 1,582
Curtiss-Wright Corp. 2,000 78
D.R. Horton, Inc. 109,800 1,825
Detroit Diesel Corp. 26,500 653
Donaldson Co., Inc. 9,800 240
DuPont Photomasks, Inc. (a) 5,500 263
EG&G, Inc. 6,000 214
FARO Technologies, Inc. (a) 25,000 119
Farr Co. (a) 15,750 165
FLIR Systems, Inc. (a) 8,000 120
Gardner Denver Machinery, Inc. (a) 12,000 194
Gemstar International Group, Ltd. (a) 15,000 979
GenCorp, Inc. 12,600 318
GenRad, Inc. (a) 40,800 849
Helix Technology Corp. 8,000 192
Holophane Corp. (a) 4,200 160
Itron, Inc. (a) 15,000 124
Kaman Corp. Class A 4,700 73
Kaufman & Broad Home Corp. 34,900 868
Kellstrom Industries, Inc. (a) 9,500 173
Kennametal, Inc. 33,200 1,029
KLA Instruments Corp. (a) 18,500 1,199
Kulicke & Soffa Industries, Inc. (a) 3,900 103
Lennar Corp. 61,500 1,476
Litton Industries, Inc. (a) 37,600 2,699
M.D.C. Holdings, Inc. 21,500 462
Manitowoc Co., Inc. 8,250 343
Middleby Corp. (The) (a) 28,000 175
Moog, Inc. (a) 10,500 361
MTS Systems Corp. 8,400 101
NACCO Industries, Inc. Class A 3,800 279
Newmark Homes Corp. (a) 20,000 103
NVR, Inc. (a) 33,400 1,743
OmniQuip International, Inc. 15,000 118
Optical Coating Laboratory, Inc. 15,000 1,253
OYO Geospace Corp. (a) 7,700 101
Pittway Corp. Class A 45,534 1,557
Plexus Corp. (a) 3,500 103
Powell Industries, Inc. (a) 16,000 148
Power-One, Inc. (a) 8,000 196
Pulte Corp. 73,300 1,690
Ryland Group, Inc. (The) 69,900 2,075
Smith (A.O.) Corp. 5,500 154
Spectra-Physics Lasers, Inc. (a) 18,600 152
SPX Corp. (a) 3,600 301
Starrett (L.S.) Co. Class A 30,100 809
Superior TeleCom, Inc. 350 9
TB Wood's Corporation 10,000 108
Tecumseh Products Co. Class A 16,500 998
Teradyne, Inc. (a) 16,382 1,175
Terex Corp. (a) 87,700 2,669
Toll Brothers, Inc. (a) 64,000 1,372
TransTechnology Corp. 5,600 110
TriStar Aerospace Co. (a) 18,000 149
U.S. Home Corp. (a) 17,900 635
Uniphase Corp. (a) 13,000 2,158
Worldtex, Inc. (a) 50,000 119
York International Corp. 11,300 484
----------
48,498
----------
TECHNOLOGY - 17.2%
Actel Corp. (a) 4,900 71
Adaptec, Inc. (a) 90,450 3,188
Advanced Digital Information (a) 32,000 1,294
Allaire Corp. (a) 27,700 1,885
Alliant Techsystems, Inc. (a) 3,400 294
Alloy Online, Inc. (a) 6,100 70
Alpha Industries, Inc. (a) 30,000 1,429
American Management
Systems, Inc. (a) 39,200 1,254
American Xtal Technology, Inc. (a) 23,350 547
Anixter International, Inc. (a) 14,800 270
Ardent Software, Inc. (a) 34,400 729
ARIS Corp. NPV (a) 15,000 125
Arrow Electronics, Inc. (a) 156,800 2,979
Special Growth Fund 23
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
AstroPower, Inc. (a) 12,000 204
Avant ! Corp. (a) 100 1
Avnet, Inc. 58,600 2,725
Bell & Howell Co. (a) 5,100 193
BindView Development Corp. (a) 39,000 924
Broadcom Corp. Class A (a) 4,550 657
Business Objects SA - ADR (a) 41,150 1,502
Cable Design Technologies Corp. (a) 64,300 993
Celeritek, Inc. (a) 30,000 184
CFI ProServices, Inc. (a) 10,500 116
Citrix Systems, Inc. (a) 28,200 1,584
Clarify, Inc. (a) 23,300 961
CNET, Inc. (a) 30,700 1,767
Coherent, Inc. (a) 8,000 149
Comverse Technology, Inc. (a) 30,000 2,261
Conexant Systems, Inc. (a) 8,200 476
Cotelligent Group, Inc. (a) 11,900 93
Covad Communications
Group, Inc. (a) 33,600 1,789
Dallas Semiconductor Corp. 15,100 763
Digital Link Corp. (a) 22,500 169
DII Group, Inc. (The) (a) 5,700 211
DSET Corp. (a) 14,000 194
DSP Group, Inc. (a) 20,000 719
E-Tek Dynamics, Inc. (a) 17,700 842
Electronics For Imaging, Inc. (a) 74,300 3,817
EMCORE Corp. NPV (a) 7,000 141
EMS Technologies, Inc. (a) 12,000 170
Exar Corp. (a) 12,000 297
Excel Technology, Inc. (a) 20,000 264
Exodus Communications, Inc. (a) 13,000 1,559
Extreme Networks, Inc. (a) 31,100 1,806
Fairchild Corp. (The) Class A (a) 26,800 342
Flycast Communications Corp. (a) 2,700 51
Go2Net, Inc. (a) 12,500 1,148
Harmon Industries, Inc. 7,000 136
Harmonic Lightwaves, Inc. (a) 15,400 884
Imation Corp. (a) 8,900 221
InfoSpace.com, Inc. (a) 6,200 291
Integrated Silicon Solution, Inc. (a) 144,700 832
InterVoice, Inc. (a) 71,300 1,025
IntraNet Solutions, Inc. (a) 41,200 348
ISS Group, Inc. (a) 35,000 1,317
ITI Technologies, Inc. (a) 14,300 322
Key Tronic Corp. (a) 30,000 165
Kronos, Inc. (a) 2,550 111
LCC International, Inc. Class A (a) 19,800 89
LSI Logic Corp. (a) 92,900 4,285
Lycos, Inc. (a) 10,800 992
Macromedia, Inc. (a) 45,650 1,621
Marshall Industries (a) 200 7
Mechanical Dynamics, Inc. (a) 25,000 147
Media Metrix, Inc. (a) 15,000 795
Mentor Graphics Corp. (a) 5,700 73
Mercury Interactive Corp. (a) 88,350 3,125
Micromuse, Inc. (a) 36,900 1,836
Micron Electronics, Inc. (a) 7,900 79
Microsemi Corp. (a) 20,000 188
MKS Instruments, Inc. NPV (a) 49,200 916
MMC Networks, Inc. (a) 45,700 2,039
MRV Communications, Inc. (a) 18,000 234
National Instruments Corp. (a) 26,950 1,081
Network Appliance, Inc. (a) 20,000 1,118
Network Solutions, Inc. Class A (a) 12,800 1,012
nFront, Inc. NPV (a) 2,700 41
NorthPoint Communications
Group, Inc. (a) 22,300 814
OrCad, Inc. (a) 12,200 155
Ortel Corp. (a) 10,000 104
OSI Systems, Inc. New (a) 27,800 139
Par Technology Corp. (a) 25,000 184
Park Electrochemical Corp. 14,700 423
Peregrine Systems, Inc. (a) 29,600 759
Pericom Semiconductor Corp.
New (a) 25,000 281
PMC - Sierra, Inc. (a) 21,000 1,238
Polycom, Inc. (a) 26,900 1,042
Progress Software Corp. (a) 31,600 893
Proxicom, Inc. (a) 7,500 190
Proxim, Inc. (a) 23,200 1,346
PSINET, Inc. (a) 50,000 2,184
QLogic Corp. (a) 16,650 2,198
Ramp Networks, Inc. (a) 11,200 160
Rational Software Corp. New (a) 104,900 3,455
RealNetworks, Inc. (a) 15,000 1,033
REMEC, Inc. (a) 12,000 191
RF Micro Devices, Inc. (a) 6,700 500
RF Monolithics, Inc. (a) 16,500 155
Safeguard Scientifics, Inc. (a) 10,000 620
ScanSource, Inc. (a) 8,000 173
Scientific-Atlanta, Inc. 53,600 1,930
SDL, Inc. (a) 3,800 194
SeaChange International, Inc. (a) 17,000 308
SERENA Software, Inc. (a) 12,000 161
Silicon Graphics, Inc. (a) 35,500 581
Siliconix, Inc. (a) 8,300 276
Smith-Gardner & Associates, Inc. (a) 34,750 278
Sterling Software, Inc. (a) 67,400 1,799
Stoneridge, Inc. (a) 6,300 85
Symbol Technologies, Inc. 13,000 479
Tech-Sym Corp. (a) 41,300 981
Tekelec, Inc. (a) 14,000 171
24 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ----------
THQ, Inc. (a) 40,200 1,152
TranSwitch Corp. (a) 32,075 1,517
Triquint Semiconductor, Inc. (a) 7,000 398
TSI International Software, Ltd. (a) 28,500 809
Vantive Corp. (The) (a) 13,000 147
Verio, Inc. (a) 36,600 2,540
Veritas Software Corp. (a) 20,000 1,898
Verity, Inc. (a) 41,200 2,230
Vishay Intertechnology, Inc. (a) 30,300 636
Vitesse Semiconductor Corp. (a) 46,100 3,129
WebTrends Corp. NPV (a) 13,100 603
Whittman-Hart, Inc. (a) 46,600 1,480
Xilinx, Inc. (a) 26,900 1,540
Xircom, Inc. (a) 34,100 1,025
----------
113,121
----------
UTILITIES - 5.0%
AGL Resources, Inc. 16,200 299
Alliant Energy Corp. (a) 23,000 653
Amdocs, Ltd. (a) 56,250 1,280
American Tower Corp. Class A (a) 8,700 209
American Water Works, Inc. 15,500 477
Aquarion Co. 5,550 193
Associated Group, Inc. (The)
Class A (a) 8,000 520
Aware, Inc. (a) 32,750 1,502
Black Hills Corp. 2,300 53
Calpine Corp. (a) 37,300 2,013
Central Hudson Gas & Electric Corp. 5,100 214
Cleco Corp. 5,600 170
Commonwealth Telephone Enterprises, Inc.
(a) 8,100 327
Conectiv, Inc. 41,300 1,009
Copper Mountain Networks, Inc. (a) 14,000 1,077
E'town Corp. 1,000 46
Energen Corp. 7,100 132
General Communication, Inc.
Class A (a) 22,000 149
Global TeleSystems Group, Inc. (a) 18,000 1,456
GST Telecommunications, Inc. (a) 12,000 158
Hawaiian Electric Industries, Inc. 35,100 1,245
Idacorp, Inc. 9,300 293
Illinova Corp. 10,600 289
Indiana Energy, Inc. 5,333 114
IXC Communications, Inc. (a) 21,000 822
Jones Intercable, Inc. Class A (a) 38,000 1,861
MDU Resources Group, Inc. 11,400 260
Metrocall, Inc. (a) 36,000 97
Midcoast Energy Resources, Inc. 10,000 161
Minnesota Power, Inc. 27,400 545
Nevada Power Co. 20,000 500
New Jersey Resources Corp. 2,300 86
Niagara Mohawk Holdings, Inc. (a) 69,400 1,114
NICOR, Inc. 13,100 499
NiSource, Inc. NPV 8,200 212
Northeast Utilities (a) 48,400 856
Northwest Natural Gas Co. 7,700 185
NUI Corp. 3,900 98
OGE Energy Corp. 19,900 473
Peoples Energy Corp. 11,200 422
Piedmont Natural Gas Co., Inc. 5,100 159
Pinnacle Holdings, Inc. (a) 7,000 171
Primus Telecommunications
Group, Inc. (a) 12,000 269
Public Service Co. of New Mexico 72,200 1,435
Questar Corp. 8,800 168
Rochester Gas & Electric Corp. 19,500 518
RSL Communications, Ltd.
Class A (a) 40,000 773
SBA Communications Corp. (a) 17,800 174
Sierra Pacific Resources 11,300 411
SIG Corp., Inc. 2,800 79
Southwest Gas Corp. 12,000 344
TNP Enterprises, Inc. 7,900 286
UGI Corp. 20,400 412
United Illuminating Co. 11,600 492
United States Cellular Corp. (a) 42,600 2,279
UtiliCorp United, Inc. 55,200 1,342
Western Resources, Inc. 33,300 887
Wisconsin Energy Corp. 12,100 303
----------
32,571
----------
TOTAL COMMON STOCKS
(cost $530,217) 630,648
----------
PRINCIPAL
AMOUNT
(000)
$
----------
LONG-TERM INVESTMENTS - 0.2%
Getty Images, Inc. (conv.)
4.750% due 06/01/03 800 760
Res-Care, Inc.
6.000% due 12/01/04 100 124
Titan Corp. (conv.)
8.250% due 11/01/03 75 226
Veterinary Centers of America, Inc.
5.250% due 05/01/06 110
150 ----------
TOTAL LONG-TERM INVESTMENTS
(cost $1,136) 1,220
----------
Special Growth Fund 25
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -----------
SHORT-TERM INVESTMENTS - 4.6%
Frank Russell Investment Company Money
Market Fund,
due on demand (b) 27,512 27,512
United States Treasury Notes
5.875% due 07/31/99 (b)(c) 2,650 2,653
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $30,165) 30,165
-----------
TOTAL INVESTMENTS - 100.7%
(identified cost $561,518) 662,033
OTHER ASSETS AND LIABILITIES,
NET - (0.7%) (4,333)
-----------
NET ASSETS - 100.0% 657,700
===========
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Held as collateral in connection with futures contracts purchased by the
Fund.
Abbreviations:
ADR - American Depositary Receipt
NPV - No Par Value
NV - Nonvoting
REIT - Real Estate Investment Trust
See accompanying notes which are an integral part of the financial statements.
26 Special Growth Fund
<PAGE>
Special Growth Fund
Statement of Net Assets, continued
June 30, 1999 (Unaudited)
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
--------- -----------------
FUTURES CONTRACTS
S & P 400 Midcap Index 111 $ 714
expiration date 09/99
S & P 500 Index 21
expiration date 09/99 197
-----------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ 911
=================
See accompanying notes which are an integral part of the financial statements.
Special Growth Fund 27
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
ASSETS
Investments at market (identified cost $561,518) ................... $ 662,033
Receivables:
Dividends and interest ........................................... 525
Investments sold ................................................. 5,629
Fund shares sold ................................................. 1,159
Daily variation margin on futures contracts ...................... 211
---------
Total Assets ................................................... 669,557
LIABILITIES
Payables:
Investments purchased ............................. $ 9,369
Fund shares redeemed .............................. 1,769
Accrued fees to affiliates ........................ 672
Other accrued expenses ............................ 47
---------
Total Liabilities .............................................. 11,857
---------
NET ASSETS ......................................................... $ 657,700
=========
NET ASSETS CONSIST OF:
Accumulated net investment loss .................................... $ (287)
Accumulated net realized gain (loss) .............................. 22,417
Unrealized appreciation (depreciation) on:
Investments ...................................................... 100,515
Futures contracts ................................................ 911
Shares of beneficial interest ...................................... 142
Additional paid-in capital ......................................... 534,002
---------
NET ASSETS ....................................................... $ 657,700
=========
NET ASSET VALUE, offering and redemption price per share:
Class C ($2,268,561 divided by 49,745 shares of $.01 par value
shares of beneficial interest outstanding) ................... $ 45.60
=========
Class E ($7,875,354 divided by 172,229 shares of $.01 par
value shares of beneficial interest outstanding) ............... $ 45.73
=========
Class S ($647,556,534 divided by 14,004,384 shares of $.01 par
value shares of beneficial interest outstanding) ............... $ 46.24
=========
See accompanying notes which are an integral part of the financial statements.
28 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF OPERATIONS
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
INVESTMENT INCOME
Dividends ....................................................... $ 2,694
Dividends from Money Market Fund ................................ 677
Interest ........................................................ 115
----------
Total Investment Income ....................................... 3,486
EXPENSES
Advisory fees ....................................... $ 2,674
Administrative fees ................................. 149
Custodian fees ...................................... 215
Distribution fees - Class C ......................... 3
Transfer agent fees ................................. 604
Professional fees ................................... 24
Registration fees - Class S ......................... 40
Shareholder servicing fees - Class C ................ 1
Shareholder servicing fees - Class E ................ 8
Trustees' fees ...................................... 3
Miscellaneous ....................................... 39
----------
Total Expenses ................................................. 3,760
----------
Net investment loss ............................................... (274)
----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ......................................... 22,247
Futures contracts ................................... 2,898 25,145
----------
Net change in unrealized appreciation
(depreciation) on:
Investments .......................................... 18,031
Futures contracts .................................... (992) 17,039
---------- ----------
Net realized and unrealized gain (loss) ........................... 42,184
----------
Net increase (decrease) in net assets resulting from operations ... $ 41,910
==========
See accompanying notes which are an integral part of the financial statements.
Special Growth Fund 29
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
------------------- -----------------
<S> <C> <C>
OPERATIONS
Net investment loss .......................................... $ (274) $ 189
Net realized gain (loss) ..................................... 25,145 25,694
Net change in unrealized appreciation (depreciation) ......... 17,039 (28,689)
------------------- -----------------
Net increase (decrease) in net assets resulting
from operations ........................................... 41,910 (2,806)
------------------- -----------------
DISTRIBUTIONS
From net investment income
Class S .................................................... -- (447)
In excess of net investment income
Class S .................................................... (13) (89)
From net realized gain on investments
Class E .................................................... (2) (257)
Class S .................................................... (178) (29,455)
In excess of net realized gain on investments
Class E .................................................... -- (24)
Class S .................................................... -- (2,783)
------------------- -----------------
Net decrease from distributions ........................... (193) (33,055)
------------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets
from share transactions .................................... 13,983 62,073
------------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS .................... 55,700 26,212
NET ASSETS
Beginning of period .......................................... 602,000 575,788
------------------- -----------------
End of period (including accumulated net loss
of $287 at June 30, 1999) .................................. $ 657,700 $ 602,000
=================== =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
30 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
---------
NET ASSET VALUE, BEGINNING OF PERIOD ............................. $ 42.17
---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)(c) ................................. (.19)
Net realized and unrealized gain (loss) on investments .......... 3.63
---------
Total Income From Investment Operations ....................... 3.44
---------
DISTRIBUTIONS
From net realized gain on investments ........................... (.01)
---------
NET ASSET VALUE, END OF PERIOD ................................... $ 45.60
=========
TOTAL RETURN (%)(a) .............................................. 8.17
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ...................... 2,269
Ratios to average net assets (%)(b):
Operating expenses ............................................ 2.30
Net investment income (loss) .................................. (1.16)
Portfolio turnover rate (%)(b) .................................. 124.03
* For the period January 27, 1999 (commencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) Average month-end shares outstanding were used for this calculation.
Special Growth Fund 31
<PAGE>
SPECIAL GROWTH FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1999* 1998 1997 1996**
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD ............................. $ 42.91 $ 45.42 $ 40.75 $ 43.48
------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)(c) ... (.07) (.17) (.13) (.02)
Net realized and unrealized gain
(loss) on investments ............ 2.90 .09 11.05 1.63
------------ ------------ ------------ ------------
Total Income From Investment
Operations ....................... 2.83 (.08) 10.92 1.61
------------ ------------ ------------ ------------
DISTRIBUTIONS
From net realized gain on
investments ...................... (.01) (2.43) (6.25) (4.34)
------------ ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD ...... $ 45.73 $ 42.91 $ 45.42 $ 40.75
============ ============ ============ ============
TOTAL RETURN (%)(a) ................ 6.61 .04 27.90 4.04
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in
thousands) ...................... 7,875 6,139 3,153 910
Ratios to average net assets (%)(b):
Operating expenses ............... 1.50 1.58 1.83 1.89
Net investment income (loss) .... (.34) (.39) (.51) (.38)
Portfolio turnover rate (%)(b) .... 124.03 129.19 97.19 118.13
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
** For the period November 4, 1996 (commencement of sale) to December 31, 1996.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 and December 31, 1996 are
annualized.
(c) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
32 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------
1999* 1998 1997 1996 1995 1994
----------- -------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD ............................. $ 43.34 $ 45.72 $ 40.79 $ 39.17 $ 33.47 $ 35.82
----------- -------------- ------------- ------------- ------------- -------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income
(loss)(c) ........................ (.02) .01 .08 .12 .18 .16
Net realized and unrealized gain
(loss) on investments ............ 2.93 .08 11.18 6.87 9.25 (.71)
----------- -------------- ------------- ------------- ------------- -------------
Total Income From Investment
Operations ..................... 2.91 .09 11.26 6.99 9.43 (.55)
----------- -------------- ------------- ------------- ------------- -------------
DISTRIBUTIONS
From net investment income ......... -- (.04) (.08) (.12) (.21) (.10)
From net realized gain on
investments ..................... (.01) (2.43) (6.25) (5.25) (3.52) (1.70)
----------- -------------- ------------- ------------- ------------- -------------
Total Distributions .............. (.01) (2.47) (6.33) (5.37) (3.73) (1.80)
----------- -------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD ...... $ 46.24 $ 43.34 $ 45.72 $ 40.79 $ 39.17 $ 33.47
=========== ============== ============= ============= ============= =============
TOTAL RETURN (%)(a) ................. 6.73 .42 28.77 18.65 28.52 (3.71)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in
thousands) ....................... 647,557 595,862 572,635 393,048 313,678 229,077
Ratios to average net assets (%)(b):
Operating expenses ............... 1.26 1.15 1.15 1.19 1.22 1.20
Net investment income (loss) ..... (.09) .03 .18 .28 .49 .50
Portfolio turnover rate (%)(b) ..... 124.03 129.19 97.19 118.13 87.56 55.40
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
Special Growth Fund 33
<PAGE>
EQUITY INCOME FUND
STATEMENT OF NET ASSETS
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ----------
COMMON STOCKS - 93.7%
AUTO AND TRANSPORTATION - 6.1%
AMR Corp. (a) 14,500 990
Delta Air Lines, Inc. 46,500 2,680
Ford Motor Co. 54,400 3,070
General Motors Corp. 63,300 4,178
Lear Corp. (a) 5,200 259
TRW, Inc. 10,600 582
UAL Corp. (a) 18,700 1,215
Union Pacific Corp. 28,800 1,679
----------
14,653
----------
CONSUMER DISCRETIONARY - 7.4%
Brinker International, Inc. (a) 11,000 299
Browning-Ferris Industries, Inc. 17,200 740
CBS Corp. (a) 44,700 1,942
Chris Craft Industries, Inc. (a) 10,609 500
Dayton Hudson Corp. 4,000 260
Deluxe Corp. 29,200 1,137
Eastman Kodak Co. 21,793 1,476
Fortune Brands, Inc. 19,100 790
Harcourt General, Inc. 9,900 510
Harrah's Entertainment, Inc. (a) 17,500 385
Hasbro, Inc. 17,000 475
Kmart Corp. (a) 121,200 1,992
Knight-Ridder, Inc. 14,000 769
Maytag Corp. 1,700 118
MediaOne Group, Inc. (a) 16,800 1,250
Premark International, Inc. 14,000 525
Sears Roebuck & Co. 29,300 1,306
Shaw Industries, Inc. (a) 16,600 274
Tribune Co. 15,300 1,333
Viacom, Inc. Class B (a) 8,500 374
Whirlpool Corp. 17,200 1,273
----------
17,728
----------
CONSUMER STAPLES - 3.1%
Albertson's, Inc. 20,628 1,064
Anheuser-Busch Cos., Inc. 1,500 106
ConAgra, Inc. 31,000 825
Heinz (H.J.) Co. 22,400 1,123
IBP, Inc. 48,700 1,157
Interstate Bakeries Corp. 20,500 460
PepsiCo, Inc. 20,800 805
SuperValu, Inc. 10,000 257
UST Corp. 28,800 842
Weis Markets, Inc. 20,400 798
----------
7,437
----------
FINANCIAL SERVICES - 26.4%
Allstate Corp. 111,040 3,984
Ambac Financial Group, Inc. 26,300 1,502
American Financial Group, Inc. 11,700 398
American General Corp. 18,200 1,372
Associates First Capital Corp. Class A 11,130 493
Astoria Financial Corp. 21,800 956
Bank of America Corp. 81,584 5,981
Bank One Corp. 37,500 2,234
BB&T Corp. 6,600 242
Bear Stearns Cos., Inc. 29,800 1,393
Chase Manhattan Corp. 60,636 5,253
Citigroup, Inc. 7,700 366
Comerica, Inc. 22,100 1,314
Conseco, Inc. 42,800 1,303
Countrywide Credit Industries, Inc. 25,800 1,103
Dime Bancorp, Inc. 43,100 867
Dow Jones & Co., Inc. 10,900 578
Dun & Bradstreet Corp. 9,100 322
Federal National Mortgage Association 26,100 1,785
First American Financial Corp. 33,000 590
First Data Corp. 11,200 548
Fleet Financial Group, Inc. 107,800 4,784
Fremont General Corp. 22,800 430
Golden West Financial Corp. 23,700 2,323
Hartford Financial Services
Group, Inc. (The) 29,400 1,714
Hartford Life, Inc. Class A 6,700 353
Jefferson-Pilot Corp. 8,800 582
Lehman Brothers Holdings, Inc. 6,100 380
Leucadia National Corp. 25,200 639
Lincoln National Corp. 2,600 136
M & T Bank Corp. 2,400 1,320
Morgan (J.P.) & Co., Inc. 9,500 1,335
Morgan Stanley Dean Witter & Co. 26,700 2,737
National City Corp. 34,700 2,273
Old Republic International Corp. 51,100 885
Pacific Century Financial Corp. 500 11
Paine Webber Group, Inc. 3,700 173
PNC Bank Corp. 14,000 807
Ryder System, Inc. 35,500 923
SouthTrust Corp. 5,700 218
Sovereign Bancorp, Inc. 63,700 776
SunTrust Banks, Inc. 10,000 694
Trustmark Corp. 13,000 297
UnionBanCal Corp. 37,600 1,358
Unitrin, Inc. 28,200 1,144
Washington Mutual, Inc. 87,688 3,102
Wells Fargo Co. 37,000 1,582
----------
63,560
----------
34 Equity Income Fund
<PAGE>
EQUITY INCOME FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- -----------
HEALTH CARE - 4.6%
Aetna, Inc. 15,400 1,377
Baxter International, Inc. 23,600 1,431
Bergen Brunswig Corp. Class A 30,200 521
Bristol-Myers Squibb Co. 18,600 1,310
Columbia/HCA Healthcare Corp. 76,600 1,748
Johnson & Johnson 10,000 980
Mallinckrodt, Inc. 33,000 1,200
McKesson HBOC, Inc. 24,300 781
PacifiCare Health Systems, Inc.
Class A (a) 1,700 122
PacifiCare Health Systems, Inc.
Class B (a) 18,400 1,324
Pharmacia & Upjohn, Inc. 2,800 159
-----------
10,953
-----------
INTEGRATED OILS - 7.3%
Amerada Hess Corp. 28,000 1,666
Ashland, Inc. 28,000 1,124
Chevron Corp. 8,600 819
Coastal Corp. 31,500 1,260
Conoco, Inc. Class A 56,300 1,569
Enron Oil & Gas Co. 23,900 484
Exxon Corp. 90,100 6,949
Mobil Corp. 11,500 1,138
Texaco, Inc. 21,900 1,369
Unocal Corp. 31,800 1,260
-----------
17,638
-----------
MATERIALS AND PROCESSING - 7.1%
Alcoa, Inc. 31,700 1,962
Centex Corp. 19,800 744
Dow Chemical Co. 17,800 2,258
du Pont (E.I.) de Nemours & Co. 17,900 1,223
FMC Corp. (a) 5,900 403
Fort James Corp. 32,900 1,246
Georgia-Pacific Corp. (Timber Group) 26,300 664
Georgia-Pacific Group 4,400 209
Goodrich (B.F.) Co. 19,900 846
Harsco Corp. 16,700 534
International Paper Co. 49,600 2,505
Mead Corp. 29,900 1,248
Mohawk Industries, Inc. (a) 16,700 507
Reynolds Metals Co. 17,200 1,015
USG Corp. 7,900 442
Vulcan Materials Co. 25,000 1,206
-----------
17,012
-----------
MISCELLANEOUS - 0.3%
Duke Realty Investments, Inc. 32,500 733
-----------
OTHER ENERGY - 2.0%
Constellation Energy Group 19,800 587
El Paso Energy Corp. 5,100 179
Sempra Energy 50,800 1,149
Sunoco, Inc. 17,900 540
Tidewater, Inc. 15,400 470
Tosco Corp. 62,000 1,608
Ultramar Diamond Shamrock Corp. 11,500 251
-----------
4,784
-----------
PRODUCER DURABLES - 6.4%
Briggs & Stratton Corp. 6,200 358
Caterpillar, Inc. 31,600 1,896
Crane Co. 5,200 163
Deere & Co. 47,900 1,898
Honeywell, Inc. 3,700 429
Ingersoll-Rand Co. 30,100 1,945
Johnson Controls, Inc. 12,400 859
Litton Industries, Inc. (a) 12,900 926
Lockheed Martin Corp. 26,900 1,002
Northrop Grumman Corp. 15,500 1,028
Raytheon Co. Class B 18,300 1,288
Tecumseh Products Co. Class A 18,400 1,113
Xerox Corp. 25,700 1,518
York International Corp. 23,400 1,002
-----------
15,425
-----------
TECHNOLOGY - 7.0%
Electronic Data Systems Corp. 34,962 1,978
General Dynamics Corp. 11,000 753
Hewlett-Packard Co. 10,400 1,045
Intel Corp. 28,082 1,669
International Business
Machines Corp. 72,500 9,371
Textron, Inc. 25,200 2,074
-----------
16,890
-----------
UTILITIES - 16.0%
Associated Group, Inc. (The)
Class A (a) 3,300 214
AT&T Corp. 67,850 3,787
Bell Atlantic Corp. 102,572 6,706
BellSouth Corp. 48,000 2,250
CenturyTel, Inc. 37,850 1,505
Consolidated Edison, Inc. 21,200 959
DTE Energy Co. 29,300 1,172
Edison International 60,500 1,618
Energy East Corp. 18,400 478
FirstEnergy Corp. 6,500 202
Equity Income Fund 35
<PAGE>
EQUITY INCOME FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- ---------
FPL Group, Inc. 400 22
GPU, Inc. 27,000 1,139
GTE Corp. 45,300 3,431
MCI WorldCom, Inc. (a) 26,500 2,279
Minnesota Power, Inc. 28,600 568
National Fuel Gas Co. 17,000 825
Peco Energy Co. 19,000 796
PG&E Corp. 61,100 1,986
Questar Corp. 8,900 170
SBC Communications, Inc. 72,700 4,217
Texas Utilities Co. 10,000 413
U.S. West, Inc. 37,400 2,197
Unicom Corp. 30,500 1,176
United States Cellular Corp. (a) 6,100 326
-------
38,436
-------
TOTAL COMMON STOCKS
(cost $186,430) 225,249
-------
PRINCIPAL
AMOUNT
(000)
$
---------
SHORT-TERM INVESTMENTS - 5.6%
Frank Russell Investment Company Money
Market Fund,
due on demand (b) 11,881 11,881
United States Treasury Notes (b)(c)
5.875% due 07/31/99 1,502 1,502
-------
TOTAL SHORT-TERM INVESTMENTS
(cost $13,383) 13,383
-------
TOTAL INVESTMENTS - 99.3%
(identified cost $199,813) 238,632
OTHER ASSETS AND LIABILITIES,
NET - 0.7% 1,671
-------
NET ASSETS - 100.0% 240,303
=======
(a) Nonincome-producing security
(b) At cost, which approximates market.
(c) Held as collateral in connection with futures contracts purchased by the
Fund.
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
--------- --------------
FUTURES CONTRACTS
S&P Barra Value Index
expiration date 09/99 34 $ 92
S&P 500 Index
expiration date 09/99 25 331
--------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ 423
========
See accompanying notes which are an integral part of the financial statements.
36 Equity Income Fund
<PAGE>
EQUITY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments at market (identified cost $199,813) ..................................................................... $ 238,632
Foreign currency holdings (identified cost $6) ....................................................................... 5
Receivables:
Dividends and interest ............................................................................................... 454
Investments sold ..................................................................................................... 6,084
Fund shares sold ..................................................................................................... 1,256
Daily variation margin on futures contracts .......................................................................... 256
---------
Total Assets ....................................................................................................... 246,687
LIABILITIES
Payables:
Investments purchased ...................................................................... $ 3,606
Fund shares redeemed ....................................................................... 2,532
Accrued fees to affiliates ................................................................. 224
Other accrued expenses ..................................................................... 22
---------
Total Liabilities .................................................................................................. 6,384
---------
NET ASSETS ............................................................................................................ $ 240,303
=========
NET ASSETS CONSIST OF:
Undistributed net investment income ................................................................................... $ 546
Accumulated net realized gain (loss) ................................................................................. 9,340
Unrealized appreciation (depreciation) on:
Investments .......................................................................................................... 38,819
Futures contracts .................................................................................................... 423
Foreign currency-related transactions ................................................................................ (1)
Shares of beneficial interest ......................................................................................... 56
Additional paid-in capital ............................................................................................ 191,120
---------
NET ASSETS ............................................................................................................ $ 240,303
=========
NET ASSET VALUE, offering and redemption price per share:
Class C ($741,593 divided by 17,403 shares of $.01 par value
shares of beneficial interest outstanding).......................................................................... $ 42.61
=========
Class E ($1,150,774 divided by 26,935 shares of $.01 par value
shares of beneficial interest outstanding).......................................................................... $ 42.72
=========
Class S ($238,410,160 divided by 5,603,849 shares of $.01 par value
shares of beneficial interest outstanding).......................................................................... $ 42.54
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Equity Income Fund 37
<PAGE>
EQUITY INCOME FUND
STATEMENT OF OPERATIONS
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Dividends .............................................................................................................. $ 2,247
Dividends from Money Market Fund ....................................................................................... 196
Interest ............................................................................................................... 37
--------
Total Investment Income .............................................................................................. 2,480
EXPENSES
Advisory fees ...................................................................................... $ 886
Administrative fees ................................................................................ 59
Custodian fees ..................................................................................... 87
Distribution fees - Class C ........................................................................ 1
Transfer agent fees ................................................................................ 218
Professional fees .................................................................................. 17
Registration fees - Class S ........................................................................ 29
Shareholder servicing fees - Class E ............................................................... 1
Trustees' fees ..................................................................................... 3
Miscellaneous ...................................................................................... 27
--------
Total Expenses ....................................................................................................... 1,328
--------
Net investment income ................................................................................................... 1,152
--------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ........................................................................................ 9,858
Futures contracts .................................................................................. 994
Foreign currency-related transactions .............................................................. 2 10,854
--------
Net change in unrealized appreciation (depreciation) on:
Investments ........................................................................................ 3,494
Futures contracts .................................................................................. 133
Foreign currency-related transactions .............................................................. (1) 3,626
-------- --------
Net realized and unrealized gain (loss) ............................................................ 14,480
--------
Net increase (decrease) in net assets resulting from operations ..................................... $ 15,632
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
38 Equity Income Fund
<PAGE>
EQUITY INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
------------------- -----------------
<S> <C> <C>
OPERATIONS
Net investment income ............................................................... $ 1,152 $ 3,335
Net realized gain (loss) ........................................................... 10,854 27,006
Net change in unrealized appreciation (depreciation) ................................ 3,626 (538)
------------------- -----------------
Net increase (decrease) in net assets resulting from operations.................... 15,632 29,803
------------------- -----------------
DISTRIBUTIONS
From net investment income
Class E ........................................................................... (2) (7)
Class S ........................................................................... (641) (3,291)
From net realized gain on investments
Class C ........................................................................... (1) --
Class E ........................................................................... (34) (56)
Class S ........................................................................... (7,761) (25,440)
------------------- -----------------
Net decrease from distributions ................................................. (8,439) (28,794)
------------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions........................ (18,126) 22,937
------------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS .......................................... (10,933) 23,946
NET ASSETS
Beginning of period ................................................................. 251,236 227,290
------------------- -----------------
End of period (including undistributed net investment income of
$546 and $37, respectively) ...................................................... $ 240,303 $ 251,236
=================== =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Equity Income Fund 39
<PAGE>
EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1999*
-------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ....................................................................... $ 40.38
-------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) ................................................................................ .01
Net realized and unrealized gain (loss) on investments .................................................... 3.64
-------
Total Income From Investment Operations ................................................................. 3.65
-------
DISTRIBUTIONS
From net investment income ................................................................................ (.08)
From net realized gain on investments ..................................................................... (1.34)
-------
Total Distributions ..................................................................................... (1.42)
-------
NET ASSET VALUE, END OF PERIOD ............................................................................. $ 42.61
=======
TOTAL RETURN (%)(a) ....................................................................................... 9.41
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ............................................................... 742
Ratios to average net assets (%)(b):
Operating expenses ...................................................................................... 2.11
Net investment income ................................................................................... .08
Portfolio turnover rate (%)(b) ........................................................................... 130.30
</TABLE>
* For the period January 27, 1999 (commencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) Average month-end shares outstanding were used for this calculation.
40 Equity Income Fund
<PAGE>
EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1999* 1998 1997 1996**
------------ ---------- ---------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ..................... $ 41.45 $ 41.43 $ 40.22 $ 41.86
------------ ---------- ---------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) .............................. .16 .37 .32 .10
Net realized and unrealized gain (loss) on investments .. 2.53 4.49 12.20 2.39
------------ ---------- ---------- --------
Total Income From Investment Operations ............... 2.69 4.86 12.52 2.49
------------ ---------- ---------- --------
DISTRIBUTIONS
From net investment income .............................. (.08) (.51) (.07) (.18)
From net realized gain on investments ................... (1.34) (4.33) (11.24) (3.95)
------------ ---------- ---------- --------
Total Distributions ................................... (1.42) (4.84) (11.31) (4.13)
------------ ---------- ---------- --------
NET ASSET VALUE, END OF PERIOD ........................... $ 42.72 $ 41.45 $ 41.43 $ 40.22
============ ========== ========== ========
TOTAL RETURN (%)(a) ..................................... 6.85 12.41 32.68 6.23
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ............. 1,151 745 338 122
Ratios to average net assets (%)(b):
Operating expenses .................................... 1.37 1.42 1.74 1.77
Net investment income ................................. .76 .90 .77 1.50
Portfolio turnover rate (%)(b) ......................... 130.30 149.63 139.33 106.40
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
** For the period November 4, 1996 (commencement of sale) to December 31, 1996.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
Equity Income Fund 41
<PAGE>
EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------
1999* 1998 1997 1996 1995 1994
-------- -------- -------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ..... $ 41.26 $ 41.08 $ 40.22 $ 38.43 $ 32.21 $ 35.90
-------- -------- -------- -------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) ............... .20 .55 .69 .82 .94 .90
Net realized and unrealized gain (loss)
on investments ....................... 2.53 4.49 12.11 7.03 10.08 (.70)
-------- -------- -------- -------- -------- ---------
Total Income From Investment Operations 2.73 5.04 12.80 7.85 11.02 .20
-------- -------- -------- -------- -------- ---------
DISTRIBUTIONS
From net investment income .............. (.11) (.53) (.70) (.83) (.97) (.89)
From net realized gain on investments.... (1.34) (4.33) (11.24) (5.23) (3.83) (3.00)
-------- -------- -------- -------- --------- ---------
Total Distributions ................... (1.45) (4.86) (11.94) (6.06) (4.80) (3.89)
-------- -------- -------- -------- --------- ---------
NET ASSET VALUE, END OF PERIOD ........... $ 42.54 $ 41.26 $ 41.08 $ 40.22 $ 38.43 $ 32.21
======== ======== ======== ======== ========= =========
TOTAL RETURN (%)(a) ...................... 6.99 12.99 33.59 21.45 34.76 .69
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) 238,410 250,491 226,952 195,132 180,116 144,285
Ratios to average net assets (%)(b):
Operating expenses .................... 1.12 1.01 1.04 1.07 1.06 1.04
Net investment income ................. .97 1.30 1.51 2.03 2.51 2.56
Portfolio turnover rate (%)(b) ......... 130.30 149.63 139.33 106.40 92.40 89.91
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
42 Equity Income Fund
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF NET ASSETS
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- ---------
COMMON STOCKS - 97.7%
AUTO AND TRANSPORTATION - 2.9%
AMR Corp. (a) 11,700 799
AutoNation, Inc. (a) 139,600 2,487
AutoZone, Inc. (a) 28,100 847
Burlington Northern, Inc. 41,700 1,293
CNF Transportation, Inc. 15,800 606
Consolidated Freightways Corp. (a) 1,300 17
Cooper Tire & Rubber Co. 6,500 154
CSX Corp. 21,900 992
Dana Corp. 50,300 2,317
Delphi Automotive Systems Corp. 102,827 1,909
Delta Air Lines, Inc. 77,000 4,437
Eaton Corp. 10,800 994
FDX Corp. (a) 28,600 1,552
Ford Motor Co. 165,400 9,335
General Motors Corp. 51,700 3,412
Genuine Parts Co. 1,800 63
Goodyear Tire & Rubber Co. 30,600 1,800
Kansas City Southern Industries, Inc. 60,200 3,842
Lear Corp. (a) 14,900 741
Meritor Automotive, Inc. 45,900 1,170
Modine Manufacturing Co. 10,900 354
Trinity Industries, Inc. 1,100 37
TRW, Inc. 32,900 1,804
Union Pacific Corp. 43,700 2,547
Wisconsin Central
Transportation Corp. (a) 2,900 53
-------
43,562
-------
CONSUMER DISCRETIONARY - 12.0%
Abercrombie & Fitch Co. Class A (a) 103,200 4,954
Amazon.com, Inc. (a) 4,700 588
AnnTaylor Stores Corp. (a) 19,200 864
AT&T Corp. - Liberty Media Group
Class A (a) 56,056 2,060
Best Buy Co. (a) 119,500 8,066
BHC Communications, Inc. Class A 400 52
BJ's Wholesale Club, Inc. (a) 8,200 247
Bob Evans Farms, Inc. 800 16
Browning-Ferris Industries, Inc. 14,700 632
Brunswick Corp. 145,500 4,056
Buffets, Inc. (a) 1,500 17
Callaway Golf Co. 21,500 314
Cendant Corp. (a) 489,600 10,037
Cintas Corp. 9,700 651
Circuit City Stores, Inc. 5,700 530
Corporate Express, Inc. (a) 15,700 109
Costco Cos., Inc. (a) 12,700 1,016
Darden Restaurants, Inc. 42,100 918
Dayton Hudson Corp. 153,200 9,958
Dillard's, Inc. Class A 19,900 699
Disney (Walt) Co. 169,400 5,220
Donnelley (R.R.) & Sons Co. 78,800 2,921
Eastman Kodak Co. 64,500 4,370
Electronic Arts, Inc. (a) 4,900 265
Enesco Group, Inc. 3,300 76
Extended Stay America, Inc. (a) 11,100 133
Federated Department Stores, Inc. (a) 72,300 3,827
Fortune Brands, Inc. 49,100 2,032
Fruit of The Loom, Inc. Class A (a) 12,200 119
Furniture Brands International, Inc. (a) 8,700 243
Gap, Inc. 11,550 582
General Nutrition Cos., Inc. (a) 14,600 339
Harland (John H.) Co. 6,500 130
Hilton Hotels Corp. 74,400 1,056
Home Depot, Inc. (The) 166,300 10,716
Huffy Corp. 1,500 21
International Game Technology 39,400 729
Interpublic Group Cos., Inc. 14,700 1,273
JC Penney & Co., Inc. 34,900 1,695
Jones Apparel Group, Inc. (a) 19,453 667
Kmart Corp. (a) 309,600 5,089
Knight-Ridder, Inc. 23,200 1,275
La-Z-Boy Inc. 9,200 212
Leggett & Platt, Inc. 37,800 1,051
Lowe's Cos., Inc. 28,200 1,599
Mandalay Resort Group (a) 57,900 1,223
Manpower, Inc. 15,700 355
Mattel, Inc. 61,000 1,613
May Department Stores Co. 3,300 135
MediaOne Group, Inc. (a) 130,500 9,706
Micro Warehouse, Inc. (a) 8,800 155
Mirage Resorts, Inc. (a) 46,300 776
New York Times Co. Class A 50,700 1,866
Newell Rubbermaid, Inc. 5,202 242
Ogden Corp. 41,800 1,126
Premark International, Inc. 12,100 454
QUALCOMM, Inc. (a) 82,200 11,796
Reebok International, Ltd. (a) 10,800 201
Sears Roebuck & Co. 75,700 3,373
Service Corp. International 82,200 1,582
Shaw Industries, Inc. (a) 100,200 1,653
Springs Industries, Inc. 1,300 57
Starwood Hotels & Resorts
Worldwide, Inc. 50,900 1,556
Sunglass Hut International, Inc. (a) 37,300 639
Time Warner, Inc. 112,400 8,261
Times Mirror Co. Series A 7,200 427
TJX Cos., Inc. 59,400 1,979
Toys "R" Us, Inc. (a) 84,624 1,751
44 Quantitative Equity Fund
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- -------
Tricon Global Restaurants, Inc. (a) 145,100 7,854
Tupperware Corp. 28,200 719
V.F. Corp. 7,900 338
Valassis Communications, Inc. (a) 3,400 125
Viacom, Inc. Class B (a) 124,100 5,460
Viad Corp. 97,800 3,025
Wal-Mart Stores, Inc. 404,600 19,521
Washington Post Co. Class B 700 375
Whirlpool Corp. 6,200 458
-------
180,225
-------
CONSUMER STAPLES - 6.9%
Albertson's, Inc. 17,627 909
Anheuser-Busch Cos., Inc. 47,700 3,384
Bestfoods 27,900 1,381
Campbell Soup Co. 25,600 1,187
Coca-Cola Co. (The) 102,300 6,394
ConAgra, Inc. 257,600 6,859
Fleming Cos., Inc. 14,100 164
General Mills, Inc. 42,500 3,416
Gillette Co. 17,400 713
Hannaford Brothers Co. 5,300 284
Heinz (H.J.) Co. 30,100 1,509
Hershey Foods Corp. 4,900 291
Hormel Foods Corp. 40,300 1,622
IBP, Inc. 233,300 5,541
International Flavors &
Fragrances, Inc. 20,200 896
Interstate Bakeries Corp. 1,500 34
Pepsi Bottling Group, Inc. (The) 12,900 298
PepsiCo, Inc. 159,000 6,151
Philip Morris Cos., Inc. 464,900 18,683
Procter & Gamble Co. 110,800 9,889
Quaker Oats Co. 65,100 4,321
Ralston-Purina Group 500 15
Safeway, Inc. (a) 188,070 9,309
Sara Lee Corp. 157,700 3,578
Seagram Co., Ltd. 128,800 6,488
SuperValu, Inc. 5,200 134
Tyson Foods, Inc. Class A 34,200 770
Unilever NV (a) 126,089 8,795
Universal Corp. 24,700 701
-------
103,716
-------
FINANCIAL SERVICES - 18.3%
Allstate Corp. 145,300 5,213
Ambac Financial Group, Inc. 26,200 1,497
American Express Co. 1,100 143
American General Corp. 16,100 1,214
American International Group, Inc. 216,400 25,332
AmSouth Bancorp 59,575 1,381
AON Corp. 41,000 1,691
Arden Realty Group, Inc. 900 22
Associated Banc-Corp. 5,800 241
Associates First Capital Corp. Class A 95,928 4,251
Astoria Financial Corp. 6,300 276
Automatic Data Processing, Inc. 23,700 1,043
BancWest Corp. New 5,300 197
Bank of America Corp. 483,090 35,417
Bank One Corp. 20,658 1,230
BankBoston Corp. 31,200 1,595
BB&T Corp. 20,400 748
Bear Stearns Cos., Inc. 38,157 1,784
Block (H&R) Co., Inc. 17,100 855
CarrAmerica Realty Corp. 22,800 570
CCB Financial Corp. 2,200 116
Charter One Financial, Inc. 18,000 500
Chase Manhattan Corp. 45,200 3,915
Chubb Corp. (The) 6,100 424
CIGNA Corp. 9,600 854
CIT Group, Inc. (The) 8,500 245
Citigroup, Inc. 606,736 28,820
City National Corp. 9,400 352
Colonial BancGroup, Inc. 6,000 84
Comerica, Inc. 72,050 4,282
Compass Bancshares, Inc. 11,600 316
Conseco, Inc. 107,600 3,275
Dime Bancorp, Inc. 60,900 1,226
DST Systems, Inc. (a) 1,700 107
Duke Realty Investments, Inc. 42,600 961
Dun & Bradstreet Corp. 7,500 266
Equifax, Inc. 39,300 1,403
Equitable Cos., Inc. 13,800 925
Federal Home Loan Mortgage Corp. 157,500 9,135
Federal National Mortgage Association 46,000 3,145
Financial Security Assurance
Holdings, Ltd. 600 31
FINOVA Group, Inc. 34,600 1,821
First American Corp. 18,300 761
First Data Corp. 29,500 1,444
First Security Corp. 62,900 1,710
First Tennessee National Corp. 1,200 46
First Union Corp. 131,500 6,181
First Virginia Banks, Inc. 15,600 766
Firstar Corp. 44,900 1,257
FirstMerit Corp. 10,500 294
Fleet Financial Group, Inc. 123,180 5,466
Fremont General Corp. 10,000 189
GATX Corp. 2,700 103
Golden State Bancorp, Inc. (a) 66,500 1,462
Quantitative Equity Fund 45
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- -------
Golden West Financial Corp. 17,400 1,705
Goldman Sachs Group, Inc. (a) 36,700 2,652
Greenpoint Financial Corp. 22,100 725
Hibernia Corp. Class A 16,000 251
Household International Corp. 36,800 1,743
Huntington Bancshares, Inc. 3,100 108
KeyCorp 45,800 1,471
Lehman Brothers Holdings, Inc. 7,600 473
Lincoln National Corp. 6,800 356
M & T Bank Corp. 400 220
Marsh & McLennan Cos., Inc. 131,250 9,909
Marshall & Ilsley Corp. 1,000 64
MBIA, Inc. 15,800 1,023
MBNA Corp. 94,300 2,888
Mellon Bank Corp. 5,300 193
Mercantile Bankshares Corp. 6,300 222
Mercury General Corp. 8,700 296
Merrill Lynch & Co., Inc. 37,600 3,006
Metris Companies, Inc. 20,118 820
Morgan (J.P.) & Co., Inc. 9,400 1,321
Morgan Stanley Dean Witter & Co. 166,550 17,071
National City Corp. 28,260 1,851
North Fork Bancorp., Inc. 37,150 792
Ocwen Financial Corp. (a) 4,000 36
Ohio Casualty Corp. 1,100 40
Old Kent Financial Corp. 11,865 497
Pacific Century Financial Corp. 68,200 1,471
PaineWebber Group, Inc. 4,300 201
Peoples Heritage Financial Group 9,600 181
PMI Group, Inc. (The) 23,500 1,476
PNC Bank Corp. 80,105 4,616
Provident Cos., Inc. 9,800 392
Provident Financial Group, Inc. 3,400 145
Providian Financial Corp. 36,900 3,450
Regions Financial Corp. 54,700 2,082
Ryder System, Inc. 6,800 177
Schwab (Charles) Corp. 14,800 1,626
SouthTrust Corp. 148,750 5,699
Sovereign Bancorp, Inc. 15,800 193
Spieker Properties, Inc. 2,300 89
St. Paul Cos., Inc. 17,400 554
Summit Bancorp 17,800 744
SunGard Data Systems (a) 96,200 3,319
SunTrust Banks, Inc. 144,436 10,029
TCF Financial Corp. 8,400 234
Torchmark Corp. 10,000 341
Travelers Property Casualty Corp.
Class A 54,900 2,148
U.S. Bancorp 65,900 2,241
Union Planters Corp. 14,600 652
UnionBanCal Corp. 103,800 3,750
UNUM Corp. 30,600 1,675
Waddell & Reed Financial, Inc.
Class A 1,100 30
Waddell & Reed Financial, Inc.
Class B 4,800 130
Washington Federal, Inc. 4,700 105
Washington Mutual, Inc. 86,600 3,063
Wells Fargo Co. 165,300 7,067
Zions Bancorp 16,500 1,047
-------
275,242
-------
HEALTH CARE - 10.8%
Abbott Laboratories 89,300 4,063
Aetna, Inc. 23,600 2,111
Allergan, Inc. 94,200 10,456
ALZA Corp. (a) 47,500 2,417
American Home Products Corp. 181,800 10,454
Amgen, Inc. (a) 18,000 1,095
Apria Healthcare Group, Inc. (a) 5,700 97
Bergen Brunswig Corp. Class A 41,000 707
Bristol-Myers Squibb Co. 308,600 21,737
Cardinal Health, Inc. 72,290 4,636
Chiron Corp. (a) 55,400 1,146
Columbia/HCA Healthcare Corp. 174,400 3,979
DENTSPLY International, Inc. 1,900 55
Forest Labs, Inc. (a) 75,800 3,506
Genzyme Corp. (a) 62,400 3,023
Genzyme Surgical Products (a) 11,170 49
HCR Manor Care, Inc. (a) 15,200 368
Health Management Associates
Class A (a) 33,900 381
HEALTHSOUTH Corp. (a) 146,400 2,187
Humana, Inc. (a) 64,200 831
ICN Pharmaceuticals, Inc. 16,300 525
Immunex Corp. (a) 6,800 866
Johnson & Johnson 202,800 19,874
Lilly (Eli) & Co. 60,300 4,319
Mallinckrodt, Inc. 86,700 3,154
McKesson HBOC, Inc. 1,900 61
MedImmune, Inc. (a) 30,000 2,040
Medtronic, Inc. 7,100 553
Merck & Co., Inc. 332,440 24,601
Omnicare, Inc. 14,900 188
Oxford Health Plans, Inc. (a) 19,500 302
PacifiCare Health Systems, Inc.
Class B (a) 54,000 3,885
PE Corp. 3,400 390
Pfizer, Inc. 6,500 713
Pharmacia & Upjohn, Inc. 122,600 6,965
Schering-Plough Corp. 169,000 8,957
Tenet Healthcare Corp. (a) 48,100 893
46 Quantitative Equity Fund
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- ---------
United Healthcare Corp. 30,300 1,898
Warner-Lambert Co. 63,900 4,432
Watson Pharmaceuticals, Inc. (a) 39,800 1,394
Wellpoint Health Networks, Inc.
Class A (a) 28,700 2,435
-------
161,743
-------
INTEGRATED OILS - 4.4%
Atlantic Richfield Co. 3,200 267
Chevron Corp. 7,700 733
Coastal Corp. 72,900 2,916
Enron Corp. 98,500 8,052
Exxon Corp. 317,444 24,483
Kerr-McGee Corp. 42,500 2,133
Lyondell Petrochemical Co. 16,400 338
Mobil Corp. 128,500 12,722
Phillips Petroleum Co. 9,100 458
Royal Dutch Petroleum Co. 189,300 11,405
Tenneco, Inc. 35,900 857
USX-Marathon Group 57,100 1,860
-------
66,224
-------
MATERIALS AND PROCESSING - 6.0%
Alcan Aluminum, Ltd. 10,900 348
Alcoa, Inc. 23,000 1,423
Allegheny Teldyne, Inc. 35,700 808
Archer-Daniels-Midland Co. 183,200 2,828
Banta Corp. 2,400 50
Bowater, Inc. 6,300 298
Dow Chemical Co. 139,500 17,699
Engelhard Corp. 51,600 1,167
FMC Corp. (a) 4,300 294
Fort James Corp. 9,800 371
Freeport-McMoRan Copper &
Gold, Inc. Class B 49,000 879
Georgia Gulf Corp. 1,800 30
Georgia-Pacific Group 95,700 4,534
Goodrich (B.F.) Co. 5,500 234
Great Lakes Chemical Corp. 57,100 2,630
Hanna (M.A.) Co. 11,400 187
IMC Global, Inc. 58,200 1,026
International Paper Co. 52,200 2,636
Johns Manville Corp. 46,900 610
Kimberly-Clark Corp. 224,200 12,779
Lafarge Corp. 23,600 836
Lubrizol Corp. 17,900 488
Minnesota Mining &
Manufacturing Co. 17,000 1,478
Monsanto Co. 186,000 7,335
Nalco Chemical Co. 12,300 638
Owens Corning 26,500 911
PPG Industries, Inc. 7,600 449
Reynolds Metals Co. 1,000 59
Rohm & Haas Co. 62,900 2,697
Sherwin-Williams Co. 43,200 1,199
Smurfit-Stone Container Corp. (a) 43,100 884
Solutia, Inc. 61,600 1,313
Temple-Inland, Inc. 8,500 580
Tyco International, Ltd. 102,200 9,683
Unifi, Inc. (a) 10,600 225
Union Carbide Corp. 25,400 1,238
USEC, Inc. 9,900 147
USG Corp. 108,400 6,070
W.R. Grace & Co. New (a) 21,500 395
Waters Corp. (a) 16,000 851
Worthington Industries, Inc. 69,900 1,146
-------
89,453
-------
MISCELLANEOUS - 0.4%
Avalonbay Communities, Inc. 2,800 104
Convergys Corp. NPV (a) 48,700 937
Crestline Capital Corp. (a) 5,760 97
Host Marriott Corp. 219,549 2,607
Liberty Property Trust REIT 58,600 1,458
Public Storage, Inc. 15,000 420
-------
5,623
-------
OTHER ENERGY - 0.9%
Apache Corp. 49,500 1,931
Conoco, Inc. Class A 6,900 192
Constellation Energy Group, Inc. 18,900 560
Cooper Cameron Corp. (a) 3,900 145
Diamond Offshore Drilling, Inc. 7,500 213
El Paso Energy Corp. 15,700 552
ENSCO International, Inc. 28,300 564
Global Marine, Inc. (a) 18,700 289
Input/Output, Inc. (a) 2,800 21
Noble Drilling Corp. (a) 49,300 971
ONEOK, Inc. 3,700 117
PennzEnergy Co. 34,200 571
Pioneer Natural Resources Co. 92,900 1,022
R&B Falcon Corp. (a) 23,000 216
Smith International, Inc. (a) 3,500 152
Tidewater, Inc. 7,000 214
Tosco Corp. 76,800 1,992
Transocean Offshore, Inc. 70,900 1,861
Ultramar Diamond Shamrock Corp. 52,200 1,139
Union Pacific Resources Group, Inc. 34,900 569
Valero Energy Corp. 7,000 149
-------
13,440
-------
Quantitative Equity Fund 47
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- ---------
PRODUCER DURABLES - 5.1%
Allied Waste Industries, Inc. (a) 5,500 109
AlliedSignal, Inc. 44,600 2,810
Applied Materials, Inc. (a) 63,900 4,721
Briggs & Stratton Corp. 15,000 866
Caterpillar, Inc. 2,200 132
Coltec Industries, Inc. (a) 13,400 291
Cordant Technologies, Inc. 4,900 221
Cummins Engine Co., Inc. 5,800 331
Deere & Co. 34,800 1,379
Emerson Electric Co. 47,300 2,974
General Electric Co. 173,900 19,651
Honeywell, Inc. 5,600 649
Hubbell, Inc. Class B 8,300 375
Ingersoll-Rand Co. 135,350 8,747
ITT Industries, Inc. 20,400 778
Johnson Controls, Inc. 39,100 2,710
Lexmark International Group, Inc.
Class A (a) 93,800 6,197
Lockheed Martin Corp. 115,700 4,310
Milacron, Inc. 3,600 67
Miller (Herman), Inc. 1,200 25
Pall Corp. 22,200 493
Raytheon Co. Class A 11,600 799
Rockwell International Corp. 59,100 3,590
Sensormatic Electronics Corp. (a) 15,900 222
Solectron Corp. (a) 24,400 1,627
Teradyne, Inc. (a) 65,300 4,685
Uniphase Corp. (a) 6,600 1,095
Waste Management, Inc. 104,600 5,621
Xerox Corp. 20,700 1,222
-------
76,697
-------
TECHNOLOGY - 18.3%
3Com Corp. (a) 27,800 740
Adobe Systems, Inc. 23,400 1,922
America Online, Inc. (a) 108,500 11,989
Anixter International, Inc. (a) 3,500 64
Apple Computer, Inc. (a) 127,900 5,923
BMC Software, Inc. (a) 23,900 1,289
Cadence Design Systems, Inc. (a) 48,200 615
Cisco Systems, Inc. (a) 565,200 36,420
CNET, Inc. (a) 2,600 150
CompUSA, Inc. (a) 16,500 123
Computer Associates
International, Inc. 150,400 8,272
Computer Sciences Corp. (a) 3,400 235
Compuware Corp. (a) 110,200 3,499
Comverse Technology, Inc. (a) 69,600 5,246
Cooper Industries, Inc. 18,600 967
Dell Computer Corp. (a) 32,700 1,208
Electronic Data Systems Corp. 109,100 6,171
EMC Corp. (a) 226,900 12,480
Exodus Communications, Inc. (a) 2,800 336
Galileo International, Inc. 7,200 385
Gateway, Inc. (a) 36,000 2,124
General Dynamics Corp. 33,800 2,315
General Instrument Corp. (a) 56,800 2,414
Harris Corp. 16,900 662
Hewlett-Packard Co. 41,300 4,151
Intel Corp. 530,200 31,514
International Business
Machines Corp. 156,600 20,241
Intuit, Inc. (a) 8,300 748
Lucent Technologies, Inc. 313,300 21,128
Microsoft Corp. (a) 311,400 28,065
Motorola, Inc. 72,500 6,869
National Semiconductor Corp. (a) 35,900 909
NCR Corp. (a) 8,800 430
Nortel Networks Corp. 87,200 7,570
Oracle Systems Corp. (a) 180,150 6,688
Quantum Corp. (a) 14,100 338
Seagate Technology (a) 298,580 7,651
Sterling Commerce, Inc. (a) 4,200 153
Sun Microsystems, Inc. (a) 87,600 6,033
Sybase, Inc. (a) 23,700 259
Symantec Corp. (a) 8,800 224
Symbol Technologies, Inc. 7,950 293
Synopsys, Inc. (a) 10,000 551
Tellabs, Inc. (a) 69,400 4,689
Texas Instruments, Inc. 112,200 16,269
Unisys Corp. (a) 23,700 923
Veritas Software Corp. (a) 12,700 1,206
Vishay Intertechnology, Inc. (a) 18,125 381
Vitesse Semiconductor Corp. (a) 9,100 618
Xilinx, Inc. (a) 10,600 607
Yahoo!, Inc. (a) 7,400 1,273
-------
275,330
-------
UTILITIES - 11.7%
Allegheny Energy, Inc. 20,600 660
Alliant Energy Corp. (a) 3,800 108
Ameren Corp. 6,300 242
Ameritech Corp. 48,900 3,594
AT&T Corp. 118,701 6,625
Bell Atlantic Corp. 400,510 26,183
BellSouth Corp. 414,946 19,451
Central & Southwest Corp. 77,600 1,814
Cinergy Corp. 18,800 602
CMS Energy Corp. 15,200 637
48 Quantitative Equity Fund
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
----------- -----------
Columbia Energy Group 10,700 671
Comcast Corp. Special Class A 93,400 3,590
Consolidated Edison, Inc. 65,800 2,977
Consolidated Natural Gas Co. 5,900 358
Cox Communications, Inc. Class A (a) 21,800 803
Dominion Resources, Inc. 24,900 1,078
DTE Energy Co. 87,500 3,500
Edison International 177,200 4,740
Energy East Corp. 11,000 286
Entergy Corp. 31,600 988
Florida Progress Corp. 23,600 975
FPL Group, Inc. 69,700 3,807
Frontier Corp. 1,600 94
GTE Corp. 150,200 11,378
K N Energy, Inc. 7,800 104
Kansas City Power & Light Co. 2,800 71
Level 3 Communications, Inc. (a) 38,600 2,323
LG&E Energy Corp. 55,600 1,168
MCI WorldCom, Inc. (a) 366,407 31,511
Northeast Utilities (a) 6,400 113
Northern States Power Co. 19,300 467
OGE Energy Corp. 27,100 644
PG&E Corp. 293,000 9,523
Pinnacle West Capital Corp. 10,900 439
PP&L Resources, Inc. 36,200 1,113
Public Service Enterprise Group, Inc. 57,800 2,363
Puget Sound Energy, Inc. 15,700 377
Reliant Energy, Inc. NPV 59,500 1,644
SBC Communications, Inc. 196,890 11,420
Southern Co. 158,000 4,187
Sprint Corp. 37,700 1,991
TECO Energy, Inc. 16,700 380
Texas Utilities Co. 70,400 2,904
U.S. West, Inc. 64,300 3,778
UtiliCorp United, Inc. 4,800 116
Vodafone Group PLC - ADR 10,650 2,097
Wisconsin Energy Corp. 51,800 1,297
-----------
175,191
-----------
TOTAL COMMON STOCKS
(cost $1,034,896) 1,466,446
-----------
SHORT-TERM INVESTMENTS - 2.6%
Frank Russell Investment Company Money
Market Fund, due on demand (b) 35,987 35,987
United States Treasury Notes 3,350 3,353
5.875% due 07/31/99 (b)(c) ---------
TOTAL SHORT-TERM INVESTMENTS
(cost $39,340) 39,340
---------
TOTAL INVESTMENTS - 100.3%
(identified cost $1,074,236) 1,505,786
OTHER ASSETS AND LIABILITIES,
NET - (0.3%) (5,140)
---------
NET ASSETS - 100.0% 1,500,646
=========
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Held as collateral in connection with futures contracts purchased by the
Fund.
Abbreviations:
ADR - American Depositary Receipt
NPV - No Par Value
NV - Nonvoting
REIT - Real Estate Investment Trust
See accompanying notes which are an integral part of the financial statements.
Quantitative Equity Fund 49
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
----------- --------------
FUTURES CONTRACTS
S&P 400 Midcap Index
expiration date 09/99 40 $ 251
S&P 500 Index
expiration date 09/99 88 1,027
--------------
Total Unrealized Appreciation
(Depreciation on Open Futures
Contracts Purchased $ 1,278
==============
See accompanying notes which are an integral part of the financial statements.
50 Quantitative Equity Fund
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
<S> <C>
ASSETS
Investments at market (identified cost $1,074,236) .................................................................. $1,505,786
Cash ................................................................................................................. 340
Receivables:
Dividends and interest .............................................................................................. 2,015
Investments sold .................................................................................................... 2,473
Fund shares sold .................................................................................................... 2,330
Daily variation margin on futures contracts ......................................................................... 600
----------
Total Assets ...................................................................................................... 1,513,544
LIABILITIES
Payables:
Investments purchased ................................................................................. $ 5,162
Fund shares redeemed .................................................................................. 6,815
Accrued fees to affiliates ............................................................................ 917
Other accrued expenses ................................................................................ 4
----------
Total Liabilities ................................................................................................. 12,898
----------
NET ASSETS ........................................................................................................... $1,500,646
==========
NET ASSETS CONSIST OF:
Undistributed net investment income .................................................................................. $ 2,873
Accumulated net realized gain (loss) ................................................................................ 117,910
Unrealized appreciation (depreciation) on:
Investments ......................................................................................................... 431,550
Futures contracts ................................................................................................... 1,278
Shares of beneficial interest ........................................................................................ 317
Additional paid-in capital ........................................................................................... 946,718
----------
NET ASSETS ........................................................................................................... $1,500,646
==========
NET ASSET VALUE, offering and redemption price per share:
Class C ($5,699,127 divided by 120,867 shares of $.01 par value
shares of beneficial interest outstanding) ....................................................................... $ 47.15
==========
Class E ($9,609,626 divided by 203,271 shares of $.01 par value
shares of beneficial interest outstanding) ....................................................................... $ 47.28
==========
Class S ($1,485,336,800 divided by 31,381,619 shares of $.01 par value
shares of beneficial interest outstanding) ....................................................................... $ 47.33
==========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Quantitative Equity Fund 51
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME
Dividends .......................................................................................................... $ 9,683
Dividends from Money Market Fund ................................................................................... 778
Interest ........................................................................................................... 94
-----------
Total Investment Income .......................................................................................... 10,555
EXPENSES
Advisory fees ......................................................................................... $ 5,054
Administrative fees ................................................................................... 347
Custodian fees ........................................................................................ 156
Distribution fees - Class C ........................................................................... 7
Transfer agent fees ................................................................................... 456
Professional fees ..................................................................................... 23
Registration fees - Class S ........................................................................... 62
Shareholder servicing fees - Class C .................................................................. 1
Shareholder servicing fees - Class E .................................................................. 10
Trustees' fees ........................................................................................ 5
Miscellaneous ......................................................................................... 49
------------
Total Expenses ................................................................................................... 6,170
-----------
Net investment income ............................................................................................... 4,385
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ........................................................................................... 106,256
Futures contracts ..................................................................................... 4,143 110,399
------------
Net change in unrealized appreciation (depreciation) on:
Investments ........................................................................................... 58,961
Futures contracts ..................................................................................... (603) 58,358
------------ -----------
Net realized and unrealized gain (loss) ............................................................................ 168,757
-----------
Net increase (decrease) in net assets resulting from operations ..................................................... $ 173,142
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
52 Quantitative Equity Fund
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
------------------- -----------------
<S> <C> <C>
OPERATIONS
Net investment income ................................................................... $ 4,385 $ 7,998
Net realized gain (loss) ............................................................... 110,399 102,532
Net change in unrealized appreciation (depreciation) .................................... 58,358 149,884
------------------- -----------------
Net increase (decrease) in net assets resulting from operations ....................... 173,142 260,414
------------------- -----------------
DISTRIBUTIONS
From net investment income
Class C ............................................................................... (1) --
Class E ............................................................................... (4) (13)
Class S ............................................................................... (1,510) (7,962)
In excess of net investment income
Class S ............................................................................... -- (20)
From net realized gain on investments
Class C ............................................................................... (7) --
Class E ............................................................................... (110) (384)
Class S ............................................................................... (18,556) (81,881)
------------------- -----------------
Net decrease from distributions ..................................................... (20,188) (90,260)
------------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions .......................... 24,162 154,152
------------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS .............................................. 177,116 324,306
NET ASSETS
Beginning of period ..................................................................... 1,323,530 999,224
------------------- -----------------
End of period (including undistributed net investment income of
$2,873 and $3, respectively) ......................................................... $ 1,500,646 $ 1,323,530
=================== =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Quantitative Equity Fund 53
<PAGE>
QUANTITATIVE EQUITY FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1999*
---------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD .................................................................................. $ 43.02
---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) ........................................................................................... (.02)
Net realized and unrealized gain (loss) on investments ............................................................... 4.77
---------
Total Income From Investment Operations ............................................................................ 4.75
---------
DISTRIBUTIONS
From net investment income .......................................................................................... (.02)
From net realized gain on investments ............................................................................... (.60)
---------
Total Distributions ............................................................................................... (.62)
---------
NET ASSET VALUE, END OF PERIOD ....................................................................................... $ 47.15
=========
TOTAL RETURN (%)(a) ................................................................................................. 11.20
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ......................................................................... 5,699
Ratios to average net assets (%)(b):
Operating expenses ................................................................................................ 1.83
Net investment income ............................................................................................. (.13)
Portfolio turnover rate (%)(b) ..................................................................................... 33.74
</TABLE>
* For the period January 27, 1999 (commencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) Average month-end shares outstanding were used for this calculation.
54 Quantitative Equity Fund
<PAGE>
QUANTITATIVE EQUITY FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------
1999* 1998 1997 1996**
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........................... $ 42.50 $ 36.80 $ 33.05 $ 33.81
------------ ------------ ------------ --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) ..................................... .07 .12 .14 .05
Net realized and unrealized gain (loss) on investments ........ 4.73 8.54 9.95 1.87
------------ ------------ ------------ --------
Total Income From Investment Operations ..................... 4.80 8.66 10.09 1.92
------------ ------------ ------------ -------
DISTRIBUTIONS
From net investment income .................................... (.02) (.16) (.07) (.08)
From net realized gain on investments ......................... (.60) (2.80) (6.27) (2.60)
------------ ------------ ------------ -------
Total Distributions ......................................... (.62) (2.96) (6.34) (2.68)
------------ ------------ ------------ -------
NET ASSET VALUE, END OF PERIOD ................................. $ 47.28 $ 42.50 $ 36.80 $ 33.05
============ ============ ============ =======
TOTAL RETURN (%)(a) ........................................... 12.88 24.34 31.70 5.91
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) .................... 9,610 7,479 2,344 322
Ratios to average net assets (%)(b):
Operating expenses .......................................... 1.13 1.31 1.59 1.65
Net investment income ....................................... .39 .30 .33 .81
Portfolio turnover rate (%)(b) ............................... 101.77 77.23 87.67 74.33
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
** For the period November 4, 1996 (commencement of sale) to December 31, 1996
(a) Periods less than one year are not annualized.
(b) The ratios for the periods ended June 30, 1999 and December 31, 1996 are
annualized.
(c) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
Quantitative Equity Fund 55
<PAGE>
QUANTITATIVE EQUITY FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------
1999* 1998 1997 1996 1995 1994
---------- ---------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....... $ 42.53 $ 36.78 $ 33.05 $ 30.76 $ 24.84 $ 26.44
---------- ---------- -------- -------- -------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) ................ .16 .27 .38 .51 .50 .49
Net realized and unrealized gain
(loss) on investments .................. 5.29 8.55 10.00 6.24 8.72 (.19)
---------- ---------- -------- -------- -------- ----------
Total Income From Investment Operations. 5.45 8.82 10.38 6.75 9.22 .30
---------- ---------- -------- -------- -------- ----------
DISTRIBUTIONS
From net investment income ............... (.05) (.27) (.38) (.51) (.51) (.49)
From net realized gain on investments..... (.60) (2.80) (6.27) (3.95) (2.79) (1.41)
---------- ---------- -------- -------- -------- ----------
Total Distributions .................... (.65) (3.07) (6.65) (4.46) (3.30) (1.90)
---------- ---------- -------- -------- -------- ----------
NET ASSET VALUE, END OF PERIOD............. $ 47.33 $ 42.53 $ 36.78 $ 33.05 $ 30.76 $ 24.84
========== ========== ======== ======== ======== ==========
TOTAL RETURN (%)(a) ...................... 12.99 24.82 32.70 23.08 37.69 .19
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period
($ in thousands) ......................... 1,485,337 1,316,051 996,880 663,925 488,948 380,592
Ratios to average net assets (%)(b):
Operating expenses ..................... .89 .91 .91 .93 .93 .94
Net investment income .................. .63 .69 1.04 1.59 1.71 1.95
Portfolio turnover rate (%)(b) ........... 101.77 77.23 87.67 74.33 78.83 45.97
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
56 Quantitative Equity Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- -----------
COMMON STOCKS - 94.1%
AUSTRALIA - 3.1%
Amcor, Ltd. 828,365 4,599
AMP, Ltd. 42,300 462
Australia & New Zealand Bank
Group, Ltd. 988,091 7,256
Boral, Ltd. 71,993 122
Brambles Industries, Ltd. 13,505 355
BRL Hardy, Ltd. 6,773 29
Broken Hill Proprietary Co. 48,190 557
Cable & Wireless Optus, Ltd. NPV (a) 1,386,100 3,152
Coles Myer, Ltd. 16,491 96
Commonwealth Bank of Australia 3,500 56
CRA, Ltd. 4,300 70
CSR, Ltd. 882,100 2,519
F.H. Faulding & Co., Ltd. 3,900 24
Foster's Brewing Group, Ltd. 852,100 2,398
Goodman Fielder Wattie 774,427 690
Harvey Norman Holdings, Ltd. NPV 7,300 64
Leighton Holdings, Ltd. Class A 5,300 21
Lend Lease Corp. 34,500 473
Macquarie Bank, Ltd. NPV 1,800 24
National Australia Bank, Ltd. 210,400 3,477
National Mutual Holdings, Ltd. 16,000 24
News Corp., Ltd. 37,746 322
Orica, Ltd. 166,000 905
Pacific Dunlop, Ltd. 572,833 826
Pioneer International, Ltd. 92,450 235
PMP Communications, Ltd. 165,000 338
Smith (Howard), Ltd. 3,854 29
Smorgon Steel Group, Ltd. NPV (a) 19,600 30
Southcorp Holdings, Ltd. 78,200 315
Telstra Corp., Ltd. NPV 150,900 864
Western Mining Corp., Ltd. 14,500 62
Westfield Holdings, Ltd. NPV 11,400 70
Westfield Trust 376,813 762
Westpac Banking Corp. 27,500 178
Woodside Petroleum, Ltd. 8,100 55
Woolworth's, Ltd. 15,200 50
-----------
31,509
-----------
AUSTRIA - 0.4%
Bank Austria AG 59,681 3,138
EVN AG 2,570 376
VA Technologie AG (BR) 2,975 269
Voest-Alpine Stahl AG 11,000 343
Wienerberger Baustoffindustrie
AG NPV (a) 10,400 269
-----------
4,395
-----------
BELGIUM - 0.4%
Delhaize-Le Lion NPV 1,900 162
Electrabel NPV 5,400 1,742
Tractebel Investments
International NPV 5,768 809
Union Miniere 43,300 1,785
-----------
4,498
-----------
CANADA - 3.0%
Alberta Energy Co., Ltd. 4,470 144
Alcan Aluminum, Ltd. 4,130 131
ATI Technologies, Inc. NPV (a) 3,700 60
Bank of Montreal 2,722 99
Bank of Nova Scotia 11,189 243
Barrick Gold Corp. NPV 11,900 230
BCE, Inc. 139,002 6,773
Bombardier, Inc. Class B 30,056 459
Canadian Imperial Bank of Commerce 19,435 463
Canadian National Railway Co. 1,511 101
Canadian National Railway Co. NPV 280 19
Canadian Natural Resources, Ltd. (a) 3,686 73
Canadian Pacific, Ltd. 9,200 219
Canadian Tire Corp. Class A 1,798 53
Celestica, Inc. (a) 1,240 54
CGI Group, Inc. Class A (a) 36,541 769
Cinar Corp. Class B (a) 620 15
Cinar Corp. Class B Sub Voting (a) 2,040 50
Dofasco, Inc. NPV 30,391 492
EdperBrascan Corp. Class A 26,500 404
Enbridge, Inc. 7,000 160
Euro-Nevada Mining Corp., Ltd. 1,630 19
Falconbridge, Ltd. New 1,400 20
Finning International, Inc. New 17,000 150
Imasco, Ltd. 17,850 481
Imperial Oil, Ltd. 15,307 291
Inco, Ltd. 61,387 1,105
Inco, Ltd. NPV 2,800 50
JDS Fitel, Inc. (a) 1,966 165
Laidlaw, Inc. 266,100 1,962
Loblaw Cos., Ltd. 1,895 48
MacMillan Bloedel, Ltd. 2,250 40
Magna International, Inc. Class A 740 42
Mitel Corp. NPV (a) 115,000 765
National Bank of Canada 29,500 387
Newbridge Networks Corp. (a) 7,590 217
Noranda, Inc. 14,688 194
Nortel Networks Corp. 6,100 530
Nortel Networks Corp. NPV 13,500 1,155
NOVA Chemicals Corp. NPV 4,500 105
NS Power Holdings, Inc. 22,500 254
Petro-Canada 4,100 56
58 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ----------
Placer Dome, Inc. 4,671 54
Poco Petroleum, Ltd. (a) 7,100 57
Power Corp. of Canada 61,200 1,172
QLT PhotoTherapeutics, Inc. (a) 21,520 1,169
Rogers Communications, Inc.
Class B (a) 5,055 81
Royal Bank of Canada 15,188 670
Seagram Co., Ltd. 67,956 3,385
Seagram Co., Ltd. NPV 170 9
Shaw Communications, Inc.
Class B NPV 2,847 113
Slocan Forest Products, Ltd. (a) 4,800 35
Suncor, Inc. NPV 10,033 411
TD Waterhouse Group, Inc. (a) 5,300 127
Teleglobe, Inc. 50,470 1,493
Thomson Corp. (The) 17,100 517
Toronto Dominion Bank (The) New 6,784 308
Torstar Corp. Class B 31,200 351
TransCanada Pipelines, Ltd. 15,000 211
United Dominion Industries, Ltd. 1,400 35
Westcoast Energy, Inc. 25,077 493
----------
29,738
----------
DENMARK - 0.3%
Danisco 5,988 270
Great Nordic Store Nord AS 5,000 168
ISS International Series B (a) 18,076 965
Jyske Bank AS (Regd) 13,100 1,244
Ratin A/S Series B 3,558 417
Sydbank A/S 3,425 143
----------
3,207
----------
FINLAND - 1.9%
Enso OY Series A 47,500 509
Fortum Corp. 256,500 1,240
Helsinki Telephone Corp. Series E 91,300 4,329
KCI Konecranes International PLC 5,557 191
Kesko Oyj 97,300 1,309
Merita, Ltd. Series A 50,400 286
Metsa-Serla Oyj Series B 31,450 267
Nokia Corp. - ADR 23,900 2,188
Nokia Oyj 53,239 4,665
OY Tamro AB 34,700 143
Pohjola Series B 5,600 287
Rauma Group (The) 9,300 110
Rautaruukki Oyj 28,200 171
Sampo Insurance Co., Ltd. Series A 18,247 529
Sonera Group Oyj 82,200 1,796
UPM-Kymmene Oyj 12,014 344
Valmet Corp. Series A 12,600 144
----------
18,508
----------
FRANCE - 10.1%
Accor SA 10,639 2,671
Alcatel Alsthom 35,953 5,059
Alstom (a) 182,532 5,739
Alstom - ADR New (a) 24,850 795
Assurances Generales de France 20,070 966
AXA - UAP 7,258 885
Banque Nationale Paris 47,078 3,921
Bongrain SA 2,320 875
Bouygues 10,754 2,841
Bouygues SA New (a) 10,754 29
Canal Plus 430 121
Cap Gemini Sogeti 31,469 4,944
Carrefour SA (a) 14,300 2,101
Castorama Dubois 1,000 237
Chargeurs International SA (a) 3,500 195
Christian Dior SA 4,150 676
Cie de St. Gobain 14,126 2,250
CNP Assurances (a) 19,960 545
Coflexip SA 22,950 1,970
Credit Commercial de France 4,325 467
Dexia France 11,923 1,595
Dexia France New 2,247 301
Elf Aquitaine - ADR 23,600 1,736
Elf Aquitaine SA 28,528 4,185
Eridania Beghin-Say SA 1,605 230
Euro RSCG 950 205
France Telecom SA 8,700 657
Galeries Lafayette (a) 5,000 661
Groupe Danone 10,290 2,652
Imetal 695 103
L'Air Liquide 13,337 2,097
Lafarge SA 5,970 567
Lafarge SA (BR) 13,870 1,318
Lagardere Groupe (Regd) 66,310 2,468
Legris Industries SA 3,900 160
LVMH Moet-Hennessy 2,200 644
LVMH New (a) 2,200 64
Michelin (Cie Gen) Class B (Regd) 33,824 1,383
Paribas 8,678 972
Pechiney International Class A 32,582 1,400
Peugeot SA 10,815 1,706
Renault 3,000 131
Rhodia SA 14,285 271
Rhone-Poulenc SA Class A - ADR 39,690 1,813
Sanofi-Synthelabo SA (a) 12,260 520
Schneider SA 7,364 413
Scor SA 9,000 446
Sefimeg (Regd) 2,000 139
SEITA 9,343 539
Sidel SA 3,225 392
International Securities Fund 59
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- ----------
Simco (Regd) 3,300 279
Societe BIC SA 38,700 2,041
Societe Generale 27,328 4,814
Sodexho 3,100 534
Suez Lyonnaise des Eaux 30,327 5,468
Sylea 2,400 153
Thomson-CSF 45,001 1,563
Total Co. SA Class B (a) 49,671 6,406
TV Francaise (TFI) 5,570 1,298
Usinor Sacilor 123,242 1,836
Vallourec (Usin) 360 13
Vivendi (a) 113,610 9,199
----------
100,659
----------
GERMANY - 7.8%
Allianz AG (Regd) 1,256 348
AMB Aachener & Muenchener Beteiligungs AG 1,972 200
BASF AG 30,950 1,367
Bayer AG 118,087 4,918
Bayerische Motoren Werk 2,474 1,701
Bayerische Vereinsbank AG 64,900 4,215
BHF - Bank AG 8,590 294
Bilfinger & Berger BAU AG 4,900 121
Commerzbank AG 34,800 1,056
Continental AG 90,278 2,140
DaimlerChrysler AG 26,519 2,296
Deutsche Bank AG 47,799 2,915
Deutsche Lufthansa AG 53,700 973
Deutsche Pfandbrief &
Hypothekenbank AG 7,000 635
Deutsche Telekom AG 34,156 1,433
Dresdner Bank AG 9,120 356
Fresenius Medical Care AG 1,677 100
GEA AG (a) 39,320 1,184
Gerresheimer Glas AG 10,500 163
Hannover Rueckversicherungs AG 6,163 492
Hoechst AG 132,174 5,981
IKB Deutsche Industriebank AG 1,750 33
Karstadt AG 7,126 3,423
KM Europa Metal AG 9,000 469
Mannesmann AG 67,589 10,082
Mannheimer Aktiengesellschaft (a) 400 205
Merck KGAA 53,100 1,726
Meto AG New NPV (a) 14,800 73
Metro AG 3,500 217
Muenchener
Rueckversicherungs-Gesellschaft AG
NPV 3,941 729
Phoenix AG 10,000 166
Preussag AG (a) 15,300 822
RWE AG 47,700 2,207
SAP AG 1,000 338
Schering AG 5,461 579
Schmalbach Lubeca AG 5,322 834
SGL Carbon AG (a) 2,000 155
Siemens AG 129,250 9,966
SKW Trostberg AG 7,500 171
Software AG NPV (a) 33,300 1,064
Stinnes AG NPV (a) 16,560 258
Tarkett AG 18,923 169
Veba AG 138,376 8,131
Viag AG 4,140 1,956
Volkswagen AG 20,850 1,336
----------
77,997
----------
HONG KONG - 1.6%
Asia Satellite Telecommunications
Holdings, Ltd. 10,000 24
Cathay Pacific Airways 214,000 328
Cheung Kong Holdings, Ltd. 89,800 799
China Telecom (Hong Kong), Ltd. (a) 12,000 33
CLP Holdings, Ltd. 128,400 624
Dairy Farm International
Holdings, Ltd. (a) 25,000 30
Dao Heng Bank Group, Ltd. 97,500 437
First Pacific Co. 707,608 602
Giordano International, Ltd. 46,000 33
Great Eagle Holdings 576,041 1,017
Hang Lung Development Co. 192,000 238
Hang Seng Bank 11,900 133
Henderson Investment, Ltd. 1,250,000 870
Hong Kong & China Gas Co., Ltd. 74,360 108
Hong Kong Electric Holding, Ltd. 893,748 2,880
Hong Kong Telecommunications, Ltd. 207,900 540
HSBC Holdings (UK Regd) PLC 24,991 912
Hutchison Whampoa, Ltd. 109,300 990
Jardine Matheson
Holdings, Ltd. - ADR (a) 214,100 1,071
Jardine Strategic
Holdings, Ltd. - ADR (a) 70,000 182
JCG Holdings, Ltd. NPV 130,400 62
Johnson Electric Holdings, Ltd. 18,200 75
Li & Fung, Ltd. 16,400 39
National Mutual Asia 54,500 44
New World Development Co., Ltd. 31,800 95
Orient Overseas International Ltd. (a) 121,000 44
QPL International Holdings, Ltd. (a) 600,000 184
SmarTone Telecommunications Holdings,
Ltd 65,400 233
Sun Hung Kai Properties, Ltd. 101,600 926
Swire Pacific, Ltd. Class A 11,800 58
Tai Cheung Holdings 56,000 17
60 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ----------
Television Broadcast 7,000 33
Vitasoy International Holdings, Ltd. 250,000 88
Wharf Holdings 836,700 2,610
Wing Hang Bank, Ltd. 21,200 68
----------
16,427
----------
IRELAND - 0.3%
Bank of Ireland 21,372 361
CRH PLC 54,581 967
Greencore Group PLC 49,200 152
Irish Life & Permanent PLC 105,956 1,103
Jefferson Smurfit Group PLC 94,400 221
----------
2,804
----------
ITALY - 3.6%
Assicurazioni Generali SPA 18,012 624
Banca Commerciale Italiana 221,000 1,613
Banca Nazionale del Lavoro (a) 763,430 2,400
Banca Pop di Milano 49,000 378
Banca Popolaire di Bergamo CV 37,000 812
Banco Fideuram SPA 109,308 637
Bulgari SPA 112,000 753
Class Editori SPA 181,200 1,448
ENI SPA - ADR 29,700 1,782
Ente Nazionale Idrocarburi
SPA (Regd) 302,814 1,807
Fiat SPA di Risp 179,300 306
Finmeccanica SPA (a) 563,457 519
Gruppo Editoriale L'Espresso 55,200 893
Istituto Bancario San Paolo
di Torino - ADR 18,847 518
Istituto Mobiliare Italiano SPA 201,122 2,737
Italgas (Soc. Ital.) 79,759 335
Luxottica Group SPA - ADR 70,000 1,089
Magneti Marelli SPA 56,000 74
Mediaset SPA 446,184 3,965
Mediolanum SPA 37,500 288
Mondadori (Arnoldo) Editore SPA 130,600 2,262
Monte dei Paschi Siena SPA (a) 23,234 103
Montefibre di Risp 67,000 35
Montefibre SPA 240,000 136
Olivetti Group SPA (a) 212,093 509
Pirelli SPA 362,700 987
Telecom Italia Mobile SPA di Risp 79,059 291
Telecom Italia SPA (a) 569,841 3,090
Telecom Italia SPA di Risp (a) 502,810 5,225
----------
35,616
----------
JAPAN - 21.4%
Able, Inc. 28,000 1,435
ADERANS Co., Ltd. 2,100 90
Advantest 1,500 165
Aiful Corp. 10,200 1,250
Alps Electric Co. 10,000 234
Aoki International 32,000 148
Aoyama Trading Co. 43,500 1,374
Aruze Corp. NPV 2,000 197
Asahi Bank, Ltd. 73,000 350
Asahi Glass Co. 19,000 123
Bank of Tokyo - Mitsubishi, Ltd. 121,000 1,723
Banyu Pharmaceutical 6,000 99
Belluna Co., Ltd. 79,000 2,273
Bridgestone Tire Corp. 24,000 726
Canon Chemicals, Inc. 1,000 8
Canon, Inc. 307,000 8,832
Chichibu Onoda Cement Corp. 43,000 123
Chugai Pharmaceutical Co., Ltd. 59,000 636
Citizen Watch Co., Ltd. 43,000 373
Credit Saison Co. 84,750 1,772
Dai Ichi Kangyo Bank 14,000 90
Dai Ichi Pharmaceutical Co. 33,000 512
Dai Nippon Printing, Ltd. 18,000 288
Dai-Tokyo Fire & Marine 383,000 1,377
Daifuku Machinery Co. 1,000 7
Daikin Industries, Ltd. 13,000 151
Daito Trust Construction 74,350 830
Daiwa Kosho Lease Co., Ltd. 87,000 381
Daiwa Securities 129,000 853
DDI Corp. 103 641
Deodeo Corp. 15,000 217
East Japan Railway Co. 364 1,956
Ebara Corp. 12,000 143
Eisai Co. 95,900 1,891
Ezaki Glico Co. 69,000 414
Fanuc Co. 8,300 446
Fuji Bank, Ltd. 306,000 2,135
Fuji Heavy Industries, Ltd. 354,000 2,733
Fuji Machine Manufacturing Co. 49,000 1,511
Fuji Photo Film Co. 17,000 644
Fuji Seal, Inc. 7,000 972
Fuji Soft ABC, Inc. 1,800 107
Fujitsu Support and Service, Inc. 15,000 2,272
Fujitsu, Ltd. 59,000 1,188
Funai Electric Co., Ltd. 1,000 198
Furukawa Electric Co. 33,000 151
General Sekiyu KK 26,000 83
Hikari Tsushin, Inc. 1,100 340
Hitachi Software
Engineering Co., Ltd. 2,500 124
International Securities Fund 61
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- --------
Hitachi, Ltd. 1,003,000 9,411
Hokkaido Electric Power Co., Inc. 20,700 305
Honda Motor Co., Ltd. 66,000 2,799
Hoya Corp. 2,000 113
Inax Corp. 10,000 61
Industrial Bank of Japan, Ltd. 15,000 119
ITO EN, Ltd. 1,000 67
Ito-Yokado Co., Ltd. 66,000 4,419
Itochu Corp. (a) 150,000 373
Japan Telecom Co., Ltd. 5 71
Japan Tobacco, Inc. 428 4,741
Kaneka Corp. 19,000 179
Kao Corp. 202,000 5,677
Kawasaki Steel Corp. 175,000 327
Keyence Corp. 600 105
Kinki Coca-Cola Bottling 27,000 469
Kirin Brewery Co. 253,000 3,033
Kissei Pharmaceutical Co. 34,000 676
Koa Fire & Marine 82,000 260
Kojima Co., Ltd. 38,700 1,289
Kokusai Denshin Denwa 3,100 223
Konami Co., Ltd. 7,000 289
Koyo Seiko Co., Ltd. 1,000 9
Kuraray Co., Ltd. 5,000 60
Kurimoto Iron Works 90,000 246
Kyocera Corp. 9,000 528
Kyowa Exeo Corp. 8,000 68
Kyushu Electric Power 13,900 214
Laox 10,000 87
Mabuchi Motor Co., Ltd. 26,000 2,418
Makita Corp. 91,000 1,030
Marubeni Corp. 845,000 1,767
Maruichi Steel Tube 38,000 497
Matsumotokiyoshi 31,500 1,888
Matsushita Communication 1,000 72
Matsushita Electric
Industrial Co., Ltd. 461,000 8,956
Matsushita-Kotobuki
Electric Co., Ltd. 4,000 113
Meiwa Estate Co., Ltd. 38,600 1,611
Mikuni Coca-Cola Bottling 4,000 81
Minebea Co., Ltd. 218,000 2,433
Minolta Camera Co. 20,000 103
Mitsubishi Chemical 178,000 617
Mitsubishi Corp. 48,000 325
Mitsubishi Estate Co., Ltd. 41,000 400
Mitsubishi Heavy Industries 371,000 1,506
Mitsui Mining & Smelting 26,000 134
Mitsui O.S.K. Lines 156,000 335
Mitsui Petrochemical Industry 4,000 26
Mitsui Trust & Banking Co., Ltd. 81,000 129
Mitsukoshi (a) 285,000 1,239
Mitsumi Electric Co. 4,000 112
Murata Manufacturing Co., Ltd. 52,000 3,422
Namco 57,900 1,556
Nanto Bank 57,000 294
NEC Corp. 172,000 2,140
NHK Spring Co. 11,000 61
Nichicon Corp. 10,000 146
Nichido Fire & Marine 172,450 888
Nichiei Co., Ltd. 29,400 2,576
NIDEC Corp. 1,100 166
Nihon Unisys 10,000 217
Nikko Securities Co., Ltd. 255,000 1,646
Nintendo Co., Ltd. 27,600 3,881
Nippon Comsys Corp. 7,000 114
Nippon Denso Co. 5,000 102
Nippon Fire & Marine 80,000 271
Nippon Meat Packers, Inc. 6,000 78
Nippon Steel Corp. 130,000 302
Nippon System Development 22,900 1,363
Nippon Telegraph & Telephone Corp. 600 6,993
Nippon Yusen 269,000 1,036
Nippon Zeon Co., Ltd. 22,000 160
Nishimatsu Construction 246,000 1,411
Nissan Chemical Industries, Ltd. 14,000 85
Nissan Motor Co., Ltd. (a) 653,000 3,120
Nitto Denko Corp. 8,000 168
Nomura Securities Co., Ltd. 148,000 1,734
NTT Mobile Communication Network, Inc. 105 1,423
NTT Mobile Communications Network,
Inc. NPV New (a) 428 5,732
Orix Corp. 3,000 268
Osaka Gas Co. 81,000 275
Otsuka Kagu 900 163
Paris Miki, Inc. 3,600 196
Ricoh Co., Ltd. 47,000 647
Rinnai Corp. 76,000 1,747
Rohm Co. 31,000 4,856
Ryohin Keikaku Co., Ltd. 5,700 1,435
Sakura Bank, Ltd. 695,000 2,637
Sanden Corp. 15,000 120
Sangetsu Co. 29,000 617
Sankyo Co., Ltd. 71,000 1,790
Sankyo Co., Ltd. GUNMA 48,400 2,317
Secom Co. 17,000 1,771
Sekisui Chemical Co., Ltd. 205,000 1,190
Sekisui House, Ltd. 51,000 551
Sharp Corp. 50,000 591
Shimano, Inc. 1,200 28
Shin-Etsu Chemical Co. 13,050 437
62 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ----------
Shionogi & Co. 188,000 1,487
Shohkoh Fund & Co., Ltd. 4,060 2,913
Skylark Co. 53,900 1,158
SMC Corp. 600 67
Snow Brand Milk 13,000 64
Softbank Corp. 3,500 709
Sony Corp. 60,000 6,473
Sony Music Entertainment, Inc. 10,600 903
Sumitomo Bakelite Co., Ltd. 16,000 123
Sumitomo Bank 102,000 1,266
Sumitomo Rubber Industries 223,000 1,578
Sundrug Co., Ltd. 17,300 815
Suzuki Motor Corp. 16,000 255
Taiyo Yuden Co., Ltd. 58,000 952
Takeda Chemical Industries 66,000 3,061
Takefuji Corp. 13,700 1,417
TDK Corp. 30,000 2,745
Terumo Corp. 13,000 290
THK Co., Ltd. 2,600 60
Toc Co. 42,000 356
Toho Bank 83,000 278
Tohoku Electric Power 16,500 250
Tokai Bank 24,000 137
Tokyo Broadcasting 6,000 87
Tokyo Electric Power 13,500 285
Tokyo Electronics 2,000 136
Tokyo Gas Co. 106,000 261
Tokyo Seimitsu Co., Ltd. 3,400 217
Tokyo Steel Manufacturing 48,400 254
Toppan Forms Co., Ltd. 6,000 114
Toppan Printing 14,000 156
Toshiba Corp. 376,000 2,682
Tostem Corp. 13,000 250
Toyo Seikan Kaisha, Ltd. 96,000 2,159
Toyota Motor Corp. 106,000 3,356
Trend Micro, Inc. 500 84
Uni-Charm Corp. 2,300 100
UNY Co., Ltd. 6,000 90
West Japan Railway Co. 531 2,037
World Co., Ltd. 2,300 167
Yakult Honsha Co., Ltd. 7,000 64
Yamanouchi Pharmaceutical 83,000 3,177
Yamato Kogyo Co. 34,000 248
Yamato Transport 6,000 105
Yodogawa Steel Works, Ltd. 122,000 503
Yonekyu Corp. 4,000 53
York-Benimaru Co., Ltd. 2,900 110
Yoshitomi Pharmaceutical 4,000 50
----------
213,419
----------
MALAYSIA - 0.3%
Berjaya Leisure Berhad 50,000 29
Carlsberg Brewery Malaysia Berhad 149,000 380
Commerce Asset Holdings 160,000 356
Golden Hope Plantation 45,000 35
Kumpulan Guthrie 344,000 205
Malayan Banking Berhad 205,000 552
Malaysian Airline System 41,000 50
Oriental Holdings Berhad 25,000 61
Perlis Plantations 189,000 198
Resorts World Berhad 481,000 1,018
Technical Resource Industries Berhad 349,000 257
----------
3,141
----------
NETHERLANDS - 6.5%
ABN Amro Holdings NV 123,877 2,682
Aegon NV 3,100 225
AKZO Nobel NV 43,100 1,813
AKZO Nobel NV - ADR 29,500 1,250
Benckiser NV Class B 2,705 144
Buhrmann NV 62,294 1,005
Elsevier NV 117,000 1,357
Equant NV (a) 27,800 2,617
Equant NV NPV (a) 15,521 1,430
European Vinyls Corp. International NV 6,100 52
Fortis (NL) NV 10,152 313
Getronics NV 5,855 225
Heineken Holding NV Class A 13,125 494
Heineken NV 6,650 340
Hollandsche Beton Groep NV 67,975 869
Hunter Douglas NV 51,427 1,765
ING Groep NV 118,036 6,388
Koninklijke (Royal) Philips
Electronics NV (a) 25,275 2,492
Koninklijke (Royal) Philips
Electronics NV NY Reg Share NPV (a) 13,162 1,328
Koninklijke Ahold NV 68,976 2,375
Koninklijke KPN NV 191,153 8,966
Koninklijke KPN NV- ADR 31,255 1,500
Koninklijke Numico NV 8,251 292
Laurus NV 23,897 554
Pakhoed Kon NV CVA 15,052 357
Royal Dutch Petroleum Co. 119,429 6,993
STMicroelectronics (a) 21,883 1,457
Stork NV 55,579 1,266
TNT Post Group NV 5,223 125
Unilever NV (a) 11,585 780
United Pan-Europe Communications NV (a) 46,595 2,527
International Securities Fund 63
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Vedior 41,985 714
Vendex NV 173,219 4,625
Verenigde Nederlandse
Uitgeversbedrijven Verenigd Bezit 86,939 3,473
Wereldhave NV 8,966 460
Wolters Kluwer NV (a) 44,328 1,763
--------
65,016
--------
NEW ZEALAND - 0.8%
Carter Holt Harvey 710,381 850
Fletcher Challenge Paper 1,055,588 788
Lion Nathan, Ltd. 12,200 29
Telecom Corp. of New Zealand, Ltd. NPV 1,353,058 5,803
Warehouse Group (The), Ltd. NPV 4,900 19
--------
7,489
--------
NORWAY - 0.2%
Christiania Bank OG Kreditkasse 44,000 158
Kvaerner Industries AS (a) 1,000 21
Kvaerner Industries AS Series B (a) 1,000 16
Norsk Hydro AS 8,666 327
Norske Skogindustrier AS Class A 4,000 147
Nycomed Amersham PLC 27,500 195
Orkla ASA Class A 30,000 466
Orkla ASA Class B 26,628 361
--------
1,691
--------
PORTUGAL - 0.7%
Banco Pinto & Sotto Mayor SA 83,584 1,484
Electricidade de Portugal SA 8,500 153
Portugal Telecom SA 81,101 3,298
Portugal Telecom SA New (a) 52,845 1
Telecel-Comunicacaoes Pessoaissa 13,142 1,693
--------
6,629
--------
RUSSIA - 0.2%
Global TeleSystems Group, Inc. (a) 31,860 2,579
--------
SINGAPORE - 0.7%
City Developments 17,400 111
Creative Technology, Ltd. 21,000 277
Datacraft Asia, Ltd. (a) 12,400 54
Development Bank of Singapore, Ltd.
(Alien Market) 267,300 3,267
Natsteel Electronics, Ltd. 362,000 1,585
Overseas Chinese Banking
(Alien Market) 17,400 145
Overseas Union Bank (Alien Market) 77,640 374
Singapore Airlines, Ltd.
(Alien Market) 10,800 103
Singapore Land 40,000 118
Singapore Press Holdings, Ltd. 10,100 172
Singapore Technologies
Engineering, Ltd. 33,800 38
Singapore Telecommunications, Ltd. 76,000 130
Straits Steamship Land, Ltd. 95,000 179
United Overseas Bank, Ltd.
(Alien Market) 58,800 411
Venture Manufacturing
(Singapore), Ltd. 17,000 131
--------
7,095
--------
SOUTH KOREA - 0.2%
Samsung Electronics Co. - GDR 39,016 2,080
--------
SPAIN - 4.4%
Argentaria, Caja Postal y Banco
Hipotecario de Espana SA - ADR 22,500 1,035
Banco Popular Espanol SA 47,406 3,409
Banco Santander Central
Hispano SA (a) 486,320 5,063
Corporacion Bancaria de Espana
SA (Regd) 287,942 6,545
Endesa SA 90,599 1,931
Gas Y Electricidad SA Series 2 19,124 1,508
Grupo Dragados SA (a) 15,900 188
Iberdrola SA 177,790 2,705
Indra Sistemas SA 120,691 1,300
Repsol SA (a) 22,200 457
Repsol SA - ADR 88,000 1,788
Superdiplo SA (a) 44,800 993
Tabacalera SA Class A (Regd) 332,395 6,716
Telefonica SA (a) 191,170 9,229
Transportes Azkar SA 2,900 30
Union Electrica Fenosa SA 41,000 536
Vallehermoso SA 16,114 154
--------
43,587
--------
SWEDEN - 1.3%
ABB, Ltd. (a) 2,159 202
Assa Abloy AB Series B (a) 47,240 512
Assa Abloy AB Series B New (a) 47,240 10
Autoliv, Inc. 54,070 1,650
Celsius Industrier AB Series B 12,000 151
Electrolux AB Series B 59,009 1,237
Enator AB 80,100 2,406
Modern Times Group MTG AB
Series B (a) 58,800 1,278
Skandia Forsakrings AB 76,120 1,426
Stora Enso Oyj Class A 16,214 174
Stora Enso Oyj Class R 30,085 326
64 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ----------
Svenska Celluosa Series B 13,700 355
Svenska Handelsbanken AB
Series A (a) 49,614 596
Telefonaktiebolaget Ericsson (LM)
Series B 59,799 1,920
Tornet Fastighets AB 52,500 714
----------
12,957
----------
SWITZERLAND - 3.4%
ABB, Ltd. (a) 1,539 145
Baer Holdings AG (BR) 1,068 3,042
Baloise Holding, Ltd. 700 571
Barry Callebaut AG (Regd) 8,235 1,260
Bobst AG (BR) 250 297
Credit Suisse Group (Regd) 1,850 320
Forbo Holding AG (Regd) 3,250 1,292
Geberit International AG (a) 690 157
Gretag Imaging Group 11,080 1,071
Holderbank Financiere
Glarus AG (BR) 150 177
Kuoni Reisen AG Series B 132 509
Nestle SA (Regd) 730 1,315
Novartis AG (Regd) 4,643 6,777
Richemont Series A (BR) 94 181
Roche Holdings Genusscheine AG NPV 131 1,346
Schweiz Ruckversicher (Regd) 676 1,287
Schweizerische Lebensversicherungs-und
Rentenanstalt 3,730 2,257
SGS Holding (BR) (a) 120 124
Sulzer AG (Regd) (a) 2,200 1,337
Swisscom AG (Regd) 11,141 4,191
Swisslog Holding AG 8,292 1,004
UBS AG 15,501 4,625
Valora Holding AG (Regd) 800 184
Zurich Allied AG 1,089 618
----------
34,087
----------
UNITED KINGDOM - 21.4%
3i Group PLC 38,255 422
Abbey National PLC 117,280 2,203
Alliance & Leicester PLC 136,500 1,844
Allied Zurich PLC 287,024 3,608
Anglian Water PLC 177,227 1,961
Arjo, Wiggins, Appleton PLC 380,000 1,321
Arriva PLC 27,600 163
ASDA-MFI Group PLC 160,255 549
Ashtead Group PLC 255,781 706
Associated British Foods PLC 269,000 1,777
AstraZeneca Group PLC 6,336 247
Bank of Scotland
Governor & Co. PLC 47,910 641
Barclays Bank PLC 179,552 5,222
Barratt Development PLC 102,332 574
Bass PLC 180,771 2,621
BBA Group PLC 113,594 870
BG PLC 369,300 2,253
Billiton PLC 143,200 501
Blue Circle Industries PLC 325,000 2,167
BOC Group PLC 100,633 1,970
Boots Co. PLC 161,000 1,911
British Aerospace PLC 583,797 3,800
British Airways PLC 783,465 5,409
British Airways PLC - ADR 4,350 311
British American Tobacco PLC 371,911 3,509
British Petroleum Co. PLC 345,459 6,186
British Sky Broadcasting Group PLC 142,283 1,320
British Steel PLC 367,600 952
British Telecom PLC 210,257 3,520
Bunzl PLC 455,000 2,256
Burmah Castrol PLC (a) 26,166 496
Cable & Wireless
Communications PLC (a) 213,873 2,056
Cable & Wireless PLC 258,100 3,291
Cadbury Schweppes PLC (a) 46,200 295
Carlton Communications PLC 25,500 211
Centrica PLC (a) 591,300 1,389
Coats Viyella PLC 268,000 215
Commercial Union
Assurance Co. PLC 204,487 2,944
Compass Group PLC 52,600 522
Courtaulds Textile Co. PLC 111,200 286
Diageo PLC 751,665 7,897
Dixon Group PLC 26,086 489
Enterprise Oil PLC 418,700 2,672
Fairview Holdings PLC 67,262 144
Gallaher Group PLC 157,228 969
General Electric Co. PLC 19,800 201
GKN PLC 162,000 2,765
Glaxo Wellcome PLC 363,061 10,089
Glynwed International PLC 92,400 302
Granada Group PLC 170,400 3,156
Great University Stores PLC 371,200 4,140
Hanson PLC 47,000 422
Hays PLC 27,100 286
Hillsdown Holdings PLC 64,524 146
HSBC Holdings PLC 110,265 3,907
Hyder PLC 106,223 1,254
IMI PLC 26,400 107
Imperial Chemical Industries PLC 157,972 1,560
Invensys PLC 217,650 1,029
International Securities Fund 65
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ---------
Kingfisher PLC 82,600 964
Laird Group PLC 230,868 957
LASMO PLC 350,000 789
Lloyds TSB Group PLC 337,229 4,579
Medeva PLC 278,029 451
MEPC PLC 159,460 1,298
MFI Furniture Group PLC 176,576 112
Mirror Group News PLC 542,000 2,114
Morgan Crucible PLC 361,120 1,540
National Grid Group PLC 95,146 663
National Power PLC 72,668 528
Northern Foods PLC 63,200 130
Northern Rock PLC 29,600 225
Nycomed Amersham PLC 69,925 489
Ocean Group PLC 13,400 221
Orange PLC (a) 225,170 3,304
Pearson PLC 23,400 475
Pen & Orient DFD PLC 115,100 1,726
Pilkington Brothers PLC 141,900 193
Powell Duffryn PLC 55,000 439
PowerGen PLC 362,989 3,908
Premier Consolidated Oil PLC (a) 848,396 247
Prudential Corp. PLC 40,100 591
Racal Electronics PLC 59,500 362
Railtrack Group PLC 356,932 7,297
Rank Group PLC 200,000 796
Reed International PLC 245,700 1,634
Rentokil Initial PLC 19,000 74
Reuters Group PLC 20,500 270
Rexam PLC 313,000 1,268
Rio Tinto Corp. PLC (Regd) 283,224 4,746
RMC Group PLC 13,000 209
Royal & Sun Alliance Insurance Group
PLC (a) 545,387 4,887
Royal Bank of Scotland Group PLC 94,300 1,932
Safeway PLC 453,165 1,807
Sainsbury (J.) PLC 69,595 439
Scottish Hydro-Electric PLC 242,633 2,478
Select Appointments
Holdings PLC (a) 11,000 131
Shell Transportation &
Trading PLC (Regd) 778,715 5,843
SkyePharma PLC (a) 1,185,000 925
Smith & Nephew PLC 733,100 2,219
SmithKline Beecham PLC 166,018 2,159
Somerfield PLC 1,037,101 4,863
South West Water PLC 75,356 1,264
Storehouse PLC 652,214 1,388
Sun Life and Provincial Holdings PLC 97,894 699
Tarmac, Ltd. PLC 924,137 1,733
Tate & Lyle, Ltd. PLC 62,400 389
Tesco Store Holdings PLC 50,400 131
Thames Water PLC 52,250 829
Thistle Hotels PLC (a) 186,666 515
TI Group PLC 18,400 124
Tomkins PLC 654,298 2,836
Trinity PLC 40,000 355
Unilever PLC (a) 38,482 342
United Biscuits (Holdings) PLC 200,000 599
Vickers PLC 65,600 169
Vodafone Group PLC 649,793 12,782
Williams PLC 25,000 165
Wimpey (George), Ltd. PLC 160,000 381
Wolseley PLC 177,000 1,334
Woolwich PLC 55,400 324
WPP Group PLC 191,600 1,623
Zeneca Group PLC 20,700 801
---------
213,099
---------
UNITED STATES - 0.1%
MIH, Ltd. (a) 22,900 604
---------
TOTAL COMMON STOCKS
(cost $833,462) 938,831
---------
PREFERRED STOCKS - 0.9%
AUSTRALIA - 0.2%
News Corp., Ltd. 91,358 695
Sydney Harbour Casino
Holdings, Ltd. 673,317 654
---------
1,349
---------
GERMANY - 0.7%
Draegerwerk AG 950 13
Dyckerhoff AG 200 60
Grohe (Friedrich) AG 1,500 424
Hugo Boss 824 1,104
Krones AG NPV (a) 12,000 371
M.A.N. AG (a) 2,000 45
Porsche AG 1,000 2,350
ProSieben Media AG NV 2,643 120
Rheinmetall AG 67,700 1,214
Volkswagen AG 18,078 669
Wella AG 1,047 762
---------
7,132
---------
ITALY - 0.0%
Fiat SPA 35,300 57
---------
66 International Securities Fund
<PAGE>
International Securities Fund
Statement of Net Assets, continued
June 30, 1999 (Unaudited)
Market
Number Value
of (000)
Shares $
---------- ---------
Japan - 0.0%
Sanwa International Financial
Bermuda Trust (conv.) 36,000,000 308
---------
Total Preferred Stocks
(cost $9,268) 8,846
---------
Principal
Amount
(000)
$
-----------
Short-Term Investments - 4.2%
United States - 4.2%
Frank Russell Investment Company
Money Market Fund,
due on demand (b) 37,378 37,378
United States Treasury Notes
5.875% due 07/31/99(b)(c) 5,000 5,005
---------
Total Short-Term Investments
(cost $42,383) 42,383
---------
Market
Value
(000)
$
---------
Total Investments - 99.2%
(identified cost $885,113) 990,060
Other Assets and Liabilities,
Net - 0.8% 7,473
---------
Net Assets - 100.0% 997,533
=========
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Held as collateral in connection with futures contracts purchased by the
Fund.
Abbreviations:
ADR - American Depositary Receipt
BR - Bearer
GDR - Global Deposit Receipt
NPV - No Par Value
NV - Nonvoting
Foreign Currency Abbreviations:
CAD - Canadian dollar
EUR - Euro dollar
DKK - Danish krone
GBP - British pound
JPY - Japanese yen
SEK - Swedish krone
USD - U.S. dollar
See accompanying notes which are an integral part of the financial statements.
International Securities Fund 67
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
------------- --------------
FUTURES CONTRACTS
CAC-40 Index (France)
expiration date 09/99 186 $ 180
DAX Index (Germany)
expiration date 09/99 63 83
FTSE - 100 Index (UK)
expiration date 09/99 133 (356)
TOPIX Index (Japan)
expiration date 09/99 88 410
-------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ 317
=============
MARKET
% OF VALUE
NET (000)
INDUSTRY DIVERSIFICATION ASSETS $
- ------------------------ ------------- --------------
Auto & Transportation 5.9% 58,745
Consumer Discretionary 15.1 150,542
Consumer Staples 6.7 67,140
Financial Services 17.1 170,972
Health Care 5.1 50,767
Integrated Oils 1.5 14,894
Materials & Processing 11.1 110,991
Miscellaneous 2.2 21,711
Other Energy 3.8 37,788
Producer Durables 8.6 85,233
Technology 5.4 54,106
Utilities 12.5 124,788
Short-Term Investments 4.2 42,383
------------- --------------
Total Investments 99.2 990,060
Other Assets and Liabilities, Net 0.8 7,473
------------- --------------
NET ASSETS 100.0% 997,533
============= ==============
MARKET
% OF VALUE
NET (000)
GEOGRAPHIC DIVERSIFICATION ASSET $
- -------------------------- ------------- --------------
Europe 42.1% 419,444
Japan 21.4 213,727
United Kingdom 21.4 213,098
Pacific Basin 6.9 69,087
Short-Term Investments 4.2 42,383
Other 3.2 32,321
------------- --------------
Total Investments 99.2 990,060
Other Assets and Liabilities, Net 0.8 7,473
------------- --------------
NET ASSETS 100.0% 997,533
============= ==============
See accompanying notes which are an integral part of the financial statements.
68 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30,1999 (UNAUDITED)
FOREIGN CURRENCY EXCHANGE SPOT CONTRACTS
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION
DELIVER FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
- ---------------- ------------- ---------- --------------
USD 87 DKK 624 07/01/99 $ -
USD 697 EUR 673 07/01/99 (4)
USD 1,590 EUR 1,537 07/02/99 (6)
USD 184 EUR 177 07/15/99 (1)
USD 2,650 EUR 2,544 07/30/99 (28)
USD 244 GBP 154 07/01/99 (1)
USD 1,909 GBP 1,203 07/02/99 (12)
USD 335 JPY 40,411 07/01/99 (1)
USD 44 SEK 369 07/02/99 -
JPY 56,991 EUR 456 07/02/99 (1)
JPY 56,991 EUR 472 07/02/99 1
CAD 1,606 USD 1,088 07/06/99 (3)
EUR 401 USD 415 07/01/99 2
EUR 752 USD 785 07/02/99 10
EUR 124 USD 128 07/06/99 -
EUR 2,093 USD 2,176 07/30/99 20
GBP 855 USD 1,346 07/06/99 (1)
JPY 119,928 USD 989 07/01/99 (3)
JPY 2,855 USD 24 07/02/99 -
SEK 1,902 USD 224 07/01/99 -
--------------
$ (28)
==============
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
USD 21,447 EUR 20,500 09/17/99 $ (189)
USD 23,273 GBP 14,640 07/30/99 (186)
USD 8,241 JPY 986,975 08/05/99 (190)
USD 12,378 JPY 1,575,000 09/17/99 (42)
GBP 4,640 USD 7,505 07/30/99 190
GBP 968,975 USD 7,000 08/05/99 (1,051)
JPY 100,000 USD 836 07/02/99 -
--------------
$ (1,468)
==============
See accompanying notes which are an integral part of the financial statements.
International Securities Fund 69
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
<S> <C>
ASSETS
Investments at market (identified cost $885,113) ........................................... $ 990,060
Foreign currency holdings (identified cost $8,697) ......................................... 8,630
Forward foreign currency exchange contracts (cost $80,580) ................................. 80,073
Foreign currency exchange spot contracts (cost $15,487) .................................... 15,805
Receivables:
Dividends and interest .................................................................... 2,246
Investments sold .......................................................................... 13,932
Fund shares sold .......................................................................... 2,143
Foreign taxes recoverable ................................................................. 1,351
-----------
Total Assets ............................................................................ 1,114,240
LIABILITIES
Payables:
Due to Custodian ........................................................... $ 86
Investments purchased ...................................................... 15,771
Fund shares redeemed ....................................................... 2,349
Accrued fees to affiliates ................................................. 862
Other accrued expenses ..................................................... 164
Daily variation margin on futures contracts ................................ 101
Forward foreign currency exchange contracts (cost $80,580) .................. 81,541
Foreign currency exchange spot contracts (cost $15,487) ..................... 15,833
-------------
Total Liabilities ....................................................................... 116,707
-----------
NET ASSETS ................................................................................. $ 997,533
===========
NET ASSETS CONSIST OF:
Undistributed net investment income ........................................................ $ 3,912
Accumulated net realized gain (loss) ....................................................... 61,205
Unrealized appreciation (depreciation) on:
Investments ............................................................................... 104,947
Futures contracts ......................................................................... 317
Foreign currency-related transactions ..................................................... (1,613)
Shares of beneficial interest .............................................................. 156
Additional paid-in capital ................................................................. 828,609
-----------
NET ASSETS ................................................................................. $ 997,533
===========
NET ASSET VALUE, offering and redemption price per share:
Class C ($2,781,991 divided by 43,738 shares of $.01 par value
shares of beneficial interest outstanding) .............................................. $ 63.61
===========
Class E ($6,007,812 divided by 94,086 shares of $.01 par value
shares of beneficial interest outstanding) .............................................. $ 63.85
===========
Class S ($988,743,005 divided by 15,435,834 shares of $.01 par
value shares of beneficial interest outstanding) ........................................ $ 64.06
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
70 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<S> <C>
INVESTMENT INCOME
Dividends .................................................................................... $ 13,705
Dividends from Money Market Fund ............................................................. 1,211
Interest ..................................................................................... 269
Less foreign taxes withheld .................................................................. (1,565)
--------
Total Investment Income .................................................................... 13,620
EXPENSES
Advisory fees ............................................................... $ 4,290
Administrative fees ......................................................... 240
Custodian fees .............................................................. 733
Distribution fees - Class C ................................................. 4
Transfer agent fees ......................................................... 495
Professional fees ........................................................... 38
Registration fees - Class S ................................................. 51
Shareholder servicing fees - Class C ........................................ 1
Shareholder servicing fees - Class E ........................................ 6
Trustees' fees .............................................................. 4
Miscellaneous ............................................................... 71
--------
Total Expenses ............................................................................. 5,933
--------
Net investment income ......................................................................... 7,687
--------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ................................................................. 58,214
Futures contracts ........................................................... 6,642
Foreign currency-related transactions ....................................... (8,223)
-------- 56,633
Net change in unrealized appreciation (depreciation) on:
Investments ................................................................. (13,332)
Futures contracts ........................................................... (847)
Foreign currency-related transactions ....................................... 679 (13,500)
-------- --------
Net realized and unrealized gain (loss) ...................................................... 43,133
--------
Net increase (decrease) in net assets resulting from operations ............................... $ 50,820
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
International Securities Fund 71
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
------------------ -----------------
<S> <C> <C>
OPERATIONS
Net investment income ............................................. $ 7,687 $ 10,770
Net realized gain (loss) ......................................... 56,633 22,759
Net change in unrealized appreciation (depreciation) ............. (13,500) 73,736
--------- ---------
Net increase (decrease) in net assets resulting from operations . 50,820 107,265
--------- ---------
DISTRIBUTIONS
From net investment income
Class C ......................................................... (1) --
Class E ......................................................... -- (22)
Class S ......................................................... (814) (5,142)
In excess of net investment income
Class E ......................................................... -- (20)
Class S ......................................................... -- (4,633)
From net realized gain on investments
Class E ......................................................... -- (5)
Class S ......................................................... -- (3,176)
--------- ---------
Net decrease from distributions ............................... (815) (12,998)
--------- ---------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ..... 2,318 9,906
--------- ---------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ........................ 52,323 104,173
NET ASSETS
Beginning of period ............................................... 945,210 841,037
--------- ---------
End of period (including undistributed net investment income
of $3,912 and accumulated distributions in excess of net
investment income of $2,960, respectively) ..................... $ 997,533 $ 945,210
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
72 International Securities Fund
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL SECURITIES FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ....................... $ 60.66
------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) ................................ .41
Net realized and unrealized gain (loss) on investments .... 2.59
------------
Total Income From Investment Operations ................. 3.00
------------
DISTRIBUTIONS
From net investment income ................................ (.05)
------------
NET ASSET VALUE, END OF PERIOD ............................. $ 63.61
============
TOTAL RETURN (%)(a) ....................................... 4.96
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ............... 2,782
Ratios to average net assets (%)(b)
Operating expenses ...................................... 2.20
Net investment income ................................... 1.68
Portfolio turnover rate (%)(b) ........................... 137.17
</TABLE>
* For the period January 27, 1999 (commencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) Average month-end shares outstanding were used for this calculation.
International Securities Fund 73
<PAGE>
INTERNATIONAL SECURITIES FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------
1999* 1998 1997 1996**
------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ................ $ 60.68 $ 54.64 $ 58.47 $ 58.56
------------ ------------ ------------ ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) ......................... .45 .28 .35 (.03)
Net realized and unrealized gain (loss) on investments 2.72 6.53 (.64) 1.68
------------ ------------ ----------- ----------
Total Income From Investment Operations .......... 3.17 6.81 (.29) 1.65
------------ ------------ ----------- ----------
DISTRIBUTIONS
From net investment income ......................... -- (.57) (.29) (.43)
From net realized gain on investments .............. -- (.20) (3.25) (1.31)
------------ ------------ ----------- ----------
Total Distributions .............................. -- (.77) (3.54) (1.74)
------------ ------------ ----------- ----------
NET ASSET VALUE, END OF PERIOD ...................... $ 63.85 $ 60.68 $ 54.64 $ 58.47
============ ============ ============ ==========
TOTAL RETURN (%)(a) ................................ 5.22 12.53 (.41) 2.86
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ......... 6,008 4,431 1,271 623
Ratios to average net assets (%)(b):
Operating expenses ............................... 1.48 1.64 1.96 2.00
Net investment income ............................ 1.46 .49 .19 (.61)
Portfolio turnover rate (%)(b) .................... 137.17 68.46 73.54 42.43
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
** For the period November 6, 1996 (commencement of sale) to December 31, 1996.
(a) Periods less than one year are not annualized.
(b) The ratios for the periods ended June 30, 1999 and December 31, 1996 are
annualized.
(c) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
74 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------
1999* 1998 1997 1996 1995 1994
--------- --------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD .......... $ 60.86 $ 54.69 $ 58.48 $ 56.61 $ 53.96 $ 57.95
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) ................... .49 .69 .56 .53 .56 .44
Net realized and unrealized gain (loss) on
investments ................................ 2.76 6.32 (.46) 3.72 4.89 1.23
--------- --------- --------- --------- --------- ---------
Total Income From Investment Operations..... 3.25 7.01 .10 4.25 5.45 1.67
--------- --------- --------- --------- --------- ---------
DISTRIBUTIONS
From net investment income ................... (.05) (.64) (.64) (.48) (1.11) (.06)
From net realized gain on investments ........ -- (.20) (3.25) (1.90) (1.69) (5.60)
--------- --------- --------- --------- --------- ---------
Total Distributions ........................ (.05) (.84) (3.89) (2.38) (2.80) (5.66)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD................. $ 64.06 $ 60.86 $ 54.69 $ 58.48 $ 56.61 $ 53.96
========= ========= ========= ========= ========= =========
TOTAL RETURN (%)(a)............................ 5.35 12.90 .26 7.63 10.20 4.86
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands).... 988,743 940,779 839,767 743,615 623,389 563,333
Ratios to average net assets (%)(b):
Operating expenses, net .................... 1.24 1.22 1.26 1.30 1.30 1.30
Operating expenses, gross .................. 1.24 1.22 1.26 1.31 1.31 1.33
Net investment income ...................... 1.60 1.15 .91 .91 .97 .70
Portfolio turnover rate (%)(b)................ 137.17 68.46 73.54 42.43 42.96 72.23
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the periods ended June 30, 1999 are annualized.
(c) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
International Securities Fund 75
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- ----------
COMMON STOCKS - 84.6%
ARGENTINA - 3.2%
Banco de Galicia y Buenos Aires
Class B - ADR 57,190 1,151
Banco Frances Rio PL 26,000 169
Central Costanera Class B 140,200 404
Central Puerto SA Class B 120,000 270
Corcemar SA Class B 26,987 128
Dalmine Siderca SA 128,000 168
Inversiones Y Representaciones 93,401 288
Naviera Perez Companc Class B 374,131 2,152
Nobleza Piccardo 53,900 178
Perez Companc SA Class B - ADR 83,370 967
Quilmes Industrial (Regd)(a) 71,000 621
Siderar SA Series A 58,800 177
Telecom Argentina Class B 170,122 936
Telecom Argentina SA Class B - ADR 13,500 361
Telefonica de Argentina Class B 340,000 1,054
Telefonica de Argentina
Class B - ADR 61,900 1,942
Transportadora de Gas del Sur SA
Class B 535,284 1,006
----------
11,972
----------
AUSTRALIA - 0.4%
Lihir Gold, Ltd. (a) 1,016,000 766
Orogen Minerals, Ltd. 800,000 867
----------
1,633
----------
BRAZIL - 2.4%
Aracruz Celulose SA NPV - ADR 43,670 950
Centrais Eletricas Brasileiras SA NPV 65,751,000 1,239
Companhia Brasileira de Distribuicao
Grupo Pao de Acucar (Regd) - GDR 9,400 176
Companhia Cervejaria Brahma - ADR 21,900 248
Companhia Energetica de Minas
Gerais SA - ADR 23,547 491
Embratel Participacoes SA (a) 26,714,000 199
Forca E Luz (Cia Paul) NPV 15,747,000 1,014
Light Servicos de Eletricidade
SA NPV 3,880,000 309
Light Servicos Eletricidade
SA NPV (a) 1,372,914 109
Makro Atacadista - GDR (a) 60,000 623
Makro Atacadista SA - GDR 60,800 631
Petroleo Brasileiro Petrobras
SA - ADR 24,000 370
Sider Nacional cia NPV 8,700,000 227
Souza Cruz NPV 45,400 319
Tele Centro Sul Participacoes
SA NPV (a) 45,625,000 241
Tele Norte Leste Participacoes
SA NPV 38,355,000 351
Telecomunicacoes Brasileiras
NPV (a) 27,360,000 1
Telesp Celular Participacoes SA NPV 34,060,000 183
Telesp Participacoes SA NPV 39,612,000 510
Uniao de Bancos Brasileiros
SA - (Units) 7,170,000 324
Uniao de Bancos Brasileiros
SA - GDR 14,900 359
White Martins SA NPV 331,407 153
----------
9,027
----------
CHILE - 4.0%
Administradora de Fondos de Pensiones
Provida SA - ADR 17,470 384
Antofagasta Holdings PLC 308,636 1,416
Banco BHIF - ADR 4,700 68
Banco de A. Edwards Series A - ADR 7,800 113
Banco Santander Chile
Series A - ADR 16,400 254
Banco Santiago - ADR 20,000 384
Chilectra SA - ADR 14,300 302
Compania de Telecomunicaciones de
Chile SA - ADR 41,344 1,023
Distribucion y Servicio D&S
SA - ADR 143,800 2,624
Embotelladora Andina SA - ADR Series A 62,900 1,258
Embotelladora Andina SA - ADR Series B 58,000 885
Embotelladora Arica SA ADR (a) 78,000 963
Enersis SA - ADR 45,602 1,043
Gener SA - ADR 64,897 1,152
Laboratorio Chile SA - ADR 30,000 540
Maderas y Sinteticos SA - ADR 103,000 1,082
Quinenco SA 143,100 1,342
Sociedad Quimica Y Minera de Chile
SA -ADR 5,500 194
----------
15,027
----------
CHINA - 2.0%
Beijing Datang Power Generation
Company, Ltd. 1,020,000 329
Beijing Enterprises Holdings, Ltd. 118,000 243
China Telecom (Hong Kong), Ltd. (a) 646,000 1,794
China Telecom (Hong Kong), Ltd. -
ADR (a) 12,000 684
76 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ----------
Guangdong Kelon Elec Holdings 320,000 373
Huaneng Power International, Inc.
Series N - ADR 145,500 2,492
Jiangsu Expressway Co., Ltd. Class H 4,590,000 994
Jilin Chemical Industrial
Company, Ltd. Class H 1,800,000 218
Yanzhou Coal Mining Co., Ltd.
Series H 1,270,000 454
Zhejiang Expressway Co., Ltd.
Series H 420,000 84
----------
7,665
----------
COLOMBIA - 0.2%
Bancolombia SA - ADR 167,500 796
----------
CROATIA - 0.3%
Pliva d.d (a) 11,600 173
Pliva d.d. - GDR 65,600 984
----------
1,157
----------
CZECH REPUBLIC - 0.7%
Central European Media
Enterprises, Ltd. Class A (a) 33,000 208
Ceske Radiokomunikace - GDR (a) 10,000 349
Komercni Banka AS - ADR (a) 87,700 544
SPT Telecom AS (a) 40,700 660
SPT Telecom AS - GDR (a) 13,000 208
Tabak AS 3,500 832
----------
2,801
----------
ECUADOR - 0.1%
La Cement National - GDR (a) 3,700 266
La Cemento Nacional - GDR (a) 700 50
----------
316
----------
EGYPT - 1.2%
Al-Ahram Beverages Co. S.A.E. (a) 8,700 485
Al-Ahram Beverages Co. S.A.E.
- GDR (a) 40,000 1,115
Al-Ahram Beverages Co. S.A.E.
- GDR (144A)(a) 14,765 415
Egyptian Mobile Phone Network (a) 58,896 1,327
Orascom Construction (a) 27,000 364
Paints & Chemical Industry Co.
- GDR (a) 52,000 335
Paints & Chemical Industry Co.
- GDR (144A)(a) 10,000 65
Suez Cement Co. (Regd) - GDR 31,900 456
----------
4,562
----------
FRANCE - 0.0%
Elf Gabon SA 24
243 ----------
GREECE - 3.3%
Alpha Credit Bank SA (a) 3,003 193
Aluminum Co. of Greece Industrial
and Commercial (Regd) 11,800 466
Athens Medical Center SA (Regd) 11,310 282
Attica Enterprises SA 13,063 149
Bank Of Greece SA (a) 1,539 101
Chipita International SA 9,040 236
Commercial Bank of Greece (Regd) 29,186 2,085
Credit Bank (Regd) 35,349 2,275
Hellenic Bottling Co. SA 23,847 575
Hellenic Telecommunication
Organization SA - ADR 5,600 62
Hellenic Telecommunication
Organization SA - GDR 119,082 2,548
Intracom SA 8,414 542
National Bank of Greece (Regd) 18,519 1,210
Panafon Hellenic Telecom SA (a) 3,310 80
Piraeus Bank SA 6,870 198
STET Hellas Telecommunications
SA - ADR (a) 9,000 200
Titan Cement Co. SA 15,758 1,449
----------
12,651
----------
HONG KONG - 0.8%
Chen Hsong Holding 1,900,000 323
China Merchants Holdings
International Co. Ltd. 298,000 261
Cosco Pacific, Ltd. 200,000 166
Goldlion Holdings, Ltd. 76,000 12
New World Infrastructure, Ltd. (a) 1,168,100 2,198
----------
2,960
----------
HUNGARY - 3.0%
BorsodChem - GDR 42,000 1,019
BorsodChem Rt. 12,000 292
Gedeon Richter 10,500 456
Gedeon Richter, Ltd. - GDR 36,248 1,577
Magyar Olaj Es Gas 18,100 436
Magyar Tavkozlesi Rt - ADR 54,370 1,495
Magyar Tavkozlesi Rt. (Regd) 281,576 1,521
Mol Magyar Olaj-Es Gazipari Rt. - GDR 145,600 3,459
Mol Magyar Olay-Es Gazipari - GDR 16,266 386
OTP Bank Rt. 12,060 503
Synergon Information
Systems, Ltd. - GDR (a) 3,000 35
----------
11,179
----------
Emerging Markets Fund 77
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ----------
INDIA - 4.3%
Bajaj Auto, Ltd. - GDR 21,520 346
BSES, Ltd. (a) 22,800 225
BSES Ltd. - GDR (a) 27,000 266
Genesis India Investment Co. (a) 640,030 6,586
Hindalco Industries, Ltd. - GDR 17,000 327
ICICI, Ltd. - GDR (a) 22,000 228
Indo Gulf Corp., Ltd. - GDR (a) 70,000 81
Indo Gulf Fertilizers
& Chemicals - GDR (a) 200,000 220
Infosys Technologies, Ltd. - ADR 3,200 185
ITC, Ltd. - GDR (a) 65,500 1,827
Larsen & Toubro, Ltd. - GDR 32,250 489
Mahanagar Telephone Nigam, Ltd. - GDR 92,100 790
Mahindra & Mahindra - GDR (a) 39,000 257
Perusahaan Persero Telekom - ADR 93,528 1,163
Reliance Industries, Ltd. - GDS (a) 69,711 697
State Bank of India - GDR 30,100 366
State Bank of India - GDR (a) 40,000 486
Tata Engineering & Locomotive Co. -
GDR (a) 95,400 525
Videsh Sanchar Nigam Ltd. - GDR 104,857 1,324
----------
16,388
----------
INDONESIA - 1.7%
Freeport-McMoRan Copper &
Gold, Inc. Class B 27,300 490
Gulf Indonesia Resources, Ltd. (a) 82,400 948
Indah Kiat Pulp & Paper
(Alien Market)(a) 334,000 154
Perusahaan Per Ind Sat Cor - ADR 21,000 410
PT Astra International, Inc. (a) 361,000 164
PT Bank Internasional Indonesia
(Alien Market)(a) 5,965,000 172
PT Gudang Garam Tbk 320,000 864
PT Hanjaya Mandala Sampoerna (a) 125,000 285
PT Indofood Sukses Makmur Tbk (a) 255,000 346
PT Matahari Putra Prima Tbk (a) 2,000,000 260
PT Ramayana Lestari Sentosa 1,450,000 1,026
PT Unilever Indonesia 19,000 110
Semen Gresik 532,000 1,152
----------
6,381
----------
ISRAEL - 2.3%
Bank Hapoalim, Ltd. 354,210 908
Bank Leumi Le-Israel 597,723 1,129
Bezeq Israeli Telecommunication
Corp., Ltd. (a) 317,711 1,279
Clal Industries, Ltd. 21,200 169
Discount Investment Corp. (Regd) 8,911 348
ECI Telecom, Ltd. 24,131 796
Elbit Systems, Ltd. 13,243 232
Israel Chemicals, Ltd. 143,324 175
Israel Discount Bank Series A (a) 300,000 360
Koor Industries 4,707 543
Koor Industries, Ltd. - ADR 25,000 584
Supersol, Ltd. 228,310 670
Tecnomatix Technologies, Ltd. (a) 41,500 721
Teva Pharmaceutical
Industries, Ltd. - ADR 17,820 878
----------
8,792
----------
JORDAN - 0.3%
Arab Bank Group 3,510 994
Housing Bank (The) 42,000 129
----------
1,123
----------
LEBANON - 0.2%
Solidere - GDR 70,000 620
----------
LUXEMBOURG - 0.4%
Millicom International Cellular SA (a) 43,000 1,349
----------
MALAYSIA - 1.8%
Commerce Asset Holdings 4,000 9
Genting Berhad 178,000 610
Golden Hope Plantation 454,000 350
IJM Corp. Berhad 101,000 79
IOI Corporated Berhad 35,000 20
Lion Corp. Berhad 6,400 6
London & Pacific
Insurance Co. Berhad 2,600 3
Malakoff Berhad 1,000 2
Malayan Banking Berhad 130,000 350
Malaysian International Shipping
Corp. (Alien Market) 130,000 214
Malaysian Pacific 475,000 1,190
Malaysian Tobacco 243,000 319
Nestle Berhad 55,000 195
O.Y.L. Industries Berhad 104,800 253
Petronas Gas Berhad 198,000 421
Public Bank Berhad 311,000 212
Public Bank Berhad (Alien Market) 229,000 215
Resorts World Berhad 230,000 487
RHB Captial Berhad (a) 177,000 205
Rothmans of Pall Mall (Malaysia) Berhad 52,000 353
Shell Refining (Malaysia) 147,000 175
Sime Darby Berhad 417,000 491
Telekom Malaysia 87,000 292
Tenaga Nasional Berhad 83,000 172
YTL Corporation Berhad 55,000 104
----------
6,727
----------
78 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- -------
MEXICO - 12.2%
Alfa SA de CV Class A NPV 141,200 586
Apasco SA de CV NPV 28,000 183
Carso Global Telecom
Series A1 NPV (a) 324,000 2,051
Cemex SA de CV Class B NPV 151,400 750
Cemex SA de CV NPV 853,885 4,206
Cifra SA de CV Series C NPV (a) 667,500 1,222
Cifra SA de CV Series V NPV (a) 480,000 957
Compania Cervecerias Unidas
SA - ADR 42,900 1,228
Controladora Comercial Mexicana
SA de CV NPV 804,500 839
Corporacion GEO SA de CV
Series B NPV (a) 41,000 174
Corporacion Interamericana de
Entretenimiento SA
Series B NPV (a) 157,300 512
Cydsa SA Series A NPV 87,000 125
Desc SA de CV Series C - ADR 85,700 1,939
Desc Sociedad de Fomento Industrial SA
de CV Series B NPV 230,000 251
Empaques Ponderosa (a) 381,000 275
Empresa Nacional de Electric - ADR 19,684 239
Fomento Economico Mexicano
SA de CV 172,500 690
Fomento Economico Mexicano SA de CV
Series B - ADR 71,200 2,839
Grupo Carso Series A NPV (a) 301,500 1,397
Grupo Continental SA 149,000 234
Grupo Financiero Banamex Accival SA de
Series O (a) 484,083 1,232
Grupo Financiero Bancomer SA de CV NPV
Series O (a) 519,839 188
Grupo Financiero Banorte
SA de CV NPV (a) 170,000 249
Grupo Industrial Bimbo
SA de CV Series A NPV 224,000 499
Grupo Industrial Durango
SA de CV - ADR (a) 17,250 184
Grupo Industrial Saltillo
SA de CV NPV 108,500 391
Grupo Mexico SA Series B NPV 108,000 459
Grupo Modelo SA Series C 227,000 647
Grupo Television
SA de CV - GDR (a) 56,500 2,532
Hylsamex SA de CV Series B NPV (a) 25,000 77
Kimberly-Clark, Mexico
Class A NPV 814,500 3,351
Organizacion Soriana SA de CV Series B
NPV 99,000 465
Panamerican Beverages, Inc. Class A 107,000 2,548
Seguros Comercial America
NPV Series B (a) 87,000 327
Telefonos de Mexico SA
Series L - ADR 138,277 11,175
Tubos de Acero de Mexico SA 19,000 207
TV Azteca SA de CV - ADR (a) 159,700 828
----------
46,056
----------
NETHERLANDS - 0.1%
Ceteco Holding NV CVA (a) 42,042 371
----------
PAKISTAN - 0.0%
Adamjee Insurance 820 1
Pakistan State Oil 36,875 66
Pakistan Telecommunications Co., Ltd.
- GDR 2,777 55
----------
122
----------
PANAMA - 0.3%
Banco Latinoamericano de Exportaciones 40,000 1,070
SA Class E ----------
PAPUA NEW GUINEA - 0.3%
Oil Search, Ltd. (Australia Regd)(a) 800,000 1,185
----------
PERU - 1.1%
Cementos Norte Pacasmayo
SA Series T 285,841 350
Compania de Minas Buenaventura Series
B - ADR 44,500 681
Credicorp, Ltd. 23,200 255
Enrique Ferreyros 344,046 226
Ferreyros SA - ADR 14,260 175
Minas Buenaventura 5,600 43
Minas Buenaventura Series B 22,000 168
Telefonica Del Peru
SA Class B - ADR 146,238 2,211
----------
4,109
----------
PHILIPPINES - 2.5%
Ayala Corp. 840,600 276
Ayala Land, Inc. 1,184,013 373
Bank of the Philippine Islands 39,800 142
Benpres Holdings Corp. (a) 971,700 230
First Philippine Holdings Class B 695,560 786
Manila Electric Co. Class B 667,200 2,401
Metropolitan Bank & Trust Co. 41,300 412
Philippine Commercial
International Bank 88,400 604
Emerging Markets Fund 79
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, continued
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- ----------
Philippine Long Distance
Telephone Co. 1,100 34
Philippine Long Distance
Telephone Co. - ADR 133,995 4,037
San Miguel Corp. Class B 97,500 213
----------
9,508
----------
POLAND - 1.5%
Agora SA - GDR (a) 9,157 107
Bank Handlowy W. Warszawie
SA - GDR (a) 18,250 285
Bank Handlowy W. Warszawie
SA - GDR (144A)(a) 22,495 357
Bank Slaski SA 3,400 166
Bank Slaski SA w Katowicach (a) 5,870 287
Elektrim SA 67,401 953
Elektrim Spolka Akcyjna SA 34,096 482
KGHM Polska Miedz SA - GDR (a) 13,390 179
Prokom Software SA - GDR (a) 29,010 469
Softbank SA - GDR 6,100 224
Telekomunikacja Polska SA
Series A - GDR (a) 190,870 1,337
WBK 83,100 487
Zywiec (a) 2,634 304
----------
5,637
----------
PORTUGAL - 0.5%
BPI-SGPS SA (a) 23,068 484
Cimpor Cimentos de Portugal 7,000 180
Electricidade de Portugal SA 18,300 329
Mundial Confianca (a) 5,500 217
Portugal Telecom SA 8,560 348
Sonae Investimentos SA 7,300 248
----------
1,806
----------
RUSSIA - 0.8%
Lukoil Oil Co. - ADR 32,900 1,301
Surgutneftegaz - ADR 138,900 1,102
Unified Energy Systems - GDR 55,200 483
Vimpel-Communications - ADR (a) 3,350 78
----------
2,964
----------
SINGAPORE - 0.5%
Asia Pulp & Paper Co., Ltd. - ADR (a) 77,300 744
Datacraft Asia, Ltd. (a) 250,000 1,090
----------
1,834
----------
SLOVAKIA - 0.0%
Slovakofarma AS 111
2,200 ----------
SOUTH AFRICA - 7.8%
Amalgamated Banks of South Africa 219,400 1,242
Amalgamated Beverage
Industries, Ltd. 50,000 410
Anglo American PLC (a) 41,100 1,921
AngloGold, Ltd. 21,210 914
Ashanti Goldfields, Ltd. - ADR 214,219 1,486
Barlow, Ltd. 96,737 558
De Beers Centenary AG 57,500 1,378
Dimension Data Holdings, Ltd. (a) 234,400 1,037
Fedsure Holdings, Ltd. 28,800 301
FirstRand, Ltd. 654,600 749
Forbes Group, Ltd. 482,000 1,262
Imperial Holdings, Ltd. (a) 43,400 432
Investec Group, Ltd. 8,500 356
Iscor 1,949,600 611
JD Group, Ltd. 61,600 377
Liberty International PLC (a) 24,639 163
Liberty Life Association of Africa 52,845 677
Lonrho Africa PLC 437,204 317
Lonrho PLC 234,676 2,182
Metro Cash and Carry, Ltd. NPV 499,000 413
MIH, Ltd. NPV (a) 10,000 264
Nampak, Ltd. 90,000 249
Nedcor, Ltd. 43,300 980
PepsiCo International, Inc. (a) 1,190 10
Real Africa Holdings, Ltd. (a) 90,400 180
Rembrandt Group, Ltd. 305,400 2,546
Rustenberg Platinum Holdings, Ltd. 21,200 495
Sanlam, Ltd. (a) 1,062,300 1,259
Sappi, Ltd. 76,300 559
Sasol NPV 425,663 3,037
South African Breweries PLC (a) 104,420 907
South African Breweries PLC (144A)(a) 140,000 1,229
Tongaat-Hulett Group, Ltd. 68,000 416
Truworths International, Ltd. 552 1
Wooltru, Ltd. Class N 464,281 754
Woolworths Holdings, Ltd. 892 1
----------
29,673
----------
SOUTH KOREA - 10.6%
Daewoo Corp. 65,000 295
Daewoo Heavy Industries 46,000 160
Honam Petrochem Corp. 20,500 478
Housing & Commercial Bank,
Korea (a) 44,000 1,387
Housing & Commercial Bank,
Korea - GDR (a) 10,000 307
Hyundai Merchant Marine 22,250 290
Kookmin Bank 79,500 1,614
80 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
----------- ----------
Korea Electric Power Corp. 81,238 3,376
Korea Electric Power Corp. - ADR 82,800 1,697
Korea Telecom Corp. 21,100 1,400
Korea Telecom Corp. - ADR (a) 29,640 1,186
LG Chemical, LTD. 34,270 933
LG Electronics 16,380 453
Medison Co. 61,540 978
Pohang Iron & Steel Co., Ltd. 25,121 3,018
Pohang Iron & Steel Co., Ltd. - ADR 19,900 669
S1 Corp. 4,223 814
S1 Corp. Rights (a) 287 13
Samsung Co. (a) 87,900 2,066
Samsung Display Devices Co.
- GDR (a) 66,750 849
Samsung Electro-Mechanics Co. 12,300 425
Samsung Electronics 76,372 8,379
Samsung Electronics Co. - GDR 16,396 874
Samsung Electronics, Ltd. - GDS 52,319 1,400
Samsung Fire & Marine Insurance 500 352
Seoul City Gas Co., Ltd. 5,000 160
Shin Han Bank 141,500 1,589
Shinhan Bank - GDR (a) 23,900 532
Sindo Ricoh Co. 151 8
SK Corp. 11,000 316
SK Telecom Co., Ltd. (a) 219 115
SK Telecom Co., Ltd. - ADR 3,100 53
SK Telecomm Co., Ltd. 896 1,212
Ssangyong Oil Refining Co., Ltd. 69,440 1,800
Tae Young Corp. 16,000 912
----------
40,110
----------
SRI LANKA - 0.1%
Aitken Spence & Co., Ltd. 11,600 16
Ceylon Theatre 13,660 38
Development Finance Corp. of Ceylon 97,221 134
Hayleys, Ltd. 21,280 33
John Keells Holdings, Ltd. 43,535 95
Keells Food Products, Ltd. (a) 8,707 19
National Development Bank, Ltd. 9,800 12
----------
347
----------
SWITZERLAND - 0.5%
Holderbank Financiere
Glarus AG (BR) 1,447 1,707
UBS AG 2000 Warrants (a) 4,500 298
----------
2,005
----------
TAIWAN - 5.6%
Acer, Inc. - GDR (a) 119,550 1,485
Advanced Semiconductor
Engineering - GDR (a) 15,000 338
Asia Cement Corp. - GDR (a) 108,718 976
Asustek Computer, Inc. - GDR (Regd) 107,440 1,526
China Steel Corp. - GDR 151,352 2,315
Delta Electronics PLC 50,000 420
Evergreen Marine Corp. - GDR (a) 81,372 1,485
Fubon Insurance Co., Ltd. - GDR 139,480 1,691
ROC Taiwan Fund 76,500 617
Siliconware Precision
Industries Co. - GDR (a) 92,659 1,232
Standard Foods Taiwan Ltd.
(Regd) - GDR (a) 180,742 1,080
Synnex Technolog
International Corp. 23,417 525
Synnex Technology International Corp.
(Regd) - GDR 79,560 1,782
Taiwan Semiconductor Manufacturing
Co., Ltd. 2000 Warrants (a) 234,146 1,101
Taiwan Semiconductor Manufacturing
Co., Ltd - ADR (a) 94,340 3,208
Windbond Electronics Corp.
- GDR (a) 37,900 421
Yageo Corp. - GDR (a) 201,030 971
----------
21,173
----------
THAILAND - 2.3%
Advanced Information Services
(Alien Market)(a) 35,000 475
Ban Pu Coal (Alien Market)(a) 79,900 159
Bangkok Bank (Alien Market)(a) 581,000 2,174
Bangkok Expressway PLC
(Alien Market)(a) 248,000 170
BEC World PLC (Alien Market) 69,939 436
Electricity Generating PLC
(Alien Market) 225,000 430
Grammy Entertainment PLC
(Alien Market) 42,000 147
Hana Microelectronic
(Alien Market)(a) 145,000 436
Jasmine International PLC
(Alien Market)(a) 700,000 494
National Petrochemical PLC
(Alien Market)(a) 410,000 378
PTT Exploration and Production PLC
(Alien Market)(a) 77,500 593
Siam Cement Co. (Alien Market)(a) 11,581 352
Siam City Cement PLC (a) 45,000 185
TelecomAsia (Alien Market)(a) 200,000 202
Thai Farmers Bank (Alien Market)(a) 733,200 2,267
----------
8,898
----------
Emerging Markets Fund 81
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- ----------
TURKEY - 3.9%
Akbank 65,576,210 963
Aksigorta AS 4,190,000 117
Arcelik (a) 8,700,000 309
EGE Biracilik Ve Malt Sanayii 5,400,000 403
Ford Otomotiv Sanayi AS (a) 21,546,000 347
Haci Omer Sabanci Holding AS 54,810,490 1,221
Haci Omer Sabanci Holding AS - ADR (a) 32,100 174
Migros 2,759,240 3,432
Tupras 2,339,250 155
Turkiye Is Bankasi 43,033,500 765
Yapi ve Kredi Bankasi AS 304,282,396 4,397
Yapi ve Kredi Bankasi AS Non Tradeable
Receipts (a) 165,628,215 2,393
----------
14,676
----------
UNITED KINGDOM - 0.4%
Genesis Smaller Companies Fund (a) 147,886 1,684
----------
VENEZUELA - 0.9%
C.A. La Electricidad
de Caracas - ADR 34,459 680
Companhia Anonima Nacional Telefonos
de Venezuela - ADR 76,146 2,075
Electricidad de Caracas (Regd) 7,135 3
Mavesa SA - ADR 151,875 494
Siderurgica Venezolana
Sivensa - ADR 65,833 197
Siderurgica Venezolana
Sivensa - GDR 5,984 20
----------
3,469
----------
ZIMBABWE - 0.1%
Delta Corp. 967,350 275
----------
TOTAL COMMON STOCKS
(cost $293,725) 320,233
----------
PREFERRED STOCKS - 7.4%
ARGENTINA - 0.4%
Quilmes Industrial Quinsa
Societe - ADR 122,200 1,513
----------
BRAZIL - 6.7%
Banco Bradesco SA NPV 136,418,000 693
Banco do Estado de Sao Paulo NPV 34,016,000 1,451
Banco Itau SA NPV 3,116,418 1,602
Brasmotor SA NPV 12,140,000 959
CIA Energetica De Minas Gerais 87,077,148 1,820
Companhia Energetica de Minas
Gerais - ADR 25,356 529
Companhia Paranaense
de Energia - Copel 157,282,000 1,262
Companhia Paranaense de Energia Copel
Class B - ADR 15,800 132
Companhia Paulista de
Forca e Luz NPV 60,090 4
Companhia Siderurgica de Tubarao 25,000,000 270
Companhia Vale Do Rio Doce
Series A NPV 59,200 1,164
Companmia Cervejaria Brahma NPV 758,000 428
Coteminas (Cia Tec) NPV 6,075,105 508
Electrobras Series B NPV 6,349,000 128
Eletropaulo Metropolitana NPV (a) 11,388,000 508
Embratel Participacoes SA - ADR 43,334 601
Embratel Participacoes SA NPV 12,591,500 175
Itausa Investimentos Itau SA 1,682,000 893
Marcopolo SA NPV 521,000 1
Petro Ipiranga (cia) NPV 73,261,000 538
Petroleo Brasileiro SA NPV 14,088,000 2,189
Tele Centro Sul Participacoes
SA - ADR 5,700 316
Tele Centro Sul Participacoes
SA NPV 64,487,000 710
Tele Norte Leste Participacoes
SA - ADR 45,113 837
Tele Norte Leste Participacoes
SA NPV 25,545,000 465
Tele Sudeste Celular Participacoes SA 51,957,000 295
Telecomunicacoes Brasileiras NPV 5,909,000 524
Telecomunicacoes de Sao Paulo
SA (a) 113,697 12
Telecomunicacoes de Sao Paulo
SA NPV 16,900,351 2,005
Telemig Celular SA Class C NPV (a) 3,825,489 34
Telesp Celular Participacoes SA NPV 17,818,176 187
Telesp Celular SA Class B NPV 33,122,841 1,648
Telesp Participacoes SA - ADR 18,200 416
Telesp Participacoes SA NPV 36,660,000 859
Usinas Siderurgicas de Minas
Gerais SA NPV (a) 221,100 744
Votorantim Celulose
e Papel SA - ADR 20,700,000 596
----------
25,503
----------
COLOMBIA - 0.0%
Gran Cadena de Almacenes
Class B - ADR (a) 38,320 48
----------
PORTUGAL - 0.1%
Filmes Lusomundo-SGPS SA
39,842 406
----------
82 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- ----------
RUSSIA - 0.1%
Lukoil Holding Oil Co. - ADR 73,200 513
----------
THAILAND - 0.1%
Siam Commercial Bank (a) 180,000 256
----------
TOTAL PREFERRED STOCKS
(cost $33,515) 28,239
----------
PRINCIPAL
AMOUNT
(000)
$
-----------
LONG-TERM INVESTMENTS - 0.2%
BRAZIL - 0.0%
Casa Anglo Series 2 (a)
1.000% due 11/01/99 (conv.)
BRL 3 22
----------
INDONESIA - 0.0%
Modernland Realty (a)
6.000% due 01/04/03 (conv.)
IDR 30 6
----------
SOUTH KOREA - 0.2%
Shinwon Corp.(a)
0.500% due 12/31/99 (conv.)
USD 520 655
----------
TOTAL LONG-TERM INVESTMENTS
(cost $850) 683
----------
SHORT-TERM INVESTMENTS - 5.5%
UNITED STATES - 5.5%
Frank Russell Investment Company Money
Market Fund, due on demand (b) 20,927 20,927
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $20,927) 20,927
----------
TOTAL INVESTMENTS - 97.7%
(identified cost $349,017) 370,082
OTHER ASSETS AND LIABILITIES,
NET - 2.3% 8,640
----------
NET ASSETS - 100.0% 378,722
==========
(a) Nonincome-producing security.
(b) At cost, which approximates market.
Abbreviations:
ADR - American Depository Receipt
GDR - Global Depository Receipt
GDS - Global Depository Share
NPV - No par Value
NV - Nonvoting
144A - Represents private placement security for qualified buyers according to
rule 144A of the Securities Act of 1933.
Foreign Currency Abbreviations:
ARS - Argentine peso
BRL - Brazilian real
EUR - Euro dollar
GRD - Greek drachma
HKD - Hong Kong dollar
IDR - Indonesian rupiah
MXN - Mexican peso
SGD - Singapore dollar
USD - U.S. dollar
ZAR - South African rand
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 83
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
INDUSTRY % OF VALUE
DIVERSIFICATION NET (000)
(Unaudited) ASSETS $
- --------------------------- --------- ---------
Auto & Transportation 1.4% 5,417
Consumer Discretionary 7.1 26,943
Consumer Staples 8.2 31,137
Financial Services 18.6 70,397
Health Care 1.2 4,644
Integrated Oils 2.5 9,419
Materials & Processing 13.4 50,654
Miscellaneous 3.8 14,339
Other Energy 3.9 14,764
Producer Durables 4.6 17,554
Technology 5.7 21,478
Utilities 21.6 81,726
Short-Term Investments 5.5 20,927
Long-Term Investments 0.2 683
--------- ---------
Total Investments 97.7 370,082
Other Assets and
Liabilities, Net 2.3 8,640
--------- ---------
NET ASSETS 100% 378,722
========= =========
MARKET
% OF VALUE
GEOGRAPHIC DIVERSIFICATION NET (000)
(Unaudited) ASSETS $
- --------------------------- -------- ---------
Latin America 31.4% 118,907
Pacific Basin 28.6 108,333
Europe 11.3 42,764
Middle East 11.1 42,068
Africa 9.1 34,508
Other 0.5 1,892
Short-Term Investments 5.5 20,927
Long-Term Investments 0.2 683
-------- ---------
Total Investments 97.7 370,082
Other Assets and Liabilities, Net 2.3 8,640
-------- ---------
NET ASSETS 100.0% 378,722
========= =========
FOREIGN CURRENCY EXCHANGE SPOT CONTRACTS
SOLD CONTRACTS BOUGHT IN UNREALIZED
TO DELIVER EXCHANGE APPRECIATION
OUT FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
- -------------- -------------- --------- -------------
USD 50 ARS 50 07/01/99 $ --
USD 156 HKD 1,209 07/02/99 --
USD 78 IDR 520,950 07/02/99 (3)
USD 293 ZAR 1,775 07/01/99 1
USD 56 ZAR 339 07/06/99 --
BRL 30 USD 17 07/01/99 --
EUR 97 USD 100 07/01/99 --
GRD 89,371 USD 283 07/01/99 --
GRD 6,272 USD 20 07/01/99 --
HKD 346 USD 45 07/02/99 --
IDR 1,944 USD 1 07/01/99 --
MXN 182 USD 19 07/01/99 --
MXN 1,344 USD 142 07/01/99 --
SGD 3 USD 2 07/01/99 --
ZAR2 36 USD 39 07/01/99 --
-------------
$ (2)
=============
See accompanying notes which are an integral part of the financial statements.
84 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
ASSETS
<S> <C>
Investments at market (identified cost $349,017) ......................................... $ 370,082
Cash ...................................................................................... 7,854
Foreign currency holdings (identified cost $4,010) ....................................... 3,991
Foreign currency exchange spot contracts (cost $1,301) ................................... 1,299
Receivables:
Dividends and interest ................................................................... 1,350
Investments sold ......................................................................... 4,100
Fund shares sold ......................................................................... 712
------------
Total Assets ........................................................................... 389,388
LIABILITIES
Payables:
Investments purchased ................................................ $ 7,482
Fund shares redeemed ................................................. 1,155
Accrued fees to affiliates ........................................... 600
Other accrued expenses ............................................... 128
Foreign currency exchange spot contracts (cost $1,301) ............... 1,301
------------
Total Liabilities ...................................................................... 10,666
------------
NET ASSETS ................................................................................ $ 378,722
============
NET ASSETS CONSIST OF:
Undistributed net investment income ....................................................... $ 690
Accumulated net realized gain (loss) ..................................................... (82,095)
Unrealized appreciation (depreciation) on:
Investments .............................................................................. 21,065
Foreign currency-related transactions .................................................... (87)
Shares of beneficial interest ............................................................. 364
Additional paid-in capital ................................................................ 438,785
------------
NET ASSETS ................................................................................ $ 378,722
============
NET ASSET VALUE, offering and redemption price per share:
Class C ($500,452 divided by 48,330 shares of $.01 par value
shares of beneficial interest outstanding) ............................................ $ 10.35
============
Class E ($5,001,439 divided by 481,607 shares of $.01 par
value shares of beneficial interest outstanding) ...................................... $ 10.38
============
Class S ($373,219,955 divided by 35,906,567 shares of $.01 par
value shares of beneficial interest outstanding) ...................................... $ 10.39
============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 85
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF OPERATIONS
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C> <C>
Dividends .............................................................................. $ 4,972
Dividends from Money Market Fund ....................................................... 395
Interest ............................................................................... 46
Less foreign taxes withheld ............................................................ (408)
-------------
Total Investment Income .............................................................. 5,005
EXPENSES
Advisory fees ......................................................... $ 1,866
Administrative fees ................................................... 82
Custodian fees ........................................................ 423
Distribution fees - Class C ........................................... 1
Transfer agent fees ................................................... 613
Professional fees ..................................................... 32
Registration fees - Class S ........................................... 35
Shareholder servicing fees - Class E .................................. 1
Trustees' fees ........................................................ 3
Miscellaneous ......................................................... 35
---------
Total Expenses ....................................................................... 3,091
-------------
Net investment income ................................................................... 1,914
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ........................................................... (9,857)
Foreign currency-related transactions ................................. (1,310) (11,167)
---------
Net change in unrealized appreciation (depreciation) on:
Investments ........................................................... 82,067
Foreign currency-related transactions ................................. (83) 81,984
--------- -------------
Net realized and unrealized gain (loss) ................................................. 70,817
-------------
Net increase (decrease) in net assets resulting from operations ......................... $ 72,731
=============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
86 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
------------------ ------------------
<S> <C> <C>
OPERATIONS
Net investment income ................................................ $ 1,914 $ 4,050
Net realized gain (loss) ............................................ (11,167) (57,573)
Net change in unrealized appreciation (depreciation) ................ 81,984 (57,066)
------------------ ------------------
Net increase (decrease) in net assets
resulting from operations .......................................... 72,731 (110,589)
------------------ ------------------
DISTRIBUTIONS
From net investment income
Class S ............................................................ (1,719) (2,472)
------------------ ------------------
Net decrease from distributions .................................. (1,719) (2,472)
------------------ ------------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share
transactions ......................................................... 13,322 74,397
------------------ ------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ........................... 84,334 (38,664)
NET ASSETS
Beginning of period .................................................. 294,388 333,052
------------------ ------------------
End of period (including undistributed net investment income of
$690 and $495, respectively) ...................................... $ 378,722 $ 294,388
================== ==================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 87
<PAGE>
Emerging Markets Fund
Financial Highlights - Class C
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1999*
----------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........................... $ 8.07
----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) .................................... .02
Net realized and unrealized gain (loss) on investments ........ 2.31
----------
Total Income From Investment Operations ..................... 2.33
----------
DISTRIBUTIONS
From net investment income .................................... (.05)
----------
NET ASSET VALUE, END OF PERIOD ................................. $ 10.35
==========
TOTAL RETURN (%)(a) ............................................ 29.01
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) .................... 501
Ratios to average net assets (%)(b):
Operating expenses .......................................... 2.93
Net investment income ....................................... .47
Portfolio turnover rate (%)(b) ............................... 112.76
</TABLE>
* For the period January 27, 1999 (commencement of operations) to June 30,
1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) Average month-end shares outstanding were used for this calculation.
88 Emerging Markets Fund
<PAGE>
Emerging Markets Fund
Financial Highlights - Class E
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1999* 1998
--------- --------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD .................. $ 8.48 $ 7.37
--------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d) ............................ .06 (.02)
Net realized and unrealized gain (loss) on investments 1.89 1.13
--------- -------
Total Income From Investment Operations ............ 1.95 1.11
--------- -------
DISTRIBUTIONS
From net investment income ........................... (.05) --
--------- -------
NET ASSET VALUE, END OF PERIOD ........................ $ 10.38 $ 8.48
========= =======
TOTAL RETURN (%)(a) ................................... 23.11 15.06
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ........... 5,001 39
Ratios to average net assets (%)(b)(c):
Operating expenses ................................. 2.20 --
Net investment income .............................. 1.30 --
Portfolio turnover rate (%)(b) ....................... 112.76 59.35
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
** For the period September 22, 1998 (commencement of operations) to
December 31, 1998.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) These ratios for the period ended December 31, 1998 are not meaningful due
to the Class's short period of operation.
(d) Average month-end shares outstanding were used for this calculation.
Emerging Markets Fund 89
<PAGE>
EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------
1999* 1998 1997 1996 1995 1994
--------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ..................... $ 8.48 $ 11.79 $ 12.35 $ 11.16 $ 12.25 $ 13.90
--------- ---------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d) ............. .05 .12 .14 .10 .11 .15
Net realized and unrealized gain
(loss) on investments ................ 1.91 (3.35) (.56) 1.26 (1.12) (1.24)
--------- ---------- --------- --------- --------- ---------
Total Income From Investment
Operations ........................... 1.96 (3.23) (.42) 1.36 (1.01) (1.09)
--------- ---------- --------- --------- --------- ---------
DISTRIBUTIONS
From net investment income ............. (.05) (.08) (.14) (.17) (.05) (.20)
From net realized
gain on investments .................. -- -- -- -- (.03) (.36)
--------- ---------- --------- --------- --------- ---------
Total Distributions .................. (.05) (.08) (.14) (.17) (.08) (.56)
--------- ---------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD .......... $ 10.39 $ 8.48 $ 11.79 $ 12.35 $ 11.16 $ 12.25
========= ========== ========= ========= ========= =========
TOTAL RETURN (%)(a)(c) .................. 23.24 (27.57) (3.45) 12.26 (8.21) (5.83)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period
($ in thousands) ........................ 373,220 294,349 333,052 271,490 172,673 127,271
Ratios to average net assets
(%)(b)(c):
Operating expenses, net .............. 1.89 1.75 1.64 1.71 1.75 .80
Operating expenses, gross ............ 1.89 1.75 1.64 1.72 1.80 .83
Net investment income ................ 1.17 1.20 .87 .77 .88 1.10
Portfolio turnover rate (%)(b) ........ 112.76 59.35 50.60 34.62 71.16 57.47
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 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 advisory fees. See Note 4.
(d) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
90 Emerging Markets Fund
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF NET ASSETS
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ----------
COMMON STOCKS (B) - 95.8%
APARTMENTS - 18.6%
Apartment Investment &
Management Co. Class A 690,415 29,515
Archstone Communities Trust 402,424 8,828
Avalonbay Communities, Inc. 798,030 29,527
Brookfield Properties Corp. 195,300 2,539
Camden Property Trust 235,429 6,533
Equity Residential Properties Trust 268,538 12,101
Essex Property Trust, Inc. 222,000 7,853
Post Properties, Inc. 207,346 8,501
Smith (Charles E.) Residential
Realty, Inc. 383,750 13,024
Summit Properties, Inc. 160,600 3,172
----------
121,593
----------
HEALTH CARE - 5.0%
American Retirement Corp. (a) 238,700 2,984
HCR Manor Care, Inc. (a) 397,400 9,612
Health Care Property Investors, Inc. 307,700 8,885
Nationwide Health Properties, Inc. 587,000 11,190
----------
32,671
----------
HOTELS/LEISURE - 8.2%
FelCor Lodging Trust, Inc. 141,150 2,929
Golf Trust of America, Inc. 56,300 1,376
Hospitality Properties Trust 172,600 4,682
Host Marriott Corp. 120,100 1,426
Interstate Hotels Corp. (a) 1,617 7
Marriot International, Inc. Class A 272,700 10,192
RFS Hotel Investors, Inc. 17,300 217
Starwood Hotels & Resorts
Worldwide, Inc. 1,036,800 31,687
Wyndham International, Inc.
Class A (a) 202,000 859
----------
53,375
----------
LEASING - 0.3%
Entertainment Properties Trust 79,800 1,406
Prison Realty Corp. 80,200 787
----------
2,193
----------
OFFICE/INDUSTRIAL - 39.5%
AMB Property Corp. 1,075,000 25,263
Arden Realty Group, Inc. 893,650 22,006
Boston Properties, Inc. 161,050 5,778
Cabot Industrial Trust 113,900 2,420
CarrAmerica Realty Corp. 195,100 4,878
Catellus Development Corp. (a) 238,700 3,700
Cornerstone Properties, Inc. 313,300 4,974
Cousins Properties, Inc. 238,300 8,058
Crescent Operating, Inc. (a) 47,900 326
Crescent Real Estate Equities, Inc. 188,200 4,470
Duke Realty Investments, Inc. 84,550 1,908
Equity Office Properties Trust 1,042,548 26,714
First Industrial Realty Trust, Inc. 285,800 7,842
Highwoods Properties, Inc. 813,500 22,320
Kilroy Realty Corp. 166,600 4,061
Liberty Property Trust 183,900 4,575
Mack-Cali Realty Corp. 899,250 27,820
Prentiss Properties Trust 114,800 2,698
ProLogis Trust 938,618 19,007
PS Business Parks, Inc. 235,800 5,748
Reckson Associates Realty Corp. 500,400 11,759
Reckson Services Industries, Inc. (a) 322,600 4,879
SL Green Realty Corp. 333,600 6,818
Spieker Properties, Inc. 566,600 22,026
TriNet Corporate Realty Trust, Inc. 40,700 1,127
Trizec Hahn Corp. 170,200 3,468
Weeks Corp. 107,550 3,280
----------
257,923
----------
OUTLET CENTERS - 0.6%
Prime Retail, Inc. 192,700 1,674
Tanger Factory Outlet Centers, Inc. 85,500 2,223
----------
3,897
----------
REGIONAL MALLS - 9.1%
General Growth Properties, Inc. 389,300 13,820
J.P. Realty, Inc. 60,100 1,236
Macerich Co. (The) 481,100 12,629
Rouse Co. (The) 420,700 10,675
Simon Property Group, Inc. 613,850 15,576
Taubman Centers, Inc. 224,900 2,966
Urban Shopping Centers, Inc. 65,800 2,073
----------
58,975
----------
SELF STORAGE - 3.2%
Public Storage, Inc. 639,656 17,910
Shurgard Storage Centers, Inc.
Class A 110,500 2,998
----------
20,908
----------
SHOPPING CENTERS - 11.3%
Bradley Real Estate, Inc. 220,500 4,575
Developers Diversified Realty Corp. 443,700 7,377
Glimcher Realty Trust 156,600 2,545
Kimco Realty Corp. 482,300 18,870
Kranzco Realty Trust 21,900 290
92 Real Estate Securities Fund
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ----------
Philips International Realty Corp. 98,100 1,655
Regency Realty Corp. 116,800 2,562
Vornado Realty Trust 1,022,600 36,111
----------
73,985
----------
TOTAL COMMON STOCKS
(cost $596,090) 625,520
----------
PRINCIPAL
AMOUNT
(000)
$
----------
SHORT-TERM INVESTMENTS - 3.6%
Frank Russell Investment Company
Money Market Fund, 23,743 23,743
due on demand (c) ----------
TOTAL SHORT-TERM INVESTMENTS
(cost $23,743) 23,743
----------
TOTAL INVESTMENTS - 99.4%
(identified cost $619,833) 649,263
OTHER ASSETS AND LIABILITIES,
NET - 0.6% 3,624
----------
NET ASSETS - 100.0% 652,887
==========
(a) Nonincome-producing security.
(b) All common stocks held are Real Estate Investment Trusts (REIT) with the
exception of the following:
American Retirement Corp.
Crescent Operating, Inc.
HCR Manor Care, Inc.
Interstate Hotels Corp.
Marriot International, Inc. Class A
Reckson Services Industries, Inc.
Rouse Co. (The)
Starwood Hotels & Resorts Worldwide, Inc.
Trizec Hahn Corp.
Wyndham International, Inc. Class A
(c) At cost, which approximates market.
See accompanying notes which are an integral part of the financial statements.
Real Estate Securities Fund 93
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
ASSETS
Investments at market (identified cost $619,833) ............... $ 649,263
Receivables:
Dividends ...................................................... 3,563
Investments sold ............................................... 1,172
Fund shares sold ............................................... 1,519
-------------
Total Assets ................................................. 655,517
LIABILITIES
Payables:
Investments purchased ........................... $ 556
Fund shares redeemed ............................ 1,390
Accrued fees to affiliates ...................... 668
Other accrued expenses .......................... 16
-------------
Total Liabilities ............................................ 2,630
-------------
NET ASSETS ...................................................... $652,887
=============
NET ASSETS CONSIST OF:
Undistributed net investment income ............................. $ 7,561
Accumulated distributions in excess of net realized gain ........ (14,802)
Unrealized appreciation (depreciation) on investments ........... 29,430
Shares of beneficial interest ................................... 254
Additional paid-in capital ...................................... 630,444
-------------
NET ASSETS ...................................................... $ 652,887
=============
NET ASSET VALUE, offering and redemption price per share:
Class C ($896,794 divided by 35,217 shares of $.01 par value
shares of beneficial interest outstanding) ................... $ 25.46
=============
Class E ($5,767,067 divided by 225,316 shares of $.01 par
value shares of beneficial interest outstanding) ............. $ 25.60
=============
Class S ($646,223,217 divided by 25,111,761 shares of $.01 par
value shares of beneficial interest outstanding) ............. $ 25.73
=============
See accompanying notes which are an integral part of the financial statements.
94 Real Estate Securities Fund
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF OPERATIONS
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
INVESTMENT INCOME
Dividends ...................................................... $ 17,825
Dividends from Money Market Fund ............................... 728
---------
Total Investment Income ...................................... 18,553
EXPENSES
Advisory fees ................................... $ 2,424
Administrative fees ............................. 153
Custodian fees .................................. 104
Distribution fees - Class C ..................... 1
Transfer agent fees ............................. 676
Professional fees ............................... 20
Registration fees - Class S ..................... 46
Shareholder servicing fees - Class E ............ 3
Trustees' fees .................................. 3
Miscellaneous ................................... 29
------------
Total Expenses ................................................ 3,459
--------
Net investment income ............................................ 15,094
--------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investments .......................... (12,322)
Net change in unrealized appreciation (depreciation) on
investments .................................................... 41,197
--------
Net realized and unrealized gain (loss) ......................... 28,875
--------
Net increase (decrease) in net assets resulting from operations .. $ 43,969
========
See accompanying notes which are an integral part of the financial statements.
Real Estate Securities Fund 95
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
------------------- -------------------
<S> <C> <C>
OPERATIONS
Net investment income ........................... $ 15,094 $ 30,253
Net realized gain (loss) ........................ (12,322) (1,281)
Net change in unrealized appreciation
(depreciation) ................................ 41,197 (137,901)
--------- ---------
Net increase (decrease) in net assets
resulting from operations ................... 43,969 (108,929)
--------- ---------
DISTRIBUTIONS
From net investment income
Class C ....................................... (4) --
Class E ....................................... (13) (26)
Class S ....................................... (10,828) (26,915)
From net realized gain on investments
Class E ....................................... -- (5)
Class S ....................................... -- (7,019)
In excess of net realized gain on investments
Class E ....................................... -- (2)
Class S ....................................... -- (2,469)
--------- ---------
Net decrease from distributions ............. (10,845) (36,436)
--------- ---------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share
transactions .................................. 42,594 106,663
--------- ---------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ...... 75,718 (38,702)
NET ASSETS
Beginning of period ............................. 577,169 615,871
--------- ---------
End of period (including undistributed net
investment income of $7,561 and $3,312,
respectively) ................................. $ 652,887 $ 577,169
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
96 Real Estate Securities Fund
<PAGE>
REAL ESTATE SECURITIES FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
----------
NET ASSET VALUE, BEGINNING OF PERIOD ............................... $ 24.13
----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) ........................................ .44
Net realized and unrealized gain (loss) on investments ............ 1.31
----------
Total Income From Investment Operations ......................... 1.75
----------
DISTRIBUTIONS
From net investment income ........................................ (.42)
----------
NET ASSET VALUE, END OF PERIOD ..................................... $ 25.46
==========
TOTAL RETURN (%)(a) ............................................... 7.45
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ....................... 897
Ratios to average net assets (%)(b):
Operating expenses .............................................. 2.16
Net investment income ........................................... 4.55
Portfolio turnover rate (%)(b) ................................... 40.63
* For the period January 27, 1999 (commmencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) Average month-end shares outstanding were used for this calculation.
Real Estate Securities Fund 97
<PAGE>
REAL ESTATE SECURITIES FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1999* 1998 1997 1996**
-------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD .... $ 24.27 $ 31.02 $ 29.18 $ 26.67
-------- -------- ------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) .............. .50 1.26 1.14 .24
Net realized and unrealized gain (loss)
on investments ....................... 1.20 (6.12) 3.95 3.85
-------- -------- ------- --------
Total Income From Investment
Operations ........................... 1.70 (4.86) 5.09 4.09
-------- -------- ------- --------
DISTRIBUTIONS
From net investment income ............. (.37) (1.43) (1.04) (.32)
From net realized gain on investments .. - (.46) (2.21) (1.26)
-------- -------- ------- --------
Total Distributions .................. (.37) (1.89) (3.25) (1.58)
-------- -------- ------- --------
NET ASSET VALUE, END OF PERIOD .......... $ 25.60 $ 24.27 $ 31.02 $ 29.18
======== ======== ======= ========
TOTAL RETURN (%)(a) ..................... 7.15 (16.25) 18.20 15.75
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in
thousands) ........................... 5,767 843 388 101
Ratios to average net assets (%)(b):
Operating expenses ................... 1.41 1.47 1.71 1.77
Net investment income ................ 4.36 4.90 3.94 5.31
Portfolio turnover rate (%)(b) ......... 40.63 42.58 49.40 51.75
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
** For the period November 4, 1996 (commencement of sale) to December 31, 1996.
(a) Periods less than one year are not annualized.
(b) The ratios for the periods ended June 30, 1999 and December 31, 1996 are
annualized.
(c) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
98 Real Estate Securities Fund
<PAGE>
REAL ESTATE SECURITIES FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1999* 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ................... $ 24.44 $ 30.86 $ 29.19 $ 23.51 $ 22.53 $ 22.76
--------- --------- --------- --------- --------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) ............................ .61 1.34 1.36 1.39 1.32 1.25
Net realized and unrealized gain (loss) on investments 1.12 (6.13) 3.93 6.89 1.03 .40
--------- --------- --------- --------- --------- ----------
Total Income From Investment Operations ............. 1.73 (4.79) 5.29 8.28 2.35 1.65
--------- --------- --------- --------- --------- ----------
DISTRIBUTIONS
From net investment income ............................ (.44) (1.17) (1.41) (1.34) (1.35) (1.23)
From net realized gain on investments ................. -- (.46) (2.21) (1.26) -- (.65)
Tax return of capital ................................. -- -- -- -- (.02) --
--------- --------- --------- --------- --------- ----------
Total Distributions ................................. (.44) (1.63) (3.62) (2.60) (1.37) (1.88)
--------- --------- --------- --------- --------- ----------
NET ASSET VALUE, END OF PERIOD ......................... $ 25.73 $ 24.44 $ 30.86 $ 29.19 $ 23.51 $ 22.53
========= ========= ========= ========= ========= ==========
TOTAL RETURN (%)(a) ................................... 7.25 (15.94) 18.99 36.81 10.87 7.24
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ........... 646,223 576,326 615,483 445,619 290,990 209,208
Ratios to average net assets (%)(b):
Operating expenses .................................. 1.13 1.05 1.02 1.04 1.04 1.05
Net investment income ............................... 4.95 4.93 4.57 5.64 6.10 5.65
Portfolio turnover rate (%)(b) ....................... 40.63 42.58 49.40 51.75 23.49 45.84
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
Real Estate Securities Fund 99
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF NET ASSETS
JUNE 30, 1999 (UNAUDITED)
Principal Market
Amount Value
(000) (000)
$ $
---------- --------
FIXED INCOME INVESTMENTS - 93.8%
ASSET-BACKED SECURITIES - 32.0%
ABFS Equipment Contract Trust
6.100% due 10/15/05 610 610
American Express Credit Account Master
Trust
Series 1997-1, Class A
6.400% due 04/15/05 7,500 7,526
Amresco Residential Securities
Mortgage Loan Trust
Step Up Bond
Series 1998-2 Class B1A
6.070% due 06/25/28 (b) 2,000 1,872
Arcadia Automobile
Receivables Trust
Series 1998-B Class A3
5.950% due 11/15/02 1,000 1,002
Series 1998-C Class A3
5.670% due 08/15/06 1,400 1,372
Banc One Auto Grantor Trust
Series 1997-A Class A
6.270% due 11/20/03 2,828 2,845
Banc One Credit Card Master Trust
Series 1995-A Class A
6.150% due 07/15/02 1,400 1,406
Barnett Auto Trust
Series 1997-A Class A3
6.030% due 11/15/01 1,935 1,940
California Infrastructure PG&E
Series 1997-1 Class A3
6.150% due 06/25/02 1,600 1,603
Captec Franchise Trust
Series 1999-1 Class A1
6.504% due 05/25/05 (b) 1,481 1,471
Case Equipment Loan Trust
Series 1997-B Class C
6.410% due 09/15/04 127 127
Chase Manhattan Auto Owner Trust
Series 1998-B Class A4
5.800% due 02/17/03 2,000 1,986
Chase Manhattan Credit
Card Master Trust
Series 1996-3 Class A
7.040% due 02/15/05 10,000 10,134
Chemical Master Credit Card Trust I
Series 1996-1 Class A
5.550% due 09/15/03 8,000 7,952
Chevy Chase Auto Receivables Trust
Series 1996-2 Class A
5.900% due 07/15/03 722 722
Series 1997-1 Class A
6.500% due 10/15/03 1,121 1,129
Series 1997-2 Class A
6.350% due 01/15/04 369 371
Series 1997-3 Class A
6.200% due 03/20/04 (b) 728 731
Citibank Credit Card Master Trust I
6.550% due 02/15/04 11,500 11,579
Copelco Capital Funding Corp.
Series 1997-A Class A3
6.270% due 04/20/05 859 861
Series 1999-A Class A2
5.500% due 03/15/01 1,400 1,395
Series 1999-A Class A3
5.665% due 03/15/02 750 742
Series 1999-A Class A5
5.950% due 06/15/04 1,250 1,227
Cox Enterprises, Inc.
6.250% due 08/26/99 2,400 2,403
Dayton Hudson Credit
Card Master Trust
Series 1997-1 Class A
6.250% due 08/25/05 800 793
Delta Funding Home
Equity Loan Trust
Series 1998-1 Class A2A
5.130% due 05/25/30 (b) 310 310
Discover Card Master Trust I
Series 1999-1 Class B
5.550% due 08/15/04 (b) 650 635
Series 1994-2, Class A
5.340% due 10/16/04 (b) 3,000 3,011
EQCC Home Equity Loan Trust
Series 1998-1 Class A3F
6.225% due 12/15/12 900 897
First Security Auto Grantor Trust
Series 1997-A, Class A
6.300% due 08/15/03 543 546
First Security Automobile
Owner Trust
Series 1999-2 Class A3
6.000% due 10/15/03 1,750 1,741
First USA Credit Card Master Trust
Series 1997-6 Class A
6.420% due 03/17/05 1,375 1,381
100 Short Term Bond Fund
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
Principal Market
Amount Value
(000) (000)
$ $
---------- --------
FMAC Loan Receivables Trust
Series 1998-CA Class A1
5.990% due 11/15/04 754 732
Franchise Loan Trust
Series 1998-I Class A1
6.240% due 07/15/04 706 689
Green Tree Financial Corp.
Series 1998-6 Class A2
5.910% due 01/01/07 905 906
Series 1998-1 Class A3
5.950% due 04/01/13 1,250 1,249
Green Tree Home Improvement
Loan Trust
Series 1997-A Class HIA3
7.050% due 08/15/23 1,080 1,090
Series 1998-D Class HIA4
6.200% due 06/15/29 1,125 1,114
Green Tree Recreational, Equipment &
Consumer Loan Trust
Series 1998-C Class A4
6.170% due 02/15/11 1,000 992
Series 1997-C Class A1
6.490% due 02/15/18 700 689
Greenpoint Manufactured Housing
Series 1999-1 Class A2
6.010% due 08/15/15 1,000 985
IMC Home Equity Loan Trust
Series 1998-1 Class A3
6.410% due 04/20/18 1,050 1,043
Nationsbank Credit Card Master Trust
Series 1995-1 Class A
6.450% due 04/15/03 8,150 8,209
Navistar Financial Corp. Owner Trust
Series 1999-A Class A3
5.950% due 04/15/03 1,675 1,661
Newcourt Equipment Trust Securities
Series 1998-2 Class A3
5.450% due 10/15/02 600 597
Series 1998-1 Class A3
5.240% due 12/20/02 1,375 1,365
Series 1998-2 Class D
7.210% due 09/15/07 (b) 700 695
NPF VI Inc.
Series 1998-1A, Class A
6.220% due 06/01/02 1,000 989
Olympic Automobile
Receivables Trust
Series 1996-B Class A4
6.700% due 03/15/02 1,250 1,257
Series 1996-D Class CTFS
6.125% due 04/15/02 3,297 3,271
Onyx Acceptance Auto Trust
Series 1999-B Class A3
5.780% due 04/15/03 (b) 2,025 2,024
Paragon Automobile
Receivables Owner Trust
Series 1999-A Class A
5.950% due 11/15/05 566 561
PBG Equipment Trust
Series 1A Class A
6.270% due 01/20/12 1,137 1,120
Peco Energy Transition Trust
Series 1999-A Class A2
5.630% due 03/01/05 8,000 7,830
PNC Student Loan Trust I
Series 1997-2 Class A3
6.314% due 01/25/01 8,500 8,510
Premier Automobile Trust
Series 1999-1 Class A3
5.690% due 11/08/02 8,500 8,442
Series 1999-3 Class A3
6.270% due 04/08/03 1,675 1,674
Series 1999-3 Class A4
6.430% due 03/08/04 (b) 1,600 1,612
Ryder Vehicle Lease Trust
Series 1998-A, Class A
6.100% due 09/15/08 (b) 694 690
Sears Credit Account Master Trust
Series 1995-5 Class A
8.100% due 06/15/04 3,404 3,465
Series 1998-1 Class A
5.800% due 08/15/05 1,500 1,493
Series 1995-2 Class A
6.050% due 01/15/08 1,000 984
Standard Credit Card Master Trust I
Series 1995-3 Class A
7.850% due 02/07/02 1,025 1,038
Team Fleet Financing Corp.
Series 1998-2A Class A
6.070% due 07/25/02 1,125 1,114
The Money Store Auto Grantor Trust
Series 1997-4 Class A2
6.350% due 03/20/04 529 532
Short Term Bond Fund 101
<PAGE>
Short Term Bond Fund
Statement of Net Assets, continued
<TABLE>
<CAPTION>
June 30, 1999 (Unaudited)
Principal Market
Amount Value
(000) (000)
$ $
---------- --------
<S> <C> <C>
The Money Store Residential Trust
Series 1997-I Class A3
6.680% due 08/15/12 900 902
The Money Store Small Business
Administration Loan Trust
Series 1996-2 Class A
5.640% due 04/15/24 (b) 879 879
Series 1997-1 Class A
5.540% due 01/15/25 (b) 1,209 1,201
Series 1997-1 Class B
6.020% due 01/15/25 (b) 806 800
UCFC Home Equity Loan
Series 1993-B1 Class A-1
6.075% due 07/25/14 51 50
WFS Financial Owner Trust
Series 1996-D Class A3
6.050% due 07/20/01 (b) 1,597 1,599
Wilshire Funding Corp.
Series 1998-WFC2 Class A3
7.000% due 12/28/37 861 849
World Omni Automobile Lease
Securitization Trust
Series 1996-B Class A3
6.250% due 11/15/02 1,743 1,747
Series 1997-A Class A2
6.750% due 06/25/03 (b) 7,741 7,790
Series 1997-A Class A4
6.900% due 06/25/03 2,376 2,395
Series 1997-B Class A1
6.070% due 11/25/03 271 273
--------
159,427
--------
Corporate Bonds and Notes - 28.8%
Ahmanson (H.F.)
9.875% due 11/15/99 2,185 2,217
Aristar, Inc.
6.125% due 12/01/00 1,225 1,223
Associates Corp. of North America
6.375% due 08/15/00 9,500 9,538
5.750% due 11/01/03 1,000 973
AT&T Capital Corp.
6.250% due 05/15/01 (MTN) 1,750 1,730
Banco De Latinoamerica
6.500% due 04/02/01 2,200 2,199
Bank of America Corp.
9.500% due 04/01/01 2,000 2,107
Bear Stearns Cos., Inc.
9.375% due 06/01/01 2,000 2,103
Business Loan Center, Inc.
Series 1998-1A
6.750% due 04/02/05 1,100 1,102
Carramerica Realty Corp.
6.625% due 10/01/00 1,575 1,564
Caterpillar Financial Services
6.100% due 07/15/99 (MTN) 500 500
Chase Manhattan Corp.
10.125% due 11/01/00 2,009 2,111
5.313% due 12/05/09 (b) 1,000 951
Chrysler Financial Corp.
6.610% due 06/16/00 (MTN) 2,000 2,015
CIT Group Holdings, Inc.
6.125% due 12/15/00 (MTN) 8,100 8,094
CIT Group, Inc.
6.500% due 06/14/02 (MTN) 3,800 3,807
Coca-Cola Put Asset Trust
6.000% due 03/15/01 1,950 1,941
Comdisco, Inc.
6.000% due 01/30/02 2,000 1,972
Conseco, Inc.
6.400% due 06/15/01 1,850 1,812
Donaldson Lufkin & Jenrette
5.875% due 04/01/02 1,150 1,130
El Paso Energy Corp.
12.000% due 12/15/00 1,925 2,050
Enron Corp.
6.450% due 11/15/01 950 949
ERAC USA Finance Co.
6.375% due 05/15/03 1,900 1,850
Finova Capital Corp.
6.625% due 09/15/01 2,000 2,009
First Bank South Dakota
5.070% due 12/20/00 (b) 500 503
First USA Bank NA
6.125% due 06/25/01 2,750 2,735
Fleet Credit Card, LLC
6.450% due 10/30/00 250 251
Fleet Financial Group, Inc.
6.875% due 03/01/03 700 707
Ford Motor Credit Co.
6.500% due 02/28/02 12,000 12,029
Franchise Finance Corp.
7.000% due 11/30/00 1,575 1,568
General Electric Capital Corp. (MTN)
6.120% due 08/15/00 5,500 5,518
5.430% due 02/25/02 4,000 3,913
General Motors Acceptance Corp.
6.850% due 04/17/01 (MTN) 750 752
8.500% due 01/01/03 1,500 1,592
7.012% due 04/01/20 (b) 1,890 1,896
Hertz Corp.
6.500% due 04/01/00 450 451
6.625% due 07/15/00 900 904
</TABLE>
102 Short Term Bond Fund
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
---------- --------
Homeside Lending, Inc. (MTN)
6.875% due 05/15/00 2,025 2,039
6.875% due 06/30/02 2,000 2,003
Household Finance Corp.
6.125% due 07/15/02 (MTN)(b) 450 446
IMC Global, Inc.
7.400% due 11/01/02 1,550 1,564
International Lease Finance Corp.
6.125% due 11/01/99 225 225
Lehman Brothers Holdings, Inc.
6.000% due 02/26/01 (MTN) 2,500 2,477
MBNA Corp.
Series B
6.500% due 09/15/00 (MTN) 1,375 1,379
Midlantic Corp.
9.250% due 09/01/99 825 830
9.200% due 08/01/01 1,123 1,177
Morgan Stanley Dean Witter & Co.
5.625% due 01/20/04 (MTN) 1,750 1,687
Nabisco, Inc.
6.000% due 02/15/01 415 411
National Westminster Bank PLC
9.450% due 05/01/01 1,500 1,584
News America Holdings, Inc.
7.450% due 06/01/00 775 784
Norwest Financial, Inc.
6.375% due 09/15/02 1,000 1,001
Panamsat Corp.
6.000% due 01/15/03 1,100 1,068
Paramount Communications, Inc.
7.500% due 01/15/02 875 894
Popular North America, Inc.
Series D
6.875% due 06/15/01 (MTN) 1,100 1,102
Procter & Gamble
9.625% due 01/14/01 6,920 7,275
Salomon Smith Barney Holdings, Inc.
6.625% due 07/01/02 75 75
6.500% due 10/15/02 300 300
Salomon, Inc.
7.750% due 05/15/00 1,000 1,015
Sears Credit Account Master Trust II
Series 1996-4 Class A
6.450% due 10/16/06 5,000 5,005
Sears ROEBUCK
Acceptance Corp. (MTN)
6.160% due 09/20/00 3,500 3,507
Series II
6.690% due 04/30/01 1,800 1,817
Series III
6.820% due 10/17/02 6,000 5,998
Sovereign Bancorp, Inc. (Regd)
6.750% due 07/01/00 1,875 1,883
Tele-Communications, Inc.
8.250% due 01/15/03 2,000 2,119
Travelers Group, Inc.
6.700% due 07/05/00 500 503
TRW, Inc.
6.500% due 06/01/02 1,325 1,320
Walt Disney Co.
Series E
5.125% due 12/15/03 (MTN) 1,100 1,047
Wellsford Residential Property Trust
5.369% due 11/24/99 (MTN)(b) 2,150 2,150
Williams Companies, Inc.
6.125% due 02/01/01 285 284
-------
143,735
-------
EURODOLLAR BONDS - 0.8%
American Express Travel
5.098% due 10/24/01 (b) 1,500 1,497
Diageo Capital PLC
6.625% due 06/24/04 545 542
St. George Bank, Ltd.
Series E
5.168% due 11/29/01 (MTN)(b) 2,000 1,998
-------
4,037
-------
MORTGAGE-BACKED SECURITIES - 6.3%
Asset Securitization Corp.
Series 1997-D5 Class A1A
6.500% due 02/14/41 983 984
Bayview Financial Acquisition Trust
Series 1998-1 Class A1
7.010% due 05/25/29 1,062 1,050
Bear Stearns Mortgage Securities, Inc.
Series 1996-6 Class A2
7.000% due 11/25/27 562 561
Chase Commercial Mortgage
Securities Corp.
Series 1997-2 Class A1
6.450% due 12/19/04 1,966 1,951
Deutsche Mortgage & Asset
Receiving Corp.
Series 1998-C1 Class A1
6.220% due 09/15/07 443 432
DLJ Mortgage Acceptance Corp.
Series 1996-CF2 Class A1A
6.860% due 11/12/21 713 716
Short Term Bond Fund 103
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -----------
Federal Home Loan Mortgage Corp.
Participation Certificate
7.500% due 2000 66 66
7.500% due 2002 33 33
9.000% due 2005 225 230
6.250% due 2007 50 49
Federal National Mortgage Association
7.000% due 2004 848 852
8.750% due 2004 33 34
6.500% due 2008 1,693 1,675
5.500% due 2009 8,399 8,079
8.000% due 2009 595 609
7.500% due 2014 1,562 1,592
8.500% due 2025 3 4
Government National
Mortgage Association
7.250% due 2006 1,529 1,551
8.250% due 2009 790 832
9.000% due 2017 1,717 1,829
9.500% due 2017 700 752
Series 1994-1 Class PE
7.500% due 07/16/22 1,150 1,174
Series 1997-11 Class M
8.000% due 05/16/24 1,200 1,223
Morgan Stanley Capital I
Series 1998-CF1 Class A1
6.330% due 10/15/07 426 420
Prudential Home Mortgage Securities
Series 1994-19, Class A2
7.050% due 05/25/24 456 458
Residential Accredited Loans, Inc.
Series 1997-QS7 Class A1
7.500% due 07/25/27 244 246
Residential Asset Securitization Trust
Series 1997-A9 Class A1
7.250% due 11/26/27 6 6
Series 1998-A1 Class A1
7.000% due 03/25/28 223 223
Series 1998-A2 Class A1
6.750% due 04/25/28 557 555
Residential Funding Mortgage Securities
Series 1998-NS1 Class A2
6.375% due 01/25/09 962 959
Resolution Trust Corp. Mortgage
Pass-thru Certificate
Series 1995-2 Class C1
7.450% due 05/25/29 (b) 400 395
Union Planters Mortgage Finance Corp.
Series 1998-A, Class A1
6.350% due 01/25/28 649 645
Series 1999-1 Class A1
6.250% due 04/01/29 634 630
Wilshire Funding Corporation
Series 1997-WFC1 Class AI
7.250% due 08/25/27 692 695
-----------
31,510
-----------
MUNICIPAL BONDS - 0.5%
Missouri Higher Education
Loan Authority
Series 97 Class P
5.120% due 07/25/08 (b) 1,098 1,090
Philadelphia, Pennsylvania, Authority
for Industrial Development
Series 1997 Class A
6.488% due 06/15/04 1,395 1,374
-----------
2,464
-----------
UNITED STATES GOVERNMENT
AGENCIES - 1.0%
Federal Farm Credit Bank
5.220% due 09/11/01 1,250 1,233
Federal National Mortgage Association
Series B
5.750% due 06/07/01 (MTN) 3,000 2,990
Tennessee Valley Authority
Series D
6.000% due 11/01/00 750 752
-----------
4,975
-----------
UNITED STATES GOVERNMENT
TREASURIES - 22.6%
United States Treasury Bonds
8.750% due 11/15/08 5,117 5,650
United States Treasury Notes
5.625% due 11/30/00 2,350 2,356
5.000% due 02/28/01 5,715 5,670
5.750% due 06/30/01 61,600 61,860
6.500% due 08/31/01 605 616
6.250% due 10/31/01 4,500 4,564
6.250% due 02/28/02 3,490 3,542
6.625% due 04/30/02 2,650 2,720
3.625% due 07/15/02 25,589 25,317
5.750% due 12/31/02 635 634
-----------
112,929
-----------
104 Short Term Bond Fund
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
-------------- --------------
YANKEE BONDS - 1.8%
Edperbrascan Corp.
7.375% due 10/01/02 2,000 1,999
Noranda Forest, Inc.
8.875% due 10/15/99 450 453
Quebec, Province of
13.250% due 09/15/14 900 954
Tyco International Group SA
6.125% due 06/15/01 3,600 3,587
Westpac Banking, Ltd.
7.875% due 10/15/02 2,006 2,072
--------------
9,065
--------------
TOTAL FIXED INCOME INVESTMENTS
(cost $471,697) 468,142
--------------
SHORT-TERM INVESTMENTS - 7.0%
Federal Home Loan Bank Corp.
Discount Note
4.490% due 07/01/99 (a) 4,475 4,475
Federal Home Loan Mortgage
Discount Note
4.760% due 07/22/99 (a) 1,600 1,595
Frank Russell Investment Company
Money Market Fund,
due on demand (a) 28,851 28,851
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $34,921) 34,921
--------------
TOTAL INVESTMENTS - 100.8%
(cost $506,618) 503,063
OTHER ASSETS AND LIABILITIES,
NET - (0.8%) (4,164)
--------------
NET ASSETS - 100.0% 498,899
==============
(a) At cost, which approximates market.
(b) Adjustable or floating rate security
Abbreviations:
MTN - Medium Term Note
See accompanying notes which are an integral part of the financial statements.
Short Term Bond Fund 105
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
<S> <C>
ASSETS
Investments at market (identified cost $506,618) ............................................. $ 503,063
Receivables:
Dividends and interest ...................................................................... 4,667
Investments sold ............................................................................ 1,005
Fund shares sold ............................................................................ 1,024
-------------
Total Assets .............................................................................. 509,759
LIABILITIES
Payables:
Investments purchased ................................................... $ 9,553
Fund shares redeemed .................................................... 829
Accrued fees to affiliates .............................................. 341
Other accrued expenses .................................................. 137
----------
Total Liabilities ......................................................................... 10,860
-------------
NET ASSETS ................................................................................... $ 498,899
=============
NET ASSETS CONSIST OF:
Undistributed net investment income .......................................................... $ 3,519
Accumulated net realized gain (loss) ......................................................... (18,467)
Unrealized appreciation (depreciation) on investments ........................................ (3,555)
Shares of beneficial interest ................................................................ 273
Additional paid-in capital ................................................................... 517,129
-------------
NET ASSETS ................................................................................... $ 498,899
=============
NET ASSET VALUE, offering and redemption price per share:
Class C ($183,116 divided by 10,015 shares of $.01 par value
shares of beneficial interest outstanding) ................................................ $ 18.28
=============
Class E ($9,267,388 divided by 505,792 shares of $.01 par value
shares of beneficial interest outstanding) ................................................ $ 18.32
=============
Class S ($489,448,494 divided by 26,747,046 shares of $.01 par value
shares of beneficial interest outstanding) ................................................ $ 18.30
=============
</TABLE>
See accompanying notes which are intergral part of the financial statements.
106 Short Term Bond Fund
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<S> <C>
INVESTMENT INCOME
Interest ............................................................................... $ 11,582
Dividends from Money Market Fund ....................................................... 538
Dividends .............................................................................. 24
-------------
Total Investment Income .............................................................. 12,144
EXPENSES
Management fees ........................................................ $ 1,068
Administrative fees .................................................... 120
Custodian fees ......................................................... 131
Distribution fees - Class C ............................................ 1
Transfer agent fees .................................................... 264
Professional fees ...................................................... 57
Registration fees - Class E ............................................ 1
Registration fees - Class S ............................................ 82
Shareholder servicing fees - Class E ................................... 3
Trustees' fees ......................................................... 6
Miscellaneous .......................................................... 124
-------------
Total Expenses ....................................................................... 1,857
-------------
Net investment income ................................................................... 10,287
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investments ................................................. (2,324)
Net change in unrealized appreciation (depreciation) on investments...................... (4,715)
-------------
Net realized and unrealized gain (loss) ................................................ (7,039)
-------------
Net increase (decrease) in net assets resulting from operations ......................... $ 3,248
=============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Short Term Bond Fund 107
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
------------------- -----------------
<S> <C> <C>
OPERATIONS
Net investment income ............................................................... $ 10,287 $ 13,185
Net realized gain (loss) ............................................................ (2,324) 1,126
Net change in unrealized appreciation (depreciation) ................................ (4,715) 355
------------------- -----------------
Net increase (decrease) in net assets
resulting from operations ....................................................... 3,248 14,666
------------------- -----------------
DISTRIBUTIONS
From net investment income
Class C ........................................................................... (4) --
Class E ........................................................................... (7) --
Class S ........................................................................... (7,420) (13,149)
------------------- -----------------
Net decrease from distributions ................................................. (7,431) (13,149)
------------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ....................... 242,543 29,552
------------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS .......................................... 238,360 31,069
NET ASSETS
Beginning of period ................................................................. 260,539 229,470
------------------- -----------------
End of period (including undistributed net investment income
of $3,519 and $621, respectively) ................................................ $ 498,899 $ 260,539
=================== =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
108 Short Term Bond Fund
<PAGE>
SHORT TERM BOND FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
----------
NET ASSET VALUE, BEGINNING OF PERIOD ......................... $ 18.36
----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) .................................. .25
Net realized and unrealized gain (loss) on investments ...... (.16)
----------
Total Income From Investment Operations ................... .09
----------
DISTRIBUTIONS
From net investment income .................................. (.17)
----------
NET ASSET VALUE, END OF PERIOD ............................... $ 18.28
==========
TOTAL RETURN (%)(a) ......................................... .48
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ................. 183
Ratios to average net assets (%)(b):
Operating expenses ........................................ 1.97
Net investment income ..................................... 3.82
Portfolio turnover rate (%)(b) ............................. 168.49
* For the period March 3, 1999 (commencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) Average month-end shares outstanding were used for this calculation.
Short Term Bond Fund 109
<PAGE>
SHORT TERM BOND FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
------------
NET ASSET VALUE, BEGINNING OF PERIOD ........................ $ 18.51
------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) ................................. .25
Net realized and unrealized gain (loss) on investments ..... (.14)
------------
Total Income From Investment Operations .................. .11
------------
DISTRIBUTIONS
From net investment income ................................. (.30)
------------
NET ASSET VALUE, END OF PERIOD .............................. $ 18.32
============
TOTAL RETURN (%)(a) ........................................ .60
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) ................ 9,267
Ratios to average net assets (%)(b):
Operating expenses ....................................... 1.39
Net investment income .................................... 4.57
Portfolio turnover rate (%)(b) ............................ 168.49
* For the period February 18, 1999 (commencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) Average month-end shares outstanding were used for this calculation.
110 Short Term Bond Fund
<PAGE>
SHORT TERM BOND FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------
1999* 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD ............................ $ 18.46 $ 18.35 $ 18.36 $ 18.55 $ 17.98 $ 18.99
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d) ........ .39 .99 1.08 1.04 1.16 1.21
Net realized and unrealized gain
(loss) on investments ............. (.21) .11 -- (.19) .59 (1.07)
--------- --------- --------- --------- --------- ---------
Total Income From Investment
Operations ...................... .18 1.10 1.08 .85 1.75 .14
--------- --------- --------- --------- --------- ---------
DISTRIBUTIONS
From net investment income ........ (.34) (.99) (1.09) (1.04) (1.18) (1.15)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD ..... $ 18.30 $ 18.46 $ 18.35 $ 18.36 $ 18.55 $ 17.98
========= ========= ========= ========= ========= =========
TOTAL RETURN (%)(a)(b) ............. .98 6.09 6.02 4.76 9.95 .82
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in
thousands) ..................... 489,448 260,539 229,470 222,983 183,577 144,030
Ratios to average net assets (%)(b)(c):
Operating expenses .............. .88 .66 .66 .70 .58 .19
Net investment income ........... 4.90 5.37 5.70 5.70 6.41 6.52
Portfolio turnover rate (%)(c) ... 168.49 129.85 213.14 264.40 269.31 233.75
</TABLE>
* For the six months ended June 30, 1999 (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 mangement 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 period ended June 30, 1999 are annualized.
(d) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
Short Term Bond Fund 111
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
---------- ----------
<S> <C> <C>
LONG-TERM INVESTMENTS - 98.8%
ASSET-BACKED SECURITIES - 9.2%
AFC Home Equity Loan Trust
Series 1996-2 Class 1 A3
7.590% due 09/25/27 354 353
Arcadia Automobile Receivables Trust
Series 1998-B Class A3
5.950% due 11/15/02 610 611
Series 1999-A Class A4
5.940% due 08/15/03 1,610 1,600
ARG Funding Corp.
Series 1999-1A Class A3
6.020% due 05/20/04 1,225 1,198
BankAmerica Manufactured
Housing Contract
Series 1997-1 Class A4
6.195% due 06/10/10 (d) 1,000 1,002
Centex Home Equity
Series 1999-2 Class A3
6.260% due 07/25/25 1,120 1,100
Circuit City Credit Card Master Trust
Series 1994-2 Class A
8.000% due 11/15/03 2,030 2,050
Citibank Credit Card Master Trust I
Series 1997-3 Class A
6.839% due 02/10/04 (d) 980 984
Series 1998-6 Class A
5.850% due 04/10/03 1,245 1,241
First Omni Credit Card Master Trust
Series 1996-A Class A
6.650% due 09/15/03 1,290 1,299
First Sierra Receivables
Series 1999-1 Class A4
5.730% due 07/15/04 2,185 2,138
First USA Credit Card Master Trust
Series 1997-6 Class A
6.420% due 03/17/05 1,700 1,708
Fleetwood Credit Corporation
Grantor Trust
Series 1997-B Class A
6.400% due 05/15/13 (d) 2,352 2,362
Ford Credit Automobile Owner Trust
Series 1999-B Class A4
5.800% due 06/15/02 2,680 2,666
GE Capital Mortgage Services, Inc.
Series 1999-HE1 Class A7
6.265% due 04/25/29 1,250 1,195
Green Tree Financial Corp.
Series 1994-2 Class A5
8.300% due 05/15/19 1,485 1,551
Series 1997-2 Class A6
7.240% due 06/15/28 1,140 1,145
Green Tree Home Improvement
Loan Trust
Series 1998-D Class HIA2
5.940% due 06/15/29 345 345
Series 1998-E Class HIA1
5.907% due 08/15/07 833 834
Green Tree Lease Finance
Series 1998-1 Class A4
5.740% due 01/20/04 540 529
Green Tree Recreational, Equipment &
Consumer Loan Trust
Series 1998-A Class A1C
6.180% due 06/15/19 384 384
Series 1998-C Class A4
6.170% due 02/15/11 400 401
Heller Equipment Asset Receivables Trust
Series 1999-1 Class A3
5.500% due 07/13/03 2,115 2,084
Ikon Receivables, L.L.C.
Series 1999-1 Class A3
5.990% due 05/15/05 2,580 2,568
Indymac Home Equity Loan Trust Step
Up Bond
Series 1998-A Class AF4
6.310% due 10/25/29 855 834
MBNA Master Credit Card Trust II
Series 1999-A Class B
5.357% due 07/17/06 (d) 1,500 1,494
Metris Master Trust
Series 1996-1 Class A
6.450% due 02/20/02 853 854
Series 1997-1 Class A
6.870% due 10/20/05 2,695 2,740
Newcourt Equipment Trust Securities
Series 1998-1 Class A4
5.393% due 05/20/04 3,500 3,359
Oakwood Mortgage Investors, Inc.
Series 1998-A Class A2
6.100% due 05/15/28 515 514
Series 1999-B Class A2
6.190% due 12/15/13 695 687
Onyx Acceptance Grantor Trust
Series 1997-1 Class A
6.550% due 09/15/03 (d) 53 53
Series 1998-A Class A3
5.850% due 08/15/02 2,580 2,575
Series 1998-C Class A2
5.550% due 09/15/01 1,495 1,492
</TABLE>
112 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ---------
<S> <C> <C>
Option One Mortgage Loan Trust
Series 1999-2 Class A4
6.340% due 05/25/29 1,430 1,386
PacificAmerica Home Equity Loan
Step Up Bond
Series 1998-2 Class AF
6.590% due 06/26/28 1,405 1,403
Peco Energy Transition Trust
Series 1999-A Class A4
5.800% due 03/01/07 955 924
Pemex Finance, Ltd.
Series 2A Class A1
6.125% due 11/15/03 3,000 3,004
Preferred Credit Corp.
Series 1997-1 Class A6
7.590% due 07/25/26 850 870
Premier Auto Trust
Series 1998-5 Class A4
5.190% due 04/08/03 1,455 1,418
Series 1999-2 Class A4
5.590% due 02/09/04 920 903
Provident Bank Home Equity Loan Trust
Series 1998-4 Class A2
5.970% due 11/25/13 1,095 1,085
Series 1998-4 Class A4
6.170% due 04/25/22 1,070 1,042
Providian Master Trust
Series 1997-4 Class A
6.250% due 06/15/07 2,065 2,050
Residential Funding Mortgage
Securities II, Inc.
Series 1999-HI1 Class A3
6.310% due 09/25/29 2,500 2,481
Saxon Asset Securities Trust
Series 1998-4 Class AF3
6.265% due 07/25/23 1,290 1,276
Student Loan Marketing Association
Series 1996-3 Class A1
4.997% due 10/25/04 (d) 1,515 1,508
Team Fleet Financing Corp.
Series 1997-1 Class A
7.350% due 05/15/03 1,800 1,828
The Money Store Home Equity Loan Trust
Series 1998-A Class AF5
6.370% due 12/15/23 1,170 1,165
UCFC Home Equity Loan
Series 1996-B1 Class A4
7.525% due 12/15/17 725 731
Union Acceptance Corp.
Series 1998-B Class A4
5.900% due 02/09/04 1,440 1,432
USAA Auto Loan Grantor Trust
Series 1998-1 Class A
5.800% due 01/15/05 1,990 1,996
Vanderbilt Mortgage & Finance, Inc.
Series 1999-A Class 1A3
6.080% due 12/07/15 690 673
Series 1999-B Class 1A3
6.280% due 03/07/13 905 897
WFS Financial Owner Trust
Series 1998-B Class A4
6.050% due 04/20/03 855 849
Series 1999-A Class A4
5.700% due 11/20/03 770 754
World Financial Network Credit Card
Master Trust
Series 1996-A Class A
6.700% due 02/15/04 (d) 2,425 2,448
World Omni Automobile Lease
Securitization Trust
Series 1996-B Class A2
6.200% due 11/15/02 388 388
Series 1997-A Class B
6.490% due 06/25/03 (d) 743 751
---------
79,212
---------
BANKERS ACCEPTANCE NOTES - 0.0%
Mellon Bank, NA
7.625% due 09/15/07 355 368
---------
CORPORATE BONDS AND NOTES - 20.0%
Ahold Finance USA, Inc.
6.250% due 05/01/09 1,730 1,631
Air Products & Chemicals, Inc.
8.750% due 04/15/21 250 282
Allegiance Corp.
7.300% due 10/15/06 875 879
7.000% due 10/15/26 130 130
America West Airlines
Series A
6.850% due 07/02/09 468 453
American Financial Group, Inc.
7.125% due 04/15/09 1,275 1,186
American General Corp.
7.125% due 02/15/04 340 346
American Health Properties, Inc.
7.050% due 01/15/02 550 539
American Stores Co.
8.000% due 06/01/26 690 742
Analog Devices, Inc.
6.625% due 03/01/00 125 126
</TABLE>
Diversified Bond Fund 113
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -------
Archer Daniels Co.
8.375% due 04/15/17 665 741
Aristar, Inc.
6.000% due 05/15/02 1,635 1,614
Associates Corp. of North America
6.500% due 10/15/02 450 452
5.750% due 11/01/03 3,000 2,918
5.500% due 02/15/04 875 834
Series H
7.090% due 04/11/03 (MTN) 400 406
AT&T Corp.
6.500% due 03/15/29 640 578
8.625% due 12/01/31 220 230
Atlantic Richfield Co.
9.125% due 08/01/31 550 676
Avco Financial Services, Inc.
6.000% due 08/15/02 800 792
Baltimore Gas & Electric Co.
7.250% due 07/01/02 500 513
6.500% due 02/15/03 840 845
Banco De Latinoamerica
6.500% due 04/02/01 1,225 1,224
Bank of New York, Inc.
7.875% due 11/15/02 350 365
Bank One Corp.
7.375% due 12/01/02 120 123
BankAmerica Corp.
6.850% due 03/01/03 425 432
6.875% due 06/01/03 260 265
Series H
5.750% due 03/01/04 (MTN) 400 384
BankBoston Corp.
6.125% due 03/15/02 (MTN) 250 248
Barnett Bank, Inc.
6.900% due 09/01/05 405 405
Baxter International, Inc.
6.630% due 02/15/28 825 732
Bear Stearns Cos., Inc.
5.200% due 02/16/01 (MTN)(d) 2,000 1,996
Series B
5.000% due 05/16/03 (MTN) 2,000 1,989
6.150% due 03/02/04 1,300 1,252
Bell Telephone Co. of Pennsylvania
8.350% due 12/15/30 355 402
BellSouth Telecommunications, Inc.
7.000% due 12/01/95 385 367
Beneficial Corp.
8.400% due 05/15/08 1,235 1,343
Boeing Co.
8.750% due 08/15/21 550 639
Burlington Northern Santa Fe
5.173% due 05/13/29 1,200 1,180
Camden Property Trust
7.000% due 04/15/04 600 587
Campbell Soup Co.
8.875% due 05/01/21 420 493
Carolina Power & Light Co.
6.875% due 08/15/23 410 389
Case Corp.
7.250% due 08/01/05 330 327
7.250% due 01/15/16 295 283
Caterpillar Financial Services Corp.
9.500% due 02/06/07 (MTN) 420 484
Caterpillar, Inc.
8.000% due 02/15/23 200 212
Central Fidelity Banks, Inc.
8.150% due 11/15/02 170 179
Central Power & Light Co.
Series FF
6.875% due 02/01/03 600 607
Champion International Corp.
6.400% due 02/15/26 460 444
Chase Manhattan Corp.
6.500% due 08/01/05 300 297
6.000% due 02/15/09 535 496
Chesapeake & Potomac Telephone Co.
8.375% due 10/01/29 230 260
Choice Hotels International, Inc.
7.125% due 05/01/08 1,075 1,012
Chrysler Financial Corp.
5.875% due 02/07/01 1,000 995
6.080% due 03/12/01 (MTN) 900 898
5.030% due 06/11/01 (MTN) 2,000 1,999
Cincinnati Gas & Electric Co.
7.200% due 10/01/23 410 390
CIT Group, Inc.
6.150% due 12/15/02 (MTN) 500 493
5.625% due 10/15/03 1,920 1,849
Citicorp
5.172% due 05/24/01 (MTN)(d) 2,000 2,000
9.500% due 02/01/02 120 129
7.125% due 06/01/03 390 397
Citigroup, Inc.
6.875% due 02/15/98 790 707
City National Bank
6.375% due 01/15/08 600 566
Coca Cola Enterprises, Inc.
7.000% due 10/01/26 675 682
6.750% due 01/15/38 250 228
Colonial Realty L.P.
6.980% due 09/26/05 (MTN) 450 424
114 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- -------
Comcast Cable Communications
8.375% due 05/01/07 850 910
Comerica Bank
7.250% due 06/15/07 700 707
6.000% due 10/01/08 400 372
Commercial Credit Group, Inc.
7.875% due 07/15/04 805 848
6.500% due 06/01/05 540 534
8.700% due 06/15/10 380 428
Commonwealth Edison Co.
Series 85
7.375% due 09/15/02 945 967
Conagra, Inc.
8.100% due 05/20/02 (MTN) 300 312
Conoco, Inc.
6.950% due 04/15/29 620 580
Countrywide Home Loan
Series H
6.250% due 04/15/09 (MTN) 500 460
Cox Communications, Inc.
6.500% due 11/15/02 550 549
6.690% due 09/20/04 (MTN) 400 396
Crown Cork & Seal Finance PLC
7.000% due 12/15/06 750 733
CSX Corp.
7.900% due 05/01/17 400 412
DaimlerChrysler AG
7.450% due 03/01/27 800 805
Delta Air Lines, Inc.
Series C
6.650% due 03/15/04 (MTN) 1,130 1,108
Dillards Inc.
6.430% due 08/01/04 1,025 981
Duke Energy Corp.
7.000% due 07/01/33 695 626
Duke Realty, Ltd. Partnership
6.800% due 02/12/09 700 654
Eastman Chemical Co.
7.250% due 01/15/24 300 283
EOP Operating, L.P.
6.500% due 01/15/04 1,185 1,154
EQCC Home Equity Loan Trust
Series 1997-1 Class A4
7.160% due 03/15/13 900 903
Federal Express Corp.
7.600% due 07/01/97 300 276
Federated Department Stores, Inc.
6.125% due 09/01/01 900 894
Fifth Third Capital Trust I
Series A
8.136% due 03/15/27 315 328
Finova Capital Corp.
5.875% due 10/15/01 500 494
7.125% due 05/01/02 925 940
First Bank Systems, Inc.
8.000% due 07/02/04 700 736
First Chicago Corp.
5.100% due 11/14/01 (MTN)(d) 3,000 2,967
8.875% due 03/15/02 505 536
First Interstate Bancorp
9.375% due 01/23/02 (MTN) 135 144
First Tennessee Bank
Series BKNT
5.750% due 12/01/08 1,225 1,101
First Union Corp.
6.625% due 06/15/04 355 355
First Union Institutional Capital Trust I
8.040% due 12/01/26 225 226
First Union National Bank
7.125% due 10/15/06 (MTN) 500 507
Fleet Financial Group, Inc.
6.875% due 03/01/03 300 303
8.125% due 07/01/04 595 632
Ford Motor Credit Co.
5.435% due 03/21/01 (MTN) 4,000 4,001
7.750% due 11/15/02 2,000 2,075
7.500% due 06/15/04 300 310
6.750% due 05/15/05 350 349
Fort James Corp.
6.625% due 09/15/04 895 894
6.875% due 09/15/07 375 369
Fortune Brands, Inc.
7.875% due 01/15/23 380 403
General Electric Capital Corp.
8.300% due 09/20/09 235 263
General Motors Acceptance Corp.
5.480% due 12/16/02 (MTN) 2,535 2,456
6.750% due 03/15/03 4,000 4,026
Grand Metropolitan Investment Corp.
7.450% due 04/15/35 300 318
GTE California, Inc.
6.750% due 05/15/27 550 517
Harrahs Operating Co., Inc.
7.500% due 01/15/09 515 499
Heller Financial, Inc.
7.000% due 05/15/02 890 901
Hertz Corp.
7.625% due 08/01/02 550 565
9.000% due 11/01/09 230 259
Hilton Hotels Corp.
7.000% due 07/15/04 1,200 1,178
Diversified Bond Fund 115
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -------
Household Finance Corp.
6.125% due 07/15/02 (MTN) 600 595
5.875% due 02/01/09 425 386
Illinois Power
7.500% due 06/15/09 1,300 1,319
IMC Global, Inc.
6.500% due 08/01/03 500 489
International Business Machines Corp.
7.125% due 12/01/96 780 748
IRT Property Co.
7.250% due 08/15/07 450 419
ITT Financial Corp.
7.400% due 11/15/25 955 824
JPM Capital Trust I
7.540% due 01/15/27 225 215
Key Bank Corp.
6.500% due 04/15/08 450 428
KeyCorp
8.000% due 07/01/04 150 158
7.500% due 06/15/06 750 770
Knight-Ridder, Inc.
6.875% due 03/15/29 900 833
Kroger Co.
6.800% due 12/15/18 600 558
Lehman Brothers Holdings, Inc.
6.000% due 02/26/01 (MTN) 1,000 991
6.625% due 04/01/04 225 219
Liberty Mutual Insurance Co.
7.697% due 10/15/97 1,650 1,515
Lincoln National Corp.
7.250% due 05/15/05 450 454
6.500% due 03/15/08 200 192
7.000% due 03/15/18 450 428
Loral Corp.
7.000% due 09/15/23 675 611
Lowes Cos., Inc.
6.875% due 02/15/28 680 635
Manufacturers & Traders Trust Co.
7.000% due 07/01/05 435 430
Marsh & McLennan Cos., Inc.
6.625% due 06/15/04 1,250 1,252
Mattel, Inc.
6.000% due 07/15/03 500 487
May Department Stores Co.
6.875% due 11/01/05 480 487
MCI WorldCom, Inc.
6.400% due 08/15/05 1,150 1,125
6.950% due 08/15/28 500 474
Mercantile Bancorp
7.050% due 06/15/04 825 836
Merrill Lynch & Co., Inc.
6.000% due 02/12/03 800 789
Mirage Resorts, Inc.
6.625% due 02/01/05 955 885
Morgan, J.P. & Co., Inc.
5.750% due 02/25/04 1,025 987
Morgan Stanley Dean Witter & Co.
5.625% due 01/20/04 (MTN) 475 458
Nabisco, Inc.
6.375% due 02/01/35 850 814
Natexix Ambs Co., LLC
Series A
8.440% due 12/29/49 150 143
Nationsbank Corp.
7.750% due 08/15/04 450 473
New England Telephone & Telegraph Co.
7.875% due 11/15/29 235 252
Newcourt Credit Group, Inc.
6.875% due 02/16/05 1,275 1,248
News America Holdings, Inc.
8.875% due 04/26/23 500 552
7.750% due 01/20/24 450 440
Northwestern Bell Telephone Co.
7.750% due 05/01/30 630 642
Norwest Corp.
Series H
6.750% due 06/15/07 (MTN) 300 295
Norwest Financial, Inc.
6.250% due 11/01/02 525 522
6.375% due 11/15/03 575 573
6.000% due 02/01/04 600 584
6.750% due 06/01/05 200 198
NYNEX Capital Funding Co.
8.750% due 12/01/04 (MTN) 450 492
NYNEX Corp.
9.550% due 05/01/10 322 360
Occidental Petroleum Corp.
8.500% due 11/09/01 (MTN) 245 253
10.125% due 11/15/01 210 225
Paine Webber Group, Inc.
6.375% due 05/15/04 275 267
Panamsat Corp.
6.125% due 01/15/05 600 560
Pennsylvania Power & Light Co.
6.875% due 03/01/04 1,000 1,014
Philadelphia Electric Co.
7.125% due 09/01/02 550 558
Philip Morris Cos., Inc.
6.950% due 06/01/06 295 298
7.200% due 02/01/07 1,000 1,001
7.650% due 07/01/08 310 319
116 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -------
Pitney Bowes Credit Corp.
8.550% due 09/15/09 460 516
PNC Funding Corp.
6.875% due 07/15/07 800 786
Praxair, Inc.
6.850% due 06/15/05 700 686
Procter & Gamble Co.
Series A
9.360% due 01/01/21 90 108
Prologis Trust
6.700% due 04/15/04 650 634
Provident Cos., Inc.
6.375% due 07/15/05 1,000 975
Ralston Purina Co.
7.875% due 06/15/25 615 628
Raytheon Co.
6.300% due 03/15/05 880 864
Realty Income Corp.
7.750% due 05/06/07 1,175 1,115
Republic of New York Corp.
9.750% due 12/01/00 190 199
8.250% due 11/01/01 150 156
Rite Aid Corp.
6.700% due 12/15/01 950 945
Safeway, Inc.
6.050% due 11/15/03 440 431
Salomon Smith Barney Holdings, Inc.
6.250% due 06/15/05 500 485
Sears Roebuck Acceptance Corp.
7.000% due 06/15/07 245 245
6.750% due 01/15/28 800 723
Series II
6.690% due 04/30/01 (MTN) 375 378
Security Capital Group, Inc.
6.950% due 06/15/05 600 560
Service Corp. International
6.750% due 06/01/01 250 249
7.375% due 04/15/04 560 562
6.000% due 12/15/05 300 277
Shopping Center Associates
6.750% due 01/15/04 750 734
Simon Property Group, Inc.
6.750% due 02/09/04 1,000 974
Societe Generale
7.850% due 04/29/49 (f) 625 612
Societe Generale Real Estate Co., L.L.C
7.640% due 12/29/49 (f) 430 406
Spieker Properties
8.000% due 07/19/05 (MTN) 700 714
Sprint Capital Corp.
6.125% due 11/15/08 1,150 1,061
6.900% due 05/01/19 900 833
Star Banc Corp.
5.875% due 11/01/03 300 291
Summit Properties Partnership, L.P.
7.200% due 08/15/07 475 443
Suntrust Banks, Inc.
7.375% due 07/01/02 700 719
6.250% due 06/01/08 150 144
TCI, Inc.
6.375% due 05/01/03 625 625
Texaco Capital, Inc.
9.750% due 03/15/20 440 564
8.875% due 09/01/21 220 262
Time Warner, Inc.
7.975% due 08/15/04 300 314
7.750% due 06/15/05 400 412
8.110% due 08/15/06 600 629
8.180% due 08/15/07 600 634
6.875% due 06/15/18 950 883
Time Warner, Inc.
Pass-Thru Asset Trust Securities
4.900% due 07/29/99 3,000 3,000
TRW, Inc.
7.125% due 06/01/09 1,200 1,165
Union Carbide Chemicals & Plastics
7.875% due 04/01/23 590 586
Union Oil Co.
9.400% due 02/15/11 (MTN) 470 542
Union Pacific Corp.
7.600% due 05/01/05 570 588
Union Pacific Railroad Trust
Pass-thru Certificate
Series 1996-A2
7.060% due 05/15/03 500 504
Union Planters Bank
6.500% due 03/15/18 670 634
United Technologies Corp.
8.750% due 03/01/21 380 442
US Bank National Association Minnesota
5.110% due 12/19/01 (d) 2,000 2,008
5.625% due 11/30/05 1,500 1,411
USX Marathon Group
8.500% due 03/01/23 800 850
Virginia Electric & Power Co.
8.750% due 04/01/21 200 205
Wachovia Corp.
6.700% due 06/21/04 1,125 1,131
6.800% due 06/01/05 305 300
Diversified Bond Fund 117
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -------
Wal-Mart Stores, Inc.
7.500% due 05/15/04 300 315
Series 1994-B3
8.800% due 12/30/14 315 376
Walt Disney Co.
Series E (MTN)
5.125% due 12/15/03 600 571
Waste Management, Inc.
6.375% due 12/01/03 325 322
Wells Fargo & Co.
6.875% due 04/01/06 500 502
Wellsford Residential Property Trust
9.375% due 02/01/02 750 796
Westdeutsche Landesbank NY
6.050% due 01/15/09 3,000 2,799
Westvaco Corp.
9.750% due 06/15/20 115 145
Willamette Industries, Inc.
7.850% due 07/01/26 520 536
Wilmington Trust
10.370% due 01/02/07 1,522 1,611
Wisconsin Central Transportation Corp.
6.625% due 04/15/08 850 809
World Financial Properties Tower
Series 1996 WBF-B
6.910% due 09/01/13 1,149 1,127
-------
171,761
-------
EURODOLLAR BONDS - 1.8%
Australian Gas Light Co.
6.400% due 04/15/08 1,000 939
Caterpillar Financial Services Corp.
Series 2
5.090% due 02/12/01 4,000 4,000
Diageo Capital PLC
6.625% due 06/24/04 1,150 1,144
Italy, Republic of
6.875% due 09/27/23 150 151
Merita Bank, Ltd.
7.150% due 12/29/49 (f) 250 248
7.500% due 12/29/49 (f) 850 825
Nationsbank Corp.
5.293% due 06/17/02 (MTN)(d) 3,000 2,995
Ontario, Province of
5.500% due 10/01/08 3,225 2,968
Poland, Government of
3.000% due 10/27/24 2,000 1,192
Quebec, Province of Canada
5.750% due 02/15/09 650 595
-------
15,057
-------
MORTGAGE-BACKED SECURITIES - 38.7%
ACLC Franchise Loan Receivables
Pass-thru Certificate
Series 1997 Class A1
7.120% due 03/15/12 783 777
American Southwest Financial Corp.
Series G Class G-4
12.250% due 11/01/14 135 141
Capital Equipment Receivables Trust
Series 1996-1 Class A4
6.280% due 06/15/00 589 590
Chase Commercial Mortgage
Securities Corp
Series 1997-1 Class E
6.490% due 12/19/07 (d) 1,475 1,370
Chase Mortgage Finance Corp.
Series 1998-S4 Class A4
6.550% due 08/25/28 2,000 1,981
Collateralized Mortgage Obligation
Trust 56 Class B CMO
9.985% due 12/01/18 149 157
COMM Mortgage Trust
Series 1999-1 Class A1
6.145% due 02/15/08 4,917 4,822
Commercial Mortgage Acceptance Corp.
Series 1997-ML1 Class A1
6.500% due 11/15/04 (d) 1,120 1,119
DLJ Commercial Mortgage Corp.
Series 1998-CF2 Class A1A
5.880% due 11/12/31 934 902
Series 1999-CG1 Class A1A
6.080% due 08/10/08 (d) 1,273 1,242
DLJ Mortgage Acceptance Corp.
Series 1993 Class A-2 CMO
7.650% due 09/18/03 2,500 2,536
Federal Home Loan Mortgage Corp.
5.000% due 02/15/01 505 500
Series 1053 Class G
7.000% due 03/15/21 970 970
Series 2006 Class B
6.500% due 08/15/23 5,348 5,343
Federal Home Loan Mortgage Corp. (c)
5.500% 15 Year TBA Gold 4,770 4,537
6.000% 15 Year TBA Gold 4,810 4,651
6.500% 15 Year TBA Gold 5,995 5,913
6.500% 30 Year TBA 6,745 6,511
6.000% 30 Year TBA Gold 4,555 4,283
6.500% 30 Year TBA Gold 7,200 6,951
118 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -------
Federal Home Loan Mortgage Corp.
Participation Certificate
7.500% due 2001 92 92
7.000% due 2002 59 59
6.500% due 2003 82 81
7.000% due 2003 217 220
6.750% due 2007 251 250
7.500% due 2007 490 498
7.000% due 2008 381 383
8.000% due 2008 81 83
8.500% due 2008 85 88
6.500% due 2009 1,315 1,303
7.500% due 2009 79 81
7.500% due 2009 1,254 1,278
8.000% due 2009 146 150
6.500% due 2010 85 84
7.000% due 2010 176 176
7.500% due 2010 30 31
8.000% due 2010 24 24
6.000% due 2011 3,671 3,559
7.000% due 2011 87 88
7.500% due 2011 248 252
8.000% due 2011 299 307
6.000% due 2012 83 80
7.500% due 2012 441 449
8.000% due 2012 177 182
7.000% due 2013 517 520
12.000% due 2014 83 91
12.000% due 2015 45 50
9.000% due 2016 437 462
12.500% due 2016 45 50
8.000% due 2017 424 436
9.000% due 2017 2 2
9.000% due 2018 875 928
9.000% due 2020 411 440
9.000% due 2022 117 123
6.500% due 2024 2,735 2,654
9.000% due 2024 522 551
8.000% due 2025 2,005 2,060
8.500% due 2025 478 500
9.000% due 2025 193 204
9.000% due 2026 12 12
7.500% due 2027 1,700 1,718
8.500% due 2027 2,004 2,094
6.500% due 2028 2,845 2,746
7.000% due 2028 1,693 1,675
Federal National Mortgage Association
7.790% due 09/27/06 775 772
7.280% due 05/23/07 (MTN) 655 662
6.780% due 10/22/07 (MTN) 2,010 1,989
Federal National Mortgage Association (c)
6.000% 15 Year TBA 3,825 3,695
6.000% 30 Year TBA 2,690 2,527
6.500% 30 Year TBA 25,180 24,291
7.000% 30 Year TBA 6,690 6,613
8.000% 30 Year TBA 4,215 4,330
Federal National Mortgage
Association Pools
7.000% due 1999 114 114
7.500% due 1999 1,264 1,277
8.500% due 1999 60 63
7.000% due 2000 401 401
9.500% due 2001 24 24
8.000% due 2002 227 229
9.500% due 2002 41 42
6.000% due 2003 311 307
7.000% due 2003 272 274
7.500% due 2003 411 413
8.000% due 2003 83 84
9.500% due 2003 85 89
6.500% due 2004 19 19
8.000% due 2004 124 126
9.500% due 2005 68 71
9.500% due 2006 69 73
7.000% due 2007 69 69
7.200% due 2007 988 1,018
6.500% due 2008 521 517
7.000% due 2008 282 283
6.500% due 2009 3,746 3,709
7.000% due 2009 400 402
6.500% due 2010 353 349
8.000% due 2010 22 23
10.500% due 2010 18 19
7.500% due 2011 113 115
8.000% due 2011 59 61
6.500% due 2012 372 367
7.000% due 2012 633 635
7.500% due 2012 70 72
5.500% due 2013 259 246
6.500% due 2013 1,113 1,096
5.500% due 2014 2,338 2,212
6.000% due 2014 538 520
6.500% due 2014 3,766 3,711
9.000% due 2016 14 14
8.000% due 2017 436 449
9.000% due 2017 424 449
8.000% due 2020 21 21
7.500% due 2022 694 702
7.000% due 2023 202 200
6.500% due 2024 4,493 4,357
7.000% due 2024 625 619
Diversified Bond Fund 119
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- -------
7.500% due 2024 338 341
8.000% due 2024 1,788 1,837
7.000% due 2025 1,007 995
8.500% due 2025 200 209
9.000% due 2025 2,172 2,292
8.500% due 2026 1,960 2,048
9.000% due 2026 304 320
7.000% due 2027 690 682
7.500% due 2027 8,079 8,160
8.500% due 2027 840 877
6.000% due 2028 1,487 1,397
6.500% due 2028 4,864 4,693
7.000% due 2028 1,422 1,405
7.500% due 2028 1,945 1,964
6.000% due 2029 (g) 19,410 18,255
6.500% due 2029 3,725 3,594
Federal National Mortgage Association
REMIC
Series 1992-10 Class ZD
8.000% due 11/25/21 1,849 1,881
Federal National Mortgage Association
Aces
6.250% due 01/25/08 1,250 1,215
Federal National Mortgage Association
Interest Only Inverse Floater
Series 1993-208 Class SA
0.450% due 02/25/23 (d)(h) 26,299 252
Federal National Mortgage Association
Principal Only Strip
Zero Coupon due 03/01/20 87 71
First Union Lehman Brothers
Commercial Mortgage Trust
Series 1997-C1 Class A3
7.380% due 04/18/07 1,255 1,269
Series 1997-C1 Class C
7.440% due 04/18/07 750 756
GMAC Commercial Mortgage Securities,
Inc
Series 1999-C1 Class A1
5.830% due 05/15/33 1,841 1,776
Government National Mortgage
Association (c)
6.000% 30 Year TBA 1,200 1,121
6.500% 30 Year TBA 2,000 1,920
7.000% 30 Year TBA 11,995 11,834
8.000% 30 Year TBA 3,355 3,448
Government National Mortgage
Association
6.500% due 2008 136 135
6.500% due 2009 1,308 1,300
7.000% due 2011 16 17
9.000% due 2016 1,021 1,087
9.500% due 2016 40 43
8.000% due 2017 112 116
9.000% due 2017 1,626 1,732
9.000% due 2020 27 29
10.500% due 2020 210 227
10.500% due 2021 55 59
7.000% due 2022 527 523
8.500% due 2022 221 232
6.125% due 2023 (d) 1,922 1,950
6.125% due 2023 (d) 2,615 2,656
6.375% due 2023 (d) 2,381 2,416
7.000% due 2023 3,702 3,666
7.500% due 2023 5,292 5,350
6.875% due 2024 (d) 1,017 1,021
7.000% due 2024 7,764 7,684
7.500% due 2024 967 978
7.500% due 2025 274 277
8.000% due 2025 1,799 1,851
9.000% due 2025 3,544 3,778
6.500% due 2026 240 231
7.000% due 2026 289 285
8.000% due 2026 391 402
7.000% due 2027 467 460
8.000% due 2027 185 191
6.000% due 2028 4,803 4,474
6.500% due 2028 4,291 4,126
7.000% due 2028 12,904 12,730
8.000% due 2028 536 551
6.500% due 2029 9,357 8,997
7.000% due 2029 5,214 5,143
Government National Mortgage Association
REMIC
Series 1998-23 Class ZA
6.500% due 09/20/28 5,248 4,518
GS Mortgage Securities Corp. II
Series 1997-GL Class A2A
6.940% due 07/13/30 1,923 1,947
Series 1997-GL Class A2B
6.860% due 07/13/30 1,290 1,290
Series 1998-GLII Class A1
6.312% due 04/13/31 (d) 884 872
Housing Securities, Inc.
Series 1994-2 Class A1
6.500% due 07/25/09 702 690
Merrill Lynch Mortgage Investors, Inc.
Series 1996-C2 Class A1
6.690% due 11/21/28 407 409
Series 1998-C3 Class A1
5.650% due 12/15/30 1,139 1,092
120 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- -------
Morgan Stanley Capital I
Series 1999-FNV1 Class A2
6.530% due 03/15/31 770 742
Mortgage Capital Funding, Inc.
Series 1996-MC1 Class A2B
7.900% due 02/15/06 775 828
Norwest Asset Securities Corp.
Series 1997-9 Class A5
7.000% due 06/25/12 4 4
Residential Accredited Loans, Inc.
Series 1999-QS6 Class NB3
6.500% due 05/25/29 3,000 2,820
Residential Funding Mortgage Securities
Series 1998-S20 Class A24
6.750% due 09/25/28 1,000 961
Resolution Trust Corp.
Series 1994-C1 Class C
8.000% due 06/25/26 975 992
Series 1994-C2 Class D
8.000% due 04/25/25 364 368
Series 1995-C1 Class D
6.900% due 02/25/27 775 749
Resolution Trust Corp.
Mortgage Pass-thru Certificate
Series 1992 Class A-3
10.600% due 05/25/24 (d) 2 2
Ryland Acceptance Corp. Four
Series 88 Class E CMO
7.950% due 01/01/19 1,407 1,432
Structured Asset Mortgage
Investments, Inc.
Series 1998-11 Class A18
6.750% due 01/25/29 5,000 4,844
Structured Asset Securities Corp.
Series 1997-LLI Class A1
6.790% due 06/12/04 1,779 1,795
Mortgage Pass-thru Certificate
Series 1996-CFL Class C
6.525% due 02/25/28 300 297
United States Department
of Veteran Affairs
REMIC
Series 1992-1 Class 2E
7.750% due 03/15/16 550 556
WFS Financial Owner Trust
Series 1998-A Class A4
5.950% due 05/20/03 2,610 2,607
-------
332,274
-------
UNITED STATES GOVERNMENT
AGENCIES - 8.0%
Federal Home Loan Bank
5.570% due 08/17/00 5,000 5,000
5.625% due 03/19/01 200 200
6.450% due 03/13/02 4,250 4,260
5.790% due 04/27/09 2,580 2,425
Federal Home Loan Mortgage Corp.
5.750% due 07/15/03 1,025 1,012
Federal National Mortgage Association
6.100% due 10/06/00 (MTN) 1,305 1,305
6.250% due 11/20/02 (MTN) 1,335 1,327
5.750% due 04/15/03 990 979
6.010% due 07/17/03 (MTN) 2,000 1,976
5.875% due 04/23/04 485 475
7.780% due 09/29/06 (MTN) 665 666
6.940% due 03/19/07 (MTN) 1,065 1,061
6.750% due 07/30/07 500 490
6.900% due 08/21/07 (MTN) 2,155 2,144
6.490% due 08/27/07 (MTN) 10,000 9,875
6.500% due 04/29/09 5,905 5,710
6.400% due 05/14/09 2,525 2,446
6.375% due 06/15/09 7,525 7,461
6.080% due 09/01/28 (MTN) 2,275 2,090
6.250% due 05/15/29 145 138
6.210% due 08/06/38 2,850 2,648
Government Backed Trust Certificate
Series IC
9.250% due 11/15/01 1,314 1,372
Series T3
9.625% due 05/15/02 (d) 379 395
Resolution Funding Corp.
8.875% due 07/15/20 1,855 2,351
8.625% due 01/15/21 715 887
8.625% due 01/15/30 390 503
Tennessee Valley Authority
Series A
6.375% due 06/15/05 2,730 2,741
Series C
6.000% due 03/15/13 3,775 3,571
Series E
6.750% due 11/01/25 2,900 2,889
6.250% due 12/15/17 610 586
-------
68,983
-------
Diversified Bond Fund 121
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- -------
UNITED STATES GOVERNMENT
TREASURIES - 18.3%
United States Treasury Bond
Principal Strip
8.875% due 02/15/19 5,900 1,715
United States Treasury Bonds
10.750% due 08/15/05 180 224
10.375% due 11/15/09 685 818
12.750% due 11/15/10 12,040 16,231
10.375% due 11/15/12 980 1,249
12.000% due 08/15/13 7,655 10,748
11.750% due 11/15/14 850 1,210
9.875% due 11/15/15 1,240 1,692
9.250% due 02/15/16 700 912
7.500% due 11/15/16 5,290 5,962
8.750% due 05/15/17 230 290
8.875% due 08/15/17 7,150 9,134
8.875% due 02/15/19 8,850 11,407
8.125% due 05/15/21 (g) 6,525 7,946
8.000% due 11/15/21 4,455 5,372
7.625% due 11/15/22 5,045 5,881
6.875% due 08/15/25 2,090 2,266
6.500% due 11/15/26 2,640 2,743
6.375% due 08/15/27 3,965 4,063
United States Treasury Notes
4.625% due 11/30/00 1,650 1,632
6.250% due 04/30/01 1,655 1,676
5.250% due 05/31/01 1,125 1,120
6.500% due 05/31/01 3,815 3,882
6.625% due 06/30/01 12,400 12,650
7.875% due 08/15/01 2,470 2,583
6.125% due 12/31/01 75 76
6.250% due 01/31/02 30 30
6.625% due 04/30/02 2,275 2,335
6.500% due 05/31/02 330 337
3.625% due 07/15/02 (g) 1,100 1,088
5.750% due 11/30/02 19,670 19,710
5.750% due 12/31/02 7,210 7,202
5.500% due 02/28/03 85 84
7.875% due 11/15/04 1,510 1,652
6.500% due 05/15/05 155 160
6.875% due 05/15/06 5,260 5,538
6.500% due 10/15/06 105 108
3.375% due 01/15/07 2,619 2,511
6.625% due 05/15/07 725 755
3.625% due 01/15/08 2,040 1,983
-------
156,975
-------
YANKEE BONDS - 2.8%
Abbey National PLC
6.700% due 06/29/49 (f) 2,125 1,981
Abitibi-Consolidated, Inc.
7.400% due 04/01/18 400 371
7.500% due 04/01/28 750 678
African Development Bank
9.750% due 12/15/03 325 365
6.750% due 10/01/04 300 303
6.875% due 10/15/15 1,245 1,217
8.800% due 09/01/19 295 355
Asian Development Bank
8.000% due 04/30/01 175 181
8.500% due 05/02/01 180 188
6.250% due 10/24/05 315 313
Canadian National Railway Co.
6.800% due 07/15/18 450 420
Canadian Occidental Petroleum, Ltd.
7.400% due 05/01/28 900 817
Carter Holt Harvey, Ltd.
8.875% due 12/01/04 350 367
Diageo Capital PLC
6.125% due 08/15/05 1,800 1,738
Export-Import Bank Korea
6.500% due 10/06/99 4,000 4,003
Hydro Quebec
Series GH
8.250% due 04/15/26 505 557
International American Development Bank
6.950% due 08/01/26 155 161
Manitoba, Province of
Series CB
8.800% due 01/15/20 200 240
Series CD
9.250% due 04/01/20 200 250
National Westminster Bank PLC
7.750% due 04/29/49 (f) 1,875 1,862
New Brunswick, Province of
7.125% due 10/01/02 400 410
9.750% due 05/15/20 190 245
Newfoundland, Province of
10.000% due 12/01/20 90 117
Noranda Forest, Inc.
6.875% due 11/15/05 250 234
Nova Scotia, Province of
9.125% due 05/01/21 690 841
Quebec, Province of
7.125% due 02/09/24 985 959
Royal Caribbean Cruises, Ltd.
7.250% due 03/15/18 640 597
7.500% due 10/15/27 300 281
Saskatchewan, Province of
8.000% due 07/15/04 1,045 1,119
122 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- -------
Trans-Canada Pipelines, Ltd.
7.150% due 06/15/06 800 804
Tyco International Group SA
6.375% due 06/15/05 700 686
United News & Media PLC
7.250% due 07/01/04 1,100 1,099
-------
23,759
-------
TOTAL LONG-TERM INVESTMENTS
(cost $860,856) 848,389
-------
NOTIONAL
AMOUNT
(000)
$
---------
OPTIONS PURCHASED - 0.0%
United States Treasury 10 Year Notes (a)*
Aug 99.37 Call 2,260 11
Sept 96.73 Call 1,133 23
Sept 97.19 Call 1,520 57
Sept 98.13 Call 1,114 13
Nov 100.11 Call 2,600 26
Dec 90.58 Put 1,300 43
Dec 90.66 Put 1,300 44
United States Treasury 30 Year Bonds (a)*
Aug 100.41 Call 1,510 4
Sept 95.06 Call 1,250 4
Dec 90.16 Put 1,300 40
-------
TOTAL OPTIONS PURCHASED
(cost $362) 265
-------
NUMBER
OF
SHARES
----------
PREFERRED STOCKS - 0.3%
Credit Lyonnais Capital S.C.A. - ADR 60,000 1,530
Equity Office Property Trust
Series B 21,500 917
-------
TOTAL PREFERRED STOCKS
(cost $2,605) 2,447
-------
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- -------
SHORT-TERM INVESTMENTS - 11.6%
Federal Home Loan Mortgage Corp.
Discount Note
4.860% due 08/12/99 (b)(e) 1,150 1,143
Frank Russell Investment Company
Money Market Fund,
due on demand (b) 98,114 98,114
-------
TOTAL SHORT-TERM INVESTMENTS
(cost $99,257) 99,257
-------
TOTAL INVESTMENTS - 110.7%
(identified cost $963,080) 950,358
OTHER ASSETS AND LIABILITIES, NET,
INCLUDING OPTIONS WRITTEN - (10.7%) (91,944)
-------
NET ASSETS - 100.0% 858,414
=======
* $100,000 notional amount represents 1 contract.
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Forward commitment.
(d) Adjustable or floating rate security.
(e) Rate noted is yield-to-maturity.
(f) Perpetual floating rate note.
(g) Held as collateral in connection with options written by the Fund.
(h) Represents notional amounts.
Abbreviations:
ADR - American Depositary Receipt
MTN - Medium Term Note
REMIC - Real Estate Mortgage Investment Conduit
TBA - To Be Announced Security
See accompanying notes which are an integral part of the financial statements.
Diversified Bond Fund 123
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
Notional Market
Amount Value
(000) (000)
$ $
------------ ------------
OPTIONS WRITTEN
Federal National Mortgage Association**
Aug 95.78 Call 3,900 5
Aug 95.95 Call 2,650 3
Sept 94.20 Call 2,650 18
Sept 94.47 Call 1,650 8
Sept 96.06 Call 1,700 13
United States Treasury 10 Year Notes*
Nov 102.62 Call 2,600 12
Nov 96.09 Put 2,600 34
Dec 97.88 Put 2,300 53
Dec 97.95 Put 2,300 54
Dec 98.08 Put 2,300 55
United States Treasury 30 Year Bonds*
Feb 104.36 Call 1,900 1
Jul 105.25 Call 2,400 --
Sept 98.77 Call 1,250 --
Feb 93.80 Put 1,900 66
Feb 93.84 Put 1,900 67
Sept 91.47 Put 1,250 14
------------
Total Liability for Options Written
(premiums received $438) 403
============
* $100,000 notional amount represents 1 contract.
** Represents 1 OTC contract.
See accompanying notes which are an integral part of the financial statements.
124 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments at market (identified cost $963,080) ....................................................... $ 950,358
Cash ................................................................................................... 252
Receivables:
Dividends and interest ................................................................................ 8,910
Investments sold (regular settlement) ................................................................. 41,748
Investments sold (delayed settlement) ................................................................. 15,535
Fund shares sold ...................................................................................... 1,545
-----------
Total Assets ........................................................................................ 1,018,348
LIABILITIES
Payables:
Investments purchased (regular settlement) ......................................... $ 28,520
Investments purchased (delayed settlement) ......................................... 128,572
Fund shares redeemed ............................................................... 2,081
Accrued fees to affiliates ......................................................... 332
Other accrued expenses ............................................................. 26
Options written, at market value (premiums .......................................... 403
received $438) ...................................................................... -----------
Total Liabilities ................................................................................... 159,934
-----------
NET ASSETS ............................................................................................. $ 858,414
===========
NET ASSETS CONSIST OF:
Undistributed net investment income .................................................................... $ 3,972
Accumulated distributions in excess of net realized gain ............................................... (18,432)
Unrealized appreciation (depreciation) on:
Investments ........................................................................................... (12,722)
Options written ....................................................................................... 35
Shares of beneficial interest .......................................................................... 382
Additional paid-in capital ............................................................................. 885,179
-----------
NET ASSETS ............................................................................................. $ 858,414
===========
NET ASSET VALUE, offering and redemption price per share:
Class C ($2,524,180 divided by 110,579 shares of $.01 par
value
shares of beneficial interest outstanding) .......................................................... $ 22.83
===========
Class E ($6,973,912 divided by 305,124 shares of $.01 par
value
shares of beneficial interest outstanding) .......................................................... $ 22.86
===========
Class S ($848,915,995 divided by 37,766,235 shares of $.01 par
value
shares of beneficial interest outstanding) .......................................................... $ 22.48
===========
</TABLE>
See accompanying notes which are an integral part of the financial statemets.
Diversified Bond Fund 125
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF OPERATIONS
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Interest ................................................................................................... $ 24,277
Dividends from Money Market Fund ........................................................................... 2,044
Dividends .................................................................................................. 206
--------
Total Investment Income .................................................................................. 26,527
EXPENSES
Advisory fees ......................................................................... $ 1,650
Administrative fees ................................................................... 212
Custodian fees ........................................................................ 166
Distribution fees - Class C ........................................................... 5
Transfer agent fees ................................................................... 264
Professional fees ..................................................................... 23
Registration fees - Class S ........................................................... 51
Shareholder servicing fees - Class C .................................................. 2
Shareholder servicing fees - Class E .................................................. 7
Trustees' fees ........................................................................ 4
Miscellaneous ......................................................................... 37
--------
Total Expenses ........................................................................................... 2,421
--------
Net investment income ....................................................................................... 24,106
--------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ........................................................................... (8,588)
Options written ....................................................................... 365 (8,223)
--------
Net change in unrealized appreciation (depreciation) on:
Investments ........................................................................... (30,115)
Options written ....................................................................... (67) (30,182)
-------- --------
Net realized and unrealized gain (loss) ............................................... (38,405)
--------
Net increase (decrease) in net assets resulting from operations ........................ $(14,299)
========
</TABLE>
See accompanying notes which are an integral part of the financial statemets.
126 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
------------------- -----------------
<S> <C> <C>
OPERATIONS
Net investment income ............................................................... $ 24,106 $ 45,167
Net realized gain (loss) ........................................................... (8,223) 15,381
Net change in unrealized appreciation (depreciation)................................. (30,182) (183)
------------------- -----------------
Net increase (decrease) in net assets resulting from operations.................... (14,299) 60,365
------------------- -----------------
DISTRIBUTIONS
From net investment income
Class C ........................................................................... (27) --
Class E ........................................................................... (129) (236)
Class S ........................................................................... (19,978) (44,831)
In excess of net investment income
Class E ........................................................................... -- (5)
Class S ........................................................................... -- (906)
From net realized gain on investments
Class E ........................................................................... -- (40)
Class S ........................................................................... -- (7,014)
In excess of net realized gain on investments
Class C ........................................................................... (2) --
Class E ........................................................................... (30) (27)
Class S ........................................................................... (4,549) (4,666)
------------------- -----------------
Net decrease from distributions ................................................. (24,715) (57,725)
------------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions......................... 83,964 121,024
------------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS .......................................... 44,950 123,664
NET ASSETS
Beginning of period ................................................................. 813,464 689,800
------------------- -----------------
End of period (including undistributed net investment income of
$3,972 at June 30, 1999) ......................................................... $ 858,414 $ 813,464
=================== =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Diversified Bond Fund 127
<PAGE>
DIVERSIFIED BOND FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
---------
NET ASSET VALUE, BEGINNING OF PERIOD ........................... $ 24.00
---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) ..................................... .46
Net realized and unrealized gain (loss) on investments ........ (1.02)
---------
Total Income From Investment Operations ..................... (.56)
---------
DISTRIBUTIONS
From net investment income .................................... (.48)
From net realized gain on investments ......................... (.13)
---------
Total Distributions ......................................... (.61)
---------
NET ASSET VALUE, END OF PERIOD ................................. $ 22.83
=========
TOTAL RETURN (%)(a) ............................................ (2.40)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) .................... 2,524
Ratios to average net assets (%)(b):
Operating expenses .......................................... 1.57
Net investment income ....................................... 4.76
Portfolio turnover rate (%)(b) ................................ 140.23
* For the period January 27, 1999 (commencement of operations) to June 30,
1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratio for the period ended June 30, 1999 is annualized.
(c) Average month-end shares outstanding were used for this calculation.
128 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1999* 1998 1997 1996**
------------ ------------ ------------ -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ......................... $ 23.92 $ 24.06 $ 22.98 $ 23.16
------------ ------------ ------------ -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d) .................................. .63 1.32 1.22 .25
Net realized and unrealized gain (loss) on investments ...... (1.04) .45 .66 (.09)
------------ ------------ ------------ -------
Total Income From Investment Operations ................... (.41) 1.77 1.88 .16
------------ ------------ ------------ -------
DISTRIBUTIONS
From net investment income .................................. (.52) (1.56) (.72) (.34)
From net realized gain on investments ....................... (.13) (.35) (.08) --
------------ ------------ ------------ -------
Total Distributions ....................................... (.65) (1.91) (.80) (.34)
------------ ------------ ------------ -------
NET ASSET VALUE, END OF PERIOD ............................... $ 22.86 $ 23.92 $ 24.06 $ 22.98
============ ============ ============ =======
TOTAL RETURN (%)(a) ......................................... (1.78) 7.63 8.35 .67
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands) .................. 6,974 4,703 2,469 962
Ratios to average net assets (%)(c):
Operating expenses ........................................ .82 .98 1.29 1.31
Net investment income ..................................... 5.47 5.42 5.64 5.75
Portfolio turnover rate (%)(c) ............................. 140.23 216.88 172.43 138.98
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
** For the period November 4, 1996 (commencement of sale) to December 31,
1996.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
Diversified Bond Fund 129
<PAGE>
DIVERSIFIED BOND FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------
1999* 1998 1997 1996 1995 1994
--------- -------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ..... $ 23.53 $ 23.43 $ 22.97 $ 23.69 $ 21.53 $ 23.73
--------- -------- --------- --------- --------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) .............. .65 1.38 1.45 1.47 1.54 1.46
Net realized and unrealized gain (loss)
on investments ........................ (1.03) .47 .56 (.71) 2.18 (2.22)
--------- -------- --------- --------- --------- ----------
Total Income From Investment
Operations .......................... (.38) 1.85 2.01 .76 3.72 (.76)
--------- -------- --------- --------- --------- ----------
DISTRIBUTIONS
From net investment income .............. (.54) (1.40) (1.47) (1.48) (1.56) (1.42)
From net realized gain on investments ... (.13) (.35) (.08) -- -- (.02)
--------- -------- --------- --------- --------- ----------
Total Distributions ................... (.67) (1.75) (1.55) (1.48) (1.56) (1.44)
--------- -------- --------- --------- --------- ----------
NET ASSET VALUE, END OF PERIOD ........... $ 22.48 $ 23.53 $ 23.43 $ 22.97 $ 23.69 $ 21.53
========= ======== ========= ========= ========= ==========
TOTAL RETURN (%)(a) ..................... (1.67) 8.09 9.09 3.43 17.76 (3.25)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in
thousands) ............................ 848,916 808,761 687,331 554,804 513,808 525,315
Ratios to average net assets (%)(b):
Operating expenses .................... .57 .57 .60 .61 .59 .56
Net investment income ................. 5.69 5.83 6.35 6.46 6.69 6.57
Portfolio turnover rate (%)(b) .......... 140.23 216.88 172.43 138.98 135.85 153.21
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
130 Diversified Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ---------
LONG-TERM INVESTMENTS - 103.5%
ASSET-BACKED SECURITIES - 4.9%
ACLC Franchise Loan Receivables
Series 1997-B, Class A1
6.728% due 04/15/14 951 927
Amresco Residential Securities
Mortgage Loan Trust
Series 1998-2 Class A1
6.500% due 11/25/15 (b) 216 216
ARG Funding Corp.
Series 1999-1A Class A3
6.020% due 05/20/04 (b) 1,825 1,785
Chase Credit Card Master Trust
Series 1997-3 Class A
6.777% due 05/15/07 3,700 3,655
Cityscape Home Equity Loan Trust
Pass-thru Certificate
Series 1996-2 Class A2
7.200% due 04/25/11 240 243
Contimortgage Home Equity
Loan Trust
Series 1996-4 Class A8
7.220% due 01/15/28 370 370
Federal Housing Authority
7.430% due 07/01/22 1,680 1,719
First Plus Home Loan Trust
Step Up Bond
Series 1998-5 Class A3
6.060% due 09/10/11 (b) 3,000 2,981
Fund America Investors Corp. II
Pass-thru Certificate
Series 1993-F Class A-1
5.400% due 09/25/09 51 50
GMAC Commercial Mortgage
Securities, Inc.
Series 1996-C1, Class F
7.860% due 11/15/06 500 388
Green Tree Financial Corp.
Series 1995-6 Class A3
6.650% due 09/15/26 10 10
Series 1998-6 Class M1
6.630% due 06/01/30 (b) 1,800 1,695
Series 1998-8 Class B1
7.690% due 09/01/30 2,115 2,031
Green Tree Recreational, Equipment
& Consumer Loan Trust
Series 1998-B Class A3
6.050% due 10/15/10 800 802
Greenwich Capital Acceptance, Inc.
Series 1994 Class A-1
8.040% due 11/25/24 (b) 54 54
New Century Home Equity
Loan Trust
Series 1997-NC6 Class A4
6.730% due 07/25/22 300 299
Peco Energy Transition Trust
Series 1999-A Class A6
6.050% due 03/01/09 600 575
Series 1999-A Class A7
6.130% due 03/01/09 1,230 1,169
Student Loan Marketing Association
Series 1997-3 Class A1
5.110% due 04/25/06 (b) 2,160 2,149
Student Loan Marketing
Association Loan Trust
Series 1996-4, Class A1
4.990% due 07/25/04 (b) 2,393 2,383
The Money Store Home Equity Trust
Series 1998-B Class AF3
6.040% due 08/15/17 4,050 4,027
UCFC Home Equity Loan
Series 1996-B1 Class A7
8.200% due 09/15/27 320 329
UCFC Home Equity Loan Trust
Series 1998-A Class A7
6.870% due 07/15/29 340 334
---------
28,191
---------
CORPORATE BONDS AND NOTES - 31.9%
A.H. Belo Corp.
6.875% due 06/01/02 900 900
AAG Holding Co., Inc.
6.875% due 06/01/08 450 409
Adelphia Communications Corp.
9.250% due 10/01/02 200 203
8.375% due 02/01/08 120 116
Series B
8.375% due 02/01/08 650 624
Ahold Finance USA, Inc.
6.250% due 05/01/09 375 353
6.875% due 05/01/29 500 463
AK Steel Corp.
7.875% due 02/15/09 150 144
Allied Waste North America, Inc.
Series B
7.375% due 01/01/04 550 521
7.625% due 01/01/06 1,275 1,183
7.875% due 01/01/09 330 306
American Airlines, Inc.
9.710% due 01/02/07 (a) 299 317
Series 1990-H
9.800% due 01/02/08 1,190 1,362
132 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -----------
American General Institutional Capital
Series B
8.125% due 03/15/46 1,260 1,329
American Standard Co.
7.375% due 04/15/05 1,675 1,600
AmeriServe Food Distribution, Inc.
8.875% due 10/15/06 115 105
AMR Corp.
9.950% due 03/07/01 (MTN) 1,000 1,051
Amresco, Inc.
Series 98-A
9.875% due 03/15/05 650 501
Aramark Corp.
6.750% due 08/01/04 1,450 1,397
Archibald Candy Corp.
10.250% due 07/01/04 260 260
AT&T Capital Corp. (MTN)
6.410% due 08/13/99 310 310
6.470% due 12/03/99 480 482
6.480% due 12/03/99 1,100 1,104
Banesto Delaware, Inc.
8.250% due 07/28/02 500 520
Bank of America Corp.
5.175% due 03/05/01 (MTN)(b) 5,000 4,990
Bank One Corp.
5.625% due 02/17/04 (MTN) 900 863
Bankers Trust Corp.
5.100% due 05/11/03 (b) 2,000 1,990
Bay View Capital Corp.
9.125% due 08/15/07 740 696
Beaver Valley Funding Corp.
9.000% due 06/01/17 1,470 1,613
BellSouth Capital Funding Corp.
6.040% due 11/15/26 (a) 750 751
Bellwether Exploration Co.
10.875% due 04/01/07 175 168
Beneficial Corp.
5.559% due 04/02/02 (MTN)(b) 2,000 2,001
Building Materials Corp.
8.000% due 10/15/07 1,400 1,330
Chancellor Media Corp.
8.000% due 11/01/08 90 88
Charter Communications Holdings LLC
Step Up Bond
Zero Coupon due 04/01/11 (b) 150 93
8.250% due 04/01/07 (b) 750 714
8.625% due 04/01/09 (b) 125 120
Chase Manhattan Corp.
6.750% due 09/15/06 (MTN) 320 319
7.250% due 06/01/07 380 388
Chase Manhattan Corp. New
6.500% due 08/01/05 125 124
Circus Circus Enterprise, Inc.
9.250% due 12/01/05 275 279
Citicorp
5.090% due 08/13/02 (MTN)(b) 2,000 1,996
6.375% due 11/15/08 (MTN) 1,025 972
Classic Cable, Inc.
9.875% due 08/01/08 100 104
Cleveland Electric Illumination Co.
7.430% due 11/01/09 260 258
Cleveland Electric/Toledo Edison
Series B
7.670% due 07/01/04 100 102
Coastal Corp.
6.200% due 05/15/04 1,850 1,808
Colonial Realty L.P.
7.500% due 07/15/01 (a) 775 776
Columbia/HCA Healthcare Corp.
8.020% due 08/05/02 (MTN) 2,000 1,951
8.360% due 04/15/24 400 376
Commercial Federal Corp.
7.950% due 12/01/06 (a) 100 99
Conmed Corp.
9.000% due 03/15/08 350 350
Connecticut Light & Power Co.
7.750% due 06/01/02 195 200
7.875% due 10/01/24 975 1,017
Conseco Finance Trust III
8.796% due 04/01/27 1,250 1,143
Conseco Financing Trust II
8.700% due 11/15/26 875 789
Continental Airlines, Inc.
9.500% due 12/15/01 1,445 1,506
CP Limited Partnership
8.750% due 03/02/00 500 508
Crescent Real Estate Equities
6.625% due 09/15/02 900 823
7.125% due 09/15/07 1,000 860
Crown Central Petroleum Corp.
10.875% due 02/01/05 95 91
CSC Holdings, Inc.
7.875% due 12/15/07 690 692
7.250% due 07/15/08 395 376
7.625% due 07/15/18 1,000 928
Delco Remy International, Inc.
10.625% due 08/01/06 145 149
Deutsche Bank Capital Funding Trust I
7.872% due 12/29/49 (b) 850 818
Dresdner Funding Trust I
8.151% due 06/30/31 345 342
Multistrategy Bond Fund 133
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -----------
Dresser Industries, Inc.
7.600% due 08/15/96 910 918
Echostar DBS Corp.
9.250% due 02/01/06 270 275
EOP Operating, LP
6.500% due 01/15/04 1,100 1,072
EOP Operating, Ltd.
6.376% due 02/15/02 670 661
ERAC USA Finance Co.
6.350% due 01/15/01 (MTN) 725 721
Exide Corp.
2.900% due 12/15/05 750 456
Extendicare Health Services, Inc.
9.350% due 12/15/07 1,150 857
First Republic Bancorp
7.750% due 09/15/12 750 700
First Security Corp.
5.875% due 11/01/03 3,400 3,268
Fleet Credit Card, LLC
6.450% due 10/30/00 700 703
Ford Motor Credit Co.
5.316% due 03/05/01 (MTN)(b) 5,000 5,008
8.200% due 02/15/02 2,755 2,874
5.800% due 01/12/09 1,540 1,407
Fox/Liberty Networks, LLC
8.875% due 08/15/07 1,045 1,087
Fred Meyer, Inc.
7.375% due 03/01/05 325 329
Fugi JGB Investment LLC
9.870% due 12/31/49 (e) 2,545 2,214
Global Crossings Holdings, Ltd.
9.625% due 05/15/08 350 378
Golden State Holdings
7.125% due 08/01/05 1,400 1,351
Goldman Sachs Group
5.278% due 02/22/02 (MTN)(b) 5,000 5,005
Granite Broadcasting Corp.
8.875% due 05/15/08 200 194
Grove Holdings, LLC
Step Up Bond
1.000% due 05/01/09 (b) 250 75
Grove Worldwide, LLC
9.250% due 05/01/08 150 135
GS Escrow Corp.
7.000% due 08/01/03 1,700 1,663
GTE Corp.
6.840% due 04/15/18 455 434
6.940% due 04/15/28 670 634
GTE North, Inc.
6.900% due 11/01/08 195 196
Gulf States Steel
13.500% due 04/15/03 70 13
Haven Capital Trust I
10.460% due 02/01/27 200 188
Hayes Lemmerz International, Inc.
11.000% due 07/15/06 50 54
8.250% due 12/15/08 185 176
Health Care REIT, Inc.
7.625% due 03/15/08 825 784
HMH Properties, Inc.
Series C
8.450% due 12/01/08 175 165
Hollywood Park, Inc.
Series B
9.500% due 08/01/07 135 134
Horseshoe Gaming Holding
8.625% due 05/15/09 1,100 1,064
IMC Global, Inc.
7.400% due 11/01/02 450 454
7.625% due 11/01/05 900 916
Imperial Capital Trust I
Series B
9.980% due 12/31/26 250 242
Integrated Health Services, Inc.
5.750% due 01/01/01 275 177
Intermedia Communications, Inc.
Series B
8.500% due 01/15/08 205 188
Interpool Capital Trust
Series B
9.875% due 02/15/27 500 448
ITC Deltacom, Inc.
11.000% due 06/01/07 140 151
ITT Corp.
6.250% due 11/15/00 3,000 2,933
Jackson Products, Inc.
9.500% due 04/15/05 250 247
James Cable Partners, LP
10.750% due 08/15/04 215 224
K Mart Corp.
7.820% due 01/02/02 (MTN) 700 691
7.840% due 01/02/02 (MTN) 900 889
7.770% due 07/02/02 (MTN) 700 685
7.470% due 07/31/02 (MTN) 500 485
9.780% due 01/05/20 1,000 1,025
Kaufman and Broad Home Corp.
7.750% due 10/15/04 300 299
Lear Corp.
7.960% due 05/15/05 1,850 1,790
134 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- ----------
Lehman Brothers Holdings, Inc.
6.625% due 04/01/04 1,745 1,700
7.625% due 06/01/06 475 488
Series E
5.900% due 04/02/02 (MTN)(b) 3,000 3,017
Series F
7.000% due 05/15/03 (MTN) 600 596
Level 3 Communications, Inc.
9.125% due 05/01/08 425 418
Long Island Savings Bank
7.000% due 06/13/02 650 653
Lyondell Chemical Co.
9.625% due 05/01/07 80 82
9.875% due 05/01/07 80 82
MCI WorldCom, Inc.
6.125% due 04/15/02 (b) 765 760
8.875% due 01/15/06 1,120 1,192
7.750% due 04/01/07 1,325 1,388
McLeodUSA, Inc.
8.375% due 03/15/08 825 773
8.125% due 02/15/09 1,130 1,045
Merck & Co., Inc.
Series B
5.760% due 05/03/37 (MTN) 2,765 2,770
Merita Bank, Ltd.
7.150% due 12/29/49 (e) 1,200 1,192
Merrill Lynch & Co., Inc.
5.295% due 08/03/00 (MTN)(b) 5,000 5,017
6.875% due 11/15/18 540 506
Metromedia Fiber Network
10.000% due 11/15/08 125 128
Metromedia Fiber Network, Inc.
Series B
10.000% due 11/15/08 145 149
MMI Capital Trust I
Series B
7.625% due 12/15/27 1,425 1,176
Morgan Stanley Dean Witter
Series C
5.820% due 06/19/00 (MTN)(b) 3,000 2,977
Motors and Gears, Inc.
Series D
10.750% due 11/15/06 345 349
Natexix Ambs Co., LLC
Series A
8.440% due 12/29/49 (e) 425 406
National Westminster Bank
9.375% due 11/15/03 295 326
New England Education Loan Marketing
Corp.
5.170% due 06/11/01 (MTN)(b) 4,000 4,000
News America, Inc.
7.625% due 11/30/28 1,300 1,246
Nextel Communications, Inc.
9.750% due 08/15/04 1,510 1,533
Step Up Bond
Zero Coupon due 09/15/07 (b) 705 511
9.950% due 02/15/08 425 293
Nextel Communications, Inc.
Step Up Bond
Zero Coupon due 01/15/04 (b) 160 162
NEXTLINK Communications, Inc.
9.625% due 10/01/07 75 72
10.750% due 11/15/08 1,175 1,207
Step Up Bond
Zero Coupon due 06/01/09 (b) 3,350 1,956
Step Up Bond
Zero Coupon due 04/15/08 (b) 625 375
Niagara Mohawk Power Corp.
8.750% due 04/01/22 500 532
Series B
7.000% due 10/01/00 3,000 3,011
Norfolk Southern Corp.
7.700% due 05/15/17 550 565
7.050% due 05/01/37 1,110 1,128
Series A
7.400% due 09/15/06 (MTN) 290 297
North Atlantic Energy Corp.
Series A
9.050% due 06/01/02 731 752
Northwest Airlines Inc.
7.625% due 03/15/05 2,370 2,169
Ocwen Capital Trust
10.875% due 08/01/27 675 527
Ocwen Federal Bank
12.000% due 06/15/05 300 295
Ocwen Financial Corp.
11.875% due 10/01/03 725 698
Optel, Inc.
Series B
11.500% due 07/01/08 825 582
Oxford Automotive, Inc.
10.125% due 06/15/07 50 49
Series D
10.125% due 06/15/07 65 65
Paging Network, Inc.
8.875% due 02/01/06 125 85
10.125% due 08/01/07 395 288
10.000% due 10/15/08 705 486
Paine Webber Group, Inc.
6.450% due 12/01/03 500 487
6.375% due 05/15/04 425 413
Multistrategy Bond Fund 135
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -----------
Pantry, Inc.
10.250% due 10/15/07 265 270
Pathmark Stores
9.625% due 05/01/03 105 107
Paxson Communications Corp.
11.625% due 10/01/02 550 568
Philip Morris Cos., Inc.
6.150% due 03/15/00 3,000 3,012
Premier Parks, Inc.
Step Up Bond
Zero Coupon due 04/01/08 (b) 375 249
Prime Succession Acquisition Co.
10.750% due 08/15/04 400 331
Providian Capital I
Series A
9.525% due 02/01/27 250 236
Prudential Insurance Co. of America
6.875% due 04/15/03 700 702
6.375% due 07/23/06 475 463
Psinet, Inc.
11.500% due 11/01/08 145 152
PX Escrow Corp.
Step Up Bond
Zero Coupon due 02/01/06 (b) 1,650 1,007
Qwest Communications International, Inc.
7.250% due 11/01/08 200 195
Regal Cinemas, Inc.
9.500% due 06/01/08 285 268
Republic Services, Inc.
7.125% due 05/15/09 175 171
Revlon Worldwide
Series B
Zero Coupon due 03/15/01 (b) 2,375 1,585
Rose Hills Corp.
9.500% due 11/15/04 500 451
Salomon Smith Barney Holdings
7.980% due 03/01/00 400 406
Seagate Technology, Inc.
7.450% due 03/01/37 850 789
Shopping Center Associates
7.625% due 05/15/05 500 499
Simon Debartolo Group LP
6.625% due 06/15/03 500 489
Simon Debartolo Group LP
6.750% due 07/15/04 850 828
Societe Generale
7.850% due 04/29/49 (e) 300 294
Societe Generale Real Estate Co. LLC
Series A
7.640% due 12/29/49 (e) 150 142
Spieker Properties, LP
6.950% due 12/15/02 500 496
Summit Properties Partmership
7.200% due 08/15/07 625 583
TCI Communications, Inc.
5.985% due 09/11/00 (MTN)(b) 2,000 1,993
6.340% due 02/01/02 570 572
6.375% due 05/01/03 95 95
9.650% due 03/31/27 735 832
Tenet Healthcare Corp.
7.875% due 01/15/03 50 49
6.000% due 12/01/05 1,425 1,094
7.625% due 06/01/08 225 213
Time Warner, Inc.
7.975% due 08/15/04 225 235
8.110% due 08/15/06 600 629
8.180% due 08/15/07 450 475
8.050% due 01/15/16 1,050 1,091
6.850% due 01/15/26 2,590 2,575
Tokai Preferred Capital Co. LLC
9.980% due 12/29/49 (b) 1,500 1,380
Toledo Edison Co.
8.700% due 09/01/02 500 514
Toll Brothers Corp.
7.750% due 09/15/07 1,175 1,125
Trenwick Capital Trust I
8.820% due 02/01/37 625 568
Tricon Global Restaurants, Inc.
7.450% due 05/15/05 825 823
TV Guide, Inc.
8.125% due 03/01/09 260 246
TXU Electric Capital V
8.175% due 01/30/37 830 836
U.S. Bancorp
Series J
6.000% due 05/15/04 (MTN) 950 924
Union Planters Bank
6.500% due 03/15/18 475 449
United Companies Financial Corp.
8.375% due 07/01/05 625 31
US Air, Inc.
9.625% due 02/01/01 1,125 1,148
Valero Energy
6.750% due 12/15/02 820 801
Walt Disney Co.
Series E
5.125% due 12/15/03 (MTN) 1,350 1,284
Waste Management, Inc.
6.875% due 05/15/09 575 559
Webster Capital Trust I
9.360% due 01/29/27 250 250
136 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- ----------
Wellsford Residential Property Trust
9.375% due 02/01/02 475 503
Wheeling-Pittsburgh Corp.
9.250% due 11/15/07 220 210
----------
184,929
----------
EURODOLLAR BONDS - 7.0%
Amvescap PLC
6.600% due 05/15/05 750 721
Argentina, Republic of
11.447% due 04/10/05 (b) 2,510 2,234
Series 10
5.688% due 04/01/00 167 166
Series L
5.938% due 03/31/05 (b) 1,460 1,243
Auxiliaire Credit Foncier
5.000% due 09/25/02 (b) 1,070 1,010
Cemex SA
8.500% due 08/31/00 (MTN) 1,000 1,010
Citicorp
5.050% due 06/27/02 (MTN)(b) 3,000 2,988
Credit Lyonnais
5.063% due 07/10/00 (b) 4,000 3,980
6.438% due 09/19/49 (e) 1,340 1,236
Ford Motor Credit Co. (b)
5.125% due 01/17/02 2,175 2,167
5.813% due 02/13/03 2,000 1,990
Household Bank Nevada NA
5.188% due 10/22/03 (MTN)(b) 4,000 3,980
Indah Kiat Finance Mauritius, Ltd.
10.000% due 07/01/07 530 366
Korea Electric Power Corp.
6.375% due 12/01/03 180 168
Morgan Stanley Dean Witter
5.287% due 03/11/03 (MTN)(b) 1,700 1,694
Okobank
6.450% due 10/29/49 (b) 90 90
Series E
5.599% due 09/29/49 (MTN) 750 753
Philippines, Republic of
6.500% due 12/01/17 (b) 1,000 855
9.875% due 01/15/19 705 690
Poland, Republic of
Step-Up Bond
4.000% due 10/27/14 (b) 540 475
5.000% due 10/27/14 (b) 3,370 2,966
Skandinaviska Enskilda Banken (e)
6.625% due 03/29/49 (MTN)(b) 510 502
7.500% due 03/29/49 (b) 630 584
8.125% due 09/06/49 (b) 475 463
6.500% due 12/29/49 (b) 2,200 2,092
Sumitomo Bank International Finance NV
8.500% due 06/15/09 470 471
Telefonica De Argentina SA
9.125% due 05/07/08 750 660
United Mexican States
6.250% due 12/31/19 4,810 3,547
Venezuela, Republic of
9.250% due 09/15/27 2,550 1,660
----------
40,761
----------
MORTGAGE-BACKED SECURITIES - 50.1%
Advanta Mortgage Loan Trust
Series 97-4 Class M1
7.040% due 01/25/29 1,600 1,608
Bear Stearns Mortgage Securities Inc.
Series 1998-2 Class B
6.750% due 04/30/30 (b) 1,665 1,630
Chase Commercial Mortgage Securities
Corp.
Series 1997-2 Class D
6.600% due 12/19/07 1,500 1,391
CMC Securities Corp. III
6.750% due 05/25/28 5,000 4,780
Commercial Mortgage Asset Trust
Series 1999-C1 Class A3
6.640% due 09/17/10 2,200 2,124
DLJ Commercial Mortgage Corp.
Series 1999-CG1 Class A1A
6.080% due 08/10/08 1,850 1,805
Federal Home Loan Mortgage Corp.
6.000% 30 Year TBA Gold (d) 12,700 11,944
6.500% 30 Year TBA Gold (d) 7,500 7,241
Series 1037, Class Z
9.000% due 02/15/21 838 877
Series 2006 Class B
6.500% due 08/15/23 5,348 5,343
Federal Home Loan Mortgage Corp.
Participation Certificate
7.000% due 2009 347 349
8.500% due 2025 798 834
8.500% due 2027 3,953 4,130
6.000% due 2028 952 895
6.500% due 2029 1,781 1,719
Federal National Mortgage Association
Zero Coupon due 02/25/23 950 604
6.000% 15 Year TBA (d) 7,810 7,544
6.500% 15 Year TBA (d) 4,020 3,961
6.000% 30 Year TBA (d) 20,050 18,834
6.500% 30 Year TBA (d) 17,630 17,007
6.500% 30 Year TBA (d) 9,100 8,779
7.000% 30 Year TBA (d) 8,600 8,500
Multistrategy Bond Fund 137
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -----------
8.000% 30 Year TBA (d) 17,435 17,909
6.000% due 2003 174 172
10.000% due 2005 149 157
6.500% due 2014 5,253 5,176
7.424% due 2023 (b) 500 520
9.000% due 2025 2,658 2,805
7.718% due 2026 (b) 3,575 3,665
8.500% due 2026 (f) 2,057 2,149
6.000% due 2029 20,592 19,337
6.500% due 2029 5,866 5,659
Series 1997-77 Class G
6.500% due 05/18/23 2,671 2,664
Federal National Mortgage Association
REMIC
Series 1992-10, Class ZD
8.000% due 11/25/21 1,806 1,837
GMAC Commercial Mortgage
Securities, Inc.
Series 1997-C1 Class A2
6.850% due 09/15/06 (b) 230 232
Government National Mortgage
Association
6.000% 30 Year TBA Jumbo (d) 9,000 8,328
6.000% 30 Year TBA (d) 2,500 2,336
6.500% 30 Year TBA (d) 34,360 33,026
8.000% 30 Year TBA (d) 2,575 2,645
9.000% due 2017 2,030 2,162
6.125% due 2023 (b) 577 585
6.375% due 2023 (b) 1,163 1,180
6.625% due 2023 (b) 372 376
6.125% due 2024 (b) 1,171 1,189
6.125% due 2024 (b) 1,340 1,360
7.000% due 2024 2,952 2,971
8.000% due 2024 183 188
7.000% due 2025 782 772
8.000% due 2025 758 780
7.000% due 2026 2,107 2,127
8.000% due 2026 1,539 1,583
8.500% due 2026 1,538 1,606
6.375% due 2027 (b) 2,203 2,231
6.500% due 2027 963 973
7.000% due 2027 667 669
7.000% due 2027 (f) 998 1,007
7.000% due 2028 9,643 9,514
6.500% due 2029 2,194 2,110
7.000% due 2029 7,826 7,721
Heller Financial Commercial
Mortgage Asset Co.
Series 1999-PH1 Class A2
6.847% due 05/15/31 1,250 1,242
Kidder Peabody Acceptance Corp.
Series 1994-C1, Class B
6.850% due 02/01/06 1,065 1,077
MBNA Master Credit Card Trust
Series 1994-B, Class B
5.120% due 01/15/02 (b) 2,000 2,000
Midland Realty Acceptance Corp.
Series 1996-C2 Class A2
7.233% due 01/25/29 1,000 1,007
Morgan Stanley Capital I, Inc.
Series 1998-XL1 Class A3
6.480% due 05/03/08 2,550 2,463
Nomura Asset Securities Corp.
6.590% due 03/17/28 2,150 2,090
Norwest Asset Securities Corp.
Series 1997-21 Class A2
7.000% due 01/25/28 2,616 2,614
Series 1999-2 Class A16
6.500% due 02/25/29 3,000 2,862
Option One Mortgage Secs Corp. Nim
9.660% due 06/25/29 996 968
Residential Funding Mortgage
Securities I
Series 1993-S20 Class A8
6.980% due 06/25/08 900 903
Series 1997-S6 Class A5
7.000% due 05/25/12 1,000 985
Residential Funding Mortgage
Securities II
Series 1997-HS5 Class M1
7.010% due 05/25/27 1,400 1,391
Resolution Trust Corp.
Series 1994 - C2 Class G
8.000% due 04/25/25 241 243
Series 1994-1 Class M-2
7.750% due 09/25/29 (b) 377 380
Resolution Trust Corp. Mortgage
Pass-thru Certificate
Series 1995-1, Class 2-C
7.500% due 10/25/28 (b) 120 120
Salomon Brothers Mortgage
Securities VII
Series 1999-NC3 Class A
5.518% due 07/25/29 5,000 5,000
Salomon Brothers Mortgage
Securities VII, Inc.
Mortgage Pass-thru Certificate
Series 1994-16, Class A
7.730% due 11/25/24 (b) 402 408
138 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -----------
Structured Asset Mortgage Investments, Inc.
Series 1998-11 Class A18
6.750% due 01/25/29 2,000 1,923
Structured Aties Corp.
Mortgage Pass-thru Certificate
Series 1996-CFL, Class C
6.525% due 02/25/28 250 247
-----------
289,543
-----------
UNITED STATES GOVERNMENT AGENCIES - 0.1%
Federal National Mortgage Association
5.125% due 02/13/04 800 767
-----------
UNITED STATES GOVERNMENT TREASURIES -
7.1%
United States Treasury Bonds
8.125% due 05/15/21 (f) 2,150 2,618
8.000% due 11/15/21 4,160 5,016
6.625% due 02/15/27 (f) 6,220 6,569
3.875% due 04/15/29 2,950 2,909
United States Treasury Notes
4.625% due 11/30/00 1,575 1,558
5.250% due 05/31/01 575 572
6.625% due 04/30/02 (f) 1,850 1,899
3.625% due 07/15/02 (f) 1,700 1,682
5.750% due 11/30/02 800 802
7.250% due 05/15/04 545 579
3.375% due 01/15/07 2,704 2,592
6.250% due 02/15/07 6,600 6,725
3.625% due 01/15/08 1,900 1,846
4.750% due 11/15/08 2,700 2,479
3.875% due 01/15/09 1,698 1,678
United States Treasury Principal Strip
8.750% due 05/15/17 5,350 1,734
-----------
41,258
-----------
YANKEE BONDS - 2.4%
Amvescap PLC
6.600% due 05/15/05 175 165
Asia Pulp & Paper Finance IX, Ltd.
9.060% due 10/04/01 (b) 1,200 895
Bangko Sentral Philipinas
8.600% due 06/15/27 1,255 971
Colombia, Republic of
9.705% due 08/13/05 (b) 910 792
Colt Telecom Group PLC
Step Up Bond
Zero Coupon due 12/15/06 (b) 600 495
Crown Packaging Enterprise, Ltd. Step
Up Bond
Zero Coupon due 08/01/06 (b) 300 15
Diamond Cable Communications PLC Step
Up Bond
Zero Coupon due 02/15/07 (b) 490 380
Ecuador, Republic of
6.000% due 02/27/15 (b) 352 114
Edperbrascan Corp.
7.125% due 12/16/03 925 895
Empresa Nacional de Electricidad SA
8.125% due 02/01/97 650 524
Grupo Iusacell SA de CV
10.000% due 07/15/04 750 692
Grupo Televisa SA
Step Up Bond
Zero Coupon due 05/15/08 (b) 1,125 911
HMV Media Group PLC
Series B
10.250% due 05/15/08 160 162
Indah Kiat Finance Mauritius
10.000% due 07/01/07 95 66
Korea Electric Power Corp.
7.000% due 10/01/02 630 610
7.000% due 02/01/27 305 281
6.750% due 08/01/27 1,350 1,242
National Westminster Bank PLC
7.750% due 04/29/49 (b) 600 596
Royal Caribbean Cruises, Ltd.
7.500% due 10/15/27 1,400 1,313
Santander Finnish Issuances
6.088% due 09/30/49 (b) 500 459
St. George Bank, Ltd.
7.150% due 10/01/05 700 690
TFM SA de CV Step Up Bond (b)
Zero Coupon due 06/15/09 370 219
Zero Coupon due 06/15/09 1,160 692
YPF Sociedad Anonima
7.250% due 03/15/03 370 358
8.000% due 02/15/04 230 224
-----------
13,761
-----------
TOTAL LONG-TERM INVESTMENTS
(cost $609,387) 599,210
-----------
Multistrategy Bond Fund 139
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED)
NOTIONAL MARKET
AMOUNT VALUE
(000) (000)
$ $
------------ --------
<S> <C> <C>
OPTIONS PURCHASED - 0.1%
Japan Government Bond (c)**
July 99.38 Put JPY 954,800 11
Japan Government Bonds 10 Year (c)**
Feb 96.03 Put JPY1,875,900 101
United States Treasury Notes (c)*
Aug 99.37 Call 3,187 15
Nov 100.11 Call 3,700 37
Aug 100.41 Call 2,200 5
Aug 97.19 Call 2,220 83
Sept 98.13 Call 1,333 16
Sept 96.73 Call 2,533 53
Dec 90.58 Put 1,900 63
Dec 90.66 Put 1,900 64
United States Treasury Bonds (c)*
Oct 96.61 Call 550 2
Dec 90.16 Put 1,900 59
--------
TOTAL OPTIONS PURCHASED
(cost $1,055) 509
--------
NUMBER
OF
SHARES
------------
PREFERRED STOCKS - 1.8%
American RE Capital 18 460
Australia & New Zealand Banking
Group, Ltd. 5 145
California Federal Preferred Capital
Corp. Series A 105 2,745
Centaur Funding Corp. 1 624
Citigroup, Inc. 18 906
Equity Office Property Trust 18 767
Global Crossing Holdings, Ltd. 10 1,060
Lehman Brothers Holdings, Inc. 22 926
NB Capital Corp. 28 704
Pinto Totta International Finance, Ltd. 1 1,174
Primedia, Inc. 5 480
--------
TOTAL PREFERRED STOCKS
(cost $10,184) 9,991
--------
PRINCIPAL
AMOUNT
(000)
$
------------
SHORT-TERM INVESTMENTS - 17.6%
Emerson Electric Co.
4.880% due 07/06/99 (a) 1,200 1,199
Federal Home Loan Mortgage
Discount Note
5.030% due 09/17/99 100 99
Federal National Mortgage Association
Discount Note (a)
4.920% due 07/06/99 2,850 2,848
4.790% due 07/08/99 4,375 4,371
Frank Russell Investment Company Money
Market Fund,
due on demand (a) 90,196 90,196
United States Treasury Bills
4.605% due 09/16/99 (f) 1,245 1,233
US West Capital Funding Commercial
Paper Discount Note
5.957% due 03/24/00 2,000 1,911
---------
TOTAL SHORT-TERM INVESTMENTS
(cost $101,858) 101,857
---------
TOTAL INVESTMENTS - 123.0%
(cost $722,484) 711,567
OTHER ASSETS AND LIABILITIES, NET,
INCLUDING OPTIONS WRITTEN - (23.0%) (132,871)
---------
NET ASSETS - 100.0% 578,696
=========
</TABLE>
* Each contract represents $100,000 notional value.
** Represents 1 OTC contract.
(a) At cost, which approximates market.
(b) Adjustable or floating rate security.
(c) Nonincome-producing security.
(d) Forward commitment. See Note 2.
(e) Perpetual floating rate note.
(f) Held as collateral in connection with futures contracts purchased (sold)
and options written by the Fund.
(g) Rate noted is yield-to-maturity.
Abbreviations:
ADR - American Depository Receipt
CMO - Collateralized Mortgage Obligation
MTN - Medium Term Note
REIT - Real Estate Investment Trust
REMIC - Real Estate Mortgage Investment Conduit
TBA - To Be Announced Security
Foreign Currency Abbreviations:
JPY - Japanese yen
USD - U.S. dollar
See accompanying notes which are an integral part of the financial statements.
140 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, continued
JUNE 30, 1999 (UNAUDITED)
UNRELIALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS* (000)
-------------- -------------
FUTURES CONTRACTS
LONG POSITIONS
Eurodollar Financial
expiration date 12/99 17 $ (33)
expiration date 03/00 17 (39)
expiration date 06/00 17 (42)
expiration date 09/00 21 (47)
expiration date 03/01 4 (5)
expiration date 06/01 4 (6)
expiration date 09/01 12 (19)
United States Treasury 5 Year Note
expiration date 09/99 54 17
United States Treasury 10 Year Note
expiration date 09/99 282 (163)
United States Treasury 30 Year Bond
expiration date 09/99 216 87
SHORT POSITIONS
United States Treasury 5 Year Bond
expiration date 09/99 283 266
United States Treasury 10 Year Note
expiration date 09/99 26 (29)
United States Treasury 30 Year Bond
expiration date 09/99 13 (16)
-------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts $ (29)
=============
NOTIONAL MARKET
AMOUNT VALUE
(000) (000)
$ $
-------------- -------------
OPTIONS WRITTEN
Eurodollar Futures*
Dec 94.25 Put 10 3
Federal National Mortgage Association*
Aug 95.78 Call 5,500 7
Aug 95.95 Call 3,900 5
Sep 94.20 Call 3,875 26
Sep 94.47 Call 1,975 10
Sep 96.06 Call 3,800 30
United States Treasury Bonds*
Oct 93.48 Put 550 14
Feb 93.80 Put 2,700 94
Feb 93.84 Put 2,700 95
Feb 104.36 Call 2,700 2
United States Treasury Notes*
Nov 96.09 Put 3,700 48
Nov 102.62 Call 3,700 16
Dec 97.95 Put 3,400 80
Dec 98.08 Put 3,400 82
Dec 98.88 Put 3,400 78
United States Treasury Bond Futures*
Aug 112.00 Put 4 2
Aug 114.00 Put 57 63
Aug 126.00 Call 43 1
-------------
Total Liability for Options Written
(premium received $689) 656
=============
Forward Foreign Currency Exchange Contracts
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION
DELIVER FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
- --------------- ------------------ ---------------- -------------
JPY 16,883 USD 142 09/17/99 $ 1
JPY 3,103 USD 26 09/17/99 --
-------------
$ 1
=============
See accompanying notes which are an integral part of the financial statements.
Multistrategy Bond Fund 141
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
ASSETS
Investments at market (identified cost $722,484).................. $ 711,567
Cash.............................................................. 120
Forward foreign currency exchange contracts (cost $168)........... 168
Receivables:
Dividends and interest........................................... 6,001
Investments sold (regular settlement)............................ 11,715
Investments sold (delayed settlement)............................ 6,180
Fund shares sold................................................. 1,232
Daily variation margin on futures contracts...................... 228
----------
Total Assets................................................... 737,211
LIABILITIES
Payables:
Investments purchased (regular settlement)......... $ 949
Investments purchased (delayed settlement)......... 154,652
Fund shares redeemed............................... 1,638
Accrued fees to affiliates......................... 381
Other accrued expenses............................. 72
Forward foreign currency exchange contracts
(cost $168)......................................... 167
Options written, at market value
(premiums received $689)............................ 656
------------
Total Liabilities.............................................. 158,515
----------
NET ASSETS........................................................ $ 578,696
==========
NET ASSETS CONSIST OF:
Undistributed net investment income............................... $ 2,494
Accumulated distributions in excess of net realized gain.......... (11,457)
Unrealized appreciation (depreciation) on:
Investments...................................................... (10,917)
Futures contracts................................................ (29)
Options written.................................................. 33
Shares of beneficial interest..................................... 591
Additional paid-in capital........................................ 597,981
----------
NET ASSETS........................................................ $ 578,696
==========
NET ASSET VALUE, offering and redemption price per share:
Class C ($2,945,651 divided by 301,808 shares of $.01 par
value shares of beneficial interest outstanding)................. $ 9.76
==========
Class E ($3,567,914 divided by 364,975 shares of $.01 par
value shares of beneficial interest outstanding)................. $ 9.78
==========
Class S ($572,182,733 divided by 58,470,764 shares of $.01 par
value shares of beneficial interest outstanding)................. $ 9.79
==========
See accompanying notes which are an integral part of the financial statements.
142 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF OPERATIONS
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
INVESTMENT INCOME
Interest......................................................... $ 16,115
Dividends from Money Market Fund................................. 2,210
Dividends........................................................ 503
----------
Total Investment Income........................................ 18,828
EXPENSES
Advisory fees........................................... $ 1,658
Administrative fees..................................... 142
Custodian fees.......................................... 116
Distribution fees - Class C............................. 4
Transfer agent fees..................................... 300
Professional fees....................................... 18
Registration fees - Class S............................. 38
Shareholder servicing fees - Class C.................... 2
Shareholder servicing fees - Class E.................... 4
Trustees' fees.......................................... 4
Miscellaneous........................................... 28
--------
Expenses before reductions.............................. 2,314
Expense reductions...................................... (30)
--------
Expenses, net.................................................. 2,284
----------
Net investment income............................................. 16,544
----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments............................................. (8,959)
Futures contracts....................................... (1,875)
Options written......................................... 707
Foreign currency-related transactions................... 15 (10,112)
--------
Net change in unrealized appreciation
(depreciation) on:
Investments............................................. (11,261)
Futures contracts....................................... 496
Options written......................................... (117)
Foreign currency-related transactions................... 5 (10,877)
-------- ----------
Net realized and unrealized gain (loss)........................... (20,989)
----------
Net increase (decrease) in net assets
resulting from operations......................................... $ (4,445)
==========
See accompanying notes which are an integral part of the financial statements.
Multistrategy Bond Fund 143
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
------------------- -----------------
<S> <C> <C>
OPERATIONS
Net investment income................................................... $ 16,544 $ 29,477
Net realized gain (loss)................................................ (10,112) 10,515
Net change in unrealized appreciation (depreciation).................... (10,877) (6,774)
------------------- -----------------
Net increase (decrease) in net assets resulting from operations....... (4,445) 33,218
------------------- -----------------
DISTRIBUTIONS
From net investment income
Class C............................................................... (24) --
Class E............................................................... (71) (42)
Class S............................................................... (13,605) (29,426)
In excess of net investment income
Class E............................................................... -- (1)
Class S............................................................... -- (557)
From net realized gain on investments
Class E............................................................... -- (45)
Class S............................................................... -- (11,128)
In excess of net realized gain on investments
Class E............................................................... (2) (3)
Class S............................................................... (431) (701)
------------------- -----------------
Net decrease from distributions .................................... (14,133) (41,903)
------------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions........... 46,917 121,730
------------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS.............................. 28,339 113,045
NET ASSETS
Beginning of period..................................................... 550,357 437,312
------------------- -----------------
End of period (including undistributed net
investment income of $2,494 and accumulated
distributions in excess of net investment
income of $350, respectively)......................................... $ 578,696 $ 550,357
=================== =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
144 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
----------
NET ASSET VALUE, BEGINNING OF PERIOD.............................. $ 10.14
----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c)........................................ .19
Net realized and unrealized gain (loss) on investments........... (.54)
----------
Total Income From Investment Operations........................ (.35)
----------
DISTRIBUTIONS
From net investment income....................................... (.02)
From net realized gain on investments............................ (.01)
----------
Total Distributions............................................ (.03)
----------
NET ASSET VALUE, END OF PERIOD.................................... $ 9.76
==========
TOTAL RETURN (%)(a)............................................... (1.58)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands)....................... 2,946
Ratios to average net assets (%)(b):
Operating expenses............................................. 1.81
Net investment income.......................................... 4.90
Portfolio turnover rate (%)(b)................................... 121.84
* For the period January 27, 1999 (commencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) Average month-end shares outstanding were used for this calculation.
Multistrategy Bond Fund 145
<PAGE>
MULTISTRATEGY BOND FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1999* 1998**
----------- -----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 10.10 $ 10.30
----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c).................................. .29 .16
Net realized and unrealized gain (loss) on investments..... (.37) .07
----------- -----------
Total Income From Investment Operations.................. (.08) .23
----------- -----------
DISTRIBUTIONS
From net investment income................................. (.23) (.20)
From net realized gain on investments...................... (.01) (.23)
----------- -----------
Total Distributions...................................... (.24) (.43)
----------- -----------
NET ASSET VALUE, END OF PERIOD.............................. $ 9.78 $ 10.10
=========== ===========
TOTAL RETURN (%)(a)......................................... (.85) 1.89
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands)................. 3,568 2,610
Ratios to average net assets (%)(b)(d):
Operating expenses, net.................................. 1.05 --
Operating expenses, gross................................ 1.07 --
Net investment income.................................... 5.59 --
Portfolio turnover rate (%)(b)............................. 121.84 334.86
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
** For the period September 11, 1998 (commencement of sale) to December 31,
1998.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) Average month-end shares outstanding were used for this calculation.
(d) The ratios for the period ended December 31, 1998 are not meaningful due to
the Class's short period of operations.
146 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
YEARS ENDED DECEMBER 31,
----------------------------------------------
1999* 1998 1997 1996 1995 1994
------ ------- -------- -------- ------- --------
NET ASSET VALUE,
BEGINNING OF PERIOD ... $10.11 $ 10.26 $ 10.11 $ 10.25 $ 9.29 $ 10.31
------ ------- -------- -------- ------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment
income (c)............. .29 .60 .60 .61 .65 .58
Net realized and
unrealized gain
(loss) on
investments......... (.36) .08 .33 (.12) .97 (1.03)
------ ------- -------- -------- ------- --------
Total Income From
Investment
Operations.......... (.07) .68 .93 .49 1.62 (.45)
------ ------- -------- -------- ------- --------
DISTRIBUTIONS
From net investment
income.............. (.24) (.60) (.61) (.62) (.66) (.57)
From net realized gain
on investments...... (.01) (.23) (.17) (.01) -- --
------ ------- -------- -------- ------- --------
Total Distributions (.25) (.83) (.78) (.63) (.66) (.57)
------ ------- -------- -------- ------- --------
NET ASSET VALUE,
END OF PERIOD.......... $ 9.79 $ 10.11 $ 10.26 $ 10.11 $ 10.25 $ 9.29
====== ======= ======== ======== ======= ========
TOTAL RETURN (%)(a).... (.75) 6.79 9.50 4.97 17.92 (4.35)
RATIOS/SUPPLEMENTAL
DATA:
Net Assets, end of
period ($ in
thousands).......... 572,183 547,747 437,312 305,428 218,765 173,035
Ratios to average net
assets (%)(b):
Operating expenses,
net................. .80 .80 .80 .81 .85 .85
Operating expenses,
gross............... .81 .81 .83 .88 .89 .90
Net investment
income.............. 5.82 5.76 5.93 6.19 6.61 6.26
Portfolio turnover
rate (%)(b)......... 121.84 334.86 263.75 145.38 142.26 136.39
* For the six months ended June 30, 1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
Multistrategy Bond Fund 147
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 (UNAUDITED)
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company") is a series
mutual fund with 27 different investment portfolios, referred to as "Funds."
These financial statements report on ten 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.
On February 26, 1999, the Fixed Income II Fund acquired all the net assets of
the Volatility Constrained Bond Fund (one of the Funds of the Investment
Company not presented herein) pursuant to a plan of reorganization approved
by the Volatility Constrained Bond Fund shareholders. The acquisition was
accomplished by a tax-free exchange of 8,934,738 shares of the Fixed Income
II Fund (valued at $163,684,403) for the 8,932,673 shares of the Volatility
Constrained Bond Fund on February 26, 1999. The Volatility Constrained Bond
Fund's net assets of $163,684,403, including $495,615 of unrealized
appreciation, were combined with those of the Fixed Income II Fund to form
the new Short Term Bond Fund. The aggregate net assets of the Fixed Income II
Fund and the Volatility Constrained Bond Fund immediately before the
acquisition were $320,262,776 and $163,684,403, respectively.
In addition, the Short Term Bond Fund made a reclassification among certain
of its capital accounts to reflect the acquisition of the Volatility
Constrained Bond Fund, without impacting its net asset value. The following
reclassification has been made for the period ended June 30, 1999:
<TABLE>
<CAPTION>
ADDITIONAL
UNDISTRIBUTED NET ACCUMULATED NET PAID-IN
INVESTMENT INCOME REALIZED GAIN (LOSS) CAPITAL
-------------------- ---------------------- ------------
<S> <C> <C> <C>
Short Term Bond Fund $ 42,226 $ (9,588,387) $ 9,546,161
</TABLE>
Effective May 18, 1998, pursuant to approval of the Investment Company's
Board of Trustees, Class C shares were renamed Class E shares. As of July 8,
1996, the ten Funds that are reported in these financial statements with the
exception of the Short Term Bond Fund made available Class S and Class E
shares, and as of January 27, 1999, they made available Class C shares. In
addition, the Short Term Bond Fund made available Class E shares on February
18, 1999, and Class C shares on March 3, 1999. 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 E shares are charged a shareholder servicing fee of
0.25% of average net assets. Class C shares are charged a shareholder
servicing fee of 0.25% and a 12b-1 distribution fee of 0.75%. Class S shares
are charged no such fees. Prior to May 18, 1998 Class E shares were charged a
12b-1 distribution fee and a shareholder servicing fee of 0.40% and 0.25%,
respectively.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles ("GAAP") 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.
148 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
Short-term investments 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 specific identified cost incurred by each money manager within a
particular Fund.
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 of
capital by the trusts are treated by the Funds, respectively, as realized
capital gains or an adjustment to 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: All premiums and discounts, including original
issue discounts, for the Funds 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.
At December 31, 1998, the following 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 12/31/05 12/31/06 TOTALS
----------- ----------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
International Securities $ -- $ -- $ -- $ -- $ 2,107,743 $ 2,107,743
Emerging Markets -- 2,887,175 348,806 -- 56,335,864 59,571,845
Real Estate Securities -- -- -- -- 2,693,062 2,693,062
Short Term Bond 3,290,212 698,949 1,746,912 574,853 -- 6,310,926
</TABLE>
The aggregate cost of investments and the composition of gross unrealized
appreciation and depreciation of investment securities for federal income tax
purposes as of June 30, 1999 are as follows:
<TABLE>
<CAPTION>
NET
GROSS GROSS UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
---------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Diversified Equity $1,125,042,455 $ 435,226,670 $ (19,801,129) $ 415,425,541
Special Growth 561,065,904 122,427,497 (21,460,504) 100,966,993
Equity Income 199,961,551 42,620,998 (3,950,897) 38,670,101
Quantitative Equity 1,057,895,631 469,527,978 (21,637,182) 447,890,796
International Securities 879,831,609 149,191,408 (38,962,786) 110,228,622
Emerging Markets 346,608,029 61,263,767 (37,808,648) 23,455,119
Real Estate Securities 616,728,829 58,145,464 (25,611,753) 32,533,711
Short-Term Bond 506,891,563 597,673 (4,426,481) (3,828,808)
Diversified Bond 971,226,407 7,794,083 (28,662,896) (20,868,813)
Multistrategy Bond 723,790,442 3,053,320 (15,276,752) (12,223,432)
</TABLE>
Notes to Financial Statements 149
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
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 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 ("FRIMCo" or "Advisor"). 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 E shares will pay shareholder servicing fees
along with other expenses that may be attributable to that Class. Prior to
May 18, 1998, Class E shares were charged a 12b-1 distribution fee. Class C
shares will pay 12b-1 distribution fees along with other expenses that may be
attributable to that class.
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.
150 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
FOREIGN CURRENCY EXCHANGE CONTRACTS: In connection with portfolio purchases
and sales of securities denominated in a foreign currency, certain Funds may
enter into 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,
Emerging Markets, Diversified 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, 1999, 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 (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.
INVESTMENT IN EMERGING MARKETS: Investing in emerging markets may involve
special risks and considerations for the Emerging Markets Fund not typically
associated with investing in the United States markets. These risks include
revaluation of currencies, high rates of inflation, repatriation 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.
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 call and put options on foreign currencies. The
domestic equity Funds may utilize options to equitize liquidity reserve
balances.
When a Fund writes a covered call or a 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.
FUTURES CONTRACTS: 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
Notes to Financial Statements 151
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
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 period ended June 30, 1999, 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 $660,016,762 $652,132,291 Emerging Markets $166,474,010 $170,552,418
Special Growth 373,752,514 348,540,294 Real Estate Securities 161,190,310 115,668,847
Equity Income 148,017,754 175,148,745 Short-Term Bond 144,058,885 101,048,843
Quantitative Equity 510,134,315 496,612,845 Diversified Bond 147,362,333 134,075,608
International Securities 636,019,077 610,082,647 Multistrategy Bond 118,238,206 95,206,448
</TABLE>
Purchases and sales of U.S. Government and Agency obligations (excluding
short-term investments, options, futures and repurchase agreements) were as
follows:
PURCHASES SALES
--------------- --------------
Short-Term Bond $ 299,236,606 $ 225,901,231
Diversified Bond 1,008,181,519 936,706,730
Multistrategy Bond 977,460,789 944,701,199
WRITTEN OPTIONS CONTRACTS: Fund transactions in written options contracts for
the period ended June 30, 1999 were as follows:
DIVERSIFIED BOND WRITTEN OPTIONS
NUMBER OF PREMIUMS
CONTRACTS (1) RECEIVED
--------------- --------------
Outstanding December 31, 1998 117 $ 167,531
Opened 281 748,845
Closed (16) (242,759)
Expired (29) (235,481)
--------------- --------------
Outstanding June 30, 1999 353 438,136
=============== ==============
MULTISTRATEGY BOND WRITTEN OPTIONS
NUMBER OF PREMIUMS
CONTRACTS (1) RECEIVED
--------------- --------------
Outstanding December 31, 1998 167 $ 251,452
Opened 339 1,128,356
Closed (36) (420,264)
Expired (17) (270,971)
--------------- --------------
Outstanding June 30, 1999 453 688,573
=============== ==============
(1) Each contract represents $100,000 notional value.
4. RELATED PARTIES
ADVISOR: FRIMCo operates and administers all of the Funds which comprise the
Investment Company, and advises 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, a
wholly owned subsidiary of The Northwestern Mutual Life Insurance Company.
Frank Russell Company researches and recommends to FRIMCo, and to the
Investment Company, one or more investment management organizations to manage
the portfolio of each Fund.
152 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
For the period ended June 30, 1999, the advisory fee paid to FRIMCo, for the
Funds listed below, in accordance with the Investment Company's Advisory
Agreement with that firm, amounted to $5,196,662 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. Effective
December 1, 1998, the advisory fee annual rates were reduced by the
Administrator fee of .05%; the new rates are:
ANNUAL RATE ANNUAL RATE
----------- -----------
Diversified Equity 0.73% Emerging Markets 1.15%
Special Growth 0.90 Real Estate Securities 0.80
Equity Income 0.75 Short Term Bond 0.45
Quantitative Equity 0.73 Diversified Bond 0.40
International Securities 0.90 Multistrategy Bond 0.60
The Advisor has contractually agreed to waive a portion of its 0.60% advisory
fee for the Multistrategy Bond Fund, up to the full amount of that fee, equal
to the amount by which the Fund's total operating expenses exceed 0.80% of
the Fund's average daily net assets on an annual basis. The total amount of
the waiver for the period ended June 30, 1999 was $30,147.
FRIMCo calculates its advisory fee based on average daily net assets for each
Fund, less any advisory fee incurred on assets invested in the Money Market
Fund (see Note 5) thereby eliminating any duplication of fees.
In accordance with the special servicing agreement entered into in February
1999 by the Advisor, the LifePoints Funds and the Funds listed above, with
the exception of the Equity Income Fund, (the "Underlying Funds") in which
the LifePoints Funds invest, expenses from the operation of the LifePoints
Funds are borne by the Underlying Funds based on each Underlying Fund's
proportionate share of assets owned by the LifePoints Funds. No Underlying
Funds will be charged expenses that exceed the estimated savings to each
respective Underlying Fund. These estimated savings result from the
elimination of separate shareholder accounts which either currently are or
have potential to be invested in the Underlying Funds. In the event that the
financial benefits to the Underlying Funds do not exceed aggregate expenses
of any LifePoints Fund, the Advisor will reimburse certain costs on behalf of
the respective LifePoint Fund.
For the period ended June 30, 1999, the special servicing expense charged to
the Underlying Funds amounted to:
AMOUNT AMOUNT
UNDERLYING FUNDS PAID UNDERLYING FUNDS PAID
--------------------------------------- ----------------------------------
Diversified Equity $ 70,873 Real Estate Securities $ 22,298
Special Growth 23,239 Short Term Bond 86,827
Quantitative Equity 71,941 Diversified Bond 67,326
International Securities 57,779 Multistrategy Bond 32,077
Emerging Markets 13,599
ADMINISTRATOR: Effective December 1, 1998, the Investment Company's Board of
Trustees approved a plan to pay a .05% fee of the average daily net assets of
the Funds to FRIMCo, in accordance with the Investment Company's Advisory
Agreement with that firm. The fee paid to FRIMCo for the ten Funds reported
herein for the period ended June 30, 1999 was $1,861,953 before waivers.
ANALYTIC SERVICES: Fees for analytic services provided to the Funds are paid
or accrued to Russell/Mellon Analytical Services, an affiliate of the
Investment Company. Russell/Mellon Analytical Services provides TruVP System
to the Funds, pursuant to a written Service Agreement. The TruVP System
provides analytics used by the investment department.
TRANSFER AGENT: The Funds have a contract with FRIMCo to provide transfer
agent services to the Investment Company. Total fees for the period ended
June 30, 1999 were $4,474,620.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has a
Distribution Plan pursuant to Rule 12b-1 (the "Plan") under the 1940 Act.
Under this Plan, the Investment Company was authorized to make payments tof
the Russell Fund Distributors (the "Distributor") which is a wholly-owned
subsidiary of FRIMCo, 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 were primarily intended to result in the sale of the
Class C shares subject to the Distribution Plan. The 12b-1 distribution
payments shall not exceed 0.75% of the average daily net assets of a Fund's
Class C shares on an annual basis.
Notes to Financial Statements 153
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
In addition, the Investment Company has adopted a Shareholder Services Plan
(the "Services Plan") under which the Funds 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 E and Class C shares of the Funds. The shareholder
servicing payments shall not exceed 0.25% of the average daily net assets of
a Fund's Class E and Class C shares on an annual basis.
ACCRUED FEES PAYABLE TO AFFILIATES AS OF JUNE 30, 1999 WERE AS FOLLOWS:
<TABLE>
<CAPTION>
SHAREHOLDER
SERVICING &
ADVISORY ADMINISTRATION ANALYTIC TRANSFER DISTRIBUTION
FEES FEES SERVICE FEES AGENT FEES FEES Totals
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Diversified Equity $ 883,769 $ 60,902 $ 2,090 $ 28,572 $ 7,460 $ 982,793
Special Growth 465,719 25,975 2,517 174,911 3,052 672,174
Equity Income 144,629 9,702 1,190 68,080 641 224,242
Quantitative Equity 837,529 59,541 518 13,109 5,835 916,532
International Securities 729,213 40,663 10,057 78,959 3,238 862,130
Emerging Markets 388,196 15,264 5,603 189,553 1,356 599,972
Real Estate Securities 467,771 27,021 650 170,630 1,817 667,889
Short-Term Bond 182,476 20,494 -- 135,745 2,142 340,857
Diversified Bond 271,773 34,912 -- 21,356 3,479 331,520
Multistrategy Bond 315,387 23,756 -- 38,696 2,888 380,727
-------------- -------------- -------------- -------------- -------------- --------------
$ 4,686,462 $ 318,230 $ 22,625 $ 919,611 $ 31,908 $ 5,978,836
============== ============== ============== ============== ============== ==============
</TABLE>
BROKERAGE COMMISSIONS: The Funds may effect portfolio transactions through
Frank Russell Securities, Inc., an affiliate of the Advisor, when a money
manager determines that the Fund will receive competitive execution, price,
and commissions. Upon completion of such tran sactions, 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 period ended June 30, 1999
were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Diversified Equity $ 113,468 Equity Income $ 40,039 International Securities $ 80,413
Special Growth 14,709 Quantitative Equity 11,141 Emerging Market 26,414
</TABLE>
Additionally, the Funds paid brokerage commissions to non-affiliated brokers
who provided brokerage and research services to the Advisor.
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 $39,933 for the period ended June 30,
1999, and were allocated to each Fund and Class, where appropriate, on a pro
rata basis, including 17 other affiliated Funds not presented herein.
154 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
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, 1999, $471,480,000
of the Money Market Fund's net assets represents investments by these Funds
and $383,085,000 represents the investments of other affiliated Funds not
presented herein.
6. FUND SHARE TRANSACTIONS
Share transactions for the period ended June 30, 1999 and the year ended
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
-------------------------------- -------------------------------
1999 1998 1999 1998
DIVERSIFIED EQUITY ----------- ----------- ----------- ----------
CLASS S
<S> <C> <C> <C> <C>
Proceeds from shares sold 4,459,756 9,507,360 $ 237,980 $ 448,918
Proceeds from reinvestment of distributions 191,634 1,274,778 9,883 59,999
Payments for shares redeemed (4,432,535) (8,070,726) (236,559) (384,259)
---------- ---------- ---------- ---------
Net increase (decrease) 218,855 2,711,412 11,304 124,658
---------- ---------- ---------- ---------
CLASS E (a)
Proceeds from shares sold 135,723 123,298 7,262 5,595
Proceeds from reinvestment of distributions 1,571 5,378 81 257
Payments for shares redeemed (21,708) (18,482) (1,188) (892)
---------- ---------- ---------- ---------
Net increase (decrease) 115,586 110,194 6,155 4,960
---------- ---------- ---------- ---------
CLASS C (b)
Proceeds from shares sold 116,469 -- 6,294 --
Proceeds from reinvestment of distributions 92 -- 5 --
Payments for shares redeemed (5,620) -- (304) --
---------- ---------- ---------- ----------
Net increase (decrease) 110,941 -- 5,995 --
---------- ---------- ---------- ----------
Total increase (decrease) 445,382 2,821,606 $ 23,454 $ 129,618
========== ========== ========== ==========
SPECIAL GROWTH
CLASS S
Proceeds from shares sold 3,037,692 6,148,876 $ 128,834 $ 275,513
Proceeds from reinvestment of distributions 4,561 617,896 183 25,944
Payments for shares redeemed (2,787,955) (5,540,547) (118,339) (242,340)
---------- ---------- ---------- ---------
Net increase (decrease) 254,298 1,226,225 10,678 59,117
---------- ---------- ---------- ---------
CLASS E (a)
Proceeds from shares sold 63,844 98,025 2,640 4,008
Proceeds from reinvestment of distributions 46 5,154 2 203
Payments for shares redeemed (34,728) (29,520) (1,442) (1,255)
---------- ---------- ---------- ---------
Net increase (decrease) 29,162 73,659 1,200 2,956
---------- ---------- ---------- ---------
CLASS C (b)
Proceeds from shares sold 53,003 -- 2,246 --
Proceeds from reinvestment of distributions 1 -- -- --
Payments for shares redeemed (3,259) -- (141) --
---------- ---------- ---------- ---------
Net increase (decrease) 49,745 -- 2,105 --
---------- ---------- ---------- ---------
Total increase (decrease) 333,205 1,299,884 $ 13,983 $ 62,073
========== ========== ========== =========
</TABLE>
(a) Effective May 18, 1998, Class C was renamed Class E.
(b) Share transactions for Class C for the period ended June 30, 1999 are for
the period January 27, 1999 (commencement of sale of shares) to June 30,
1999.
Notes to Financial Statements 155
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
--------------------------------- ---------------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
EQUITY INCOME
CLASS S
Proceeds from shares sold 879,480 2,229,736 $ 35,728 $ 93,208
Proceeds from reinvestment of distributions 165,433 512,914 6,369 20,629
Payments for shares redeemed (1,511,671) (2,196,713) (61,306) (91,318)
------------- ------------- ------------- -------------
Net increase (decrease) (466,758) 545,937 (19,209) 22,519
------------- ------------- ------------- -------------
CLASS E (a)
Proceeds from shares sold 11,096 22,270 454 940
Proceeds from reinvestment of distributions 598 547 23 21
Payments for shares redeemed (2,720) (13,005) (112) (543)
------------- ------------- ------------- -------------
Net increase (decrease) 8,974 9,812 365 418
------------- ------------- ------------- -------------
CLASS C (b)
Proceeds from shares sold 18,548 -- 765 --
Proceeds from reinvestment of distributions 48 -- 2 --
Payments for shares redeemed (1,194) -- (49) --
------------- ------------- ------------- -------------
Net increase (decrease) 17,402 -- 718 --
------------- ------------- ------------- -------------
Total increase (decrease) (440,382) 555,749 $ (18,126) $ 22,937
============= ============= ============= =============
QUANTITATIVE EQUITY
CLASS S
Proceeds from shares sold 5,554,910 10,401,417 $ 245,126 $ 411,247
Proceeds from reinvestment of distributions 376,162 1,801,116 15,941 71,013
Payments for shares redeemed (5,495,970) (8,361,539) (243,550) (332,333)
------------- ------------- ------------- -------------
Net increase (decrease) 435,102 3,840,994 17,517 149,927
------------- ------------- ------------- -------------
CLASS E (a)
Proceeds from shares sold 52,366 135,230 2,358 5,167
Proceeds from reinvestment of distributions 2,411 7,335 102 292
Payments for shares redeemed 27,490 (30,285) (1,245) (1,234)
------------- ------------- ------------- -------------
Net increase (decrease) 82,267 112,280 1,215 4,225
------------- ------------- ------------- -------------
CLASS C (b)
Proceeds from shares sold 126,662 -- 5,692 --
Proceeds from reinvestment of distributions 165 -- 7 --
Payments for shares redeemed (5,960) -- (269) --
------------- ------------- ------------- -------------
Net increase (decrease) 120,867 -- 5,430 --
------------- ------------- ------------- -------------
Total increase (decrease) 638,236 3,953,274 $ 24,162 $ 154,152
============= ============= ============= =============
</TABLE>
(a) Effective May 18, 1998, Class C was renamed Class E.
(b) Share transactions for Class C for the period ended June 30, 1999 are for
the period January 27, 1999 (commencement of sale of shares) to June 30,
1999.
156 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DOLLARS
---------------------------------------------------------------------------------
INTERNATIONAL SECURITIES 1999 1998 1999 1998
------------ ------------- -------------- --------------
<S> <C> <C> <C> <C>
CLASS S
Proceeds from shares sold 2,677,402 5,496,045 $ 164,856 $ 326,448
Proceeds from reinvestment of
distributions 11,621 171,775 687 10,072
Payments for shares redeemed (2,712,520) (5,562,388) (167,229) (329,404)
------------ ------------- -------------- --------------
Net increase (decrease) (23,497) 105,432 (1,686) 7,116
------------ ------------- -------------- --------------
CLASS E (a)
Proceeds from shares sold 36,351 59,331 2,245 3,346
Proceeds from reinvestment of
distributions -- 588 -- 35
Payments for shares redeemed (15,279) (10,159) (950) (591)
------------ ------------- -------------- --------------
Net increase (decrease) 21,072 49,760 1,295 2,790
------------ ------------- -------------- --------------
CLASS C (b)
Proceeds from shares sold 45,782 -- 2,835 --
Proceeds from reinvestment of
distributions 5 -- -- --
Payments for shares redeemed (2,049) -- (126) --
------------ ------------- -------------- --------------
Net increase (decrease) 43,738 -- 2,709 --
------------ ------------- -------------- --------------
Total increase (decrease) 41,313 155,192 $ 2,318 $ 9,906
============ ============= ============== ==============
EMERGING MARKETS
CLASS S
Proceeds from shares sold 9,239,080 22,508,124 $ 81,722 $ 221,964
Proceeds from reinvestment of
distributions 179,941 188,272 1,447 2,070
Payments for shares redeemed (8,221,643) (16,241,312) (75,159) (149,675)
------------ ------------- -------------- --------------
Net increase (decrease) 1,197,378 6,455,084 8,010 74,359
------------ ------------- -------------- --------------
CLASS E (a)
Proceeds from shares sold 506,630 4,558 5,149 38
Proceeds from reinvestment of
distributions 57 -- 1 --
Payments for shares redeemed (29,637) -- (291) --
------------ ------------- -------------- --------------
Net increase (decrease) 477,050 4,558 4,859 38
------------ ------------- -------------- --------------
CLASS C (b)
Proceeds from shares sold 48,797 -- 458 --
Proceeds from reinvestment of
distributions 44 -- -- --
Payments for shares redeemed (511) -- (5) --
------------ ------------- -------------- --------------
Net increase (decrease) 48,330 -- 453 --
------------ ------------- -------------- --------------
Total increase (decrease) 1,722,758 6,459,642 $ 13,322 $ 74,397
============ ============= ============== ==============
REAL ESTATE SECURITIES
CLASS S
Proceeds from shares sold 5,500,637 9,286,206 $ 135,765 $ 254,637
Proceeds from reinvestment of
distributions 374,033 1,114,356 8,769 30,226
Payments for shares redeemed (4,346,794) (6,759,461) (107,866) (178,741)
------------ ------------- -------------- --------------
Net increase (decrease) 1,527,876 3,641,101 36,668 106,122
------------ ------------- -------------- --------------
</TABLE>
(a) Effective May 18, 1998, Class C was renamed Class E.
(b) Share transactions for Class C for the period ended June 30, 1999 are for
the period January 27, 1999 (commencement of sale of shares) to June 30,
1999.
Notes fo Financial Statement 157
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
REAL ESTATE SECURITIES, CONTINUED --------------------------------- ----------------------------------
CLASS E (a) 1999 1998 1999 1998
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Proceeds from shares sold 204,129 28,391 5,391 715
Proceeds from reinvestment of distributions 320 375 7 9
Payments for shares redeemed (13,894) (6,530) (353) (183)
------------- ------------- -------------- --------------
Net increase (decrease) 190,555 22,236 5,045 541
------------- ------------- -------------- --------------
CLASS C (b)
Proceeds from shares sold 36,689 -- 918 --
Proceeds from reinvestment of distributions 138 -- 3 --
Payments for shares redeemed (1,610) -- (40) --
------------- ------------- -------------- --------------
Net increase (decrease) 35,217 -- 881 --
------------- ------------- -------------- --------------
Total increase (decrease) 1,753,648 3,663,337 $ 42,594 $ 106,663
============= ============= ============== ==============
SHORT-TERM BOND
CLASS S
Proceeds from shares sold 8,531,591 6,088,176 $ 158,419 $ 112,707
Shares issued in connection with
acquisition of Volatility
Constrained Bond Fund 8,934,738 -- 163,684 --
Proceeds from reinvestment of distributions 309,836 604,269 5,675 11,141
Payments for shares redeemed (5,140,183) (5,088,094) (94,696) (94,296)
------------- ------------ ------------- -------------
Net increase (decrease) 12,635,982 1,604,351 233,082 29,552
------------- ------------ ------------- -------------
CLASS E (c)
Proceeds from shares sold 518,225 -- 9,502 --
Proceeds from reinvestment of distributions 387 -- 7 --
Payments for shares redeemed (12,820) -- (235) --
------------- ------------ ------------- -------------
Net increase (decrease) 505,792 -- 9,274 --
------------- ------------ ------------- -------------
CLASS C (d)
Proceeds from shares sold 30,044 -- 553 --
Proceeds from reinvestment of distributions 216 -- 4 --
Payments for shares redeemed (20,244) -- (370) --
------------- ------------ ------------- -------------
Net increase (decrease) 10,016 -- 187 --
------------- ------------ ------------- -------------
Total increase (decrease) 13,151,790 1,604,351 $ 242,543 $ 29,552
============= ============ ============= =============
DIVERSIFIED BOND
CLASS S
Proceeds from shares sold 9,757,441 15,009,859 $ 224,965 $ 355,143
Proceeds from reinvestment of distributions 634,074 1,508,462 14,561 35,660
Payments for shares redeemed (6,998,663) (11,474,358) (160,699) (272,067)
------------- ------------ ------------- -------------
Net increase (decrease) 3,392,852 5,043,963 78,827 118,736
------------- ------------ ------------- -------------
</TABLE>
(a) Effective May 18, 1998, Class C was renamed Class E.
(b) Share transactions for Class C for the period ended June 30, 1999 are for
the period January 27, 1999 (commencement of sale of shares) to June 30,
1999.
(c) Share transactions for Class E for the period ended June 30, 1999 are for
the period February 18, 1999 (commencement of sale of shares) to June 30,
1999.
(d) Share transactions for Class C for the period ended June 30, 1999 are for
the period March 3, 1999 (commencement of sale of shares) to June 30, 1999
158 Notes to Financial Statement
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
--------------------------------- ---------------------------------
DIVERSIFIED BOND, CONTINUED 1999 1998 1999 1998
Class E(a) -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Proceeds from shares sold 120,800 155,188 2,826 3,757
Proceeds from reinvestment of distributions 5,353 6,059 125 146
Payments for shares redeemed (17,629) (67,274) (409) (1,615)
-------------- ------------- ------------- -------------
Net increase (decrease) 108,524 93,973 2,542 2,288
-------------- ------------- ------------- -------------
CLASS C (b)
Proceeds from shares sold 120,277 -- 2,818 --
Proceeds from reinvestment of distributions 1,025 -- 24 --
Payments for shares redeemed (10,723) -- (247) --
-------------- ------------- ------------- -------------
Net increase (decrease) 110,579 -- 2,595 --
-------------- ------------- ------------- -------------
Total increase (decrease) 3,611,955 5,137,936 $ 83,964 $ 121,024
============== ============= ============= =============
MULTISTRATEGY BOND
CLASS S
Proceeds from shares sold 12,960,093 22,246,273 $ 129,487 $ 228,942
Proceeds from reinvestment of distributions 1,098,558 3,444,172 10,932 35,248
Payments for shares redeemed (9,782,609) (14,104,977) (97,567) (145,116)
-------------- ------------- ------------- -------------
Net increase (decrease) 4,276,042 11,585,468 42,852 119,074
-------------- ------------- ------------- -------------
CLASS E (a)
Proceeds from shares sold 168,622 253,909 1,685 2,611
Proceeds from reinvestment of distributions 7,421 8,900 74 90
Payments for shares redeemed (69,483) (4,393) (697) (45)
-------------- ------------- ------------- -------------
Net increase (decrease) 106,560 258,416 1,062 2,656
-------------- ------------- ------------- -------------
CLASS C (b)
Proceeds from shares sold 320,548 -- 3,186 --
Proceeds from reinvestment of distributions 2,225 -- 22 --
Payments for shares redeemed (20,965) -- (205) --
-------------- ------------- ------------- -------------
Net increase (decrease) 301,808 -- 3,003 --
-------------- ------------- ------------- -------------
Total increase (decrease) 4,684,410 11,843,884 $ 46,917 $ 121,730
============== ============= ============= =============
</TABLE>
(a) Effective May 18, 1998, Class C was renamed Class E.
(b) Share transactions for Class C for the period ended June 30, 1999 are for
the period January 27, 1999 (commencement of sale of shares) to June 30,
1999.
Notes to Financial Statements 159
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
7. DIVIDENDS
On July 1, 1999, the Board of Trustees declared the following dividends from
net investment income payable on July 6, 1999, to shareholders of record on
July 2, 1999:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Diversified Equity - Class S $0.0647 Short-Term Bond - Class S $0.2118
Diversified Equity - Class E 0.0335 Short-Term Bond - Class E 0.2062
Equity Income - Class S 0.0105 Short-Term Bond - Class C 0.1077
Equity Income - Class E 0.0772 Diversified Bond - Class S 0.1044
Equity Income - Class C 0.0498 Diversified Bond - Class E 0.0997
Quantitative Equity - Class S 0.0918 Diversified Bond - Class C 0.0860
Quantitative Equity - Class E 0.0649 Multistrategy Bond - Class S 0.0480
Quantitative Equity - Class C 0.0248 Multistrategy Bond - Class E 0.0459
Real Estate Securities - Class S 0.2982 Multistrategy Bond - Class C 0.0409
Real Estate Securities - Class E 0.2893
Real Estate Securities - Class C 0.2594
</TABLE>
8. BENEFICIAL INTEREST
As of June 30, 1999, the following Funds had one or more shareholders with
shares of beneficial interest greater than 10% of the total outstanding
shares of each respective Fund or Class:
<TABLE>
<CAPTION>
CLASS S CLASS E CLASS C
---------------- --------------------- ----------------
<S> <C> <C> <C>
Diversified Equity -- 31.6%, 28.3% --
Special Growth -- 43.3% --
Equity Income -- 27.3%, 23.8%, 23.8% 12.9%
Quantitative Equity -- 24.4% --
International Securities -- 15.9% --
Emerging Markets -- 20.4%, 10.4 --
Real Estate Securities -- 20.4% --
Short Term Bond -- 38.6% 52.5%, 22.4%
Diversified Bond 14.5% 43.1%, 18.2%, 12.1% 11.2%
Multistrategy Bond -- 14.8% --
</TABLE>
160 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 832-6688
In Washington (253) 627-7001
TRUSTEES
Lynn L. Anderson
Paul E. Anderson
Paul Anton, PhD
William E. Baxter
Lee C. Gingrich
Eleanor W. Palmer
TRUSTEES EMERITUS
George F. Russell, Jr., Chairman
OFFICERS
Lynn L. Anderson, President and Chief Executive Officer
Peter Apanovitch, Manager of Short Term Investment Funds
Mark E. Swanson, Treasurer and Chief Accounting Officer
Randall P. Lert, Director of Investments
Karl Ege, Secretary and General Counsel
MANAGER, TRANSFER AND DIVIDEND PAYING 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, MA 02109
DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
MONEY MANAGERS
DIVERSIFIED EQUITY FUND
Alliance Capital Management L.P., Minneapolis, MN
Barclays Global Investors, San Francisco, CA
Equinox Capital Management, LLC, New York, NY
INVESCO Capital Management, Inc., Atlanta, GA
Jacobs Levy Equity Management, Inc., Roseland, NJ
Lincoln Capital Management Company, Chicago, IL
Marsico Capital Management, LLC, Denver, CO
Morgan Stanley Dean Witter Investment
Management, Inc., New York, NY
Peachtree Asset Management, Atlanta, GA
Sanford C. Bernstein & Co., Inc., New York, NY
Suffolk Capital Management, Inc., New York, NY
Trinity Investment Management Corporation, Boston, MA
SPECIAL GROWTH FUND
Delphi Management, Inc., Boston, MA
Fiduciary Trust Company 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
Westpeak Investment Advisors, L.P., Boulder, CO
EQUITY INCOME FUND
Equinox Capital Management, LLC, New York, NY
Trinity Investment Management Corporation, Boston, MA
Westpeak Investment Advisors, L.P., Boulder, CO
QUANTITATIVE EQUITY FUND
Barclays Global Investors, San Francisco, CA
Franklin Portfolio Associates, LLC, Boston, MA
Jacobs Levy Equity Management, Inc., Roseland, NJ
J.P. Morgan Investment Management, Inc., New York, NY
INTERNATIONAL SECURITIES FUND
Delaware International Advisers Limited, London, England
Fidelity Management Trust Company, Boston, MA
J.P. Morgan Investment Management, Inc., New York, NY
Mastholm Asset Management, LLC, Bellevue, WA
Montgomery Asset Management, LLC, San Francisco, CA
Oechsle International Advisors, L.P., Boston, MA
Sanford C. Bernstein & Co., Inc., New York, NY
The Boston Company Asset Management, Inc., Boston, MA
EMERGING MARKETS FUND
Foreign & Colonial Emerging Markets, London, England
Genesis Asset Managers Limited, London, England
J.P. Morgan Investment Management, Inc., New York, NY
Montgomery Asset Management, LLC, San Francisco, CA
Nicholas Applegate Capital Management, San Diego, CA
Sanford C. Bernstein & Co., Inc., New York, NY
Schroder Capital Management
International Limited, New York, NY
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.
Manager, Money Managers and Service Providers 161
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 832-6688
In Washington (253) 627-7001
REAL ESTATE SECURITIES FUND
AEW Capital Management, L.P., Boston, MA
Cohen & Steers Capital Management, Inc., New York, NY
SHORT TERM BOND FUND
BlackRock Financial Management, Inc., New York, NY
Standish, Ayer & Wood, Inc., Boston, MA
STW Fixed Income Management California, Santa Barbara, CA
DIVERSIFIED BOND FUND
Lincoln Capital Management Company, Chicago, IL
Pacific Investment Management Company, Newport Beach, CA
Standish, Ayer & Wood, Inc., Boston, MA
MULTISTRATEGY BOND FUND
Credit Suisse Asset Management, 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.
162 Manager, Money Managers and Service Providers
<PAGE>
[LOGO OF FRANK RUSSELL INVESTMENT COMPANY]
Frank Russell Investment Company
909 A Street
Tacoma, Washington 98402
253-627-7001
800-787-7354
Fax: 253-591-3495
www.russell.com A-5424(699) 36-08-067(6/99)
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
TAX ADVANTAGED FUNDS
1999 Semiannual Report
EQUITY T FUND - CLASS S SHARES
TAX EXEMPT BOND FUND - CLASS C, E, AND S SHARES
TAX FREE MONEY MARKET FUND - CLASS S SHARES
JUNE 30, 1999
[LOGO OF FRANK RUSSELL INVESTMENT COMPANY]
<PAGE>
Frank Russell Investment Company
Frank Russell Investment Company is a
"series mutual fund" with 27 different
investment portfolios. These financial
statements report on three 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
TAX ADVANTAGED FUNDS
SEMIANNUAL REPORT
JUNE 30, 1999 (UNAUDITED)
TABLE OF CONTENTS
Page
Equity T Fund................................................. 2
Tax Exempt Bond Fund.......................................... 10
Tax Free Money Market Fund.................................... 24
Notes to Financial Statements................................. 36
Manager, Money Managers and Service Providers................. 42
FRANK RUSSELL INVESTMENT COMPANY - TAX ADVANTAGED FUNDS
Copyright (C) Frank Russell Company 1999. 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>
EQUITY T FUND
STATEMENT OF NET ASSETS
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
COMMON STOCKS - 97.4%
AUTO AND TRANSPORTATION - 2.9%
AutoZone, Inc. (a) 43,000 1,295
CNF Transportation, Inc. 9,000 345
Consolidated Freightways Corp. (a) 250 3
CSX Corp. 38,600 1,749
DaimlerChrysler AG 13,763 1,223
Dana Corp. 28,900 1,331
Delphi Automotive Systems Corp. 2,795 52
Eaton Corp. 12,700 1,168
Ford Motor Co. 24,000 1,355
General Motors Corp. 13,100 865
Genuine Parts Co. 1,600 56
Lear Corp. (a) 20,800 1,035
Union Pacific Corp. 47,600 2,776
----------
13,253
----------
CONSUMER DISCRETIONARY - 10.3%
Abercrombie & Fitch Co. Class A (a) 17,100 821
AT&T Corp. - Liberty Media Group Class
A (a) 23,532 865
Best Buy Co. (a) 8,800 594
Cendant Corp. (a) 83,400 1,710
Circuit City Stores, Inc. 14,200 1,321
Dayton Hudson Corp. 23,800 1,547
Dillard's, Inc. Class A 14,300 502
Eastman Kodak Co. 35,100 2,378
Extended Stay America, Inc. (a) 1,700 20
Federated Department Stores, Inc. (a) 30,600 1,620
Fruit of The Loom, Inc. Class A (a) 28,300 276
Gap, Inc. 28,800 1,451
Hilton Hotels Corp. 2,300 33
Home Depot, Inc. (The) 34,500 2,223
International Game Technology 30,200 559
JC Penney & Co., Inc. 31,700 1,539
Jones Apparel Group, Inc. (a) 37,900 1,300
Kmart Corp. (a) 17,500 288
Leggett & Platt, Inc. 44,900 1,249
Lowe's Cos., Inc. 15,700 890
Mattel, Inc. 54,900 1,451
May Department Stores Co. 18,400 752
McDonald's Corp. 18,800 777
MediaOne Group, Inc. (a) 35,400 2,633
Mirage Resorts, Inc. (a) 170,100 2,849
New York Times Co. Class A 6,800 250
Sears Roebuck & Co. 36,100 1,609
Service Corp. International 44,000 847
Starwood Hotels & Resorts Worldwide,
Inc. 77,234 2,360
Time Warner, Inc. 33,250 2,444
TJX Cos., Inc. 61,800 2,059
Toys "R" Us, Inc. (a) 9,800 203
Wal-Mart Stores, Inc. 156,600 7,556
----------
46,976
----------
CONSUMER STAPLES - 7.9%
Albertson's, Inc. 1,600 83
Anheuser-Busch Cos., Inc. 2,700 192
Bestfoods 17,000 842
Coca-Cola Co. (The) 96,500 6,031
Hannaford Brothers Co. 7,200 385
Heinz (H.J.) Co. 3,500 175
PepsiCo, Inc. 62,400 2,414
Philip Morris Cos., Inc. 216,400 8,697
Procter & Gamble Co. 67,100 5,989
Ralston-Purina Group 3,000 91
Safeway, Inc. (a) 23,700 1,173
Sara Lee Corp. 1,200 27
Seagram Co., Ltd. NPV 91,100 4,589
Unilever NV (a) 75,896 5,294
----------
35,982
----------
FINANCIAL SERVICES - 15.9%
AEGON NV 5,608 415
Allstate Corp. 76,700 2,752
Ambac Financial Group, Inc. 6,100 348
American Express Co. 11,500 1,496
American International Group, Inc. 20,400 2,388
AON Corp. 12,700 524
Associated Banc-Corp. 13,800 573
Associates First Capital Corp. Class A 4,506 200
Astoria Financial Corp. 53,085 2,329
Automatic Data Processing, Inc. 47,800 2,103
Bank of America Corp. 78,051 5,722
BankBoston Corp. 100 5
Charter One Financial, Inc. 10,600 294
CIT Group, Inc. (The) 145,100 4,190
Citigroup, Inc. 138,101 6,560
Commercial Federal Corp. 7,500 174
Compass Bancshares, Inc. 20,800 567
Dime Bancorp, Inc. 35,700 718
Equifax, Inc. 52,900 1,888
Federal National Mortgage Association 9,400 643
FINOVA Group, Inc. 36,500 1,921
First Union Corp. 137,718 6,473
Fremont General Corp. 800 15
Household International Corp. 31,953 1,514
KeyCorp 72,800 2,339
Marsh & McLennan Cos., Inc. 31,750 2,397
2 Equity T Fund
<PAGE>
EQUITY T FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- ----------
MBIA, Inc. 30,400 1,968
Morgan Stanley Dean Witter & Co. 28,840 2,956
Ocwen Financial Corp. (a) 3,200 28
Peoples Heritage Financial Group 121,900 2,293
PNC Bank Corp. 4,400 254
Provident Cos., Inc. 4,600 184
Provident Financial Group, Inc. 27,600 1,175
Ryder System, Inc. 3,800 99
Sovereign Bancorp, Inc. 12,900 157
TCF Financial Corp. 71,700 1,999
U.S. Bancorp 23,200 789
Union Planters Corp. 104,200 4,656
UNUM Corp. 49,200 2,694
Washington Mutual, Inc. 107,009 3,785
Wells Fargo Co. 20,900 893
----------
72,478
----------
HEALTH CARE - 10.2%
ALZA Corp. (a) 107,900 5,489
American Home Products Corp. 78,900 4,537
Amgen, Inc. (a) 8,800 535
Bausch & Lomb, Inc. 4,800 367
Bristol-Myers Squibb Co. 120,200 8,467
Celera Genomics (a) 3,600 58
Columbia/HCA Healthcare Corp. 51,400 1,173
Forest Labs, Inc. (a) 35,600 1,647
Genzyme Corp. (a) 75,400 3,652
Genzyme Surgical Products (a) 13,497 59
HCR Manor Care, Inc. (a) 44,700 1,081
Health Management Associates
Class A (a) 87,900 989
HEALTHSOUTH Corp. (a) 94,600 1,413
Humana, Inc. (a) 48,200 624
Johnson & Johnson 11,500 1,127
LifePoint Hospitals, Inc. (a) 2,705 36
Lilly (Eli) & Co. 58,100 4,161
MedImmune, Inc. (a) 5,600 381
Medtronic, Inc. 7,600 592
Merck & Co., Inc. 36,000 2,664
PE Corp. 7,200 826
Pfizer, Inc. 15,300 1,679
Schering-Plough Corp. 20,200 1,071
Tenet Healthcare Corp. (a) 37,400 694
Triad Hospitals, Inc. (a) 2,705 36
United Healthcare Corp. 6,900 432
Warner-Lambert Co. 34,800 2,415
Watson Pharmaceuticals, Inc. (a) 10,100 354
----------
46,559
----------
INTEGRATED OILS - 5.4%
Enron Corp. 1,900 155
Exxon Corp. 77,800 6,000
Lyondell Petrochemical Co. 94,400 1,947
Mobil Corp. 93,400 9,247
Royal Dutch Petroleum Co. 83,900 5,055
Tenneco, Inc. 94,200 2,249
----------
24,653
----------
MATERIALS AND PROCESSING - 5.6%
Allegheny Teldyne, Inc. 179,200 4,054
Dow Chemical Co. 22,200 2,817
Georgia-Pacific Group 33,200 1,573
International Paper Co. 11,600 586
Kimberly-Clark Corp. 49,200 2,804
Monsanto Co. 74,100 2,922
Rohm & Haas Co. 68,300 2,928
Sherwin-Williams Co. 4,200 117
Smurfit-Stone Container Corp. (a) 13,900 285
Temple-Inland, Inc. 3,400 232
Tyco International, Ltd. 64,403 6,102
USEC, Inc. 65,600 976
----------
25,396
----------
OTHER ENERGY - 1.4%
BP Amoco PLC - ADR 15,940 1,729
El Paso Energy Corp. 7,600 267
Global Marine, Inc. (a) 76,700 1,184
R&B Falcon Corp. (a) 86,400 810
Tosco Corp. 28,800 747
Ultramar Diamond Shamrock Corp. 69,200 1,509
----------
6,246
----------
PRODUCER DURABLES - 5.6%
AlliedSignal, Inc. 61,300 3,862
Applied Materials, Inc. (a) 12,500 923
Boston Scientific Corp. (a) 6,500 286
Coltec Industries, Inc. (a) 5,900 128
Deere & Co. 36,000 1,427
Emerson Electric Co. 28,400 1,786
General Electric Co. 99,400 11,232
Grainger (W.W.), Inc. 1,400 75
Johnson Controls, Inc. 4,300 298
Lockheed Martin Corp. 59,200 2,205
Waste Management, Inc. 57,236 3,076
----------
25,298
----------
Equity T Fund 3
<PAGE>
EQUITY T FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
TECHNOLOGY - 20.7%
America Online, Inc. (a) 51,200 5,658
Cisco Systems, Inc. (a) 155,750 10,036
Cooper Industries, Inc. 22,300 1,160
Dell Computer Corp. (a) 74,200 2,741
Electronic Data Systems Corp. 19,600 1,109
EMC Corp. (a) 76,600 4,213
Exodus Communications, Inc. (a) 12,100 1,451
Harris Corp. 65,900 2,582
Intel Corp. 188,100 11,180
International Business
Machines Corp. 103,400 13,364
Lucent Technologies, Inc. 106,800 7,202
Microsoft Corp. (a) 215,900 19,458
Motorola, Inc. 12,800 1,213
National Semiconductor Corp. (a) 44,900 1,137
Oracle Systems Corp. (a) 51,950 1,929
Sun Microsystems, Inc. (a) 91,400 6,295
Texas Instruments, Inc. 24,200 3,509
----------
94,237
----------
UTILITIES - 11.5%
Allegheny Energy, Inc. 7,900 253
Ameritech Corp. 15,400 1,132
AT&T Corp. 91,607 5,113
Bell Atlantic Corp. 92,364 6,038
Columbia Energy Group 72,350 4,535
Comcast Corp. Special Class A 17,900 688
Dominion Resources, Inc. 4,000 173
Entergy Corp. 5,900 184
GTE Corp. 113,200 8,575
K N Energy, Inc. 25,050 335
Level 3 Communications, Inc. (a) 3,000 181
MCI WorldCom, Inc. (a) 129,690 11,153
Northern States Power Co. 26,900 651
PP&L Resources, Inc. 54,400 1,673
SBC Communications, Inc. 98,900 5,736
Sprint Corp. 32,600 1,722
Sprint Corp. (PCS Group) (a) 8,150 466
TECO Energy, Inc. 44,200 1,006
Wisconsin Energy Corp. 97,700 2,449
----------
52,063
----------
TOTAL COMMON STOCKS
(cost $326,275) 443,141
----------
PRINCIPAL
AMOUNT
(000)
$
---------
SHORT-TERM INVESTMENTS - 1.2%
Frank Russell Investment Company Money
Market Fund,
due on demand (b) 4,482 4,482
United States Treasury Notes
5.875% due 07/31/99 (b)(c) 400 400
5.880% due 07/31/99 (b)(c) 500 505
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $5,387) 5,387
----------
TOTAL INVESTMENTS - 98.6%
(identified cost $331,662) 448,528
OTHER ASSETS AND LIABILITIES,
NET - 1.4% 6,562
----------
455,090
NET ASSETS - 100.0% ----------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Held as collateral in connection with futures contracts purchased by the
fund
Abbreviations:
ADR - American Depository Receipt
NPV - No Par Value
NV - Nonvoting
See accompanying notes which are an integral part of the financial statements.
4 Equity T Fund
<PAGE>
EQUITY T FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1999 (UNAUDITED)
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
----------- --------------
Futures Contracts
S&P 500 Index
expiration date 07/99 13 $ 157
--------------
Total Unrealized Apreciation
(Depreciation) on Open
Futures Contracts Purchased $ 157
==============
See accompanying notes which are an integral part of the financial statements.
Equity T Fund 5
<PAGE>
EQUITY T FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments at market (identified cost $331,662).............. $ 448,528
Receivables:
Dividends and interest....................................... 456
Investments sold............................................. 458
Fund shares sold............................................. 6,530
Daily variation margin on futures contracts.................. 84
Deferred organization expenses................................ 10
--------------
Total Assets............................................... 456,066
LIABILITIES
Payables:
Due to Custodian............................... $ 430
Fund shares redeemed........................... 296
Accrued fees to affiliates..................... 243
Other accrued expenses......................... 7
-----------
Total Liabilities........................................... 976
--------------
NET ASSETS..................................................... $ 455,090
==============
NET ASSETS CONSIST OF:
Undistributed net investment income............................ $ 1,529
Accumulated net realized gain (loss)........................... 54
Unrealized appreciation (depreciation) on:
Investments................................................... 116,866
Futures contracts............................................. 157
Shares of beneficial interest.................................. 221
Additional paid-in capital..................................... 336,263
--------------
NET ASSETS..................................................... $ 455,090
==============
NET ASSET VALUE, offering and redemption price per share:
($455,090,400 divided by 22,056,788 shares of $.01 par value
shares of beneficial interest outstanding).................. $ 20.63
==============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
6 Equity T Fund
<PAGE>
EQUITY T FUND
Statement of Operations
Amounts in thousands For the Six Months Ended June 30, 1999 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends.................................................... $ 2,877
Dividends from Money Market Fund............................. 147
Interest..................................................... 11
--------------
Total Investment Income.................................... 3,035
EXPENSES
Advisory fees................................... $ 1,273
Administrative fees............................. 91
Custodian fees.................................. 5
Transfer agent fees............................. 1
Registration fees............................... 18
Trustees' fees. ................................ 3
Amortization of deferred organization expenses.. 3
Miscellaneous................................... 2
-------------
Total Expenses............................................. 1,396
--------------
Net investment income......................................... 1,639
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments..................................... 684
Futures contracts............................... 138
------------- 822
Net change in unrealized appreciation
(depreciation) on:
Investments..................................... 44,624
Futures contracts............................... 54 44,678
------------- --------------
Net realized and unrealized gain (loss)....................... 45,500
--------------
Net increase (decrease) in net assets resulting
from operations............................................. $ 47,139
==============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Equity T Fund 7
<PAGE>
EQUITY T FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
------------------- ------------------
<S> <C> <C>
OPERATIONS
Net investment income.......................... $ 1,639 $ 1,202
Net realized gain (loss)....................... 822 (729)
Net change in unrealized appreciation
(depreciation)................................. 44,678 58,053
------------- --------------
Net increase (decrease) in net assets
resulting from operations.................... 47,139 58,526
------------- --------------
DISTRIBUTIONS
From net investment income..................... -- (1,222)
In excess of net investment income............. -- (112)
In excess of net realized gain on investments.. -- (78)
------------- --------------
Net decrease from distributions.............. -- (1,412)
------------- --------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share
transactions................................... 102,499 138,603
------------- --------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS .... 149,638 195,717
NET ASSETS
Beginning of period............................ 305,452 109,735
------------- --------------
End of period (including undistributed net
investment income of $1,529 and accumulated
distributions in excess of net investment
income of $110, respectively)................ $ 455,090 $ 305,452
============= ==============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
8 Equity T Fund
<PAGE>
EQUITY T FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1999* 1998 1997 1996**
------- ------- ------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...... $ 18.26 $ 13.90 $ 10.61 $ 10.00
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d)................ .09 .10 .08 .03
Net realized and unrealized gain (loss)
on investments......................... 2.28 4.35 3.28 .61
------- ------- ------- -------
Total Income From Investment
Operations............................ 2.37 4.45 3.36 .64
------- ------- ------- -------
DISTRIBUTIONS
From net investment income............... -- (.08) (.07) (.03)
From net realized gain on investments.... -- (.01) -- --
------- ------- ------- -------
Total Distributions.................... -- (.09) (.07) (.03)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD............ $ 20.63 $ 18.26 $ 13.90 $ 10.61
======= ======= ======= =======
TOTAL RETURN (%)(a)(b).................... 12.98 32.08 31.73 6.10
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in
thousands)............................. 455,090 305,452 109,735 19,931
Ratios to average net assets (%)(b)(c):
Operating expenses, net................ .77 .99 1.00 1.00
Operating expenses, gross.............. .77 .99 1.08 2.83
Net investment income.................. .90 .61 .92 1.62
Portfolio turnover rate (%)(c)........... 44.53 50.59 39.23 8.86
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
** For the period October 7, 1996 (commencement of operations) to December 31,
1996.
(a) Periods less than one year are not annualized.
(b) 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.
(c) The ratios for the periods ended June 30, 1999 and October 7, 1996
(commencement of operations) to December 31, 1996 are annualized.
(d) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
Equity T Fund 9
<PAGE>
TAX EXEMPT BOND FUND
Statement of Net Assets
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY $
--------- ------- ---------- --------
MUNICIPAL BONDS - 98.5%
ALABAMA - 1.2%
Birmingham, Alabama
General Obligation,
Series A 1,000 5.000 04/01/07 1,013
Huntsville, Alabama
Health Care Authority
Revenue, Series A (a) 335 4.500 06/01/01 337
Jefferson County,
Alabama Sewer
Revenue, Series A (a) 500 5.000 02/01/05 509
----------
1,859
----------
ALASKA - 1.7%
Alaska State Housing
Finance Corp.
Revenue, Series A-1 (a) 650 4.550 12/01/02 655
Alaska State
International
Airports Revenue,
Series B (a) 1,000 5.000 10/01/19 938
Anchorage, Alaska
General Obligation (a) 1,000 5.125 12/01/13 985
----------
2,578
----------
ARIZONA - 2.4%
Arizona State
Transportation Board
Special Obligations
Revenue, Series A
(pre-refunded
07/01/2001)(e) 1,425 6.450 07/01/06 1,510
Maricopa County,
Arizona Community
College General
Obligation Revenue 1,000 5.000 07/01/07 1,018
Maricopa County,
Arizona Union High
School District No.
210 Phoenix
General Obligation 1,000 5.000 07/01/07 1,016
----------
3,544
----------
ARKANSAS - 1.3%
Ashdown, Arkansas
Pollution Control
Revenue 500 4.750 04/01/08 478
Baxter County,
Arkansas Hospital
Revenue, Series A 1,515 5.000 09/01/08 1,461
----------
1,939
----------
CALIFORNIA - 3.9%
California Health
Facilities Finance
Authority Revenue (a) 1,000 5.000 11/15/04 1,033
California, State of,
General Obligation (a) 850 6.100 11/01/01 891
California Statewide
Communities
Development Authority
Multifamily Revenue (b) 1,000 5.200 12/01/29 999
Los Angeles,
California Regional
Airports Improvement
Corp. Lease Revenue (b) 200 3.850 12/01/24 200
Los Angeles County,
California
Transportation
Participation
Certificate Tax
Revenue, Series B 760 5.900 07/01/00 778
Sacramento, California
Municipal Utility
District Revenue,
Series Z (a) 1,000 6.000 07/01/01 1,040
Stanislaus, California
Waste-to-Energy
Financing Agency
Solid Waste
Facility Revenue 900 7.625 01/01/10 928
----------
5,869
----------
COLORADO - 1.0%
Colorado Housing
Finance Authority
Revenue, Series C-2 500 4.500 11/01/05 494
Denver, Colorado
Health & Hospital
Revenue, Series A 1,000 5.000 12/01/04 1,003
----------
1,497
----------
CONNECTICUT - 0.6%
Connecticut State
Special Tax
Obligation Revenue, 750 6.250 10/01/04 813
Series C (a) ----------
10 Tax Exempt Bond Fund
<PAGE>
TAX EXEMPT BOND FUND
Statement of Net Assets, continued
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY $
--------- ------- ---------- --------
DISTRICT OF COLUMBIA - 2.0%
District of Columbia
Revenue (a) 1,000 5.250 10/01/02 1,025
District of Columbia
Revenue, Series A 1,000 5.000 01/01/12 969
District of Columbia
Revenue General
Obligation, Series A (a)(d) 500 5.500 04/01/01 511
Washington, D.C.
Convention Center
Authority Dedicated
Tax Revenue (a) 500 4.750 10/01/05 501
----------
3,006
----------
FLORIDA - 3.9%
Florida Gas Utility
Revenue 800 5.000 12/01/03 821
Florida State Board of
Education Capital
Outlay General
Obligation, Series A 765 7.250 06/01/23 801
Florida State Board of
Education Lottery
Revenue, Series B (a) 1,000 5.000 07/01/05 1,025
Jacksonville, Florida
Electric Authority
Revenue, Series 2-13 2,000 6.000 10/01/05 2,149
Orange County, Florida
School Board
Participation
Certificates, Series A (a) 575 4.700 08/01/01 582
Pinellas County,
Florida Health
Facilities Authority
Revenue (b) 400 3.550 12/01/15 400
----------
5,778
----------
GEORGIA - 3.6%
Atlanta, Georgia
Airport Facilities
Revenue (a) 500 5.500 01/01/01 510
Georgia, State of,
General Obligation,
Series C 1,500 6.500 07/01/07 1,677
Georgia, State of,
General Obligation,
Series F 600 6.500 12/01/09 681
Georgia State
Municipal Electric
Authority General
Resolution Revenue,
Series A (a) 850 5.000 01/01/02 864
Georgia State
Municipal Electric
Authority Revenue,
Series B (a) 850 6.250 01/01/17 942
Savannah, Georgia
Hospital Authority
Revenue Series A 800 4.200 07/01/05 780
----------
5,454
----------
HAWAII - 4.4%
Hawaii, State of,
General Obligation,
Series CP (a) 600 5.000 10/01/02 612
Hawaii, State of,
General Obligation,
Series CR (a) 1,000 5.500 04/01/04 1,038
Hawaii, State of,
General Obligation,
Series CS (a) 2,000 5.250 04/01/06 2,051
Hawaii State Housing
Financial &
Development Corp.,
Single Family
Mortgage Purchasing
Revenue, Series B 1,000 4.450 07/01/03 998
Honolulu, Hawaii City
& County General
Obligation, Series A (a) 650 5.000 11/01/02 664
Honolulu, Hawaii City
& County General
Obligation, Series B 5 5.000 10/01/02 5
Honolulu, Hawaii City
& County General
Obligation, Series B 1,145 5.000 10/01/02 1,166
----------
6,534
----------
ILLINOIS - 10.8%
Berwyn, Illinois
General Obligation (a) 1,000 5.250 12/01/14 992
Bolingbrook, Illinois
Parks District
General Obligation
Zero Coupon (a) 1,230 0.000 01/01/05 946
Chicago, Illinois
General Obligation,
Series C (a) 1,500 6.250 10/31/01 1,567
Chicago, Illinois
Lakefront Millenium
Parking Facility
General Obligation (a) 1,000 5.000 01/01/06 1,007
Chicago, Illinois
Metropolitan Water
Reclamation District
General Obligation 1,000 5.750 12/01/04 1,058
Chicago, Illinois
Public Building
Commercial Building
Revenue, Series B (a) 500 5.250 12/01/18 494
Chicago, Illinois
Sales Tax Revenue (a) 1,000 5.250 01/01/05 1,026
Chicago, Illinois
Sales Tax Revenue (a) 1,000 5.000 01/01/13 973
Tax Exempt Bond Fund 11
<PAGE>
TAX EXEMPT BOND FUND
Statement of Net Assets, continued
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY $
--------- ------- ---------- --------
Cook County, Illinois
High School District
No. 201 General
Obligation 1,000 5.000 12/01/05 1,017
Illinois Development
Finance Authority
Revenue, Series A (a) 1,145 5.500 05/15/05 1,184
Illinois Health
Facilities Authority
Revenue 1,000 5.250 09/01/04 1,011
Illinois Health
Facilities Authority
Revenue (a) 500 5.000 08/01/03 508
Illinois Health
Facilities Authority
Revenue (a) 270 5.250 08/15/03 277
Illinois Health
Facilities Authority
Revenue (a) 500 5.000 08/15/04 507
Illinois Health
Facilities Authority
Revenue, Series A (a) 345 5.000 10/01/00 350
Illinois Health
Facilities Authority
Revenue, Series A (a) 1,000 4.550 07/01/01 1,006
Illinois Housing
Development Authority
Elderly Housing
Development Revenue 265 4.350 01/01/04 263
Illinois Housing
Development Authority
Elderly Housing
Development Revenue 500 4.450 01/01/05 496
Illinois, State of,
General Obligation (a) 500 5.375 05/01/01 511
Illinois, State of,
Dedicated Tax
Revenue, Series A (a) 1,000 7.000 12/15/13 1,058
----------
16,251
----------
INDIANA - 2.6%
Indiana Bond Bank
Revenue, Series A 1,000 4.100 02/01/05 971
Indiana Health
Facilities Financing
Authority Hospital
Revenue 465 4.500 02/15/05 456
Indiana Health
Facilities Financing
Authority Hospital
Revenue, Series A (a) 500 5.000 11/01/02 511
Indiana Health
Facilities Financing
Authority Hospital
Revenue, Series D (b) 1,435 5.000 11/01/26 1,434
Monroe County, Indiana
Hospital Authority
Revenue (a) 500 4.500 05/01/03 499
----------
3,871
----------
KENTUCKY - 0.7%
McCracken County,
Kentucky Hospital
Revenue, Series A (a) 1,000 5.700 11/01/00 1,024
----------
LOUISIANA - 2.5%
De Soto Parish,
Louisiana Pollution
Control Revenue,
Series A 650 5.050 12/01/02 661
Louisiana Public
Facilities Authority
Hospital Revenue,
Series A 1,600 5.500 08/15/19 1,536
Louisiana, State of,
General Obligation,
Series A (a) 800 5.500 04/15/05 832
Shreveport, Louisiana
General Obligation
Zero Coupon (a) 1,000 0.000 01/01/05 770
----------
3,799
----------
MAINE - 0.7%
Maine Health & Higher
Education Facilities
Authority Revenue,
Series A 1,000 4.300 07/01/04 987
----------
MARYLAND - 0.4%
Maryland State & Local
Facilities Loan
General Obligation,
Series 3 500 5.000 10/15/02 513
----------
MASSACHUSETTS - 2.5%
Massachusetts Bay
Transportation
Authority, Series C 1,250 5.250 03/01/07 1,284
Massachusetts State
Health & Educational
Facilities Authority
Revenue, Series B (b) 500 2.600 07/01/05 500
Massachusetts State
Health & Educational
Facilities Authority
Revenue, Series B (b) 485 4.550 01/01/21 485
12 Tax Exempt Bond Fund
<PAGE>
TAX EXEMPT BOND FUND
Statement of Net Assets, continued
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY $
--------- ------- ---------- --------
Massachusetts State
Industrial Finance
Agency Resource
Recovery Revenue,
Series A 500 4.850 12/01/05 487
Massachusetts, State
of, Special Obligation
Revenue, Series A 1,000 5.500 06/01/13 1,035
----------
3,791
----------
MICHIGAN - 4.5%
Bishop International
Airport Authority,
Michigan Airport
Revenue, Series B 1,000 5.000 12/01/10 970
Bishop International
Airport Authority,
Michigan Airport
Revenue, Series B 1,030 5.250 12/01/11 1,002
Clarkston, Michigan
Community Schools
General Obligation (a) 1,000 6.000 05/01/04 1,061
Detroit, Michigan City
School District
General Obligation,
Series B (a) 1,000 5.000 05/01/05 1,016
Jackson County,
Michigan Hospital
Financial Authority
Revenue (a) 300 4.375 06/01/02 299
Michigan State
Building Authority
Revenue, Series I 375 5.400 10/01/03 394
Michigan State
Hospital Finance
Authority Revenue,
Series A 1,000 5.500 10/01/04 1,022
Michigan State
Hospital Finance
Authority Revenue,
Series A (a) 500 5.000 07/01/02 508
Michigan State
Hospital Finance
Authority Revenue,
Series S 500 5.500 08/15/00 510
----------
6,782
----------
MINNESOTA - 0.7%
Dakota County,
Minnesota General
Obligation, Series C 1,000 4.750 02/01/09 980
----------
NEVADA - 0.7%
Clark County, Nevada
School District
General Obligation
Limited (a) 1,000 6.000 06/15/05 1,067
----------
NEW HAMPSHIRE - 1.2%
New Hampshire Higher
Educational & Health
Facilities Authority
Revenue (pre-refunded
03/01/2003)(e) 750 9.000 03/01/23 871
New Hampshire State
Turnpike Systems
Revenue, Series A (a) 1,000 5.125 04/01/18 970
----------
1,841
----------
NEW JERSEY - 1.8%
New Jersey, State of,
General Obligation,
Series E 500 5.500 07/15/02 519
New Jersey State
Transportation
Corporation Capital
Grant Anticipation
Notes, Series A 1,000 5.000 09/01/00 1,009
New Jersey State
Transportation
Corporation Capital
Grant Anticipation
Notes, Series A 670 4.900 09/01/01 678
Ocean County, New
Jersey Utilities
Authority Wastewater
Revenue 500 5.000 01/01/01 507
----------
2,713
----------
NEW MEXICO - 0.4%
New Mexico Mortgage
Finance Authority
Revenue, Series A-1 630 6.200 01/01/01 642
----------
NEW YORK - 9.2%
Metropolitan
Transportation
Authority, New York
Service Contract
Commuter Facilities,
Series 7 1,000 5.300 07/01/05 1,023
Metropolitan
Transportation
Authority, New York
Transit Facilities
Revenue, Series R (d) 650 5.000 07/01/03 659
Tax Exempt Bond Fund 13
<PAGE>
TAX EXEMPT BOND FUND
Statement of Net Assets, continued
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY $
--------- ------- ---------- --------
Municipal Assistance
Corp., New York, New
York Revenue, Series E 1,000 4.700 07/01/02 1,012
Municipal Assistance
Corp., New York, New
York Revenue, Series L 500 4.500 07/01/02 503
New York City, New
York Transitional
Finance Authority
Revenue, Series A-2 (b) 1,000 3.350 11/15/22 1,000
New York, New York
General Obligation,
Series E 500 5.300 08/01/03 514
New York, New York
General Obligation,
Series F 500 5.300 08/01/03 514
New York, New York
General Obligation,
Series H 750 5.250 08/01/03 769
New York State
Dormitory Authority
Revenue 450 5.000 04/01/03 456
New York State
Dormitory Authority
Revenue (a) 1,900 7.000 07/01/09 2,148
New York State
Dormitory Authority
Revenue (a) 845 5.500 08/01/09 873
New York State
Dormitory Authority
Revenue, Series 1 500 5.000 07/01/03 507
New York State
Dormitory Authority
Revenue, Series A 375 6.000 02/15/03 392
New York State
Dormitory Authority
Revenue, Series A 375 6.000 08/15/04 396
New York State
Dormitory Authority
Revenue, Series A (a) 1,000 4.300 08/15/04 986
New York State
Dormitory Authority
Revenue, Series B 745 4.500 02/15/03 741
New York State
Dormitory Authority
Revenue, Series E 1,000 5.500 02/15/03 1,028
New York State Energy
Research & Development
Authority Pollution
Control Revenue,
Series D (b) 200 3.800 10/01/29 200
New York State Urban
Development Corp.
Revenue, Series 7 125 5.500 01/01/01 127
----------
13,848
----------
NORTH CAROLINA - 0.7%
North Carolina Medical
Care Community
Hospital Revenue (a) 1,000 4.250 06/01/04 984
----------
OHIO - 2.8%
Franklin County, Ohio
Health Systems
Revenue (b) 100 2.550 07/01/15 100
Ohio State Building
Authority State
Facilities Administration
Building Fund
Revenue, Series A 600 5.250 10/01/03 619
Ohio State Building
Authority State
Facilities Arts
Facilities Building
Fund Revenue, Series A 1,000 5.500 10/01/03 1,041
Ohio State Elementary
and Secondary
Education Capital
Facilities Special
Obligation Revenue,
Series A 1,000 5.000 06/01/04 1,020
Perrysburg, Ohio
Exempt Village School
District, Series B 1,440 5.000 12/01/05 1,471
----------
4,251
----------
OKLAHOMA - 0.7%
Oklahoma State Capital
Improvement Authority
State Highway Capital
Improvement Revenue (a) 750 5.000 06/01/06 765
Stillwater, Oklahoma
Medical Center
Authority Revenue,
Series A 300 5.550 05/15/01 305
----------
1,070
----------
OREGON - 0.9%
Blue Mountain
Community College
District, Umatilla
County Oregon General
Obligation (a) 375 5.250 06/15/14 379
Oregon State
Department of
Administrative
Services Lottery
Revenue, Series A 1,000 5.000 04/01/06 1,020
----------
1,399
----------
14 Tax Exempt Bond Fund
<PAGE>
TAX EXEMPT BOND FUND
Statement of Net Assets, continued
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY $
--------- ------- ---------- --------
PENNSYLVANIA - 3.4%
Allegheny County,
Pennsylvania Hospital
Development Authority
Revenue (a) 750 5.200 10/01/05 769
Erie, Pennsylvania
Water Authority Water
Revenue (a) 420 4.300 12/01/04 414
Pennsylvania State
Higher Educational
Facilities Authority
Revenue, Series A 700 5.000 08/01/06 702
Philadelphia,
Pennsylvania
Hospitals & Higher
Education Facilities
Authority
Revenue, Series A 500 5.000 05/15/02 508
Philadelphia,
Pennsylvania Parking
Authority Revenue (a) 1,000 5.250 02/01/11 1,006
Philadelphia,
Pennsylvania Water &
Wastewater Revenue (a) 1,000 5.250 12/15/11 1,011
Scranton-Lackawanna,
Pennsylvania Health &
Welfare Authority
Revenue, Series A 700 7.375 07/15/08 757
----------
5,167
----------
RHODE ISLAND - 1.2%
Rhode Island Housing &
Mortgage Finance
Authority Housing
Revenue, Series A (a) 1,000 5.150 07/01/01 1,013
Rhode Island State
Health & Educational
Building Corp.
Revenue (a) 785 5.500 04/01/17 798
----------
1,811
----------
SOUTH CAROLINA - 0.9%
Columbia, South
Carolina Waterworks &
Sewer System Revenue,
Zero Coupon 1,000 0.000 02/01/04 811
Winnsboro, South
Carolina Utility
Revenue (a) 550 5.250 08/15/14 554
----------
1,365
----------
SOUTH DAKOTA - 1.0%
South Dakota Housing
Development Authority
Revenue, Series A 1,000 5.200 05/01/02 1,016
South Dakota Housing
Development Authority
Revenue, Series D 490 4.250 05/01/05 483
----------
1,499
----------
TENNESSEE - 2.7%
Memphis, Tennessee
General Obligation 1,230 5.250 07/01/02 1,263
Metropolitan
Government, Nashville
& Davidson Counties,
Tennessee Health &
Educational
Facilities Board
Revenue, Series A 920 5.000 11/01/06 930
Metropolitan
Government, Nashville
& Davidson Counties,
Tennessee Health &
Educational
Facilities Board
Revenue, Series A (a) 750 4.500 11/01/03 749
Metropolitan
Government, Nashville
& Davidson Counties,
Tennessee Health &
Educational
Facilities Board
Revenue, Series A (d) 615 5.250 05/01/01 628
White House Utility
District, Tennessee,
Robertson & Sumner
Counties Waterworks
Revenue, Zero Coupon,
Series B (a) 650 0.000 01/01/05 501
----------
4,071
----------
TEXAS - 10.4%
Arlington, Texas
Independent School
District General
Obligation 1,000 4.750 02/15/09 981
Dallas, Texas General
Obligation 990 5.000 02/15/06 1,011
Harris County, Texas
Health Facilities
Development Corp.
Hospital Revenue 500 5.000 06/01/04 506
Harris County, Texas
Health Facilities
Development Corp.
Hospital Revenue,
Series A 1,365 5.000 10/01/06 1,376
Tax Exempt Bond Fund 15
<PAGE>
TAX EXEMPT BOND FUND
Statement of Net Assets, continued
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY $
--------- ------- ---------- --------
Harris County, Texas
Health Facilities
Development Corp.
Hospital Revenue,
Series A (b) 455 2.600 02/15/27 455
Houston, Texas General
Obligation, Series A 650 5.000 03/01/02 662
Houston, Texas General
Obligation, Series C 1,000 5.900 03/01/03 1,037
Houston, Texas
Independent School
District General
Obligation, Series A 1,000 5.250 02/15/17 989
La Porte, Texas
Independent School
District General
Obligation 1,000 5.750 02/15/07 1,058
San Antonio, Texas
Electric & Gas Revenue 800 4.700 02/01/05 802
San Antonio, Texas
Electric & Gas
Revenue, Zero Coupon,
Series B (a) 1,000 0.000 02/01/04 808
San Antonio, Texas
General Obligation (d) 1,000 5.000 08/01/00 1,016
Texas, State of,
General Obligation,
Series A & C 1,685 5.000 08/01/05 1,720
Texas State Public
Finance Authority
Building Revenue,
Series B 1,000 5.000 02/01/05 1,016
Travis County, Texas
General Obligation 630 5.000 03/01/09 633
University of Texas,
University Revenues,
Series A 605 5.000 08/15/03 619
Wichita Falls, Texas
Independent School
District General
Obligation 865 5.000 02/01/05 874
----------
15,563
----------
UTAH - 3.0%
Intermountain Power
Agency, Utah Power
Supply Revenue,
Series E (d) 500 5.250 07/01/01 510
Intermountain Power
Agency, Utah Power
Supply Revenue,
Series C 1,000 4.700 07/01/02 1,009
Jordan, Utah School
District General
Obligation 1,050 5.000 06/15/05 1,076
Utah, State of,
General Obligation 850 5.000 07/01/02 870
Utah State Board of
Regents Revenue (a) 300 5.000 08/01/02 305
Utah State Board of
Regents Revenue (a) 700 5.500 08/01/05 727
----------
4,497
----------
VIRGINIA - 0.7%
Arlington County,
Virginia Industrial
Development Authority
Resource Recovery Revenue,
Series A 1,000 5.250 01/01/04 1,025
----------
WASHINGTON - 3.2%
CDP King County III,
Washington Lease
Revenue (a) 1,000 4.600 06/01/03 1,004
Washington, State of,
General Obligation,
Series A 1,060 6.500 07/01/04 1,151
Washington, State of,
General Obligation,
Series C 1,000 5.000 07/01/02 1,021
Washington State
Public Power Supply
System Nuclear
Project No. 3
Revenue, Series A 1,000 5.000 07/01/04 1,014
Washington State
Public Power Supply
System Nuclear
Project No. 2
Revenue, Series C 650 7.200 07/01/99 650
----------
4,840
----------
WISCONSIN - 2.2%
Chippewa Falls,
Wisconsin Area
University School
District General
Obligation 1,375 5.250 04/01/05 1,410
Wisconsin Rural Water
Construction Loan
Bond Anticipation
Notes (a) 1,850 4.250 09/15/00 1,857
----------
3,267
----------
TOTAL MUNICIPAL BONDS
(cost $149,747) 147,789
----------
16 Tax Exempt Bond Fund
<PAGE>
TAX EXEMPT BOND FUND
Statement of Net Assets, continued
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- --------
SHORT-TERM INVESTMENTS - 0.3%
Frank Russell Investment Company Money Market Fund,
due on demand (c) 399 399
----------
TOTAL SHORT-TERM INVESTMENTS 399
(cost $399) ----------
TOTAL INVESTMENTS - 98.8%
(identified cost $150,146) 148,188
OTHER ASSETS & LIABILITIES, NET - 1.2% 1,861
----------
NET ASSETS - 100.0% 150,049
==========
(a) Bond is insured by AMBAC, FGIC or MBIA.
(b) Adjustable or floating rate security.
(c) At cost, which approximates market.
(d) Forward commitment.
(e) 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. The rate is for descriptive purposes; effective
yield may vary.
Abbreviations:
AMBAC - AMBAC Indemnity Corporation
FGIC - Financial Guaranty Insurance Corporation
MBIA - Municipal Bond Investors Assurance
QUALITY RATINGS AS A % OF MARKET VALUE
AAA 59%
AA 26
A 6
BBB 9
--------
100%
========
ECONOMIC SECTOR EMPHASIS AS A % OF MARKET VALUE
General Obligation 32%
Health Care Revenue 21
Utility Revenue 10
State and Community Lease 8
Housing Revenue 5
University Revenue 4
Refunded & Special Obligation 2
Pollution Control Revenue 1
Other 17
--------
100%
========
See accompanying notes which are an integral part of the financial statements.
Tax Exempt Bond Fund 17
<PAGE>
TAX EXEMPT BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
ASSETS
Investments at market (identified cost $150,146).............. $ 148,188
Receivables:
Interest..................................................... 2,218
Investments sold............................................. 1,099
Fund shares sold............................................. 701
--------------
Total Assets............................................... 152,206
LIABILITIES
Payables:
Investments purchased.......................... $ 1,011
Investments purchased (delayed settlement)..... 1,019
Fund shares redeemed........................... 85
Accrued fees to affiliates..................... 42
-----------
Total Liabilities.......................................... 2,157
--------------
NET ASSETS................................................... $ 150,049
==============
NET ASSETS CONSIST OF:
Undistributed net investment income.......................... $ 510
Accumulated net realized gain (loss)......................... (654)
Unrealized appreciation (depreciation) on investments........ (1,958)
Shares of beneficial interest................................ 72
Additional paid-in capital................................... 152,079
--------------
NET ASSETS................................................... $ 150,049
==============
NET ASSET VALUE, offering and redemption price per share:
Class C ($134,530 divided by 6,453 shares of $.01 par value
shares of beneficial interest outstanding)................ $ 20.85
==============
Class E ($3,239,965 divided by 155,322 shares of $.01 par
value shares of beneficial interest outstanding)............ $ 20.86
==============
Class S ($146,674,303 divided by 7,030,054 shares of $.01
par value shares of beneficial interest outstanding)........ $ 20.86
==============
See accompanying notes which are an integral part of the financial statements.
18 Tax Exempt Bond Fund
<PAGE>
TAX EXEMPT BOND FUND
STATEMENT OF OPERATIONS
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
INVESTMENT INCOME
Interest..................................................... $ 3,036
EXPENSES
Advisory fees.................................. $ 205
Administrative fees............................ 34
Custodian fees................................. 35
Transfer agent fees............................ 42
Professional fees.............................. 8
Registration fees - Class S.................... 32
Shareholder servicing fees - Class E........... 1
Trustees' fees................................. 3
Miscellaneous.................................. 2
-----------
Total Expenses............................................. 362
--------------
Net investment income......................................... 2,674
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investments....................... 342
Net change in unrealized appreciation (depreciation) on (4,509)
investments................................................... --------------
Net realized and unrealized gain (loss)....................... (4,167)
--------------
Net increase (decrease) in net assets resulting from operations $ (1,493)
==============
See accompanying notes which are an integral part of the financial statements.
Tax Exempt Bond Fund 19
<PAGE>
TAX EXEMPT BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
------------------- -----------------
<S> <C> <C>
OPERATIONS
Net investment income............................................... $ 2,674 $ 4,119
Net realized gain (loss)............................................ 342 (141)
Net change in unrealized appreciation
(depreciation)...................................................... (4,509) 1,153
------------- --------------
Net increase (decrease) in net assets
resulting from operations......................................... (1,493) 5,131
------------- --------------
DISTRIBUTIONS
From net investment income
Class C........................................................... (1) --
Class E........................................................... (10) --
Class S........................................................... (2,153) (4,095)
In excess of net investment income
Class S........................................................... -- (59)
------------- --------------
Net decrease from distributions................................. (2,164) (4,154)
------------- --------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions....... 24,747 44,906
------------- --------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS.. 21,090 45,883
NET ASSETS
Beginning of period................................................. 128,959 83,076
------------- --------------
End of period (including undistributed net
investment income of $510 at June 30, 1999)...................... $ 150,049 $ 128,959
============= ==============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
20 Tax Exempt Bond Fund
<PAGE>
TAX EXEMPT BOND FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
-----------
NET ASSET VALUE, BEGINNING OF PERIOD............................ $ 21.38
-----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c)...................................... .16
Net realized and unrealized gain (loss) on investments......... (.52)
-----------
Total Income From Investment Operations...................... (.36)
-----------
DISTRIBUTIONS
From net investment income..................................... (.17)
-----------
NET ASSET VALUE, END OF PERIOD.................................. $ 20.85
===========
TOTAL RETURN (%)(a)............................................. (1.72)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands)..................... 135
Ratios to average net assets (%)(d):
Operating expenses........................................... --
Net investment income........................................ --
Portfolio turnover rate (%)(b)................................. 133.64
* For the period March 29, 1999 (commencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) Average month-end shares outstanding were used for this calculation.
(d) The ratios are not meaningful due to the Class's short period of
operations.
Tax Exempt Bond Fund 21
<PAGE>
TAX EXEMPT BOND FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
-----------
NET ASSET VALUE, BEGINNING OF PERIOD............................ $ 21.19
-----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c)...................................... .09
Net realized and unrealized gain (loss) on investments......... (.36)
-----------
Total Income From Investment Operations...................... (.27)
-----------
DISTRIBUTIONS
From net investment income..................................... (.06)
-----------
NET ASSET VALUE, END OF PERIOD.................................. $ 20.86
===========
TOTAL RETURN (%)(a)............................................. (1.26)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands)..................... 3,240
Ratios to average net assets (%)(d):
Operating expenses........................................... --
Net investment income........................................ --
Portfolio turnover rate (%)(b)................................. 133.64
* For the period May 14, 1999 (commencement of sale) to June 30, 1999
(Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) Average month-end shares outstanding were used for this calculation.
(d) The ratios are not meaningful due to the Class's short period of
operations.
22 Tax Exempt Bond Fund
<PAGE>
TAX EXEMPT BOND FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1999* 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 21.39 $ 21.19 $ 21.02 $ 21.24 $ 20.48 $ 21.45
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income
(c)................. .41 .81 .84 .85 .81 .86
Net realized and
unrealized gain
(loss) on
investments......... (.60) .19 .18 (.21) .77 (.97)
-------- -------- -------- -------- -------- --------
Total Income From
Investment
Operations.......... (.19) 1.00 1.02 .64 1.58 (.11)
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS
From net investment
income.............. (.34) (.80) (.85) (.86) (.82) (.86)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END
OF PERIOD.............. $ 20.86 $ 21.39 $ 21.19 $ 21.02 $ 21.24 $ 20.48
======== ======== ======== ======== ======== ========
TOTAL RETURN (%)(a).... (.93) 4.82 4.92 3.07 7.81 (.54)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of
period ($ in
thousands).......... 146,674 128,959 83,076 66,344 63,838 48,975
Ratios to average net
assets (%)(b):
Operating expenses .53 .72 .71 .75 .74 .72
Net investment
income.............. 3.92 3.80 3.99 4.02 3.91 4.14
Portfolio turnover
rate (%)(b)......... 133.64 74.42 40.79 74.34 73.91 71.71
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
Tax Exempt Bond Fund 23
<PAGE>
TAX FREE MONEY MARKET FUND
Statement of Net Assets
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
--------- --------- --------- --------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS - 101.2%
ALABAMA - 6.6%
Alabama Housing Financing Authority
Multi-family Housing Residential
Development, Series B, weekly
demand 1,725 3.650 (2) 12/01/14 1,725
Birmingham, Alabama Private
Educational Building Authority
Revenue,
weekly demand 5,500 3.700 (2) 04/01/13 5,500
Childersburg, Alabama Industrial
Development Board Pollution Control
Revenue 680 7.400 11/15/99 691
Mobile, Alabama Industrial
Development Board Pollution Control
Revenue, weekly demand 3,000 3.825 (2) 06/01/04 3,000
Tuscaloosa, Alabama Industrial
Development Board Revenue, weekly
demand 1,100 3.550 (2) 12/01/99 1,100
--------
12,016
--------
ARIZONA - 2.1%
Chandler, Arizona Industrial
Development Authority Revenue,
monthly demand 2,955 3.350 (3) 12/15/09 2,955
Maricopa County, Arizona Industrial
Development Authority Revenue,
weekly demand 550 3.850 (2) 10/01/04 550
Pinal County, Arizona Industrial
Development Authority Pollution
Control Revenue, daily demand 400 3.550 (1) 12/01/09 400
--------
3,905
--------
ARKANSAS - 0.1%
Greystone Tax-Exempt Certificate
Trust Revenue, Series 1998-1,
weekly demand (f) 210 3.780 (2) 05/01/28 210
--------
COLORADO - 2.0%
Central Platte Valley Metropolitan
District, Colorado Special
Obligation Revenue, Series 98 (a) 495 3.550 10/01/99 495
Colorado Housing Financing Authority
Multi-family Housing Revenue,
weekly demand 1,150 3.450 (2) 06/01/05 1,150
Colorado Housing Financing Authority
Multi-family Housing Revenue,
weekly demand 600 3.550 (2) 05/01/15 600
Denver, Colorado City and County
Multi-family Housing Revenue, daily
demand 1,350 3.550 (1) 12/01/09 1,350
--------
3,595
--------
DELAWARE - 0.4%
Delaware State Economic Development
Authority Multi-family Revenue,
weekly demand 650 3.600 (2) 12/01/15 650
--------
DISTRICT OF COLUMBIA - 2.2%
District of Columbia General
Obligation, Series B-1, daily
demand 1,200 3.700 (1) 06/01/03 1,200
District of Columbia General
Obligation, Series B-3, daily
demand 800 3.700 (1) 06/01/03 800
District of Columbia Revenue, weekly
demand 2,100 3.450 (2) 07/01/22 2,100
--------
4,100
--------
FLORIDA - 6.4%
Alachua County, Florida Industrial
Development Revenue, Series A,
monthly demand 375 3.500 (3) 01/01/12 375
Broward County, Florida Finance
Authority Multi-family Housing
Revenue, weekly demand 700 3.750 (2) 02/01/09 700
Fort Pierce, Florida Health Facility
Revenue, weekly demand 1,725 3.750 (2) 10/01/17 1,725
</TABLE>
24 Tax Free Money Market Fund
<PAGE>
TAX FREE MONEY MARKET FUND
Statement of Net Assets, continued
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Greystone Tax-Exempt Certificate
Trust Revenue, Series 1998-1,
weekly demand (f) 318 3.780 (2) 05/01/28 318
Orange County, Florida Educational
Facilities Authority Revenue,
Series 1998, weekly demand 300 3.750 (2) 05/01/25 300
Orange County, Florida Industrial
Development Authority Revenue,
monthly demand 1,100 4.250 (3) 01/01/11 1,100
Orange County, Florida Industrial
Development Authority Revenue,
semiannual demand 3,055 3.200 (5) 10/01/15 3,055
Orange County, Florida Industrial
Development Authority Revenue,
Series A, weekly demand 1,000 3.750 (2) 02/01/16 1,000
Orange County, Florida Multi-family
Housing Finance Authority Revenue,
semiannual demand 1,800 3.550 (5) 10/01/07 1,800
Palm Beach County, Florida Economic
Development Revenue, weekly demand 1,200 3.750 (2) 01/01/24 1,200
----------
11,573
----------
GEORGIA - 6.8%
Cobb County, Georgia Housing
Authority Multi-family Housing Revenue,
weekly demand 1,000 3.350 (2) 06/01/25 1,000
Fulton County, Georgia Development
Authority Revenue, weekly demand 600 3.750 (2) 12/01/16 600
Georgia State Hospital Financing
Authority Revenue, daily demand 200 3.550 (1) 03/01/01 200
Greystone Tax-Exempt Certificate
Trust Revenue, Series 1998-1,
weekly demand (f) 1,064 3.780 (2) 05/01/28 1,064
Gwinnett County, Georgia Development
Authority Revenue, weekly demand 135 3.750 (2) 03/01/17 135
La Grange, Georgia Water & Sewage
Revenue (pre-refunded 01/01/00)(b) 1,000 7.375 01/01/12 1,040
Marietta, Georgia Housing Authority
Multi-family Housing Revenue,
weekly demand 2,500 3.475 (2) 01/01/08 2,500
Municipal Electric Authority,
Georgia Revenue, weekly demand 3,400 3.500 (2) 01/01/22 3,400
Residential Apartments I Portfolio
CERT Trust 1996, Series A,
weekly demand (e) 720 3.800 (2) 12/01/02 720
Savannah, Georgia Housing Authority
Multi-family Housing Revenue,
Series B, weekly demand 1,000 3.350 (2) 06/15/26 1,000
Walton County, Georgia Development
Authority Industrial Development
Revenue, Series B, weekly demand 800 3.750 (2) 06/01/04 800
----------
12,459
----------
ILLINOIS - 10.0%
De Kalb, Illinois Industrial
Development Revenue, Series C,
weekly demand 500 3.650 (2) 02/01/01 500
East Peoria, Illinois Multi-family
Housing Authority, weekly demand 1,690 3.950 (2) 06/01/08 1,690
Hoffman Estates, Illinois Park
District General Obligation 855 4.150 12/01/99 857
Illinois Development Finance
Authority Revenue, quarterly demand 700 3.500 (4) 08/01/25 700
Illinois Development Finance
Authority Revenue, weekly demand 2,048 3.650 (2) 09/01/26 2,048
Illinois Educational Facilities
Authority Revenue, weekly demand 200 3.700 (2) 03/01/27 200
Illinois Health Facilities Authority
Revenue, Series A, weekly demand 4,000 3.600 (2) 02/15/16 4,000
Illinois Health Facilities Authority
Revenue, Series B, weekly demand 2,000 3.400 (2) 08/15/22 2,000
Illinois State Certificate of
Participation (a) 1,005 4.500 07/01/00 1,013
Illinois State Certificate of
Participation, Series A (a) 540 4.900 07/01/99 540
St. Clair County, Illinois
Industrial Development Board
Revenue, Series 94, weekly demand 1,000 3.850 (2) 10/01/15 1,000
Troy Grove, Illinois Revenue, weekly
demand 750 4.572 (2) 05/01/10 750
</TABLE>
Tax Free Money Market Fund 25
<PAGE>
TAX FREE MONEY MARKET FUND
Statement of Net Assets, continued
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Winnebago & Boone Counties, Illinois
School District Number 205 Tax
Anticipation Warrants 3,000 5.400 10/29/99 3,009
----------
18,307
----------
INDIANA - 3.5%
Fort Wayne, Indiana Economic
Development Revenue, Series 83,
weekly demand 1,000 3.825 (2) 12/01/03 1,000
Indiana Secondary Market Educational
Loans, Inc. Revenue 500 5.300 09/01/99 502
Indiana Secondary Market Educational
Loans, Inc. Revenue, Series A (a) 500 7.000 12/01/99 507
Indiana State Educational Facilities
Authority Revenue, Series B, weekly
demand 800 3.700 (2) 06/01/28 800
Mishawaka, Indiana Waterworks
Revenue Bond Anticipation Notes,
Series A 2,000 4.200 08/12/99 2,000
Penn Harris Madison, Indiana School
Corporation 850 3.350 12/31/99 850
Residential Apartments I Portfolio
CERT Trust 1996, Series A,
weekly demand (e) 740 3.800 (2) 12/01/02 740
----------
6,399
----------
IOWA - 1.9%
Residential Apartments I Portfolio
CERT Trust 1996, Series A,
weekly demand (e) 540 3.800 (2) 12/01/02 540
Storm Lake, Iowa Private College
Revenue, weekly demand 2,900 3.750 (2) 12/01/03 2,900
----------
3,440
----------
KANSAS - 1.4%
Derby, Kansas Waterworks Utility
System Revenue, Series 1 1,450 4.500 01/15/00 1,450
Greystone Tax-Exempt Certificate
Trust Revenue, Series 1998-1,
weekly demand (f) 158 3.780 (2) 05/01/28 158
Kansas State Development Finance
Authority Health Facilities
Revenue, Series M, daily demand (a) 1,000 3.650 (1) 11/15/23 1,000
----------
2,608
----------
KENTUCKY - 1.4%
Elsmere, Kentucky Industrial
Building Revenue, semiannual
demand 530 3.350 (5) 02/01/06 530
Kentucky Area Development Districts
Financing Lease Program Revenue,
Sereis E2, weekly demand 490 3.850 (2) 12/01/31 490
Kentucky Development Finance
Authority Revenue 845 6.000 11/01/99 853
Louisville, Kentucky Industrial
Development Revenue, weekly demand 750 3.600 (2) 09/01/01 750
----------
2,623
----------
MARYLAND - 2.5%
Anne Arundel County, Maryland
Industrial Development Revenue,
Series C, weekly demand 2,260 3.650 (2) 02/01/01 2,260
Maryland State Health & Higher
Educational Facilities Authority
Revenue, Series B, weekly demand 1,400 3.400 (2) 04/01/35 1,400
Montgomery County, Maryland
Industrial Development Revenue,
monthly demand 800 4.250 (3) 04/01/14 800
----------
4,460
----------
MASSACHUSETTS - 1.8%
New England Educational Loan
Marketing Corporation,
Massachusetts Revenue, Series E 3,190 5.000 07/01/99 3,190
----------
</TABLE>
26 Tax Free Money Market Fund
<PAGE>
TAX FREE MONEY MARKET FUND
Statement of Net Assets, continued
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
--------- --------- --------- --------
<S> <C> <C> <C> <C>
MICHIGAN - 4.7%
Cedar Springs, Michigan Public
School District State Aid Notes,
General Obligation 1,700 4.500 08/23/99 1,701
Lansing, Michigan Economic
Development Corporation, semiannual
demand 1,925 3.250 (5) 05/01/15 1,925
Livonia, Michigan Economic
Development Corporation, semiannual
demand 240 3.800 (5) 11/15/04 240
McDonald Tax-Exempt Mortgage Bond
Trust, thirteen month demand (d) 101 3.450 (7) 01/15/09 101
Meridian, Michigan Economic
Development, monthly demand 455 3.350 (3) 11/15/14 455
Michigan State Housing Development
Authority Limited Obligation
Revenue, weekly demand 800 3.825 (2) 06/01/04 800
Michigan State Job Development
Authority Revenue, monthly demand 1,300 3.500 (3) 11/01/14 1,300
Northville Township, Michigan
Economic Development Corporation,
Limited Obligation Revenue, Series
P, weekly demand 500 3.825 (2) 05/01/14 500
Oakland County, Michigan Economic
Development Corporation, Limited
Obligation Revenue, semiannual
demand 520 3.400 (5) 08/01/15 520
Parchment, Michigan School District
State Anticipation Notes 1,000 4.250 08/26/99 1,000
----------
8,542
----------
MINNESOTA - 7.4%
Burnsville, Minnesota Industrial
Development Revenue, Series C,
weekly demand 350 3.650 (2) 02/01/01 350
Capital Realty Investment Tax-Exempt
Fund, Series 96-1, weekly demand 8,535 3.760 (2) 12/01/04 8,535
Mendota Heights, Minnesota
Commercial Development, weekly
demand 1,550 3.750 (2) 12/01/15 1,550
Minnesota State Revenue, Series A (a) 980 5.000 06/30/00 993
St. Paul, Minnesota Port Authority
Industrial Development Revenue,
Series 1, weekly demand 2,000 3.800 (2) 06/01/19 2,000
----------
13,428
----------
MISSISSIPPI - 0.2%
DeSoto County, Mississippi
Industrial Development Revenue,
weekly demand 400 4.572 (2) 12/01/08 400
----------
MISSOURI - 4.9%
Clayton, Missouri Industrial
Development Authority Revenue,
weekly demand 1,000 3.900 (2) 01/01/09 1,000
Kansas City, Missouri Industrial
Development Authority Multi-family
Housing Revenue, weekly demand 3,900 3.850 (2) 10/01/15 3,900
St. Charles County, Missouri
Industrial Development Authority
Revenue, weekly demand 2,300 3.720 (2) 12/01/27 2,300
St. Louis, Missouri Industrial
Development Authority Revenue,
Series C, weekly demand 965 3.650 (2) 02/01/01 965
St. Louis, Missouri Industrial
Development Authority Revenue,
Series C-1, weekly demand 700 4.150 (2) 08/30/99 700
----------
8,865
----------
NEBRASKA - 0.2%
Douglas County, Nebraska Data
Equipment Corporation Equipment
Revenue 275 3.750 11/01/99 275
----------
NEVADA - 0.7%
Reno, Nevada Hospital Revenue,
Series B (pre-refunded 01/01/00) (b) 1,100 7.750 07/01/15 1,142
Washoe County, Nevada General
Obligation (a) 100 8.250 06/01/00 104
----------
1,246
----------
</TABLE>
Tax Free Money Market Fund 27
<PAGE>
TAX FREE MONEY MARKET FUND
Statement of Net Assets, continued
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
--------- --------- --------- --------
<S> <C> <C> <C> <C>
NEW HAMPSHIRE - 0.6%
New Hampshire Higher Education &
Health Facilities Authority Revenue
(pre-refunded 12/01/99)(b) 1,000 9.750 12/01/19 1,058
----------
NEW JERSEY - 0.5%
North Hudson Sewer Authority, New
Jersey Tax-Exempt Notes 900 4.250 03/31/00 900
----------
NEW YORK - 1.0%
North Hempstead, New York Bond
Anticipation Notes 1,800 4.000 07/29/99 1,800
----------
NORTH CAROLINA - 0.2%
Beaufort County, North Carolina
Industrial Facility & Pollution
Control Revenue, Series 85, weekly
demand 300 3.800 (2) 12/01/00 300
----------
OHIO - 5.1%
Bellevue, Ohio Hospital Facilities
Revenue, quarterly demand 330 3.250 (4) 03/01/17 330
Buckeye, Ohio Tax-Exempt Mortgage
Bond Trust, seminannual demand 265 3.400 (5) 02/01/05 265
Cincinnati & Hamilton County, Ohio
Port Authority Economic Development
Revenue, quarterly demand 760 3.100 (4) 09/01/99 760
Clermont County, Ohio Economic
Development Revenue, semiannual
demand 425 3.300 (5) 12/01/09 425
Clermont County, Ohio Economic
Development Revenue, semiannual
demand 560 3.100 (5) 05/01/12 560
Clermont County, Ohio Hospital
Facilities Revenue, Series A
(pre-refunded 09/01/99)(a)(b) 700 7.500 09/01/19 719
Columbus, Ohio Electric System
Revenue, monthly demand 1,300 3.000 (3) 09/01/09 1,300
East Muskingum, Ohio Water Revenue
Anticipation Notes 1,000 4.320 06/22/00 1,003
Franklin County, Ohio Industrial
Development Revenue, seminannual
demand 140 3.300 (5) 11/01/15 140
Mahoning County, Ohio Industrial
Development Revenue, Series A,
weekly demand 5 3.650 (2) 10/01/00 5
Mahoning County, Ohio Industrial
Development Revenue, Series B,
weekly demand 25 3.650 (2) 10/01/00 25
McDonald Tax-Exempt Mortgage Bond
Trust, thirteen month demand (d) 473 3.450 (7) 01/15/09 473
Ohio State Higher Educational
Facilities Community College
Revenue, weekly demand 585 3.550 (2) 09/01/20 585
Scioto County, Ohio Health Care
Facilities Revenue, semiannual
demand 670 3.250 (5) 12/01/15 670
Stark County, Ohio Health Care
Facilities, quarterly demand 1,595 3.050 (4) 09/15/16 1,595
Trumbull County, Ohio Industrial
Development Revenue, Series A,
weekly demand 420 3.650 (2) 04/01/04 420
----------
9,275
----------
OKLAHOMA - 1.8%
Muskogee, Oklahoma Industrial Trust
Revenue, weekly demand 1,990 3.700 (2) 12/01/15 1,990
Tulsa County, Oklahoma Industrial
Authority Health Care Revenue,
semiannual demand 1,250 3.350 (5) 12/15/08 1,250
----------
3,240
----------
OREGON - 3.9%
Hillsboro, Oregon Revenue, weekly
demand 1,850 3.650 (2) 08/01/11 1,850
Medford, Oregon Hospital Facilities
Authority Revenue, weekly demand 5,300 3.625 (2) 05/15/27 5,300
----------
7,150
----------
</TABLE>
28 Tax Free Money Market Fund
<PAGE>
TAX FREE MONEY MARKET FUND
Statement of Net Assets, continued
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
PENNSYLVANIA - 2.6%
Berks County, Pennsylvania
Industrial Development Authority,
weekly demand 1,750 3.825 (2) 12/01/04 1,750
McDonald Tax-Exempt Mortgage Bond
Trust, thirteen month demand (d) 101 3.450 (7) 01/15/09 101
Northampton County, Pennsylvania
Higher Education Authority Revenue
(pre-refunded 11/15/99)(a)(b) 860 7.100 11/15/09 889
Shaler Township, Pennsylvania Tax
Anticipation Notes 2,000 3.200 12/31/99 2,000
----------
4,740
----------
SOUTH CAROLINA - 0.3%
Edgefield County, South Carolina
School District General Obligation 565 5.750 02/01/00 573
----------
SOUTH DAKOTA - 0.8%
Sioux Falls, South Dakota Industrial
Development Revenue, weekly demand 1,470 3.550 (2) 06/01/06 1,470
----------
TENNESSEE - 3.6%
Franklin County, Tennessee Health &
Educational Facilities Revenue,
monthly demand 1,610 4.250 (3) 09/01/10 1,610
Greystone Tax-Exempt Certificate
Trust Revenue, Series 1998-1,
weekly demand (f) 1,190 3.780 (2) 05/01/28 1,190
Knox County, Tennessee Industrial
Development Revenue, monthly demand 2,700 3.450 (3) 12/01/14 2,700
Tusculum, Tennessee Health
Educational & Housing Facilities
Revenue, weekly demand 1,000 3.750 (2) 07/01/15 1,000
----------
6,500
----------
TEXAS - 3.5%
Big Spring, Texas Independent School
District General Obligation 260 8.250 08/15/99 262
Burleson, Texas Independent School
District General Obligation 240 7.500 08/01/99 241
Harlingen, Texas Construction
Independent School District General
Obligation (pre-refunded
08/15/99)(a)(b) 300 6.750 08/15/04 301
Harris County, Texas Health
Facilities Development Corporation
Revenue,
Series A, weekly demand 700 3.500 (2) 11/01/25 700
Houston, Texas Hotel Occupancy
Revenue, Series A (a) 500 7.000 07/01/99 500
Hurst, Euless & Bedford, Texas
Independent School District General
Obligation, Series 1991
(pre-refunded 08/15/99)(b) 620 6.500 08/15/04 635
Tarrant County, Texas Housing
Finance Corporation Revenue,
daily demand 3,770 3.600 (1) 12/01/07 3,770
----------
6,409
----------
VIRGINIA - 3.4%
Greystone Tax-Exempt Certificate
Trust Revenue, Series 1998-1,
weekly demand (f) 560 3.780 (2) 05/01/28 560
Harrisonburg, Virginia Redevelopment
& Housing Authority Multi-family
Housing Revenue, annual demand 1,000 3.200 (6) 02/01/26 1,000
Harrisonburg, Virginia Redevelopment
& Housing Authority Multi-family
Housing Revenue, Series A,
annual demand 3,495 3.200 (6) 02/01/26 3,495
Norfolk, Virginia Industrial
Development Authority Industrial
Development Revenue, weekly demand 1,075 3.825 (2) 03/01/16 1,075
----------
6,130
----------
</TABLE>
Tax Free Money Market Fund 29
<PAGE>
TAX FREE MONEY MARKET FUND
Statement of Net Assets, continued
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
--------- --------- --------- --------
<S> <C> <C> <C> <C>
WASHINGTON - 1.9%
King County, Washington School
District Number 403 Renton General
Obligation 680 4.000 12/01/99 682
Washington State Housing Finance
Commission Nonprofit Housing
Revenue, daily demand 100 4.150 (1) 01/01/27 100
Washington State Housing Finance
Commission Nonprofit Housing
Revenue, daily demand 900 4.700 (1) 05/01/27 900
Washington State Housing Finance
Commission Nonprofit Housing
Revenue, weekly demand 685 3.750 (2) 07/01/11 685
Washington State Public Power Supply
System Nuclear Project Number 1
Revenue, Series B (pre-refunded
01/01/00)(b) 1,000 7.250 07/01/03 1,040
----------
3,407
----------
WEST VIRGINIA - 0.6%
Marshall County, West Virginia
Pollution Control Revenue, weekly demand 1,000 3.800 (2) 03/01/26 1,000
----------
WISCONSIN - 4.2%
Fall Creek, Wisconsin School
District Tax & Revenue Anticipation
Notes 890 3.810 09/30/99 890
Hartford, Wisconsin Joint School
District Number 1, Tax & Revenue
Anticipation Promisory Notes 1,000 3.530 10/29/99 1,000
Minocqua, Hazelhurst and Lake
Tomahawk, Wisconsin Joint School
District Number 1, Tax & Revenue
Anticipation Promisory Notes 850 3.820 08/31/99 850
Northern Ozaukee School District,
Wisconsin Bond Anticipation Notes 1,500 3.400 02/01/00 1,500
Richfield, Wisconsin Joint School
District Number 1, Tax & Revenue
Anticipation Promisory Notes 400 3.680 10/29/99 400
Wisconsin School Districts Temporary
Borrowing Program Certificate
Participation, Series B2 1,000 3.900 10/08/99 1,000
Wittenberg-Birnamwood, Wisconsin
School District Tax & Revenue
Anticipation Promisory Note 2,000 3.920 09/30/99 2,000
----------
7,640
----------
TOTAL INVESTMENTS - 101.2%
(amortized cost $183,883)(c) 183,883
OTHER ASSETS AND LIABILITIES, NET - (2,246)
(1.2%) ----------
181,637
NET ASSETS - 100.0% ==========
</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. The rate noted is for descriptive purposes;
effective yield may vary.
(c) The cost for federal income tax purposes is the same as shown above.
(d) Multi-State bond issue including Michigan, Ohio and Pennsylvania.
(e) Multi-State bond issue including Georgia, Indiana, and Iowa.
(f) Multi-State bond issue including Arkansas, Florida, Georgia, Kansas,
Tennessee, and Virginia.
* 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) Annual
(7) Thirteen-month
See accompanying notes which are an integral part of the financial statements.
30 Tax Free Money Market Fund
<PAGE>
TAX FREE MONEY MARKET FUND
Statement of Net Assets, continued
JUNE 30, 1999 (UNAUDITED)
QUALITY RATINGS AS A % OF MARKET VALUE++
VMIG1 or SP-1 73%
P1 27
-----------
100%
===========
ECONOMIC SECTOR EMPHASIS AS A % OF MARKET VALUE
Housing Revenue 22%
General Obligation 21
Industrial Revenue Bonds 19
Education Revenue 18
Healthcare Revenue 13
Utility Revenue 4
Pollution Control Revenue 3
-----------
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."
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."
See accompanying notes which are an integral part of the financial statements.
Tax Free Money Market Fund 31
<PAGE>
TAX FREE MONEY MARKET FUND
Statement of Assets and Liabilities
Amounts in thousands (except per share amounts) JUNE 30, 1999 (UNAUDITED)
ASSETS
Investments at amortized cost which approximates market.......... $ 183,883
Receivables:
Interest........................................................ 1,610
Investments sold................................................ 39
-------------
Total Assets.................................................. 185,532
LIABILITIES
Payables:
Dividends....................................... $ 18
Due to Custodian................................ 100
Investments purchased........................... 3,642
Accrued fees to affiliates...................... 68
Other accrued expenses.......................... 67
------------
Total Liabilities............................................. 3,895
-------------
NET ASSETS ...................................................... $ 181,637
=============
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss)............................. $ (5)
Shares of beneficial interest.................................... 1,816
Additional paid-in capital....................................... 179,826
-------------
NET ASSETS....................................................... $ 181,637
=============
NET ASSET VALUE, offering and redemption price per share:
($181,637,110 divided by 181,642,296 shares of $.01 par value
shares of beneficial interest outstanding).................... $ 1.00
=============
See accompanying notes which are an integral part of the financial statements.
32 Tax Free Money Market Fund
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF OPERATIONS
Amounts in thousands FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
INVESTMENT INCOME
Interest..................................................... $ 3,092
EXPENSES
Advisory fees................................... $ 185
Administrative fees............................. 46
Custodian fees.................................. 24
Transfer agent fees............................. 58
Professional fees............................... 6
Registration fees............................... 30
Trustees' fees.................................. 3
Miscellaneous................................... 8
------------
Expenses before reductions...................... 360
Expense reductions.............................. (92)
------------
Expenses, net.............................................. 268
--------------
Net investment income......................................... 2,824
--------------
Net increase in net assets resulting from operations.......... $ 2,824
==============
See accompanying notes which are an integral part of the financial statements.
Tax Free Money Market Fund 33
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
----------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income.......................... $ 2,824 $ 5,654
Net realized gain (loss)....................... -- (5)
---------------- -----------------
Net increase in net assets resulting from
operations................................... 2,824 5,649
---------------- -----------------
DISTRIBUTIONS
From net investment income..................... (2,824) (5,654)
---------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from
share transactions............................. (13,026) 63,943
---------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS..... (13,026) 63,938
---------------- -----------------
NET ASSETS
Beginning of period............................ 194,663 130,725
---------------- -----------------
End of period.................................. $ 181,637 $ 194,663
================ =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
34 Tax Free Money Market Fund
<PAGE>
TAX FREE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1999* 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- --------
<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....................... .0152 .0331 .0355 .0329 .0370 .0279
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS
From net investment
income.................................... (.0152) (.0331) (.0355) (.0329) (.0370) (.0279)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END
OF PERIOD.................................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ======== ======== ======== ========
TOTAL RETURN (%)(a).......................... 1.53 3.36 3.61 3.35 3.76 2.83
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($ in thousands).. 181,637 194,663 130,725 102,207 78,000 100,819
Ratios to average net assets (%)(b):
Operating expenses, net (c)............... .29 .34 .28 .42 .48 .40
Operating expenses, gross (c)............. .39 .44 .38 .42 .48 .40
Net investment income..................... 3.06 3.29 3.55 3.28 3.69 2.84
</TABLE>
* For the six months ended June 30, 1999 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1999 are annualized.
(c) See Note 4 for current period amounts.
Tax Free Money Market Fund 35
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
TAX ADVANTAGED FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 (Unaudited)
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company") is a series
mutual fund with 27 different investment portfolios, referred to as
"Funds." These financial statements report on three 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.
At its meeting on April 27, 1998, the Investment Company's Board of
Trustees approved a plan to rename the "Limited Volatility Tax Free Fund"
the "Tax Exempt Bond Fund." The change was approved by the shareholders at
a meeting on November 19, 1998 and became effective January 15, 1999.
Effective May 18, 1998, pursuant to approval of the Investment Company's
Board of Trustees, Class C shares were renamed Class E shares. As of
February 18, 1999, the Tax Exempt Bond Fund made available Class E shares.
As of March 3, 1999, the Tax Exempt Bond Fund made available 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 E shares are
charged a shareholder servicing fee of 0.25% of average daily net assets.
Class S shares which are reported herein are charged no such fees. Prior to
May 18, 1998, Class E shares were charged a 12b-1 distribution fee and a
shareholder servicing fee of 0.40% and 0.25% of average net assets,
respectively.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds' financial statements a re prepared in accordance with generally
accepted accounting principles ("GAAP") 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 Tax Free Money Market Fund's portfolio investments are valued in
accordance with Rule 2a-7 of the Investment Company Act of 1940, as
amended, 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 short-term investments maturing within 60 days
of the valuation date held by Funds other than the Tax Free Money Market
Fund are also valued at amortized cost unless the Board of Trustees
determines that amortized cost does not represent fair value.
Municipal investments of the Tax Exempt Bond 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 specific identified cost incurred by each money
manager within a particular fund.
36 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
TAX ADVANTAGED FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1999 (Unaudited)
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded on the accrual basis.
AMORTIZATION AND ACCRETION: All premiums and discounts, including original
issue discounts, for the Funds 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.
At December 31, 1998, 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>
12/31/99 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 Totals
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Equity T $ -- $ -- $ -- $ -- $ -- $655,772 $655,772
Tax Exempt Bond 383,404 345,504 110,634 15,075 -- 141,152 995,769
Tax Free Money Market -- -- -- -- 1,583 4,102 5,685
</TABLE>
The aggregate cost of investments and the composition of gross unrealized
appreciation and depreciation of investment securities for federal income
tax purposes for certain Funds as of June 30, 1999 were as follows:
<TABLE>
<CAPTION>
NET
GROSS GROSS UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Equity T $ 331,745,490 $ 120,340,720 $ (3,558,722) $ 116,781,998
Tax Exempt Bond 150,145,622 586,839 (2,544,947) (1,958,108)
</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
Tax Exempt Bond Fund and annually for the Equity T Fund. The Tax Free Money
Market Fund declares and records dividends daily and pays 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.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from 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 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 ("FRIMCo" or "Advisor"). 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 E shares will pay shareholder
servicing fees along with other expenses that may be attributable to that
Class. Prior to May 18, 1998, Class E shares paid a 12b-1 distribution fee.
Class C shares will pay a 12b-1 distribution fee as well as shareholder
servicing fees along with other expenses that may be attributable to that
class.
DEFERRED ORGANIZATION EXPENSES: Organization and initial registration costs
of the Equity T Fund have been deferred and are being amortized over 60
months on a straight-line basis.
Notes to Financial Statements 37
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
TAX ADVANTAGED FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1999 (Unaudited)
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.
FUTURES CONTRACTS: 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 period ended June 30, 1999, purchases and sales of
investment securities (excluding U.S. Government and Agency obligations,
short-term investments, options, futures and repurchase agreements) were as
follows:
PURCHASES SALES
------------ -----------
Equity T $175,026,722 $76,566,388
Tax Exempt Bond 114,709,693 89,905,599
Tax Free Money Market purchases, sales and maturities of short-term
tax-exempt obligations were $158,108,197, $160,355,000 and $15,475,000,
respectively.
4. RELATED PARTIES
ADVISOR: FRIMCo operates and administers all of the Funds which comprise
the Investment Company. FRIMCo is a wholly owned subsidiary of Frank
Russell Company, a wholly owned subsidiary of The Northwestern Mutual Life
Insurance Company. Frank Russell Company 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 period ended June 30, 1999, the advisory fee paid to FRIMCo, for
the Funds listed below, in accordance with the Investment Company's
Advisory Agreement with that firm, amounted to $1,661,945 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.
Effective December 1, 1998, the advisory fee annual rates were reduced by
the Administrator fee of .05%, the new rates are:
ANNUAL RATE
-------------
Equity T 0.70%
Tax Exempt Bond 0.30
Tax Free Money Market 0.20
The Advisor has contractually agreed to waive a portion of its 0.70%
advisory 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. There were
no waivers by the Advisor for the period ended June 30, 1999.
The Advisor has contractually agreed to waive 0.10% of its 0.20% advisory
fee for the Tax Free Money Market Fund. The amount of such waiver for the
period ended June 30, 1999 was $92,438.
38 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
TAX ADVANTAGED FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1999 (Unaudited)
FRIMCo calculates its advisory fee based on average daily net assets for
each Fund less any advisory fee incurred on assets invested in the Money
Market Fund (see Note 5) thereby eliminating any duplication of fees.
ADMINISTRATOR: Effective December 1, 1998, the Investment Company's Board
of Trustee approved a plan to pay a 0.05% fee of the average daily net
assets of the fund to FRIMCo, in accordance with the Investment Company's
Advisory agreement with that firm. The fee paid to FRIMCo for the Funds
listed for the period ended June 30, 1999 were $171,441 before waivers.
ANALYTIC SERVICES: Fees for analytic services provided to the Funds are
paid or accrued to Russell/Mellon Analytical Services, an affiliate of the
Investment Company. Russell/Mellon Analytical Services provides TruVP
System to the Funds, pursuant to a written Service Agreement. The TruVP
System provides analytics used by the investment department.
TRANSFER AGENT: The Funds have a contract with FRIMCo to provide transfer
agent services to the Investment Company. Total fees for the Funds listed
for the period ended June 30, 1999 were $101,518.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has a
Distribution Plan pursuant to Rule 12b-1 (the "Plan") under the 1940 Act.
Under this Plan, the Investment Company was authorized to make payments to
the Russell Fund Distributors (the "Distributor") which is a wholly-owned
subsidiary of FRIMCo, 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 were primarily intended to result in the sale of
the Class C shares subject to the Distribution Plan. The 12b-1 distribution
payments shall not exceed 0.75% of the average daily net assets of a Fund's
Class C shares on an annual basis.
In addition, the Investment Company has adopted a Shareholder Services Plan
(the "Services Plan") under which the Funds 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 E and Class C shares of the Funds. The shareholder
servicing payments shall not exceed 0.25% of the average daily net assets
of a Fund' s Class E and Class C shares on an annual basis.
ACCRUED FEES PAYABLE TO AFFILIATES AS OF JUNE 30, 1999 WERE AS FOLLOWS:
<TABLE>
<CAPTION>
SHAREHOLDER
SERVICING &
ADVISORY ADMINISTRATION TRANSFER DISTRIBUTION
FEES FEES AGENT FEES FEES TOTALS
---------- -------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Equity T $ 224,363 $ 17,556 $ 730 $ --- $ 242,649
Tax Exempt Bond 34,376 6,139 1,089 789 42,393
Tax Free Money Market 14,672 7,336 46,099 --- 68,107
---------- -------------- ---------- ------------ -----------
$ 273,411 $ 31,031 $ 47,918 $ 789 $ 353,149
========== ============== ========== ============ ===========
</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 for the Funds listed for the period ended
June 30, 1999 were $8,105, and were allocated to each Fund and Class, where
appropriate, on a pro rata basis, including 24 other affiliated Funds not
presented herein.
5. MONEY MARKET FUND
The Equity T Fund is permitted to invest its 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, 1999, $4,882,000 of the Money Market Fund's net assets
represents investments by this Fund and $849,684,000 represents the
investments of other affiliated Funds not presented herein.
Notes to Financial Statements 39
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
TAX ADVANTAGED FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1999 (Unaudited)
6. FUND SHARE TRANSACTIONS
Share transactions for the period ended June 30, 1999 and year ended
December 31, 1998 were as follows:
SHARES DOLLARS (000)
-------------------------- --------------------------
1999 1998 1999 1998
EQUITY T FUND ----------- ------------ ------------ ------------
Proceeds from shares
sold 6,128,600 10,018,318 $ 118,044 $ 157,138
Proceeds from
reinvestment
of distributions -- 66,849 -- 1,142
Payments for shares
redeemed (800,522) (1,253,400) (15,545) (19,677)
Total increase ----------- ------------ ------------ ------------
(decrease) 5,328,078 8,831,767 $ 102,499 $ 138,603
=========== ============ ============ ============
TAX EXEMPT BOND FUND
CLASS S
Proceeds from shares
sold 2,426,538 3,941,290 $ 52,367 $ 83,966
Proceeds from
reinvestment
of distributions 75,353 140,598 1,605 2,994
Payments for shares
redeemed (1,500,207) (1,973,744) (32,655) (42,054)
Net increase ----------- ------------ ------------ ------------
(decrease) 1,001,684 2,108,144 21,317 44,906
=========== ============ ============ ============
TAX EXEMPT BOND FUND
CLASS E (a)
Proceeds from shares
sold 164,530 -- 3,486 --
Proceeds from
reinvestment
of distributions 81 -- 2 --
Payments for shares
redeemed (9,289) -- (196) --
Net increase ----------- ------------ ------------ ------------
(decrease) 155,322 -- 3,292 --
=========== ============ ============ ============
TAX EXEMPT BOND FUND
CLASS C (b)
Proceeds from shares
sold 6,407 -- 137 --
Proceeds from
reinvestment
of distributions 46 -- 1 --
Payments for shares -- -- -- --
redeemed
----------- ------------ ------------ ------------
Total net increase 6,453 -- 138 --
(decrease) ----------- ------------ ------------ ------------
1,163,459 2,108,144 $ 24,747 $ 44,906
=========== ============ ============ ============
(a) Share transactions for Class E for the period ended June 30, 1999 are for
the period May 14, 1999 (commencement of sale of shares) to June 30, 1999.
(b) Share transactions for Class C for the period ended June 30, 1999 are for
the period March 29, 1999 (commencement of sale of shares) to June 30,
1999.
40 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
TAX ADVANTAGED FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1999 (Unaudited)
ON A CONSTANT DOLLAR BASIS (000)
-------------------------------
1999 1998
TAX FREE MONEY MARKET FUND ------------ ------------
Proceeds from shares sold 135,346 367,890
Proceeds from reinvestment
of distributions 2,180 3,258
Payments for shares redeemed (150,552) (307,205)
------------ ------------
Total net increase (decrease) (13,026) 63,943
============ ============
7. DIVIDENDS
On July 1, 1999, the Board of Trustees declared the following dividend from
net investment income payable on July 6, 1999, to shareholders of record on
July 2, 1999:
CLASS S CLASS E CLASS C
-------- -------- --------
Tax Exempt Bond Fund $ 0.0710 $ 0.0649 $ 0.0538
8. BENEFICIAL INTEREST
As of June 30, 1999, the following Funds have one or more shareholders with
shares of beneficial interest of greater than 10% of the total outstanding
shares of each respective Fund or Class:
Equity T 21.1%
Tax Exempt Bond - Class E 51.4% 16.9%
Tax Exempt Bond - Class C 99.9%
Tax Free Money Market 38.3%
Notes to Financial Statements 41
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 832-6688
In Washington (253) 627-7001
TRUSTEES
Lynn L. Anderson
Paul E. Anderson
Paul Anton, PhD
William E. Baxter
Lee C. Gingrich
Eleanor W. Palmer
TRUSTEES EMERITUS
George F. Russell, Jr., Chairman
OFFICERS
Lynn L. Anderson, President and Chief Executive Officer
Peter Apanovitch, Manager of Short Term Investment Funds
Mark E. Swanson, Treasurer and Chief Accounting Officer
Randall P. Lert, Director of Investments
Karl Ege, Secretary and General Counsel
MANAGER, TRANSFER AND DIVIDEND PAYING 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, MA 02109
DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
MONEY MANAGERS
EQUITY T FUND
J.P. Morgan Investment Management, Inc., New York, NY
TAX EXEMPT BOND FUND
MPS Institutional Advisors, Inc., Boston, MA
Standish, Ayer & Wood, Inc., Boston, MA
TAX FREE MONEY MARKET FUND
Weiss, Peck & Greer, LLC, New York, NY
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.
42 Manager, Money Managers and Service Providers
<PAGE>
[LOGO OF FRANK RUSSEL INVESTMENT COMPANY]
Frank Russell Investment Company
909 A Street
Tacoma, Washington 98402
253-627-7001
800-787-7354
Fax: 253-591-3495
www.russell.com A-5424(699) 36-08-069(6/99)
