<PAGE>
INSTITUTIONAL FUNDS
1999 ANNUAL REPORT
FRANK RUSSELL INVESTMENT COMPANY
1999 Annual 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
DECEMBER 31, 1999
<PAGE>
Frank Russell Investment Company
Frank Russell Investment Company is a "series mutual fund" with 29 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
Annual Report
December 31, 1999
Table of Contents
Page
Letter To Our Clients .................................................... 2
Equity I Fund ............................................................ 3
Equity II Fund ........................................................... 19
Equity III Fund .......................................................... 39
Equity Q Fund ............................................................ 51
International Fund ....................................................... 65
Emerging Markets Fund .................................................... 85
Real Estate Securities Fund .............................................. 103
Short Term Bond Fund ..................................................... 113
Fixed Income I Fund ...................................................... 127
Fixed Income III Fund .................................................... 147
Notes to Financial Statements ............................................ 168
Report of Independent Accountants ........................................ 180
Tax Information .......................................................... 181
Manager, Money Managers and Service Providers ............................ 182
Frank Russell Investment Company - Institutional Funds
Copyright Frank Russell Company 2000. 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 Comany. 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 fluctate 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>
To Our Clients
We are pleased to present the Frank Russell Investment Company 1999 Annual
Report. This report covers information on ten of the Funds and represents our
eighteenth year in operation.
We remain committed to providing our clients with superior investment solutions
through the benefits of multi-manager, multi-style diversification used in
structuring our Funds. The commitment proved worthwhile in 1999, as our Funds,
in general, provided solid returns as compared to their respective benchmarks
and attracted many new investors, both creating significant growth in assets.
Frank Russell Investment Management Company (FRIMCo) continuously evaluates the
Funds we offer our clients. Each of these Funds is carefully monitored by
Russell investment professionals to ensure that the most appropriate investment
advisors and strategies are utilized within each Fund. The advisors are
monitored by FRIMCo using the expertise and advice of the Investment Policy and
Research group of Frank Russell Company.
Since the close of 1998 we have implemented changes in our Funds' structure
which we believe will benefit current and potential investors. The Russell Funds
and the LifePoints(R) Funds both added Class C shares during 1999, and the
Russell Institutional Funds opened Class E shares for investment in May 1999.
Additionally, the Tax-Managed Small Cap Fund was opened for investment in
November 1999, providing a small cap alternative to the existing tax-managed
Russell Funds.
Thank you for your continued confidence and investment with Frank Russell
Investment Company. We look forward to 2000 and continuing to earn your support.
Sincerely,
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
Lynn L. Anderson. Eric A. Russell
Chairman of the Board President
Frank Russell Investment Company Frank Russell Investment Management
Company
<PAGE>
Equity I Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: To provide income and capital growth by investing principally in
equity securities.
Invests in: Primarily US equity securities.
Strategy: The Fund uses a multi-style, multi-manager strategy intended to
achieve higher returns with moderate risk. The Fund employed the investment
management services of eleven managers with four separate and distinct
investment styles.
[The following was depicted as a mountain chart in the printed material.]
Dates Equity I - Class I Russell 10,000** Lipper Growth & Income ++
$10,000 $10,000 $10,000
1990 $ 9,436 $ 9,684 $ 9,551
1991 $12,382 $12,749 $12,300
1992 $13,600 $13,901 $13,322
1993 $15,067 $15,319 $14,816
1994 $15,184 $21,176 $14,816
1995 $20,641 $15,371 $14,684
1996 $25,610 $26,930 $19,151
1997 $33,681 $34,448 $23,123
1998 $42,132 $43,757 $33,691
1999 $50,128 $52,907 $38,552
- --------------------------------------------------------------------------------
Total $247,062 $255,136 $218,759.58
================================================================================
- --------------------------------------------------------------------------------
Equity I Fund - Class I
- --------------------------------------------------------------------------------
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- ------------ ------------
1 Year $ 11,898 18.98%
5 Years $ 33,014 26.96%ss.
10 Years $ 50,128 17.48%ss.
- --------------------------------------------------------------------------------
Equity I Fund - Class E+++
- --------------------------------------------------------------------------------
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- ------------ ------------
1 Year $ 11,881 18.81%
5 Years $ 32,966 26.93%ss.
10 Years $ 50,056 17.47%ss.
- --------------------------------------------------------------------------------
Russell 1000(Registered) Index
- --------------------------------------------------------------------------------
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- ------------ ------------
1 Year $ 12,091 20.91%
5 Years $ 34,421 28.05%ss.
10 Years $ 52,907 18.13%ss.
- --------------------------------------------------------------------------------
Lipper(R) Growth & Income Funds Benchmark
- --------------------------------------------------------------------------------
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- ------------ ------------
1 Year $ 11,375 13.75%
5 Years $ 26,291 21.33%ss.
10 Years $ 38,552 14.45%ss.
3 Equity I Fund
<PAGE>
Equity I Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Performance Review
For the year ended December 31, 1999, the Equity I Fund Class I and Class E
shares reflected total returns of 18.98% and 18.81%, respectively, as compared
to the Russell 1000(R) Index results of 20.91%. The Fund trailed the Index
primarily due to its underexposure to high valuation technology stocks.
Performance compared more favorably with the 13.75% average return of mutual
funds tracked in the Lipper(R) Growth and Income Funds Universe.
Portfolio Highlights
The performance of stocks in 1999 was characterized by extreme differences in
returns between the various market sectors. Overall, stocks provided investors
with their fifth consecutive year of returns in excess of 20% - an unprecedented
trend in the US stock market's history. Unlike the previous four years, the
market's advance was much broader across capitalization tiers, with small cap
shares actually finishing the year slightly higher than large caps after an end
of year rally. The market was also narrower, however, by economic sector
performance, which was mostly reflective of the extreme strength of technology
issues. Technology, which gained 77% for the year, dominated other market
sectors, as excitement over the Internet created aggressive buying. Other
sectors lagged by a wide margin, as value stocks in the Russell 1000 Index
trailed their growth counterparts by 26 percentage points.
The Equity I Fund fared better than the majority of its peers in the Lipper
Growth and Income Funds Universe for the year. The Fund's growth managers
produced very strong returns, though their growing reluctance to accept
increasingly extreme valuations led them to underweight several of the market's
strongest performing issues during the second half of the year. The Fund's
value-oriented managers all had very frustrating years, as their valuation
sensitivity led them away from the market's strongest performing issues.
Four new managers were funded, with Westpeak's assignment expanded to provide a
supplementary defensive role to the Fund. The challenging market environment
during the year proved difficult for the Fund, as it did for most broadly
diversified investment funds. Analysis of the Fund may result in further changes
in the manager line up, as well as changes to manager allocations, with the goal
to improve performance consistency in extreme market environments.
- --------------------------------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) December 31, 1999
- --------------------------------------------------------------------------------
Cisco Systems, Inc. 2.7%
General Electric Co. 2.4
Microsoft Corp. 2.2
Citigroup, Inc. 1.9
EMC Corp. 1.5
Home Depot, Inc. (The) 1.5
Dell Computer Corp. 1.5
Lucent Technologies, Inc. 1.4
Intel Corp. 1.4
Wal-Mart Stores, Inc. 1.4
- --------------------------------------------------------------------------------
Portfolio Characteristics
December 31, 1999
- --------------------------------------------------------------------------------
Current P/E Ratio 25.2x
Portfolio Price/Book Ratio 4.46x
Market Capitalization - $- Weighted Average 104.06 Bil
Number of Holdings 697
- --------------------------------------------------------------------------------
Money Managers Styles
- --------------------------------------------------------------------------------
Alliance Capital Management L.P. Growth
Barclays Global Advisors Market- Oriented
Equinox Capital Management, Inc. Value
Jacobs Levy Equity Management, Inc. Market- Oriented
Lincoln Capital Management Co. Growth
Marsico Capital Management, LLC Growth
Peachtree Asset Management Market- Oriented
Sanford C. Bernstein & Co., Inc. Value
Suffolk Capital Management, Inc. Market- Oriented
Trinity Investment Management Corp. Value
Westpeak Investment Advisors, LP Defensive
Westpeak Investment Advisors, LP Market- Oriented
* Equity I Fund Class I assumes initial investment on January 1, 1990.
** Russell 1000(R) Index includes the 1,000 largest companies in the Russell
3000(R) Index, the smallest of which is valued at about $1,124.8 million.
The Russell 1000 Index represents the universe of stocks from which most
active money managers typically select. The Russell 1000 Index return
reflects adjustments for income dividends and capital gains distributions
reinvested as of the ex-dividend dates.
++ Prior to April 1, 1995, Fund performance results are reported gross of
investment management fees. For the period following April 1, 1995, Fund
performance results are reported net of investment management fees but
gross of any investment services fees. Information concerning these fees
can be obtained from the Fund's Advisor upon request.
+++ Lipper(R) Growth & Income Funds Benchmark is the average total return for
the universe of funds within the Growth and Income Funds investment
objective. The total return for the funds reflects adjustments for income
dividends and capital gains distributions reinvested as of the ex-dividend
dates.
++++ Equity I Fund Class I performance has been linked with Class E to provide
historical perspective. From May 14, 1999 (commencement of sale) through
the current period, Class E paid shareholder service fees. Total return
would have been lower had these fees been in effect during prior reporting
periods.
ss. Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Equity I Fund 4
<PAGE>
Equity I Fund
Statement of Net Assets
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
--------- ---------
- --------------------------------------------------------------------------------
Common Stocks - 93.5%
Auto and Transportation - 3.1%
Alaska Air Group, Inc. (a) 4,800 169
America West Holding Corp.
Class B (a) 5,740 119
Arvin Industries, Inc. 3,170 90
AutoZone, Inc. (a) 3,400 110
Borg-Warner Automotive, Inc. 1,400 57
Burlington Northern, Inc. 36,470 884
Continental Airlines, Inc. Class B (a) 69,200 3,071
Cooper Tire & Rubber Co. 48,010 747
CSX Corp. 9,600 301
Dana Corp. 56,750 1,699
Delphi Automotive Systems Corp 55,717 878
Delta Air Lines, Inc. 89,600 4,463
Eaton Corp. 2,800 203
Expeditors International of
Washington, Inc. 5,000 217
Ford Motor Co. 162,100 8,662
General Motors Corp. 100,300 7,291
Genuine Parts Co. 26,710 663
Goodyear Tire & Rubber Co. 7,100 200
Harley-Davidson, Inc. 900 58
Hertz Corp. Class A 18,600 932
Kansas City Southern Industries, Inc. 12,700 948
Koninklijke Luchtvaart
Maatschappij NV (KLM)(a) 64,892 1,618
Lancaster Colony Corp. 900 30
Lear Corp.(a) 70,100 2,243
Meritor Automotive, Inc. 18,600 360
Norfolk Southern Corp. 35,850 735
Northwest Airlines Corp. Class A (a) 73,200 1,620
PACCAR, Inc. 13,540 599
Tower Automotive, Inc. (a) 5,980 92
Trinity Industries, Inc. 1,940 55
TRW, Inc. 18,650 969
UAL Corp. (a) 100,950 7,830
Union Pacific Corp. 78,900 3,442
USFreightways Corp. 4,000 189
---------
51,544
---------
Consumer Discretionary - 12.0%
Abercrombie & Fitch Co. Class A (a) 57,600 1,537
Alberto Culver Co. Class B 7,700 199
American Eagle Outfitters,
Inc. NPV (a) 2,200 99
AMFM, Inc. (a) 35,500 2,778
Applebee's International, Inc. 3,600 106
AT&T Corp. - Liberty Media
Group Class A (a) 65,800 3,734
Avon Products, Inc. 3,200 106
Barnes & Noble, Inc. (a) 22,200 458
Bed Bath & Beyond, Inc. (a) 30,400 1,053
Belo (A.H.) Corp. Class A 8,500 162
Best Buy Co. (a) 17,500 878
BJ's Wholesale Club, Inc. (a) 11,300 412
Black & Decker Corp. 18,700 977
Brinker International, Inc. (a) 38,000 912
Brunswick Corp. 36,800 819
Carnival Corp. Class A NPV 60,400 2,888
Catalina Marketing Corp. (a) 2,310 267
CBS Corp. (a) 19,700 1,260
CEC Entertainment, Inc. (a) 3,400 96
Central Newspapers, Inc. Class A 3,380 133
Circuit City Stores, Inc. 7,660 345
Claire's Stores, Inc. 3,800 85
Clear Channel
Communications, Inc. (a) 74,178 6,620
CMG Information Services, Inc. (a) 2,200 609
Cost Plus, Inc. (a) 4,500 160
Costco Wholesale Corp. (a) 68,500 6,246
Darden Restaurants, Inc. 58,300 1,057
Dayton Hudson Corp. 75,100 5,515
Deluxe Corp. 27,700 760
Dillard's, Inc. Class A 17,000 343
Disney (Walt) Co. 124,000 3,627
Donnelley (R.R.) & Sons Co. 33,100 821
Eastman Kodak Co. 36,289 2,404
Electronic Arts, Inc. (a) 20,600 1,730
eToys, Inc. (a) 100 3
Federated Department Stores, Inc. (a) 49,260 2,491
Fortune Brands, Inc. 72,000 2,381
Four Seasons Hotels, Inc. 33,870 1,804
Gannett Co., Inc. 25,500 2,080
Gap, Inc. 169,290 7,787
Harrah's Entertainment, Inc. (a) 21,800 576
Hasbro, Inc. 132,550 2,527
Home Depot, Inc. (The) 364,619 24,999
Houghton Mifflin Co. 1,300 55
Interim Services, Inc. (a) 2,830 70
International Game Technology 52,100 1,058
Interpublic Group Cos., Inc. 23,600 1,361
Intimate Brands, Inc. Class A 6,200 267
JC Penney & Co., Inc. 30,260 603
Kmart Corp. (a) 72,900 734
Knight-Ridder, Inc. 36,230 2,156
Kohl's Corp. (a) 47,300 3,414
Legato Systems, Inc. (a) 600 41
Liberty Digital, Inc. Class A (a) 1,300 96
Limited, Inc. (The) 5,400 234
Lowe's Cos., Inc. 88,900 5,312
Manpower, Inc. 21,300 801
5 Equity I Fund
<PAGE>
Equity I Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
--------- ---------
- --------------------------------------------------------------------------------
Mattel, Inc. 137,203 1,801
May Department Stores Co. 29,600 955
Maytag Corp. 9,000 432
McDonald's Corp. 44,000 1,774
McGraw-Hill, Inc. 3,500 216
MediaOne Group, Inc. (a) 179,400 13,780
Metro-Goldwyn-Mayer, Inc. (a) 9,300 219
Neiman Marcus Group, Inc. (The)
Class A (a) 1,700 48
New York Times Co. Class A 98,000 4,814
NIKE, Inc. Class B 6,800 337
Office Depot, Inc. (a) 69,550 761
Omnicom Group, Inc. 12,400 1,240
Pacific Sunwear of California (a) 1,900 60
PanAmSat Corp. (a) 5,300 313
Payless ShoeSource, Inc. (a) 1,500 71
Reynolds & Reynolds Co. Class A 1,100 25
Ross Stores, Inc. 26,600 477
Royal Caribbean Cruises, Ltd. 49,561 2,444
Russell Corp. 5,100 85
Saks, Inc. (a) 35,810 557
Scholastic Corp. (a) 1,600 100
Sears Roebuck & Co. 18,710 569
Shaw Industries, Inc. (a) 32,600 503
Starwood Hotels & Resorts
Worldwide, Inc. 7,100 167
Station Casinos, Inc. (a) 6,200 139
Ticketmaster Online-CitySearch, Inc.
Class B (a) 300 12
Tiffany & Co. 41,156 3,673
Time Warner, Inc. 151,787 10,995
Times Mirror Co. Series A 7,300 489
TJX Cos., Inc. 39,200 801
TMP Worldwide, Inc. (a) 700 99
Tommy Hilfiger Corp. (a) 70,800 1,651
Toys "R" Us, Inc. (a) 52,730 755
Tribune Co. 84,500 4,653
Tricon Global Restaurants, Inc. (a) 8,800 340
Tupperware Corp. 10,500 178
UnitedGlobalCom, Inc. Class A (a) 1,900 133
Univision Communications, Inc.
Class A (a) 2,800 286
USA Networks, Inc. (a) 75,100 4,145
V.F. Corp. 29,300 879
Valassis Communications, Inc. (a) 13,600 575
Viacom, Inc. Class B (a) 70,200 4,243
Viad Corp. 5,100 142
Wal-Mart Stores, Inc. 340,638 23,547
Washington Post Co. Class B 56 31
Wendy's International, Inc. 8,500 175
Whirlpool Corp. 26,560 1,728
Wiley (John) & Son Inc. Class A 500 8
Young & Rubicam, Inc. 7,400 524
Zale Corp. (a) 15,910 770
---------
202,765
---------
Consumer Staples - 5.2%
Albertson's, Inc. 16,400 529
Anheuser-Busch Cos., Inc. 64,750 4,589
Bestfoods 5,700 300
Campbell Soup Co. 21,800 843
Church and Dwight Co., Inc. 4,200 112
Coca-Cola Co. (The) 119,500 6,961
Colgate-Palmolive Co. 60,900 3,959
ConAgra, Inc. 125,620 2,834
Coors (Adolph) Co. Class B 2,100 110
Corn Products International, Inc. 3,100 102
CVS Corp. 92,200 3,682
Dial Corp. 3,200 78
Dole Food Co., Inc. 3,000 49
Earthgrains Co. 3,080 50
General Mills, Inc. 15,480 554
Gillette Co. (The) 91,900 3,785
Hannaford Brothers Co. 1,000 69
Heinz (H.J.) Co. 16,580 660
Hormel Foods Corp. 28,360 1,152
IBP, Inc. 51,870 934
Interstate Bakeries Corp. 17,600 319
Jack in the Box, Inc. (a) 4,770 99
Kellogg Co. 14,000 431
Kroger Co. (The) (a) 207,300 3,913
Nabisco Holdings Corp. Class A 37,000 1,170
Pepsi Bottling Group, Inc. (The) 4,700 78
PepsiCo, Inc. 292,170 10,299
Philip Morris Cos., Inc. 387,160 8,977
Procter & Gamble Co. 115,040 12,604
Quaker Oats Co. 32,960 2,163
R.J. Reynolds Tobacco
Holdings, Inc. (a) 10,666 188
Ralston-Purina Group 60,100 1,675
Safeway, Inc. (a) 53,500 1,903
Sara Lee Corp. 93,400 2,061
Seagram Co., Ltd. NPV 36,500 1,640
SuperValu, Inc. 73,190 1,464
SYSCO Corp. 38,200 1,511
Tyson Foods, Inc. Class A 109,920 1,786
U.S. Foodservice (a) 24,840 416
Unilever NV (a) 6,800 370
UST Corp. 54,700 1,378
Walgreen Co. 91,300 2,670
Weis Markets, Inc. 1,300 56
---------
88,523
---------
Equity I Fund 6
<PAGE>
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
--------- ---------
- --------------------------------------------------------------------------------
Financial Services - 15.4%
Aetna, Inc. 13,700 765
AFLAC, Inc. 39,400 1,859
Allmerica Financial Corp. 3,500 195
Allstate Corp. 33,600 806
AMB Property Corp. (e) 1,300 26
Ambac Financial Group, Inc. 25,600 1,336
American Express Co. 13,700 2,278
American Financial Group, Inc. 23,010 607
American General Corp. 69,800 5,296
American International Group, Inc. 146,430 15,833
Ameritrade Holding Corp. Class A (a) 1,800 39
AmSouth Bancorp 78,375 1,514
Apartment Investment &
Management Co. Class A (e) 200 8
Archstone Communities Trust (e) 1,600 33
Arden Realty Group, Inc. (e) 2,500 50
Associates First Capital Corp. Class A 187,240 5,137
Astoria Financial Corp. 43,320 1,319
Automatic Data Processing, Inc. 55,300 2,979
Avalonbay Communities, Inc. (e) 2,500 86
Bank of America Corp. 194,451 9,759
Bank One Corp. 113,000 3,623
BB&T Corp. 11,700 320
Bear Stearns Co., Inc. 6,583 281
Block (H&R) Co., Inc. 7,400 324
Capital One Financial Corp. 67,700 3,262
CarrAmerica Realty Corp. 2,900 61
Charter One Financial, Inc. 64,506 1,234
Chase Manhattan Corp. 146,284 11,365
Chubb Corp. (The) 15,620 880
CIGNA Corp. 45,280 3,648
CIT Group, Inc. 120,440 2,544
Citigroup, Inc. 582,682 32,375
CNA Financial Corp. (a) 5,520 215
Comerica, Inc. 19,900 929
Commerce Bancshares, Inc. 24,967 857
Concord EFS, Inc. (a) 55,800 1,433
Conseco, Inc. 330,144 5,901
Countrywide Credit Industries, Inc. 32,230 814
Dime Bancorp, Inc. 76,300 1,154
Donaldson, Lufkin & Jenrette, Inc. - DLJ 400 19
Donaldson, Lufkin & Jenrette, Inc. -
DLJ Direct (a) 600 8
Dow Jones & Co., Inc. 11,900 809
DST Systems, Inc. (a) 11,300 862
Duke Realty Investments, Inc. (e) 3,500 68
Dun & Bradstreet Corp. 26,610 785
E.W. Blanch Holdings, Inc. 2,530 155
Edwards (A.G.), Inc. 3,841 123
Equifax, Inc. 8,200 193
Equity Office Properties Trust (e) 3,400 84
Everest Reinsurance Holdings, Inc. 16,210 362
Fannie Mae 198,962 12,423
FBR Asset Investment Corp. (e) 31,600 442
Federal Home Loan Mortgage Corp. 194,800 9,168
FelCor Lodging Trust, Inc. (e) 4,000 70
Fifth Third Bancorp 23,600 1,730
Financial Security Assurance 1,710 89
Holdings, Ltd.
FINOVA Group, Inc. 2,610 93
First Data Corp. 19,500 962
First Union Corp. 43,380 1,423
Fleet Financial Corp. 245,095 8,532
Foundation Health Systems, Inc. (a) 43,520 433
Franklin Resources, Inc. 69,500 2,228
Fulton Financial Corp. 500 9
Gallagher (Arthur J.) & Co. 1,000 65
GATX Corp. 1,700 57
General Growth Properties, Inc. (e) 4,700 132
Golden State Bancorp, Inc. (a) 49,340 851
Golden West Financial Corp. 43,350 1,452
Goldman Sachs Group, Inc. (a) 40,200 3,786
Greenpoint Financial Corp. 4,370 104
Hartford Financial Services Group,
Inc. (The) 83,600 3,961
Heller Financial, Inc. Class A 2,680 54
Hibernia Corp. Class A 93,700 996
Highwoods Properties, Inc. 9,500 221
Host Marriott Corp. (e) 41,584 343
Household International Corp. 8,200 306
HRPT Properties Trust (e) 4,500 41
Hudson United Bancorp NPV 7,400 189
Huntington Bancshares, Inc. 21,100 502
Jefferson-Pilot Corp. 8,050 549
KeyCorp 126,480 2,798
Kimco Realty Corp. (e) 200 7
Knight/Trimark Group, Inc.
Class A (a) 400 18
Lehman Brothers Holdings, Inc. 17,130 1,451
Leucadia National Corp. 3,600 83
Liberty Property Trust (e) 400 10
Lincoln National Corp. 53,200 2,128
Loews Corp. 22,620 1,373
Mack-Cali Realty Corp. (e) 11,400 297
Marsh & McLennan Cos., Inc. 7,900 756
Marshall & Ilsley Corp. 1,100 69
MBIA, Inc. 16,040 847
MBNA Corp. 530,260 14,450
Meditrust Cos. (e) 3,900 21
MGIC Investment Corp. 2,400 144
MONY Group, Inc. (The) 3,000 88
Morgan (J.P.) & Co., Inc. 46,500 5,888
Morgan Stanley Dean Witter & Co. 123,405 17,616
7 Equity I Fund
<PAGE>
Equity I Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
--------- ---------
- --------------------------------------------------------------------------------
National City Corp. 81,160 1,922
New Plan Excel Realty Trust (e) 36,000 569
North Fork Bancorp., Inc. 66,700 1,167
Old Kent Financial Corp. 10,466 370
Old Republic International Corp. 34,740 473
Pacific Century Financial Corp. 19,800 370
Paychex, Inc. 76,900 3,071
PMI Group, Inc. (The) 13,200 644
PNC Bank Corp. 58,180 2,589
Post Properties, Inc. (e) 1,200 46
Profit Recovery Group
International, Inc. (The) (a) 1,200 32
ProLogis Trust (e) 2,800 54
Protective Life Corp. 2,900 92
Providian Financial Corp. 23,860 2,173
Public Storage, Inc. (e) 3,400 77
Radian Group, Inc. (a) 4,200 201
Regions Financial Corp. 73,800 1,850
Republic of New York Corp. 8,100 583
Ryder System, Inc. 42,000 1,026
SAFECO Corp. 21,270 528
SEI Corp. 100 12
Simon Property Group, Inc. (e) 13,800 317
SouthTrust Corp. 23,110 872
Sovereign Bancorp, Inc. 129,300 958
Spieker Properties, Inc. (e) 1,400 51
St. Paul Cos., Inc. 43,610 1,469
State Street Corp. 17,900 1,308
Summit Bancorp 23,130 708
SunGard Data Systems (a) 24,100 572
SunTrust Banks, Inc. 21,300 1,466
TCF Financial Corp. 10,240 255
Torchmark Corp. 25,760 749
Transatlantic Holdings, Inc. 970 76
Travelers Property Casualty Corp.
Class A 24,550 841
Trustmark Corp. 500 11
U.S. Bancorp 30,500 726
U.S. Trust Corp. 900 72
UnionBanCal Corp. 27,680 1,092
UnumProvident Corp. 48,700 1,561
Vornado Realty Trust (e) 700 23
Wachovia Corp. 3,410 232
Washington Mutual, Inc. 86,980 2,261
Wells Fargo Co. 38,190 1,544
---------
258,881
---------
Health Care - 8.2%
Abbott Laboratories 27,400 995
Allergan, Inc. 41,420 2,061
ALZA Corp. (a) 46,800 1,620
American Home Products Corp. 61,400 2,421
Amgen, Inc. (a) 61,200 3,672
Andrx Corp. (a) 700 29
AstraZeneca Group PLC - ADR 61,200 2,555
Bard (C.R.), Inc. 11,800 625
Bausch & Lomb, Inc. 2,400 164
Baxter International, Inc. 106,900 6,715
Becton, Dickinson & Co. 99,200 2,654
Bergen Brunswig Corp. Class A 37,490 312
Biogen, Inc. (a) 8,040 679
Bristol-Myers Squibb Co. 279,010 17,909
Cardinal Health, Inc. 68,900 3,299
Columbia/HCA Healthcare Corp. 183,220 5,371
DENTSPLY International, Inc. 1,500 35
Elan Corp. PLC - ADR (a) 124,800 3,682
Genentech, Inc. (a) 58,820 7,911
HEALTHSOUTH Corp. (a) 25,800 139
Humana, Inc. (a) 8,770 72
ICN Pharmaceuticals, Inc. 15,100 382
IVAX Corp. (a) 16,600 427
Johnson & Johnson 86,010 8,010
Lilly (Eli) & Co. 43,400 2,886
Mallinckrodt, Inc. 40,300 1,282
Manor Care, Inc. (a) 20,400 326
Medtronic, Inc. 53,600 1,953
Merck & Co., Inc. 138,580 9,294
Oxford Health Plans, Inc. (a) 9,500 121
PacifiCare Health Systems, Inc. (a) 20,800 1,102
PE Corp. 1,100 132
Pfizer, Inc. 243,915 7,912
Pharmacia & Upjohn, Inc. 175,600 7,902
Priority Healthcare Corp. Class B (a) 52,476 1,519
Schering-Plough Corp. 292,600 12,344
St. Jude Medical, Inc. (a) 10,200 313
Tenet Healthcare Corp. (a) 23,370 549
Trigon Healthcare, Inc. (a) 7,120 210
United Healthcare Corp. 33,790 1,795
Warner-Lambert Co. 203,550 16,678
---------
138,057
---------
Integrated Oils - 3.8%
Amerada Hess Corp. 61,550 3,493
Ashland, Inc. 66,140 2,179
Atlantic Richfield Co. 55,800 4,827
Chevron Corp. 18,300 1,585
Coastal Corp. 80,290 2,845
Conoco, Inc. Class A 16,300 403
Conoco, Inc. Class B NPV 125,330 3,118
Enron Corp. 13,300 590
Exxon Mobil Corp. NPV (a) 261,625 21,077
Kerr-McGee Corp. 19,500 1,209
Equity I Fund 8
<PAGE>
Equity I Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
--------- ---------
- --------------------------------------------------------------------------------
Lyondell Petrochemical Co. 19,200 245
Phillips Petroleum Co. 50,770 2,386
Royal Dutch Petroleum Co. 61,400 3,711
Texaco, Inc. 116,490 6,327
Unocal Corp. 119,800 4,021
USX-Marathon Group 214,700 5,300
---------
63,316
---------
Materials and Processing - 6.4%
Air Products & Chemicals, Inc. 126,920 4,260
Alcan Aluminum, Ltd. 10,600 437
Alcoa, Inc. 53,800 4,465
American Standard Cos., Inc. 18,850 865
(a)
Archer-Daniels-Midland Co. 70,959 865
Armstrong World Industries,
Inc. 25,300 844
Avery Dennison Corp. 3,500 255
B.F. Goodrich Co. 89,640 2,465
Ball Corp. 15,700 618
Boise Cascade Corp. 15,940 646
Cabot Corp. 18,670 380
Centex Corp. 22,700 560
Champion International Corp. 39,700 2,459
CK Witco Corp. 13,308 178
Consolidated Papers, Inc. 11,500 366
Cornerstone Properties, Inc. 400 6
Crown Cork & Seal Co., Inc. 30,350 679
Dow Chemical Co. 48,910 6,536
du Pont (E.I.) de Nemours & Co. 47,391 3,122
Eastman Chemical Co. 10,500 501
Ecolab, Inc. 2,800 110
Engelhard Corp. 11,700 221
Fluor Corp. 5,400 248
FMC Corp. (a) 4,100 235
Fort James Corp. 17,000 465
Freeport-McMoRan Copper &
Gold, Inc. Class B (a) 20,600 435
Fuller (H.B.) Co. 1,020 57
Georgia Gulf Corp. 6,700 204
Georgia-Pacific Group 73,440 3,727
Great Lakes Chemical Corp. 6,400 244
Hercules, Inc. 17,400 485
Illinois Tool Works, Inc. 52,100 3,520
IMC Global, Inc. 21,700 355
International Paper Co. 154,184 8,702
Johns Manville Corp. 3,800 53
Kimberly-Clark Corp. 56,160 3,664
Lafarge Corp. 15,600 431
Louisiana Pacific Corp. 16,700 238
Lubrizol Corp. 13,600 420
Masco Corp. 55,800 1,416
Mead Corp. 16,500 717
Millennium Chemicals, Inc. 10,600 209
Minnesota Mining &
Manufacturing Co. 26,170 2,561
Monsanto Co. 153,000 5,451
Nucor Corp. 21,630 1,186
OM Group 1,950 67
Owens Corning 72,760 1,405
Owens-Illinois, Inc. (a) 29,310 735
PPG Industries, Inc. 2,200 138
Praxair, Inc. 85,060 4,280
Rouse Co. (The) 400 8
Scotts Co. (The) Class A (a) 600 24
Sealed Air Corp. New (a) 22,300 1,155
Sherwin-Williams Co. 29,700 624
Sigma Aldrich Corp. 3,200 96
Smurfit-Stone Container Corp. (a) 37,930 927
Solutia, Inc. 25,500 394
Sonoco Products Co. 28,110 639
Temple-Inland, Inc. 22,780 1,502
Texas Industries, Inc. 2,260 96
Textron, Inc. 45,460 3,486
Tyco International, Ltd. 498,516 19,380
Union Carbide Corp. 11,200 748
USG Corp. 22,400 1,056
USX-U.S. Steel Group 31,100 1,026
W.R. Grace & Co. (a) 35,900 498
Waters Corp. (a) 3,800 201
Westvaco Corp. 11,500 375
Weyerhaeuser Co. 22,860 1,642
Willamette Industries, Inc. 10,400 483
---------
106,846
---------
Miscellaneous - 0.1%
Convergys Corp. NPV (a) 15,700 483
ServiceMaster Co. 12,300 152
SFX Entertainment, Inc. (a) 23,800 861
---------
1,496
---------
Other Energy - 1.0%
Apache Corp. 82,400 3,044
Baker Hughes, Inc. 600 13
Burlington Resources, Inc. 5,150 170
Constellation Energy Group 53,300 1,546
El Paso Energy Corp. 40,380 1,567
ENSCO International, Inc. 24,600 563
EOG Resources, Inc. 16,900 297
Noble Drilling Corp. (a) 9,200 301
Occidental Petroleum Corp. 44,780 968
Schlumberger, Ltd. 5,700 320
Sempra Energy 65,200 1,133
Sunoco, Inc. 20,080 472
9 Equity I Fund
<PAGE>
Equity I Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
--------- ---------
- --------------------------------------------------------------------------------
Tidewater, Inc. 3,700 133
Tosco Corp. 68,070 1,851
Transocean Sedco Forex, Inc. NPV (a) 76,904 2,591
Ultramar Diamond Shamrock Corp. 90,940 2,063
Varco International, Inc. (a) 6,600 67
Weatherford International, Inc. (a) 1,800 72
---------
17,171
---------
Producer Durables - 6.2%
Applied Materials, Inc. (a) 118,500 15,005
Boeing Co. 19,600 815
Briggs & Stratton Corp. 14,300 767
Caterpillar, Inc. 35,510 1,671
CommScope, Inc. (a) 14,500 585
Cordant Technologies, Inc. 4,100 135
CTS Corp. 9,180 692
Cummins Engine Co., Inc. 33,620 1,624
D.R. Horton, Inc. 9,300 128
Deere & Co. 93,800 4,069
Dover Corp. 7,200 327
General Electric Co. 258,166 39,951
Honeywell International, Inc. (a) 98,374 5,675
Ingersoll-Rand Co. 96,970 5,339
Johnson Controls, Inc. 23,300 1,325
Kaufman & Broad Home Corp. 7,960 193
KLA Instruments Corp. (a) 27,200 3,028
Lexmark International Group, Inc.
Class A (a) 14,930 1,351
Litton Industries, Inc. (a) 7,160 357
Lockheed Martin Corp. 33,500 733
Manitowoc Co., Inc. 3,000 102
Mettler-Toledo International,
Inc. New (a) 3,200 122
Miller (Herman), Inc. 18,900 434
National Service Industries, Inc. 11,000 324
Northrop Grumman Corp. 54,870 2,966
Novellus Systems, Inc. (a) 32,600 3,994
Pall Corp. 9,800 211
Parker-Hannifin Corp. 2,850 146
Pitney Bowes, Inc. 2,800 135
Pulte Corp. 12,180 274
Raytheon Co. Class B 112,996 3,001
Rockwell International Corp. 10,000 479
Roper Industries, Inc. 1,900 72
Snap-On Tools Corp. 19,500 518
Solectron Corp. (a) 21,930 2,086
Tecumseh Products Co. Class A 1,990 94
Teradyne, Inc. (a) 23,400 1,544
Terex Corp. (a) 3,700 103
Thermo Instrument Systems, Inc. (a) 4,200 47
Thomas & Betts Corp. 15,810 504
United Technologies Corp. 53,600 3,484
---------
104,410
---------
Technology - 22.8%
3Com Corp. (a) 141,555 6,644
Adaptec, Inc. (a) 20,600 1,026
ADC Telecommunications, Inc. (a) 28,200 2,045
Adobe Systems, Inc. 76,620 5,153
Adtran, Inc. (a) 31,300 1,610
Affiliated Computer Services, Inc.
Class A (a) 200 9
Altera Corp. (a) 6,800 337
America Online, Inc. (a) 251,572 18,978
Analog Devices, Inc. (a) 33,200 3,088
Apple Computer, Inc. (a) 72,200 7,419
Applied Micro Circuits Corp. (a) 3,900 495
Arrow Electronics, Inc. (a) 14,500 368
Atmel Corp. (a) 22,200 656
Avnet, Inc. 5,400 327
AVX Corp. 7,900 395
BEA Systems, Inc. (a) 9,400 658
BMC Software, Inc. (a) 83,900 6,702
Broadcom Corp. Class A (a) 1,600 436
CheckFree Holdings Corp. (a) 1,000 105
CIENA Corp. (a) 3,400 196
Cisco Systems, Inc. (a) 420,084 44,975
Citrix Systems, Inc. (a) 3,900 479
CNET, Inc. (a) 1,300 74
Computer Associates
International, Inc. 25,200 1,762
Computer Sciences Corp. (a) 14,100 1,334
Compuware Corp. (a) 54,300 2,019
Comverse Technology, Inc. (a) 3,300 477
Conexant Systems, Inc. (a) 6,300 416
Cooper Industries, Inc. 30,660 1,240
Covad Communications Group,
Inc. (a) 2,000 111
Critical Path, Inc. (a) 200 19
Cypress Semiconductor Corp. (a) 83,200 2,694
Dell Computer Corp. (a) 483,182 24,612
DoubleClick, Inc. (a) 900 228
E*TRADE Group, Inc. (a) 5,100 133
EarthLink Network, Inc. (a) 20,700 880
eBay, Inc. (a) 2,600 325
Electronic Data Systems Corp. 81,126 5,430
Electronics For Imaging, Inc. (a) 5,500 322
EMC Corp. (a) 234,100 25,575
Emulex Corp. (a) 1,000 113
Exodus Communications, Inc. (a) 5,100 453
Galileo International, Inc. 27,000 808
Equity I Fund 10
<PAGE>
Equity I Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
--------- ---------
- --------------------------------------------------------------------------------
Gateway, Inc. (a) 1,700 123
General Dynamics Corp. 36,900 1,946
General Instrument Corp. (a) 12,200 1,037
Harris Corp. 22,120 590
Hewlett-Packard Co. 17,600 2,005
Imation Corp. (a) 4,500 151
IMS Health, Inc. 115,800 3,148
InfoSpace.com, Inc. (a) 700 150
Ingram Micro, Inc. Class A (a) 29,490 387
Inktomi Corp. (a) 16,200 1,436
Intel Corp. 290,578 23,900
International Business Machines Corp. 124,720 13,470
JDS Uniphase Corp. (a) 43,852 7,071
Koninklijke (Royal) Philips
Electronics NV NY Reg Share
NPV (a) 32,172 4,343
Linear Technology Corp. 1,000 72
LSI Logic Corp. (a) 69,100 4,664
Lucent Technologies, Inc. 324,159 24,251
Lycos, Inc. (a) 1,900 151
Macromedia, Inc. (a) 1,100 80
Maxim Integrated Products, Inc. (a) 15,700 740
Mercury Interactive Corp. (a) 900 97
Microchip Technology, Inc. (a) 5,800 398
Micron Technology, Inc. (a) 41,500 3,227
Microsoft Corp. (a) 321,045 37,462
MindSpring Enterprises, Inc. (a) 35,400 929
Motorola, Inc. 61,160 9,006
National Semiconductor Corp. (a) 30,800 1,319
NCR Corp. (a) 15,200 576
Network Appliance, Inc. (a) 7,300 606
Network Associates, Inc. (a) 3,800 101
Network Solutions, Inc. Class A (a) 400 87
Nextel Communications, Inc.
Class A (a) 27,800 2,865
Nortel Networks Corp. 22,300 2,252
Oracle Systems Corp. (a) 44,344 4,967
Portal Software, Inc. (a) 400 41
PSINET, Inc. (a) 1,100 68
QUALCOMM, Inc. (a) 78,500 13,821
Quantum Corp. DLT & Storage
Systems (a) 26,100 395
Quantum Corp. Hard Disk Drive (a) 7,700 53
RealNetworks, Inc. (a) 1,000 120
RF Micro Devices, Inc. (a) 8,300 566
Rhythms NetConnections, Inc. (a) 1,600 50
Safeguard Scientifics, Inc. (a) 1,000 162
Scientific-Atlanta, Inc. 25,100 1,396
SDL, Inc. (a) 1,200 262
Seagate Technology (a) 30,200 1,406
Siebel Systems, Inc. (a) 4,600 388
Sony Corp. - ADR 3,457 984
Sterling Commerce, Inc. (a) 2,800 95
Sterling Software, Inc. (a) 6,100 192
Sun Microsystems, Inc. (a) 207,255 16,036
Symantec Corp. (a) 6,600 387
Synopsys, Inc. (a) 2,700 179
Tandy Corp. 12,200 600
Tech Data Corp. (a) 7,200 195
Tellabs, Inc. (a) 34,100 2,187
Texas Instruments, Inc. 95,987 9,299
Unisys Corp. (a) 140,100 4,474
USWeb Corp. (a) 2,400 107
Verio, Inc. (a) 1,800 83
VeriSign, Inc. (a) 4,600 879
Veritas Software Corp. (a) 14,150 2,024
Vignette Corp. (a) 600 98
Vishay Intertechnology, Inc. (a) 23,081 730
Xilinx, Inc. (a) 19,140 870
---------
382,880
---------
Utilities - 9.3%
Adelphia Communications Corp. (a) 37,700 2,472
Allegheny Energy, Inc. 24,830 669
Allegiance Telecom, Inc. (a) 1,400 128
Alliant Energy Corp. (a) 21,400 589
Alltel Corp. 17,370 1,436
Ameren Corp. 23,460 768
American Electric Power Co., Inc. 8,700 279
AT&T Corp. 209,430 10,629
Bell Atlantic Corp. 205,420 12,646
BellSouth Corp. 82,670 3,870
Calpine Corp. (a) 5,340 342
Central & Southwest Corp. 27,600 552
CenturyTel, Inc. 20,250 959
Cinergy Corp. 28,070 677
CMS Energy Corp. 4,330 135
Columbia Energy Group 28,000 1,771
Comcast Corp. Special Class A 125,100 6,318
Comsat Corp. Series 1 7,069 140
Conectiv, Inc. 11,100 187
Consolidated Edison, Inc. 23,000 793
Consolidated Natural Gas Co. 400 26
Copper Mountain Networks, Inc. (a) 200 10
Cox Communications, Inc. Class A (a) 36,800 1,895
DTE Energy Co. 30,900 969
Duke Energy Corp. 9,090 456
Edison International 63,900 1,673
Energy East Corp. 31,200 649
Entergy Corp. 31,530 812
FirstEnergy Corp. 75,500 1,713
11 Equity I Fund
<PAGE>
Equity I Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
--------- ---------
- --------------------------------------------------------------------------------
Florida Progress Corp. 2,700 114
FPL Group, Inc. 4,600 197
Global Crossing, Ltd. (a) 7,692 384
GPU, Inc. 62,650 1,876
GTE Corp. 91,360 6,447
Kansas City Power & Light Co. 1,800 40
KeySpan Corp. (a) 7,210 167
MCI WorldCom, Inc. (a) 427,659 22,666
National Fuel Gas Co. 8,500 395
New Century Energies, Inc. 16,940 515
Nokia Corp. - ADR 100,300 19,057
Northern States Power Co. 20,620 402
OGE Energy Corp. 1,100 21
Peco Energy Co. 2,600 90
PG&E Corp. 41,460 850
Pinnacle West Capital Corp. 20,700 633
Potomac Electric Power Co. 18,400 422
Powertel, Inc. (a) 700 70
PP&L Resources, Inc. 85,100 1,947
Public Service Co. of New Mexico 6,110 99
Public Service Enterprise Group, Inc. 66,320 2,309
Quanta Services, Inc. (a) 2,400 68
Questar Corp. 26,000 390
RCN Corp. (a) 9,400 455
Reliant Energy, Inc. NPV 27,810 636
SBC Communications, Inc. 264,951 12,916
Sprint Corp. 207,400 13,961
Sprint Corp. (PCS Group) (a) 49,762 5,101
Telephone & Data Systems, Inc. 5,800 731
Texas Utilities Co. 112,940 4,016
U.S. West, Inc. NPV 1,700 122
Unicom Corp. 6,980 234
United States Cellular Corp. (a) 300 30
UtiliCorp United, Inc. 6,790 132
Vodafone Group PLC - ADR 97,451 4,824
Western Resources, Inc. 23,170 394
Western Wireless Corp. NPV
Class A (a) 7,400 493
Wisconsin Energy Corp. 18,200 350
---------
157,117
---------
Total Common Stocks
(cost $1,217,627) 1,573,006
---------
Preferred Stocks - 0.1%
Sealed Air Corp.
Series A New (conv.) 25,100 1,268
---------
Total Preferred Stocks
(cost $898) 1,268
---------
Principal Market
Amount Value
(000) (000)
$ $
--------- --------
Short-Term Investments - 6.6%
Frank Russell Investment Company
Money Market Fund,
due on demand (b) 102,505 102,505
United States Treasury Bills (b)(c)(d)
4.630% due 01/20/00 2,000 1,995
4.650% due 01/20/00 1,000 998
4.660% due 01/20/00 4,250 4,240
4.670% due 01/20/00 1,500 1,496
---------
Total Short-Term Investments
(cost $111,234) 111,234
---------
Total Investments - 100.2%
(identified cost $1,329,759) 1,685,508
Other Assets and Liabilities,
Net - (0.2%) (3,441)
---------
Net Assets - 100.0% 1,682,067
=========
* Each contract represents $100,000 notional value.
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
(c) Held as collateral in connection with futures contracts purchased by the
Fund.
(d) Rate noted is yield-to-maturity from date of acquisition.
(e) Real Estate Investment Trust (REIT).
Abbreviations:
ADR - American Depositary Receipt
NPV - No Par Value
NV - Nonvoting
See accompanying notes which are an integral part of the financial statements.
Equity I Fund 12
<PAGE>
Equity I Fund
Statement of Net Assets, continued
December 31, 1999
Unrealized
Number Appreciation
of (Depreciation)
Contracts* (000)
-------------- --------------
Futures Contracts
Nasdaq 100 Index
expiration date 03/00 62 $ 2,891
S & P 500 Index
expiration date 03/00 210 2,473
--------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ 5,364
==============
See accompanying notes which are an integral part of the financial statements.
13 Equity I Fund
<PAGE>
Equity I Fund
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Amounts in thousands (except per share amounts) December 31, 1999
Assets
<S> <C> <C>
Investments at market (identified cost $1,329,759) ..................... $ 1,685,508
Foreign currency holdings (identified cost $29) ........................ 23
Receivables: ...........................................................
Dividends ............................................................ 2,145
Investments sold ..................................................... 4,518
Fund shares sold ..................................................... 2,383
Daily variation margin on futures contracts .......................... 301
Prepaid expenses ....................................................... 5
-----------
Total assets ...................................................... 1,694,883
Liabilities
Payables:
Investments purchased ...................................... $ 6,188
Fund shares redeemed ....................................... 6,292
Accrued fees to affiliates ................................. 174
Other accrued expenses ..................................... 162
-----------
Total liabilities ................................................. 12,816
-----------
Net Assets ............................................................. $ 1,682,067
===========
Net Assets Consist of:
Accumulated net realized gain (loss) ................................... $ 141,842
Unrealized appreciation (depreciation) on:
Investments .......................................................... 355,749
Futures contracts .................................................... 5,364
Foreign currency-related transactions ................................ (6)
Shares of beneficial interest .......................................... 449
Additional paid-in capital ............................................. 1,178,669
-----------
Net Assets ............................................................. $ 1,682,067
===========
Net Asset Value, offering and redemption price per share:
Class E ($49,283,899 divided by 1,314,052 shares of $.01 par value
shares of beneficial interest outstanding) ......................... $ 37.51
===========
Class I ($1,632,783,429 divided by 43,584,183 shares of $.01 par value
shares of beneficial interest outstanding) ......................... $ 37.46
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Equity I Fund 14
<PAGE>
Equity I Fund
Statement of Operations
Amounts in thousands Year Ended December 31, 1999
Investment Income
Dividends ....................................................... $ 17,335
Dividends from Money Market Fund ................................ 3,418
Interest ........................................................ 401
---------
Total investment income ....................................... 21,154
Expenses
Advisory fees ....................................... $ 8,157
Administrative fees ................................. 748
Custodian fees ...................................... 620
Transfer agent fees ................................. 497
Professional fees ................................... 40
Registration fees ................................... 114
Shareholder servicing fees - Class E ................ 60
Trustees' fees ...................................... 5
Miscellaneous ....................................... 116
---------
Total expenses ................................................ 10,357
---------
Net investment income .............................................. 10,797
---------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ......................................... 253,148
Futures contracts ................................... 11,105
Foreign currency-related transactions ............... (1) 264,252
---------
Net change in unrealized appreciation (depreciation) on:
Investments ......................................... (9,387)
Futures contracts ................................... 3,606
Foreign currency-related transactions ............... (3) (5,784)
--------- ---------
Net realized and unrealized gain (loss) ................ 258,468
---------
Net increase (decrease) in net assets from operations .. $ 269,265
=========
See accompanying notes which are an integral part of the financial statements.
15 Equity I Fund
<PAGE>
Equity I Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Amounts in thousands Years Ended December 31,
1999 1998
----------- -----------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ....................................... $ 10,797 $ 10,430
Net realized gain (loss) .................................... 264,252 122,357
Net change in unrealized appreciation (depreciation) ........ (5,784) 155,425
----------- -----------
Net increase (decrease) in net assets from operations ..... 269,265 288,212
----------- -----------
Distributions
From net investment income
Class E ................................................... (121) --
Class I ................................................... (11,264) (10,494)
From net realized gain
Class E ................................................... (4,447) --
Class I ................................................... (154,221) (92,776)
----------- -----------
Net decrease in net assets from distributions ........... (170,053) (103,270)
----------- -----------
Share Transactions
Net increase (decrease) in net assets from share transactions 201,151 60,389
----------- -----------
Total net increase (decrease) in net assets ................... 300,363 245,331
Net Assets
Beginning of period ......................................... 1,381,704 1,136,373
----------- -----------
End of period ............................................... $ 1,682,067 $ 1,381,704
=========== ===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Equity I Fund 16
<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.
1999*
----------
Net Asset Value, Beginning of Period ....................... $ 38.01
----------
Income From Operations
Net investment income (a) ................................ .13
Net realized and unrealized gain (loss) .................. 3.11
----------
Total income from operations ........................... 3.24
----------
Distributions
From net investment income ............................... (.12)
From net realized gain ................................... (3.62)
----------
Total distributions .................................... (3.74)
----------
Net Asset Value, End of Period ............................. $ 37.51
==========
Total Return (%)(b) ........................................ 8.97
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ................. 49,284
Ratios to average net assets (%)(c):
Operating expenses ..................................... .95
Net investment income .................................. .57
Portfolio turnover rate (%) .............................. 111.56
* For the period May 14, 1999 (commencement of sale) to December 31, 1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
17 Equity I Fund
<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
----------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................ $ 35.17 $ 30.51 $ 30.34 $ 28.00 $ 23.32
----------- ----------- ---------- ---------- -----------
Income From Operations
Net investment income (a) ......................... .27 .27 .34 .42 .52
Net realized and unrealized gain (loss)............ 6.18 7.10 8.89 5.96 7.71
----------- ----------- ---------- ---------- -----------
Total income from operations .................... 6.45 7.37 9.23 6.38 8.23
----------- ----------- ---------- ---------- -----------
Distributions
From net investment income ........................ (.28) (.27) (.34) (.42) (.52)
From net realized gain ............................ (3.88) (2.44) (8.72) (3.62) (3.03)
----------- ----------- ---------- ---------- -----------
Total distributions ............................. (4.16) (2.71) (9.06) (4.04) (3.55)
----------- ----------- ---------- ---------- -----------
Net Asset Value, End of Period ...................... $ 37.46 $ 35.17 $ 30.51 $ 30.34 $ 28.00
=========== =========== ========== ========== ============
Total Return (%)(b) ................................. 18.98 25.10 32.02 23.58 35.94
Ratios/Supplemental Data:
Net Assets, end of period (in thousands)........... 1,632,783 1,381,704 1,136,373 961,953 751,497
Ratios to average net assets (%)(b):
Operating expenses .............................. .69 .70 .70 .71 .59
Net investment income ........................... .72 .82 .96 1.38 1.91
Portfolio turnover rate (%) ....................... 111.56 100.68 110.75 99.51 92.04
</TABLE>
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Prior to April 1, 1995, Fund performance, operating expenses, and net
investment income do not include any management fees paid to the Manager
or money managers. For periods thereafter, they are reported net of
investment management fees but gross of any investment services fees. See
Note 4.
Equity I Fund 18
<PAGE>
Equity II Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: To maximize total return primarily through capital appreciation and
by assuming a higher level of volatility than the Equity I Fund.
Invests in: Primarily small capitalization and "emerging growth-type" US equity
securities.
Strategy: The Fund uses a multi-style, multi-manager strategy intended to
achieve higher returns with moderate risk. The Fund employed the investment
management services of seven small capitalization stock fund managers with three
separate and distinct investment styles.
[THE FOLLOWING WAS DEPICTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL.]
Dates Equity II - Class I Russell 2500(TM) Lipper Small Co.(R) Growth++
$10,000 $10,000 $10,000
1990 8,524 $8,512 $6,962
1991 $12,138 $12,487 $13,688
1992 $13,754 $14,508 $15,238
1993 $16,050 $16,908 $17,777
1994 $15,639 $16,729 $17,694
1995 $20,114 $22,033 $23,020
1996 $23,838 $26,226 $27,570
1997 $30,687 $32,014 $33,287
1998 $30,884 $32,739 $33,076
1999 $37,865 $40,645 $43,886
- --------------------------------------------------------------------------------
Total $219,486 $233,402 $243,997
================================================================================
- --------------------------------------------------------------------------------
Equity II Fund - Class I
- --------------------------------------------------------------------------------
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- ------------ ------------
1 Year $ 12,260 22.60%
5 Years $ 24,222 19.34%ss.
10 Years $ 37,865 14.23%ss.
- --------------------------------------------------------------------------------
Equity II Fund - Class E +++
- --------------------------------------------------------------------------------
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- ------------ ------------
1 Year $ 12,241 22.41%
5 Years $ 24,184 19.30%ss.
10 Years $ 37,806 14.21%ss.
- --------------------------------------------------------------------------------
Russell 2500(TM) Index
- --------------------------------------------------------------------------------
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- ------------ ------------
1 Year $ 12,415 24.15%
5 Years $ 24,296 19.43%ss.
10 Years $ 40,645 15.05%ss.
- --------------------------------------------------------------------------------
Lipper(R) Small Co. Growth Funds Benchmark
- --------------------------------------------------------------------------------
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- ------------ ------------
1 Year $ 13,268 32.68%
5 Years $ 24,943 20.06%ss.
10 Years $ 43,885 15.94%ss.
19 Equity II Fund
<PAGE>
Equity II Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Performance Review
For the year ended December 31, 1999, the Equity II Fund Class I and Class E
shares reflected total returns of 22.60% and 22.41%, respectively, as compared
to the Russell 2500(TM) Index, which gained 24.15%. The Fund's performance
lagged the 32.68% gain of other small cap funds tracked by Lipper(R) Analytical
Services. The Fund's results reflect strong returns from its growth managers,
but also disappointing results from its market-oriented and value managers, as
the more valuation-sensitive approaches struggled in an extremely hostile
environment for small cap value stocks.
Portfolio Highlights
Small capitalization stocks caught up with large cap issues at year end 1999.
The Russell 2000(R) Index gained 18.45% in the fourth quarter to bring its
annual gain to 21.26%, versus the Russell 1000(R) Index gain of 20.91%. Similar
to its large cap counterparts, the performance of small cap stocks was dominated
by technology shares, with small cap technology issues up more than 100% for the
year. Disappointing security selection results accounted for the Fund's margin
of underperformance. However, its underlying cause was tied much more to the
disparities in returns being driven by valuation. As managers grew increasingly
concerned about overvaluation, their decisions to rotate to more attractively
valued alternatives led to significant underexposure to the strongest performing
issues, generally the stocks of Internet companies. A consequent tactical value
bias in the portfolio had a severe impact on performance results, as price
momentum dominated the market.
Fund management grappled with performance trends during the period, notably late
in the year, as managers increasingly moved away from stocks on valuation
concerns. Efforts to fortify the Fund's growth exposure proved disappointing as
the Fund's growth manager was unable to rationalize share prices on some of the
market's hottest issues-which continued to post strong gains nonetheless.
Complicating matters further was a scarce supply of investment manager
alternatives or additions in the growth category, as market conditions led many
investment management firms to close to new assets. Analysis of the Fund's
structure may result in some changes in the manager line up and to manager
allocations, with an objective of improving performance consistency in extreme
market environments.
- --------------------------------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) December 31, 1999
- --------------------------------------------------------------------------------
MedImmune, Inc. 0.8%
Tiffany & Co. 0.8
Macromedia, Inc. 0.7
BJ Services Co. 0.7
VeriSign, Inc. 0.6
Business Objects SA - ADR 0.6
Calpine Corp. 0.6
LSI Logic Corp. 0.6
Alkermes, Inc. 0.6
Go2Net, Inc. 0.5
- --------------------------------------------------------------------------------
Portfolio Characteristics
December 31, 1999
- --------------------------------------------------------------------------------
Current P/E Ratio 18.3x
Portfolio Price/Book Ratio 2.94x
Market Capitalization - $- Weighted Average 3.22 Bil
Number of Holdings 942
- --------------------------------------------------------------------------------
Money Managers Styles
- --------------------------------------------------------------------------------
Delphi Management, Inc. Value
Fiduciary International, Inc. Growth
GlobeFlex Capital, L.P. Market-Oriented
Jacobs Levy Equity Management, Inc. Value
Sirach Capital Management, Inc. Growth
Wellington Management Company LLP Market-Oriented
Westpeak Investment Advisors, L.P. Market-Oriented
* Equity II Fund Class I assumes initial investment on January 1, 1990. **
Russell 2500(TM) Index is composed of the bottom 500 stocks the Russell
1000(R) Index and all the stocks in the Russell 2000(R) Index. The largest
security in this Index has a market capitalization of about $2.0 billion.
The Russell 2500 Index return reflects adjustments for income dividends
and capital gains distributions reinvested as of the ex-dividend dates.
++ Prior to April 1, 1995, Fund performance results are reported gross of
investment management fees. For the period following April 1, 1995, Fund
performance results are reported net of investment management fees but
gross of any investment services fees. Information concerning these fees
can be obtained from the Fund's Advisor upon request.
+++ Lipper(R) Small Co. Growth Funds Benchmark is the average total return for
the universe of funds within the Small Company Growth Funds investment
objective. The total return for the funds reflects adjustments for income
dividends and capital gains distributions reinvested as of the ex-dividend
dates.
++++ Equity II Fund Class I performance has been linked with Class E to provide
historical perspective. From May 14, 1999 (commencement of sale) through
the current period, Class E paid shareholder service fees. Total return
would have been lower had these fees been in effect during prior reporting
periods.
ss. Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Equity II Fund 20
<PAGE>
Equity II Fund
Statement of Net Assets
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
--------- ---------
- --------------------------------------------------------------------------------
Common Stocks - 92.5%
Auto and Transportation - 3.8%
ABC Rail Products Corp. (a) 12,900 106
AirTran Holdings, Inc. (a) 7,500 33
Alaska Air Group, Inc. (a) 37,400 1,314
Alexander & Baldwin, Inc. 5,000 113
America West Holding Corp.
Class B (a) 54,300 1,127
American Freightways Corp. (a) 16,900 274
Arvin Industries, Inc. 12,300 349
AutoZone, Inc. (a) 39,000 1,260
Avis Rent A Car, Inc. (a) 87,600 2,238
Borg-Warner Automotive, Inc. 5,400 219
C.H. Robinson Worldwide, Inc. 9,500 378
Carey International, Inc. (a) 7,500 183
Carlisle Cos., Inc. 8,000 288
CNF Transportation, Inc. 28,300 976
Coachmen Industries, Inc. 50,800 768
Cooper Tire & Rubber Co. 11,100 173
Dollar Thrifty Automotive
Group, Inc. (a) 50,400 1,206
Expeditors International of
Washington, Inc. 24,800 1,075
Fleetwood Enterprises, Inc. 17,200 355
FRP Properties, Inc. (a) 6,400 154
Hertz Corp. Class A 4,100 206
Lancaster Colony Corp. 28,400 941
Landair Corp. (a) 32,000 160
Landstar Systems, Inc. (a) 14,700 612
Lear Corp. (a) 27,900 893
M.S. Carriers, Inc. (a) 1,300 31
Midwest Express Holdings, Inc. (a) 6,700 214
Monro Muffler Brake, Inc. (a) 20,200 152
Navistar International Corp. (a) 39,400 1,867
Newport News Shipbuilding, Inc. 6,200 171
Offshore Logistics, Inc. (a) 45,900 427
Pittston Burlington Group 6,700 71
Polaris Industries, Inc. 36,600 1,327
Roadway Express, Inc. 3,000 64
Rollins Truck Leasing Corp. 14,400 172
Skywest, Inc. 69,000 1,932
Superior Industries International, Inc 7,900 212
Tower Automotive, Inc. (a) 69,700 1,076
Transport Corp. of America (a) 12,000 144
Trinity Industries, Inc. 72,200 2,052
UAL Corp. (a) 9,200 714
USA Truck, Inc. (a) 15,000 116
USFreightways Corp. 76,850 3,640
Wynn's International, Inc. 12,000 170
Yellow Corp. (a) 9,500 160
---------
30,113
---------
Consumer Discretionary - 15.6%
Aaron Rents, Inc. 8,300 147
Abercrombie & Fitch Co. Class A (a) 65,800 1,756
ABM Industries, Inc. 4,400 90
Activision, Inc. (a) 27,900 427
Ambassadors International,
Inc. (a) 14,000 153
AMERCO (a) 7,400 184
American Eagle
Outfitters, Inc. NPV (a) 59,300 2,668
American Greetings Corp. Class A 67,000 1,583
Ames Department Stores, Inc. (a) 7,900 227
AMFM, Inc. (a) 30,000 2,348
Anchor Gaming (a) 3,800 164
AnnTaylor Stores Corp. (a) 75,650 2,605
Applebee's International, Inc. 21,100 621
Argosy Gaming Co. (a) 103,400 1,609
Aztar Corp. (a) 125,300 1,363
Barnes & Noble, Inc. (a) 25,300 522
Barra, Inc. (a) 19,300 618
BHC Communications, Inc. Class A 2,500 400
BJ's Wholesale Club, Inc. (a) 4,800 175
BOLDER Technologies Corp. (a) 14,000 179
Bowne & Co., Inc. 7,300 99
Brinker International, Inc. (a) 8,800 211
Bristol Hotels & Resorts, Inc. (a) 32,000 162
Brown Shoe Co., Inc 6,100 86
Brunswick Corp. 40,200 894
Catalina Marketing Corp. (a) 1,600 185
Cato Corp. Class A 3,300 41
Cavanaughs Hospitality Corp. (a) 20,000 165
CDI Corp. (a) 5,900 142
CEC Entertainment, Inc. (a) 91,725 2,602
Central Newspapers, Inc. Class A 82,200 3,236
Charming Shoppes, Inc. (a) 28,600 188
Children's Comprehensive
Services, Inc. (a) 19,000 109
Choice Hotels International, Inc. (a) 4,000 69
Chris Craft Industries, Inc. (a) 12,463 899
Claire's Stores, Inc. 64,900 1,452
Cole National Corp. Class A (a) 25,000 125
Cornell Corrections, Inc. (a) 17,300 145
Cox Radio, Inc. Class A (a) 800 80
Cyberian Outpost, Inc. (a) 10,100 100
Daisytek International Corp. (a) 7,400 173
Dan River, Inc. Class A (a) 25,300 130
Darden Restaurants, Inc. 8,000 145
David's Bridal, Inc. (a) 18,600 205
Deluxe Corp. 29,400 807
DeVry, Inc. (a) 64,700 1,204
Diamond Technology
Partners, Inc. (a) 21,100 1,817
21 Equity II Fund
<PAGE>
Equity II Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
--------- ---------
- --------------------------------------------------------------------------------
EduTrek International, Inc.
Class A (a) 100,000 100
Electronics Boutique
Holdings Corp. (a) 6,000 108
Emmis Broadcasting Corp.
Class A (a) 20,000 2,492
Entercom Communications Corp. (a) 29,000 1,914
Ethan Allen Interiors, Inc. 8,250 265
Extended Stay America, Inc. (a) 15,800 120
Family Dollar Stores, Inc. 58,900 961
Federated Department Stores, Inc. (a) 20,000 1,011
Footstar, Inc. (a) 3,000 92
Fossil, Inc. (a) 73,250 1,694
Franklin Covey Co. (a) 4,300 32
Funco, Inc. (a) 7,000 77
Furniture Brands International, Inc. (a) 67,700 1,489
G & K Services, Inc. Class A 25,000 802
Genesco, Inc. (a) 73,400 954
Gray Communications
Systems, Inc. NPV 5,800 103
Grey Advertising, Inc. 4,770 1,894
GTECH Holdings Corp. (a) 19,700 433
Guitar Center, Inc. (a) 18,700 186
Handleman Co. (a) 93,000 1,244
Harland (John H.) Co. 44,300 811
Harte Hanks Communications 48,500 1,055
Haverty Furniture Co., Inc. 10,400 131
Hearst-Argyle Television, Inc. (a) 41,800 1,113
Hispanic Broadcasting Corp. (a) 13,200 1,214
Hollywood Park, Inc. (a) 86,700 1,945
Houghton Mifflin Co. 12,300 519
IHOP Corp. (a) 2,120 35
Ikon Office Solutions, Inc. 31,300 213
Interim Services, Inc. (a) 52,900 1,309
Iron Mountain, Inc. (a) 4,000 157
ITT Educational Services, Inc. (a) 9,900 153
Jones Apparel Group, Inc. (a) 4,600 125
Kellwood Co. 7,800 152
Knight-Ridder, Inc. 26,000 1,547
La-Z-Boy Inc. 11,200 188
Lamar Advertising Co. Class A (a) 33,000 1,992
Learning Tree International, Inc. (a) 14,600 405
Lee Enterprises, Inc. 39,500 1,262
Legato Systems, Inc. (a) 17,200 1,183
Linens 'N Things, Inc. (a) 6,600 196
Lithia Motors, Inc., Class A (a) 4,500 80
Mail-Well, Inc. (a) 7,100 96
Mandalay Resort Group (a) 64,910 1,306
Manpower, Inc. 29,300 1,102
Maxim Group, Inc. (a) 26,300 141
McClatchy Co. Class A 51,500 2,226
McGraw-Hill, Inc. 24,000 1,479
Media General, Inc. Class A 5,400 281
MeriStar Hotels & Resorts, Inc. (a) 50,000 178
MGM Grand, Inc. (a) 11,000 553
Michaels Stores, Inc. (a) 11,700 330
Modem Media Poppe Tyson, Inc. (a) 25,900 1,826
Movado Group, Inc. 2,400 52
O'Charleys, Inc. (a) 12,100 156
On Assignment, Inc. (a) 45,200 1,339
Oshkosh B' Gosh, Inc. Class A 8,000 156
Pacific Sunwear of California (a) 97,500 3,102
Packaged Ice, Inc. (a) 26,000 85
Park Place Entertainment Corp. (a) 93,300 1,166
Payless ShoeSource, Inc. (a) 18,300 860
Penton Media, Inc. 55,761 1,338
Petco Animal Supplies, Inc. (a) 23,000 334
Phillips-Van Heusen Corp. 6,700 56
Pierce Leahy Corp. (a) 4,100 177
Polo Ralph Lauren Corp.
Class A (a) 51,300 875
Pomeroy Computer Resources, Inc. (a) 10,000 130
Pre-Paid Legal Services, Inc. (a) 36,000 864
Quicksilver, Inc. (a) 59,500 922
R.H. Donnelley Corp. (a) 9,400 177
RARE Hospitality International, Inc. NPV (a) 3,600 78
RCM Technologies, Inc. (a) 10,000 169
RDO Equipment Co. Class A (a) 22,000 129
Regis Corp. 32,900 617
RemedyTemp, Inc. Class A (a) 7,300 128
Rent-Way, Inc. (a) 37,010 692
Reynolds & Reynolds Co. Class A 53,500 1,204
Ross Stores, Inc. 121,300 2,176
Rural/Metro Corp. (a) 20,000 86
Ryan's Family Steak Houses, Inc. (a) 115,900 982
S1 Corp. (a) 9,700 755
Saga Communications Class A (a) 9,765 198
Salton, Inc. (a) 49,050 1,640
Scholastic Corp. (a) 6,000 373
Schultz Sav-o Stores, Inc. 61,750 745
SCP Pool Corp. (a) 9,000 233
Scripps (E.W.) Co. Class A 29,000 1,300
Sport Supply Group, Inc. (a) 26,000 179
Springs Industries, Inc. 17,200 687
Stage Stores, Inc. (a) 50,000 116
Station Casinos, Inc. (a) 25,300 568
Steinway Musical Instruments, Inc. (a) 7,400 150
Sturm, Ruger & Co., Inc. 7,500 67
Talbots, Inc. 21,600 964
TETRA Technologies, Inc. (a) 56,500 869
Equity II fund 22
<PAGE>
Equity II Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
--------- ---------
- --------------------------------------------------------------------------------
Tiffany & Co. 69,150 6,172
Timberland Co. Class A (a) 3,200 169
Tommy Hilfiger Corp. (a) 39,500 921
Toro Co. 33,800 1,261
Tupperware Corp. 30,800 522
United Stationers, Inc. (a) 6,900 197
United Television, Inc. 11,000 1,491
USinternetworking, Inc. (a) 33,825 2,359
Valassis Communications, Inc. (a) 30,000 1,268
Value City Department Stores, Inc. (a) 5,800 88
Venator Group, Inc. (a) 96,600 676
Warnaco Group, Inc. Class A 13,600 167
Washington Post Co. Class B 3,700 2,057
West Marine, Inc. (a) 19,700 164
Wilsons The Leather Experts, Inc. (a) 11,000 202
WMS Industries, Inc. (a) 108,800 1,428
Zale Corp. (a) 35,200 1,703
---------
122,323
---------
Consumer Staples - 1.8%
Alberto-Culver Co. Class A 47,000 1,022
Block Drug Co., Inc. Class A 19,539 601
Canandaigua Brands Inc. Class A (a) 9,500 485
Coca-Cola Bottling Co. Consolidated 19,200 900
Corn Products International, Inc. 15,200 498
Dean Foods Co. 500 20
Earthgrains Co. 25,500 411
Fleming Cos., Inc. 10,700 110
IBP, Inc. 138,200 2,487
International Home
Foods, Inc. (a) 16,600 288
Interstate Bakeries Corp. 27,800 504
Michael Foods, Inc. 4,800 118
Nature's Sunshine Products, Inc. 22,000 176
Pepsi Bottling Group, Inc. (The) 43,900 727
Performance Food Group Co. (a) 4,800 116
Ralcorp Holdings, Inc. (a) 14,700 293
Robert Mondavi Corp. Class A (a) 4,600 160
Ruddick Corp. 6,900 107
Schweitzer-Mauduit
International, Inc. 19,400 261
Smithfield Foods, Inc. (a) 10,200 245
Standard Commercial Corp. 23,000 82
Suiza Foods Corp. (a) 18,100 717
SuperValu, Inc. 68,100 1,361
Tootsie Roll Industries, Inc. 29,810 982
U.S. Foodservice (a) 50,200 841
Universal Corp. 12,300 281
Universal Foods Corp. 18,300 373
---------
14,166
---------
Financial Services - 12.2%
ACE, Ltd. 70,500 1,176
Advanta Corp. Class A 25,700 467
Allmerica Financial Corp. 11,000 612
American Financial Group, Inc. 8,200 216
American Financial Holdings, Inc. (a) 12,000 151
American National Insurance Co. 1,100 70
AmeriCredit Corp. (a) 10,800 200
AmerUs Life Holdings, Inc. 2,700 62
Amplicon, Inc. 23,900 260
Andover Bancorp, Inc. 6,600 182
Astoria Financial Corp. 81,200 2,472
BancFirst Corp. 3,400 115
BancWest Corp. 17,400 339
Bank United Corp. Class A 22,000 594
BankAtlantic Bancorp, Inc. Class A 60,296 249
Bay View Capital Corp. 41,700 592
Bear Stearns Cos., Inc. 32,799 1,402
BISYS Group, Inc. (a) 56,300 3,667
BOK Financial Corp. (a) 8,858 179
Brookline Bancorp., Inc. 3,200 31
BSB Bancorp, Inc. 7,400 142
Capitol Federal Financial 11,300 110
Capstead Mortgage Corp. 30,100 126
Centura Banks, Inc. 4,600 203
Charter One Financial, Inc. 45,937 879
Citizens Banking Corp. 1,500 33
City National Corp. 38,300 1,262
Clark/Bardes Holdings, Inc. (a) 8,600 124
CNA Surety Corp. 5,000 65
Cohoes Bancorp, Inc. 12,000 120
Colonial BancGroup, Inc. 87,000 903
Commerce Bancorp, Inc. 6,300 255
Commerce Bancshares, Inc. 10,468 359
Commerce Group, Inc. 3,000 78
Commonwealth Bancorp, Inc. 3,400 57
Community Bank System, Inc. 40,500 937
Compass Bancshares, Inc. 3,750 84
CompuCredit Corporation NPV (a) 1,700 65
Concord EFS, Inc. (a) 65,800 1,690
Conning Corp. 18,000 151
CORT Business Services Corp. (a) 4,900 85
Creditrust Corp. (a) 4,000 31
Cullen Frost Bankers, Inc. 27,000 695
Data Transmission Network Corp. (a) 6,000 102
Delphi Financial Group, Inc. (a) 13,240 397
Delta Financial Corp. (a) 34,500 142
Dime Bancorp, Inc. 33,100 501
Dime Community Bancorp, Inc. 3,500 65
Donaldson, Lufkin & Jenrette, Inc. 32,400 1,567
Donegal Group, Inc. 25,000 158
23 Equity II Fund
<PAGE>
Equity II Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
--------- ---------
- --------------------------------------------------------------------------------
Doral Financial Corp. 36,200 443
Downey Financial Corp. 15,300 309
DST Systems, Inc. (a) 49,400 3,770
Duke-Weeks Realty Investments,
Inc. (b) 42,000 819
E.W. Blanch Holdings, Inc. 8,800 539
East West Bancorp, Inc. 4,500 50
Edwards (A.G.), Inc. 37,300 1,196
Enhance Financial Services
Group, Inc. 9,500 154
Everest Reinsurance Holdings, Inc. 29,200 652
Farm Family Holdings, Inc. (a) 2,400 101
FBL Financial Group, Inc. Class A 6,500 130
Financial Security Assurance
Holdings, Ltd. 5,030 262
First American Financial Corp. 31,500 392
First Commonwealth Financial Corp. 2,600 31
First Essex Bancorp, Inc. 8,000 114
First Indiana Corp. 7,000 152
First Republic Bank (a) 8,700 204
First Tennessee National Corp. 50,700 1,445
First Washington Bancorp, Inc. 2,530 37
FirstFed Financial Corp. (a) 9,800 138
FirstMerit Corp. 1,800 42
Flagstar Bancorp, Inc. 6,300 108
Freedom Securities Corp. 9,000 101
Fremont General Corp. 27,800 205
GA Financial, Inc. 8,300 110
Golden State Bancorp, Inc. (a) 17,600 304
Greater Bay Bancorp NPV 3,400 145
Greenpoint Financial Corp. 50,400 1,200
Hamilton Bancorp, Inc. (a) 5,400 95
Heller Financial, Inc. Class A 35,341 709
Hibernia Corp. Class A 33,500 356
Home Port Bancorp, Inc. 6,000 155
Hudson River Bancorp, Inc. 12,000 120
Humphrey Hospitality Trust, Inc. (b) 21,000 159
Imperial Bancorp (a) 17,600 425
Independence Community Bank Corp. 14,400 179
Insurance Management Solutions
Group, Inc. (a) 50,000 125
Intercontinental Life Corp. (a) 15,000 139
Investors Financial Services Corp. 52,800 2,422
IPC Holdings, Ltd. 55,500 826
Itla Cap Corp. (a) 12,000 149
Jack Henry & Assocociates, Inc. 20,500 1,079
Jefferies Group, Inc. 46,300 1,019
JSB Financial, Inc. 2,500 130
Keystone Financial, Inc. 9,300 196
Klamath First Bancorp, Inc. 12,000 143
Legg Mason, Inc. 61,900 2,244
Lehman Brothers Holdings, Inc. 23,500 1,990
Leucadia National Corp. 9,900 229
Liberty Financial Cos., Inc. 5,700 131
LINC Capital, Inc. (a) 20,000 85
MAF Bancorp, Inc. 2,400 50
Markel Corp. (a) 6,500 1,008
Medical Assurance, Inc. (a) 2,800 59
Mercantile Bankshares Corp. 18,800 600
Mercury General Corp. 10,000 223
Metris Companies, Inc. 16,150 576
MGIC Investment Corp. 33,000 1,986
Mississippi Valley Bancshares, Inc. 6,700 180
MONY Group, Inc. (The) 11,300 330
National City Bancorporation 9,300 156
National Commerce Bancorp 80,600 1,829
National Data Corp. 9,500 322
Nationwide Financial Services, Inc.
Class A 34,000 950
NCO Group, Inc. NPV (a) 40,800 1,216
Northrim Bank 11,000 107
OceanFirst Financial Corp. 4,600 80
Old National Bancorp 6,075 197
Old Republic International Corp. 49,600 676
One Valley Bancorp of West
Virginia, Inc. 3,500 107
Pacific Century Financial Corp. 44,000 822
Pacific Gulf Properties, Inc. (b) 7,000 142
Pan Pacific Retail Properties, Inc. (b) 7,000 114
Paychex, Inc. 50,000 1,997
Penn Treaty American Corp. (a) 16,500 260
Pennsylvania Real Estate
Investment Trust (b) 8,000 117
Peoples Bank 4,000 84
Peoples Heritage Financial Group 68,224 1,023
PFF Bancorp, Inc. (a) 3,100 60
Pinnacle Holdings, Inc. (a)(b) 6,000 256
PMI Group, Inc. (The) 53,950 2,633
Price (T. Rowe) & Associates, Inc. 41,100 1,513
Profit Recovery Group
International, Inc. (The)(a) 40,000 1,060
Protective Life Corp. 28,100 894
Provident Bankshares Corp. 11,337 196
Provident Financial Group, Inc. 4,700 169
Queens County Bancorp 8,997 242
Quotesmith.com, Inc. (a) 11,400 128
Radian Group, Inc. (a) 69,600 3,322
RenaissanceRe Holdings, Ltd. 33,500 1,368
Republic Bancorp, Inc. 2,530 31
Resource Bancshares Mortgage Group 28,300 128
Richmond County Financial Corp. 8,700 157
Riggs National Corp. 24,000 315
Equity II Fund 24
<PAGE>
Equity II Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
--------- ---------
- --------------------------------------------------------------------------------
Roslyn Bancorp, Inc. 36,000 659
Ryder System, Inc. 13,200 323
Scottish Annuity & Life
Holdings, Ltd. 12,000 98
SCPIE Holdings, Inc. 2,000 64
Seacoast Financial Services Corp. (a) 11,000 111
Silicon Valley Bancshares (a) 37,600 1,856
Sky Financial Group, Inc. 38,500 775
Smith (Charles E.) Residential
Realty, Inc. (b) 36,600 1,294
Sovereign Bancorp, Inc. 190,527 1,411
Sovran Self Storage, Inc. 46,500 881
Stancorp Financial Group, Inc. NPV 10,900 275
Staten Island Bancorp, Inc. 14,000 252
Stewart Information Services Corp. 22,500 300
SunGard Data Systems (a) 78,500 1,863
TCF Financial Corp. 10,000 249
Transatlantic Holdings, Inc. 17,300 1,350
Trustmark Corp. 4,800 104
UMB Financial Corp. 1,650 61
Unico American Corp. NPV 17,100 120
Union Planters Corp. 24,502 966
Washington Federal, Inc. 18,955 372
Webster Financial Corp. 57,700 1,360
Wellsford Real Properties, Inc. (b) 10,000 85
Westamerica Bancorporation 50,000 1,396
WesterFed Financial Corp. 6,000 89
Whitney Holding Corp. 700 26
XL Capital, Ltd. Class A 20,900 1,084
---------
95,787
---------
Health Care - 6.8%
Accredo Health, Inc. (a) 2,800 86
Affymetrix, Inc. NPV (a) 20,000 3,393
Alkermes, Inc. (a) 97,100 4,758
Alpharma, Inc. Class A 15,100 464
AmSurg Corp. Class A (a) 18,000 117
Apria Healthcare Group, Inc. (a) 56,000 1,005
Assisted Living Concepts, Inc. (a) 90,000 186
Bard (C.R.), Inc. 25,300 1,341
Bindley Western Industries, Inc. 52,362 789
Biosite Diagnostics, Inc. (a) 17,000 271
Cephalon, Inc. (a) 71,800 2,482
Cooper Companies, Inc. (a) 21,300 642
Cor Therapeutics, Inc. (a) 30,100 809
CorVel Corp. (a) 5,000 116
Coventry Health Care, Inc. (a) 10,600 72
Cytyc Corp. (a) 45,400 2,775
Dura Pharmaceuticals, Inc. (a) 26,500 369
First Health Group Corp. (a) 56,500 1,518
Genzyme Corp. (a) 16,100 722
Gilead Sciences, Inc. (a) 16,000 864
Hanger Orthopedic Group, Inc. (a) 41,500 415
Healthcare Services Group, Inc. (a) 20,000 142
Humana, Inc. (a) 87,300 715
IDEC Pharmaceuticals Corp. (a) 36,200 3,550
Immucor Corp. (a) 11,800 154
IRIDEX Corp. (a) 20,000 170
IVAX Corp. (a) 96,500 2,485
Jones Pharma, Inc. 29,225 1,267
King Pharmaceuticals, Inc. NPV (a) 2,500 140
Laser Vision Centers, Inc. (a) 56,900 597
Lincare Holdings, Inc. (a) 57,000 1,977
Lunar Corp. (a) 16,100 111
Mallinckrodt, Inc. 10,900 347
MedImmune, Inc. (a) 39,400 6,530
Medquist, Inc. (a) 25,000 641
NBTY, Inc. (a) 47,300 520
Oxford Health Plans, Inc. (a) 90,700 1,150
Patterson Dental Co. (a) 8,300 353
Perrigo Co. (a) 5,800 46
ProMedCo Management Co. (a) 65,000 187
Province Healthcare Co. (a) 75,400 1,433
QLT PhotoTherapeutics, Inc. NPV (a) 42,500 2,485
Quest Diagnostics, Inc. (a) 13,800 422
Renal Care Group, Inc. (a) 100,575 2,344
Res-Care, Inc. (a) 11,000 140
Respironics, Inc. (a) 17,000 135
Sierra Health Services, Inc. (a) 5,800 39
Sola International, Inc. (a) 7,900 110
STAAR Surgical Co. (a) 13,000 124
Syncor International Corp. (a) 3,500 99
Techne Corp. (a) 2,600 143
Trigon Healthcare, Inc. (a) 25,700 758
Universal Health Services, Inc.
Class B (a) 5,800 209
VISX, Inc. (a) 13,500 699
Zoll Medical Corp. (a) 4,100 153
---------
53,569
---------
Integrated Oils - 0.4%
Callon Petroleum Co. (a) 9,000 133
Cross Timbers Oil Co. 99,025 897
Equitable Resources, Inc. 12,100 404
Giant Industries, Inc. (a) 76,500 641
Murphy Oil Corp. 17,500 1,004
Tesoro Petroleum Corp. (a) 23,700 274
---------
3,353
---------
Materials and Processing - 7.2%
Agrium, Inc. 84,000 662
AK Steel Holding Corp. 64,700 1,221
25 Equity II Fund
<PAGE>
Equity II Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
--------- ---------
- --------------------------------------------------------------------------------
AMCOL International Corp. 4,100 66
Ameron, Inc. 2,700 107
AptarGroup, Inc. 59,800 1,502
Ball Corp. 36,300 1,429
Banta Corp. 43,800 988
Boise Cascade Corp. 72,700 2,944
Bowater, Inc. 4,800 261
Brady Corp. Class A 4,900 166
Building Materials Holding Corp. (a) 12,000 122
BWay Corp. (a) 25,000 153
Cambrex Corp. 9,200 317
Carpenter Technology Corp. 8,000 220
Centex Construction Products, Inc. 25,700 1,002
Centex Corp. 62,000 1,531
Channell Commercial Corp. (a) 18,000 203
Chemed Corp. 4,700 135
Cleveland-Cliffs, Inc. 4,700 146
Commercial Metals Co. 11,400 387
Cytec Industries, Inc. (a) 34,400 796
Dal-Tile International, Inc. (a) 8,000 81
Dayton Superior Corp. Class A (a) 8,400 137
Dexter Corp. 8,000 318
Engle Homes, Inc. 14,000 168
Ennis Business Forms, Inc. 68,200 529
Ethyl Corp. 21,200 83
Florida Rock Industries, Inc. 2,300 79
Fluor Corp. 20,800 954
Freeport-McMoRan Copper &
Gold, Inc. Class B (a) 30,400 642
Fuller (H.B.) Co. 3,100 173
Geon Co. 23,700 770
Georgia Gulf Corp. 51,600 1,571
Granite Construction, Inc. 10,300 190
Great Lakes Chemical Corp. 24,500 936
Hanna (M.A.) Co. 23,400 256
Hexcel Corp. (a) 33,200 185
Hughes Supply, Inc. 20,700 446
IMCO Recycling, Inc. 3,200 40
Internet Corp. 15,100 176
Ionics, Inc. (a) 200 6
Jacob's Engineering Group, Inc. (a) 8,500 276
Justin Industries, Inc. 3,372 50
Kaydon Corp. 30,000 804
Lafarge Corp. 33,700 931
Lesco, Inc. 12,000 204
Louisiana Pacific Corp. 74,100 1,056
Lubrizol Corp. 57,200 1,766
Lydall, Inc. (a) 24,800 164
MacDermid, Inc. 20,500 842
Martin Marietta Materials, Inc. 25,000 1,025
Meritage Corp. (a) 14,000 153
Millennium Chemicals, Inc. 40,300 796
Minerals Technologies, Inc. 28,900 1,158
Morrison Knudsen Corp. (a) 8,900 70
Mueller Industries, Inc. (a) 12,700 460
NCI Building Systems, Inc. (a) 9,700 179
Newmont Mining Corp. 19,500 478
NN Ball & Roller, Inc. 23,000 155
Nortek, Inc. (a) 54,800 1,533
Northwest Pipe Co. (a) 9,900 135
OM Group 8,100 279
Palm Harbor Homes, Inc. (a) 7,500 135
Penford Corp. 9,500 164
Pentair, Inc. 10,600 408
Phelps Dodge Corp. 37,000 2,483
Plum Creek Timber Co., Inc. (b) 32,000 800
Potlatch Corp. 7,700 344
Precision Castparts Corp. 5,000 131
Primex Technologies, Inc. 7,200 149
Quaker Fabric Corp. (a) 30,000 128
Quanex Corp. 7,100 181
Reliance Steel & Aluminum Co. 9,550 224
Rock-Tenn Co. Class A 14,700 217
RPM, Inc. (Ohio) 44,200 450
Ryerson Tull, Inc. 25,900 503
Schulman (A.), Inc. 49,200 800
Scotts Co. (The) Class A (a) 34,900 1,405
SIFCO Industries 67,400 468
Sigma Aldrich Corp. 21,700 651
Simpson Manufacturing Co., Inc. (a) 3,700 162
Southdown, Inc. 23,500 1,212
Spartech Corp. 8,000 258
St. Joe Co. (The) 46,500 1,131
Temple-Inland, Inc. 12,700 837
Texas Industries, Inc. 51,200 2,178
Timken Co. 23,800 486
Tractor Supply Co. (a) 10,300 165
Universal Forest Products, Inc. 7,000 103
USEC, Inc. 32,100 225
USG Corp. 64,500 3,040
USX-U.S. Steel Group 32,300 1,065
Waters Corp. (a) 5,000 265
Webb (Del E.) Corp. (a) 10,700 267
Wellman, Inc. 9,000 168
Westinghouse Air Brake Co. 23,760 422
Westvaco Corp. 17,400 568
Worthington Industries, Inc. 10,100 167
---------
56,972
---------
Miscellaneous - 1.1%
Agribrands International, Inc. (a) 4,200 193
ChoicePoint, Inc. (a) 46,000 1,903
Equity II Fund 26
<PAGE>
Equity II Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
--------- ---------
- --------------------------------------------------------------------------------
Crestline Capital Corp. (a) 5,600 116
LNR Property Corp. 63,500 1,262
MAXIMUS, Inc. (a) 48,500 1,646
Quest Education Corp. (a) 18,000 158
Safety-Kleen Corp. (a) 39,100 442
SFX Entertainment, Inc. (a) 28,000 1,013
Stone Energy Corp. (a) 23,900 851
URS Corp. (a) 63,300 1,373
---------
8,957
---------
Other Energy - 5.4%
Apache Corp. 7,000 259
Arch Coal, Inc. 2,600 29
Barrett Resources Corp. (a) 42,500 1,251
BJ Services Co. (a) 121,300 5,072
Brown (Tom), Inc. (a) 2,100 28
Chesapeake Energy Corp. (a) 37,600 89
Clayton Williams Energy, Inc. (a) 9,600 113
Cleco Corp. 6,500 208
Cooper Cameron Corp. (a) 30,000 1,468
Devon Energy Corp. 79,700 2,620
Dynegy, Inc. 11,400 277
Edge Petroleum Corp. (a) 55,000 151
EEX Corp. (a) 10,000 29
ENSCO International, Inc. 5,800 133
EOG Resources, Inc. 70,400 1,236
Global Industries, Inc. (a) 76,350 659
Global Marine, Inc. (a) 126,100 2,096
Helmerich & Payne, Inc. 81,600 1,780
Horizon Offshore, Inc. (a) 22,300 120
HS Resources, Inc. (a) 1,100 19
Hugoton Royalty Trust 97,200 790
Kinder Morgan, Inc. 49,100 991
Louis Dreyfus Natural Gas Corp. (a) 50,700 919
Mallon Resources Corp. (a) 27,100 159
Marine Drilling Co, Inc. (a) 12,000 269
Mitcham Industries, Inc. (a) 40,000 133
Mitchell Energy &
Development Corp. 3,800 82
Nabors Industries, Inc. (a) 55,007 1,702
Noble Affiliates, Inc. 47,900 1,027
Noble Drilling Corp. (a) 27,600 904
Northwestern Corp. 6,600 145
Nuevo Energy Co. (a) 11,900 223
OMNI Energy Services Corp (a) 70,000 74
ONEOK, Inc. 14,200 357
Pioneer Natural Resources Co. (a) 91,300 816
Rowan Cos., Inc. (a) 60,500 1,312
Santa Fe International Corp. 70,500 1,824
Seacor Holdings, Inc. (a) 26,300 1,361
Seitel, Inc. (a) 25,400 171
Smith International, Inc. (a) 20,000 994
Sunoco, Inc. 32,400 761
Supreme Industries, Inc. Class A (a) 21,661 134
Talisman Energy, Inc. (a) 38,000 979
Tidewater, Inc. 75,900 2,733
Titan Exploration, Inc. (a) 24,900 128
Transocean Sedco Forex, Inc. NPV (a) 30,500 1,028
Ultramar Diamond Shamrock Corp. 47,100 1,070
UniSource Energy Corp. NPV (a) 55,900 625
Unit Corp. (a) 18,000 138
UTI Energy Corp. (a) 12,600 291
Varco International, Inc. (a) 74,100 755
Veritas DGC, Inc. (a) 67,500 945
Vintage Petroleum, Inc. (a) 100,250 1,209
---------
42,686
---------
Producer Durables - 6.8%
Advanced Lighting
Technologies, Inc. (a) 27,900 160
Ag-Chem Equipment Co., Inc. (a) 14,000 145
American Homestar Corp. (a) 33,000 129
ANTEC Corp. (a) 21,000 767
Applied Industrial Technology, Inc. 1,100 18
Astec Industries, Inc. (a) 9,000 169
Belden, Inc. 8,900 187
Briggs & Stratton Corp. 39,200 2,102
C&D Technologies, Inc. 7,800 332
Cascade Corp. 13,800 127
Celestica, Inc. NPV (a) 24,000 1,332
CFM Technologies, Inc. (a) 20,000 190
Champion Enterprises, Inc. (a) 17,700 152
Chart Industries, Inc. 44,000 176
Clayton Homes, Inc. 44,300 407
Cohu, Inc. 68,800 2,107
Columbus McKinnon Corp. 33,400 334
CommScope, Inc. (a) 33,000 1,330
Cordant Technologies, Inc. 8,900 294
Crossmann Communities, Inc. (a) 9,000 138
CTS Corp. 10,700 807
Cummins Engine Co., Inc. 38,300 1,850
D.R. Horton, Inc. 90,500 1,250
Detroit Diesel Corp. 14,300 274
Diebold, Inc. 50,300 1,182
Donaldson Co., Inc. 9,300 224
Electroglas, Inc. (a) 46,500 1,177
FARO Technologies, Inc. (a) 50,000 147
Farr Co. (a) 13,500 132
FLIR Systems, Inc. (a) 9,000 145
Foster Wheeler Corp. 22,600 201
Gardner Denver Machinery, Inc. (a) 9,000 150
Gemstar International Group, Ltd. (a) 32,400 2,304
27 Equity II Fund
<PAGE>
Equity II Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
--------- ---------
- --------------------------------------------------------------------------------
GenRad, Inc. (a) 38,700 624
Gleason Corp. 16,500 384
Helix Technology Corp. 3,600 161
Hubbell, Inc. Class B 26,500 722
inTEST Corp. (a) 15,000 270
Itron, Inc. (a) 26,000 156
JLG Industries, Inc. 7,100 113
Johnson Controls, Inc. 5,000 284
Jore Corp. NPV (a) 20,000 156
Kaman Corp. Class A 5,900 75
Kaufman & Broad Home Corp. 38,700 936
KLA Instruments Corp. (a) 16,100 1,792
Kulicke & Soffa Industries, Inc. (a) 40,000 1,700
Lennar Corp. 53,600 871
Litton Industries, Inc. (a) 36,500 1,820
M.D.C. Holdings, Inc. 7,800 122
Manitowoc Co., Inc. 10,650 362
Mark IV Industries, Inc. 20,200 357
Microwave Power Devices, Inc. (a) 20,800 148
Moog, Inc. (a) 7,500 203
MTS Systems Corp. 17,600 135
NACCO Industries, Inc. Class A 5,400 300
National Service Industries, Inc. 36,000 1,062
NVR, Inc. (a) 26,900 1,284
Orbital Sciences Corp. Class A (a) 9,800 182
OYO Geospace Corp. (a) 18,000 185
Pall Corp. 45,500 981
Pittway Corp. Class A 41,322 1,852
Powell Industries, Inc. (a) 25,000 172
Pulte Corp. 71,900 1,618
Ryland Group, Inc. 50,400 1,162
Sauer, Inc. 14,200 129
Sawtek, Inc. (a) 29,100 1,937
Smith (A.O.) Corp. 2,700 59
Spectra-Physics Lasers, Inc. (a) 10,000 280
SpeedFam-IPEC, Inc. NPV (a) 68,500 886
SPX Corp. (a) 3,200 259
Standard Pacific Corp. 13,200 145
Starrett (L.S.) Co. Class A 25,200 565
TB Wood's Corporation 19,000 162
Tecumseh Products Co. Class A 10,500 495
Tennant Co. 5,000 164
Teradyne, Inc. (a) 29,200 1,927
Terex Corp. (a) 68,700 1,907
Thomas & Betts Corp. 22,500 717
Toll Brothers, Inc. (a) 55,200 1,029
U.S. Home Corp. (a) 5,000 128
Waste Connections, Inc. (a) 44,400 633
Watts Industries, Inc. Class A 5,500 81
York International Corp. 33,100 908
---------
53,039
---------
Technology - 25.5%
Actuate Corp. (a) 16,500 706
Adaptec, Inc. (a) 72,400 3,606
Advanced Digital Information (a) 29,300 1,425
Advanced Micro Devices, Inc. (a) 50,000 1,447
Affiliated Computer Services, Inc.
Class A (a) 43,500 2,001
Akamai Technologies, Inc. (a) 1,900 622
Allaire Corp. (a) 19,200 2,809
Alliant Techsystems, Inc. (a) 4,000 249
Alpha Industries, Inc. (a) 22,000 1,249
American Management
Systems, Inc. (a) 29,500 920
American Xtal Technology, Inc. (a) 10,000 173
Amkor Technology, Inc. (a) 117,400 3,302
Amphenol Corp. Class A (a) 4,500 300
Anixter International, Inc. (a) 12,900 266
ARIS Corp. NPV (a) 15,200 175
Arrow Electronics, Inc. (a) 111,900 2,839
AstroPower, Inc. (a) 14,000 194
AudioCodes, Ltd. (a) 4,200 383
Avant! Corp. (a) 24,200 363
Avnet, Inc. 27,900 1,688
AVX Corp. 27,200 1,358
Bell & Howell Co. (a) 9,500 302
Benchmark Electronics, Inc. (a) 4,800 110
BindView Development Corp. (a) 43,500 2,159
Burr-Brown Corp. (a) 7,950 286
Business Objects SA - ADR (a) 36,550 4,829
Cable Design Technologies Corp. (a) 62,700 1,442
Celeritek, Inc. (a) 13,800 267
CFI ProServices, Inc. (a) 19,200 156
Check Point Software
Technologies, Ltd. NPV (a) 2,600 516
China.com Corp. Class A (a) 21,100 1,666
CIENA Corp. (a) 34,900 2,006
Clarent Corp. (a) 4,300 334
Clarify, Inc. (a) 20,000 2,533
Coherent, Inc. (a) 9,800 259
Comverse Technology, Inc. (a) 26,850 3,884
Conexant Systems, Inc. (a) 14,400 951
Cotelligent Group, Inc. (a) 40,000 215
Covad Communications Group, Inc. (a) 48,800 2,714
CSG Systems International, Inc. (a) 24,200 951
Equity II Fund 28
<PAGE>
Equity II Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
--------- ---------
- --------------------------------------------------------------------------------
CyberSource Corp. (a) 11,000 571
Cypress Semiconductor Corp. (a) 34,600 1,120
Dallas Semiconductor Corp. 19,900 1,282
Digex, Inc. (a) 17,000 1,156
DoubleClick, Inc. (a) 10,000 2,531
DSET Corp. (a) 6,900 258
DSP Group, Inc. (a) 20,000 1,858
E-Tek Dynamics, Inc. (a) 14,900 2,000
eCollege.com (a) 7,900 86
Electronics For Imaging, Inc. (a) 26,800 1,568
EMCORE Corp. NPV (a) 8,000 266
EMS Technologies, Inc. (a) 12,200 139
Equinox Systems, Inc. (a) 20,200 173
Excel Technology, Inc. (a) 15,000 263
Extreme Networks, Inc. (a) 25,500 2,129
Globecomm Systems, Inc. (a) 19,800 494
Go2Net, Inc. (a) 48,700 4,237
Great Plains Software, Inc. (a) 4,900 366
Harmon Industries, Inc. 9,400 112
Harris Corp. 55,000 1,468
HotJobs.com, Ltd. (a) 31,100 1,365
i2 Technologies, Inc. (a) 11,500 2,238
iBasis, Inc. (a) 6,800 196
Imation Corp. (a) 29,200 980
In Focus Systems, Inc. (a) 73,800 1,711
Informatica Corp. (a) 1,500 158
Inktomi Corp. (a) 30,200 2,676
Integrated Device Technology, Inc. (a) 143,100 4,141
Integrated Silicon Solution, Inc. (a) 122,000 1,998
Inter-Tel, Inc. 3,600 90
Internap Network Services Corp. (a) 7,700 1,330
International FiberCom, Inc. NPV (a) 26,000 203
Interphase Corp. NPV (a) 6,000 126
Intertrust Technologies Corp. (a) 5,000 588
InterVoice, Inc. (a) 8,300 193
IntraNet Solutions, Inc. (a) 16,200 595
ISS Group, Inc. (a) 35,000 2,485
IT Group, Inc. (a) 11,800 108
ITI Technologies, Inc. (a) 5,000 150
J.D. Edwards & Co. (a) 26,200 783
JDS Uniphase Corp. (a) 20,000 3,225
Kemet Corp. (a) 10,000 451
Key Tronic Corp. (a) 46,500 180
Kronos, Inc. (a) 3,450 210
Lam Research Corp. (a) 12,700 1,417
Landmark Systems Corp. (a) 3,600 37
Latitude Communications, Inc. (a) 26,700 696
LCC International, Inc. Class A (a) 17,500 350
Littlefuse, Inc. (a) 3,600 87
LSI Logic Corp. (a) 70,550 4,762
Macromedia, Inc. (a) 77,250 5,649
Media Metrix, Inc. (a) 19,200 686
Mercury Interactive Corp. (a) 35,800 3,864
Microchip Technology, Inc. (a) 31,400 2,153
Micromuse, Inc. (a) 11,000 1,870
Micron Electronics, Inc. (a) 15,200 169
Microsemi Corp. (a) 20,000 176
MP3.com, Inc. (a) 5,200 166
MRV Communications, Inc. (a) 2,000 126
N2H2, Inc. (a) 35,500 834
National Instruments Corp. (a) 46,650 1,784
National Semiconductor Corp. (a) 25,600 1,096
Net2Phone, Inc. (a) 23,000 1,054
Network Appliance, Inc. (a) 37,200 3,088
Network Associates, Inc. (a) 56,800 1,512
Network Equipment
Technologies, Inc. (a) 7,500 89
Network Solutions, Inc. Class A (a) 3,500 761
New Era of Networks, Inc. (a) 12,000 572
nFront, Inc. NPV (a) 7,000 140
NorthPoint Communications Group, Inc. (a) 47,400 1,129
OnDisplay, Inc. (a) 3,500 317
Online Resources & Communications Corp. (a) 9,200 151
Open Market, Inc. (a) 15,000 677
Ortel Corp. (a) 13,000 1,558
OSI Systems, Inc. (a) 24,000 124
Park Electrochemical Corp. 12,600 335
PC-Tel, Inc. (a) 2,000 105
Pericom Semiconductor Corp. (a) 10,000 263
PerkinElmer, Inc. (a) 32,200 1,342
Photronics, Inc. (a) 40,000 1,143
Pioneer-Standard Electronics, Inc. 19,200 277
PMC - Sierra, Inc. (a) 11,400 1,827
Printronix, Inc. (a) 7,200 164
PSINET, Inc. (a) 45,000 2,779
QLogic Corp. (a) 22,600 3,613
Quest Software, Inc. NPV (a) 7,200 717
Rare Medium Group, Inc. (a) 16,400 554
Rational Software Corp. (a) 36,800 1,808
RealNetworks, Inc. (a) 10,400 1,251
Redback Networks, Inc. (a) 10,400 1,838
REMEC, Inc. (a) 8,300 211
RF Micro Devices, Inc. (a) 5,400 369
RF Monolithics, Inc. (a) 13,800 79
Rogers Corp. (a) 5,600 214
Safeguard Scientifics, Inc. (a) 24,400 3,954
Scientific-Atlanta, Inc. 27,300 1,519
29 Equity II Fund
<PAGE>
Equity II Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
--------- ---------
- --------------------------------------------------------------------------------
SDL, Inc. (a) 12,200 2,660
SeaChange International, Inc. (a) 9,050 319
Secure Computing Corp. (a) 11,500 144
Sequa Corp. (a) 2,500 135
ShopNow.com, Inc. (a) 40,100 757
Siliconix, Inc. (a) 7,700 998
SPSS, Inc. (a) 9,900 250
Sterling Software, Inc. (a) 68,000 2,142
Stoneridge, Inc. (a) 11,000 170
Sybase, Inc. (a) 35,700 605
Symantec Corp. (a) 32,000 1,876
Symbol Technologies, Inc. 15,600 992
Synopsys, Inc. (a) 15,200 1,010
Systemax, Inc. (a) 11,500 98
Tech-Sym Corp. (a) 33,500 691
Tekelec, Inc. (a) 10,000 223
Titan Corp. (a) 5,500 259
TSI International Software, Ltd. (a) 21,000 1,186
USWeb Corp. (a) 17,600 782
Varian Semiconductor Equipment
Associates, Inc. (a) 52,000 1,765
Verio, Inc. (a) 76,200 3,518
VeriSign, Inc. (a) 25,900 4,950
Veritas Software Corp. (a) 27,000 3,862
Verity, Inc. (a) 19,000 808
ViaSat, Inc. (a) 4,400 213
Vignette Corp. (a) 11,000 1,791
Vishay Intertechnology, Inc. (a) 10,000 316
Visio Corp. (a) 17,600 836
Volt Information Sciences, Inc. (a) 4,600 110
WebTrends Corp. NPV (a) 21,750 1,750
Xilinx, Inc. (a) 20,000 909
Xircom, Inc. (a) 34,500 2,588
---------
200,081
---------
Utilities - 5.9%
Alliant Energy Corp. (a) 19,300 531
Amdocs, Ltd. (a) 18,800 649
American Water Works, Inc. 10,300 219
Arch Communications Group, Inc. (a) 20,200 133
Associated Group, Inc. (The)
Class A (a) 8,800 805
Black Hills Corp. 3,200 71
BroadWing, Inc. (a) 100,440 3,704
Calpine Corp. (a) 74,800 4,787
Cascade Natural Gas Corp. 6,000 97
CFW Communications Co. NPV 6,000 206
CH Energy Group, Inc. (a) 5,500 182
Citizens Utilities Co. Class B (a) 23,000 326
Columbia Energy Group 52,900 3,345
Commonwealth Telephone Enterprises, Inc. (a) 15,800 830
Conectiv, Inc. 34,500 580
Copper Mountain Networks, Inc. (a) 14,200 689
Dycom Industries, Inc. (a) 24,000 1,058
Energen Corp. 6,200 112
Energy East Corp. 60,900 1,267
Global TeleSystems Group, Inc. (a) 34,000 1,177
GST Telecommunications, Inc. (a) 22,200 201
Hawaiian Electric Industries, Inc. 31,700 915
Idacorp, Inc. 8,000 215
Illinova Corp. 36,000 1,251
Indiana Energy, Inc. 2,466 44
Jones Intercable, Inc. Class A (a) 36,000 2,463
Laclede Gas Co. 3,900 84
Leap Wireless International, Inc. (a) 1,500 117
MDU Resources Group, Inc. 9,450 189
Metrocall, Inc. (a) 75,000 122
Midcoast Energy Resources, Inc. 7,500 126
Minnesota Power, Inc. 21,800 369
New Jersey Resources Corp. 2,600 102
Niagara Mohawk Holdings, Inc. (a) 70,800 987
NICOR, Inc. 13,200 429
NiSource, Inc. NPV 10,300 184
Northwest Natural Gas Co. 19,200 418
NUI Corp. 3,100 82
OGE Energy Corp. 6,900 131
Paging Network, Inc. (a) 158,000 123
Peoples Energy Corp. 14,500 486
Piedmont Natural Gas Co., Inc. 6,605 200
Powerwave Technologies, Inc. (a) 14,700 857
Price Communications Corp. (a) 39,900 1,110
Primus Telecommunications
Group, Inc. (a) 8,000 306
Public Service Co. of New Mexico 70,700 1,148
Razorfish, Inc. (a) 4,400 418
RGS Energy Group, Inc. 16,600 341
RSL Communications, Ltd.
Class A (a) 36,900 630
SBA Communications Corp. (a) 12,700 231
Sierra Pacific Resources NPV 25,200 436
South Jersey Industries, Inc. 5,500 156
Southwest Gas Corp. 15,200 350
Time Warner Telecom, Inc.
Class A (a) 72,000 3,573
TNP Enterprises, Inc. 5,100 210
UGI Corp. 40,000 818
United Illuminating Co. 7,800 401
United States Cellular Corp. (a) 22,000 2,220
Equity II Fund 30
<PAGE>
Equity II Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
--------- ---------
- --------------------------------------------------------------------------------
UtiliCorp United, Inc. 60,600 1,177
Western Resources, Inc. 52,700 896
Wisconsin Energy Corp. 28,900 556
---------
45,840
---------
Total Common Stocks
(cost $567,833) 726,886
---------
Preferred Stocks - 0.0%
Sovereign Bancorp, Inc. (conv.) 2,000 97
---------
Total Preferred Stocks
(cost $100) 97
---------
Principal
Amount
(000)
$
---------
Long-Term Investments - 0.0%
Veterinary Centers of
America, Inc. (conv.)
5.250% due 05/01/06 250 164
---------
Total Long-Term Investments
(cost $178) 164
---------
Principal Market
Amount Value
(000) (000)
$ $
--------- --------
Short-Term Investments - 7.5%
Frank Russell Investment Company
Money Market Fund,
due on demand (c) 54,203 54,203
United States Treasury Bills
4.670% due 01/20/00 (c)(d)(e) 4,450 4,439
---------
Total Short-Term Investments
(cost $58,642) 58,642
---------
Total Investments - 100.0%
(identified cost $626,753) 785,789
Other Assets and Liabilities,
Net - 0.0% 266
---------
Net Assets - 100.0% 786,055
=========
* Each contract represents $100,000 notional value.
(a) Nonincome-producing security.
(b) Real Estate Investment Trust (REIT).
(c) At amortized cost, which approximates market.
(d) Rate noted is yield-to-maturity from date of acquisition.
(e) Held as collateral in connection with futures contracts
purchased by the Fund.
Abbreviations:
ADR - American Depositary Receipt
NPV - No Par Value
See accompanying notes which are an integral part of the financial statements.
31 Equity II Fund
<PAGE>
Equity II Fund
Statement of Net Assets, continued
December 31, 1999
Unrealized
Number Appreciation
of (Depreciation)
Contracts* (000)
-------------- --------------
Futures Contracts
S&P Midcap 400
expiration date 03/00 216 $ 2,255
--------------
S&P 500 Index
expiration date 03/00 29 378
--------------
Total Unrealized Appreciation
(Depreciation) on Open
Futures Contracts Purchased $ 2,633
==============
See accompanying notes which are an integral part of the financial statements.
Equity II Fund 32
<PAGE>
Equity II Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amounts) December 31, 1999
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Investments at market (identified cost $626,753) ..................... $ 785,789
Receivables:
Dividends and interest ............................................. 729
Investments sold ................................................... 1,642
Fund shares sold ................................................... 753
Daily variation margin on futures contracts ........................ 327
Prepaid expenses ..................................................... 2
---------
Total assets .................................................... 789,242
Liabilities
Payables:
Investments purchased .................................. $ 1,629
Fund shares redeemed ................................... 1,292
Accrued fees to affiliates ............................. 139
Other accrued expenses ................................. 127
----------
Total liabilities ............................................... 3,187
---------
Net Assets ........................................................... $ 786,055
=========
Net Assets Consist of:
Undistributed net investment income .................................. $ 154
Accumulated net realized gain (loss) ................................. 18,370
Unrealized appreciation (depreciation) on:
Investments ........................................................ 159,036
Futures contracts .................................................. 2,633
Shares of beneficial interest ........................................ 220
Additional paid-in capital ........................................... 605,642
---------
Net Assets ........................................................... $ 786,055
=========
Net Asset Value, offering and redemption price per share:
Class E ($33,525,007 divided by 938,819 shares of $.01 par value
shares of beneficial interest outstanding) ....................... $ 35.71
=========
Class I ($752,530,120 divided by 21,073,931 shares of $.01 par value
shares of beneficial interest outstanding) ....................... $ 35.71
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
33 Equity II Fund
<PAGE>
Equity II Fund
Statement of Operations
Amounts in thousands Year ended December 31, 1999
<TABLE>
<CAPTION>
Investment Income
<S> <C> <C>
Dividends ......................................................... $ 5,107
Dividends from Money Market Fund .................................. 2,294
Interest .......................................................... 296
---------
Total investment income ......................................... 7,697
Expenses
Advisory fees ......................................... $ 4,325
Administrative fees ................................... 312
Custodian fees ........................................ 453
Transfer agent fees ................................... 451
Professional fees ..................................... 24
Registration fees ..................................... 118
Shareholder servicing fees - Class E .................. 40
Trustees' fees ........................................ 5
Miscellaneous ......................................... 74
---------
Total expenses .................................................. 5,802
---------
Net investment income ................................................ 1,895
---------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments .......................................... 51,643
Futures contracts .................................... 7,164
Foreign currency-related transactions ................ 1 58,808
---------
Net change in unrealized appreciation (depreciation) on:
Investments .......................................... 86,803
Futures contracts .................................... (405) 86,398
--------- ---------
Net realized and unrealized gain (loss) ................. 145,206
---------
Net increase (decrease) in net assets from operations ... $ 147,101
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Equity II Fund 34
<PAGE>
Equity II Fund
Statement of Changes in Net Assets
Amounts in thousands Years Ended December 31, 1999
<TABLE>
<CAPTION>
1999 1998
--------- ---------
Increase (Decrease) in Net Assets
<S> <C> <C>
Operations
Net investment income ......................................... $ 1,895 $ 1,453
Net realized gain (loss) ...................................... 58,808 29,064
Net change in unrealized appreciation (depreciation) .......... 86,398 (25,411)
--------- ---------
Net increase (decrease) in net assets from operations ....... 147,101 5,106
--------- ---------
Distributions
From net investment income
Class E ..................................................... (6) --
Class I ..................................................... (1,914) (1,505)
From net realized gain
Class E ..................................................... (1,580) --
Class I ..................................................... (37,803) (32,392)
--------- ---------
Net decrease in net assets from distributions ............. (41,303) (33,897)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions . 146,438 80,451
--------- ---------
Total net increase (decrease) in net assets ..................... 252,236 51,660
Net Assets
Beginning of period ........................................... 533,819 482,159
--------- ---------
End of period (including undistributed net investment
income of $154 and $178, respectively) ...................... $ 786,055 $ 533,819
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
35 Equity II Fund
<PAGE>
Equity II Fund
Financial Highlight--Class E The following table includes selected data for a
share outstanding througout the period and other performance information derived
from the financial statements
1999*
-----
Net Asset Value, Beginning of Period ........................ $ 31.37
----------
Income From Operations
Net investment income (a) ................................ .02
Net realized and unrealized gain (loss) .................. 5.99
----------
Total income from operations ........................... 6.01
----------
Distributions
From net investment income ............................... (.01)
From net realized gain ................................... (1.66)
----------
Total distributions .................................... (1.67)
----------
Net Asset Value, End of Period .............................. $ 35.71
==========
Total Return (%)(b) ......................................... 19.55
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ................. 33,525
Ratios to average net assets (%)(c):
Operating expenses ..................................... 1.17
Net investment income .................................. .09
Portfolio turnover rate (%) .............................. 111.89
* For the period May 14, 1999 (commencement of sale) to December 31, 1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
Equity II Fund 36
<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.
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................ $ 30.94 $ 32.96 $ 30.05 $ 28.88 $ 25.00
----------- ----------- ---------- ---------- -----------
Income From Operations
Net investment income (a) ......................... .10 .09 .11 .16 .27
Net realized and unrealized gain (loss) ........... 6.68 .04 8.11 4.96 6.80
----------- ----------- ---------- ---------- -----------
Total income from operations .................... 6.78 .13 8.22 5.12 7.07
----------- ----------- ---------- ---------- -----------
Distributions
From net investment income ........................ (.10) (.10) (.11) (.16) (.29)
From net realized gain ............................ (1.91) (2.05) (5.20) (3.79) (2.90)
----------- ----------- ---------- ---------- -----------
Total distributions ............................. (2.01) (2.15) (5.31) (3.95) (3.19)
----------- ----------- ---------- ---------- -----------
Net Asset Value, End of Period ...................... $ 35.71 $ 30.94 $ 32.96 $ 30.05 $ 28.88
=========== =========== ========== ========== ===========
Total Return (%)(b) ................................. 22.60 .70 28.66 18.51 28.67
Ratios/Supplemental Data:
Net Assets, end of period (in thousands)........... 752,530 533,819 482,159 365,955 279,566
Ratios to average net assets (%)(b):
Operating expenses .............................. .92 .91 .92 .95 .83
Net investment income ........................... .31 .29 .35 .52 .97
Portfolio turnover rate (%) ....................... 111.89 128.87 103.00 120.78 89.31
</TABLE>
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) 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 service fees. See
Note 4.
37 Equity II Fund
<PAGE>
Equity III Fund
Portolio Management Discussion
December 31, 1999 (unaudited)
Objective: To achieve a high level of current income while maintaining the
potential for capital appreciation.
Invests in: Primarily income-producing US equity securities.
Strategy: The Fund uses a multi-manager strategy intended to achieve a high
level of current income and the potential for capital appreciation with moderate
risk. The Fund employed the investment management services of three managers
with three separate approaches to value-oriented investment.
[The following was depicted as a mountain chart in the printed material]
Dates Equity III - Class I Russell 10,000(R) Lipper Equity &
Value** Income ++
$10,000 $10,000 $10,000
1990 $ 9,427 $9,192 $9,373
1991 $12,054 $11,453 $11,841
1992 $13,637 $13,035 $12,953
1993 $15,581 $16,387 $14,736
1994 $16,741 $16,091 $14,383
1995 $21,402 $20,879 $16,639
1996 $25,876 $25,397 $22,099
1997 $34,447 $34,332 $28,164
1998 $38,419 $39,698 $31,307
1999 $38,514 $42,615 $32,762
- ------------------------------------------------------------------------------
Total $234,877 $237,068 $206,252
================================================================================
- --------------------------------------------------------------------------------
Equity III Fund - Class I
- --------------------------------------------------------------------------------
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- ------------ ------------
1 Year $10,025 0.25%
5 Years $24,467 19.58%ss.
10 Years $38,514 14.43%ss.
- --------------------------------------------------------------------------------
Equity III Fund - Class E +++
- --------------------------------------------------------------------------------
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- ------------ ------------
1 Year $10,010 0.10%
5 Years $24,430 19.55%ss.
10 Years $38,456 14.41%ss.
- --------------------------------------------------------------------------------
Russell 1000(R)Value Index
- --------------------------------------------------------------------------------
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- ------------ ------------
1 Year $10,735 7.35%
5 Years $28,238 23.07%ss.
10 Years $42,615 15.60%ss.
- --------------------------------------------------------------------------------
Lipper(R)Equity Income Funds Benchmark
- --------------------------------------------------------------------------------
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- ------------ ------------
1 Year $10,463 4.63%
5 Years $22,805 17.93%ss.
10 Years $32,756 12.60%ss.
39 Equity III Fund
<PAGE>
Equity III Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Performance Review
For the year ended December 31, 1999, the Equity III Fund Class I and Class E
shares reflected total returns of 0.25% and 0.10%, respectively, as compared to
the Russell 1000(R) Value Index results of 7.35%. The Fund trailed the index due
to disappointing security selection linked to the strong valuation bias of its
investment managers. Performance also trailed the 4.63% average return of mutual
funds as tracked in the Lipper(R) Equity Income Funds Universe.
Portfolio Highlights
The performance of stocks in 1999 was characterized by extreme differences
between returns of the various market sectors. Led by the technology sector, the
Russell 1000(R) Growth Index gained 33.16% for the year. Technology stocks
alone, despite seemingly absurd valuations, rose nearly 77% for the same time
period. Valuation-based investors found it a very frustrating environment in
which to invest. Any level of valuation sensitivity proved a severe liability as
value stocks in the Russell 1000(R) Index trailed their growth counterparts by
26 percentage points. Technology overwhelmingly dominated other market sectors
as excitement over the Internet created aggressive buying. More traditional
value sectors, such as financial services and utilities, managed gains of only
3.1% and 13.5%, respectively.
The Equity III Fund's managers found abundant opportunities to select stocks
with strong fundamentals and very favorable market-relative valuations. However,
the market ignored these securities in favor of anything linked to the Internet.
Though overweighted in the technology sector, the Fund's Internet exposure
proved insufficient given market trends. The Fund's managers all had a very
frustrating year as their valuation sensitivity focused their investments away
from the market's strongest performing issues.
- --------------------------------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) December 31, 1999
- --------------------------------------------------------------------------------
Chase Manhattan Corp. 3.0%
AT&T Corp. 2.7
MCI WorldCom, Inc. 2.6
Citigroup, Inc. 2.6
Exxon Mobil Corp. NPV 2.3
Morgan Stanley Dean Witter & Co. 2.0
International Business Machines Corp. 1.9
Fleet Boston Financial Corp. 1.5
Dow Chemical Co. 1.5
Morgan (J.P.) & Co., Inc. 1.4
- --------------------------------------------------------------------------------
Portfolio Characteristics
December 31, 1999
- --------------------------------------------------------------------------------
Current P/E Ratio 16.0x
Portfolio Price/Book Ratio 2.54x
Market Capitalization - $- Weighted
Average 53.48 Bil
Number of Holdings 206
- --------------------------------------------------------------------------------
Money Managers Styles
- --------------------------------------------------------------------------------
Equinox Capital Management, Inc. Value
Trinity Investment Management Corp. Value
Westpeak Investment Advisors, L.P. Value
* Equity III Fund Class I assumes initial investment on January 1, 1990.
** Russell 1000(R) Value Index includes stocks from the Russell 1000(R) Index
with a less than average growth orientation. The Index represents the
universe of stocks from which most price-driven managers typically select.
The Russell 1000 Value Index return reflects adjustments for income
dividends and capital gains distributions reinvested as of the ex-
dividend dates.
+ Prior to April 1, 1995, Fund performance results are reported gross of
investment management fees. For the period following April 1, 1995, Fund
performance results are reported net of investment management fees but
gross of any investment services fees. Information concerning these fees
can be obtained from the Fund's Advisor upon request.
++ Lipper(R) Equity Income Funds Benchmark is the average total return for
the universe of funds within the Equity Income Funds investment objective.
The total return for the funds reflects adjustments for income dividends
and capital gains distributions reinvested as of the ex-dividend dates.
+++ Equity III Fund Class I performance has been linked with Class E to
provide historical perspective. From May 14, 1999 (commencement of sale)
through the current period, Class E paid shareholder service fees. Total
return would have been lower had these fees been in effect during prior
reporting periods.
ss. Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Equity III Fund 40
<PAGE>
Equity III Fund
Statement of Net Assets
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
--------- ---------
- --------------------------------------------------------------------------------
Common Stocks - 93.2%
Auto and Transportation - 4.7%
Continental Airlines, Inc. Class B (a) 6,900 306
Dana Corp. 7,300 219
Delta Air Lines, Inc. 16,300 812
Eaton Corp. 2,800 203
Ford Motor Co. 45,900 2,452
General Motors Corp. 28,900 2,101
Hertz Corp. Class A 3,000 150
Lear Corp. (a) 11,300 362
UAL Corp. (a) 2,500 194
Union Pacific Corp. 34,900 1,523
---------
8,322
---------
Consumer Discretionary - 6.0%
AT&T Corp. - Liberty Media Group
Class A (a) 22,400 1,271
Barnes & Noble, Inc. (a) 11,800 243
Brinker International, Inc.(a) 18,600 446
Brunswick Corp. 6,100 136
CBS Corp. (a) 2,800 179
Darden Restaurants, Inc. 18,100 328
Dayton Hudson Corp. 1,400 103
Deluxe Corp. 2,100 58
Eastman Kodak Co. 11,293 748
Federated Department Stores, Inc. (a) 7,500 379
Fortune Brands, Inc. 7,800 258
Gannett Co., Inc. 4,900 400
International Game Technology 12,200 248
Knight-Ridder, Inc. 21,000 1,250
May Department Stores Co. 2,900 94
MediaOne Group, Inc. (a) 14,400 1,106
MGM Grand, Inc. (a) 2,600 131
PanAmSat Corp. (a) 6,300 372
Payless ShoeSource, Inc. (a) 5,500 259
Shaw Industries, Inc. (a) 16,700 258
Times Mirror Co. Series A 2,300 154
Tribune Co. 26,300 1,447
Washington Post Co. Class B 400 222
Whirlpool Corp. 7,000 455
---------
10,545
---------
Consumer Staples - 2.0%
Albertson's, Inc. 8,000 258
ConAgra, Inc. 10,300 232
Dean Foods Co. 200 8
IBP, Inc. 59,500 1,071
Interstate Bakeries Corp. 15,000 272
PepsiCo, Inc. 16,000 564
Philip Morris Cos., Inc. 23,700 550
SuperValu, Inc. 5,000 100
Tyson Foods, Inc. Class A 8,900 145
U.S. Foodservice (a) 15,400 258
---------
3,458
---------
Financial Services - 28.5%
Aetna, Inc. 12,100 675
AFLAC, Inc. 4,700 222
Allmerica Financial Corp. 9,900 551
Ambac Financial Group, Inc. 15,200 793
American General Corp. 16,600 1,260
American International Group, Inc. 13,150 1,422
Associates First Capital Corp. Class A 46,900 1,287
Astoria Financial Corp. 20,500 624
AXA Financial, Inc. 9,700 329
Bank of America Corp. 31,513 1,582
Bank One Corp. 18,200 584
Bear Stearns Co., Inc. 7,020 300
Charter One Financial, Inc. 23,100 442
Chase Manhattan Corp. 67,876 5,273
Citigroup, Inc. 81,900 4,551
Conseco, Inc. 76,400 1,366
Dime Bancorp, Inc. 26,100 395
Everest Reinsurance Holdings, Inc. 15,600 348
Fannie Mae 29,100 1,817
Federal Home Loan Mortgage Corp. 14,300 673
First Data Corp. 11,200 552
Fleet Boston Financial Corp. 78,400 2,729
Golden State Bancorp, Inc. (a) 17,100 295
Golden West Financial Corp. 17,100 573
Hartford Financial Services
Group, Inc. (The) 27,800 1,317
Hartford Life, Inc. Class A 6,800 299
Hibernia Corp. Class A 10,500 112
Highwoods Properties, Inc. (b) 10,200 237
Hudson United Bancorp NPV 3,300 84
Lehman Brothers Holdings, Inc. 3,300 279
Lincoln National Corp. 34,600 1,384
Loews Corp. 8,800 534
Mack-Cali Realty Corp. (b) 9,000 235
Marshall & Ilsley Corp. 9,400 590
MBIA, Inc. 19,300 1,019
MGIC Investment Corp. 6,200 373
Morgan (J.P.) & Co., Inc. 19,400 2,457
Morgan Stanley Dean Witter & Co. 24,800 3,540
National City Corp. 8,900 211
New Plan Excel Realty Trust (b) 24,700 391
Paine Webber Group, Inc. 5,700 221
PMI Group, Inc. (The) 4,900 239
PNC Bank Corp. 50,900 2,265
Provident Financial Group, Inc. 16,200 581
Radian Group, Inc. (a) 4,000 191
41 Equity III Fund
<PAGE>
Equity III Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
--------- ---------
- --------------------------------------------------------------------------------
Regions Financial Corp. 47,200 1,183
Ryder System, Inc. 18,300 447
SouthTrust Corp. 15,600 589
Sovereign Bancorp, Inc. 67,000 496
UnionBanCal Corp. 27,800 1,096
UnumProvident Corp. 7,100 228
Washington Mutual, Inc. 21,250 553
Wells Fargo Co. 9,400 380
---------
50,174
---------
Health Care - 4.8%
Bard (C.R.), Inc. 3,100 164
Bausch & Lomb, Inc. 6,000 411
Baxter International, Inc. 17,800 1,118
Bristol-Myers Squibb Co. 15,400 988
Columbia/HCA Healthcare Corp. 55,500 1,627
Genzyme Corp. (a) 4,400 197
IVAX Corp. (a) 37,300 960
Johnson & Johnson 8,700 810
Mallinckrodt, Inc. 4,800 153
Pharmacia & Upjohn, Inc. 25,300 1,139
St. Jude Medical, Inc. (a) 200 6
United Healthcare Corp. 17,700 940
---------
8,513
---------
Integrated Oils - 6.4%
Amerada Hess Corp. 39,600 2,247
Ashland, Inc. 25,500 840
Chevron Corp. 24,000 2,079
Coastal Corp. 22,200 787
Murphy Oil Corp. 2,500 143
Phillips Petroleum Co. 20,900 982
Royal Dutch Petroleum Co. 17,000 1,027
Texaco, Inc. 15,400 836
Unocal Corp. 31,800 1,067
USX-Marathon Group 48,500 1,197
---------
11,205
---------
Materials and Processing - 9.5%
Air Products & Chemicals, Inc. 13,300 446
Alcoa, Inc. 17,500 1,453
Armstrong World Industries, Inc. 6,300 210
Ball Corp. 10,800 425
Dow Chemical Co. 20,300 2,713
du Pont (E.I.) de Nemours & Co. 12,400 817
FMC Corp. (a) 8,100 464
Fort James Corp. 16,500 452
Georgia-Pacific Corp. (Timber Group) 29,500 726
Georgia-Pacific Group 19,400 985
Goodrich (B.F.) Co. 25,100 690
International Paper Co. 30,200 1,704
Kimberly-Clark Corp. 9,600 626
Lubrizol Corp. 18,600 574
Minnesota Mining &
Manufacturing Co. 2,500 245
Morrison Knudsen Corp. 2003
Warrants (a) 350 1
Nucor Corp. 1,700 93
PPG Industries, Inc. 2,800 175
Praxair, Inc. 5,500 277
Temple-Inland, Inc. 7,300 481
Textron, Inc. 12,300 943
USG Corp. 14,400 679
USX-U.S. Steel Group 23,600 779
Westvaco Corp. 8,400 274
Weyerhaeuser Co. 5,300 381
Willamette Industries, Inc. 2,400 111
---------
16,724
---------
Other Energy - 4.5%
Anadarko Petroleum Corp. 2,800 96
Apache Corp. 20,800 768
Constellation Energy Group 23,400 679
El Paso Energy Corp. 13,600 528
EOG Resources, Inc. 28,500 501
Exxon Mobil Corp. NPV (a) 50,853 4,097
Occidental Petroleum Corp. 4,000 87
Sempra Energy 31,800 553
Ultramar Diamond Shamrock Corp. 25,400 576
---------
7,885
---------
Producer Durables - 5.1%
Boeing Co. 12,200 507
Briggs & Stratton Corp. 5,600 300
Caterpillar, Inc. 11,800 555
CommScope, Inc. (a) 7,300 294
Cummins Engine Co., Inc. 6,000 290
Deere & Co. 31,200 1,353
Diebold, Inc. 6,200 146
Dover Corp. 1,700 77
Honeywell International, Inc. (a) 22,700 1,310
Ingersoll-Rand Co. 9,900 545
Johnson Controls, Inc. 9,600 546
Northrop Grumman Corp. 13,800 746
Parker-Hannifin Corp. 6,100 313
Raytheon Co. Class B 45,016 1,196
Snap-On Tools Corp. 4,800 128
Tecumseh Products Co. Class A 15,200 716
Thomas & Betts Corp. 1,500 48
---------
9,070
---------
Equity III Fund 42
<PAGE>
Equity III Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
--------- ---------
- --------------------------------------------------------------------------------
Technology - 7.5%
Atmel Corp. (a) 12,000 355
AVX Corp. 1,900 95
BMC Software, Inc. (a) 15,500 1,238
Cooper Industries, Inc. 10,700 433
Electronic Data Systems Corp. 25,667 1,718
General Dynamics Corp. 16,700 881
Intel Corp. 16,956 1,395
International Business
Machines Corp. 31,100 3,359
LSI Logic Corp. (a) 1,600 108
Motorola, Inc. 9,300 1,369
NCR Corp. (a) 23,300 882
Unisys Corp. (a) 43,800 1,399
---------
13,232
---------
Utilities - 14.2%
Alltel Corp. 4,700 389
Associated Group, Inc. (The)
Class A (a) 1,800 165
AT&T Corp. 93,000 4,720
Bell Atlantic Corp. 37,468 2,307
BellSouth Corp. 21,200 992
Cox Communications, Inc. Class A (a) 2,200 113
DTE Energy Co. 24,900 781
Energy East Corp. 13,800 287
Entergy Corp. 26,200 675
FirstEnergy Corp. 38,900 883
GPU, Inc. 22,300 668
GTE Corp. 31,500 2,222
MCI WorldCom, Inc. (a) 86,550 4,586
Peco Energy Co. 13,300 462
Public Service Enterprise Group, Inc. 34,200 1,191
Questar Corp. 16,200 243
SBC Communications, Inc. 40,000 1,950
Sprint Corp. 7,754 522
Telephone & Data Systems, Inc. 1,500 189
Texas Utilities Co. 44,200 1,572
United States Cellular Corp. (a) 1,200 121
---------
25,038
---------
Total Common Stocks
(cost $151,815) 164,166
---------
Principal Market
Amount Value
(000) (000)
$ $
--------- --------
Short-Term Investments - 6.8%
Frank Russell Investment Company
Money Market Fund,
due on demand (c) 10,543 10,543
United States Treasury Bills
4.670% due 01/20/00 (c)(d)(e 1,500 1,496
---------
Total Short-Term Investments
(cost $12,039) 12,039
---------
Total Investments - 100.0%
(identified cost $163,854) 176,205
Other Assets and Liabilities,
Net - 0.0% 83
---------
Net Assets - 100.0% 176,288
=========
* Each contract represents $100,000 notional value.
(a) Nonincome-producing security.
(b) Real Estate Investment Trust (REIT).
(c) At amortized cost, which approximates market.
(d) Rate noted is yield-to-maturity from date of acquisition.
(e) Held as collateral in connection with futures contracts purchased by the
Fund.
Abbreviations:
NPV - No Par Value
See accompanying notes which are an integral part of the financial statements.
43 Equity III Fund
<PAGE>
Equity III Fund
Statement of Net Assets, continued
December 31, 1999
Unrealized
Number Appreciation
of (Depreciation)
Contracts* (000)
-------------- --------------
Futures Contracts
S&P Barra Value Index
expiration date 03/00 28 $ 58
S&P 500 Index
expiration date 03/00 17 214
--------------
Total Unrealized Appreciation
(Depreciation) on Open
Futures Contracts Purchased $ 272
==============
See accompanying notes which are an integral part of the financial statements.
Equity III Fund 44
<PAGE>
Equity III Fund
Statement of Operations
Amounts in thousands Year ended December 31, 1999
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Investments at market (identified cost $163,854) ......................... $ 176,205
Receivables:
Dividends .............................................................. 399
Investments sold ....................................................... 4
Fund shares sold ....................................................... 70
Daily variation margin on futures contracts ............................ 34
Prepaid expenses ......................................................... 2
-----------
Total assets ........................................................ 176,714
Liabilities
Payables:
Fund shares redeemed ....................................... $ 372
Accrued fees to affiliates ................................. 21
Other accrued expenses ..................................... 33
-----------
Total liabilities ................................................... 426
-----------
Net Assets ............................................................... $ 176,288
===========
Net Assets Consist of:
Accumulated net realized gain (loss) ..................................... $ 4,021
Unrealized appreciation (depreciation) on:
Investments ............................................................ 12,351
Futures contracts ...................................................... 272
Shares of beneficial interest ............................................ 67
Additional paid-in capital ............................................... 159,577
-----------
Net Assets ............................................................... $ 176,288
===========
Net Asset Value, offering and redemption price per share:
Class E ($7,926,649 divided by 302,828 shares of $.01 par value
shares of beneficial interest outstanding) ........................... $ 26.18
===========
Class I ($168,361,414 divided by 6,431,356 shares of $.01 par value
shares of beneficial interest outstanding) ........................... $ 26.18
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
45 Equity III Fund
<PAGE>
Equity III Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amounts) December 31, 1999
<TABLE>
<CAPTION>
Investment Income
<S> <C> <C>
Dividends .............................................................. $ 3,746
Dividends from Money Market Fund ....................................... 479
Interest ............................................................... 106
-----------
Total investment income ............................................. 4,331
Expenses
Advisory fees .............................................. $ 1,080
Administrative fees ........................................ 99
Custodian fees ............................................. 148
Transfer agent fees ........................................ 99
Professional fees .......................................... 20
Registration fees .......................................... 77
Shareholder servicing fees - Class E ....................... 10
Trustees' fees ............................................. 6
Miscellaneous .............................................. 34
-----------
Total expenses ...................................................... 1,573
-----------
Net investment income .................................................... 2,758
-----------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ................................................ 14,007
Futures contracts .......................................... 1,696 15,703
-----------
Net change in unrealized appreciation (depreciation) on:
Investments ................................................ (18,033)
Futures contracts .......................................... (276) (18,309)
----------- -----------
Net realized and unrealized gain (loss) .................................. (2,606)
Net increase (decrease) in net assets from operations .................... $ 152
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Equity III Fund 46
<PAGE>
Equity III Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Amounts in thousands Years Ended December 31,
-----------------------
1999 1998
---------- ---------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ......................................... $ 2,758 $ 3,613
Net realized gain (loss) ...................................... 15,703 28,478
Net change in unrealized appreciation (depreciation) .......... (18,309) (9,816)
--------- ---------
Net increase (decrease) in net assets from operations ....... 152 22,275
--------- ---------
Distributions
From net investment income
Class E ..................................................... (52) --
Class I ..................................................... (2,693) (3,541)
From net realized gain
Class E ..................................................... (545) --
Class I ..................................................... (16,024) (25,167)
--------- ---------
Net decrease in net assets from distributions ............ (19,314) (28,708)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions . (15,041) (25,188)
--------- ---------
Total net increase (decrease) in net assets ...................... (34,203) (31,621)
Net Assets
Beginning of period ........................................... 210,491 242,112
--------- ---------
End of period (including undistributed net investment income of
$72 at December 31, 1998) ................................... $ 176,288 $ 210,491
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
47 Equity III Fund
<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 Operations
Net investment income (a) ..................................... .21
Net realized and unrealized gain (loss) ....................... (2.12)
---------
Total income from operations ................................ (1.91)
---------
Distributions
From net investment income .................................... (.25)
From net realized gain ........................................ (1.93)
---------
Total distributions ......................................... (2.18)
---------
Net Asset Value, End of Period ................................... $ 26.18
=========
Total Return (%)(b) .............................................. (6.13)
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ...................... 7,927
Ratios to average net assets (%)(c):
Operating expenses .......................................... 1.03
Net investment income ....................................... 1.25
Portfolio turnover rate (%) ................................... 146.28
* For the period May 14, 1999 (commencement of sale) to December 31, 1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
Equity III Fund 48
<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.
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 29.12 $ 29.80 $ 29.68 $ 29.11 $ 24.18
----------- ----------- ----------- ----------- -----------
Income From Operations
Net investment income (a) .............. .40 .47 .60 .70 .82
Net realized and unrealized gain (loss) (.41) 2.75 8.69 5.10 7.73
----------- ----------- ----------- ----------- -----------
Total income from operations ......... (.01) 3.22 9.29 5.80 8.55
----------- ----------- ----------- ----------- -----------
Distributions
From net investment income ............. (.40) (.47) (.61) (.71) (.83)
From net realized gain ................. (2.53) (3.43) (8.56) (4.52) (2.79)
----------- ----------- ----------- ----------- -----------
Total distributions .................. (2.93) (3.90) (9.17) (5.23) (3.62)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ............ $ 26.18 $ 29.12 $ 29.80 $ 29.68 $ 29.11
=========== =========== =========== =========== ===========
Total Return (%)(b) ....................... .25 11.53 33.13 20.90 35.96
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 168,361 210,491 242,112 221,778 222,541
Ratios to average net assets (%)(b):
Operating expenses ................... .79 .74 .78 .79 .65
Net investment income ................ 1.39 1.54 1.77 2.23 2.90
Portfolio turnover rate (%) ............ 146.28 135.53 128.86 100.78 103.40
</TABLE>
- ----------
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) 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.
49 Equity III Fund
<PAGE>
Equity Q Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: To provide 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.
Invests in: Primarily US equity securities.
Strategy: The Fund uses a multi-manager strategy intended to achieve higher
returns through security selection with sector diversification similar to the
Russell 1000 Index. The Fund employed the investment management services of four
managers using four distinctive quantitative approaches to investment.
[The following table was depicted as a mountain chart in the printed material.]
Equity Q - Russell Lipper(R) Growth
Dates Class I++ 1000(R)** & Income II++++
Yearly periods
ended
December 31
Inception* $10,000 $10,000 $10,000
1990 $9,520 $89,684 $9,651
1991 $12,579 $12,749 $12,300
1992 $13,892 $13,901 $13,322
1993 $15,741 $15,313 $14,616
1994 $15,898 $15,371 $14,664
1995 $21,924 $21,176 $19,161
1996 $27,112 $25,000 $23,123
1997 $36,077 $34,449 $29,387
1998 $45,410 $49,767 $39,091
1999 $65,490 $52,907 $28,552
- ---------------------------------------------------------------------------
Total $283,558 $255,138 $218,760
- ---------------------------------------------------------------------------
Equity Q Fund - Class I
Periods Ended Growth of
12/31/99 $10,000 Total Return
- -------- ------- ------------
1 Year $12,196 21.96%
5 Years $34,870 28.36%ss.
10 Years $55,430 18.67%ss.
Equity Q Fund - Class E++++++
Periods Ended Growth of
12/31/99 $10,000 Total Return
- -------- ------- ------------
1 Year $12,185 21.85%
5 Years $34,838 28.34%ss.
10 Years $55,380 18.66%ss.
Russell 1000(R) Index
Periods Ended Growth of
12/31/99 $10,000 Total Return
- -------- ------- ------------
1 Year $12,091 20.91%
5 Years $34,421 28.05%ss.
10 Years $52,907 18.13%ss.
Lipper(R) Growth & Income Funds Benchmark
Periods Ended Growth of
12/31/99 $10,000 Total Return
- -------- ------- ------------
1 Year $11,375 13.75%
5 Years $26,291 21.33%ss.
10 Years $38,552 14.45%ss.
51 Equity Q Fund
<PAGE>
Equity Q Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Performance Review
For the year ended December 31, 1999, the Equity Q Fund Class I and Class E
shares reflected total returns of 21.96% and 21.85%, respectively, as compared
to the Russell 1000(R) Index results of 20.91%. The Fund exceeded the index
primarily due to effective security selection. Performance also compared
favorably with the 13.75% average return of mutual funds tracked in the
Lipper(R) Growth and Income Funds Universe.
Portfolio Highlights
The performance of stocks in 1999 was characterized by extreme differences in
returns between the various market sectors. Overall, stocks provided investors
with their fifth consecutive year of returns in excess of 20% - an unprecedented
trend in the US stock market's history. Unlike the previous four years, the
market's advance was much broader across capitalization tiers, with small cap
shares actually finishing the year slightly higher than large caps after an end
of year rally. The market was also narrower, however, by economic sector
performance, which was mostly reflective of the extreme strength of technology
issues. Technology, which gained 77% for the year, dominated other market
sectors, as excitement over the Internet created aggressive buying. Other
sectors lagged by a wide margin, as value stocks in the Russell 1000 Index
trailed their growth counterparts by 26 percentage points.
The Equity Q Fund fared better than both the Russell 1000 Index and the majority
of its peers in the Lipper Growth and Income Funds Universe. Its mix of
quantitative approaches proved effective in capturing stock selection
opportunities within a risk-controlled portfolio. The Fund's four managers
sustained performance through the year by focusing on opportunities within
economic sectors, with the sectors themselves weighted in line with the index.
This had the desirable effect of maintaining exposure to aggressively-valued
sectors which continued to outperform.
A new manager was added to the Fund during the year, bringing the total to four.
The new manager, Jacobs Levy, employs a solid quantitative approach to
investing.
Top Ten Equity Holdings
(as a percent of Total Investments)
December 31, 1999
General Electric Co. 3.9%
Cisco Systems, Inc. 3.7
Microsoft Corp. 3.2
Exxon Mobil Corp. NPV 2.0
Lucent Technologies, Inc. 2.0
Wal-Mart Stores, Inc. 1.9
Intel Corp. 1.7
MCI WorldCom, Inc. 1.6
Bank of America Corp. 1.5
Oracle Systems Corp. 1.5
Portfolio Characteristics
December 31, 1999
Current P/E Ratio 25.7x
Portfolio Price/Book Ratio 4.59x
Market Capitalization - $- Weighted Average 125.96 Bil
Number of Holdings 563
Money Managers Styles
Barclays Global Investors, N.A. Market-Oriented
Franklin Portfolio Associates, LLC Market-Oriented
J.P. Morgan Investment Management, Inc. Market-Oriented
Jacobs Levy Equity Management, Inc. Market-Oriented
* Equity Q Fund Class I assumes initial investment on January 1, 1990.
** Russell 1000(R) Index includes the 1,000 largest companies in the
Russell 3000(R) Index, the smallest of which is valued at about $1,124.8
million. The Russell 1000 Index represents the universe of stocks from
which most active money managers typically select. The Russell 1000
Index return reflects adjustments for income dividends and capital gains
distributions reinvested as of the ex-dividend dates.
++ Prior to April 1, 1995, Fund performance results are reported gross of
investment management fees. For the period following April 1, 1995, Fund
performance results are reported net of investment management fees but
gross of any investment services fees. Information concerning these fees
can be obtained from the Fund's Advisor upon request.
++++ Lipper(R) Growth & Income Funds Benchmark is the average total return
for the universe of funds within the Growth and Income Funds investment
objective. The total return for the funds reflects adjustments for
income dividends and capital gains distributions reinvested as of the
ex-dividend dates.
++++++ Equity Q Fund Class I performance has been linked with Class E to
provide historical perspective. From May 14, 1999 (commencement of sale)
through the current period, Class E paid shareholder service fees. Total
return would have been lower had these fees been in effect during prior
reporting periods.
ss. Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Equity Q Fund 52
<PAGE>
Equity Q Fund
Statement of Net Assets
December 31, 1999
Market
Number Value
of (000)
Shares $
------- --------
Common Stocks - 94.5%
Auto and Transportation - 1.9%
Alaska Air Group, Inc. (a) 7,900 277
America West Holding Corp. Class B (a) 9,900 205
Arvin Industries, Inc. 5,700 162
Burlington Northern, Inc. 81,400 1,974
CNF Transportation, Inc. 4,600 159
Consolidated Freightways Corp. (a) 600 5
Cooper Tire & Rubber Co. 5,700 89
CSX Corp. 19,200 602
Dana Corp. 34,800 1,042
Delphi Automotive Systems Corp. 76,825 1,210
Delta Air Lines, Inc. 50,500 2,516
Eaton Corp. 10,100 734
Expeditors International of Washington, Inc. 6,700 291
Ford Motor Co. 152,846 8,168
General Motors Corp. 20,800 1,512
Genuine Parts Co. 10,900 270
Goodyear Tire & Rubber Co. 21,500 606
Lear Corp. (a) 26,100 835
Meritor Automotive, Inc. 31,400 608
Modine Manufacturing Co. 3,000 75
Norfolk Southern Corp. 20,900 428
PACCAR, Inc. 12,700 562
Tower Automotive, Inc. (a) 10,900 168
Trinity Industries, Inc. 16,200 461
TRW, Inc. 7,501 390
UAL Corp. (a) 8,700 675
Union Pacific Corp. 42,220 1,842
USFreightways Corp. 7,100 336
Wisconsin Central Transportation Corp. (a) 3,200 42
---------
26,244
---------
Consumer Discretionary - 11.0%
Abercrombie & Fitch Co. Class A (a) 98,200 2,621
Alberto Culver Co. Class B 8,100 209
Amazon.com, Inc. (a) 5,900 449
American Eagle Outfitters, Inc. NPV (a) 3,100 140
Applebee's International, Inc. 7,100 209
AT&T Corp. - Liberty Media Group Class A (a) 52,900 3,002
Best Buy Co. (a) 55,935 2,807
BHC Communications, Inc. Class A 500 80
BJ's Wholesale Club, Inc. (a) 5,100 186
Brunswick Corp. 102,528 2,281
Buffets, Inc. (a) 6,800 68
Callaway Golf Co. 40,600 718
Catalina Marketing Corp. (a) 4,100 475
CEC Entertainment, Inc. (a) 5,500 156
Cendant Corp. (a) 230,000 6,109
Central Newspapers, Inc. Class A 4,800 189
Circuit City Stores, Inc. 12,900 581
Clear Channel Communications, Inc. (a) 54,500 4,864
CMG Information Services, Inc. (a) 1,000 277
Costco Wholesale Corp. (a) 13,100 1,195
Cost Plus, Inc. (a) 7,400 263
Darden Restaurants, Inc. 68,800 1,247
Dayton Hudson Corp. 81,879 6,013
Delhaize America, Inc. 5,800 118
Deluxe Corp. 20,000 549
Dillard's, Inc. Class A 7,200 145
Disney (Walt) Co. 112,800 3,299
Eastman Kodak Co. 36,092 2,391
Enesco Group, Inc. 10,400 115
Extended Stay America, Inc. (a) 12,300 94
Federated Department Stores, Inc. (a) 72,400 3,661
Fortune Brands, Inc. 25,930 857
Furniture Brands International, Inc. (a) 8,300 183
Gannett Co., Inc. 24,800 2,023
Gap, Inc. 107,200 4,931
GTECH Holdings Corp. (a) 10,800 238
Harland (John H.) Co. 2,000 37
Hasbro, Inc. 9,800 187
Hilton Hotels Corp. (a) 60,800 585
Home Depot, Inc. (The) 205,290 14,075
Infinity Broadcasting Corp. Class A (a) 7,000 253
Interim Services, Inc. (a) 4,800 119
International Game Technology 24,600 500
Interpublic Group Cos., Inc. 10,400 600
Intimate Brands, Inc. Class A 10,300 444
JC Penney & Co., Inc. 47,500 947
Jones Apparel Group, Inc. (a) 15,800 429
Jostens, Inc. 6,700 163
Kmart Corp. (a) 146,500 1,474
Knight-Ridder, Inc. 25,300 1,505
Land's End, Inc. (a) 36,700 1,275
Leggett & Platt, Inc. 32,400 695
Lowe's Cos., Inc. 37,600 2,247
Mandalay Resort Group (a) 12,100 244
Manpower, Inc. 69,200 2,604
Mattel, Inc. 52,000 683
May Department Stores Co. 33,400 1,077
McDonald's Corp. 1,800 73
MediaOne Group, Inc. (a) 91,200 7,005
Mirage Resorts, Inc. (a) 41,200 631
New York Times Co. Class A 23,700 1,164
53 Equity Q Fund
<PAGE>
Equity Q Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
------- --------
Nordstrom, Inc. 7,400 194
Office Depot, Inc. (a) 57,300 627
Omnicom Group, Inc. 16,470 1,647
Pacific Sunwear of California (a) 3,100 99
Priceline.com, Inc. (a) 9,900 469
Reebok International, Ltd. (a) 9,500 78
Reynolds & Reynolds Co. Class A 3,100 70
Russell Corp. 1,900 32
Scholastic Corp. (a) 2,600 162
Sears Roebuck & Co. 221,300 6,736
Service Corp. International 67,800 470
Shaw Industries, Inc. (a) 63,600 982
Starwood Hotels & Resorts Worldwide, Inc. 41,600 978
Station Casinos, Inc. (a) 13,400 301
Tiffany & Co. 15,700 1,401
Time Warner, Inc. 70,000 5,071
Times Mirror Co. Series A 9,200 616
TJX Cos., Inc. 46,100 942
TMP Worldwide, Inc. (a) 700 99
Toys "R" Us, Inc. (a) 132,500 1,896
Tribune Co. 17,004 936
Tricon Global Restaurants, Inc. (a) 94,700 3,658
Tupperware Corp. 26,000 440
Univision Communications, Inc. Class A (a) 3,200 327
Valassis Communications, Inc. (a) 14,200 600
Venator Group, Inc. (a) 200 1
Viacom, Inc. Class B (a) 67,769 4,096
Wal-Mart Stores, Inc. 390,343 26,982
Washington Post Co. Class B 303 168
Water Pik Technologies, Inc. (a) 505 5
Whirlpool Corp. 8,300 539
Young & Rubicam, Inc. 12,200 862
Zale Corp. (a) 3,400 163
---------
153,406
---------
Consumer Staples - 6.0%
Albertson's, Inc. 3,400 110
Anheuser-Busch Cos., Inc. 36,720 2,603
Bestfoods 4,500 237
Brown-Forman Distillers, Inc. Class B 7,652 438
Church and Dwight Co., Inc. 7,800 208
Clorox Co. (The) 19,800 997
Coca-Cola Co. (The) 7,615 444
Colgate-Palmolive Co. 22,900 1,489
ConAgra, Inc. 170,956 3,857
Corn Products International, Inc. 5,000 164
Earthgrains Co. 5,100 82
General Mills, Inc. 37,600 1,344
Gillette Co. (The) 70,400 2,900
Great Atlantic & Pacific Tea Co., Inc. 1,200 33
Heinz (H.J.) Co. 32,300 1,286
Hershey Foods Corp. 11,400 542
Hormel Foods Corp. 45,700 1,857
IBP, Inc. 211,100 3,800
International Flavors & Fragrances, Inc. 11,974 452
Interstate Bakeries Corp. 2,300 42
Jack in the Box, Inc. (a) 7,200 149
Kroger Co. (The) (a) 88,800 1,676
PepsiCo, Inc. 208,800 7,360
Philip Morris Cos., Inc. 353,450 8,196
Procter & Gamble Co. 181,300 19,864
Quaker Oats Co. 40,000 2,625
Ralston-Purina Group 88,200 2,459
Safeway, Inc. (a) 91,425 3,251
Sara Lee Corp. 237,100 5,231
Seagram Co., Ltd. NPV 106,200 4,772
SuperValu, Inc. 13,300 266
SYSCO Corp. 45,000 1,780
Tyson Foods, Inc. Class A 17,800 289
U.S. Foodservice (a) 12,900 216
Unilever NV (a) 42,300 2,302
Universal Corp. 31,400 715
---------
84,036
---------
Financial Services - 13.7%
Aetna, Inc. 29,480 1,645
Allstate Corp. 167,400 4,018
Ambac Financial Group, Inc. 12,200 637
American Financial Group, Inc. 3,000 79
American International Group, Inc. 188,787 20,413
American National Insurance Co. 1,600 102
AmSouth Bancorp 96,275 1,859
AON Corp. 62,610 2,504
Associates First Capital Corp. Class A 104,184 2,859
Astoria Financial Corp. 18,500 563
Automatic Data Processing, Inc. 5,700 307
AXA Financial, Inc. 7,400 251
Bank of America Corp. 421,644 21,161
Bank One Corp. 109,400 3,508
BB&T Corp. 900 25
Bear Stearns Co., Inc. 22,470 961
Block (H&R) Co., Inc. 10,415 456
Capital One Financial Corp. 13,500 651
Charter One Financial, Inc. 29,405 562
Chase Manhattan Corp. 59,555 4,627
CIGNA Corp. 26,200 2,111
Cincinnati Financial Corp. 7,900 245
CIT Group, Inc. 20,900 442
Citigroup, Inc. 376,452 20,917
Equity Q Fund 54
<PAGE>
EQUITY Q FUND
STATEMENT OF NET ASSETS, CONTINUED
DECEMBER 31, 1999
MARKET
NUMBER VALUE
OF (000)
SHARES $
------ ---------
City National Corp. 5,200 171
CNA Financial Corp. (a) 7,900 308
Colonial BancGroup, Inc. 4,400 46
Comerica, Inc. 36,000 1,681
Compass Bancshares, Inc. 5,200 116
Conseco, Inc. 6,400 114
Countrywide Credit Industries, Inc. 27,200 687
Dime Bancorp, Inc. 19,800 299
Dow Jones & Co., Inc. 19,700 1,340
DST Systems, Inc. (a) 2,200 168
E.W. Blanch Holdings, Inc. 4,300 263
Equifax, Inc. 32,400 763
Everest Reinsurance Holdings, Inc. 6,200 138
Fannie Mae 37,100 2,316
Federal Home Loan Mortgage Corp. 167,384 7,878
Financial Security Assurance 3,600 188
Holdings, Ltd.
FINOVA Group, Inc. 11,400 405
First Data Corp. 30,000 1,479
First Tennessee National Corp. 13,400 382
First Union Corp. 144,000 4,725
Firstar Corp. 38,200 807
FirstMerit Corp. 4,900 113
Fleet Financial Corp. 88,817 3,092
Foundation Health Systems, Inc. (a) 16,700 166
Franklin Resources, Inc. 700 22
Fremont General Corp. 9,000 66
Golden State Bancorp, Inc. (a) 9,700 167
Golden West Financial Corp. 35,100 1,176
Goldman Sachs Group, Inc. (a) 4,600 433
Greenpoint Financial Corp. 19,800 471
Hartford Financial Services Group, 37,200 1,762
Inc. (The)
Heller Financial, Inc. Class A 4,900 98
Hibernia Corp. Class A 17,400 185
Household International Corp. 23,000 857
Huntington Bancshares, Inc. 23,600 562
KeyCorp 66,000 1,460
Lehman Brothers Holdings, Inc. 6,200 525
Leucadia National Corp. 5,900 136
Loews Corp. 9,100 552
M & T Bank Corp. 700 290
Marsh & McLennan Cos., Inc. 41,210 3,943
MBIA, Inc. 20,900 1,104
MBNA Corp. 110,173 3,002
Mercantile Bankshares Corp. 7,500 240
Mercury General Corp. 7,200 160
Merrill Lynch & Co., Inc. 44,570 3,722
MONY Group, Inc. (The) 5,000 146
Morgan (J.P.) & Co., Inc. 15,218 1,927
Morgan Stanley Dean Witter & Co. 104,698 14,946
National City Corp. 67,000 1,587
North Fork Bancorp., Inc. 44,000 770
Ocwen Financial Corp. (a) 4,200 26
Old Republic International Corp. 21,900 298
Pacific Century Financial Corp. 7,200 135
Paine Webber Group, Inc. 12,500 485
Paychex, Inc. 20,670 826
Peoples Heritage Financial Group 8,400 126
PMI Group, Inc. (The) 33,800 1,650
PNC Bank Corp. 117,150 5,213
Profit Recovery Group International, 3,600 95
Inc. (The) (a)
Provident Financial Group, Inc. 3,000 108
Providian Financial Corp. 10,747 979
Radian Group, Inc. (a) 3,300 158
Regions Financial Corp. 23,000 576
Ryder System, Inc. 6,300 154
SAFECO Corp. 22,500 558
Schwab (Charles) Corp. 3,745 144
SEI Corp. 500 60
SouthTrust Corp. 83,050 3,135
Sovereign Bancorp, Inc. 57,600 427
Spieker Properties, Inc. 8,300 302
St. Paul Cos., Inc. 42,500 1,432
Summit Bancorp 18,400 564
SunTrust Banks, Inc. 33,354 2,295
TCF Financial Corp. 8,000 199
TD Waterhouse Group, Inc. (a) 16,200 266
Torchmark Corp. 9,000 262
Transatlantic Holdings, Inc. 1,800 141
Travelers Property Casualty Corp. 10,700 366
Class A
Trustmark Corp. 1,900 41
U.S. Bancorp 69,700 1,660
Union Planters Corp. 14,700 580
UnionBanCal Corp. 26,057 1,028
UnumProvident Corp. 67,100 2,151
Washington Federal, Inc. 4,900 95
Washington Mutual, Inc. 104,816 2,724
Wells Fargo Co. 81,300 3,287
-------
191,403
-------
HEALTH CARE - 8.2%
Abbott Laboratories 500 18
Allergan, Inc. 133,212 6,627
ALZA Corp. (a) 62,400 2,161
American Home Products Corp. 126,000 4,969
Apria Healthcare Group, Inc. (a) 6,600 118
Baxter International, Inc. 31,600 1,985
Bergen Brunswig Corp. Class A 28,332 236
Biogen, Inc. (a) 24,432 2,063
55 Equity Q Fund
<PAGE>
MARKET
NUMBER VALUE
OF (000)
SHARES $
------ ---------
Bristol-Myers Squibb Co. 272,160 17,469
Cardinal Health, Inc. 42,973 2,057
Chiron Corp. (a) 47,071 1,992
Columbia/HCA Healthcare Corp. 110,151 3,229
Forest Labs, Inc. (a) 58,900 3,619
Genzyme Corp. (a) 71,800 3,222
HEALTHSOUTH Corp. (a) 91,900 494
Human Genome Sciences, Inc. (a) 2,400 366
Humana, Inc. (a) 38,900 318
ICN Pharmaceuticals, Inc. 66,800 1,691
Immunex Corp. (a) 7,136 781
IVAX Corp. (a) 75,600 1,947
Johnson & Johnson 100,700 9,378
Lilly (Eli) & Co. 105,000 6,983
Mallinckrodt, Inc. 86,800 2,761
Manor Care, Inc. (a) 7,900 126
MedImmune, Inc. (a) 6,481 1,074
Medtronic, Inc. 30,700 1,119
Merck & Co., Inc. 145,314 9,745
PacifiCare Health Systems, Inc. (a) 41,800 2,215
PE Corp. 4,000 481
Pfizer, Inc. 217,400 7,052
Pharmacia & Upjohn, Inc. 62,975 2,834
Schering-Plough Corp. 104,100 4,392
St. Jude Medical, Inc. (a) 1,000 31
Tenet Healthcare Corp. (a) 66,200 1,556
Trigon Healthcare, Inc. (a) 3,400 100
United Healthcare Corp. 32,232 1,712
Warner-Lambert Co. 60,200 4,933
Watson Pharmaceuticals, Inc. (a) 26,200 938
Wellpoint Health Networks, Inc. (a) 26,978 1,779
--------
114,571
--------
INTEGRATED OILS - 3.6%
Amerada Hess Corp. 8,000 454
Ashland, Inc. 11,800 389
Atlantic Richfield Co. 11,100 960
Chevron Corp. 38,300 3,318
Coastal Corp. 10,000 354
Conoco, Inc. Class B NPV 35,187 875
Enron Corp. 85,348 3,787
Exxon Mobil Corp. NPV (a) 344,895 27,786
Kerr-McGee Corp. 22,885 1,419
Lyondell Petrochemical Co. 27,800 354
Phillips Petroleum Co. 14,400 677
Royal Dutch Petroleum Co. 92,600 5,597
Texaco, Inc. 43,500 2,363
USX-Marathon Group 48,200 1,189
--------
49,522
--------
MATERIALS AND PROCESSING - 5.7%
Air Products & Chemicals, Inc. 48,500 1,628
Alcoa, Inc. 54,300 4,507
Allegheny Technologies, Inc. (a) 14,500 325
Archer-Daniels-Midland Co. 117,743 1,435
B.F. Goodrich Co. 11,600 319
Banta Corp. 5,700 129
Boise Cascade Corp. 4,900 198
Bowater, Inc. 7,300 396
Dow Chemical Co. 89,002 11,893
FMC Corp. (a) 1,800 103
Fort James Corp. 23,600 646
Fuller (H.B.) Co. 1,700 95
Georgia Gulf Corp. 13,200 402
Georgia-Pacific Group 127,700 6,481
Illinois Tool Works, Inc. 28,491 1,925
IMC Global, Inc. 33,500 549
International Paper Co. 13,462 760
Kimberly-Clark Corp. 24,859 1,622
Lafarge Corp. 10,900 301
Louisiana Pacific Corp. 25,400 362
Lubrizol Corp. 3,600 111
Minnesota Mining & Manufacturing Co. 96,015 9,397
Monsanto Co. 145,000 5,166
Nucor Corp. 21,800 1,195
OM Group 3,500 121
Owens Corning 4,000 77
PPG Industries, Inc. 9,500 594
Praxair, Inc. 2,000 101
Reynolds Metals Co. 9,400 720
Rohm & Haas Co. 60,559 2,464
RPM, Inc. (Ohio) 1,205 12
Sherwin-Williams Co. 16,791 353
Sigma Aldrich Corp. 55,200 1,656
Smurfit-Stone Container Corp. (a) 37,900 926
Solutia, Inc. 58,900 909
Teleflex, Inc. 354 11
Temple-Inland, Inc. 7,500 495
Texas Industries, Inc. 3,800 162
Textron, Inc. 7,200 552
Tyco International, Ltd. 325,681 12,661
Unifi, Inc. (a) 10,000 123
Union Carbide Corp. 8,400 561
USEC, Inc. 9,300 65
USG Corp. 81,300 3,831
USX-U.S. Steel Group 4,300 142
Weyerhaeuser Co. 40,434 2,903
--------
79,384
--------
Equity Q Fund 56
<PAGE>
Equity Q Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
------- --------
Miscellaneous - 0.1%
Convergys Corp. NPV (a) 31,100 956
---------
Other Energy - 1.0%
Apache Corp. 104,000 3,842
Burlington Resources, Inc. 8,900 294
Cooper Cameron Corp. (a) 6,800 333
El Paso Energy Corp. 16,400 637
ENSCO International, Inc. 15,000 343
Global Marine, Inc. (a) 22,200 369
Input/Output, Inc. (a) 2,800 14
Noble Drilling Corp. (a) 22,500 737
Pioneer Natural Resources Co. (a) 3,234 29
R&B Falcon Corp. (a) 24,600 326
Smith International, Inc. (a) 4,800 239
Sunoco, Inc. 9,600 226
Tidewater, Inc. 5,500 198
Tosco Corp. 84,800 2,306
Transocean Sedco Forex, Inc. NPV (a) 21,486 724
Ultramar Diamond Shamrock Corp. 96,000 2,178
Union Pacific Resources Group, Inc. 85,800 1,093
Valero Energy Corp. 7,800 154
---------
14,042
---------
Producer Durables - 7.4%
Applied Materials, Inc. (a) 46,180 5,848
Boeing Co. 19,100 794
Boston Scientific Corp. (a) 23,900 523
Briggs & Stratton Corp. 12,000 644
CommScope, Inc. (a) 21,400 863
Cordant Technologies, Inc. 800 26
CTS Corp. 17,100 1,289
Cummins Engine Co., Inc. 13,300 643
D.R. Horton, Inc. 21,300 294
Deere & Co. 29,400 1,275
Diebold, Inc. 68,144 1,601
Dover Corp. 71,800 3,258
Emerson Electric Co. 11,100 637
General Electric Co. 349,300 54,054
Honeywell International, Inc. (a) 20,500 1,183
Hubbell, Inc. Class B 7,000 191
Ingersoll-Rand Co. 44,827 2,468
ITT Industries, Inc. 30,700 1,027
Kaufman & Broad Home Corp. 13,500 327
Lexmark International Group, Inc. Class A (a) 38,051 3,444
Litton Industries, Inc. (a) 3,200 160
Lockheed Martin Corp. 91,600 2,004
Manitowoc Co., Inc. 5,500 187
Mettler-Toledo International, Inc. New (a) 5,200 199
Milacron, Inc. 4,200 65
Miller (Herman), Inc. 6,200 142
NACCO Industries, Inc. Class A 1,700 94
Northrop Grumman Corp. 44,200 2,390
Pall Corp. 1,417 31
Parker-Hannifin Corp. 4,900 251
Pulte Corp. 11,400 257
Raytheon Co. Class A 19,000 471
Raytheon Co. Class B 33,500 890
Rockwell International Corp. 24,231 1,160
Roper Industries, Inc. 3,400 129
Solectron Corp. (a) 32,324 3,075
Tecumseh Products Co. Class A 3,300 155
Teradyne, Inc. (a) 118,800 7,840
Terex Corp. (a) 7,100 196
Waste Management, Inc. 86,700 1,489
Xerox Corp. 54,800 1,242
---------
102,816
---------
Technology - 26.4%
3Com Corp. (a) 117,800 5,529
Adaptec, Inc. (a) 16,502 822
Adobe Systems, Inc. 97,600 6,564
Altera Corp. (a) 21,177 1,050
America Online, Inc. (a) 234,902 17,720
Analog Devices, Inc. (a) 8,400 781
Anixter International, Inc. (a) 4,000 83
Apple Computer, Inc. (a) 21,396 2,198
Applied Micro Circuits Corp. (a) 4,200 533
At Home Corp. Series A (a) 33,000 1,417
AVX Corp. 14,800 739
BEA Systems, Inc. (a) 6,000 420
BMC Software, Inc. (a) 18,000 1,438
Broadcom Corp. Class A (a) 1,000 272
Cisco Systems, Inc. (a) 483,138 51,726
Citrix Systems, Inc. (a) 6,300 775
CNET, Inc. (a) 1,800 102
COMPAQ Computer Corp. 11,700 317
CompUSA, Inc. (a) 15,400 79
Computer Associates International, Inc. 135,800 9,498
Comverse Technology, Inc. (a) 5,300 767
Conexant Systems, Inc. (a) 7,300 482
Cooper Industries, Inc. 15,700 635
Dell Computer Corp. (a) 195,500 9,958
eBay, Inc. (a) 1,000 125
Electronic Data Systems Corp. 50,801 3,400
EMC Corp. (a) 151,286 16,528
Emulex Corp. (a) 1,200 136
Exodus Communications, Inc. (a) 15,200 1,350
Galileo International, Inc. 110,100 3,296
Equity Q Fund 56
<PAGE>
Equity Q Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
Market
Number Value
of (000)
Shares $
------- --------
<S> <C> <C>
General Dynamics Corp. 19,696 1,039
General Instrument Corp. (a) 21,268 1,808
Imation Corp. (a) 5,600 188
Inktomi Corp. (a) 8,600 762
Integrated Device Technology, Inc. (a) 23,300 674
Intel Corp. 290,700 23,910
International Business Machines Corp. 39,500 4,266
JDS Uniphase Corp. (a) 29,000 4,676
Lanier Worldwide, Inc. (a) 4,500 17
Linear Technology Corp. 14,500 1,038
LSI Logic Corp. (a) 13,100 884
Lucent Technologies, Inc. 368,232 27,548
Maxim Integrated Products, Inc. (a) 32,800 1,546
Mercury Interactive Corp. (a) 1,400 151
Microchip Technology, Inc. (a) 19,200 1,316
Micron Technology, Inc. (a) 102,088 7,937
Microsoft Corp. (a) 385,701 45,006
Motorola, Inc. 59,900 8,820
National Semiconductor Corp. (a) 183,225 7,844
NCR Corp. (a) 4,164 158
Network Appliance, Inc. (a) 6,000 498
Network Solutions, Inc. Class A (a) 400 87
Nextel Communications, Inc. Class A (a) 20,562 2,119
Nortel Networks Corp. 112,300 11,342
Novell, Inc. (a) 27,200 1,085
Oracle Systems Corp. (a) 187,430 20,992
QUALCOMM, Inc. (a) 61,616 10,848
Quantum Corp. DLT & Storage Systems (a) 63,600 962
RealNetworks, Inc. (a) 4,500 541
SDL, Inc. (a) 1,400 305
Seagate Technology (a) 35,874 1,670
Siebel Systems, Inc. (a) 6,900 581
Silicon Graphics, Inc. (a) 4,800 47
Sterling Commerce, Inc. (a) 3,400 116
Sun Microsystems, Inc. (a) 189,000 14,624
SunGard Data Systems (a) 140,100 3,327
Symantec Corp. (a) 7,200 422
Tandy Corp. 54,000 2,656
Teledyne Technologies, Inc. (a) 106 1
Tellabs, Inc. (a) 13,545 869
Texas Instruments, Inc. 64,800 6,278
Unisys Corp. (a) 12,754 407
USWeb Corp. (a) 3,400 151
VeriSign, Inc. (a) 5,500 1,051
Veritas Software Corp. (a) 19,593 2,804
Vishay Intertechnology, Inc. (a) 23,600 747
Xilinx, Inc. (a) 34,762 1,580
Yahoo!, Inc. (a) 8,000 3,463
---------
367,901
---------
Utilities - 9.5%
Allegheny Energy, Inc. 13,700 369
Alltel Corp. 2,795 231
AT&T Corp. 191,877 9,738
Bell Atlantic Corp. 253,237 15,590
BellSouth Corp. 323,051 15,123
Calpine Corp. (a) 9,400 602
Carolina Power & Light Co. 29,500 898
Central & Southwest Corp. 67,200 1,344
Cinergy Corp. 16,000 386
CMS Energy Corp. 20,900 652
Columbia Energy Group 9,400 595
Comcast Corp. Special Class A 91,295 4,610
Consolidated Edison, Inc. 27,401 945
Consolidated Natural Gas Co. 5,100 331
Cox Communications, Inc. Class A (a) 3,736 192
Dominion Resources, Inc. 9,700 381
DTE Energy Co. 50,500 1,584
Duke Energy Corp. 58,100 2,912
Edison International 79,300 2,077
Energy East Corp. 25,600 533
Entergy Corp. 15,000 386
FirstEnergy Corp. 37,200 844
FPL Group, Inc. 25,193 1,079
Global Crossing, Ltd. (a) 67,000 3,346
GPU, Inc. 21,100 632
GTE Corp. 75,200 5,306
Kansas City Power & Light Co. 2,400 53
KeySpan Corp. (a) 21,100 489
Level 3 Communications, Inc. (a) 43,400 3,548
MCI WorldCom, Inc. (a) 426,848 22,623
NiSource, Inc. NPV 13,400 240
Northern States Power Co. 36,200 706
OGE Energy Corp. 24,200 460
PG&E Corp. 138,000 2,829
Pinnacle West Capital Corp. 16,200 495
Powertel, Inc. (a) 1,200 120
PP&L Resources, Inc. 24,400 558
Public Service Co. of New Mexico 10,700 174
Public Service Enterprise Group, Inc. 78,700 2,740
Quanta Services, Inc. (a) 4,000 113
Reliant Energy, Inc. NPV 37,469 857
SBC Communications, Inc. 331,490 16,160
Southern Co. 71,460 1,679
Sprint Corp. 23,300 1,568
TECO Energy, Inc. 14,200 264
Texas Utilities Co. 75,743 2,694
</TABLE>
Equity Q Fund 58
<PAGE>
Equity Q Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
Market
Number Value
of (000)
Shares $
------- --------
<S> <C> <C>
U.S. West, Inc. NPV 34,300 2,470
Unicom Corp. 12,000 402
UtiliCorp United, Inc. 11,600 225
Western Resources, Inc. 8,100 138
Western Wireless Corp. NPV Class A (a) 3,900 260
Wisconsin Energy Corp. 14,200 272
---------
132,823
---------
Total Common Stocks
(cost $971,823) 1,317,104
---------
Principal
Amount (000)
$
------------
Short-Term Investments - 5.5%
Frank Russell Investment Company Money
Market Fund, due on demand (b) 72,386 72,386
United States Treasury Bills (b)(c)(d)
4.67% due 01/20/00 4,950 4,938
---------
Total Short-Term Investments
(cost $77,324) 77,324
---------
Total Investments - 100.0%
(identified cost $1,049,147) 1,394,428
Other Assets and Liabilities,
Net - 0.0% (347)
---------
Net Assets - 100.0% 1,394,081
=========
Futures Contracts
S&P 400 Midcap Index
expiration date 03/00 80 $867
S&P 500 Index
expiration date 03/00 158 1,682
---------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ 2,549
=========
</TABLE>
* Each contract represents $100,000 notional value.
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
(c) Rate noted is yield-to-maturity from date of acquisition.
(d) Held as collateral in connection with futures contracts purchased by the
Fund.
Abbreviations:
NPV - No Par Value
See accompanying notes which are an integral part of the financial statements.
59 Equity Q Fund
<PAGE>
Equity Q Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amounts)
December 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Investments at market (identified cost $1,049,147) ...................... $1,394,428
Receivables:
Dividends ............................................................ 1,785
Investments sold ..................................................... 349
Fund shares sold ..................................................... 6,699
Daily variation margin on futures contracts .......................... 246
----------
Total assets ....................................................... 1,403,507
Liabilities
Payables:
Investments purchased ................................................ $ 1,285
Fund shares redeemed ................................................. 7,900
Accrued fees to affiliates ........................................... 136
Other accrued expenses ............................................... 105
----------
Total liabilities .................................................. 9,426
----------
Net Assets .............................................................. $1,394,081
==========
Net Assets Consist of:
Accumulated net realized gain (loss) .................................... $ 98,823
Unrealized appreciation (depreciation) on:
Investments .......................................................... 345,281
Futures contracts .................................................... 2,549
Shares of beneficial interest ........................................... 336
Additional paid-in capital .............................................. 947,092
----------
Net Assets .............................................................. $1,394,081
==========
Net Asset Value, offering and redemption price per share:
Class E ($30,745,646 divided by 739,446 shares of $.01 par value
shares of beneficial interest outstanding) ......................... $ 41.58
==========
Class I ($1,363,335,732 divided by 32,813,227 shares of $.01 par value
shares of beneficial interest outstanding) ......................... $ 41.55
==========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Equity Q Fund 60
<PAGE>
Equity Q Fund
Statement of Operations
Amounts in thousands Year Ended December 31, 1999
Investment Income
Dividends ........................................... $ 16,490
Dividends from Money Market Fund .................... 1,688
Interest ............................................ 243
--------
Total investment income ........................... 18,421
Expenses
Advisory fees ....................................... $ 6,772
Administrative fees ................................. 619
Custodian fees ...................................... 472
Transfer agent fees ................................. 467
Professional fees ................................... 31
Registration fees ................................... 88
Shareholder servicing fees - Class E ................ 38
Trustees' fees ...................................... 5
Miscellaneous ....................................... 90
--------
Total expenses .................................... 8,582
--------
Net investment income .................................. 9,839
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ......................................... 235,895
Futures contracts ................................... 5,206 241,101
--------
Net change in unrealized appreciation (depreciation) on:
Investments ......................................... 774
Futures contracts ................................... 1,719 2,493
-------- --------
Net realized and unrealized gain (loss) ................ 243,594
--------
Net increase (decrease) in net assets from operations .. $253,433
========
See accompanying notes which are an integral part of the financial statements.
61 Equity Q Fund
<PAGE>
Equity Q Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Amounts in thousands Years Ended December 31,
1999 1998
----------- -----------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ....................................... $ 9,839 $ 9,340
Net realized gain (loss) .................................... 241,101 153,911
Net change in unrealized appreciation (depreciation) ........ 2,493 87,859
----------- -----------
Net increase (decrease) in net assets from operations ..... 253,433 251,110
----------- -----------
Distributions
From net investment income
Class E ................................................... (133) (9,349)
Class I ................................................... (10,782) --
From net realized gain
Class E ................................................... (4,279) (117,001)
Class I ................................................... (191,979) --
----------- -----------
Net decrease in net assets from distributions .......... (207,173) (126,350)
----------- -----------
Share Transactions
Net increase (decrease) in net assets from share transactions 171,921 63,380
----------- -----------
Total net increase (decrease) in net assets .................... 218,181 188,140
Net Assets
Beginning of period ......................................... 1,175,900 987,760
----------- -----------
End of period (including undistributed net investment
income of $40 at December 31, 1998) ....................... $ 1,394,081 $ 1,175,900
=========== ===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Equity Q Fund 62
<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 Operations
Net investment income (a) .................................... .14
Net realized and unrealized gain (loss) ...................... 4.35
----------
Total income from operations ............................... 4.49
----------
Distributions
From net investment income ................................... (.24)
From net realized gain ....................................... (5.66)
----------
Total distributions ........................................ (5.90)
----------
Net Asset Value, End of Period .................................. $ 41.58
==========
Total Return (%)(b) ............................................. 11.01
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ..................... 30,746
Ratios to average net assets (%)(c):
Operating expenses ......................................... .94
Net investment income ...................................... .55
Portfolio turnover rate (%) .................................. 90.16
* For the period May 14, 1999 (commencement of sale) to December 31, 1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
63 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
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 40.22 $ 35.90 $ 32.94 $ 30.40 $ 24.43
------------- ------------- ------------- ------------- -------------
Income From Operations
Net investment income (a) .............. .34 .32 .44 .58 .59
Net realized and unrealized gain (loss) 8.03 8.53 10.01 6.33 8.52
------------- ------------- ------------- ------------- -------------
Total income from operations ......... 8.37 8.85 10.45 6.91 9.11
------------- ------------- ------------- ------------- -------------
Distributions
From net investment income ............. (.38) (.32) (.44) (.59) (.61)
From net realized gain ................. (6.66) (4.21) (7.05) (3.78) (2.53)
------------- ------------- ------------- ------------- -------------
Total distributions .................. (7.04) (4.53) (7.49) (4.37) (3.14)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of Period ............ $ 41.55 $ 40.22 $ 35.90 $ 32.94 $ 30.40
============= ============= ============= ============= =============
Total Return (%)(b) ....................... 21.96 25.98 33.07 23.67 37.91
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 1,363,336 1,175,900 987,760 818,281 620,259
Ratios to average net assets (%)(b):
Operating expenses ................... .69 .69 .68 .71 .58
Net investment income ................ .80 .85 1.17 1.80 2.07
Portfolio turnover rate (%) ............ 90.16 74.56 94.89 74.59 74.00
</TABLE>
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Prior to April 1, 1995, Fund performance, operating expenses, and net
investment income do not include any management fees paid to the Manager
or money managers. For periods thereafter, they are reported net of
investment management fees but gross of any investment services fees. See
Note 4.
Equity Q Fund 64
<PAGE>
International Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: To provide favorable total return and additional diversification for
US investors.
Invests in: Primarily the equity securities of non-US companies in developed
foreign markets.
Strategy: The Fund uses a multi-manager strategy intended to achieve higher
returns than its benchmark index with moderate risk by employing the investment
management services of eight managers with separate and distinct investment
approaches. The Fund's primary source of added value is intended to be stock
selection with only moderate country allocations relative to the index to
capture the diversification benefits of international investment in an asset
allocation context.
[The following table was depicted as a mountain chart in the printed material.]
Dates Equity Q - Class I++ MSCI EAFE** Lipper(R) International++++
Yearly periods
ended
December 31
* $10,000 $10,000 $10,000
1990 $8,408 $7,680 $8,806
1991 $9,530 $6,640 $9,900
1992 $8,856 $7,616 $9,490
1993 $12,141 $10,126 $13,247
1994 $12,796 $10,942 $19,119
1995 $14,165 $12,206 $14,323
1996 $15,295 $12,980 $16,978
1997 $15,983 $13,250 $16,790
1998 $17,464 $15,944 $18,957
1999 $22,785 $20,296 $20,504
- --------------------------------------------------------------------------------
Total $146,928 $129,683 $157,127
================================================================================
International Fund - Class I
Periods Ended Growth of
12/31/99 $10,000 Total Return
- -------- ------- ------------
1 Year $13,046 30.46%
5 Years $17,807 12.22%ss.
10 Years $22,783 8.58%ss.
International Fund - Class E++++++
Periods Ended Growth of
12/31/99 $10,000 Total Return
- -------- ------- ------------
1 Year $13,026 30.26%
5 Years $17,780 12.19%ss.
10 Years $22,749 8.56%ss.
MSCI EAFE Index
Periods Ended Growth of
12/31/99 $10,000 Total Return
- -------- ------- ------------
1 Year $12,730 27.30%
5 Years $18,549 13.15%ss.
10 Years $20,296 7.34%ss.
Lipper(R) International Funds Benchmark
Periods Ended Growth of
12/31/99 $10,000 Total Return
- -------- ------- ------------
1 Year $13,974 39.74%
5 Years $20,212 15.11%ss.
10 Years $26,504 10.24%ss.
Salomon Smith Barney Broad Market Index (BMI)
ex-US+
Periods Ended Growth of
12/31/99 $10,000 Total Return
- -------- ------- ------------
1 Year $12,873 28.73%
5 Years $18,806 13.47%ss.
10 Years $20,293 7.33%ss.
65 International Fund
<PAGE>
International Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Performance Review
For the year ended December 31, 1999, the International Fund Class I and Class E
shares posted total returns of 30.46% and 30.26%, respectively, as compared to
the Salomon Smith Barney BMI World ex- US, which gained 28.73% for the year.
Fund results were also favorable versus the MSCI EAFE Index, which gained 27.30%
The Fund's performance advantage over the benchmarks was primarily due to the
strong results of its growth-oriented managers.
Portfolio Highlights
Dominant trends in the non-US developed markets were once again similar to those
in the US. Technology dominated other sectors, particularly late in the year, as
Internet enthusiasm spread globally. Japan led all other international markets
with the BMI-Japan Index up 68% for the year. Continental European markets were
the strongest performers as the European Union continued to foster optimism in
the stock market. The United Kingdom performed well, but trailed the majority of
other major markets as it struggled with inflationary pressures.
The Fund's value managers struggled during the year, though their results were
relatively consistent with value-biased peers. The growth managers produced
strong gains, well ahead of the BMI-ex US Index. Security selection and country
selection were generally positive contributors, with the technology and
telecommunications holdings of the growth managers offsetting the deeper value
holdings of their counterparts. The Fund trailed the average international fund
tracked by Lipper Analytical Services, which gained 39.74% for the year. Reduced
exposure to emerging markets, technology and telecommunications shares versus
many peer funds accounted for much of the difference. Transaction costs
associated with manager changes early in 1999 also impacted index- and
peer-relative results.
Top Ten Equity Holdings
(as a percent of Total Investments) December 31,1999
Mannesmann AG NPV (Germany) 1.7%
Koninklijke KPN NV (Netherlands) 1.5
Nippon Telegraph & Telephone Corp.
(Japan) 1.3
Hitachi, Ltd. (Japan) 1.2
Total Co. SA Class B (France) 1.1
NTT Mobile Communication Network, Inc. NPV (Japan) 1.1
Vodafone Group PLC (United Kingdom) 1.1
Telefonica SA (Spain) 1.0
Sony Corp. (Japan) 1.0
Fujitsu, Ltd. (Japan) 1.0
Portfolio Characteristics
December 31, 1999
Current P/E Ratio 26.44x
Portfolio Price/Book Ratio 3.09x
Market Capitalization - $- Weighted Average 48.7 Bil
Number of Holdings 791
Money Managers Styles
Delaware International Advisors, Ltd. Value
Fidelity Management Trust Company Market-Oriented
J.P. Morgan Investment Management, Inc. Market-Oriented
Montgomery Asset Management, LLC Growth
Mastholm Asset Management, LLC Growth
Oechsle International Advisors, LLC Growth
Sanford C. Bernstein & Co., Inc. Value
The Boston Company Asset Management, Inc. Value
* International Fund Class I assumes initial investment on January 1,
1990.
** Morgan Stanley Capital International Europe, Australia, Far East (MSCI
EAFE) Index is an index composed of an arithmetic, market value-weighted
average of the performance of approximately 1,600 securities listed on
the stock exchange of the countries of Europe, Australia, and the Far
East. The index is calculated on a total-return basis, which includes
reinvestment of gross dividends before deduction of withholding taxes
++ Prior to April 1, 1995, Fund performance results are reported gross of
investment management fees. For the period following April 1, 1995, Fund
performance results are reported net of investment management fees but
gross of any investment services fees. Information concerning these fees
can be obtained from the Fund's Advisor upon request.
++++ Lipper(R) International Funds Benchmark is the average total return for
the universe of funds within the International Funds investment
objective. The total return for the funds reflects adjustments for
income dividends and capital gains distributions reinvested as of the
ex-dividend dates.
++++++ International Fund Class I performance has been linked with Class E to
provide historical perspective. From May 14, 1999 (commencement of sale)
through the current period, Class E paid shareholder service fees. Total
return would have been lower had these fees been in effect during prior
reporting periods.
+ Salomon Smith Barney BMI Index ex-US is a comprehensive float-weighted
equity index consisting of every company with an investable market
capitalization of over $100 million in 22 countries. This Index has
broader representation than the MSCI EAFE Index.
ss. Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Investments in securities of non-US issuers and foreign currencies involve
investment risks different from those of US issuers. The Prospectus contains
further information and details regarding these risks.
International Fund 66
<PAGE>
International Fund
Statement of Net Assets
December 31, 1999
Market
Number Value
of (000)
Shares $
------- --------
Common Stocks - 94.5%
Australia - 2.6%
Amcor, Ltd. 579,265 2,713
AMP, Ltd. 30,200 334
Australia & New Zealand Bank Group, Ltd. 1,041,021 7,573
Australian Gas & Light Co. 5,400 32
Boral, Ltd. 73,946 115
Brambles Industries, Ltd. 2,700 75
Broken Hill Proprietary Co. 50,285 660
Cable & Wireless Optus, Ltd. NPV (a) 1,236,000 4,130
Coles Myer, Ltd. 12,692 66
Colonial, Ltd. 10,200 46
CSR, Ltd. 1,018,200 2,473
F.H. Faulding & Co., Ltd. 3,600 24
Foster's Brewing Group, Ltd. 919,200 2,637
Goldfields, Ltd. 74,055 53
Goodman Fielder Wattie 834,994 746
Harvey Norman Holdings, Ltd. NPV 27,800 53
Leighton Holdings, Ltd. Class A 5,100 20
Lend Lease Corp. 28,600 401
Macquarie Bank, Ltd. NPV 2,000 34
National Australia Bank, Ltd. 256,300 3,920
National Foods, Ltd. 10,800 19
National Mutual Holdings, Ltd. 611,000 1,071
News Corp., Ltd. 29,317 285
Oil Search, Ltd. (Australia Regd) (a) 10,600 14
Orica, Ltd. 181,000 976
Pacific Dunlop, Ltd. 576,985 817
PMP Communications, Ltd. 196,000 270
Rio Tinto, Ltd. NPV 3,200 69
Seven Network, Ltd. NPV 5,800 20
Southcorp Holdings, Ltd. 96,100 339
Tabcorp. Holdings, Ltd. 145,000 982
Telstra Corp., Ltd. (a) 52,783 186
Telstra Corp., Ltd. NPV (a) 137,300 746
Wesfarmers, Ltd. 4,400 36
Westfield Holdings, Ltd. NPV 8,700 54
Westfield Trust 457,057 897
Westfield Trust NPV (a) 15,789 30
Westpac Banking Corp. 55,300 381
WMC, Ltd. 45,300 250
Woodside Petroleum, Ltd. 4,600 33
Woolworth's, Ltd. 11,821 40
---------
33,620
---------
Austria - 0.3%
Bank Austria AG 40,224 2,269
VA Technologie AG (BR) 4,300 284
Voest-Alpine Stahl AG 13,000 507
Wienerberger Baustoffindustrie AG NPV 12,800 278
---------
3,338
---------
Belgium - 0.3%
Dexia (a) 10,778 1,783
Electrabel NPV 5,900 1,932
Real Software NPV 600 47
---------
3,762
---------
Canada - 3.6%
Abitibi-Consolidated, Inc. 7,350 86
Air Canada Inc. Class A (a) 17,500 122
Air Canada, Inc. (a) 10,774 81
Alberta Energy Co., Ltd. 10,679 333
Alcan Aluminum, Ltd. 4,470 184
Anderson Exploration, Ltd. (a) 4,910 59
ATI Technologies, Inc. NPV (a) 105,400 1,395
Bank of Nova Scotia 24,717 532
Barrick Gold Corp. NPV 14,620 261
BCE Emergis, Inc. NPV (a) 62,200 3,339
BCE, Inc. 84,715 7,697
Biovail Corp. International NPV New (a) 870 81
Bombardier, Inc. Class B 98,767 2,029
Canada Life Financial Corp. NPV (a) 2,160 33
Canadian Imperial Bank of Commerce 18,775 449
Canadian Natural Resources, Ltd. (a) 2,527 62
Canadian Occidental Petroleum, Ltd. 1,730 34
Canadian Pacific, Ltd. 12,430 267
Canfor Corp. (a) 2,280 27
Celestica, Inc. (a) 1,690 95
Celestica, Inc. NPV (a) 2,040 113
CGI Group, Inc. Class A (a) 61,500 2,631
Crestar Energy, Inc. (a) 1,640 23
Dofasco, Inc. NPV 36,671 724
Domtar, Inc. NPV 7,320 87
Enbridge, Inc. 2,904 58
Falconbridge, Ltd. New 3,450 62
Franco-Nevada Mining Corp., Ltd. 3,076 47
Hudson's Bay Co. 1,650 20
Imasco, Ltd. New 8,700 241
Imperial Oil, Ltd. 14,692 316
Inco, Ltd. (a) 100 2
Inco, Ltd. NPV (a) 12,510 292
JDS Uniphase Canada, Ltd. NV (a) 630 102
Magna International, Inc. Class A 4,000 170
Mitel Corp. NPV (a) 195,000 2,702
National Bank of Canada 34,700 445
67 International Fund
<PAGE>
International Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
------- --------
Newbridge Networks Corp. (a) 1,110 25
Noranda, Inc. 16,441 221
Nortel Networks Corp. 5,470 552
Nortel Networks Corp. NPV 32,960 3,330
NOVA Chemicals Corp. NPV 1,760 34
NS Power Holdings, Inc. 20,200 202
Petro-Canada 1,890 27
Placer Dome, Inc. 6,927 74
Precision Drilling Corp. (a) 32,900 843
QLT PhotoTherapeutics, Inc. (a) 50,500 2,974
QLT PhotoTherapeutics, Inc. NPV (a) 980 57
Quebecor Printing, Inc. 80,330 1,795
Rogers Cantel Mobile Communications, Inc.
Class B (a) 1,390 51
Rogers Communications, Inc. Class B (a) 57,390 1,418
Royal Bank of Canada 16,680 734
Royal Group Technologies, Ltd. NPV (a) 33,000 703
Seagram Co., Ltd. 63,158 2,831
Seagram Co., Ltd. NPV 31,190 1,402
St Laurent Paperboard, Inc. (a) 104,700 1,396
Stelco, Inc. Class A 5,140 38
Suncor, Inc. NPV 5,557 233
Talisman Energy, Inc. (a) 2,600 66
TD Waterhouse Group, Inc. (a) 13,000 214
Teleglobe, Inc. 670 15
Telesystem International Wireless, Inc. (a) 1,340 49
Tembec, Inc. Class A (a) 3,070 34
Thomson Corp. (The) 12,540 330
Toronto Dominion Bank (The) 17,022 457
Torstar Corp. Class B 14,800 161
TransAlta Corp. 11,300 111
TransCanada Pipelines, Ltd. 11,700 101
Westcoast Energy, Inc. 63,510 1,019
---------
46,698
---------
Denmark - 0.3%
ISS International Series B (a) 20,552 1,382
Jyske Bank A/S (Regd) (a) 65,705 1,325
Novo Nordisk AS Series B 2,200 292
Ratin A/S Series B 1,611 181
Sydbank A/S 3,699 153
---------
3,333
---------
Finland - 1.6%
Comptel Oyj NPV (a) 848 60
Helsinki Telephone Corp. Series E 44,600 3,716
Huhtamaki OY Series I Free 3,000 102
Kesko Oyj 105,700 1,342
Nokia Oyj 60,871 11,037
Pohjola Group Insurance Corp. Series B 7,300 441
Sampo Insurance Co., Ltd. Series A 18,623 651
Sonera Group Oyj 16,961 1,163
Stora Enso OYJ Series R 46,000 802
Tietoenator Oyj NPV 4,680 292
UPM-Kymmene Oyj 13,618 548
Valmet - Rauma Oyj (a) 27,225 353
---------
20,507
---------
France - 11.5%
Alcatel Alsthom 55,647 12,781
Alstom 175,656 5,857
Assurances Generales de France 26,856 1,455
Atos SA (a) 1,102 183
Aventis SA (a) 82,776 4,803
AXA - UAP 23,609 3,292
Banque Nationale Paris 84,683 7,814
Bongrain SA 2,260 750
Bouygues 7,144 4,541
Carrefour SA (a) 37,380 6,895
Castorama Dubois 17,840 5,427
Chargeurs International SA 3,100 175
Christian Dior SA 10,772 2,669
Cie de St. Gobain 15,114 2,843
CNP Assurances 4,200 155
Coflexip SA 9,766 710
Credit Commercial de France 2,391 298
Eridania Beghin-Say SA 1,843 198
France Telecom SA 27,510 3,639
Galeries Lafayette (a) 2,500 415
Gecina 1,288 145
Groupe Danone 2,009 474
Havas Advertising SA 1,045 445
L'Air Liquide 24,492 4,100
Lafarge SA 8,330 970
Lagardere Groupe (Regd) 8,500 462
Legris Industries SA 4,600 185
LVMH Moet-Hennessy 2,765 1,239
Michelin (Cie Gen) Class B (Regd) 41,261 1,621
Neopost SA (a) 35,000 1,472
Peugeot SA 10,215 2,319
Pinault-Printemps- Redoute SA 1,830 483
Renault (Regie Nationale) 3,578 173
Rhodia SA 145,374 3,286
Rhone-Poulenc SA Class A - ADR 214,635 12,475
Sanofi-Synthelabo SA (a) 11,118 463
Schneider Electric SA 10,553 829
Scor SA 6,000 265
Sidel SA 5,335 551
International Fund 68
<PAGE>
International Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
------- --------
Simco (Regd) 3,900 316
Societe Generale 25,116 5,844
Suez Lyonnaise des Eaux 40,824 6,543
Sylea 2,800 137
Thomson Multimedia (a) 53,200 2,867
Thomson-CSF 48,118 1,589
Total Co. SA Class B 109,199 14,575
Total Fina SA - ADR 29,585 2,049
TV Francaise (TF1) 6,659 3,488
Usinor Sacilor 89,414 1,680
Valeo SA 32,900 2,538
Vivendi 114,596 10,348
---------
148,831
---------
Germany - 7.8%
AMB Aachener & Muenchener Beteiligungs AG 2,130 148
BASF AG 31,407 1,614
Bayer AG 132,940 6,294
Bayerische Hypo Vereinsbank AG 62,100 4,241
Bayerische Motoren Werke AG (a) 109,200 3,333
Bilfinger & Berger BAU AG 4,900 107
Celanese AG NPV (a) 5,607 102
Commerzbank AG 40,400 1,483
Consors Discount Broker AG NPV (a) 2,055 172
Continental AG 86,000 1,720
DaimlerChrysler AG 10,204 794
Deutsche Bank AG (Regd) NPV (a) 50,133 4,235
Deutsche Lufthansa AG 176,798 4,114
Deutsche Pfandbrief & Hypothekenbank AG 8,000 598
Deutsche Telekom AG 55,587 3,959
Entrium Direct Bankers AG NPV (a) 5,000 77
Epcos AG NPV (a) 57,888 4,344
Gerresheimer Glas AG 11,350 177
Hannover Rueckversicherungs AG 7,562 583
Hochtief AG 4,087 152
IKB Deutsche Industriebank AG 2,250 39
Jenoptik AG 167,400 2,816
Mannesmann AG NPV (a) 90,996 21,954
Mannheimer Aktiengesellschaft NPV (a) 5,000 257
Merck KGAA 65,700 2,038
Metallgesellschaft AG 53,530 1,073
Muenchener Rueckversicherungs- Gesellschaft AG NPV 3,839 974
Phoenix AG 11,000 142
RWE AG 50,630 1,984
SAP AG 1,064 524
SAP AG - ADR 13,100 682
Schering AG 4,784 578
Siemens AG NPV (a) 97,991 12,467
Software AG NPV (a) 91,905 5,601
Stinnes AG NPV (a) 21,457 454
Thyssen Krupp AG NPV (a) 11,702 357
Veba AG 146,674 7,129
Viag AG NPV (a) 58,131 1,066
Volkswagen AG 40,371 2,275
---------
100,657
---------
Greece - 0.2%
Hellenic Telecommunication Organization SA - ADR 197,200 2,354
---------
Hong Kong - 1.4%
Asia Satellite Telecommunications Holdings, Ltd. 10,000 32
Cathay Pacific Airways 18,000 32
CDL Hotels International 1,020,000 407
Cheung Kong Holdings, Ltd. 276,200 3,500
China Telecom (Hong Kong), Ltd. (a) 9,900 62
CLP Holdings, Ltd. 149,300 688
Dao Heng Bank Group, Ltd. 56,500 291
Giordano International, Ltd. 44,000 45
Great Eagle Holdings 641,849 1,139
Hang Lung Development Co. 250,000 283
Hang Seng Bank 9,500 108
Henderson Investment, Ltd. 704,000 729
Henderson Land Development Co., Ltd. 217,000 1,396
Hong Kong & China Gas Co., Ltd. 57,770 79
Hong Kong Electric Holding, Ltd. 1,129,914 3,532
Hong Kong Telecommunications, Ltd. 158,500 458
Hutchison Whampoa, Ltd. 90,800 1,320
Jardine Matheson Holdings, Ltd. - ADR (a) 232,700 917
Jardine Strategic Holdings, Ltd. - ADR (a) 279,000 555
JCG Holdings, Ltd. NPV 60,800 34
Johnson Electric Holdings, Ltd. 12,400 80
Li & Fung, Ltd. (a) 27,400 69
New World Development Co., Ltd. 23,200 52
New World Infrastructure, Ltd. (a) 15,000 19
Orient Overseas International, Ltd. (a) 188,000 73
QPL International Holdings, Ltd. (a) 200,000 149
SmarTone Telecommunications Holdings, Ltd. 45,000 217
Sun Hung Kai Properties, Ltd. 60,400 629
Swire Pacific, Ltd. Class A 17,400 103
Tai Cheung Holdings 73,000 18
Television Broadcast 6,000 41
Wharf Holdings 749,537 1,740
69 International Fund
<PAGE>
International Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
------- --------
Wheelock & Co. 15,000 16
Wing Hang Bank, Ltd. 11,900 40
---------
18,853
---------
Ireland - 0.3%
Bank of Ireland 82,085 654
CRH PLC 50,275 1,086
Irish Life & Permanent PLC 11,862 112
Jefferson Smurfit Group PLC 106,159 321
Waterford Wedgwood (Units) 1,093,176 1,111
---------
3,284
---------
Italy - 3.9%
Assicurazioni Generali SPA 7,527 249
Banca Commerciale Italiana 283,000 1,539
Banca Nazionale del Lavoro (a) 873,489 2,912
Banca Pop di Milano 55,343 431
Banca Popolare di Bergamo CV 38,600 893
Banca Popolare di Brescia 1,978 175
Banco Fideuram SPA 41,600 493
Bulgari SPA 116,400 1,046
ENI SPA - ADR 34,000 1,874
Ente Nazionale Idrocarburi SPA (Regd) 352,152 1,937
Fiat SPA (a) 33,565 593
Finmeccanica SPA (a) 710,132 936
Ifil (Finanziaria di Partecipazioni)SPA (a) 31,000 129
Istituto Mobiliare Italiano SPA 223,007 3,030
Magneti Marelli SPA (a) 36,750 140
Mediaset SPA 504,947 7,854
Mediolanum SPA 45,400 595
Mondadori (Arnoldo) Editore SPA 45,800 1,453
Montefibre di Risp 90,000 45
Olivetti Group SPA (a) 1,459,000 4,225
Pirelli SPA 160,000 439
Saipem SPA 26,100 94
Telecom Italia Mobile SPA 833,615 9,313
Telecom Italia SPA 632,646 3,856
Telecom Italia SPA di Risp 371,614 5,241
Unicredito Italiano SPA 266,344 1,309
---------
50,801
---------
Japan - 23.9%
77th Bank, Ltd. (The) 166,000 1,740
Able, Inc. 22,000 1,318
Advantest Corp. 3,900 1,031
Aiful Corp. 8,350 1,022
Ajinomoto Co., Inc. 17,000 177
Amada Co., Ltd. 8,000 44
Aoki International 27,000 98
Aoyama Trading Co. 45,000 965
Asahi Bank, Ltd. 88,000 543
Asahi Glass Co., Ltd. 234,000 1,812
Bank of Fukuoka, Ltd. (The) 32,000 222
Bank of Tokyo - Mitsubishi, Ltd. 266,000 3,707
Belluna Co., Ltd. 91,500 2,364
Bridgestone Tire Corp. 12,000 264
Canon, Inc. 316,000 12,557
Chubu Electric Power Co., Inc. 6,600 108
Chugai Pharmaceutical Co., Ltd. 110,000 1,190
Citizen Watch Co., Ltd. 30,000 191
Credit Saison Co. 98,000 1,707
CSK Corp., Ltd. 12,600 2,047
Dai Ichi Kangyo Bank 16,000 150
Dai Ichi Pharmaceutical Co. 21,000 273
Dai Nippon Printing, Ltd. 10,000 160
Dai-Tokyo Fire & Marine 388,000 1,584
Daikin Industries, Ltd. 9,000 122
Daito Trust Construction 34,990 390
Daiwa Kosho Lease Co., Ltd. 104,000 335
Daiwa Securities Group, Inc. 583,000 9,124
DDI Corp. 229 3,138
Deodeo Corp. 18,000 220
East Japan Railway Co. 31 167
Ebara Corp. 40,000 446
Eisai Co. 104,000 2,000
Enix Corp. 16,600 1,803
Ezaki Glico Co. 76,000 354
Familymart, Co. 2,400 160
Fanuc Co. 5,000 637
Fuji Bank, Ltd. 586,000 5,695
Fuji Heavy Industries, Ltd. 59,000 404
Fuji Machine Manufacturing Co. 41,400 3,339
Fuji Photo Film Co. 7,000 256
Fujisawa Pharmaceutical 7,000 170
Fujitsu, Ltd. 287,000 13,090
Funai Electric Co., Ltd. 700 412
Furukawa Electric Co. 55,000 834
Futaba Corp. 22,000 969
General Sekiyu KK 32,000 72
Hikari Tsushin, Inc. 400 803
Hitachi Chemical Co., Ltd. 7,000 130
Hitachi Software Engineering Co., Ltd. 2,500 365
Hitachi, Ltd. 971,000 15,586
Hokkaido Electric Power Co., Inc. 24,400 358
Honda Motor Co., Ltd. 56,000 2,083
Hosiden Electronics 4,000 257
Hoya Corp. 6,000 473
Inax Corp. 17,000 95
ITO EN, Ltd. 1,700 238
International Fund 70
<PAGE>
International Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
------- --------
Ito-Yokado Co., Ltd. 26,000 2,825
Itochu Corp. (a) 228,000 1,136
Japan Telecom Co., Ltd. 5 201
Japan Tobacco, Inc. 23 176
Kaken Pharmaceutical Co., Ltd. 9,000 50
Kaneka Corp. 20,000 256
Kao Corp. 162,000 4,622
Kawasaki Steel Corp. (a) 188,000 337
Keyence Corp. 200 81
Kinki Coca-Cola Bottling 32,000 454
Kissei Pharmaceutical Co. 35,000 507
Koa Fire & Marine 97,000 290
Kokusai Denshin Denwa 2,300 319
Konami Co., Ltd. 4,200 750
Kurimoto Iron Works 97,000 232
Kyocera Corp. 37,100 9,623
Kyorin Pharmaceutical Co., Ltd. 53,000 1,873
Kyushu Electric Power 13,100 194
Laox 12,000 94
Mabuchi Motor Co., Ltd. 20,400 3,560
Makita Corp. 106,000 954
Marubeni Corp. 1,038,000 4,358
Marui Co., Ltd. 4,000 60
Maruichi Steel Tube 51,000 573
Matsumotokiyoshi 31,500 2,439
Matsushita Communication 13,000 3,435
Matsushita Electric Industrial Co., Ltd. 275,000 7,617
Minebea Co., Ltd. 219,000 3,758
Mitsubishi Chemical 208,000 733
Mitsubishi Corp. 83,000 641
Mitsubishi Electric Corp. 258,000 1,667
Mitsubishi Estate Co., Ltd. 114,000 1,112
Mitsubishi Heavy Industries 337,000 1,125
Mitsui Fudosan Co., Ltd. 108,000 731
Mitsui Marine & Fire Insurance Co., Ltd. 27,000 160
Mitsui O.S.K. Lines 156,000 263
Mitsui Trust & Banking Co., Ltd. 31,000 70
Mitsumi Electric Co. 4,000 125
Murata Manufacturing Co., Ltd. 10,000 2,349
Namco 61,700 3,998
NEC Corp. 52,000 1,239
Nichicon Corp. 14,000 433
Nichido Fire & Marine 188,000 1,082
Nichiei Co., Ltd. 30,000 652
NIDEC COPAL Corp. 6,000 156
NIDEC Corp. 1,700 491
Nihon Unisys 5,000 172
Nikko Securities Co., Ltd. 480,000 6,075
Nintendo Co., Ltd. 3,500 582
Nippon Comsys Corp. 13,000 270
Nippon Express Co., Ltd. 453,000 2,505
Nippon Fire & Marine 113,000 337
Nippon Meat Packers, Inc. 2,000 26
Nippon Sheet Glass 62,000 322
Nippon Steel Corp. 451,000 1,055
Nippon System Development 3,300 481
Nippon Telegraph & Telephone Corp. 965 16,529
Nippon Yusen 160,000 655
Nippon Zeon Co., Ltd. 24,000 152
Nishimatsu Construction 240,000 963
Nissan Chemical Industries, Ltd. 15,000 74
Nissan Motor Co., Ltd. (a) 440,000 1,731
Nitto Denko Corp. 9,000 450
Nomura Securities Co., Ltd. 158,000 2,853
NTT Data Corp. 16 368
NTT Mobile Communication Network, Inc. NPV 371 14,271
Omron Corp. 89,000 2,051
Orix Corp. 3,400 766
Osaka Gas Co. 85,000 205
Otsuka Kagu 500 135
Paris Miki, Inc. 2,900 208
Pioneer Electronics Corp. 22,000 581
Promise Co., Ltd. 6,000 305
Ricoh Co., Ltd. 31,000 584
Rinnai Corp. 78,000 1,451
Rohm Co. 23,100 9,496
Ryohin Keikaku Co., Ltd. 1,100 221
Sailor Pen Co., Ltd. (The) 161,000 3,309
Sakura Bank, Ltd. 486,000 2,816
Sanden Corp. 15,000 90
Sanki Engineering Co., Ltd. 11,000 49
Sankyo Co., Ltd. 66,000 1,357
Sankyo Co., Ltd. GUNMA 3,000 225
Sanwa Bank 147,000 1,788
Sanyo Electric Co., Ltd. 47,000 191
Secom Co. 42,000 4,625
Sekisui Chemical Co., Ltd. 267,000 1,184
Sekisui House, Ltd. 48,000 425
Sharp Corp. 90,000 2,304
Shin-Etsu Chemical Co., Ltd. 29,400 1,266
Shohkoh Fund & Co., Ltd. 5,560 2,201
SMC Corp. 1,500 332
Snow Brand Milk Products Co., Ltd. 15,000 60
Softbank Corp. 5,000 4,786
Sony Corp. 44,600 13,227
Sony Music Entertainment, Inc. 10,900 2,174
Sumitomo Bakelite Co., Ltd. 20,000 179
Sumitomo Bank 46,000 630
Sumitomo Rubber Industries 58,000 257
71 International Fund
<PAGE>
International Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ----------
Sumitomo Trust & Banking 15,000 101
Sunkus & Associates, Inc. 1,900 83
Suruga Bank, Ltd. 19,000 265
Suzuki Motor Corp. 29,000 423
Taiheiyo Cement Corp. 32,000 61
Taisho Pharmaceutical Co., Ltd. 67,000 1,967
Takeda Chemical Industries 48,000 2,373
Takefuji Corp. 14,600 1,828
Terumo Corp. 12,000 321
THK Co., Ltd. 8,300 336
Toc Co. 50,000 333
Toho Bank 100,000 461
Tohoku Electric Power 19,700 293
Tokuyama Corp. 55,000 202
Tokyo Electric Power 18,500 496
Tokyo Electron, Ltd. 18,000 2,466
Tokyo Gas Co. 78,000 190
Tokyo Seimitsu Co., Ltd. 3,700 598
Tokyo Tomin Bank, Ltd. (a) 1,800 69
Toppan Printing Co., Ltd. 38,000 379
Toshiba Corp. 476,000 3,634
Tostem Corp. 16,000 287
Toyo Trust & Banking Co., Ltd. (The) 77,000 317
Toyoda Gosei Co., Ltd. 13,000 713
Toyota Motor Corp. 144,000 6,977
Trend Micro, Inc. (a) 500 126
UNION TOOL Co. 500 81
UNY Co., Ltd. 18,000 176
West Japan Railway Co. 633 2,243
World Co., Ltd. 1,200 149
Yakult Honsha Co., Ltd. 15,000 112
Yamaha Corp. 15,000 97
Yamanouchi Pharmaceutical 106,000 3,703
Yamato Kogyo Co. 42,000 190
Yamato Transport 7,000 270
Yodogawa Steel Works, Ltd. 71,000 213
York-Benimaru Co., Ltd. 4,000 103
Yoshitomi Pharmaceutical Ind., Ltd. 29,000 368
----------
309,953
----------
Netherlands - 8.2%
ABN Amro Holding NV 177,793 4,442
Aegon NV 18,627 1,799
AKZO Nobel NV 51,300 2,574
AKZO Nobel NV - ADR 31,140 1,553
Buhrmann NV 93,361 1,406
Elsevier NV 128,000 1,529
Endemol Entertainment Holding NV 33,392 1,795
Equant NV - NY Reg Share (a) 46,657 5,297
Exact Holding NV (a) 16,980 905
Fortis (NL) NV 76,290 2,747
Getronics NV 3,842 307
Heineken Holding NV Class A 15,624 550
Heineken NV 53,150 2,592
Hollandsche Beton Groep NV 70,402 674
Hunter Douglas NV 54,176 1,474
ING Groep NV 154,661 9,339
Koninklijke (Royal) Philips Electronics NV (a) 13,807 1,878
Koninklijke Ahold NV 10,335 306
Koninklijke KPN NV 200,299 19,552
Koninklijke KPN NV- ADR 10,723 1,031
Koninklijke Numico NV 8,318 310
Koninklijke Vopak NV (a) 12,631 300
KPNQwest NV (a) 9,217 614
Laurus NV 72,717 1,311
Libertel NV (a) 10,500 275
Royal Dutch Petroleum Co. 119,323 7,314
STMicroelectronics (a) 46,997 7,234
Stork NV 70,943 1,036
TNT Post Group NV 28 1
Unilever NV (a) 33,600 1,829
United Pan-Europe Communications NV (a) 25,529 3,266
Vedior 77,638 798
Vendex NV 217,929 5,796
Verenigde Nederlandse Uitgeversbedrijven NV 212,526 11,171
Wereldhave NV 10,338 464
Wolters Kluwer NV (a) 86,355 2,922
----------
106,391
----------
New Zealand - 0.7%
Carter Holt Harvey 773,300 1,010
Fletcher Challenge Paper 1,040,318 728
Lion Nathan, Ltd. 9,500 22
Telecom Corp. of New Zealand, Ltd. NPV 1,507,331 7,088
Warehouse Group (The), Ltd. NPV 4,000 18
Westpac Trust Investments, Ltd. - ADR 4,100 19
----------
8,885
----------
Norway - 0.4%
Christiania Bank OG Kreditkasse 45,000 222
Den Norske Bank ASA (a) 95,570 393
Norsk Hydro AS 30,500 1,280
Norske Skogindustrier AS Class A 4,000 209
Orkla SA Class A 64,017 1,103
Petroleum Geo-Services ASA - ADR (a) 108,100 1,925
----------
5,132
----------
International Fund 72
<PAGE>
International Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ----------
Portugal - 0.3%
Banco Pinto & Sotto Mayor SA 34,433 738
Electricidade de Portugal SA 32,300 564
ParaRede, SGPS SA (a) 24,800 248
Portugal Telecom SA (a) 182,600 2,003
PT MULTIMEDIA - Servicos de
Telecomunicacoes e Multimedia SGPS SA (a) 3,959 225
Telecel - Comunicacoes Pessoais SA (a) 26,590 464
----------
4,242
----------
Singapore - 0.7%
Chartered Semiconductor Manufacturing, Ltd (a) 5,000 27
City Developments 7,700 45
Creative Technology, Ltd. (a) 81,400 1,394
Datacraft Asia, Ltd. (a) 6,000 50
DBS Group Holdings, Ltd. (a) 199,171 3,265
DBS Land 16,000 32
Development Bank 819 9
Natsteel Electronics, Ltd. 10,000 53
Natsteel, Ltd. 10,000 20
Neptune Orient Lines, Ltd. (a) 89,000 119
Oversea-Chinese Banking Corp., Ltd. 100,320 922
Overseas Union Bank 9,456 55
Singapore Airlines, Ltd. (Alien Market) 13,300 151
Singapore Land 46,000 121
Singapore Press Holdings, Ltd. 8,700 189
Singapore Technologies Engineering, Ltd. 27,400 42
Singapore Telecommunications, Ltd. 108,400 224
Straits Steamship Land, Ltd. 110,000 180
United Overseas Bank, Ltd. 186,438 1,646
Venture Manufacturing (Singapore), Ltd. 16,000 183
----------
8,727
----------
South Korea - 0.7%
Pohang Iron & Steel Co., Ltd. - ADR 50,800 1,778
Samsung Electronics 12,110 2,837
Samsung Electronics - GDR (a) 37,524 4,550
----------
9,165
----------
Spain - 3.3%
Acciona SA 7,437 420
Banco Bilbao Vizcaya SA 15,098 215
Banco Popular ESPAnol SA 49,602 3,235
Banco Santander Central HiSPAno SA 381,999 4,325
Centros Comerciales Continente SA 6,127 123
Corporacion Bancaria de Espana SA (Regd) 196,004 4,606
Endesa SA 176,217 3,499
Grupo Dragados SA 19,800 175
Iberdrola SA 263,272 3,649
Indra Sistemas SA 11,784 221
Repsol SA 51,200 1,187
Repsol SA - ADR 91,600 2,130
Sogecable SA (a) 24,100 1,539
Tabacalera SA Class A (Regd) 248,837 3,559
Telefonica SA (a) 537,189 13,421
Union Electrica Fenosa SA 52,382 916
----------
43,220
----------
Sweden - 1.7%
ABB, Ltd. (a) 2,159 263
Assa Abloy AB Series B (a) 101,238 1,422
Autoliv, Inc. 60,381 1,767
Electrolux AB Series B 31,961 804
ForeningsSPArbanken AB Series A 12,382 182
Framtidsfabriken AB (a) 300 54
Mo och Domsjo AB Series B 10,000 361
Modern Times Group MTG AB Series B (a) 2,907 144
Skandia Forsakrings AB 74,644 2,254
SKF AB Series B 88,289 2,148
Stora Enso Oyj Class R 32,066 550
Svenska Handelsbanken AB Series A (a) 36,912 464
Telefonaktiebolaget Ericsson (LM) Series B 162,584 10,452
Telefonaktiebolaget LM Ericsson Class B - ADR 11,700 768
Tornet Fastighets AB 52,000 721
----------
22,354
----------
Switzerland - 2.8%
ABB, Ltd. (a) 10,815 1,323
Baloise Holding, Ltd. 625 492
Barry Callebaut AG (Regd) 8,885 1,292
Bobst AG (BR) 300 362
Clariant AG (Regd) 8,736 4,164
Forbo Holding AG (Regd) 2,780 1,309
Geberit International AG (a) 690 236
Gretag Imaging Group 4,380 635
Holderbank Financiere Glarus AG (BR) 150 205
Julius Baer Holding Ltd., Class B 630 1,903
73 International Fund
<PAGE>
International Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ----------
Kuoni Reisen AG Series B 147 610
Nestle SA (Regd) 1,139 2,087
Novartis AG (Regd) 4,146 6,088
Richemont Series A (BR) 325 776
Roche Holdings Genusscheine AG NPV 143 1,697
Schweiz Ruckversicher (Regd) 1,579 3,244
Schweizerische Lebensversicherungsund Rentenanstalt (a) 351 204
SGS Holding (BR) (a) 120 153
Sulzer AG (Regd) 1,728 1,123
Swisscom AG (Regd) 5,791 2,342
UBS AG (Regd) 19,738 5,330
Valora Holding AG (Regd) 1,200 321
Zurich Allied AG 1,370 781
----------
36,677
----------
Taiwan - 0.1%
Hon Hai Precision Industry Co., Ltd. GDR (a) 42,300 817
----------
United Kingdom - 17.5%
3i Group PLC 77,542 1,384
Alliance UniChem PLC 150,000 998
Allied Zurich AG 245,030 2,889
Anglian Water PLC 244,916 2,192
Arjo, Wiggins, Appleton PLC 450,000 1,519
ARM Holdings PLC (a) 2,900 196
Arriva PLC 27,900 109
Ashtead Group PLC 268,978 730
Associated British Foods PLC 257,840 1,405
AstraZeneca Group PLC 11,822 500
Bank of Scotland Governor & Co. PLC 54,126 629
Barclays Bank PLC 201,130 5,780
Barratt Development PLC 49,895 232
Bass PLC 195,914 2,465
BBA Group PLC 129,050 1,069
BG Group PLC (a) 428,541 2,767
Billiton PLC 81,100 481
Blue Circle Industries PLC 375,000 2,193
BOC Group PLC 67,786 1,462
Boots Co. PLC 273,000 2,672
BP Amoco PLC 811,910 8,196
British AeroSPAce PLC 1,036,956 6,817
British Airways PLC 461,307 3,010
British American Tobacco PLC 33,100 187
British Sky Broadcasting Group PLC 35,500 573
British Telecom PLC 350,420 8,491
Bunzl PLC 443,101 2,434
Burmah Castrol PLC 29,364 519
Cable & Wireless PLC 319,200 5,476
Cadbury Schweppes PLC 52,600 317
Carillion PLC 217,269 396
CMG PLC 2,600 191
Coats Viyella PLC 290,000 192
Commercial Union Assurance Co. PLC 223,829 3,612
Compass Group PLC 55,500 762
Corus Group PLC (a) 1,205,100 3,134
Courtaulds Textile Co. PLC 130,000 136
Diageo PLC 1,024,283 8,173
Dixons Group PLC 13,800 332
Energis PLC (a) 9,900 476
Enterprise Oil PLC 12,600 85
Fairview Holdings PLC 79,719 206
FirstGroup PLC 29,000 112
Freeserve PLC (a) 127,300 1,295
Gallaher Group PLC 180,633 759
GKN PLC 176,000 2,883
Glaxo Wellcome PLC 455,681 12,911
Glynwed International PLC 73,000 283
Granada Group PLC 343,200 3,465
Great University Stores PLC 352,200 2,048
Hanson PLC 33,900 284
Hays PLC 11,400 182
HSBC Holdings PLC 340,351 4,718
Hyder PLC 221,235 1,033
Imperial Chemical Industries PLC 192,239 2,031
Invensys PLC 655,100 3,464
Kingfisher PLC 79,181 879
Ladbroke Group, Ltd. PLC 697,700 2,265
Laird Group PLC 228,447 893
LASMO PLC 430,000 833
Lloyds TSB Group PLC 236,215 2,934
Marconi PLC 130,302 2,298
Marks & Spencer PLC 316,700 1,514
Medeva PLC 4,503 13
MEPC PLC 231,686 1,740
Meyer International PLC 44,700 277
MFI Furniture Group PLC 138,941 101
Morgan Crucible PLC 425,728 1,987
National Grid Group PLC 108,093 822
National Power PLC 453,845 2,617
NDS Group PLC - ADR (a) 1,332 40
Northern Foods PLC 8,900 14
Northern Rock PLC 18,800 121
Norwich Union PLC 16,100 123
Nycomed Amersham PLC 24,717 156
Ocean Group PLC 13,500 252
Pearson PLC 23,700 771
Pen & Orient DFD PLC 352,093 5,841
International Fund 74
<PAGE>
International Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ----------
Pilkington Brothers PLC 70,600 96
Powell Duffryn PLC 68,000 524
PowerGen PLC 432,115 3,106
Premier Consolidated Oil PLC (a) 613,971 144
Prudential Corp. PLC 107,200 2,092
Racal Electronics PLC 63,000 567
Railtrack Group PLC 127,124 2,136
Rank Group PLC 150,000 485
Reckitt Benckiser PLC 16,700 158
Reed International 529,128 3,974
Reuters Group PLC 23,300 324
Rexam PLC 497,500 2,025
Rio Tinto Corp. PLC (Regd) 206,453 4,956
Royal & Sun Alliance Insurance Group PLC 760,433 5,699
Royal Bank of Scotland Group PLC 115,177 2,039
Safeway PLC 436,722 1,515
Sage Group PLC (The) 18,000 220
Scottish & Newcastle PLC 225,000 1,563
Scottish & Southern Energy PLC 171,655 1,366
ScottishPower PLC 72,000 547
SEMA Group PLC 6,800 122
Shell Transport & Trading Co. PLC (Regd) 505,189 4,198
Smith & Nephew PLC 737,600 2,478
SmithKline Beecham PLC 190,779 2,419
Somerfield PLC 824,902 1,203
South West Water PLC 119,169 1,036
Sun Life and Provincial Holdings PLC 85,859 729
Tarmac PLC 217,269 1,930
Tate & Lyle, Ltd. PLC 70,400 451
TeleWest Communications PLC (a) 477,338 2,533
Tesco Store Holdings PLC 130,700 397
Thames Water PLC 30,250 374
Thistle Hotels PLC (a) 255,122 762
Thus PLC (a) 18,000 114
TI Group PLC 18,400 133
Tomkins PLC 659,790 2,153
Trinity PLC 130,000 1,388
Unilever PLC 110,785 814
United Biscuits (Holdings) PLC 200,000 856
Vodafone Group PLC 2,832,313 14,118
Williams PLC 26,000 118
Wimpey (George), Ltd. PLC 150,000 269
Wolseley PLC 261,810 2,009
Woolwich PLC 58,400 313
WPP Group PLC 77,835 1,221
Zeneca Group PLC 83,451 3,468
----------
226,488
----------
United States - 0.4%
Global TeleSystems Group, Inc. (a) 68,240 2,363
Infonet Services Corp. Class B (a) 60,900 1,599
MIH, Ltd. NPV (a) 22,900 1,342
----------
5,304
----------
Total Common Stocks
(cost $939,072) 1,223,393
----------
Preferred Stocks - 1.1%
Australia - 0.1%
News Corp., Ltd. 103,652 888
----------
Brazil - 0.2%
Telecomunicacoes Brasileiras SA - ADR 18,400 2,364
Telemig Celular SA Class C NPV (a) 10,835 1
----------
2,365
----------
Germany - 0.8%
Dyckerhoff AG NPV (a) 2,500 77
Hugo Boss AG (a) 11,375 1,455
Krones AG NPV (a) 14,000 353
M.A.N. AG (a) 2,500 55
Marschollek, Lautenschlaeger und Partner AG NPV (a) 350 106
Porsche AG 606 1,660
ProSieben Media AG NV 16,255 945
Rheinmetall AG 26,500 280
SAP AG 9,548 5,752
Volkswagen AG 4,000 128
Wella AG - NPV (a) 30,843 684
----------
11,495
----------
Italy - 0.0%
Fiat SPA (a) 3,139 45
----------
Japan - 0.0%
Sanwa International Financial Bermuda Trust (conv.) 21,000,000 226
----------
Netherlands - 0.0%
Unilever NV 4,820 24
----------
Total Preferred Stocks
(cost $12,429) 15,043
----------
75 International Fund
<PAGE>
International Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ----------
Long-Term Investments - 0.1%
Japan - 0.1%
Yamanouchi Pharmaceutical (conv.)
1.250% due 03/31/14 JPY 30,000 533
United Kingdom - 0.0%
BG Transco Holdings PLC
7.057% due 12/14/09 (e) GBP 60 98
4.188% due 12/14/22 GBP 60 97
7.000% due 12/16/24 GBP 60 94
----------
289
----------
Total Long-Term Investments
(cost $636) 822
----------
Short-Term Investments - 3.9%
United States - 3.9%
Frank Russell Investment
Company Money Market
Fund, due on demand (b) 45,287 45,287
United States Treasury Bills (b)(c)(d)
4.670 due 01/20/00 5,000 4,988
----------
Total Short-Term Investments
(cost $50,275) 50,275
----------
Total Investments - 99.6%
(identified cost $1,002,412) 1,289,533
Other Assets and Liabilities, Net - 0.4% 4,684
----------
Net Assets - 100.0% 1,294,217
==========
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
(c) Held as collateral in connection with futures contracts purchased by the
Fund.
(d) Rate noted is yield-to-maturity from date of acquisition.
(e) Floating rate security.
Abbreviations:
ADR - American Depositary Receipt
BR - Bearer
GDR - Global Depositary Receipt
NPV - No Par Value
NV - Nonvoting
Foreign Currency Abbreviations:
AUD - Australian dollar
EUR - Euro dollar
GBP - British pound
JPY - Japanese yen
NZD - New Zealand dollar
USD - U.S. dollar
See accompanying notes which are an integral part of the financial statements.
International Fund 76
<PAGE>
International Fund
Statement of Net Assets, continued
December 31, 1999
Unrealized
Number Appreciation
of (Depreciation)
Contracts (000)
----------- --------------
Futures Contracts
CAC-40 Index
Futures Contracts (France)
expiration date 03/00 213 $ 984
DAX Index
Futures Contracts (Germany)
expiration date 03/00 70 1,539
FTSE - 100 Index
Futures Contracts (UK)
expiration date 03/00 169 688
TOPIX Index
Futures Contracts (Japan)
expiration date 03/00 111 870
------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $4,081
======
Market
% of Value
Industry Diversification Net (000)
(Unaudited) Assets $
- -------------------------------- --------- ---------
Auto & Transportation 4.5% 58,678
Consumer Discretionary 14.3 186,001
Consumer Staples 4.0 52,270
Financial Services 16.6 214,352
Health Care 4.6 60,104
Integrated Oils 0.8 10,109
Materials & Processing 10.1 130,425
Miscellaneous 1.7 22,043
Other Energy 3.8 48,680
Producer Durables 11.8 152,278
Technology 8.9 115,621
Utilities 14.5 187,875
Short-Term Investments 3.9 50,275
Long-Term Investments 0.1 822
----- ---------
Total Investments 99.6 1,289,533
Other Assets and Liabilities, Net 0.4 4,684
----- ---------
Net Assets 100.0% 1,294,217
===== =========
Market
% of Value
Geographic Diversification Net (000)
(Unaudited) Assets $
--------- ---------
Europe 43.7% 566,448
Japan 23.9 310,179
United Kingdom 17.5 226,488
Pacific Basin 6.3 80,941
Short-Term Investments 3.9 50,275
Long-Term Investments 0.1 822
Other 4.2 54,380
----- ---------
Total Investments 99.6 1,289,533
Other Assets and Liabilities, Net 0.4 4,684
----- ---------
Net Assets 100.0% 1,294,217
===== =========
See accompanying notes which are an integral part of the financial statements.
77 International Fund
<PAGE>
International Fund
Statement of Net Assets, continued
December 31, 1999
Forward Foreign Currency Exchange Contracts
Unrealized
Contracts to In Exchange Appreciation
Deliver For Settlement (Depreciation)
(000) (000) Date (000)
- -------------- --------------- ---------- ------------------
USD 1,018 EUR 1,000 03/24/00 $ (4)
USD 22,363 EUR 22,000 03/24/00 (63)
USD 5,053 EUR 5,000 03/24/00 15
USD 1,020 EUR 1,000 03/24/00 (6)
USD 1,019 EUR 1,000 03/24/00 (5)
USD 10,779 EUR 10,600 03/24/00 (34)
USD 19,073 GBP 11,925 03/24/00 190
USD 3,205 GBP 2,000 03/24/00 25
USD 1,623 GBP 1,000 03/24/00 (7)
USD 4,883 GBP 3,050 03/24/00 44
USD 17,195 JPY 1,725,000 03/24/00 (81)
USD 2,974 JPY 300,000 03/24/00 2
USD 987 JPY 100,000 03/24/00 5
USD 986 JPY 100,000 03/24/00 6
USD 6,958 JPY 700,000 03/24/00 (14)
EUR 300 USD 306 03/24/00 1
EUR 3,500 USD 3,561 03/24/00 13
EUR 1,500 USD 1,525 03/24/00 4
EUR 2,000 USD 2,033 03/24/00 6
EUR 2,000 USD 2,040 03/24/00 13
EUR 1,000 USD 1,013 03/24/00 (1)
EUR 4,000 USD 4,069 03/24/00 14
GBP 700 USD 1,122 03/24/00 (9)
GBP 1,000 USD 1,606 03/24/00 (9)
GBP 1,000 USD 1,618 03/24/00 2
GBP 1,000 USD 1,617 03/24/00 2
GBP 3,000 USD 4,835 03/24/00 (11)
JPY 100,000 USD 995 03/24/00 3
JPY 200,000 USD 1,967 03/24/00 (18)
JPY 75,000 USD 739 03/24/00 (5)
JPY 200,000 USD 1,991 03/24/00 6
JPY 100,000 USD 992 03/24/00 --
JPY 400,000 USD 3,975 03/24/00 6
------------------
$ 90
==================
Forward Foreign Exchange Spot Contracts
Unrealized
Contracts to In Exchange Appreciation
Deliver For Settlement (Depreciation)
(000) (000) Date (000)
- -------------- --------------- ---------- ------------------
USD 163 EUR 161 01/03/00 $ (1)
USD 243 GBP 150 01/04/00 --
USD 195 JPY 19,908 01/04/00 (1)
USD 17 JPY 1,766 01/05/00 --
AUD 64 USD 41 01/04/00 --
NZD 63 USD 33 01/05/00 --
------------------
$ (2)
==================
See accompanying notes which are an integral part of the financial statements.
International Fund 78
<PAGE>
International Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amounts) December 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Investments at market (identified cost $1,002,412) ....................................................... $ 1,289,533
Foreign currency holdings (identified cost $7,311) ....................................................... 7,342
Unrealized appreciation on forward foreign currency exchange contracts ................................... 357
Receivables:
Dividends and interest ................................................................................. 1,094
Investments sold ....................................................................................... 887
Fund shares sold ....................................................................................... 1,341
Foreign taxes recoverable .............................................................................. 1,058
Daily variation margin on futures contracts ............................................................ 16
-----------
Total assets ......................................................................................... 1,301,628
Liabilities
Payables:
Investments purchased ...................................................................... $ 2,269
Fund shares redeemed ....................................................................... 4,328
Accrued fees to affiliates ................................................................. 146
Other accrued expenses ..................................................................... 399
Unrealized depreciation on forward foreign currency exchange contracts ....................... 267
Unrealized depreciation on foreign currency exchange spot contracts .......................... 2
-----------
Total liabilities .................................................................................... 7,411
-----------
Net Assets ............................................................................................... $ 1,294,217
===========
Net Assets Consist of:
Accumulated distributions in excess of net investment income ............................................. $ (4,911)
Accumulated net realized gain (loss) ..................................................................... 80,101
Unrealized appreciation (depreciation) on:
Investments ............................................................................................ 287,121
Futures contracts ...................................................................................... 4,081
Foreign currency-related transactions .................................................................. 87
Shares of beneficial interest ............................................................................ 277
Additional paid-in capital ............................................................................... 927,461
-----------
Net Assets ............................................................................................... $ 1,294,217
===========
Net Asset Value, offering and redemption price per share:
Class E ($30,541,560 divided by 654,304 shares of $.01 par value
shares of beneficial interest outstanding) ........................................................... $ 46.68
===========
Class I ($1,263,675,725 divided by 27,075,322 shares of $.01 par value
shares of beneficial interest outstanding) ........................................................... $ 46.67
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
79 International Fund
<PAGE>
International Fund
Statement of Operations
Amounts in thousands Year Ended December 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income
Dividends .............................................................................................. $ 22,034
Dividends from Money Market Fund ....................................................................... 2,688
Interest ............................................................................................... 491
Less foreign taxes withheld ............................................................................ (2,525)
---------
Total investment income .............................................................................. 22,688
Expenses
Advisory fees ............................................................................. $ 7,599
Administrative fees ....................................................................... 546
Custodian fees ............................................................................ 2,067
Transfer agent fees ....................................................................... 490
Professional fees ......................................................................... 65
Registration fees ......................................................................... 97
Shareholder servicing fees - Class E ...................................................... 44
Trustees' fees ............................................................................ 6
Miscellaneous ............................................................................. 107
---------
Total expenses ....................................................................................... 11,021
---------
Net investment income .................................................................................... 11,667
---------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ............................................................................... 124,531
Futures contracts ......................................................................... 17,317
Foreign currency-related transactions ..................................................... (9,253) 132,595
---------
Net change in unrealized appreciation (depreciation) on:
Investments ............................................................................... 161,400
Futures contracts ......................................................................... 2,286
Foreign currency-related transactions ..................................................... 2,612 166,298
--------- ---------
Net realized and unrealized gain (loss) .................................................................. 298,893
---------
Net increase (decrease) in net assets from operations .................................................... $ 310,560
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
International Fund 80
<PAGE>
International Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Amounts in thousands Years Ended December 31,
1999 1998
----------- -----------
Increase (Decrease) in Net Assets
<S> <C> <C>
Operations
Net investment income ................................................................... $ 11,667 $ 14,307
Net realized gain (loss) ................................................................ 132,595 39,005
Net change in unrealized appreciation (depreciation) .................................... 166,298 73,399
----------- -----------
Net increase (decrease) in net assets from operations ................................. 310,560 126,711
----------- -----------
Distributions
From net investment income
Class E ............................................................................... (276) --
Class I ............................................................................... (12,571) (15,707)
From net realized gain
Class E ............................................................................... (1,407) --
Class I ............................................................................... (59,070) (16,426)
----------- -----------
Net decrease in net assets from distributions ....................................... (73,324) (32,133)
----------- -----------
Share Transactions
Net increase (decrease) in net assets from share transactions ........................... 43,302 (53,634)
----------- -----------
Total net increase (decrease) in net assets ............................................... 280,538 40,944
Net Assets
Beginning of period ..................................................................... 1,013,679 972,735
----------- -----------
End of period (including accumulated distributions in excess of
net investment income of $4,911 and $4,172, respectively) ............................. $ 1,294,217 $ 1,013,679
=========== ===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
81 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 Operations
Net investment income (a) ..................................... .24
Net realized and unrealized gain (loss) ....................... 9.73
----------
Total income from operations ................................ 9.97
----------
Distributions
From net investment income .................................... (.38)
From net realized gain ........................................ (1.98)
----------
Total distributions ......................................... (2.36)
----------
Net Asset Value, End of Period .................................. $ 46.68
==========
Total Return (%)(b) ............................................. 25.87
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ...................... 30,541
Ratios to average net assets (%)(c):
Operating expenses .......................................... 1.27
Net investment income ....................................... .92
Portfolio turnover rate (%) ................................... 118.99
* For the period May 14, 1999 (commencement of sale) to December 31, 1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
International Fund 82
<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
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ......... $ 38.03 $ 34.60 $ 37.39 $ 36.26 $ 34.28
------------- ------------- ------------- ------------- -------------
Income From Operations
Net investment income (a) .................. .43 .52 .46 .44 .48
Net realized and unrealized gain (loss) .... 10.93 4.10 (.28) 2.41 3.16
------------- ------------- ------------- ------------- -------------
Total income from operations ............. 11.36 4.62 .18 2.85 3.64
------------- ------------- ------------- ------------- -------------
Distributions
From net investment income ................. (.48) (.59) (.55) (.35) (.72)
From net realized gain ..................... (2.24) (.60) (2.42) (1.37) (.94)
------------- ------------- ------------- ------------- -------------
Total distributions ...................... (2.72) (1.19) (2.97) (1.72) (1.66)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of Period ............... $ 46.67 $ 38.03 $ 34.60 $ 37.39 $ 36.26
============= ============= ============= ============= =============
Total Return (%)(b) .......................... 30.46 13.52 .58 7.98 10.71
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ... 1,263,676 1,013,679 972,735 944,380 796,777
Ratios to average net assets (%)(b):
Operating expenses, net .................. 1.00 .98 1.00 1.04 .88
Operating expenses, gross ................ 1.00 .98 1.00 1.05 .89
Net investment income .................... 1.07 1.38 1.14 1.20 1.41
Portfolio turnover rate (%) ................ 118.99 64.47 79.45 42.69 36.78
</TABLE>
(a) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) 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.
83 International Fund
<PAGE>
Emerging Markets Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: To provide maximum total return, primarily through capital
appreciation and by assuming a higher level of volatility than is ordinarily
expected from developed market international portfolios, by investing
principally in equity securities.
Invests in: Primarily emerging market equity securities.
Strategy: The Fund uses a multi-manager strategy intended to achieve higher
returns with moderate risk when compared to either single country or region
emerging markets investments. The Fund employed the investment management
services of five managers with four separate approaches to global emerging
markets investment.
[The following table was depicted as a mountain chart in the printed material.]
Growth of a $10,000 Investment
Yearly periods Emerging Extended IFC
ended Markets Barings Investible
December 31 Class S++ EM++++ Composite**
Dates
Inception* $10,000 $10,000 $10,000
1993 $14,163 $17,628 $18,040
1994 $13,356 $16,793 $15,876
1995 $12,260 $15,856 $14,536
1996 $13,783 $17,288 $15,903
1997 $13,289 $15,672 $13,566
1998 $8,625 $12,733 $10,572
1999 $14,344 $20,977 $17,871
- --------------------------------------------------------------------------------
Total $100,820 $127,047 $116,150
================================================================================
Emerging Markets Fund - Class S
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- --------- ---------
1 Year $14,903 49.03%
5 Years $10,740 1.44%ss.
Inception $14,344 5.35%ss.
Emerging Markets Fund - Class Ess.ss.
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- --------- ---------
1 Year $14,871 48.71%
5 Years $10,711 1.38%ss.
Inception $14,306 5.31%ss.
Emerging Markets Fund - Class Css.ss.ss.
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- --------- ---------
1 Year $14,791 47.91%
5 Years $10,654 1.28%ss.
Inception $14,230 5.23%ss.
IFC Investable Composite Index
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- --------- ---------
1 Year $16,711 67.11%
5 Years $11,131 2.17%ss.
Inception $17,671 8.58%ss.
Extended Barings Emerging Markets Index
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- --------- ---------
1 Year $16,474 64.74%
5 Years $12,492 4.55%ss.
Inception $20,977 11.31%ss.
85 Emerging Markets Fund
<PAGE>
Emerging Markets Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Performance Review
For the year ended December 31, 1999, the Emerging Markets Fund Class S, Class
E, and Class C shares reflected total returns of 49.03%, 48.71%, and 47.91%,
respectively, as compared to the IFC Investable Composite Index results of
67.11%. The Fund trailed the Index primarily due to poor country and security
selection as well as costs associated with changes to the investment managers.
Performance also lagged the Extended Barings Emerging Markets Index.
Portfolio Highlights
The year proved to be one of strong recovery for emerging markets globally.
Asian markets led the recovery early in the year, but were joined by Latin
American, European, Middle Eastern, and African (EMEA) markets as the year
progressed. As strong as the recovery was, emerging markets still ended the year
below their pre-Asian currency "meltdown" highs.
The Fund's return was impressive in absolute terms, but a disappointment
relative to the benchmark. A strong fourth quarter failed to compensate for weak
performance earlier in the year. Performance difficulties specific to the Fund's
investment managers led to corrective action. However, the laborious and costly
change of managers in a highly illiquid asset class also negatively impacted
results. Two of the three managers in the Fund at the start of the year were
replaced and four new managers were hired to improve the Fund's style
diversification and reflect the efforts of Russell's manager research process.
Top Ten Equity Holdings
(as a percent of Total Investments) December 31, 1999
Telefonos de Mexico SA Series L - ADR (Mexico) 3.4%
Yapi ve Kredi Bankasi AS (Turkey) 2.6
Samsung Electronics (South Korea) 2.6
Genesis India Investment Co. (India) 2.2
SK Telecomm Co., Ltd. (South Korea) 1.1
Taiwan Semiconductor Manufacturing Co., Ltd. - ADR (Taiwan) 1.1
Migros (Turkey) 1.0
Acer, Inc. - GDR (Taiwan) 1.0
Credit Bank (Regd)(Greece) 0.9
Infosys Technologies, Ltd. - ADR (India) 0.9
Portfolio Characteristics
December 31, 1999
Current P/E Ratio 18.57x
Portfolio Price/Book Ratio 2.17x
Market Capitalization - $ - Weighted Average 8.1 Bil
Number of Holdings 513
Money Managers Styles
Genesis Asset Managers Limited Global/ Market-Oriented
Foreign & Colonial Emerging Markets Limited Market-Oriented
Nicholas Applegate Capital Management Growth
Sanford C. Bernstein & Co., Inc. Value
Schroder Investment Management North America, Ltd. Market-Oriented
* Emerging Markets Fund Class S assumes initial investment on January 29,
1993. IFC Index and Barings Index assumes initial investment on February
1, 1993.
** International Finance Corporation (IFC) Investable Composite Index is a
market capitalization-weighted index of the performance of securities
listed on the stock exchange(s) of the countries included in the index,
calculated on a total-return basis. The investable index reflects the
accessibility of markets and individual stocks to foreign investors.
++ Prior to April 1, 1995, Fund performance results are reported gross of
investment management fees. For the period following April 1, 1995, Fund
performance results are reported net of investment management fees but
gross of any investment services fees. Information concerning these fees
can be obtained from the Fund's Advisor upon request.
++++ Extended Barings Emerging Markets Index is a market
capitalization-weighted index of companies' performance within 20
countries in Africa, Asia, Europe and Latin America.
ss. Annualized.
ss.ss. Emerging Markets Fund Class S performance has been linked with Class E to
provide historical perspective. For the period September 22, 1998
(commencement of sale) through the current period, Class E paid
shareholder servicing and Rule 12b-1 distribution fees. Total return
would have been lower had these fees been in effect during prior
reporting periods.
ss.ss.ss. Emerging Markets Fund Class S and Class E performance has been linked
with Class C to provide historical perspective. From January 27, 1999
(commencement of sale) through the current period, Class C paid
shareholder service and Rule 12b-1 distribution fees. Total return
would have been lower had these fees been in effect during prior
reporting periods.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Emerging Markets Fund 86
<PAGE>
Emerging Markets Fund
Statement of Net Assets
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ----------
Common Stocks - 87.9%
Argentina - 1.9%
Astra cia Argentina de Petro (a) 240,000 511
Banco de Galicia y Buenos Aires SA de CV
Class B - ADR 14,329 284
Banco Frances del Rio la Plata - ADR 14,500 343
Central Costanera SA Class B 187,100 425
Central Puerto SA Class B 120,000 194
Inversiones Y Representaciones SA Class B 99,137 321
Naviera Perez Companc Class B 277,031 1,419
Nobleza Piccardo SA 51,100 108
Perez Companc SA Class B - ADR 3,010 31
Quilmes Industrial (Regd)(a) 71,000 639
Siderar SA Series A 18,800 77
Siderca SAIC 250,000 525
Telecom Argentina SA Class B - ADR 20,700 709
Telefonica de Argentina Class B 340,000 1,044
Telefonica de Argentina SA Class B - ADR 26,100 806
Transportadora de Gas del Sur SA Class B 400,000 752
-------
8,188
-------
Australia - 0.6%
Lihir Gold, Ltd. (a) 1,083,000 789
Oil Search, Ltd. (Australia Regd)(a) 800,000 1,050
Orogen Minerals, Ltd. 800,000 946
-------
2,785
-------
Austria - 0.0%
Elektrim SA 20,250 201
-------
Brazil - 1.8%
Centrais Eletricas Brasileiras SA NPV 36,009,000 788
Companhia Cervejaria Brahma - ADR 21,900 307
Companhia de Tecidos Norte de Minas NPV
1999 Rights (a) 1,492,066 136
Companhia Energetica de Minas
Gerais SA - ADR 23,547 532
Companhia Siderurgica Nacional NPV 17,800,000 690
Companhia Siderurgica Nacional NPV - ADR 2,800 103
Companhia Vale do Rio Doce NPV 6,000 139
Embratel Participacoes SA (a) 31,214,000 522
Globo Cabo SA - ADR NPV 35,300 622
Light Servicos de Eletricidade SA NPV (a) 7,902,914 871
Petroleo Brasileiro Petrobras SA - ADR 26,700 685
Tele Centro Sul Participacoes SA NPV (a) 34,233,000 368
Tele Norte Leste Participacoes SA NPV 26,105,000 470
Tele Sudeste Celular Participacoes SA NPV 68,617,000 273
Telecomunicacoes Brasileiras SA NPV 3,620,000 309
Telesp Celular Participacoes SA NPV 34,060,000 322
Telesp Participacoes SA NPV 33,112,000 458
Ultrapar Participacoes SA - ADR NPV (a) 10,100 116
White Martins SA NPV 331,407 232
-------
7,943
-------
Chile - 3.5%
Antofagasta Holdings PLC 408,036 2,834
Banco de A. Edwards Series A NPV - ADR 9,944 165
Banco Santander Chile Series A - ADR 10,200 156
Banco Santiago - ADR 20,000 428
BBV Banco BHIF - ADR (a) 25,000 378
Chilectra SA NPV - ADR 3,000 60
Compania de Telecomunicaciones de Chile SA- ADR 41,769 762
Distribucion Y Servicio D&S SA - ADR 125,600 2,449
Embotelladora Andina SA - ADR Series A 62,000 1,104
Embotelladora Andina SA - ADR Series B 58,000 848
Embotelladora Arica SA -ADR (a) 79,300 793
Enersis SA - ADR 55,652 1,308
Gener SA - ADR 25,000 388
Laboratorio Chile SA - ADR 30,000 546
Maderas y Sinteticos SA - ADR 103,000 1,326
Quinenco SA 166,300 1,850
Sociedad Quimica Y Minera de Chile SA - ADR 3,750 118
-------
15,513
-------
China - 2.3%
Beijing Datang Power Generation Company, Ltd. 732,000 121
Beijing Enterprises Holdings, Ltd. 182,000 287
Beijing Yanhua Petrochemical Co., Ltd. Class H 950,000 110
China Merchants Holdings International Co. Ltd. 1,024,000 843
China Resources Enterprise, Ltd. 210,000 336
87 Emerging Markets Fund
<PAGE>
Emerging Markets Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ----------
China Southern Airlines (a) 1,060,000 232
China Steel Corp. - ADR (a) 25,000 365
China Telecom (Hong Kong), Ltd. (a) 358,000 2,234
China Telecom (Hong Kong), Ltd. - ADR (a) 8,500 1,093
Cosco Pacific, Ltd. 200,000 166
Guangdong Kelon Electrical Holdings Co., Ltd. 470,000 357
Huaneng Power International, Inc. Series N - ADR 136,500 1,442
Jiangsu Expressway Co., Ltd. Class H 4,590,000 750
Jilin Chemical Industrial Company, Ltd. Class H 1,800,000 139
New World China Land, Ltd. (a) 1,994,000 737
Shanghai Petrochemical Co., Ltd. Class H 260,000 41
Yanzhou Coal Mining Co., Ltd. Series H 1,740,000 481
Yizheng Chemical Fibre Class H (a) 1,985,000 556
-------
10,290
-------
Croatia - 0.3%
Pliva d.d. 11,600 148
Pliva d.d. - GDR 85,230 1,091
-------
1,239
-------
Czech Republic - 0.4%
Ceska Sporitelna AS (Regd) - GDR (a) 27,270 125
Ceske Energeticke Zavody AS (a) 33,000 82
Ceske Radiokomunikace AS - GDR (a) 13,000 468
Komercni Banka AS - ADR (a) 24,400 127
SPT Telecom AS (a) 8,280 134
Tabak AS 3,500 705
-------
1,641
-------
Ecuador - 0.0%
La Cemento Nacional - GDR (144A)(a) 700 34
La Cemento National - GDR (a) 3,700 177
-------
211
-------
Egypt - 1.6%
Al Ahram Beverage Co. SAE - GDR (144A) 21,130 412
Al-Ahram Beverages Co. S.A.E. - GDR (a) 83,200 1,622
Arabian International Construction (a) 3,750 14
Commercial International Bank 62,400 912
Commercial International Bank (Regd.) - GDR 4,000 57
Eastern Company for Tobacco & Cigarettes 3,300 87
Egypt International Pharmaceutical
Industries Co. 2,000 98
Egyptian Mobile Phone Network (a) 52,018 2,384
Madinet NASR for Housing & Development 2,950 29
Misr International Bank 7,400 151
Orascom Construction (a) 42,700 880
Oriental Weavers Co. 4,100 74
Suez Cement Co. (Regd) - GDR 5,889 97
-------
6,817
-------
Greece - 3.6%
Aluminum Co. of Greece SA 20,100 988
Attica Enterprises Holdings SA 6,175 119
Bank of Piraues 6,870 171
Commercial Bank of Greece 35,426 2,704
Credit Bank (Regd) 51,240 4,012
Hellenic Bottling Co. SA 15,837 364
Hellenic Telecommunication Organization SA - ADR 5,600 67
Hellenic Telecommunication Organization SA - GDR 142,139 3,366
Intracom SA 20,192 924
National Bank of Greece SA 19,159 1,412
Panafon Hellenic Telecom SA (a) 35,920 482
STET Hellas Telecommunications SA - ADR (a) 11,000 333
Titan Cement Co. (a) 15,836 944
-------
15,886
-------
Hong Kong - 0.6%
Chen Hsong Holdings, Ltd. 1,900,000 501
New World Infrastructure, Ltd. (a) 1,222,100 1,564
Pacific Century CyberWorks, Ltd. (a) 192,000 446
-------
2,511
-------
Hungary - 2.8%
BorsodChem - GDR 42,000 1,649
BorsodChem Rt. 12,000 492
Magyar Olaj Es Gas 5,200 108
Magyar Tavkozlesi Rt - ADR 67,550 2,432
Magyar Tavkozlesi Rt. (Regd) 255,476 1,790
Mol Magyar Olaj-Es Gazipari Rt. - GDR 101,900 2,089
Mol Magyar Olay-Es Gazipari - GDR 16,266 336
OTP Bank Rt. 14,160 829
Richter Gedeon, Ltd. - GDR 31,280 2,033
Emerging Markets Fund 88
<PAGE>
Emerging Markets Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ----------
Synergon Information Systems, Ltd. - GDR (a) 3,000 29
Tiszai Vegyi Kombinat Rt. 21,400 402
-------
12,189
-------
India - 5.8%
Bajaj Auto, Ltd. - GDR 52,820 489
BSES, Ltd. - GDR 27,000 342
BSES, Ltd. (a) 22,800 288
Genesis India Investment Co. (a) 710,000 9,450
Grasim Industries, Ltd. - GDS (a) 9,500 128
Hindalco Industries, Ltd. - GDR 11,600 270
ICICI, Ltd. - ADR (a) 62,900 918
Indo Gulf Fertilizers & Chemicals - GDR (a) 419,000 608
Infosys Technologies, Ltd. - ADR 11,700 3,767
ITC, Ltd. - GDR (a) 28,300 549
Larsen & Toubro, Ltd. - GDR 53,350 1,761
Mahanagar Telephone Nigam, Ltd. - GDR (a) 52,700 580
Mahindra & Mahindra , Ltd. - GDR (a) 35,700 384
Perusahaan Persero Telekom - ADR 83,528 919
Reliance Industries, Ltd. - GDR (a) 99,311 1,400
State Bank of India - GDR 25,600 305
Tata Engineering & Locomotive Co. - GDR (a) 104,400 548
Videsh Sanchar Nigam, Ltd. - GDR (a) 106,557 2,608
-------
25,314
-------
Indonesia - 1.7%
Gulf Indonesia Resources, Ltd. (a) 81,300 661
Indah Kiat Pulp & Paper (Alien Market)(a) 972,000 383
PT Astra International, Inc. (a) 564,000 303
PT Bank Internasional Indonesia (Alien Market)(a) 5,965,000 128
PT Bank Pan Indonesia Tbk (a) 1,364,000 132
PT Gudang Garam Tbk 211,000 568
PT Hanjaya Mandala Sampoerna Tbk (a) 245,000 623
PT Indofood Sukses Makmur Tbk (a) 414,000 518
PT Indosat (Persero) Tbk 144,000 321
PT Indosat (Persero) Tbk - ADR 21,900 474
PT Matahari Putra Prima Tbk (a) 8,800,000 1,480
PT Ramayana Lestari Sentosa 1,670,000 1,410
PT Telekomunikasi Indonesia Series B (a) 350,000 199
Semen Gresik 232,000 367
-------
7,567
-------
Israel - 2.7%
Bank Hapoalim, Ltd. 467,090 1,455
Bank Leumi Le-Israel 726,733 1,529
Bezeq Israeli Telecommunication Corp., Ltd. (a) 107,292 535
Blue Square Israel, Ltd. NPV - ADR 13,720 175
Clal Industries, Ltd. 24,400 230
Delta-Galil Industries, Ltd. 32,000 582
Discount Investment Corp. (Regd.) 6,328 321
ECI Telecom, Ltd. 3,460 109
ECtel, Ltd. (a) 7,600 138
Elbit Systems, Ltd. 13,243 207
Gilat Satellite Networks, Ltd. (a) 5,300 628
IDB Holding Corp., Ltd. 3,864 128
Israel Chemicals, Ltd. 161,724 178
Israel Discount Bank Series A (a) 300,000 373
Koor Industries, Ltd. 1,394 139
Koor Industries, Ltd. - ADR 25,000 500
Matav-Cable Systems Media, Ltd. 12,100 350
Nice Systems, Ltd. - ADR (a) 10,730 528
Orbotech, Ltd. NPV (a) 3,750 291
Orekit Communications, Ltd. - GDR (a) 3,800 130
Partner Communications Co., Ltd. - ADR (a) 26,400 683
Property & Building Corp., Ltd. 666 71
RADWARE, Ltd. (a) 7,800 330
Scitex Corp., Ltd. (a) 19,000 273
Tecnomatix Technologies, Ltd. (a) 41,500 1,172
Teva Pharmaceutical Industries, Ltd. - ADR 14,473 1,036
-------
12,091
-------
Jordan - 0.2%
Arab Bank Group 3,510 954
-------
Lebanon - 0.1%
Solidere - GDR (a) 70,000 515
-------
Luxembourg - 0.7%
Millicom International Cellular SA (a) 43,000 2,666
Ritek, Inc. - GDR (a) 17,690 198
-------
2,864
-------
89 Emerging Markets Fund
<PAGE>
Emerging Markets Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ----------
Malaysia - 3.7%
AMMB Holdings Berhad 220,000 527
Commerce Asset - Holding Berhad 482,000 1,237
Genting Berhad 346,000 1,229
Golden Hope Plantation 454,000 409
Malakoff Berhad 231,000 608
Malayan Banking Berhad 493,000 1,751
Malaysian International Shipping Corp.
Berhad (Alien Market) 175,000 288
Malaysian Pacific 210,000 1,354
O.Y.L. Industries Berhad 104,800 270
Oriental Holdings Berhad 407,000 889
Petronas Gas Berhad 329,000 771
Public Bank Berhad 311,000 272
Public Bank Berhad (Alien Market) 339,000 351
Resorts World Berhad 361,000 1,036
RHB Capital Berhad (a) 323,000 335
Rothmans of Pall Mall (Malaysia) Berhad 80,200 612
Sime Darby Berhad 679,000 861
Telekom Malaysia Berhad 350,000 1,354
Tenaga Nasional Berhad 604,000 1,558
United Engineers (Malaysia) Berhad (a) 286,000 455
YTL Corp. Berhad 66,000 105
YTL Corp. Berhad 2009 Warrants (a) 16,500 10
-------
16,282
-------
Mexico - 12.5%
Alfa SA de CV Class A NPV (a) 194,000 911
Apasco SA de CV NPV 28,000 174
Carso Global Telecom Series A1 NPV (a) 328,100 3,082
Cemex SA de CV 2002 Warrants (a) 35,000 20
Cemex SA de CV - ADR (a) 65,754 1,833
Cemex SA de CV NPV (a) 434,440 2,430
Cemex SA de CV NPV 2002 Warrants (a) 3,790 16
Cifra SA de CV Class C NPV (a) 452,700 862
Cifra SA de CV Series V NPV (a) 555,000 1,113
Compania Cervecerias Unidas SA - ADR 49,900 1,600
Controladora Comercial Mexicana SA de CV NPV 1,134,000 1,520
Corporacion Interamericana de
Entretenimiento SA Series B NPV (a) 280,300 1,120
Corporacion Interamericana de
Entretenimiento SA Series L NPV (a) 105,000 410
Cydsa SA Series A NPV 277,000 257
Desc SA de CV Series B NPV (a) 180,000 148
Desc SA de CV Series C - ADR (a) 81,000 1,357
Empaques Ponderosa (a) 327,500 131
Empresa Nacional de Electricidad SA - ADR 41,438 588
Fomento Economico Mexicano SA de CV 160,500 717
Fomento Economico Mexicano SA de CV
Series B - ADR 61,950 2,757
Grupo Bimbo SA de CV Series A NPV (a) 224,000 500
Grupo Carso Series A NPV (a) 79,500 396
Grupo Continental SA Series CP 149,000 217
Grupo Financiero Banamex Accival SA de CV
(Banacci) Series O (a) 396,483 1,590
Grupo Financiero Bancomer SA de CV NPV
Series O (a) 267,000 112
Grupo Financiero Banorte SA de CV NPV (a) 220,000 332
Grupo Financiero Inbursa SA de CV NPV
Class O (a) 96,000 393
Grupo Industrial Durango SA - ADR (a) 17,250 205
Grupo Industrial Saltillo SA de CV NPV 54,500 174
Grupo Mexico SA Series B NPV 232,700 1,153
Grupo Modelo SA de CV Series C NPV 212,000 582
Grupo Sanborns SA NPV Series B (a) 151,000 335
Grupo Television SA de CV - GDR (a) 42,000 2,867
Hylsamex SA de CV Series B NPV (a) 170,000 499
Kimberly-Clark, Mexico Class A NPV 840,500 3,282
Nuevo Grupo Iusacell SA de CV Series V - ADR (a) 65,000 971
Organizacion Soriana SA de CV Series B NPV (a) 104,000 477
Panamerican Beverages, Inc. Class A 112,000 2,303
Seguros Comercial America NPV Series B (a) 87,000 321
Telefonos de Mexico SA Series L - ADR 134,287 15,107
Tubos de Acero de Mexico SA 37,700 511
TV Azteca SA de CV - ADR (a) 177,100 1,593
-------
54,966
-------
Panama - 0.2%
Banco Latinoamericano de Exportaciones SA Class E 40,000 940
-------
Emerging Markets Fund 90
<PAGE>
Emerging Markets Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ----------
Peru - 0.9%
Compania de Minas Buenaventura Series B - ADR 38,700 622
Companiade Minas Buenaventura SA Series B 22,000 178
Credicorp, Ltd. 29,450 353
Enrique Ferreyros 236,970 128
Minas Buenaventura 5,600 45
Minsur SA 64,000 132
Southern Peru Copper Corp. 10,800 167
Telefonica Del Peru SA Class B - ADR 166,938 2,233
-------
3,858
-------
Philippines - 1.8%
Ayala Corp. (a) 203,000 59
Ayala Land, Inc. 395,013 103
Equitable PCI Bank 480,200 1,066
First Philippine Holdings Corp. 653,360 559
Manila Electric Co. Class B 875,200 2,497
Metropolitan Bank & Trust Co. 35,700 257
Philippine Long Distance Telephone Co. 6,100 155
Philippine Long Distance Telephone Co. - ADR 81,027 2,097
San Miguel Corp. Class B 67,500 95
Security Bank Corp. (a) 350,000 317
SM Prime Holdings 878,000 166
Universal Robina 2,000,000 358
-------
7,729
-------
Poland - 0.9%
Agora SA - GDR (a) 7,100 105
Bank Handlowy W. Warszawie SA - GDR (a) 27,355 410
BRE Bank SA 9,900 314
Elektrim Spolka Akcyjna SA (a) 44,100 437
KGHM Polska Miedz SA - GDR (a) 34,600 462
Orbis SA (a) 21,600 187
Polski Koncern Naftowy SA - GDR (a) 90,930 1,114
Softbank SA - GDR 8,480 288
Telekomunikacja Polska SA Class S - GDR 34,300 214
Telekomunikacja Polska SA Series A - GDR 29,710 195
WBK 27,662 188
-------
3,914
-------
Russia - 1.0%
Lukoil Oil Co. - ADR 26,930 1,066
OAO Gazprom - ADR (a) 6,000 50
Surgutneftegaz SP - ADR (a) 142,350 2,491
Unified Energy Systems - GDR 22,700 272
Vimpel-Communications - ADR (a) 15,950 713
-------
4,592
-------
Singapore - 0.4%
Asia Pulp & Paper Co, - ADR Ltd. (a) 79,000 622
Datacraft Asia, Ltd. (a) 122,000 1,013
1,635
South Africa - 7.0%
AECI, Ltd. 131,000 267
Alexander Forbes, Ltd. 482,000 1,288
Amalgamated Banks of South Africa 216,267 970
Amalgamated Beverage Industries, Ltd. 50,971 435
Anglo American Platinum Corp., Ltd. 22,300 678
Anglo American PLC (a) 22,100 1,422
AngloGold, Ltd. 21,210 1,091
Ashanti Goldfields, Ltd. - ADR 216,178 567
Barlow, Ltd. 68,737 495
DataTec, Ltd. (a) 37,000 653
De Beers Centenary Linked Units 40,154 1,168
Dimension Data Holdings, Ltd. (a) 293,857 1,843
Fedsure Holdings, Ltd. 32,900 267
FirstRand, Ltd. 577,600 826
Impala Platinum Holdings, Ltd. 12,900 522
Imperial Holdings, Ltd. (a) 40,666 445
Iscor, Ltd. (a) 74,960 284
Ixchange Technology Holdings, Ltd. (a) 68,500 289
JD Group, Ltd. 41,600 358
Liberty Life Association of Africa 48,886 564
Lonrho Africa PLC 437,204 219
Lonrho PLC 184,676 1,870
Metro Cash and Carry, Ltd. NPV 392,500 446
MIH, Ltd. NPV (a) 6,900 405
Nampak, Ltd. 90,000 271
Nedcor Investment Bank Holdings (a) 31,800 20
Nedcor, Ltd. 24,062 536
PepsiCo International, Inc. (a) 1,190 10
Profurn, Ltd. NPV 296,400 327
Real Africa Holdings, Ltd. (a) 38,400 54
Rembrandt Group, Ltd. 273,600 2,605
Sanlam, Ltd. (a) 940,100 1,314
Sappi, Ltd. 104,400 1,031
Sasol NPV 443,463 3,739
South African Breweries PLC (a) 229,920 2,326
Standard Bank Investment Corporation, Ltd. 85,060 352
91 Emerging Markets Fund
<PAGE>
Emerging Markets Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ----------
Tongaat-Hulett Group, Ltd. 103,000 869
Truworths International, Ltd. 552 1
Woolworths Holdings, Ltd. 892 1
-------
30,828
-------
South Korea - 12.4%
Dacom Corp. 2,400 1,236
Daewoo Securities (a) 14,934 169
Doosan Corp. (a) 40,172 1,038
Hanil Cement Manufacturing Co., Ltd. 20,430 363
Hankuk Glass Industries, Inc. 17,000 322
Hansol Paper Co. (a) 33,960 307
Hanvit Bank (a) 102,000 345
Honam Petrochemical Corp. 20,500 287
Housing & Commercial Bank, Korea - GDR 10,000 293
Housing & Commercial Bank, Korea (a) 45,790 1,452
Hyundai Electronics Industries Co. (a) 76,498 1,624
Hyundai Industrial Development & Construction 27,566 204
Hyundai Merchant Marine 41,164 269
Hyundai Motor Co., Ltd. (a) 62,530 991
Hyundai Motor Co., Ltd. - GDR (a) 31,234 326
Kookmin Bank 115,308 1,808
Korea Electric Power Corp. 65,818 2,040
Korea Electric Power Corp. - ADR 38,700 648
Korea Exchange Bank (a) 249,500 956
Korea Telecom Corp. 8,180 1,289
Korea Telecom Corp. - ADR (a) 41,790 3,124
LG Chemical, Ltd. 28,520 902
LG Electronics 26,790 1,109
Lotte Confectionery Co. 4,500 535
Medison Co. 16,400 239
Pohang Iron & Steel Co., Ltd. 19,451 2,141
Pohang Iron & Steel Co., Ltd. - ADR 26,600 931
S1 Corp. (a) 46,760 807
Samsung Corp. (a) 51,950 778
Samsung Display Devices Co. - GDR 52,250 523
Samsung Electronics 48,585 11,381
Samsung Electronics, Ltd. - GDS (a) 45,719 3,578
Samsung Fire & Marine Insurance (a) 5,600 179
Samsung Fire & Marine Insurance 2000 Rights (a) 1,145 9
Samsung Securities Co., Ltd. 21,078 639
Seoul City Gas Co., Ltd. 5,000 92
Shin Han Bank 137,000 1,484
Shinwon Corp. (a) 159,136 193
SK Corp. 27,362 829
SK Telecom Co., Ltd. - ADR 39,892 1,531
SK Telecomm Co., Ltd. 1,368 4,903
Ssangyong Oil Refining Co. 69,440 1,827
Tae Young Corp. 17,639 683
-------
54,384
-------
Sri Lanka - 0.1%
Ceylon Theatre 13,660 38
Development Finance Corp. of Ceylon 97,221 169
John Keells Holdings, Ltd. 52,242 148
-------
355
-------
Switzerland - 0.2%
UBS AG 2000 Warrants (a) 4,500 711
-------
711
-------
Taiwan - 6.3%
Accton Technology Corp. - GDR (a) 51,000 365
Acer, Inc. - GDR (144A) 39,700 556
Acer, Inc. - GDR (a) 317,282 4,442
Advanced Semiconductor Engineering, Inc. - GDR (a) 16,605 319
ASE Test, Ltd. (a) 39,800 940
Asia Cement Corp. - GDR (a) 96,461 931
Asustek Computer, Inc. - GDR (Regd) 83,840 1,136
Asustek Computer, Inc. 2000 Warrants (a) 47,000 539
Asustek Computer, Inc. - GDR 110 1
China Steel Corp. - GDS (a) 96,102 1,403
Evergreen Marine Corp. - GDR (a) 61,642 518
Far Eastern Textile, Ltd. - GDR (a) 54,000 1,284
First Bank 2000 Warrants (a) 180,000 226
Formosa Plastic Corp. 2000 Warrants (a) 115,700 230
Fubon Insurance Co., Ltd. - GDR 78,980 644
Hon Hai Precision Industry Co., Ltd. GDR (a) 124,340 2,403
Hua Nan Commercial Bank 2000 Warrants (a) 183,000 230
Powerchip Semiconductor Corp. - GDR (a) 7,000 93
Siliconware Precision Industries Co. - GDR (a) 98,158 1,384
Synnex Technology International Corp. 23,416 605
Synnex Technology International Corp.(Regd) - GDR 55,060 1,421
Taiwan Semiconductor Manufacturing Co.,
Ltd. 2000 Warrants (a) 234,146 1,531
Taiwan Semiconductor Manufacturing
Co., Ltd - ADR (a) 105,626 4,753
Emerging Markets Fund 92
<PAGE>
Emerging Markets Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ----------
Windbond Electronics Corp. - GDR (a) 64,300 1,473
Yageo Corp. - GDR (a) 63,517 374
-------
27,801
-------
Thailand - 1.5%
Advanced Information Services (Alien
Market)(a) 42,000 705
Bangkok Bank PLC (Alien Market)(a) 352,000 888
Bangkok Expressway PLC (Alien Market)(a) 288,000 138
BEC World PLC, Ltd. (Alien Market) 34,939 213
Delta Electronics (Thailand) PLC 50,000 595
Electricity Generating PLC (Alien Market) 61,000 76
Hana Microelectronics PLC (Alien Market)(a) 145,000 654
Jasmine International PLC (Alien Market)(a) 700,000 423
National Petrochemical PLC (Alien Market)(a) 410,000 446
PTT Exploration and Production PLC, Ltd.
(Alien Market)(a) 20,000 123
Siam Cement Co. (Alien Market)(a) 9,581 318
Siam City Cement PLC (Alien Market)(a) 45,000 241
TelecomAsia (Alien Market)(a) 240,000 312
Thai Farmers Bank (Alien Market)(a) 755,700 1,265
-------
6,397
-------
Turkey - 6.9%
Akansa Cimento AS 1,370,000 31
Akbank TAS 63,320,352 1,868
Arcelik AS (a) 13,923,920 911
EGE Biracilik Ve Malt Sanayii AS 16,750,000 1,282
Erciyas Biracilik ve Malt Sanayii AS (a) 3,500,000 168
Eregli Demir ve Celik Fabrikalari TAS (a) 8,000,000 332
Ford Otomotiv Sanayi AS (a) 21,546,000 953
Haci Omer Sabanci Holding AS 51,310,000 2,980
Haci Omer Sabanci Holding AS - ADR (a) 70,500 917
Hurriyet Gazetecilik ve Matbaacilik AS (a) 20,207,000 373
Koc Holding AS 5,239,390 966
Migros 7,068,800 4,561
Sasa Suni ve Sentetik Elyaf Sanayii
Anonim Sirketi 5,000,000 150
Tupras 1,491,350 168
Turkiye Garanti Bankasi AS (a) 81,442,800 1,231
Turkiye Is Bankasi 32,287,164 1,548
Vestel Elektronik Sanayi ve Ticaret AS (a) 941,900 226
Yapi ve Kredi Bankasi AS 369,106,168 11,397
-------
30,062
-------
United Kingdom - 0.8%
Billiton PLC 204,300 1,211
Genesis Smaller Companies Fund (a) 172,135 2,375
-------
3,586
-------
United States - 0.2%
Comverse Technology, Inc. (a) 4,900 709
-------
Venezuela - 0.4%
Companhia Anonima Nacional Telefonos de
Venezuela - ADR 44,946 1,107
Mavesa SA - ADR 151,875 465
Siderurgica Venezolana "Sivensa" S.A.C.A.
Class B - GDR 13,167 32
-------
1,604
-------
Zimbabwe - 0.1%
Delta Corp. 1,010,343 360
-------
Total Common Stocks
(cost $301,998) 385,432
-------
Preferred Stocks - 10.0%
Argentina - 0.3%
Quilmes Industrial Quinsa Societe - ADR 120,300 1,436
-------
Brazil - 9.6%
Aracruz Celulose SA NPV - ADR 35,870 942
Banco Bradesco SA NPV 135,183,000 1,060
Banco do Estado de Sao Paulo NPV (a) 26,849,000 951
Banco Itau SA NPV 31,214,180 2,678
Banco Votorantim SA NPV (a) 20,700,000 951
Brasmotor SA NPV 14,640,000 2,053
CIA Energetica De Minas Gerais 74,997,148 1,681
Companhia Brasileira de Distribuicao Grupo
Pao de Acucar - ADR 29,300 947
Companhia Energetica de Minas Gerais - ADR 25,356 573
Companhia Paranaense de Energia - Copel 157,282,000 1,524
Companhia Paranaense de Energia Copel
Class B - ADR 15,800 147
Companhia Siderurgica de Tubarao NPV (a) 31,000,000 506
93 Emerging Markets Fund
<PAGE>
Emerging Markets Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ----------
Companhia Vale Do Rio Doce Series A NPV 67,900 1,879
Companmia Cervejaria Brahma NPV 823,000 601
Coteminas (Cia Tec) NPV 6,075,105 555
Eletropaulo Metropolitana- Electricidade
de Sao Paulo SA NPV (a) 17,090,000 1,107
Embratel Participacoes SA - ADR 117,534 3,203
Embratel Participacoes SA NPV 12,591,500 324
Gerdau SA NPV 9,300,000 247
Itausa Investimentos Itau SA 848,000 878
Marcopolo SA NPV 521,000 1
Petroleo Brasileiro SA NPV 14,123,000 3,596
Tele Centro Sul Participacoes SA - ADR 12,700 1,153
Tele Centro Sul Participacoes SA NPV 59,380,300 1,084
Tele Norte Leste Participacoes SA - ADR 71,780 1,830
Tele Norte Leste Participacoes SA NPV 28,795,000 773
Telecomunicacoes Brasileiras SA NPV 4,109,000 540
Telecomunicacoes de Sao Paulo NPV (a) 114,198,586 2,687
Telemig Celular SA Class C NPV (a) 35,333 1
Telesp Celular Participacoes SA NPV 17,818,176 316
Telesp Celular SA Class B NPV 45,852,841 3,630
Telesp Participacoes SA - ADR 13,800 337
Telesp Participacoes SA NPV 30,231,000 733
Uniao de Bancos Brasileiros SA - (Units) 9,720,000 646
Uniao de Bancos Brasileiros SA - GDR 7,300 220
Usinas Siderurgicas de Minas Gerais SA NPV (a) 296,100 1,605
-------
41,959
-------
Russia - 0.1%
Lukoil Holding Oil Co. - ADR 57,300 530
-------
Thailand - 0.0%
Siam Commercial Bank 140,000 171
-------
Total Preferred Stocks
(cost $35,158) 44,096
-------
Principal Market
Amount Value
(000) (000)
$ $
--------- ----------
Long-Term Investments - 0.0%
Indonesia - 0.0%
Modernland Realty
6.000% due 01/04/03 (conv.)(c) IDR 30 0
-------
Total Long-Term Investments (cost $32) 0
-------
Short-Term Investments - 1.9%
United States - 1.9%
Frank Russell Investment Company Money
Market Fund, due on demand (b) 8,311 8,311
-------
Total Short-Term Investments (cost $8,311) 8,311
-------
Total Investments - 99.8%
(identified cost $345,499) 437,839
Other Assets and Liabilities,
Net - 0.2% 900
-------
Net Assets - 100.0% 438,739
=======
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
(c) This security has been valued by the Security Valuation Committee of the
Board of Trustees. It is possible that the estimated value may differ
significantly from the amount that might ultimately be realized.
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:
BRL - Brazilian real
IDR - Indonesian rupiah
MXN - Mexican peso
SGD - Singapore dollar
USD - U.S. dollar
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 94
<PAGE>
Emerging Markets Fund
Statement of Net Assets, continued
December 31, 1999
Market
% of Value
Industry Diversification Net (000)
(Unaudited) Assets $
- ----------------------------------- --------- ----------
Auto & Transportation 1.7% 7,511
Consumer Discretionary 8.5 37,178
Consumer Staples 7.1 31,098
Financial Services 20.2 88,744
Health Care 0.9 4,155
Integrated Oils 2.4 10,245
Material & Processing 12.6 55,273
Miscellaneous 3.2 14,152
Other Energy 3.3 14,602
Producer Durables 5.8 25,239
Technology 12.1 53,115
Utilities 20.1 88,216
Short-Term Investments 1.9 8,311
Long-Term Investments 0.0 --
----- -------
Total Investments 99.8 437,839
Other Assets and Liabilities, Net 0.2 900
----- -------
Net Assets 100.0% 438,739
===== =======
Market
% of Value
Net (000)
Geographic Diversification (Unaudited) Assets $
- -------------------------------------- --------- ----------
Pacific Basin 31.4% 137,552
Latin America 31.1 136,619
Middle East 17.2 75,660
Europe 9.8 42,860
Africa 6.3 27,462
Other 2.1 9,375
Short-Term Investments 1.9 8,311
Long-Term Investments 0.0 --
----- -------
Total Investments 99.8 437,839
Other Assets and Liabilities, Net 0.2 900
----- -------
Net Assets 100.0% 438,739
===== =======
Foreign Currency Exchange Spot Contracts
Sold Contracts to Unrealized
Deliver Bought In Exchange Appreciation
Out For Settlement (Depreciation)
(000) (000) Date (000)
- ------------------ ------------------ ---------- --------------
BRL 51 USD 28 01/03/00 $ --
MXN 258 USD 27 01/03/00 $ --
SGD 2 USD 1 01/03/00 $ --
--------------
$ --
==============
See accompanying notes which are an integral part of the financial statements.
95 Emerging Markets Fund.
<PAGE>
Emerging Markets Fund
Statements of Assets and Liabilities
Amounts in thousands (except per share amounts)
<TABLE>
<CAPTION>
December 31, 1999
<S> <C> <C>
Assets
Investments at market (identified cost $345,499) .......................................................... $ 437,839
Foreign currency holdings (identified cost $708) .......................................................... 708
Receivables:
Dividends .............................................................................................. 636
Investments sold ....................................................................................... 591
Fund shares sold ....................................................................................... 1,005
---------
Total assets ......................................................................................... 440,779
Liabilities
Payables:
Investments purchased ................................................................... $ 229
Fund shares redeemed .................................................................... 1,346
Accrued fees to affiliates .............................................................. 261
Other accrued expenses .................................................................. 204
---------
Total liabilities .................................................................................... 2,040
---------
Net Assets ................................................................................................ $ 438,739
=========
Net Assets Consist of:
Accumulated distributions in excess of net investment income .............................................. $ (2,814)
Accumulated net realized gain (loss) ...................................................................... (74,121)
Unrealized appreciation (depreciation) on:
Investments ............................................................................................ 92,340
Foreign currency-related transactions .................................................................. (11)
Shares of beneficial interest ............................................................................. 350
Additional paid-in capital ................................................................................ 422,995
---------
Net Assets ................................................................................................ $ 438,739
=========
Net Asset Value, offering and redemption price per share:
Class C ($1,630,585 divided by 130,718 shares of $.01 par value
shares of beneficial interest outstanding) ........................................................... $ 12.47
=========
Class E ($6,314,481 divided by 504,665 shares of $.01 par value
shares of beneficial interest outstanding) ........................................................... $ 12.51
=========
Class S ($430,794,084 divided by 34,407,709 shares of $.01 par value
shares of beneficial interest outstanding) ........................................................... $ 12.52
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 96
<PAGE>
Emerging Markets Fund
Statements of Operations
Amounts in thousands
<TABLE>
<CAPTION>
Year Ended December 31, 1999
<S> <C> <C>
Investment Income
Dividends ..................................................................................... $ 7,347
Dividends from Money Market Fund .............................................................. 894
Less foreign taxes withheld ................................................................... (607)
---------
Total investment income ..................................................................... 7,634
Expenses
Advisory fees ..................................................................... $ 4,046
Administrative fees ............................................................... 177
Custodian fees .................................................................... 1,137
Distribution fees - Class C ....................................................... 4
Transfer agent fees ............................................................... 1,161
Professional fees ................................................................. 48
Registration fees ................................................................. 95
Shareholder servicing fees - Class C .............................................. 1
Shareholder servicing fees - Class E .............................................. 8
Trustees' fees .................................................................... 6
Miscellaneous ..................................................................... 72
---------
Total expenses .............................................................................. 6,755
---------
Net investment income ............................................................................ 879
---------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ....................................................................... (2,140)
Foreign currency-related transactions ............................................. (2,085) (4,225)
---------
Net change in unrealized appreciation (depreciation) on:
Investments ....................................................................... 153,342
Foreign currency-related transactions ............................................. (7) 153,335
--------- ---------
Net realized and unrealized gain (loss) .......................................................... 149,110
---------
Net increase (decrease) in net assets from operations ............................................ $ 149,989
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
97 Emerging Markets Fund
<PAGE>
Emerging Markets Fund
Statements of Changes in Net Assets
Amounts in thousands
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
--------- ---------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ................................................................. $ 879 $ 4,050
Net realized gain (loss) .............................................................. (4,225) (57,573)
Net change in unrealized appreciation (depreciation) .................................. 153,335 (57,066)
--------- ---------
Net increase (decrease) in net assets from operations ............................... 149,989 (110,589)
--------- ---------
Distributions
From net investment income
Class E ............................................................................. (16) --
Class S ............................................................................. (3,161) (2,472)
--------- ---------
Net decrease in net assets from distributions .................................... (3,177) (2,472)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions ......................... (2,461) 74,397
--------- ---------
Total net increase (decrease) in net assets .............................................. 144,351 (38,664)
Net Assets
Beginning of period ................................................................... 294,388 333,052
--------- ---------
End of period (including accumulated distribution in excess of
net investment income of $2,814 and undistributed
net investment income of $495, respectively) ........................................ $ 438,739 $ 294,388
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 98
<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 Operations
Net investment income (loss)(a) ............................... (.12)
Net realized and unrealized gain (loss) ....................... 4.57
---------
Total income from operations ................................ 4.45
---------
Distributions
From net investment income .................................... (.05)
---------
Net Asset Value, End of Period ................................... $ 12.47
=========
Total Return (%)(b) .............................................. 55.43
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ...................... 1,631
Ratios to average net assets (%)(c):
Operating expenses .......................................... 2.91
Net investment income (loss) ................................ (1.23)
Portfolio turnover rate (%) ................................... 94.85
* For the period January 27, 1999 (commencement of sale) to December 31,
1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
99 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.
Years Ended December 31,
------------------------
1999 1998*
--------- ---------
Net Asset Value, Beginning of Period ................. $ 8.48 $ 7.37
--------- ---------
Income From Operations
Net investment income (loss)(a) ................... (.04) (.02)
Net realized and unrealized gain (loss) ........... 4.14 1.13
--------- ---------
Total income from operations .................... 4.10 1.11
--------- ---------
Distributions
From net investment income ........................ (.07) --
--------- ---------
Net Asset Value, End of Period ....................... $ 12.51 $ 8.48
========= =========
Total Return (%)(b) .................................. 48.71 15.06
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) .......... 6,314 39
Ratios to average net assets (%)(c)(d):
Operating expenses .............................. 2.17 --
Net investment income (loss) .................... (.40) --
Portfolio turnover rate (%) ....................... 94.85 59.35
* For the period September 22, 1998 (commencement of sale) to December 31,
1998.
(a) Average month-end shares outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
(d) The ratios for the period ended December 31, 1998 are not meaningful due
to the Class's short period of operation.
Emerging Markets Fund 100
<PAGE>
Emerging Markets 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
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 8.48 $ 11.79 $ 12.35 $ 11.16 $ 12.25
-------- -------- -------- -------- --------
Income From Operations
Net investment income (a) .............. .03 .12 .14 .10 .11
Net realized and unrealized gain (loss) 4.10 (3.35) (.56) 1.26 (1.12)
-------- -------- -------- -------- --------
Total income from operations ......... 4.13 (3.23) (.42) 1.36 (1.01)
-------- -------- -------- -------- --------
Distributions
From net investment income ............. (.09) (.08) (.14) (.17) (.05)
From net realized gain ................. -- -- -- -- (.03)
-------- -------- -------- -------- --------
Total distributions .................. (.09) (.08) (.14) (.17) (.08)
-------- -------- -------- -------- --------
Net Asset Value, End of Period ............ $ 12.52 $ 8.48 $ 11.79 $ 12.35 $ 11.16
======== ======== ======== ======== ========
Total Return (%)(b) ....................... 49.03 (27.57) (3.45) 12.26 (8.21)
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 430,794 294,349 333,052 271,490 172,673
Ratios to average net assets (%)(b):
Operating expenses, net .............. 1.91 1.75 1.64 1.71 1.75
Operating expenses, gross ............ 1.91 1.75 1.64 1.72 1.80
Net investment income ................ .26 1.20 .87 .77 .88
Portfolio turnover rate (%) ............ 94.85 59.35 50.60 34.62 71.16
</TABLE>
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) 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.
101 Emerging Markets Fund
<PAGE>
Real Estate Securities Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: To generate a high level of total return through above-average
current income, while maintaining the potential for capital appreciation.
Invests in: Equity securities of companies in the real estate industry.
Strategy: The Fund uses a multi-manager strategy intended to achieve higher
returns with moderate risk. The Fund employed the investment management services
of two managers with distinct approaches to investing in real estate equity
securities.
[The following table was depicted as a mountain chart in the printed material.]
Growth of a $10,000 Investment
Real Estate Securities NAREIT Equity Lipper(R)
Dates - Class S REIT ** Real Estate ++
Yearly periods
ended
December 31
Inception* $10,000 $10,000 $10,000
1990 $8,407 $8,466 $8,351
1991 $11,525 $11,474 $11,053
1992 $13,517 $13,141 $12,478
1993 $15,872 $15,726 $15,305
1994 $17,021 $16,224 $15,078
1995 $18,872 $18,699 $17,054
1996 $25,819 $25,292 $22,344
1997 $30,724 $30,424 $27,332
1998 $25,824 $25,096 $23,160
1999 $25,965 $23,937 $22,330
- --------------------------------------------------------------------------------
Total $203,546 $198,460 $184,554
================================================================================
Real Estate Securities Fund - Class S
Periods Ended
12/31/99 Growth of $10,000 Total Return
- ------------------ --------------------- ----------------------
1 Year $10,055 0.55%
5 Years $15,255 8.81%ss.
Inception* $25,965 10.01%ss.
Real Estate Securities Fund - Class E++++
Periods Ended
12/31/99 Growth of $10,000 Total Return
- ------------------ --------------------- ----------------------
1 Year $10,030 0.30%
5 Years $15,037 8.50%ss.
Inception* $25,595 9.85%ss.
Real Estate Securities Fund - Class C++++++
Periods Ended
12/31/99 Growth of $10,000 Total Return
- ------------------ --------------------- ----------------------
1 Year $ 9,961 (0.39)%
5 Years $14,936 8.35%ss.
Inception* $25,422 9.77%ss.
NAREIT Equity REIT Index
Periods Ended
12/31/99 Growth of $10,000 Total Return
- ------------------ --------------------- ----------------------
1 Year $ 9,538 (4.62)%
5 Years $14,754 8.09%ss.
Inception* $23,937 9.12%ss.
Lipper(R) Real Estate Benchmark
Periods Ended
12/31/99 Growth of $10,000 Total Return
- ------------------ --------------------- ----------------------
1 Year $ 9,646 (3.54)%
5 Years $14,810 8.17%ss.
Inception* $22,330 8.37%ss.
103 Real Estate Securities Fund
<PAGE>
Real Estate Securities Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Performance Review
For the year ended December 31, 1999, the Real Estate Securities Fund Class S
and Class E shares gained 0.55% and 0.30%, respectively, while Class C shares
fell 0.39%, as compared to the NAREIT Equity REIT Index, which lost 4.62%. The
Fund's margin of performance over the benchmark was primarily due to effective
security selection.
Portfolio Highlights
REITs suffered through one of their worst years in history, saved only by a
December rally that cut losses for the year. REITs suffered from a number of
negative trends, including weakness in small cap value equity investments. Also
impacting the REIT market's performance was concern that late economic cycle
prospects would impair the ability of the underlying properties to generate
internal growth through increased rentals and higher occupancy rates. External
growth opportunities were also questioned, given unattractive capital raising
prospects as depressed prices discouraged equity issuance and rising interest
rates and credit spreads limited debt financing.
The Real Estate Securities Fund fared better during the year. Effective security
selection by both managers helped the Fund limit downside, with Class S results
517 basis points ahead of the benchmark. Both managers gravitated towards higher
quality issues during the year as firms with access to capital were viewed as
having a decided advantage in sustaining business momentum.
Top Ten Equity Holdings
(as a percent of Total Investments) December 31, 1999
Vornado Realty Trust 5.7%
Apartment Investment & Management Co. Class A 5.1
Avalonbay Communities, Inc. 4.9
Equity Office Properties Trust 4.7
Spieker Properties, Inc. 4.3
Starwood Hotels & Resorts Worldwide, Inc. 4.0
Mack-Cali Realty Corp. 3.6
Reckson Services Industries, Inc. 3.3
Simon Property Group, Inc. 3.1
ProLogis Trust 3.1
Portfolio Characteristics
December 31, 1999
Current P/E Ratio 15.9x
Portfolio Price/Book Ratio 1.32x
Market Capitalization - $- Weighted Average 2.28 Bil
Number of Holdings 65
Money Managers
AEW Capital Management, L.P.
Cohen & Steers Capital Management, Inc.
* Real Estate Securities Fund Class S assumes initial investment on July
28, 1989. NAREIT Index comparison for the initial investment began
August 1, 1989. Lipper index comparison for the initial investment
began October 1, 1989.
** NAREIT Equity REIT Index is an index composed of all the data based on
the last closing price of the month for all tax-qualified REITs listed
on the New York Stock Exchange, American Stock Exchange, and the NASDAQ
National Market System. The data is market value-weighted. The
total-return calculation is based upon whether it is 1-month, 3-months
or 12-months. Only those REITs listed for the entire period are used in
the total return calculation.
++ Lipper(R) Real Estate Benchmark is the average total return for the
universe of funds within the Real Estate Funds investment objective.
The total return for the funds reflects adjustments for income
dividends and capital gains distributions reinvested as of the
ex-dividend dates.
++++ Real Estate Securities Fund Class S performance has been linked with
Class E to provide historical perspective. For the period, November 4,
1996 (commencement of sale) through May 15, 1998, Class E paid
shareholder service and Rule 12b-1 distribution fees. From May 16, 1998
through the current period, Class E paid only shareholder service fees.
Total return would have been lower had these fees been in effect during
prior reporting periods.
++++++ Real Estate Securities Fund Class S and Class E performance has been
linked with Class C to provide historical perspective. From January 27,
1999 (commencement of sale) through the current period, Class C paid
shareholder service and Rule 12b-1 distribution fees. Total return
would have been lower had these fees been in effect during prior
reporting periods.
ss. Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Real Estate Securities Fund 104
<PAGE>
Real Estate Securities Fund
Statement of Net Assets
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ---------
Common Stocks (b) - 95.0%
Apartment - 20.4%
Apartment Investment & Management Co. Class A 767,315 30,549
Archstone Communities Trust 398,724 8,174
Avalonbay Communities, Inc. 841,930 28,889
Brookfield Properties Corp. 323,800 3,400
Camden Property Trust 219,229 6,001
Equity Residential Properties Trust 322,588 13,770
Essex Property Trust, Inc. 216,000 7,344
Post Properties, Inc. 237,146 9,071
Smith (Charles E.) Residential Realty, Inc. 279,950 9,903
Summit Properties, Inc. 159,000 2,842
Sun Communities, Inc. 61,700 1,986
---------
121,929
---------
Health Care - 4.7%
Health Care Property Investors, Inc. 446,600 10,663
Manor Care, Inc. (a) 483,000 7,728
Nationwide Health Properties, Inc. 715,800 9,842
---------
28,233
---------
Hotels/Leisure - 5.9%
Golf Trust of America, Inc. 51,700 876
Hospitality Properties Trust 219,000 4,175
Marriot International, Inc. Class A 157,700 4,977
Starwood Hotels & Resorts Worldwide, Inc. 1,023,500 24,052
Wyndham International, Inc. Class A (a) 446,500 1,312
---------
35,392
---------
Leasing - 0.6%
Entertainment Properties Trust 98,700 1,302
Franchise Finance Corp. of America 85,700 2,051
Starwood Financial, Inc. 392 7
---------
3,360
---------
Office/Industrial - 40.0%
AMB Property Corp. 853,300 17,013
Arden Realty Group, Inc. 894,550 17,947
Boston Properties, Inc. 234,850 7,310
Cabot Industrial Trust 97,700 1,795
CarrAmerica Realty Corp. 198,800 4,200
Cornerstone Properties, Inc. 335,100 4,901
Cousins Properties, Inc. 194,500 6,601
Crescent Operating, Inc. (a) 47,900 126
Crescent Real Estate Equities, Inc. 188,200 3,458
Duke Realty Investments, Inc. 320,919 6,258
Equity Office Properties Trust 1,136,148 27,978
First Industrial Realty Trust, Inc. 274,900 7,543
Highwoods Properties, Inc. 491,800 11,434
Kilroy Realty Corp. 172,100 3,786
Liberty Property Trust 183,900 4,460
Mack-Cali Realty Corp. 816,200 21,272
Prentiss Properties Trust 175,500 3,686
ProLogis Trust 946,218 18,215
PS Business Parks, Inc. 235,800 5,364
Reckson Associates Realty Corp. 500,400 10,258
Reckson Services Industries, Inc. (a) 311,500 19,430
SL Green Realty Corp. 333,600 7,256
Spieker Properties, Inc. 696,700 25,385
Trizec Hahn Corp. 230,300 3,885
---------
239,561
---------
Outlet Centers - 0.4%
Prime Retail, Inc. 212,800 1,197
Tanger Factory Outlet Centers, Inc. 47,000 975
---------
2,172
---------
Regional Malls - 9.5%
General Growth Properties, Inc. 455,500 12,754
Macerich Co. (The) 511,100 10,637
Rouse Co. (The) 390,900 8,307
Simon Property Group, Inc. 801,350 18,381
Taubman Centers, Inc. 376,200 4,044
Urban Shopping Centers, Inc. 92,500 2,509
---------
56,632
---------
Self Storage - 3.3%
Public Storage, Inc. 765,056 17,357
Shurgard Storage Centers, Inc. Class A 117,800 2,732
---------
20,089
---------
Shopping Center - 10.2%
Bradley Real Estate, Inc. 219,300 3,824
Developers Diversified Realty Corp. 273,800 3,525
Glimcher Realty Trust 155,100 1,997
JDN Realty Corp. 42,950 693
Kimco Realty Corp. 361,300 12,239
Philips International Realty Corp. 110,800 1,821
Regency Realty Corp. 148,200 2,963
Vornado Realty Trust 1,040,000 33,800
---------
60,862
---------
Total Common Stocks
(cost $590,650) 568,230
---------
105 Real Estate Securities Fund
<PAGE>
Real Estate Securities Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Short-Term Investments - 4.3%
Frank Russell Investment Company
Money Market Fund, due on demand (c) 25,874 25,874
---------
Total Short-Term Investments
(cost $25,874) 25,874
---------
Total Investments - 99.3%
(identified cost $616,524) 594,104
Other Assets and Liabilities,
Net - 0.7% 4,101
---------
Net Assets - 100.0% 598,205
=========
(a) Nonincome-producing security.
(b) All common stocks held are Real Estate Investment Trusts (REIT) with the
exception of the following:
Brookfield Properties Corp.
Crescent Operating, Inc.
Manor Care, Inc.
Marriot International, Inc.
Reckson Services Industries, Inc.
Starwood Hotels & Resorts Worldwide, Inc.
Trizec Hahn Corp.
(c) At amortized cost, which approximates market.
See accompanying notes which are an integral part of the financial statements.
Real Estate Securities Fund 106
<PAGE>
Real Estate Securities Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amounts)
<TABLE>
<CAPTION>
December 31, 1999
<S> <C> <C>
Assets
Investments at market (identified cost $616,524) ................................................................... $ 594,104
Receivables:
Dividends ....................................................................................................... 4,605
Investments sold ................................................................................................ 301
Fund shares sold ................................................................................................ 1,854
---------
Total assets .................................................................................................. 600,864
Liabilities
Payables:
Investments purchased ................................................................................ $ 455
Fund shares redeemed ................................................................................. 1,855
Accrued fees to affiliates ........................................................................... 259
Other accrued expenses ............................................................................... 90
---------
Total liabilities ............................................................................................. 2,659
---------
Net Assets ......................................................................................................... $ 598,205
=========
Net Assets Consist of:
Accumulated distributions in excess of net investment income ....................................................... $ (6,282)
Accumulated net realized gain (loss) ............................................................................... (24,722)
Unrealized appreciation (depreciation) on:
Investments ..................................................................................................... (22,420)
Shares of beneficial interest ...................................................................................... 262
Additional paid-in capital ......................................................................................... 651,367
---------
Net Assets ......................................................................................................... $ 598,205
=========
Net Asset Value, offering and redemption price per share:
Class C ($1,771,086 divided by 78,049 shares of $.01 par value
shares of beneficial interest outstanding) .................................................................... $ 22.69
=========
Class E ($7,133,784 divided by 313,490 shares of $.01 par value
shares of beneficial interest outstanding) .................................................................... $ 22.76
=========
Class S ($589,299,947 divided by 25,782,227 shares of $.01 par value
shares of beneficial interest outstanding) .................................................................... $ 22.86
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
107 Real Estate Securities Fund
<PAGE>
Real Estate Securities Fund
Statement of Operations
Amounts in thousands
<TABLE>
<CAPTION>
Year Ended December 31, 1999
<S> <C> <C>
Investment Income
Dividends ...................................................................................... $ 38,576
Dividends from Money Market Fund ............................................................... 1,751
Interest ....................................................................................... 2
--------
Total investment income ...................................................................... 40,329
Expenses
Advisory fees ....................................................................... $ 4,886
Administrative fees ................................................................. 308
Custodian fees ...................................................................... 250
Distribution fees - Class C ......................................................... 6
Transfer agent fees ................................................................. 1,339
Professional fees ................................................................... 28
Registration fees ................................................................... 123
Shareholder servicing fees - Class C ................................................ 2
Shareholder servicing fees - Class E ................................................ 11
Trustees' fees ...................................................................... 7
Miscellaneous ....................................................................... 71
--------
Total expenses .................................................................... 7,031
--------
Net investment income ............................................................................. 33,298
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on investments ........................................................... (22,242)
Net change in unrealized appreciation (depreciation) on investments ............................... (10,653)
--------
Net realized and unrealized gain (loss) ........................................................... (32,895)
--------
Net increase (decrease) in net assets from operations ............................................. $ 403
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Real Estate Securities Fund 108
<PAGE>
Real Estate Securities Fund
Statement of Changes in Net Assets
Amounts in thousands
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
--------- ---------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ............................................ $ 33,298 $ 30,253
Net realized gain (loss) ......................................... (22,242) (1,281)
Net change in unrealized appreciation (depreciation) ............. (10,653) (137,901)
--------- ---------
Net increase (decrease) in net assets from operations .......... 403 (108,929)
--------- ---------
Distributions
From net investment income
Class C ........................................................ (67) --
Class E ........................................................ (358) (26)
Class S ........................................................ (42,467) (26,915)
From net realized gain
Class E ........................................................ -- (7)
Class S ........................................................ -- (9,488)
--------- ---------
Net decrease in net assets from distributions ............... (42,892) (36,436)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions .... 63,525 106,663
--------- ---------
Total net increase (decrease) in net assets ......................... 21,036 (38,702)
Net Assets
Beginning of period .............................................. 577,169 615,871
--------- ---------
End of period (including accumulated distributions in excess of
net investment income of $6,282 and undistributed net investment
income of $3,312, respectively ................................. $ 598,205 $ 577,169
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
109 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 Operations
Net investment income (a) ..................................... 1.08
Net realized and unrealized gain (loss) ....................... (1.06)
---------
Total income from operations ................................ .02
---------
Distributions
From net investment income .................................... (1.46)
---------
Net Asset Value, End of Period ................................... $ 22.69
=========
Total Return (%)(b) .............................................. .19
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ...................... 1,771
Ratios to average net assets (%)(c):
Operating expenses .......................................... 2.14
Net investment income ....................................... 5.12
Portfolio turnover rate (%) ................................... 42.69
* For the period January 27, 1999 (commencement of sale) to December 31,
1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
Real Estate Securities Fund 110
<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 Operations
Net investment income (a) .............. 1.28 1.26 1.14 .24
Net realized and unrealized gain (loss) (1.24) (6.12) 3.95 3.85
--------- --------- --------- ---------
Total income from operations ......... .04 (4.86) 5.09 4.09
--------- --------- --------- ---------
Distributions
From net investment income ............. (1.55) (1.43) (1.04) (.32)
From net realized gain ................. -- (.46) (2.21) (1.26)
--------- --------- --------- ---------
Total distributions .................. (1.55) (1.89) (3.25) (1.58)
--------- --------- --------- ---------
Net Asset Value, End of Period ............ $ 22.76 $ 24.27 $ 31.02 $ 29.18
========= ========= ========= =========
Total Return (%)(b) ....................... .30 (16.25) 18.20 15.75
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 7,134 843 388 101
Ratios to average net assets (%)(c):
Operating expenses ................... 1.39 1.47 1.71 1.77
Net investment income ................ 5.42 4.90 3.94 5.31
Portfolio turnover rate (%) ............ 42.69 42.58 49.40 51.75
</TABLE>
* For the period November 4, 1996 (commencement of sale) to December 31,
1996.
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are not annualized.
111 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
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 24.44 $ 30.86 $ 29.19 $ 23.51 $ 22.53
-------- -------- -------- -------- --------
Income From Operations
Net investment income (a) .............. 1.30 1.34 1.36 1.39 1.32
Net realized and unrealized gain (loss) (1.20) (6.13) 3.93 6.89 1.03
-------- -------- -------- -------- --------
Total income from operations ......... .10 (4.79) 5.29 8.28 2.35
-------- -------- -------- -------- --------
Distributions
From net investment income ............. (1.68) (1.17) (1.41) (1.34) (1.35)
From net realized gain ................. -- (.46) (2.21) (1.26) (.02)
-------- -------- -------- -------- --------
Total distributions .................. (1.68) (1.63) (3.62) (2.60) (1.37)
-------- -------- -------- -------- --------
Net Asset Value, End of Period ............ $ 22.86 $ 24.44 $ 30.86 $ 29.19 $ 23.51
======== ======== ======== ======== ========
Total Return (%) .......................... .55 (15.94) 18.99 36.81 10.87
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 589,300 576,326 615,483 445,619 290,990
Ratios to average net assets (%):
Operating expenses ................... 1.14 1.05 1.02 1.04 1.04
Net investment income ................ 5.41 4.93 4.57 5.64 6.10
Portfolio turnover rate (%) ............ 42.69 42.58 49.40 51.75 23.49
</TABLE>
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
Real Estate Securities Fund 112
<PAGE>
Short Term Bond Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: The preservation of capital and the generation of current income
consistent with the preservation of capital by investing primarily in
fixed-income securities with low-volatility characteristics.
Invests in: Fixed-income securities with low-volatility characteristics.
Strategy: The Fund uses a multi-style, multi-manager strategy intended to
achieve higher returns with moderate risk relative to other short-term bond
investments. The Fund employed the investment management services of three
managers using three approaches to investment in short-term fixed income
securities.
[The following table was depicted as a mountain chart in the printed material.]
Growth of a $10,000 Investment
Short Term Bond Lipper(R) Short
Dates - Class S ++ ML 1-2.99 ** 1-5 Yr ++++
Yearly periods
ended
December 31
Inception* $10,000 $10,000 $10,000
1990 $10,971 $10,972 $10,808
1991 $12,321 $12,254 $12,093
1992 $12,659 $13,026 $12,782
1993 $13,543 $13,731 $13,569
1994 $13,653 $13,809 $13,519
1995 $15,011 $15,328 $14,972
1996 $15,726 $16,091 $15,639
1997 $16,673 $17,162 $16,595
1998 $17,687 $18,362 $17,544
1999 $18,222 $18,925 $18,062
- --------------------------------------------------------------------------------
Total $156,466 $159,659 $155,584
================================================================================
Short Term Bond Fund - Class S
Periods Ended Growth of
12/31/99 $10,000 Total Return
- ------------------ ---------------- ------------------
1 Year $10,303 3.03%
5 Years $13,347 5.94%ss.
10 Years $18,222 6.18%ss.
Short Term Bond Fund - Class Ess.ss.
Periods Ended Growth of
12/31/99 $10,000 Total Return
- ------------------ ---------------- ------------------
1 Year $10,281 2.81%
5 Years $13,319 5.90%ss.
10 Years $18,185 6.16%ss.
Short Term Bond Fund - Class Css.ss.ss.
Periods Ended Growth of
12/31/99 $10,000 Total Return
- ------------------ ---------------- ------------------
1 Year $10,219 2.19%
5 Years $13,239 5.77%ss.
10 Years $18,076 6.10%ss.
Merrill Lynch 1-2.99 Years Treasury Index
Periods Ended Growth of
12/31/99 $10,000 Total Return
- ------------------ ---------------- ------------------
1 Year $10,306 3.06%
5 Years $13,705 6.51%ss.
10 Years $18,925 6.59%ss.
Lipper(R) Short Investment Grade Debt Funds
Benchmark
Periods Ended Growth of
12/31/99 $10,000 Total Return
- ------------------ ---------------- ------------------
1 Year $10,295 2.95%
5 Years $13,360 5.97%ss.
10 Years $18,062 6.09%ss.
113 Short-Term Bond Fund
<PAGE>
Short-Term Bond Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Performance Review
For the year ended December 31, 1999, the Short Term Bond Fund Class S, Class E
and Class C shares reflected total returns of 3.03%, 2.81% and 2.19%
respectively, as compared to the Merrill Lynch 1-2.99 Years Treasury Index,
which rose 3.06%. Performance compared more favorably with the 2.95% gain of the
Lipper(R) Short Investment Grade Debt Funds Benchmark The Fund benefited from
its emphasis on spread sector holdings, which outperformed relative to
comparable maturity treasuries.
Portfolio Highlights
Bonds suffered their worst setback since 1994 and their second worst year in
over two decades. Strong US economic growth led to significantly higher interest
rates and aggressive Fed intervention via actual policy tightening. US
treasuries were most severely impacted relative to other sectors of the US bond
market during the year, with the 30-year US treasury bond losing nearly 15% for
the year. Shorter maturities were less vulnerable to rising rates but also fared
poorly. Spread sectors, including corporate bonds and mortgage- and asset-backed
securities, fared better, as the post-emerging markets crisis spread widening
reversed.
The Fund's spread sector emphasis proved critical in this market environment, as
narrowing spreads helped offset the impact of rising interest rates. Large
allocations to corporate, mortgage, and asset-backed securities added value
relative to comparable duration treasuries. A neutral-to-benchmark duration also
helped avoid weaker returns to longer duration securities.
Top Ten Issuers
(as a percent of Total Investments) December 31, 1999
Federal Home Loan Bank 4.8%
Federal National Mortgage Association 4.0
General Motors Acceptance Corp. 3.5
Daimler Chrysler North America 3.1
General Electric Capital Corp. 3.1
Ford Motor Credit Co. 3.0
Associates Corp. of North America 2.8
CIT Group, Inc. 2.8
American Express Credit 2.7
Citibank Credit Card Master Trust 2.5
Portfolio Characteristics
December 31, 1999
Weighted Average Quality Diversification AA
Weighted Average Years-to-Maturity 2.1 Years
Weighted Average Duration 1.6 Years
Current Yield (SEC 30-day standardized)
Class S 6.1%
Class E 5.8%
Class C 4.8%
Number of Issues 234
Number of Issuers 175
Money Managers Styles
BlackRock Financial Management Mortgage/Asset-
Backed Specialist
Standish, Ayer & Wood, Inc. Corporate Specialist
STW Fixed Income Management, Ltd. Sector Rotation
* Short-Term Bond Fund Class S assumes initial investment on January 1,
1990.
** Merrill Lynch 1-2.99 Years Treasury Index is an index composed of
approximately 160 issues in the form of publicly placed,
coupon-bearing US Treasury debt. Issues must carry a term to maturity
of at least one year, and par amounts outstanding must be no less
than $10 million at the start and at the close of the performance
measurement periods.
++ Prior to April 1, 1995, Fund performance results are reported gross
of investment management fees. For the period following April 1,
1995, Fund performance results are reported net of investment
management fees but gross of any investment services fees.
Information concerning these fees can be obtained from the Fund's
Advisor upon request.
++++ Lipper(R) Short (1-5 Yr.) Investment Grade Debt Funds Benchmark is
the average total return for the universe of funds within the Short
Investment Grade Debt Funds investment objective. The total return
for the funds reflects adjustments for income dividends and capital
gains distributions reinvested as of the ex-dividend dates. This type
of fund which invests at least 65% of assets in investment grade debt
issues (rated in top four grades) with average maturities of five
years or less.
ss. Annualized.
ss.ss. Short-Term Bond Fund Class S performance has been linked with Class E
to provide historical perspective. From February 18, 1999
(commencement of sale) through the current period, Class E paid
shareholder service fees. Total return would have been lower had
these fees been in effect during prior reporting periods.
ss.ss.ss. Short-Term Bond Fund Class S and Class E performance has been linked
with Class C to provide historical perspective. From March 3, 1999
(commencement of sale) through the current period, Class C paid
shareholder service and Rule 12b-1 distribution fees. Total return
would have been lower had these fees been in effect during prior
reporting periods.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Short-Term Bond Fund 114
<PAGE>
Short Term Bond Fund
Statement of Net Assets
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
----------- -----------
Long-Term Investments - 96.3%
Asset-Backed Securities - 34.6%
ABFS Equipment Contract Trust
Series 1998-A Class A
6.100% due 10/15/05 479 469
American Express Credit Account Master Trust
Series 1996-1, Class A
6.800% due 12/15/03 5,000 5,002
Series 1997-1, Class A
6.400% due 04/15/05 7,500 7,404
Amresco Residential Securities Mortgage
Loan Trust
Step Up Bond
Series 1998-2 Class B1A
6.7400% due 06/25/28 (b) 2,000 1,874
Arcadia Automobile Receivables Trust
Series 1998-B Class A3
5.950% due 11/15/02 1,000 995
Banc One Auto Grantor Trust
Series 1997-A, Class A
6.270% due 11/20/03 1,966 1,961
Barnett Auto Trust
Series 1997-A Class A3
6.030% due 11/15/01 828 828
Boston Edison Co.
Series 1999-1 Class A2
6.450% due 09/15/05 9,350 9,143
California Infrastructure PG&E
Series 1997-1 Class A3
6.150% due 06/25/02 513 513
Captec Franchise Trust
Series 1999-1 Class A1
6.504% due 05/25/05 (b) 1,368 1,334
Case Equipment Loan Trust
Series 1997-B, Class C
6.410% due 09/15/04 88 87
Chase Manhattan Auto Owner Trust
Series 1998-B Class A4
5.800% due 02/17/03 2,000 1,969
Chase Manhattan Credit Card Master Trust
Series 1996-3 Class A
7.040% due 02/15/05 11,000 11,024
Chemical Master Credit Card Trust I
Series 1996-1, Class A
5.550% due 09/15/03 8,000 7,905
Chevy Chase Auto Receivables Trust
Series 1997-1, Class A
6.500% due 10/15/03 785 785
Series 1997-2, Class A
6.350% due 01/15/04 261 260
Series 1997-3, Class A
6.200% due 03/20/04 (b) 530 527
Citibank Credit Card Master Trust I
Series 1997-2 Class A
6.550% due 02/15/04 11,500 11,399
Copelco Capital Funding Corp.
Series 1997-A Class A3
6.270% due 04/20/05 397 397
Series 1999-A Class A2
5.500% due 03/15/01 1,400 1,396
Series 1999-A Class A3
5.665% due 03/15/02 750 740
Series 1999-A Class A5
5.950% due 06/15/04 1,250 1,205
Dayton Hudson Credit Card Master Trust
Series 1997-1 Class A
6.250% due 08/25/05 800 779
Delta Funding Home Equity Loan Trust
Series 1998-1 Class A2A
5.616% due 05/25/30 (b) 170 168
Discover Card Master Trust I
Series 1998-2 Class A
5.800% due 09/16/03 1,000 990
Series 1998-7 Class A
5.600% due 05/15/06 2,000 1,898
Series 1999-1 Class B
5.550% due 08/15/04 (b) 650 629
First Security Auto Grantor Trust
Series 1997-A, Class A
6.300% due 08/15/03 340 339
First Security Automobile Owner Trust
Series 1999-2 Class A3
6.000% due 10/15/03 1,750 1,734
FMAC Loan Receivables Trust
Series 1998-CA Class A1
5.990% due 11/15/04 699 673
115 Short Term Bond Fund
<PAGE>
Short Term Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
----------- -----------
Ford Credit Automobile Owner Trust
Series 1997-B Class B
6.400% due 05/15/02 825 817
Series 1999-A Class A4
5.310% due 11/15/01 1,700 1,685
Series 1999-B Class A4
5.800% due 06/15/02 1,225 1,211
Series 1999-C Class A4
6.080% due 09/16/02 4,675 4,627
Franchise Loan Trust
Series 1998-I Class A1
6.240% due 07/15/04 643 626
Green Tree Financial Corp.
Series 1998-1, Class A3
5.950% due 04/01/13 1,250 1,235
Series 1998-6 Class A2
5.910% due 01/01/07 486 485
Green Tree Home Improvement Loan Trust
Series 1997-A, Class HIA3
7.050% due 08/15/23 755 755
Green Tree Recreational, Equipment &
Consumer Loan Trust
Series 1998-C Class A4
6.170% due 02/15/11 1,000 986
Series 1997-C Class A1
6.490% due 02/15/18 556 549
Greenpoint Manufactured Housing
Series 1999-1 Class A2
6.010% due 08/15/15 1,000 963
Honda Automobile Lease Trust
Series 1999-A Class A3
6.100% due 01/15/02 3,500 3,474
Series 1999-A Class A4
6.450% due 09/16/02 2,450 2,439
Honda Automobile Receivables Grantor Trust
Series 1998-A Class A
5.500% due 07/15/04 1,131 1,112
IMC Home Equity Loan Trust
Series 1998-1 Class A3
6.410% due 04/20/18 1,050 1,036
MBNA Master Credit Card Trust
Series-F Class A
6.600% due 11/15/04 10,000 9,938
Mellon Auto Grantor Trust
Series 1999-1 Class A
5.460% due 10/17/05 1,293 1,269
Missouri Higher Education Loan Authority
Series 97 Class P
5.286% due 07/25/08 (b) 967 958
Navistar Financial Corp. Owner Trust
Series 1999-A Class A3
5.950% due 04/15/03 1,675 1,652
Newcourt Equipment Trust Securities
Series 1998-1 Class A3
5.240% due 12/20/02 1,375 1,331
Series 1998-2 Class A3
5.450% due 10/15/02 600 595
Nissan Automobile Receivables Owner Trust
Series 1999-A Class A3
6.470% due 09/15/03 1,025 1,017
NPF VI Inc.
Series 1998-1A, Class A
6.220% due 06/01/02 1,000 986
Olympic Automobile Receivables Trust
Series 1996-B Class A4
6.700% due 03/15/02 668 669
Series 1996-D Class CTFS
6.125% due 04/15/02 2,511 2,463
Onyx Acceptance Auto Trust
Series 1999-B Class A3
5.780% due 02/15/03 (b) 2,025 1,992
PBG Equipment Trust
Series 1A Class A
6.270% due 01/20/12 1,021 993
PNC Student Loan Trust I
Series 1997-2 Class A3
6.314% due 01/25/01 6,197 6,132
Premier Automobile Trust
Series 1999-1 Class A3
5.690% due 11/08/02 8,495 8,384
Series 1999-3 Class A4
6.430% due 03/08/04 (b) 1,600 1,577
Ryder Vehicle Lease Trust
Series 1998-A, Class A
6.100% due 09/15/08 (b) 586 578
Series 1999-A Class A4
6.890% due 04/15/05 1,100 1,090
Sears Credit Account Master Trust
Series 1995-2 Class A
8.100% due 06/15/04 2,329 2,348
Series 1996-4 Class A
6.450% due 10/16/06 5,000 4,950
Series 1998-1 Class A
5.800% due 08/15/05 1,500 1,485
Standard Credit Card Master Trust I
Series 1995-3 Class A
7.850% due 02/07/02 1,025 1,027
Short Term Bond Fund 116
<PAGE>
Short Term Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
----------- -----------
Team Fleet Financing Corp.
Series 1998-2A Class A
6.070% due 07/25/02 1,625 1,604
The Money Store Auto Grantor Trust
Series 1997-4, Class A2
6.350% due 03/20/04 212 212
The Money Store Small Business
Administration Loan Trust
Series 1996-2 Class A
6.070% due 04/15/24 (b) 764 758
Series 1997-1 Class A
5.990% due 01/15/25 (b) 1,073 1,059
Series 1997-1 Class B
6.469% due 01/15/25 (b) 715 711
UCFC Home Equity Loan
Series 1993-B1 Class A-1
6.075% due 07/25/14 42 41
USAA Automobile Loan Grantor Trust
Series 1999-1 Class A
6.100% due 02/15/06 (b) 2,039 2,018
Wilshire Funding Corp.
Series 1998-WFC2 Class A3
7.000% due 12/28/37 768 758
World Omni Automobile Lease Securitization
Trust
Series 1996-B Class A3
6.250% due 11/15/02 775 775
Series 1997-A Class A2
6.750% due 06/25/03 (b) 118 117
Series 1997-A, Class A4
6.900% due 06/25/03 2,318 2,315
-----------
158,229
-----------
Corporate Bonds and Notes - 41.0%
Aerofreighter Finance Trust
7.850% due 10/30/09 675 674
Aristar, Inc.
6.125% due 12/01/00 1,225 1,214
Associates Corp. of North America
5.875% due 07/15/02 9,500 9,253
6.500% due 07/15/02 2,700 2,671
5.750% due 11/01/03 1,000 954
AT&T Capital Corp.
6.250% due 05/15/01 (MTN) 1,750 1,733
Avon Energy Partners Holdings
6.730% due 12/11/02 310 302
Banco De Latinoamerica
6.500% due 04/02/01 2,200 2,188
Bank One Corp.
6.400% due 08/01/02 2,725 2,679
Bear Stearns Co., Inc.
9.375% due 06/01/01 2,000 2,061
Business Loan Center, Inc.
Series 1998-1A
6.750% due 04/02/05 1,100 1,106
Carramerica Realty Corp.
6.625% due 10/01/00 1,575 1,560
Chase Manhattan Corp.
10.125% due 11/01/00 2,009 2,064
CIT Group, Inc.
5.000% due 10/06/00 (MTN) 750 740
6.125% due 12/15/00 (MTN) 8,100 8,045
6.500% due 06/14/02 (MTN) 3,800 3,754
Coca-Cola Put Asset Trust
6.000% due 03/15/01 1,950 1,934
Comdisco, Inc.
6.000% due 01/30/02 2,000 1,939
Conseco, Inc.
6.400% due 06/15/01 1,850 1,794
Cox Communications, Inc.
7.000% due 08/15/01 2,000 1,996
DaimlerChrysler AG
6.371% due 08/23/02 (b) 2,250 2,254
Series B
6.460% due 12/07/01 (MTN) 12,000 11,908
Donaldson, Lufkin & Jenrette, Inc.
5.875% due 04/01/02 1,150 1,116
El Paso Energy Corp.
12.000% due 12/15/00 1,925 1,973
Series B
6.625% due 07/15/01 1,050 1,043
Enron Corp.
6.450% due 11/15/01 1,825 1,799
ERAC USA Finance Co.
6.375% due 05/15/03 1,900 1,825
Finova Capital Corp.
6.625% due 09/15/01 2,000 1,980
First Bank South Dakota
6.533% due 12/20/00 (b) 500 501
Firstar Corp.
6.500% due 07/15/02 545 537
Fleet Credit Card, LLC
6.450% due 10/30/00 250 249
Ford Motor Credit Co.
6.500% due 02/28/02 12,000 11,874
6.700% due 07/16/04 1,600 1,566
Franchise Finance Corp.
7.000% due 11/30/00 1,575 1,556
117 Short Term Bond Fund
<PAGE>
Short Term Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
----------- -----------
General Electric Capital Corp. (MTN)
5.430% due 02/25/02 4,000 3,889
Series A
6.330% due 09/17/01 5,500 5,462
5.180% due 02/01/02 2,380 2,301
6.520% due 10/08/02 2,500 2,474
General Motors Acceptance Corp.
5.350% due 04/16/01 (MTN) 12,000 11,780
6.850% due 04/17/01 (MTN) 750 750
8.500% due 01/01/03 1,500 1,554
7.137% due 04/01/20 (b) 1,872 1,874
Hertz Corp.
6.500% due 04/01/00 450 450
6.625% due 07/15/00 900 900
Homeside Lending, Inc.
6.875% due 05/15/00 (MTN) 2,025 2,028
Household Finance Corp.
6.125% due 07/15/02 (MTN)(b) 450 438
IBM Credit Corp.
6.450% due 11/12/02 (MTN) 1,300 1,286
International Lease Finance Corp.
8.875% due 04/15/01 1,500 1,536
Lehman Brothers Holdings, Inc.
6.000% due 02/26/01 (MTN) 1,500 1,483
MBNA Corp.
Series B
6.500% due 09/15/00 (MTN) 1,375 1,371
Metropolitan Life Insurance Co.
6.300% due 11/01/03 730 705
Midlantic Corp.
9.200% due 08/01/01 1,123 1,156
Morgan Stanley Dean Witter & Co.
7.125% due 01/15/03 935 934
5.625% due 01/20/04 (MTN) 1,750 1,648
Nabisco, Inc.
6.000% due 02/15/01 415 409
National Westminster Bank PLC
9.450% due 05/01/01 5,500 5,670
NationsBank Corp.
8.125% due 06/15/02 2,750 2,812
News America Holdings, Inc.
7.450% due 06/01/00 775 778
Norwest Financial, Inc.
6.375% due 09/15/02 1,000 984
Panamsat Corp.
6.000% due 01/15/03 1,100 1,020
Paramount Communications, Inc.
7.500% due 01/15/02 875 877
Popular North America, Inc.
Series D
6.875% due 06/15/01 (MTN) 1,100 1,093
Procter & Gamble
9.625% due 01/14/01 6,920 7,107
Reilly
7.430% due 03/01/19 1,154 1,156
Safeway, Inc.
7.000% due 09/15/02 2,100 2,091
Salomon Smith Barney Holdings, Inc.
6.625% due 07/01/02 75 74
6.500% due 10/15/02 300 296
Salomon, Inc.
7.750% due 05/15/00 1,000 1,005
Sears Roebuck Acceptance Corp. (MTN)
Series II
6.690% due 04/30/01 1,800 1,783
Series III
6.820% due 10/17/02 6,000 5,868
Tele-Communications, Inc.
8.250% due 01/15/03 2,000 2,070
Textron, Inc.
6.750% due 09/15/02 11,000 10,890
US Bank National Association Minnesota
6.350% due 09/28/01 2,000 1,989
US West Capital Funding, Inc.
6.875% due 08/15/01 1,230 1,219
Wal-Mart Stores, Inc.
6.150% due 08/10/01 2,300 2,280
Waste Management, Inc.
7.100% due 08/01/26 1,175 1,089
Wells Fargo Co.
6.500% due 09/03/02 1,500 1,485
Williams Companies, Inc.
6.125% due 02/01/01 285 283
-----------
187,189
-----------
Eurodollar Bonds - 1.7%
American Express Travel
6.323% due 10/24/01 (b) 1,500 1,496
Argentina, Republic of
Series B
Zero Coupon due 04/15/01 1,500 1,331
Diageo Capital PLC
6.625% due 06/24/04 545 533
Lehman Brothers Holdings, Inc.
6.089% due 06/10/03 (b) 2,278 2,227
St. George Bank, Ltd.
Series E
6.231% due 11/29/01 (MTN)(b) 2,000 1,998
-----------
7,585
-----------
Short Term Bond Fund 118
<PAGE>
Short Term Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
----------- -----------
Mortgage-Backed Securities - 8.9%
Asset Securitization Corp.
Series 1997-D5 Class A1A
6.500% due 02/14/41 898 888
Bayview Financial Acquisition Trust
Series 1998-1, Class A1
7.010% due 05/25/29 936 923
Bear Stearns Mortgage Securities, Inc.
Series 1996-6 Class A2
7.000% due 11/25/27 133 132
Chase Commercial Mortgage Securities Corp.
Series 1997-2 Class A1
6.450% due 12/19/04 1,909 1,866
Citicorp Mortgage Securities, Inc.
Series 1994-4 Class A6
6.000% due 02/25/09 975 911
Deutsche Mortgage & Asset Receiving Corp.
Series 1998-C1 Class A1
6.220% due 09/15/07 424 408
DLJ Mortgage Acceptance Corp.
Series 1995-CF2 Class A1A
6.650% due 12/17/27 348 346
Series 1996-CF2 Class A1A
6.860% due 11/12/21 621 616
Series 1997-CF1 Class A1A
7.400% due 05/15/06 1,101 1,101
Series 1999-STF1 Class A1
6.880% due 09/05/01 (b) 675 675
Federal Home Loan Mortgage Corp.
6.964% due 2027 (b) 2,323 2,317
Federal Home Loan Mortgage Corp.
Participation Certificate
7.500% due 2000 13 13
7.500% due 2002 6 6
9.000% due 2005 172 174
6.250% due 2007 36 35
5.500% due 2009 2,396 2,269
7.000% due 2011 1,299 1,289
Federal National Mortgage Association
7.000% due 2004 665 664
8.750% due 2004 29 29
6.500% due 2008 1,550 1,522
5.500% due 2009 7,813 7,411
8.000% due 2009 1,755 1,772
7.000% due 2014 (b) 666 659
7.500% due 2014 1,385 1,395
8.500% due 2014 680 691
5.812% due 2029 (b) 354 339
Series 1998-32 Class TB
6.000% due 05/18/13 1,000 979
Government National Mortgage Association
7.250% due 2006 1,312 1,316
7.000% due 2007 68 67
7.000% due 2008 843 835
7.000% due 2009 893 884
8.250% due 2009 693 719
7.000% due 2011 436 431
7.000% due 2012 391 387
9.500% due 2017 592 628
Series 1994-1 Class PE
7.500% due 07/16/22 1,150 1,159
Series 1997-11 Class M
8.000% due 05/16/24 1,045 1,054
Morgan Stanley Capital I, Inc.
Series 1998-CF1 Class A1
6.330% due 10/15/07 409 395
Prudential Home Mortgage Securities
Series 1994-19, Class A2
7.050% due 05/25/24 317 316
Residential Accredited Loans, Inc.
Series 1997-QS7, Class A1
7.500% due 07/25/27 102 102
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 03/25/28 173 172
Series 1998-A2, Class A1
6.750% due 04/25/28 417 414
Residential Funding Mortgage Securities
Series 1998-NS1 Class A2
6.375% due 01/25/09 802 792
Resolution Trust Corp. Mortgage Pass-thru
Certificate
Series 1995-2, Class C1
7.650% due 05/25/29 (b) 365 356
Union Planters Mortgage Finance Corp.
Series 1998-A, Class A1
6.350% due 01/25/28 451 448
Series 1999-1 Class A1
6.250% due 04/01/29 547 529
Wilshire Funding Corporation
Series 1997-WFC1, Class AI
7.250% due 08/25/27 500 499
-----------
40,939
-----------
119 Short Term Bond Fund
<PAGE>
Short Term Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Municipal Bonds - 0.3%
Philadelphia, Pennsylvania, Authority
for Industrial Development
Series 1997 Class A
6.488% due 06/15/04 1,386 1,289
---------
United States Government
Agencies - 5.6%
Federal Farm Credit Bank
5.220% due 09/11/01 1,250 1,225
Federal Home Loan Bank
5.875% due 08/15/01 1,000 991
5.875% due 09/17/01 18,000 17,823
5.250% due 04/25/02 2,000 1,940
Federal National Mortgage Association
6.140% due 06/12/02 (MTN) 2,900 2,858
Tennessee Valley Authority
Series D
6.000% due 11/01/00 750 747
---------
25,584
---------
United States Government
Treasuries - 1.4%
United States Treasury Notes
5.375% due 02/15/01 1,300 1,289
5.500% due 08/31/01 2,100 2,076
3.375% due 01/15/07 2,503 2,358
3.625% due 01/15/08 929 885
---------
6,608
---------
Yankee Bonds - 2.8%
Edperbrascan Corp.
7.375% due 10/01/02 2,000 1,961
Manitoba, Province of
8.000% due 04/15/02 5,600 5,738
Tyco International, Ltd.
6.500% due 11/01/01 3,000 2,953
Westpac Banking, Ltd.
7.875% due 10/15/02 2,006 2,042
---------
12,694
---------
Total Long-Term Investments
(cost $447,167) 440,117
---------
Short-Term Investments - 3.2%
Federal Home Loan Bank Discount Note
5.680% due 01/19/00 1,250 1,247
Frank Russell Investment Company
Money Market Fund,
due on demand (a) 13,211 13,211
---------
Total Short-Term Investments
(cost $14,458) 14,458
---------
Total Investments - 99.5%
(identified cost $461,625) 454,575
Other Assets and Liabilities,
Net - 0.5% 2,509
---------
Net Assets - 100.0% 457,084
=========
(a) At amortized 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 120
<PAGE>
Short Term Bond Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amounts) December 31, 1999
<TABLE>
Assets
<S> <C> <C>
Investments at market (identified cost $461,625) ....................... $ 454,575
Receivables:
Dividends and interest ............................................. 5,753
Fund shares sold ................................................... 751
From Advisor ....................................................... 100
---------
Total assets .................................................... 461,179
Liabilities
Payables:
Fund shares redeemed ............................................... $ 3,844
Accrued fees to affiliates ......................................... 224
Other accrued expenses ............................................. 27
---------
Total liabilities ............................................... 4,095
---------
Net Assets ............................................................. $ 457,084
=========
Net Assets Consist of:
Undistributed net investment income .................................... $ 168
Accumulated net realized gain (loss) ................................... (18,035)
Unrealized appreciation (depreciation) on investments .................. (7,050)
Shares of beneficial interest .......................................... 253
Additional paid-in capital ............................................. 481,748
---------
Net Assets ............................................................. $ 457,084
=========
Net Asset Value, offering and redemption price per share:
Class C ($800,598 divided by 44,158 shares of $.01 par value
shares of beneficial interest outstanding) ...................... $ 18.13
=========
Class E ($8,693,112 divided by 480,760 shares of $.01 par value
shares of beneficial interest outstanding) ...................... $ 18.08
=========
Class S ($447,589,936 divided by 24,818,524 shares of $.01 par value
shares of beneficial interest outstanding) ...................... $ 18.03
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
121 Short Term Bond Fund
<PAGE>
Short Term Bond Fund
Statement of Operations
Amounts in thousands Year Ended December 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Interest ........................................................... $ 26,239
Dividends from Money Market Fund ................................... 1,092
---------
Total investment income ......................................... 27,331
Expenses
Advisory fees ...................................................... $ 2,041
Administrative fees ................................................ 229
Custodian fees ..................................................... 334
Distribution fees - Class C ........................................ 4
Transfer agent fees ................................................ 607
Professional fees .................................................. 10
Registration fees .................................................. 159
Shareholder servicing fees - Class C ............................... 1
Shareholder servicing fees - Class E ............................... 15
Trustees' fees ..................................................... 12
Miscellaneous ...................................................... 3
---------
Total expenses .................................................. 3,415
---------
Net investment income .................................................. 23,916
---------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on investments ................................ (2,426)
Net change in unrealized appreciation (depreciation) on investments .... (7,220)
---------
Net realized and unrealized gain (loss) ................................ (9,646)
---------
Net increase (decrease) in net assets from operations .................. $ 14,270
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Short Term Bond Fund 122
<PAGE>
Short Term Bond Fund
Statement of Changes in Net Assets
Amounts in thousands Years Ended December 31,
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ......................................... $ 23,916 $ 13,185
Net realized gain (loss) ...................................... (2,426) 1,126
Net change in unrealized appreciation (depreciation) .......... (7,220) 355
--------- ---------
Net increase (decrease) in net assets from operations ...... 14,270 14,666
--------- ---------
Distributions
From net investment income
Class C .................................................... (24) --
Class E .................................................... (303) --
Class S .................................................... (24,023) (13,149)
--------- ---------
Net decrease in net assets from distributions .......... (24,350) (13,149)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions . 206,625 29,552
--------- ---------
Total net increase (decrease) in net assets ....................... 196,545 31,069
Net Assets
Beginning of period ........................................... 260,539 229,470
--------- ---------
End of period (including undistributed net investment income of
$168 and $621, respectively) ............................... $ 457,084 $ 260,539
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
123 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 Operations
Net investment income (a) ...................................... .68
Net realized and unrealized gain (loss) ........................ (.31)
-------
Total income from operations ................................ .37
-------
Distributions
From net investment income ..................................... (.60)
-------
Net Asset Value, End of Period ..................................... $ 18.13
=======
Total Return (%)(b) ................................................ 2.02
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ....................... 801
Ratios to average net assets (%)(c):
Operating expenses .......................................... 1.72
Net investment income ....................................... 4.41
Portfolio turnover rate (%) .................................... 177.08
* For the period March 3, 1999 (commencement of sale) to December 31, 1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
Short Term Bond Fund 124
<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 Operations
Net investment income (a) .................................... .80
Net realized and unrealized gain (loss) ...................... (.34)
---------
Total income from operations .............................. .46
---------
Distributions
From net investment income ................................... (.89)
---------
Net Asset Value, End of Period ................................... $ 18.08
=========
Total Return (%)(b) .............................................. 2.53
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ..................... 8,693
Ratios to average net assets (%)(c):
Operating expenses ........................................ .97
Net investment income ..................................... 5.05
Portfolio turnover rate (%) .................................. 177.08
* For the period February 18, 1999 (commencement of sale) to December 31,
1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
125 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
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ....... $ 18.46 $ 18.35 $ 18.36 $ 18.55 $ 17.98
----------- ----------- ----------- ----------- -----------
Income From Operations
Net investment income (a) .............. .90 .99 1.08 1.04 1.16
Net realized and unrealized gain (loss) (.36) .11 -- (.19) .59
----------- ----------- ----------- ----------- -----------
Total income from operations ........ .54 1.10 1.08 .85 1.75
----------- ----------- ----------- ----------- -----------
Distributions
From net investment income ............. (.97) (.99) (1.09) (1.04) (1.18)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ............. $ 18.03 $ 18.46 $ 18.35 $ 18.36 $ 18.55
=========== =========== =========== =========== ===========
Total Return (%)(b) ........................ 3.03 6.09 6.02 4.76 9.95
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 447,590 260,539 229,470 222,983 183,577
Ratios to average net assets (%)(b):
Operating expenses .................. .74 .66 .66 .70 .58
Net investment income ............... 5.22 5.37 5.70 5.70 6.41
Portfolio turnover rate (%) ............ 177.08 129.85 213.14 264.40 269.31
</TABLE>
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) 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.
Short Term Bond Fund 126
<PAGE>
Fixed Income I Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: To provide effective diversification against equities and a stable
level of cash flow by investing in fixed-income securities.
Invests in: Fixed-income securities.
Strategy: The Fund uses a multi-style, multi-manager strategy and employed
three managers with distinct approaches to managing portfolios of
intermediate-maturity, investment-grade fixed income securities.
[The following table was depicted as a mountain chart in the printed material.]
Growth of a $10,000 Investment
Dates Fixed 1 - Class 1++ LB Aggregate** Lipper(R) Intermediate++++
- ----- ------------------- -------------- --------------------------
Yearly periods ended December 31
* $10,000 $10,000 $10,000
1990 $10,861 $10,896 $10,708
1991 $12,600 $12,640 $12,334
1992 $13,614 $13,576 $13,165
1993 $14,928 $14,899 $14,416
1994 $14,484 $14,464 $13,935
1995 $17,095 $17,136 $16,246
1996 $17,736 $17,758 $16,762
1997 $19,408 $19,473 $18,177
1998 $21,033 $21,164 $19,628
1999 $20,816 $20,991 $19,278
- --------------------------------------------------------------------------------
Total $172,476 $172,996 $164,650
================================================================================
Fixed Income I Fund - Class I
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- --------- ------
1 Year $9,896 (1.04)%
5 Years $14,372 7.52%ss.
10 Years $20,816 7.60%ss.
Fixed Income I Fund - Class E++++++
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- --------- ------
1 Year $9,883 (1.17)%
5 Years $14,351 7.49%ss.
10 Years $20,787 7.59%ss.
Lehman Brothers Aggregate Bond Index
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- --------- ------
1 Year $9,918 (0.82)%
5 Years $14,512 7.73%ss.
10 Years $20,991 7.70%ss.
Lipper(R) Intermediate Investment Grade Debt Funds Benchmark
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- --------- ------
1 Year $9,872 (1.28)%
5 Years $13,834 6.71%ss.
10 Years $19,278 6.78%ss.
127 Fixed Income I Fund
<PAGE>
Fixed Income I Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Performance Review
For the year ended December 31, 1999, the Fixed Income I Fund Class I and Class
E shares reflected losses of 1.04% and 1.17%, respectively, as compared to the
Lehman Brothers Aggregate Bond Index, which fell 0.82%. The year proved
challenging for the Fund's managers, as spread widening, yield curve strategies,
and duration strategies all negatively impacted Fund results. Spread sector
holdings helped dampen market weakness in the latter half of the year, as
favorable economic trends supported narrowing credit spreads. Higher yields on
these sectors helped offset some of the impact of rising interest rates.
Portfolio Highlights
Bonds suffered their worst setback since 1994 and their second worst year in
over two decades. Strong US economic growth led to significantly higher interest
rates and aggressive Fed intervention via actual policy tightening. US
treasuries were most severely impacted relative to other sectors of the US bond
market during the year, with the 30-year US treasury bond losing nearly 15% for
the year. Spread sectors, including corporate bonds and mortgage- and
asset-backed securities, fared better as the post-emerging markets crisis spread
widening reversed.
The Fund's emphasis on spread sector holdings was a source of returns for the
year, however, results attributable to other decisions were generally mixed.
High-grade corporates and mortgage-backed securities were overweighted relative
to the Lehman Brothers Aggregate Bond Index and were a net positive contributor
for the year. Duration strategies helped mitigate market weakness, but detracted
during the third quarter. Security selection helped, while yield curve
strategies were only a slight negative. In a difficult market, all three
managers were limited in their effectiveness.
Top Ten Issuers
(as a percent of Total Investments) December 31, 1999
Federal National Mortgage Association 18.9%
United States Treasury 14.4
Government National Mortgage Association 11.1
Federal Home Loan Mortgage Corp. 8.6
Federal Home Loan Bank 1.8
General Motors Acceptance Corp. 1.3
Ford Motor Credit Co. 0.9
Merrill Lynch & Co. 0.8
Philip Morris Cos., Inc. 0.6
Heller Equipment Asset Receivables Trust 0.6
Portfolio Characteristics
December 31, 1999
Weighted Average Quality Diversification AAA
Weighted Average Years-to- Maturity 8.5 Years
Weighted Average Duration 4.9 Years
Current Yield (SEC 30-day standardized)
Class I 6.6%
Class E 6.4%
Number of Issues 1216
Number of Issuers 719
Money Managers Styles
Lincoln Capital Management Co. Enhanced Core
Pacific Investment Management Co. Broad Market - Sector
Rotation
Standish, Ayer & Wood, Inc. Broad Market - Sector
Rotation
* Fixed Income I Fund Class I assumes initial investment on January 1,
1990.
** Lehman Brothers Aggregate Bond Index is composed of securities from
Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed
Securities Index, and the Asset-Backed Securities Index. Total return
comprises price appreciation/depreciation and income as a percentage of
the original investment. Indexes are rebalanced monthly by market
capitalization.
++ Prior to April 1, 1995, Fund performance results are reported gross of
investment management fees. For the period following April 1, 1995, Fund
performance results are reported net of investment management fees but
gross of any investment services fees. Information concerning these fees
can be obtained from the Fund's Advisor upon request.
++++ Lipper(R) Intermediate (5-10 Yr.) Investment Grade Debt Funds Benchmark
total return for the universe of funds within the Intermediate Investment
Grade Debt Funds investment objective. The total return for the funds
reflects adjustments for income dividends and capital gains distributions
reinvested as of the ex-dividend dates.
++++++ Fixed Income I Fund Class I performance has been linked with Class E to
provide historical perspective. From May 14, 1999 (commencement of sale)
through the current period, Class E paid shareholder service fees. Total
return would have been lower had these fees been in effect during prior
reporting periods.
ss. Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Fixed Income I Fund 128
<PAGE>
Fixed Income I Fund
Statement of Net Assets
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
----------- -----------
Long-Term Investments - 97.4%
Asset-Backed Securities - 8.2%
ANRC Automobile Owner Trust
Series 1999-A Class A4
6.940% due 04/17/06 3,515 3,496
Arcadia Automobile Receivables Trust
Series 1998-B Class A3
5.950% due 11/15/02 765 761
Associates Manufactured Housing
Pass-Thru Certificates
Series 1997-2 Class A3
6.275% due 03/15/28 833 832
BankAmerica Manufactured Housing
Contract
Series 1997-1 Class A4
6.195% due 06/10/10 (c) 707 704
Bombardier Capital Mortgage
Securitization
Series 1999-B Class A3
7.180% due 12/15/15 1,230 1,224
Boston Edison Co.
Series 1999-1 Class A3
6.620% due 03/15/07 (c) 375 361
California Infrastructure PG&E-1
Series 1997-1 Class A7
6.420% due 09/25/08 1,745 1,689
California Infrastructure SDG&E
6.310% due 09/25/08 4,050 3,924
Carco Auto Loan Master Trust
Series 1994-4 Class A
6.430% due 11/15/04 1,810 1,793
Centex Home Equity
Series 1999-2 Class A3
6.260% due 07/25/25 1,305 1,271
Charter Financial, Inc.
Series 1999-1 Class A4
7.070% due 01/25/06 2,075 2,074
Chase Credit Card Master Trust
Series 1999-3 Class B
6.950% due 01/15/07 200 198
Citibank Credit Card Master Trust I
Series 1997-3 Class A
6.839% due 02/10/04 (c) 1,100 1,091
Series 1999-1 Class A
5.500% due 02/15/06 500 473
Comed Transitional Funding Trust
Series 1998-1 Class A3
5.340% due 03/25/04 500 486
Cross Country Master Credit Card Trust II
Series 1999-1 Class A
6.963% due 09/15/05 (c) 1,700 1,700
Federal Housing Authority: Project
Citi 68
7.430% due 06/27/21 1,175 1,149
First Omni Credit Card Master Trust
Series 1996-A Class A
6.650% due 09/15/03 2,235 2,227
First USA Credit Card Master Trust
Series 1999-3 Class C
6.450% due 01/19/07 1,750 1,667
Fleetwood Credit Corporation Grantor Trust
Series 1997-B Class A
6.400% due 05/15/13 (c) 2,308 2,292
Ford Credit Automobile Owner Trust
Series 1999-D Class A5
6.520% due 09/15/03 1,940 1,921
GE Capital Mortgage Services, Inc.
Series 1999-HE1 Class A4
6.185% due 01/25/23 750 726
Green Tree Financial Corp.
Series 1994-1 Class A4
7.200% due 04/15/19 1,905 1,912
Green Tree Home Improvement Loan Trust
Series 1998-D Class HEA5
6.320% due 08/15/29 1,360 1,313
Series 1998-D Class HIA2
5.940% due 06/15/29 453 452
Series 1998-E Class HIA1
5.907% due 08/15/07 294 292
Green Tree Lease Finance
Series 1998-1 Class A4
5.740% due 01/20/04 610 595
Green Tree Recreational, Equipment &
Consumer Loan Trust
Series 1998-A Class A1C
6.180% due 06/15/19 344 338
Series 1998-C Class A4
6.170% due 02/15/11 465 459
Heller Equipment Asset Receivables Trust
Series 1999-1 Class A3
5.500% due 07/13/03 3,465 3,404
Series 1999-2 Class A3
6.650% due 03/14/04 3,600 3,578
129 Fixed Income I Fund
<PAGE>
Fixed Income I Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
----------- -----------
Ikon Receivables, L.L.C.
Series 1999-1 Class A3
5.990% due 05/15/05 2,500 2,468
Indymac Home Equity Loan Trust
Step Up Bond
Series 1998-A Class AF4
6.310% due 10/25/29 855 821
MBNA Master Credit Card Trust
Series 1999-G Class B
6.600% due 12/15/06 1,250 1,217
Metris Master Trust
Series 1997-1 Class A
6.870% due 10/20/05 3,350 3,354
MMCA Auto Owner Trust
Series 1999-2 Class A3
7.000% due 05/15/04 2,330 2,338
NationsBank Credit Card Master Trust
Series 1993-2 Class A
6.000% due 12/15/05 840 810
Onyx Acceptance Grantor Trust
Series 1998-C Class A2
5.550% due 09/15/01 101 100
Pacificamerica Home Equity Loan
Step Up Bond (c)
Series 1998-2 Class AF
6.590% due 06/26/28 1,358 1,334
Peco Energy Transition Trust
Series 1999-A Class A4
5.800% due 03/01/07 1,800 1,708
Preferred Credit Corp.
Series 1997-1 Class A6
7.590% due 07/25/26 1,050 1,051
Premier Auto Trust
Series 1998-5 Class A4
5.190% due 04/08/03 1,760 1,703
Series 1999-3 Class A4
6.430% due 03/08/04 1,925 1,897
Residential Funding Mortgage
Securities II, Inc.
Series 1999-HI6 Class AI3
7.340% due 07/25/12 1,440 1,433
Series 1999-HI1 Class A3
6.310% due 09/25/29 900 883
Saxon Asset Securities Trust
Series 1997-1 Class AF2
7.085% due 07/25/20 156 156
Series 1998-4 Class AF3
6.265% due 07/25/23 1,490 1,458
Series 1999-3 Class AF3
7.205% due 01/25/19 1,710 1,699
Sears Credit Account Master Trust
Series 1999-2 Class A
6.350% due 02/15/07 3,890 3,826
Sears Credit Account Master Trust II
Series 1996-4 Class A
6.450% due 10/16/06 2,040 2,020
Sears Mortgage Securities Corp.
Series 1992 Class A
7.587% due 10/25/22 (c) 975 986
Team Fleet Financing Corp.
Series 1997-1 Class A
7.350% due 05/15/03 1,975 1,955
The Money Store Home Equity Loan Trust
Series 1998-A Class AF5
6.370% due 12/15/23 1,420 1,399
UCFC Home Equity Loan
Series 1996-B1 Class A4
7.525% due 12/15/17 538 538
USAA Auto Loan Grantor Trust
Series 1998-1 Class A
5.800% due 01/15/05 1,294 1,288
Vanderbilt Mortgage & Finance, Inc.
Series 1999-A Class 1A3
6.080% due 12/07/15 530 497
Series 1999-B Class 1A3
6.280% due 03/07/13 880 852
Series 1999-D Class IA2
6.815% due 08/07/12 1,410 1,395
West Penn Funding, L.L.C.
Series 1999-A Class A2
6.630% due 12/26/05 3,200 3,201
World Omni Automobile Lease
Securitization Trust
Series 1996-B Class A3
6.250% due 11/15/02 1,077 1,077
Series 1997-A Class A2
6.750% due 06/25/03 (c) 26 26
Series 1997-A Class B
7.300% due 06/25/03 (c) 830 830
-----------
88,722
-----------
Bankers Acceptance Notes - 0.1%
Mellon Bank, NA
7.625% due 09/15/07 510 513
Signet Bank
7.800% due 09/15/06 480 485
-----------
998
-----------
Fixed Income I Fund 130
<PAGE>
Fixed Income I Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
----------- -----------
Corporate Bonds and Notes - 20.8%
Ahold Finance USA, Inc.
6.250% due 05/01/09 2,560 2,294
Air Products & Chemicals, Inc
8.750% due 04/15/21 300 308
Albertson's, Inc.
7.450% due 08/01/29 885 843
Allegiance Corp.
7.000% due 10/15/26 100 97
America West Airlines
Series A
6.850% due 07/02/09 558 521
American Financial Group, Inc.
7.125% due 04/15/09 1,500 1,344
American Health Properties, Inc.
7.050% due 01/15/02 650 629
Appalachian Power Co.
6.800% due 03/01/06 1,250 1,199
Archer Daniels Co.
8.375% due 04/15/17 900 947
ARG Funding Corp.
Series 1999-1A Class A3
6.020% due 05/20/05 (c) 1,400 1,326
Aristar, Inc.
6.000% due 05/15/02 1,935 1,875
Associates Corp. of North America
6.500% due 10/15/02 400 395
5.500% due 02/15/04 2,000 1,878
Series H
7.090% due 04/11/03 (MTN) 400 400
AT&T Capital Corp.
Series G
6.830% due 12/01/00 (MTN)(c) 3,200 3,213
AT&T Corp.
8.625% due 12/01/31 440 441
Atlantic Richfield Co.
9.125% due 08/01/31 700 820
Avco Financial Services, Inc.
6.000% due 08/15/02 400 389
Baltimore Gas & Electric Co.
6.500% due 02/15/03 550 543
Bank of New York, Inc.
7.875% due 11/15/02 500 510
Bank One Corp.
6.875% due 08/01/06 695 673
BankAmerica Corp.
6.850% due 03/01/03 425 419
BankBoston Corp.
6.125% due 03/15/02 (MTN) 1,200 1,176
Barnett Bank, Inc.
6.900% due 09/01/05 665 648
Baxter International, Inc.
6.630% due 02/15/28 1,150 976
Bear Stearns Co., Inc.
6.661% due 02/16/01 (MTN)(c) 1,800 1,801
Bell Telephone Co. of Pennsylvania
8.350% due 12/15/30 645 699
BellSouth Telecommunications, Inc.
7.000% due 12/01/95 295 262
Beneficial Corp.
8.400% due 05/15/08 757 775
Burlington Northern Santa Fe
7.082% due 05/13/29 1,100 1,021
Camden Property Trust
7.000% due 04/15/04 1,310 1,264
Campbell Soup Co.
8.875% due 05/01/21 500 558
Carolina Power & Light Co.
6.875% due 08/15/23 250 222
Case Corp.
7.250% due 08/01/05 395 375
7.250% due 01/15/16 400 370
Case Credit Corp.
Series B
5.850% due 02/20/01 (MTN) 3,000 2,947
Caterpillar Financial Services Corp.
9.500% due 02/06/07 (MTN) 80 89
Caterpillar, Inc.
8.000% due 02/15/23 750 767
Central Fidelity Banks, Inc.
8.150% due 11/15/02 280 286
Central Power & Light Co.
Series FF
6.875% due 02/01/03 550 545
Champion International Corp.
6.400% due 02/15/26 570 533
Chase Manhattan Corp.
Series C
6.750% due 12/01/04 (MTN) 1,065 1,082
Chesapeake & Potomac Telephone Co.
8.375% due 10/01/29 405 420
Cincinnati Gas & Electric Co.
7.200% due 10/01/23 250 220
CIT Group, Inc.
6.150% due 12/15/02 (MTN) 300 292
5.625% due 10/15/03 2,100 1,984
7.250% due 08/15/05 750 742
Citicorp
6.202% due 05/24/01 (MTN)(c) 2,000 2,007
6.227% due 05/24/01 (MTN)(c) 3,000 3,000
9.500% due 02/01/02 195 205
7.125% due 06/01/03 485 484
131 Fixed Income I Fund
<PAGE>
Fixed Income I Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
----------- -----------
Citigroup, Inc.
6.875% due 02/15/98 920 767
City National Bank
6.375% due 01/15/08 575 514
Coca Cola Enterprises, Inc.
7.000% due 10/01/26 665 653
Comcast Cable Communications
8.375% due 05/01/07 300 311
6.200% due 11/15/08 950 859
Comerica Bank
7.250% due 06/15/07 700 683
6.000% due 10/01/08 275 246
Commercial Credit Group, Inc.
7.875% due 07/15/04 500 511
6.500% due 06/01/05 300 289
8.700% due 06/15/10 795 853
Commonwealth Edison Co.
Series 85
7.375% due 09/15/02 1,120 1,128
Conagra, Inc.
8.100% due 05/20/02 (MTN) 300 307
Conoco, Inc.
6.950% due 04/15/29 800 722
Cooper Tire & Rubber Co.
7.125% due 12/16/02 1,475 1,459
Countrywide Home Loan
Series H
6.250% due 04/15/09 (MTN) 1,300 1,173
Cox Communications, Inc.
6.500% due 11/15/02 600 584
7.500% due 08/15/04 1,525 1,532
6.690% due 09/20/04 (MTN) 500 487
CPC International, Inc.
Series E
7.250% due 12/15/26 1,150 1,086
CSX Corp.
6.250% due 10/15/08 425 385
7.900% due 05/01/17 500 495
CVS Corp.
5.500% due 02/15/04 400 373
Daimler Chrysler North America Holding
6.900% due 09/01/04 3,550 3,513
DaimlerChrysler AG
7.450% due 03/01/27 990 959
Dana Corp.
6.250% due 03/01/04 5,000 4,752
Delta Air Lines, Inc.
Series C
6.650% due 03/15/04 (MTN) 1,500 1,436
Dillards Inc.
6.430% due 08/01/04 1,175 1,095
Duke Capital Corp.
7.250% due 10/01/04 500 489
Duke Energy Corp.
6.875% due 08/01/23 600 521
7.000% due 07/01/33 1,030 885
Duke Weeks Realty, L.P.
7.750% due 11/15/09 1,425 1,383
E. I. Du Pont de Nemours
6.750% due 10/15/04 1,000 987
Electronic Data Systems Corp.
6.850% due 10/15/04 1,300 1,282
7.450% due 10/15/29 500 485
EOP Operating, L.P.
6.500% due 01/15/04 1,225 1,168
Federal Express Corp.
7.600% due 07/01/97 400 346
Fifth Third Bank
6.750% due 07/15/05 900 872
Fifth Third Capital Trust I
Series A
8.136% due 03/15/27 365 338
Finova Capital Corp.
7.250% due 11/08/04 1,860 1,834
First Bank Systems, Inc.
8.000% due 07/02/04 1,050 1,068
First Chicago Corp.
6.170% due 11/14/01 (MTN)(c) 3,000 2,983
First Interstate Bancorp
9.375% due 01/23/02 (MTN) 225 235
First Tennessee Bank
Series BKNT
5.750% due 12/01/08 1,325 1,151
First Union Corp.
6.875% due 09/15/05 750 729
First Union Institutional Capital Trust I
8.040% due 12/01/26 100 93
First Union National Bank
7.125% due 10/15/06 (MTN) 555 545
Firstar Bank North America
7.125% due 12/01/09 850 823
Fleet Financial Group, Inc.
6.875% due 03/01/03 350 345
8.125% due 07/01/04 675 691
Ford Motor Credit Co.
6.000% due 01/14/03 3,000 2,910
6.125% due 04/28/03 690 669
6.700% due 07/16/04 6,000 5,873
6.750% due 05/15/05 425 414
7.375% due 10/28/09 740 731
Fixed Income I Fund 132
<PAGE>
Fixed Income I Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
----------- -----------
Fort James Corp.
6.625% due 09/15/04 1,225 1,181
6.875% due 09/15/07 400 380
Fortune Brands, Inc.
7.875% due 01/15/23 400 389
General Electric Capital Corp.
8.300% due 09/20/09 470 501
Series A
6.650% due 09/03/02 (MTN) 900 893
6.267% due 07/23/03 (MTN) 1,450 1,413
General Motors Acceptance Corp.
5.480% due 12/16/02 (MTN) 3,075 2,945
6.750% due 03/15/03 5,000 4,946
Goldman Sachs Group
6.357% due 01/15/01 (c) 1,500 1,502
Series A
6.334% due 02/20/01 (MTN)(c) 3,000 3,006
Grand Metropolitan Investment Corp.
7.450% due 04/15/35 425 434
Great Lakes Chemical Corp.
7.000% due 07/15/09 1,500 1,431
GTE California, Inc.
6.750% due 05/15/27 600 533
Harrahs Operating Co., Inc.
7.500% due 01/15/09 1,300 1,214
Heller Financial, Inc.
6.440% due 10/06/02 1,100 1,076
Hertz Corp.
7.625% due 08/01/02 450 455
9.000% due 11/01/09 390 425
Household Finance Corp.
6.125% due 07/15/02 (MTN) 800 779
7.200% due 07/15/06 770 757
Illinois Power
7.500% due 06/15/09 1,500 1,457
International Business Machines Corp.
7.125% due 12/01/96 1,200 1,089
International Paper Co.
9.400% due 06/01/02 600 628
ITT Financial Corp.
7.400% due 11/15/25 1,165 1,049
JPM Capital Trust I
7.540% due 01/15/27 285 255
KeyCorp
8.000% due 07/01/04 200 204
7.500% due 06/15/06 875 872
Knight-Ridder, Inc.
6.875% due 03/15/29 1,288 1,130
Kroger Co.
7.625% due 09/15/06 800 793
6.800% due 12/15/18 650 564
Liberty Mutual Insurance Co.
7.697% due 10/15/97 1,850 1,548
Lincoln National Corp.
7.250% due 05/15/05 450 441
6.500% due 03/15/08 250 229
7.000% due 03/15/18 600 543
Loral Corp.
7.000% due 09/15/23 900 760
Lowes Cos., Inc.
6.875% due 02/15/28 1,520 1,338
Manufacturers & Traders Trust Co.
7.000% due 07/01/05 525 499
Marsh & McLennan Cos., Inc.
6.625% due 06/15/04 650 630
Martin Marietta Corp.
7.000% due 03/15/11 325 289
Mattel, Inc.
6.000% due 07/15/03 1,100 1,038
MCI WorldCom, Inc.
6.400% due 08/15/05 600 575
6.950% due 08/15/28 1,300 1,180
Mercantile Bancorp.
7.050% due 06/15/04 1,000 983
Merck & Co., Inc.
Series B
5.760% due 05/03/37 (MTN) 1,575 1,572
Merrill Lynch & Co.
6.000% due 02/12/03 550 533
Series 144
6.154% due 10/01/03 (MTN)(c) 5,250 5,243
Mirage Resorts, Inc.
6.625% due 02/01/05 1,070 978
Morgan Stanley Dean Witter & Co.
7.125% due 01/15/03 1,000 999
Nabisco, Inc.
6.375% due 02/01/35 1,000 929
Natexix Ambs Co., LLC
Series A
8.440% due 12/29/49 (g) 325 306
National City Corp.
5.750% due 02/01/09 1,200 1,050
New England Telephone & Telegraph Co.
7.875% due 11/15/29 430 438
News America Holdings, Inc.
8.875% due 04/26/23 575 606
7.750% due 01/20/24 600 563
133 Fixed Income I Fund
<PAGE>
Fixed Income I Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
----------- -----------
Norfolk Southern Corp.
6.950% due 05/01/02 950 946
Northern Trust Corp.
7.100% due 08/01/09 1,415 1,373
Northwestern Bell Telephone Co.
7.750% due 05/01/30 455 433
Norwest Corp.
Series H
6.750% due 06/15/07 (MTN) 150 143
Norwest Financial, Inc.
6.375% due 11/15/01 750 743
6.250% due 11/01/02 425 416
6.375% due 11/15/03 650 633
NRG Energy, Inc.
7.500% due 06/01/09 680 624
NYNEX Corp.
9.550% due 05/01/10 500 544
Paine Webber Group, Inc.
6.375% due 05/15/04 300 285
Panamsat Corp.
6.125% due 01/15/05 700 620
Pepsi Bottling Group, Inc.
Series B
7.000% due 03/01/29 500 452
Philip Morris Cos., Inc.
6.150% due 03/15/00 2,900 2,895
7.000% due 07/15/05 1,700 1,612
6.950% due 06/01/06 380 374
7.200% due 02/01/07 2,000 1,873
7.650% due 07/01/08 395 377
Pitney Bowes Credit Corp.
8.550% due 09/15/09 780 839
PNC Funding Corp.
6.875% due 07/15/07 1,100 1,048
Praxair, Inc.
6.850% due 06/15/05 880 849
Procter & Gamble Co.
6.600% due 12/15/04 635 628
Prologis Trust
6.700% due 04/15/04 750 715
Provident Cos., Inc.
6.375% due 07/15/05 1,200 1,119
Ralston Purina Co.
7.875% due 06/15/25 845 781
Raytheon Co.
6.300% due 03/15/05 1,020 962
Safeco Capital Trust I
8.072% due 07/15/37 300 266
Safeco Corp.
7.020% due 09/18/02 (MTN) 1,050 1,050
Safeway, Inc.
7.000% due 09/15/02 900 896
6.050% due 11/15/03 500 477
7.250% due 09/15/04 1,075 1,065
Seagram (Joseph) & Sons, Inc.
7.600% due 12/15/28 1,100 1,036
Sears Roebuck Acceptance Corp.
7.030% due 06/04/03 (MTN) 800 783
6.750% due 01/15/28 950 774
Security Capital Group, Inc.
6.950% due 06/15/05 700 641
Shopping Center Associates
6.750% due 01/15/04 750 714
Societe Generale
7.850% due 04/29/49 (g) 675 651
Southern California Edison Co.
6.375% due 01/15/06 415 396
6.650% due 04/01/29 500 432
Spieker Properties, L.P.
8.000% due 07/19/05 (MTN) 800 800
Sprint Capital Corp.
6.125% due 11/15/08 1,100 997
6.900% due 05/01/19 1,385 1,260
Suntrust Banks Inc.
6.250% due 06/01/08 160 148
SunTrust Banks, Inc.
7.375% due 07/01/02 575 578
Tele-Communications Inc.
8.650% due 09/15/04 225 239
9.800% due 02/01/12 425 497
Temple Inland, Inc.
7.250% due 09/15/04 575 560
Texaco Capital, Inc.
9.750% due 03/15/20 225 269
8.875% due 09/01/21 440 492
Time Warner, Inc.
7.975% due 08/15/04 450 457
8.110% due 08/15/06 900 926
8.180% due 08/15/07 900 925
6.875% due 06/15/18 1,050 942
6.625% due 05/15/29 975 831
Times Mirror Co.
7.450% due 10/15/09 475 472
Transamerica Finance Corp.
7.250% due 08/15/02 1,300 1,297
TRW, Inc.
6.625% due 06/01/04 875 842
7.125% due 06/01/09 750 718
U.S. Bancorp
Series J
6.000% due 05/15/04 (MTN) 700 664
Fixed Income I Fund 134
<PAGE>
Fixed Income I Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
----------- -----------
Union Carbide Corp.
7.875% due 04/01/23 835 833
Union Oil Co.
9.400% due 02/15/11 (MTN) 390 434
Union Pacific Corp.
7.600% due 05/01/05 350 351
Union Pacific Railroad Trust Pass-thru
Certificate
Series 1996-A2
7.060% due 05/15/03 450 446
Union Planters Bank
6.500% due 03/15/18 700 619
United Technologies Corp.
7.000% due 09/15/06 800 785
8.750% due 03/01/21 445 489
US Bank National Association Minnesota
6.572% due 12/19/01 (c) 3,000 3,018
5.625% due 11/30/05 1,000 915
US West Communications, Inc.
7.200% due 11/10/26 1,500 1,310
USX Marathon Group
8.500% due 03/01/23 930 965
Virginia Electric & Power Co.
8.750% due 04/01/21 335 333
Wachovia Corp.
6.800% due 06/01/05 280 273
Wal-Mart Stores, Inc.
Series 1994-B3
8.800% due 12/30/14 360 389
Waste Management, Inc.
6.375% due 12/01/03 750 676
Wells Fargo & Co.
6.625% due 07/15/04 1,500 1,464
6.875% due 04/01/06 500 487
Westdeutsche Landesbank NY
6.050% due 01/15/09 5,000 4,457
Westvaco Corp.
6.850% due 11/15/04 1,200 1,171
Willamette Industries, Inc.
7.850% due 07/01/26 750 740
Wisconsin Central Transportation Corp.
6.625% due 04/15/08 1,190 1,089
World Financial Properties Tower
Series 1996 WBF-B
6.910% due 09/01/13 1,246 1,165
-----------
226,195
-----------
Eurodollar Bonds - 2.0%
Australian Gas Light Co.
6.400% due 04/15/08 1,350 1,225
Banco Latinoamericano de Exportaciones SA
6.500% due 04/02/01 1,400 1,393
7.100% due 11/30/01 500 500
Bear Stearns Co., Inc.
6.515% due 03/18/05 (MTN)(c) 1,300 1,289
Countrywide Home Loans, Inc.
6.371% due 06/03/03 (c) 3,200 3,167
Diageo Capital PLC
6.625% due 06/24/04 400 392
Merita Bank, Ltd.
7.150% due 12/29/49 (g) 250 242
7.500% due 12/29/49 (g) 675 641
Nationsbank Corp.
6.271% due 06/17/02 (MTN)(c) 3,000 2,994
Ontario, Province of
7.375% due 01/27/03 450 455
5.500% due 10/01/08 1,200 1,063
Poland, Government of
3.000% due 10/27/24 (c) 1,000 618
Sanwa Finance Aruba AEC
8.350% due 07/15/09 3,000 3,011
SCL Term Aereo Santiago SA
6.950% due 07/01/12 3,000 2,624
Skandinaviska Enskilda Banken
8.125% due 09/06/49 (g) 375 354
Tyco International Group SA
6.875% due 09/05/02 1,500 1,478
-----------
21,446
-----------
Mortgage-Backed Securities - 38.4%
ACLC Franchise Loan Receivables 1997
Pass-thru Class A1
7.120% due 03/15/12 836 815
Capital Equipment Receivables Trust
Series 1996-1 Class A4
6.280% due 06/15/00 173 173
Chase Commercial Mortgage Securities Corp.
Series 1997-1 Class E
7.370% due 12/19/07 (c) 1,800 1,633
COMM Mortgage Trust
Series 1999-1 Class A1
6.145% due 02/15/08 2,844 2,723
Credit Suisse First Boston Mortgage
Securities Corp.
Series 1999-C1 Class A2
7.290% due 09/15/09 1,620 1,591
135 Fixed Income I Fund
<PAGE>
Fixed Income I Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
----------- -----------
DLJ Commercial Mortgage Corp.
Series 1998-CF2 Class A1A
5.880% due 11/12/31 1,072 1,012
Series 1999-CG1 Class A1A
6.080% due 07/10/08 (c) 1,462 1,392
DLJ Mortgage Acceptance Corp.
Series 1996-CF1 Class A1B
7.580% due 02/12/06 2,000 2,024
Series 1999-CG3 Class A1B
7.340% due 09/10/09 1,565 1,547
Federal Home Loan Mortgage Corp. (b)
6.000% 15 Year TBA 5,250 4,984
6.000% 30 Year Gold TBA 10,820 9,907
6.500% 30 Year Gold TBA 3,800 3,583
7.500% 30 Year TBA 155 153
8.000% 30 Year TBA 4,685 4,730
Federal Home Loan Mortgage Corp.
Series K Class 5
7.760% due 05/01/12 944 954
Federal Home Loan Mortgage Corp.
Participation Certificate
6.500% due 2003 259 256
7.000% due 2003 8 8
5.500% due 2006 6,069 5,727
7.000% due 2008 272 270
6.500% due 2009 297 290
8.000% due 2009 86 87
6.000% due 2010 192 184
6.500% due 2010 60 59
7.000% due 2010 1,458 1,448
7.500% due 2010 475 479
8.000% due 2010 346 351
6.000% due 2011 1,941 1,855
7.000% due 2011 156 154
7.500% due 2011 22 22
6.000% due 2012 167 159
7.500% due 2012 1,090 1,098
6.000% due 2013 1,017 966
5.500% due 2014 3,429 3,182
6.000% due 2014 845 803
6.500% due 2014 1,032 1,001
7.500% due 2014 952 959
12.000% due 2014 156 169
9.000% due 2016 738 765
12.500% due 2016 82 91
9.000% due 2017 18 18
9.000% due 2018 1,148 1,199
9.000% due 2020 710 749
6.500% due 2024 3,737 3,557
7.500% due 2024 92 91
6.500% due 2025 315 299
8.000% due 2025 736 745
8.500% due 2025 503 517
9.000% due 2025 444 462
9.000% due 2026 9 10
8.500% due 2027 1,372 1,409
6.000% due 2028 754 690
6.500% due 2028 758 714
6.000% due 2029 152 139
6.500% due 2029 11,112 10,476
7.500% due 2029 2,557 2,530
Federal National Mortgage Association
Pools
7.000% due 2000 185 185
8.000% due 2002 319 321
7.000% due 2003 293 294
7.500% due 2003 465 465
8.000% due 2003 135 136
6.500% due 2004 6,549 6,467
8.000% due 2004 29 30
8.000% due 2005 13 13
7.200% due 2007 974 965
10.500% due 2010 3 3
6.500% due 2011 516 502
7.000% due 2011 135 134
8.000% due 2011 88 89
6.500% due 2012 676 656
7.000% due 2012 333 329
7.500% due 2012 (c) 70 70
7.500% due 2012 353 355
6.000% due 2013 4,559 4,328
5.500% due 2014 2,268 2,104
6.000% due 2014 1,073 1,018
6.500% due 2014 (c) 283 275
6.500% due 2014 399 387
7.000% due 2014 2,718 2,686
7.500% due 2017 20 20
8.000% due 2017 28 29
9.000% due 2017 277 289
8.000% due 2019 457 463
7.500% due 2022 22 21
7.500% due 2023 54 54
6.500% due 2024 3,527 3,358
7.500% due 2024 1,716 1,704
8.000% due 2024 2,132 2,153
8.500% due 2024 436 448
7.000% due 2025 763 740
7.500% due 2025 581 576
Fixed Income I Fund 136
<PAGE>
Fixed Income I Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
----------- -----------
8.500% due 2025 810 831
7.000% due 2026 1,067 1,035
7.500% due 2026 375 372
7.000% due 2027 355 344
7.500% due 2027 871 865
8.000% due 2027 615 621
8.500% due 2027 711 730
9.000% due 2027 15 16
6.000% due 2028 11,768 10,764
6.500% due 2028 506 477
7.500% due 2028 2,309 2,289
8.000% due 2028 1,690 1,704
8.500% due 2028 936 961
6.000% due 2029 15,604 14,273
6.500% due 2029 29,866 28,139
7.000% due 2029 17,758 17,170
7.500% due 2029 47 47
Federal National Mortgage Association (b)
6.500% 15 Year TBA 8,065 7,823
7.000% 15 Year TBA 160 158
5.500% 30 Year TBA 5,000 4,465
6.500% 30 Year TBA 7,405 6,977
7.000% 30 Year TBA 4,050 3,916
7.500% 30 Year TBA 19,280 19,063
8.000% 30 Year TBA 620 625
Federal National Mortgage Association Aces
6.250% due 01/25/08 1,250 1,165
Series 1997-M5 Class B
6.650% due 08/25/07 1,720 1,670
Series 1999-M4 Class A
7.354% due 12/25/09 2,118 2,092
Federal National Mortgage Association
Principal Only Strip
Zero Coupon due 03/ 01/20 88 70
Federal National Mortgage Association REMIC
Series 1997-55 Class ZA
7.000% due 04/18/27 5,919 5,188
Series 1992-158 Class ZZ
7.750% due 08/25/22 522 494
First Union Lehman Brothers Commercial Trust
Series 1997-C1 Class C
7.440% due 04/18/07 950 929
GMAC Commercial Mortgage Securities, Inc.
Series 1996-C1 Class A2A
6.790% due 09/15/03 2,062 2,046
Series 1999-C1 Class A1
5.830% due 05/15/33 2,095 1,977
Series 1999-C2 Class A1
6.570% due 09/15/33 3,206 3,106
Government National Mortgage Association
8.500% due 2005 26 27
6.500% due 2008 74 72
6.500% due 2009 583 570
6.500% due 2010 134 131
7.000% due 2011 132 131
9.000% due 2016 1,055 1,113
9.500% due 2016 84 89
8.000% due 2017 68 69
9.000% due 2017 2,100 2,216
9.000% due 2020 3 3
10.500% due 2020 558 607
10.500% due 2021 64 70
7.000% due 2022 166 161
8.000% due 2022 285 289
8.500% due 2022 34 35
6.125% due 2023 (c) 1,731 1,758
6.500% due 2023 688 652
7.000% due 2023 8,287 8,059
7.500% due 2023 5,884 5,847
6.125% due 2024 (c) 1,724 1,752
7.000% due 2024 17,195 16,711
7.500% due 2024 2,151 2,136
8.000% due 2024 829 839
8.000% due 2025 738 746
6.500% due 2026 3,188 3,012
7.000% due 2026 847 820
6.500% due 2027 116 109
7.000% due 2027 201 194
8.000% due 2027 550 556
6.000% due 2028 4,658 4,233
6.500% due 2028 5,024 4,718
7.000% due 2028 9,290 8,970
8.500% due 2028 540 555
6.000% due 2029 4,107 3,735
6.500% due 2029 6,675 6,269
7.000% due 2029 8,018 7,743
7.500% due 2029 (c) 2,855 2,823
7.500% due 2029 1,732 1,713
8.000% due 2029 11,114 11,225
137 Fixed Income I Fund
<PAGE>
Fixed Income I Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
----------- -----------
Government National Mortgage
Association (b)
6.000% 30 Year TBA 2,400 2,179
6.500% 30 Year TBA 15,040 14,114
7.000% 30 Year TBA 4,990 4,818
8.000% 30 Year TBA 7,345 7,418
Greenwich Capital Acceptance, Inc.
Mortgage Pass-thru Certificate
Series 1993 Class LB-1
6.925% due 04/25/23 (c) 252 251
GS Mortgage Securities Corp. II
Series 1997-GL Class A2A
6.940% due 07/13/30 364 363
Series 1997-GL Class A2B
6.860% due 07/13/30 1,550 1,530
Guaranteed Export Trust
Series 1996-A
6.550% due 06/15/04 585 576
Housing Securities, Inc.
Series 1994-2 Class A1
6.500% due 07/25/09 717 698
LB Commercial Conduit Mortgage Trust
Series 1999-C2 Class A1
7.105% due 07/15/08 956 947
Merrill Lynch Mortgage Investors, Inc.
Series 1995-C2 Class D
7.878% due 06/15/21 (c) 460 455
Series 1998-C3 Class A1
5.650% due 12/15/30 1,408 1,327
Merrill Lynch Mortgage Investors, Inc.
Pass-thru Certificates
Series 1999-C1 Class A2
7.560% due 09/15/09 1,475 1,465
Mortgage Capital Funding, Inc.
Series 1996-MC1 Class A2B
7.900% due 02/15/06 950 975
Nationslink Funding Corp.
Series 1999-2 Class A2C
7.229% due 10/20/08 1,840 1,840
Series 1999-2 Class A3
7.181% due 12/20/06 (c) 1,763 1,744
Prudential Home Mortgage Securities Co.
Series 1992-38 Class A8
6.950% due 11/25/22 1,640 1,484
Series 1993-52 Class A1
7.759% due 11/25/23 (c) 286 285
Residential Accredited Loans, Inc.
Series 1996-QS1 Class A4
6.900% due 01/25/26 1,268 1,182
Residential Funding Mortgage Securities I
REMIC
Series 1997-S17 Class A5
7.000% due 11/25/27 5,000 4,664
Resolution Trust Corp.
Series 1995 - C1 Class D
6.900% due 02/25/27 900 869
Salomon Brothers Mortgage Securities VII,
Inc. Mortgage Pass-thru Certificate
Series 1994-16 Class A
8.384% due 11/25/24 (c) 540 550
Small Business Investment Cos.
Series 1999-P10B Class 1
7.540% due 08/10/09 5,000 4,899
Structured Asset Mortgage Investments, Inc.
REMIC
Series 1998-9 Class 1A3
6.250% due 11/25/28 5,000 4,402
Structured Asset Securities Corp.
Series 1997-LLI Class A1
6.790% due 06/12/04 2,359 2,340
-----------
417,411
-----------
Non-US Bonds - 0.4%
Banque Centrale de Tunisie
7.500% due 08/06/09 TND 2,500 2,450
Korea Development Bank
7.375% due 09/17/04 KRW 1,000 981
New Zealand, Government of
10.000% due 03/15/02 NZD 600 335
Series 403
5.500% due 04/15/03 NZD 600 299
-----------
4,065
-----------
United States Government
Agencies - 9.7%
Federal Home Loan Bank
5.625% due 03/19/01 9,400 9,299
6.450% due 03/13/02 2,625 2,603
5.233% due 11/17/03 3,125 2,956
5.790% due 04/27/09 3,980 3,621
Fixed Income I Fund 138
<PAGE>
Fixed Income I Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
----------- -----------
Federal Home Loan Mortgage Corp.
5.750% due 06/15/01 5,130 5,080
6.250% due 10/15/02 1,865 1,848
6.300% due 06/01/04 3,000 2,922
5.750% due 03/15/09 1,825 1,667
6.625% due 09/15/09 9,055 8,797
6.750% due 09/15/29 5,660 5,383
Federal National Mortgage Association
6.250% due 11/15/02 900 892
6.250% due 11/20/02 (MTN) 1,955 1,917
5.750% due 04/15/03 2,975 2,889
6.100% due 06/26/03 (MTN) 660 640
6.010% due 07/17/03 (MTN) 2,000 1,935
5.125% due 02/13/04 6,000 5,641
5.625% due 05/14/04 (d) 9,325 8,911
6.940% due 03/19/07 (MTN) 1,550 1,496
6.900% due 08/21/07 (MTN) 3,650 3,514
6.500% due 04/29/09 460 430
6.400% due 05/14/09 5,700 5,331
6.625% due 09/15/09 3,285 3,191
6.080% due 09/01/28 (MTN) 2,475 2,145
6.210% due 08/06/38 3,445 2,974
Series B
5.820% due 07/19/01 (MTN) 6,850 6,776
Government Backed Trust Certificates
Class 1-C
9.250% due 11/15/01 902 929
Series T-3
9.625% due 05/15/02 (c) 437 450
Resolution Funding Corp.
8.875% due 07/15/20 2,275 2,713
8.625% due 01/15/21 880 1,027
8.625% due 01/15/30 240 291
Tennessee Valley Authority
Series A
6.375% due 06/15/05 3,260 3,184
Series E
6.250% due 12/15/17 640 578
6.750% due 11/01/25 3,320 3,079
-----------
105,109
-----------
United States Government Treasuries - 15.4%
United States Treasury Bond
Principal Strip
Zero Coupon due 02/15/19 8,300 2,282
United States Treasury Bonds
10.750% due 02/15/03 150 168
10.750% due 08/15/05 1,675 1,998
10.375% due 11/15/09 2,130 2,450
11.750% due 02/15/10 1,900 2,310
10.000% due 05/15/10 2,365 2,712
12.750% due 11/15/10 14,490 18,682
13.875% due 05/15/11 3,365 4,598
14.000% due 11/15/11 1,590 2,218
10.375% due 11/15/12 6,250 7,598
12.000% due 08/15/13 8,895 11,878
13.250% due 05/15/14 2,670 3,847
12.500% due 08/15/14 2,385 3,332
10.625% due 08/15/15 550 749
9.250% due 02/15/16 3,660 4,518
8.750% due 05/15/17 505 603
8.875% due 08/15/17 8,230 9,947
8.875% due 02/15/19 12,300 14,971
8.125% due 08/15/19 20 23
8.125% due 05/15/21 (d) 8,200 9,399
8.000% due 11/15/21 8,520 9,669
6.500% due 11/15/26 580 566
6.625% due 02/15/27 (d) 2,350 2,329
6.375% due 08/15/27 6,520 6,262
6.125% due 11/15/27 4,085 3,802
United States Treasury Notes
6.250% due 04/30/01 5,345 5,349
5.625% due 05/15/01 1,995 1,980
6.625% due 06/30/01 490 493
7.875% due 08/15/01 10,145 10,399
5.625% due 09/30/01 350 347
6.375% due 09/30/01 3,495 3,502
6.250% due 10/31/01 395 395
7.500% due 11/15/01 1,185 1,211
5.875% due 11/30/01 80 79
6.125% due 12/31/01 2,000 1,996
6.250% due 02/28/02 1,820 1,819
6.625% due 04/30/02 4,740 4,776
6.250% due 06/30/02 45 45
3.375% due 01/15/07 1,909 1,797
3.625% due 01/15/08 4,304 4,097
3.875% due 01/15/09 2,825 2,729
-----------
167,925
-----------
Yankee Bonds - 2.4%
Abbey National PLC
6.700% due 06/29/49 (g) 2,325 2,114
African Development Bank
9.750% due 12/15/03 425 461
6.750% due 10/01/04 400 393
6.875% due 10/15/15 775 711
8.800% due 09/01/19 535 601
Asian Development Bank
6.250% due 10/24/05 400 382
Canadian National Railway Co.
6.800% due 07/15/18 555 500
139 Fixed Income I Fund
<PAGE>
Fixed Income I Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
----------- -----------
Carnival Corp.
7.050% due 05/15/05 650 633
Carter Holt Harvey, Ltd.
7.625% due 04/15/02 500 499
8.875% due 12/01/04 350 361
Diageo Capital PLC
6.125% due 08/15/05 1,850 1,750
Hydro Quebec
Series GH
8.250% due 04/15/26 605 630
International American Development Bank
6.950% due 08/01/26 425 428
Korea Development Bank
6.250% due 05/01/00 2,000 2,033
Manitoba, Province of
Series CD
9.250% due 04/01/20 335 397
National Westminster Bank PLC
7.750% due 04/29/49 (g) 1,600 1,537
New Brunswick, Province of
7.125% due 10/01/02 500 501
9.750% due 05/15/20 320 389
Newfoundland, Province of
10.000% due 12/01/20 150 183
Noranda Forest, Inc.
6.875% due 11/15/05 350 323
Nova Scotia, Province of
9.125% due 05/01/21 685 776
Pemex Finance, Ltd.
6.125% due 11/15/03 2,000 1,951
Quebec, Province of
7.125% due 02/09/24 1,145 1,063
7.500% due 09/15/29 1,550 1,503
Royal Caribbean Cruises, Ltd.
7.250% due 03/15/18 1,300 1,174
7.500% due 10/15/27 200 179
Saskatchewan, Province of
6.625% due 07/15/03 100 99
8.000% due 07/15/04 1,290 1,334
Stagecoach Holdings PLC
8.625% due 11/15/09 800 794
Trans-Canada Pipelines, Ltd.
7.150% due 06/15/06 1,000 971
Tyco International Group SA
6.375% due 06/15/05 800 748
United News & Media PLC
7.250% due 07/01/04 1,300 1,268
-----------
26,686
-----------
Total Long-Term Investments
(cost $1,092,248) 1,058,557
-----------
Notional
Amount
(000)
$
-----------
Options Purchased - 0.0%
United States Treasury Bills (e)*
May 100.65 Call 3,100 8
United States Treasury Notes (e)*
Feb 99.21 Call 2,084 3
Feb 98.73 Call 2,272 5
-----------
Total Options Purchased
(cost $91) 16
-----------
Number
of
Shares
-----------
Preferred Stocks - 0.2%
Banco Bilbao Vizcaya
International - ADR 10,000 253
Credit Lyonnais Capital S.C.A. - ADR 40,000 980
Equity Office Properties Trust
Series B 27,800 1,084
-----------
Total Preferred Stocks
(cost $2,759) 2,317
-----------
Fixed Income I Fund 140
<PAGE>
Fixed Income I Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
----------- -----------
Short-Term Investments - 10.0%
Federal Home Loan Bank Corp.
Discount Note
5.330% due 02/09/00 (a)(f) 2,900 2,883
Federal Home Loan Mortgage Corp.
Discount Note
5.480% due 01/25/00 (a)(f) 3,190 3,176
5.590% due 01/25/00 (a)(f) 775 771
5.600% due 01/25/00 (a)(f) 3,020 3,006
Federal National Mortgage Association
Discount Note
5.590% due 01/19/00 (a)(f) 3,225 3,216
5.590% due 04/10/00 (f) 2,600 2,559
Frank Russell Investment Company Money
Market Fund,
due on demand (a) 93,082 93,082
-----------
Total Short-Term Investments
(cost $108,693) 108,693
-----------
Total Investments - 107.6%
(identified cost $1,203,791) 1,169,583
Other Assets and Liabilities,
Net, Including Options Written - (7.6%) (82,271)
-----------
Net Assets - 100.0% 1,087,312
===========
Notional Market
Amount Value
(000) (000)
$ $
----------- -----------
Options Written
Government National Mortgage Association*
Feb 97.98 Call 3,020 10
Feb 97.61 Call 3,215 12
United States Treasury Bills*
May 104.66 Call 3,100 1
May 97.28 Put 3,100 53
United States Treasury 30 Year Bonds*
Feb 93.84 Put 2,000 112
Feb 93.80 Put 2,000 111
-----------
Total Liability for Options Written
(premiums received $147) 299
===========
Forward Foreign Currency Exchange Contracts
Unrealized
Contracts to In Exchange Appreciation
Deliver For Settlement (Depreciation)
(000) (000) Date (000)
------------ ----------- ---------- -----------
EUR 2,491 USD 2,656 01/24/00 $ 143
===========
* $100,000 notional amount represents 1 contract.
(a) At amortized cost, which approximates market.
(b) Forward commitment.
(c) Adjustable or floating rate security.
(d) Held as collateral in connection with options written by the Fund.
(e) Nonincome-producing security.
(f) Rate noted is yield-to-maturity from date of acquisition.
(g) Perpetual floating rate note.
Abbreviations:
ADR - American Depositary Receipt
MTN - Medium Term Note
REMIC - Real Estate Mortgage Investment Conduit
TBA - To Be Announced Security
Foreign Currency Abbreviations:
EUR - Euro dollar
KRW - South Korean won
NZD - New Zealand dollar
TND - Tunisian dinar
USD - U.S. dollar
See accompanying notes which are an integral part of the financial statements.
141 Fixed Income I Fund
<PAGE>
Fixed Income I Fund
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Amounts in thousands (except per share amounts) December 31, 1999
<S> <C> <C>
Assets
Investments at market (identified cost $1,203,791) ................... $ 1,169,583
Unrealized appreciation on forward foreign currency exchange contracts 143
Receivables:
Dividends and interest ........................................... 12,716
Investments sold (regular settlement) ............................ 11,666
Investments sold (delayed settlement) ............................ 6,278
Fund shares sold ................................................. 4,106
Prepaid expenses ..................................................... 6
-----------
Total assets .................................................. 1,204,498
Liabilities
Payables:
Investments purchased (regular settlement) ....................... $ 7,907
Investments purchased (delayed settlement) ....................... 108,010
Fund shares redeemed ............................................. 719
Accrued fees to affiliates ....................................... 96
Other accrued expenses ........................................... 155
Options written, at market value (premiums received $147) ............ 299
-----------
Total liabilities ............................................. 117,186
-----------
Net Assets ........................................................... $ 1,087,312
===========
Net Assets Consist of:
Undistributed net investment income .................................. $ 548
Accumulated net realized gain (loss) ................................. (17,447)
Unrealized appreciation (depreciation) on:
Investments ...................................................... (34,208)
Options written .................................................. (152)
Foreign currency-related transactions ............................ 143
Shares of beneficial interest ........................................ 536
Additional paid-in capital ........................................... 1,137,892
-----------
Net Assets ........................................................... $ 1,087,312
===========
Net Asset Value, offering and redemption price per share:
Class E ($35,949,801 divided by 1,771,329 shares of
$.01 par value shares of beneficial interest outstanding) ..... $ 20.30
===========
Class I ($1,051,362,168 divided by 51,873,318 shares of
$.01 par value shares of beneficial interest outstanding) ..... $ 20.27
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Fixed Income I Fund 142
<PAGE>
Fixed Income I Fund
Statement of Operations
<TABLE>
<CAPTION>
Amounts in thousands Year Ended December 31, 1999
<S> <C> <C>
Investment Income
Interest ......................................................... $ 61,879
Dividends from Money Market Fund ................................. 5,216
Dividends ........................................................ 338
-----------
Total investment income ....................................... 67,433
Expenses
Advisory fees .................................................... $ 2,514
Administrative fees .............................................. 523
Custodian fees ................................................... 530
Transfer agent fees .............................................. 339
Professional fees ................................................ 38
Registration fees ................................................ 128
Shareholder servicing fees - Class E ............................. 53
Trustees' fees ................................................... 6
Miscellaneous .................................................... 60
-----------
Total expenses ................................................ 4,191
-----------
Net investment income ................................................ 63,242
-----------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ...................................................... (19,448)
Options written .................................................. 410
Foreign currency-related transactions ............................ 60 (18,978)
-----------
Net change in unrealized appreciation (depreciation) on:
Investments ...................................................... (54,674)
Options written .................................................. (192)
Foreign currency-related transactions ............................ 143 (54,723)
----------- -----------
Net realized and unrealized gain (loss) .............................. (73,701)
-----------
Net increase (decrease) in net assets from operations ................ $ (10,459)
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
143 Fixed Income I Fund
<PAGE>
Fixed Income I Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Amounts in thousands Years Ended Deceber 31, 1999
1999 1998
----------- -----------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ......................................... $ 63,242 $ 54,878
Net realized gain (loss) ...................................... (18,978) 19,960
Net change in unrealized appreciation (depreciation) .......... (54,723) (1,058)
----------- -----------
Net increase (decrease) in net assets from operations ...... (10,459) 73,780
----------- -----------
Distributions
From net investment income
Class E .................................................... (1,388) --
Class I .................................................... (61,700) (55,645)
From net realized gain
Class I .................................................... (859) (9,092)
----------- -----------
Net decrease in net assets from distributions .......... (63,947) (64,737)
----------- -----------
Share Transactions
Net increase (decrease) in net assets from share transactions . 183,227 171,196
----------- -----------
Total net increase (decrease) in net assets ....................... 108,821 180,239
Net Assets
Beginning of period ........................................... 978,491 798,252
----------- -----------
End of period (including undistributed net investment income of
$548 at December 31, 1999) ................................. $ 1,087,312 $ 978,491
=========== ===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Fixed Income I Fund 144
<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 Operations
Net investment income (a) ................................... .74
Net realized and unrealized gain (loss) ..................... (.81)
----------
Total income from operations ............................. (.07)
----------
Distributions
From net investment income .................................. (.88)
----------
Net Asset Value, End of Period .................................. $ 20.30
==========
Total Return (%)(b) ............................................. (.32)
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) .................... 35,950
Ratios to average net assets (%)(c):
Operating expenses ....................................... .66
Net investment income .................................... 5.79
Portfolio turnover rate (%) ................................. 138.69
* For the period May 14, 1999 (commencement of sale) to December 31, 1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized
145 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
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ....... $ 21.76 $ 21.51 $ 20.99 $ 21.59 $ 19.59
----------- ----------- ----------- ----------- -----------
Income From Operations
Net investment income (a) .............. 1.28 1.32 1.37 1.38 1.42
Net realized and unrealized gain (loss) (1.50) .45 .54 (.62) 2.02
----------- ----------- ----------- ----------- -----------
Total income from operations ........ (.22) 1.77 1.91 .76 3.44
----------- ----------- ----------- ----------- -----------
Distributions
From net investment income ............. (1.25) (1.31) (1.39) (1.36) (1.44)
From net realized gain ................. (.02) (.21) -- -- --
----------- ----------- ----------- ----------- -----------
Total distributions ................. (1.27) (1.52) (1.39) (1.36) (1.44)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ............. $ 20.27 $ 21.76 $ 21.51 $ 20.99 $ 21.59
=========== =========== =========== =========== ===========
Total Return (%)(b) ........................ (1.04) 8.37 9.42 3.75 18.03
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 1,051,362 978,491 798,252 662,899 638,317
Ratios to average net assets (%)(b):
Operating expenses .................. .39 .39 .42 .42 .35
Net investment income ............... 6.05 6.03 6.54 6.57 6.82
Portfolio turnover rate (%) ............ 138.69 226.70 165.81 147.31 138.05
</TABLE>
(a) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) 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.
Fixed Income I Fund 146
<PAGE>
Fixed Income III Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: 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.
Invests in: Fixed-income securities.
Strategy: The Fund uses a multi-style, multi-manager strategy intended to
achieve higher returns by assuming the additional risk of investment in
non-investment grade US fixed income securities, and foreign bonds including
emerging markets debt in addition to US investment grade fixed income
instruments. The Fund employed the investment management services of four
managers, each employing a distinct approach to the Broad Market- Sector
Rotation style.
[The following table was depicted as a mountain chart in the printed material.]
Fixed III - LB Aggregate ** Lipper(R)
Class I ++ Intermediate ++++
Yearly periods
ended
December 31
Inception* $10,000 $10,000 $10,000
1993 $11,022 $10,768 $10,950
1994 $10,593 $10,454 $10,505
1995 $12,499 $12,386 $12,340
1996 $13,109 $12,835 $12,732
1997 $14,372 $14,076 $13,807
1998 $15,350 $15,297 $14,833
1999 $15,306 $15,172 $14,643
- --------------------------------------------------------------------------------
Total $102,251 $100,987 $599,890
================================================================================
Fixed Income III Fund - Class I
Periods Ended
12/31/99 Growth of $10,000 Total Return
- ------------- ----------------- ------------
1 Year $9,971 (0.29)%
5 Years $14,449 7.63%ss.
Inception* $15,306 6.34%ss.
Fixed Income III Fund - Class E++++++
Periods Ended
12/31/99 Growth of $10,000 Total Return
- ------------- ----------------- ------------
1 Year $9,962 (0.38)%
5 Years $14,436 7.62%ss.
Inception* $15,292 6.33%ss.
Lehman Brothers Aggregate Bond Index
Periods Ended
12/31/99 Growth of $10,000 Total Return
- ------------- ----------------- ------------
1 Year $9,918 (0.82)%
5 Years $14,512 7.73%ss.
Inception* $15,172 6.21%ss.
Lipper(R)Intermediate Investment Grade Debt Funds Benchmark
Periods Ended
12/31/99 Growth of $10,000 Total Return
- ------------- ----------------- ------------
1 Year $9,872 (1.28)%
5 Years $13,834 6.71%ss.
Inception* $14,643 5.60%ss.
147 Fixed Income III Fund
<PAGE>
Fixed Income III Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Performance Review
For the year ended December 31, 1999, the Fixed Income III Fund Class I and
Class E shares reflected losses of 0.29%, and 0.38%, respectively, as compared
to the Lehman Brothers Aggregate Bond Index which fell 0.82%. The Fund's
performance was negatively impacted by the sporadic weakness in the bond market.
Portfolio Highlights
Bonds suffered their worst setback since 1994 and their second worst year in
over two decades. Strong US economic growth led to significantly higher interest
rates and aggressive Fed intervention via actual policy tightening. US
treasuries were most severely impacted relative to other sectors of the US bond
market, with the 30-year US treasury bond losing nearly 15% for the year. Spread
sectors, including corporate bonds and mortgage- and asset-backed securities,
fared better as the post-emerging markets crisis spread widening reversed.
The underlying strategies employed in the Fund fared well during the year.
Emerging markets debt and lower quality corporate issues fared well, as evidence
of continued economic strength helped narrow credit spreads. Duration strategies
were generally neutral for the year, as the Fed's bias towards tightening was
tempered by data showing little inflationary pressure in the US economy. Manager
changes had a slightly negative impact on results due to transition costs.
Professional turnover at Credit Suisse Asset Management led to their replacement
with two new firms. The hires of Miller Anderson & Sherrerd, LLP and Lazard
Asset Management eroded some of the value added through investment strategies,
as the transition led to material turnover and portfolio repositioning.
Top Ten Issuers
(as a percent of Total Investments) December 31, 1999
Government National Mortgage Association 17.2%
Federal Home Loan Mortgage Corp. 11.1
Federal National Mortgage Association 9.6
United States Treasury 8.4
Ford Motor Credit Co. 2.2
Morgan Stanley Dean Witter 1.5
Lehman Brothers Holdings, Inc. 1.4
Goldman Sachs Group, Inc. 1.0
Residential Funding Mortgage Securities 1.0
Citicorp 1.0
Portfolio Characteristics
December 31, 1999
Weighted Average Quality Diversification AA
Weighted Average Years-to-Maturity 6.6 Years
Weighted Average Duration 4.8 Years
Current Yield (SEC 30-day standardized)
Class I 6.3%
Class E 6.5%
Number of Issues 563
Number of Issuers 418
Money Managers Styles
Lazard Asset Management Broad Market-Sector Rotation
Miller Anderson & Sherrerd, LLP Broad Market-Sector Rotation
Pacific Investment Management Co. Broad Market-Sector Rotation
Standish, Ayer & Wood, Inc. Broad Market-Sector Rotation
* Fixed Income III Fund Class I assumes initial investment on January 29,
1993. Lehman Brothers Index comparison for the initial investment began
February 1, 1993. Lipper Index comparison for the initial investment
began January 1, 1993.
** Lehman Brothers Aggregate Bond Index is composed of securities from
Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed
Securities Index, and the Asset-Backed Securities Index. Total return
comprises price appreciation/depreciation and income as a percentage of
the original investment. Indexes are rebalanced monthly by market
capitalization.
++ Prior to April 1, 1995, Fund performance results are reported gross of
investment management fees. For the period following April 1, 1995, Fund
performance results are reported net of investment management fees but
gross of any investment services fees. Information concerning these fees
can be obtained from the Fund's Advisor upon request.
++++ Lipper(R) Intermediate (5-10 Yr.) Investment Grade Debt Funds Benchmark
is the average total return for the universe of funds within the
Intermediate Investment Grade Debt Funds investment objective. The total
return for the funds reflects adjustments for income dividends and
capital gains distributions reinvested as of the ex-dividend dates. This
type of fund which invests at least 65% of assets in U.S. Treasury
Bills, Notes and Bonds with average maturities of five to ten years.
++++++ Fixed Income III Fund Class I performance has been linked with Class E
to provide historical perspective. From May 14, 1999 (commencement of
sale) through the current period, Class E paid shareholder service fees.
Total return would have been lower had these fees been in effect during
prior reporting periods.
ss. Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Fixed Income III Fund 148
<PAGE>
Fixed Income III Fund
Statement of Net Assets
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
------- --------
Long-Term Investments - 103.1%
Asset-Backed Securities - 6.8%
American Express Credit Account
Master Trust
Series 1997-1 Class A
6.400% due 04/15/05 850 839
Arcadia Automobile Receivables Trust
Series 1997-D Class A3
6.200% due 05/15/03 379 378
Caterpillar Financial Asset Trust
Series 1999-A Class A2
5.900% due 03/25/02 400 399
Chase Manhattan Auto Owner Trust
Series 1998-A Class A3
5.700% due 09/17/01 370 370
Chevy Chase Auto Receivables Trust
Series 1997-4 Class A
6.250% due 06/15/04 438 435
Citibank Credit Card Master Trust I
Series 1999-1 Class B
5.750% due 02/15/06 970 915
Citibank Credit Card Master Trust
5.750% due 07/16/07 1,000 509
Cityscape Home Equity Loan Trust
Pass-thru Certificate
Series 1996-2 Class A2
7.200% due 04/25/11 2 2
Conseco Finance
Series 1999-H Class AF1
6.450% due 12/15/29 391 390
Contimortgage Home Equity Loan Trust
Series 1996-4 Class A8
7.220% due 01/15/28 105 103
Cross Country Master
Credit Card Trust II
Series 1999-1 Class A
6.963% due 09/15/05 (b) 400 400
Daimler Benz Vehicle Trust
Series 1998-A Class A3
5.160% due 01/20/03 500 494
Daimler-Benz Vehicle Trust
Series 1998-A Class A2
5.230% due 06/10/00 145 145
Delta Funding Home Equity Loan Trust
Series 1998-4 Class A4F
6.340% due 04/15/26 1,250 1,145
Discover Card Master Trust I
Series 1999-6 Class A
6.850% due 07/17/07 1,200 1,189
DR Structured Finance Corp.
Series 1994-K1 Class A-1
7.600% due 08/15/07 72 69
Duck Automobile Grantor Trust
Step Up Bond
Series 1999-B Class A
6.450% due 04/15/04 (b) 252 251
EQCC Home Equity Loan Trust
Series 1999-1 Class A1F
5.770% due 05/20/10 542 538
Series 1999-3 Class A1F
6.548% due 04/25/10 444 441
First Plus Home Loan Trust
Step Up Bond
Series 1998-5 Class A3
6.060% due 09/10/11 (b) 5,000 4,969
First Security Auto Owner Trust
Series 1998-1 Class A2
5.182% due 06/15/01 156 156
Ford Credit Auto Owner Trust
Series 1998-A Class A3
5.650% due 10/15/01 359 358
Series 1999-B Class A3
5.470% due 09/15/01 800 796
Series 1998-B Class A3
5.850% due 10/15/01 754 752
Series 1999-C Class A3
5.770% due 11/15/01 775 771
Green Tree Financial Corp.
Series 1998-6 Class M1
6.630% due 06/01/30 (b) 1,700 1,538
Series 1998-8 Class B1
7.690% due 09/01/30 1,875 1,691
Series 1999-C Class A1
5.990% due 07/15/30 383 382
Green Tree Lease Finance LLC
Series 1997-1 Class A3
6.170% due 09/20/05 352 351
Greenpoint Manufactured Housing
Series 1999-5 Class A1
6.750% due 04/15/11 393 391
Greenwich Capital Acceptance, Inc.
Series 1994 Class A-1
8.040% due 11/25/24 31 32
Harley-Davidson Eaglemark
Motorcycle Trust
Series 1999-3 Class A1
6.220% due 02/15/04 387 385
149 Fixed Income III Fund
<PAGE>
Fixed Income III Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
------- --------
Honda Auto Receivables Grantor Trust
Series 1997-A Class A
5.850% due 02/15/03 373 371
Household Home Equity Loan Trust
Series 1999-1 Class A1
6.830% due 12/20/16 (b) 378 376
MBNA Master Credit Card Trust
Series 1999-B Class A
5.900% due 08/15/11 500 455
Series 1999-G Class A
6.350% due 12/15/06 800 779
MMCA Auto Owner Trust
Series 1997-1 Class A3
6.080% due 05/15/01 223 223
Series 1999-2 Class A1
6.300% due 06/15/02 442 442
Premier Auto Trust
Series 1998-5 Class A3
5.070% due 07/08/02 400 395
Student Loan Marketing Association
Series 1996-4 Class A1
5.340% due 07/25/04 (b) 1,704 1,693
Series 1997-3 Class A1
5.460% due 04/25/06 (b) 1,851 1,836
Student Loan Marketing Association
Loan Trust
Vanderbilt Mortgage & Finance, Inc.
Series 1998-C Class 1A6
6.750% due 10/07/28 1,000 882
WFS Financial Owner Trust
Series 1997-D Class A3
6.250% due 03/20/02 95 95
Series 1998-C Class A3
5.650% due 11/20/02 (b) 3,000 2,968
---------
32,099
---------
Corporate Bonds and Notes - 27.4%
Adelphia Communications Corp.
9.375% due 11/15/09 45 44
Series B
8.375% due 02/01/08 200 186
Agrilink Foods, Inc.
11.875% due 11/01/08 15 15
Ahold Finance USA, Inc.
6.250% due 05/01/09 850 762
Airgate Pcs, Inc.
Zero Coupon due 10/01/09 (b) 30 17
Albertson's, Inc.
7.450% due 08/01/29 705 672
Allied Waste North America
10.000% due 08/01/09 45 40
American Airlines, Inc.
9.710% due 01/02/07 297 306
Series 90-P
10.600% due 03/04/09 1,013 1,154
American General Institutional Capital
Series B
8.125% due 03/15/46 1,045 1,023
American Restaurant Group, Inc.
Series B
11.500% due 02/15/03 40 32
AMR Corp.
9.950% due 03/07/01 (MTN) 1,000 1,028
Amresco, Inc.
Series 98-A
9.875% due 03/15/05 575 368
Amtrol, Inc.
10.625% due 12/31/06 40 38
AMSC Acquisition Co., Inc.
Series B
12.250% due 04/01/08 30 24
Aramark Corp.
6.750% due 08/01/04 1,365 1,276
Arco Chemical Co.
9.800% due 02/01/20 50 51
AT & T Capital Corp.
7.110% due 09/13/01 (MTN)(b) 2,050 2,049
AT&T Corp.
6.500% due 03/15/29 (f) 435 373
Atlas Air, Inc.
9.250% due 04/15/08 65 62
Banc One Corp.
7.625% due 10/15/26 240 230
8.000% due 04/29/27 90 90
Banesto Delaware, Inc.
8.250% due 07/28/02 1,000 1,011
BankAmerica Corp.
6.141% due 03/05/01 (MTN)(b) 5,000 4,993
Bank United Corp.
8.875% due 05/01/07 1,050 993
Bankboston NA
6.375% due 04/15/08 290 267
Bay View Capital Corp.
9.125% due 08/15/07 320 272
Beneficial Corp.
6.214% due 04/01/02 (MTN)(b) 2,000 2,005
Budget Group, Inc.
9.125% due 04/01/06 40 37
Buhrmann US, Inc.
12.250% due 11/01/09 50 52
Building Materials Corp.
8.000% due 10/15/07 500 455
Fixed Income III Fund 150
<PAGE>
Fixed Income III Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
------- --------
Building One Services Corp.
10.500% due 05/01/09 50 48
Burlington Northern Santa Fe Corp.
6.700% due 08/01/28 325 279
Charter Communications Holdings, LLC
8.250% due 04/01/07 575 535
8.625% due 04/01/09 110 102
Chase Manhattan Corp.
7.000% due 11/15/09 320 308
Cheasapeake Energy
9.625% due 05/01/05 20 19
Chevy Chase Auto Receivables
5.970% due 10/20/04 209 208
Chippac Intl., Ltd.
12.750% due 08/01/09 40 42
Citibank
Zero Coupon due 12/03/01 35 35
Citibank Crc Linked Deposit
1.000% due 02/03/00 (d) 70 69
Citicorp
6.160% due 08/13/02 (MTN)(b) 2,000 2,002
6.375% due 11/15/08 (MTN) 450 416
CMS Energy Corp.
7.500% due 01/15/09 330 298
Coastal Corp.
6.200% due 05/15/04 1,000 949
Columbia/HCA Healthcare Corp.
8.020% due 08/05/02 (MTN) 2,000 1,946
7.500% due 12/15/23 530 420
Comstock Res, Inc.
11.250% due 05/01/07 35 36
Conmed Corp.
9.000% due 03/15/08 300 272
Connecticut Light & Power Co.
7.875% due 10/01/24 665 669
Conoco, Inc.
6.950% due 04/15/29 415 374
Continental Airlines, Inc.
Pass-thru Certificate
Series 9 91-A Class A
6.545% due 02/02/19 65 59
Courtyard Marriott II, Ltd.
Series B
10.750% due 02/01/08 60 59
Crescent Real Estate Equities
7.000% due 09/15/02 850 767
7.500% due 09/15/07 925 735
CSC Holdings, Inc.
7.875% due 12/15/07 585 576
7.250% due 07/15/08 305 288
7.625% due 07/15/18 1,000 924
Csfb Trl Weekly Reset 3
63.420% due 11/30/00 21 21
Delphi Automotive Systems Corp.
7.125% due 05/01/29 250 220
Delta Air Lines, Inc.
Series C
6.650% due 03/15/04 (MTN) 2,000 1,914
Dictaphone Corp.
11.750% due 08/01/05 40 30
Dresser Industries, Inc.
7.600% due 08/15/96 780 744
EOP Operating, L.P.
6.500% due 01/15/04 975 930
ERAC USA Finance Co.
6.350% due 01/15/01 (MTN) 800 792
Exide Corp.
2.900% due 12/15/05 625 328
Extendicare Health Services, Inc.
9.350% due 12/15/07 900 529
First Republic Bancorp
7.750% due 09/15/12 700 620
First Security Corp.
5.875% due 11/01/03 3,000 2,815
Ford Motor Credit Co.
6.341% due 03/05/01 (MTN)(b) 5,000 5,017
6.304% due 05/21/04 (MTN)(b) 3,000 2,986
5.800% due 01/12/09 400 355
Fugi JGB Investment LLC
9.870% due 12/31/49 (e) 450 446
GEO Specialty Chemicals, Inc.
10.125% due 08/01/08 45 41
Global Crossing Holdings, Ltd.
9.125% due 11/15/06 240 237
9.625% due 05/15/08 750 748
Globix Corp.
13.000% due 05/01/05 30 30
Gold Eagle Capital, Ltd.
11.453% due 04/15/01 (b) 250 249
Golden State Holdings
7.125% due 08/01/05 1,515 1,374
Goldman Sachs Group, Inc.
6.331% due 02/22/02 (MTN)(b) 5,000 5,002
7.350% due 10/01/09 (MTN) 650 635
Grove Holdings, LLC Step Up Bond
Zero Coupon due 05/01/09 (b) 250 24
Grove Worldwide, LLC
9.250% due 05/01/08 150 44
GS Escrow Corp.
7.000% due 08/01/03 1,725 1,596
151 Fixed Income III Fund
<PAGE>
Fixed Income III Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
------- --------
GTE Corp.
6.940% due 04/15/28 400 362
GTE North, Inc.
6.900% due 11/01/08 165 160
Hartford Life, Inc.
7.650% due 06/15/27 210 204
Health Care REIT, Inc.
7.625% due 03/15/08 500 440
HMH Properties, Inc.
Series A
7.875% due 08/01/05 250 231
Home Interiors & Gifts, Inc.
10.125% due 06/01/08 50 43
Horseshoe Gaming Holding Corp.
8.625% due 05/15/09 750 722
Household Finance Corp.
5.875% due 02/01/09 415 367
Hyperion Telecommunication, Inc.
12.000% due 11/01/07 15 16
Imperial Capital Trust I
Series B
9.980% due 12/31/26 250 228
Intermedia Communications, Inc.
8.600% due 06/01/08 230 212
Series B
8.500% due 01/15/08 215 196
International Business Machines Corp.
8.375% due 11/01/19 700 767
7.000% due 10/30/25 115 109
Interpool Capital Trust
Series B
9.875% due 02/15/27 355 270
IPC Information Systems, Inc. Step
Up Bond
Zero Coupon due 05/01/08 (b) 35 27
IT Group, Inc.
Series B
11.250% due 04/01/09 40 39
ITC Deltacom, Inc.
11.000% due 06/01/07 35 37
ITT Corp.
6.250% due 11/15/00 3,000 2,942
K Mart Funding Corp.
Series F
8.800% due 07/01/10 175 173
Kaufman and Broad Home Corp.
7.750% due 10/15/04 325 302
Kroger Co.
7.250% due 06/01/09 650 621
LCI International, Inc.
7.250% due 06/15/07 710 683
Lear Corp.
7.960% due 05/15/05 1,525 1,462
Lehman Brothers Holdings, Inc.
6.625% due 04/01/04 1,515 1,467
7.625% due 06/01/06 450 446
6.700% due 11/30/06 (b) 3,000 2,730
Series E
6.904% due 04/02/02 (MTN)(b) 3,000 3,021
Series F
7.000% due 05/15/03 (MTN) 200 197
Lenfest Communications, Inc.
8.375% due 11/01/05 640 651
Level 3 Communications, Inc.
9.125% due 05/01/08 55 52
Lockheed Martin Corp.
6.850% due 05/15/01 5,000 4,966
7.950% due 12/01/05 275 271
Louisiana Land and Exploration Co.
7.650% due 12/01/23 398 379
MCI WorldCom, Inc.
6.125% due 04/15/02 (b) 605 595
McLeodUSA, Inc.
8.125% due 02/15/09 775 723
Merrill Corp.
Series Unit
12.000% due 05/01/09 50 49
Merrill Lynch & Co., Inc.
6.375% due 10/15/08 2,000 1,850
6.875% due 11/15/18 505 459
Midwest Energy, Inc.
9.375% due 10/15/29 100 103
MMI Capital Trust I
Series B
7.625% due 12/15/27 1,300 1,108
Monsanto Co.
6.600% due 12/01/28 370 326
Morgan Stanley Dean Witter
Series C
5.820% due 06/19/00 (MTN)(b) 3,000 2,965
Namazu Re, Ltd.
10.606% due 12/02/04 250 250
Natexix Ambs Co., LLC
Series A
8.440% due 12/29/49 (e) 400 376
Nationsbank Corp.
6.800% due 03/15/28 515 450
News America Holdings, Inc.
8.875% due 04/26/23 250 263
Fixed Income III Fund 152
<PAGE>
Fixed Income III Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
------- --------
Nextel Communications, Inc.
Zero Coupon due 08/15/04 1,215 1,251
Step Up Bond
10.125 due 01/15/04 140 145
Step Up Bond
Zero Coupon due 09/15/07 (b) 645 482
9.950% due 02/15/08 305 214
Nextlink Communications, Inc.
10.750% due 11/15/08 1,000 1,030
10.750% due 06/01/09 40 41
Step Up Bond
Zero Coupon due 04/15/08 (b) 575 365
Niagara Mohawk Power Corp.
8.750% due 04/01/22 430 426
Series B
7.000% due 10/01/00 2,268 2,267
Norfolk Southern Corp.
7.050% due 05/01/37 890 882
North American Van Lines, Inc.
13.375% due 12/01/09 60 60
Ocwen Capital Trust
10.875% due 08/01/27 250 160
Paine Webber Group, Inc.
6.450% due 12/01/03 400 383
6.375% due 05/15/04 350 333
Park Place Entertainment Corp.
7.950% due 08/01/03 450 446
Paxson Communications Corp.
11.625% due 10/01/02 450 465
Petro Stopping Centers
10.500% due 02/01/07 40 37
Plains Resources, Inc.
Series E
10.250% due 03/15/06 40 39
PNC Funding Corp.
7.500% due 11/01/09 70 69
Premier Parks, Inc. Step Up Bond
Zero Coupon due 04/01/08 (b) 350 242
Procter & Gamble Co.
6.600% due 12/15/04 700 692
Prudential Insurance Co. of America
6.875% due 04/15/03 700 690
6.375% due 07/23/06 235 219
Psinet, Inc.
11.500% due 11/01/08 125 131
Public Service Co. New Mexico
7.100% due 08/01/05 500 482
PX Escrow Corp. Step Up Bond
Zero Coupon due 02/01/06 (b) 925 453
Qwest Communications International, Inc.
Series B
7.250% due 11/01/08 170 163
Railworks Corp.
11.500% due 04/15/09 60 61
RBF Finance Co.
11.000% due 03/15/06 45 48
Republic Services, Inc.
7.125% due 05/15/09 250 224
Revlon Consumer Products Corp.
8.625% due 02/01/08 725 355
Revlon Worldwide Corp.
Series B
Zero Coupon due 03/15/01 (b) 750 146
Rhythms Netconnections, Inc.
12.750% due 04/15/09 40 39
Rose Hills Corp.
9.500% due 11/15/04 475 380
Sabreliner Corp.
11.000% due 06/15/08 20 16
Saks, Inc.
7.375% due 02/15/19 260 220
Salomon, Inc.
6.356% due 11/28/00 35 33
Seagate Technology, Inc.
7.450% due 03/01/37 680 593
Societe Generale
7.850% due 04/29/49 (e) 300 289
Societe Generale Real Estate Co. LLC Series A
7.640% due 12/29/49 175 158
Spieker Properties, L.P.
6.950% due 12/15/02 500 489
TCI-Communications, Inc.
6.335% due 09/11/00 (MTN)(b) 2,000 1,996
Teligent, Inc. Step Up Bond
Series B
Zero Coupon due 03/01/08 (b) 30 18
Tenet Healthcare Corp.
7.875% due 01/15/03 50 49
6.000% due 12/01/05 1,250 1,009
7.625% due 06/01/08 275 255
Time Warner, Inc.
7.975% due 08/15/04 375 380
8.110% due 08/15/06 1,225 1,261
8.180% due 08/15/07 750 771
7.480% due 01/15/08 45 44
6.625% due 05/15/29 1,200 1,023
153 Fixed Income III Fund
<PAGE>
Fixed Income III Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
------- --------
Tokai Preferred Capital Co. LLC
9.980% due 12/29/49 (e) 1,500 1,481
Toledo Edison Co.
8.700% due 09/01/02 500 505
Toll Brothers Corp.
7.750% due 09/15/07 1,200 1,125
Transdigm, Inc.
10.375% due 12/01/08 50 45
Trenwick Capital Trust I
8.820% due 02/01/37 575 452
U.S. Bancorp
Series J
6.000% due 05/15/04 (MTN) 775 735
Union Pacific Corp.
6.625% due 02/01/08 500 466
Union Planters Bank
6.500% due 03/15/18 400 354
United Rentals, Inc.
Series B
8.800% due 08/15/08 40 37
URS Corp.
Series B
12.250% due 05/01/09 40 41
US Unwired, Inc. Step Up Bond
Zero Coupon due 11/01/09 (b) 25 15
US West Capital Funding, Inc.
6.875% due 08/15/01 1,600 1,585
6.875% due 07/15/28 600 525
Verio, Inc.
11.250% due 12/01/08 5 5
10.625% due 11/15/09 35 36
Viatel, Inc. Step Up Bond
Zero Coupon due 04/15/08 (b) 40 25
Walt Disney Co. Series E
5.125% due 12/15/03 (MTN) 825 771
Washington Mutual, Inc.
7.500% due 08/15/06 385 381
Waste Management Inc.
6.875% due 05/15/09 500 423
7.000% due 07/15/28 460 347
Webster Capital Trust I
9.360% due 01/29/27 225 213
Wells Fargo & Co.
6.625% due 07/15/04 2,000 1,951
Williams Communications Group, Inc.
10.700% due 10/01/07 400 420
10.875% due 10/01/09 45 46
WRC Media, Inc.
Series Unit
12.750% due 11/15/09 50 50
-------
128,455
-------
Eurodollar Bonds - 7.3%
Argentina, Republic of
11.786% due 04/10/05 (b) 2,000 1,835
Series L
6.813% due 03/31/05 (b) 44 40
Asia Pulp & Paper International
Finance Bond
Zero Coupon due 07/07/00 575 523
Bulgaria, Republic of
Series A
6.500% due 07/28/24 (b) 35 28
Bundesrepublik Deutschland
4.250% due 11/26/04 1,960 1,927
Citicorp
6.231% due 06/27/02 (MTN)(b) 3,000 2,988
Colt Telecom Group PLC
7.625% due 12/15/09 30 30
Countrywide Home Loan
5.250% due 12/15/05 150 75
Credit Lyonnais
5.688% due 07/10/00 (b) 4,000 3,990
Dolphin Telecom PLC Step Up Bond
Zero Coupon due 06/01/08 (b) 35 17
Exodus Communications, Inc.
10.750% due 12/15/09 15 15
Ford Credit of Canada, Ltd.
6.280% due 12/16/02 (b) 5,000 4,981
Ford Motor Credit Co. (b)
6.311% due 01/17/02 1,500 1,498
5.813% due 02/13/03 2,000 1,993
Global TeleSystems Group, Inc.
10.500% due 12/01/06 20 20
Household Bank Nevada NA
6.410% due 10/22/03 (MTN)(b) 4,000 3,976
Jazztel PLC
13.250% due 12/15/09 35 36
Kappa Beheer BV
10.625% due 07/15/09 20 21
Merita Bank, Ltd.
7.150% due 12/29/49 (e) 1,200 1,160
Morgan Stanley Dean Witter
6.308% due 03/11/03 (MTN)(b) 2,000 1,996
Nacional Financiera SNC
8.000% due 06/19/00 420 421
Fixed Income III Fund 154
<PAGE>
Fixed Income III Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
------- --------
Netia Holdings II BV
13.500% due 06/15/09 10 10
North America Capital Corp.
8.250% due 11/17/03 90 146
NTL Communications Corp.
9.250% due 11/15/06 35 35
Ono Finance PLC
13.000% due 05/01/09 80 85
Panama, Republic of Step Up Bond
4.500% due 07/17/14 25 20
Peru, Republic of
4.250% due 03/07/17 35 24
Poland, Republic of
Step Up Bond
4.000% due 10/27/24 (b) 1,250 819
PTC International Finance II
11.250% due 12/01/09 45 45
SCL Term Aereo Santiago SA
6.950% due 07/01/12 2,000 1,749
Skandinaviska Enskilda Banken (e)
8.125% due 09/06/49 475 449
6.500% due 12/29/49 1,050 980
Tele1 Europe BV
11.875% due 12/01/09 30 31
Tyco International Group SA
6.875% due 09/05/02 1,525 1,504
United Pan-Europe
10.875% due 11/01/07 25 26
Upm-Kymmene Corp.
7.450% due 11/26/27 750 680
Versatel Telecom International NV
11.875% due 07/15/09 15 16
Viatel, Inc.
11.500% due 03/15/09 15 15
Worldwide Fiber, Inc.
12.000% due 08/01/09 45 45
------
34,249
------
Mortgage-Backed Securities - 47.0%
Bear Stearns Mortgage Securities Inc.
Series 1998-2 Class B
6.750% due 04/30/30 (b) 1,477 1,386
Chase Commercial Mortgage Securities
Corp.
Series 1997-2 Class D
6.600% due 12/19/07 1,325 1,190
Credit Suisse First Boston Mortgage
Securities Corp.
Series 1999-C1 Class A2
7.290% due 09/15/09 (b) 370 362
DLJ Mortgage Acceptance Corp.
Series 1996-CF2 Class A1B
7.290% due 11/12/21 1,525 1,509
Series 1996-Q5 Class A1
6.125% due 06/01/26 (b) 679 672
Federal Home Loan Mortgage Corp.
7.500% 15 Year TBA (d) 2,000 1,977
8.000% 15 Year TBA (d) 3,250 3,269
6.000% 30 Year Gold TBA (d) 3,200 2,929
6.500% 30 Year Gold TBA (d) 8,270 7,797
7.500% 30 Year TBA (d) 10,350 10,230
Series 1037, Class Z
9.000% due 02/15/21 693 714
Series 2006 Class B
6.500% due 08/15/23 4,546 4,482
Federal Home Loan Mortgage Corp.
Participation Certificate
7.000% due 2009 284 282
8.500% due 2017 595 608
8.500% due 2025 336 345
7.500% due 2026 1 1
8.500% due 2027 1,589 1,632
6.500% due 2028 40 38
6.000% due 2029 3,623 3,316
6.500% due 2029 11,084 10,450
Federal Home Loan Mortgage Corp.
8.000% 30 Year TBA Gold (d) 680 687
Federal National Mortgage Association
6.500% due 08/15/04 250 247
6.000% 30 Year TBA (d) 7,500 6,855
7.500% 30 Year TBA (d) 3,550 3,510
6.000% due 2003 177 173
10.000% due 2005 113 117
7.000% due 2014 3,009 2,974
7.575% due 2024 (b) 59 60
7.037% due 2026 (b) 2,255 2,329
6.000% due 2028 512 468
6.000% due 2029 11,795 10,789
6.500% due 2029 18,315 17,256
Series 1997-77 Class G
6.500% due 05/18/23 2,278 2,245
Federal National Mortgage
Association (REMIC)
Series 1992-10 Class ZD
8.000% due 11/25/21 1,867 1,825
First Union Lehman Brothers
Commercial Mortgage Trust
Pass-Thru Certificates
Series 1997-C1 Class D
7.500% due 10/18/08 300 285
155 Fixed Income III Fund
<PAGE>
Fixed Income III Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
------- --------
GMAC Commercial Mortgage
Securities, Inc.
Series 1997-C1 Class A2
6.850% due 09/15/06 (b) 200 195
Series 1998-C2 Class A1
6.150% due 11/15/07 1,854 1,770
Government National Mortgage
Association
6.000% due 02/20/27 96 97
6.000% 30 Year TBA (d) 1,450 1,319
6.500% 30 Year TBA (d) 28,960 27,177
7.000% 30 Year TBA (d) 20,790 20,055
8.000% 30 Year TBA (d) 5,800 5,858
9.000% due 2017 2,486 2,623
6.125% due 2023 (b) 880 894
6.750% due 2023 (b) 329 332
6.125% due 2024 (b) 2,263 2,300
6.750% due 2024 (b) 2,152 2,171
7.500% due 2024 292 290
6.375% due 2025 (b) 435 441
6.750% due 2025 (b) 75 75
7.000% due 2025 1,022 991
8.000% due 2025 566 572
7.000% due 2026 (b) 2,845 2,823
8.000% due 2026 425 430
6.125% due 2027 (b) 319 324
6.375% due 2027 (b) 1,852 1,880
6.750% due 2027 (b) 2,279 2,296
7.000% due 2027 2,339 2,261
6.375% due 2028 (b) 98 99
6.500% due 2028 2,077 1,951
7.000% due 2028 5,312 5,129
7.500% due 2029 (b) 4,262 4,215
8.000% due 2029 (b) 9,674 9,771
Government National Mortgage
Association Pass-thru Certificate
Series 1999-43 Class UD
2.219% due 11/16/29 (b) 2,350 109
Series 1999-44 Class SA
2.750% due 12/16/29 1,850 118
Heller Financial Commercial Mortgage
Asset Co.
Series 1999-PH1 Class A2
6.847% due 05/15/31 680 652
Merrill Lynch Mortgage Investors, Inc.
Series 1995-C2 Class D
7.681% due 06/15/21 (b) 1,319 1,303
Morgan Stanley Capital I, Inc.
Series 1998-XL1 Class A3
6.480% due 05/03/08 1,550 1,464
Norwest Asset Securities Corp.
Series 1997-21 Class A2
7.000% due 01/25/28 2,328 2,284
Series 1999-2 Class A16
6.500% due 02/25/29 2,000 1,794
Prudential Securities Secured
Financing Corp.
Series 1999-C2 Class A2
7.193% due 04/15/09 755 737
Residential Funding Mortgage
Securities I, Inc.
Series 1998-S13 Class A21
6.750% due 06/25/28 4,600 4,205
Residential Funding Mortgage
Securities II
Series 1997-HS5 Class M1
7.010% due 05/25/27 1,368 1,328
Resolution Trust Corp.
Series 1994 - C2 Class G
8.000% due 04/25/25 252 240
Series 1994-1 Class M-2
7.750% due 09/25/29 366 363
Resolution Trust Corp. Mortgage
Pass-thru Certificate
Series 1995-1, Class 2-C
7.500% due 10/25/28 (b) 3 3
Salomon Brothers Mortgage
Securities VII
Series 1999-NC3 Class A
5.940% due 06/25/29 (b) 4,578 4,578
Salomon Brothers Mortgage
Securities VII, Inc. Mortgage
Pass-thru Certificate
Series 1994-16 Class A
8.384% due 11/25/24 (b) 216 220
-------
220,746
-------
Non-US Bonds - 0.4%
Argentina, Republic of
Series PRE1
Zero Coupon due 04/01/01 ARS 100 40
Citicorp
5.500% due 06/30/10 EUR 190 93
Coca Cola Enterprises PLC
6.750% due 03/12/08 (MTN) GBP 70 111
Energis PLC
9.500% due 06/15/09 GBP 25 42
Greece, Republic of
6.500% due 01/11/14 GRD 4,500 14
Lesotho Highlands Water
13.000% due 09/15/10 ZAR 850 129
Fixed Income III Fund 156
<PAGE>
Fixed Income III Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
------- --------
New Zealand, Government of
10.000% due 03/15/02 NZD 600 335
Series 403
5.500% due 04/15/03 NZD 600 300
Nykredit
6.000% due 10/01/29 DKK 1,200 151
Pannon Finance BV
7.750% due 08/03/04 EUR 35 37
Polestar Corp.
10.500% due 05/30/08 GBP 5 8
Rabobank
42.300% due 11/02/00 TRL 111,826 227
42.800% due 12/18/00 TRL 7,970 15
Spintab AB
7.500% due 06/15/04 SEK 600 74
Stadshypotek AB
3.500% due 09/15/04 SEK 1,000 106
Telewest Communication PLC Step Up
Bond
Zero Coupon due 04/15/09 GBP 15 15
TM Group Holdings PLC
12.250% due 05/15/08 GBP 10 16
Unikredit
7.000% due 10/01/29 DKK 2,880 385
--------
2,098
--------
United States Government
Agencies - 1.9%
Federal Home Loan Bank Corp.
Discount Note
5.811% due 11/03/00 170 162
Federal Home Loan Mortgage Corp.
5.750% due 03/15/09 6,795 6,207
Federal National Mortgage Association
5.125% due 02/13/04 725 682
5.625% due 05/14/04 500 478
Federal National Mortgage Association
Zero Coupon due 06/01/17 5,350 1,555
--------
9,084
--------
United States Government
Treasuries - 9.9%
United States Treasury Bond
Principal Strip
9.125% due 05/15/18 1,266 366
8.000% due 11/15/21 2,549 589
United States Treasury Bonds
11.250% due 02/15/15 1,000 1,414
8.750% due 08/15/20 450 545
8.125% due 05/15/21 1,375 1,576
6.625% due 02/15/27 2,000 1,982
6.125% due 08/15/29 2,567 2,447
United States Treasury
Interest Only Strips
37.234% due 02/15/15 3,180 1,137
United States Treasury Notes
4.625% due 11/30/00 2,750 2,714
6.250% due 04/30/01 625 625
5.625% due 09/30/01 4,095 4,054
6.625% due 04/30/02 1,125 1,134
3.625% due 07/15/02 1,600 1,584
5.750% due 11/30/02 1,025 1,010
6.000% due 08/15/04 4,408 4,339
7.875% due 11/15/04 625 661
7.500% due 02/15/05 6,300 6,571
3.375% due 01/15/07 3,467 3,266
3.625% due 01/15/08 2,295 2,185
3.875% due 01/15/09 2,825 2,730
6.000% due 08/15/09 4,713 4,566
United States Treasury Interest Strip
Zero Coupon due 02/15/07 525 328
United States Treasury Interest Strips
5.780% due 05/15/09 1,306 697
--------
46,520
--------
Yankee Bonds - 2.4%
Abbey National PLC
7.950% due 10/26/29 380 378
Amatek Industries Pty, Ltd.
12.000% due 02/15/08 55 51
Amvescap PLC
6.600% due 05/15/05 875 785
Asia Pulp & Paper Finance IX, Ltd.
9.060% due 10/04/01 1,000 830
Colt Telecom Group PLC Step Up Bond
Zero Coupon due 12/15/06 (b) 500 440
Edperbrascan Corp.
7.125% due 12/16/03 775 743
Empresa Nacional de Electric
7.750% due 07/15/08 205 194
Glencore Nickel Party, Ltd.
9.000% due 12/01/14 250 209
Grupo Televisa SA Step Up Bond
13.250% due 05/15/08 (b) 950 867
Hyundai Semiconductor America, Inc.
8.625% due 05/15/07 280 232
Korea Electric Power Corp.
7.000% due 02/01/27 215 199
Mexico (United Mexican States)
6.903% due 12/31/19 (b) 3,000 2,809
National Power Corp.
9.625% due 05/15/28 60 53
157 Fixed Income III Fund
<PAGE>
Fixed Income III Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
------- --------
National Westminster Bank PLC
7.750% due 04/29/49 (e) 475 456
Peru, Republic of
6.813% due 03/08/27 (b) 25 18
Quebec, Province of
7.500% due 09/15/29 400 388
Royal Caribbean Cruises, Ltd.
7.500% due 10/15/27 1,325 1,187
RSL Communications PLC
12.000% due 11/01/08 100 101
RSL Communications PLC Step Up Bond
Zero Coupon due 03/01/08 (b) 375 233
St. George Bank, Ltd.
7.150% due 10/01/05 775 743
Wolters Kluwer
5.500% due 09/22/06 160 159
--------
11,075
--------
Total Long-Term Investments
(cost $494,531) 484,326
--------
Notional
Amount (000)
$
--------------
Options Purchased - 0.0%
United States Treasury Bills
Mar 100.77 Call 3,500 2
May 100.66 Call 3,100 8
United States Treasury Notes
Feb 99.21 Call 1,780 3
Feb 98.73 Call 1,979 5
---------
Total Options Purchased
(cost $149) 18
---------
Number of
Shares
---------
Preferred Stocks - 0.6%
American Restaurant Group, Inc. -- 8
Australia & New Zealand Banking
Group, Ltd. 7 180
California Federal Preferred Capital Corp. 19 423
Equity Office Properties Trust
Series B 15 585
Granite Broadcasting Corp. -- 26
Paxson Communications Corp. -- 326
Pinto Totta International
Finance, Ltd. 1 1,112
---------
Total Preferred Stocks
(cost $2,992) 2,660
---------
Short-Term Investments - 16.0%
American Express Credit Corp. 1&2
5.150% due 01/19/00 (a) 2,300 2,273
Bank of Tokyo Mitsubishi, Ltd.
5.937% due 02/18/00 (a) 4,000 4,000
Citibank LTN Linked BRL Note
Zero Coupon due 03/16/00
(a)(f)(g) 40 42
Citibank Service Time Deposit
Zero Coupon 02/22/00 (a) 70 71
Federal Home Loan Bank Corp.
Discount Note
5.480% due 02/04/00 (a) 360 355
Federal Home Loan Mortgage Corp.
Discount Note
5.170% due 01/21/00 (a) 725 723
5.480-5.600% due 01/25/00 (a) 5,860 5,838
5.700% due 01/31/00 (a) 100 100
5.760% due 03/27/00 30 30
Federal Home Loan Mortgage Corp.
Discount Notes
5.750% due 03/20/00 100 99
5.630% due 05/31/00 100 98
Federal Home Loan Mortgage
Discount Notes
5.510% due 01/14/00 (a) 300 297
Federal National Mortgage
Association Discount Note
5.580% due 01/19/00 (a) 750 748
Federal National Mortgage
Association Discount Notes
5.750% due 02/03/00 (a) 332 327
5.710% due 02/07/00 (a) 145 143
5.610% due 02/14/00 (a) 135 134
5.635% due 03/02/00 127 126
5.615% due 03/09/00 (f) 50 49
5.750% due 04/12/00 115 113
5.710% due 05/03/00 150 147
5.795% due 05/04/00 (a) 340 333
5.470% due 05/11/00 100 98
5.891% due 10/27/00 242 230
Ford Motor Credit Co.
Zero Coupon due 01/19/00 (a) 500 494
Frank Russell Investment Company
Money Market Fund,
due on demand (a) 45,483 45,483
General Electric Capital Corp.
Discount Note
5.950% due 01/19/00 (a) 1,309 1,293
General Motors Acceptance Corp.
5.950% due 01/19/00 2,309 2,302
Fixed Income III Fund 158
<PAGE>
Fixed Income III Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
------- --------
Household Finance Corp.
6.000% due 01/19/00 (a) 2,003 1,997
Houston Industries Finance Co.
Commercial Paper
6.500% due 01/19/00 (a) 2,000 1,978
Morgan Stanley Dean Witter
5.980% due 01/19/00 (a) 2,250 2,243
Peru Central Bank
17.250% due 02/18/00 (a) 200 57
United States Treasury Bills
4.710% due 02/17/00 (f) 25 25
United States Treasury Notes
5.500% due 02/29/00 (a)(f) 820 820
US West Capital Funding Commercial
Paper Discount Note
5.957% due 03/24/00 2,000 1,998
Total Short-Term Investments
(cost $74,772) 75,064
Number of
Shares
---------
Warrants - 0.0%
American Mobile Satellite Corp. -- 1
---------
Total Warrants
(cost $1) 1
---------
Total Investments - 119.7%
(cost $572,444) 562,069
Other Assets and Liabilities,
Net - (19.7%) (92,434)
---------
Net Assets - 100.0% 469,635
=========
* Each contract represents $100,000 notional value.
(a) At amortized 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 from date of acquisition.
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:
ARS - Argentine peso
BRL - Brazilian real
CLP - Chilean peso
CNY - Chinese renminbi yuan
COP - Columbian peso
CZK - Czech koruna
DKK - Danish krone
EUR - Euro currency
GBP - British pound sterling
GRD - Greek drachma
HUF - Hungarian forint
IDR - Indonesian rupah
ILS - Israeli shekel
INR - Indian rupee
JPY - Japanese yen
KES - Kenyan shilling
KRW - South Korean won
PEN - Peruvian nouveau sol
PHP - Philippine peso
PLN - Polish zloty
SEK - Swedish krona
SKK - Slovakian koruna
THB - Thailand baht
TRL - Turkish lira
USD - U.S. dollar
See accompanying notes which are an integral part of the financial statements.
159 Fixed Income III Fund
<PAGE>
Fixed Income III Fund
Statements of Net Assets, continued
December 31, 1999
Unrealized
Number Appreciation
of (Depreciation)
Contracts (000)
--------- -------------
Futures Contracts
Long Positions
Eurodollar
expiration date 09/00 63 $ (114)
expiration date 12/00 51 (60)
United States Treasury Notes 10 Year Futures
expiration date 03/00 327 (541)
Short Positions
United States Treasury Bond Futures
expiration date 03/00 4 8
United States Treasury 10 Year Futures
expiration date 03/00 10 22
United States Treasury 5 Year Futures
expiration date 03/00 11 13
---------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts $ (672)
=========
Notional Market
Amount Value
(000) (000)
$ $
------- --------
Options Written
Eurodollar Mid Curve 1 Year Futures*
Dec 93.50 Put 115 68
Eurodollar Futures*
Dec 93.50 Put 30 18
Government National Mortgage Association*
Feb 97.98 Call 2,580 8
Feb 97.61 Call 2,800 10
United States Treasury Bills*
Mar 104.77 Call 3,500 --
May 104.66 Call 3,100 1
Mar 96.66 Put 3,500 33
May 97.28 Put 3,100 53
United States Treasury Bonds*
Feb 93.84 Put 2,300 129
Feb 93.80 Put 2,300 128
United States Treasury Bond Futures*
Feb 98.00 Call 95 6
Jan 91.00 Put 95 32
---------
Total Liability for Options Written
(premium received $314) 486
=========
See accompanying notes which are an integral part of the financial statements.
Fixed income III Fund 160
<PAGE>
Fixed Income III Fund
Statement of Net Assets, continued
December 31, 1999
Forward Foreign Currency Exchange Contracts
Unrealized
Contracts to In Exchange Appreciation
Deliver For Settlement (Depreciation)
(000) (000) Date (000)
- -------------- -------------- ---------- ----------------
USD 115 ARS 118 04/17/00 $1
USD 150 ARS 155 05/03/00 3
USD 55 BRL 101 01/24/00 1
USD 50 BRL 99 02/14/00 4
USD 20 BRL 41 06/05/00 2
USD 140 CLP 77,875 02/02/00 6
USD 35 CNY 293 02/22/00 --
USD 35 CNY 293 02/28/00 --
USD 23 CNY 193 03/03/00 --
USD 14 CNY 117 03/03/00 --
USD 25 COP 47,575 01/11/00 --
USD 135 COP 260,820 02/07/00 2
USD 119 CZK 4,176 02/08/00 (3)
USD 11 EUR 11 01/21/00 --
USD 8 EUR 8 01/21/00 --
USD 15 EUR 15 01/21/00 (1)
USD 17 EUR 16 01/21/00 (1)
USD 17 EUR 16 01/21/00 (1)
USD 5 EUR 5 01/21/00 --
USD 43 EUR 42 01/21/00 --
USD 86 EUR 85 01/21/00 --
USD 40 HUF 10,275 03/03/00 --
USD 215 HUF 54,191 05/04/00 (6)
USD 50 IDR 341,500 01/24/00 (1)
USD 13 IDR 88,335 02/15/00 --
USD 38 IDR 271,080 02/15/00 --
USD 12 IDR 88,440 03/03/00 1
USD 12 IDR 85,560 03/20/00 --
USD 30 IDR 213,090 03/20/00 --
USD 64 ILS 277 06/06/00 1
USD 140 INR 6,132 01/13/00 1
USD 8 JPY 855 01/21/00 --
USD 29 KES 2,168 03/27/00 --
USD 105 KRW 124,793 01/26/00 5
USD 38 KRW 44,052 03/03/00 1
USD 30 KRW 34,350 03/09/00 --
USD 85 MXN 850 05/17/00 1
USD 20 MXN 209 10/03/00 --
USD 170 MXN 1,860 11/08/00 6
USD 27 MXN 290 12/29/00 --
USD 28 MXN 304 12/29/00 --
USD 81 PEN 290 02/08/00 1
USD 245 PHP 9,910 02/07/00 --
USD 120 PLN 534 05/04/00 5
USD 120 PLN 522 02/04/00 5
USD 212 SKK 8,941 02/04/00 (1)
USD 35 SKK 1,470 02/14/00 --
USD 30 THB 1,158 02/17/00 1
USD 25 THB 966 03/17/00 1
USD 40 THB 1,521 03/21/00 --
ARS 35 USD 35 02/04/00 --
COP 65,695 USD 35 01/11/00 --
COP 66,320 USD 35 02/07/00 --
DKK 3,998 USD 547 01/21/00 6
EUR 74 USD 75 01/21/00 --
EUR 137 USD 145 01/21/00 7
EUR 126 USD 133 01/21/00 6
EUR 159 USD 168 01/21/00 7
EUR 40 USD 42 01/21/00 2
EUR 380 USD 400 01/21/00 17
EUR 20 USD 21 01/21/00 --
EUR 36 USD 38 01/21/00 1
EUR 28 USD 29 01/21/00 1
EUR 44 USD 46 01/21/00 1
EUR 270 USD 280 01/21/00 8
EUR 10 USD 10 01/21/00 --
EUR 19 USD 20 01/21/00 --
EUR 525 USD 537 01/21/00 7
EUR 79 USD 80 01/21/00 1
EUR 16 USD 16 01/21/00 --
EUR 28 USD 28 01/21/00 --
EUR 15 USD 15 01/21/00 --
EUR 30 USD 31 01/21/00 1
EUR 30 USD 31 01/21/00 --
EUR 2,055 USD 2,106 01/21/00 33
EUR 111 USD 113 01/21/00 1
EUR 5 USD 5 01/21/00 --
EUR 13 USD 13 01/21/00 --
EUR 200 USD 212 02/04/00 10
EUR 113 USD 119 02/08/00 5
EUR 33 USD 35 02/14/00 1
EUR 10 USD 10 02/24/00 --
GBP 9 USD 15 01/21/00 --
GBP 73 USD 117 01/21/00 --
GBP 92 USD 147 01/21/00 (2)
GBP 27 USD 43 01/21/00 --
GBP 20 USD 32 01/21/00 --
GBP 5 USD 8 01/21/00 --
GRD 3,347 USD 10 02/24/00 --
GRD 77,997 USD 242 11/06/00 (8)
JPY 3,206 USD 31 01/21/00 (1)
JPY 7,183 USD 70 01/21/00 (1)
JPY 1,241 USD 12 01/21/00 --
JPY 722 USD 7 01/21/00 --
JPY 1,110 USD 11 01/21/00 --
JPY 477 USD 5 01/21/00 --
JPY 1,146 USD 11 01/21/00 --
JPY 951 USD 9 01/21/00 --
JPY 1,615 USD 16 01/21/00 --
JPY 1,232 USD 12 01/21/00 --
MXN 360 USD 36 05/17/00 (1)
MXN 490 USD 49 05/17/00 --
See accompanying notes which are an integral part of the financial statements.
161 Fixed Income III Fund
<PAGE>
Fixed Income III Fund
Statement of Net Assets, continued
December 31, 1999
Forward Foreign Currency Exchange Contracts
Unrealized
Contracts to In Exchange Appreciation
Deliver For Settlement (Depreciation)
(000) (000) Date (000)
- -------------- -------------- ---------- ----------------
MXN 300 USD 29 11/08/00 $ --
PHP 1,068 USD 26 02/07/00 --
PLN 135 USD 31 02/04/00 (1)
PLN 130 USD 30 02/04/00 (1)
SEK 1,568 USD 186 01/21/00 2
--------
$ 136
========
See accompanying notes which are an integral part of the financial statements.
Fixed Income III Fund 162
<PAGE>
Fixed Income III Fund
Statements of Assets and Liabilities
Amounts in thousands (except per share amounts) December 31, 1999
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Investments at market (identified cost $572,444) ...................... $ 562,069
Unrealized appreciation on forward foreign currency exchange contracts 164
Receivables:
Dividends and interest ............................................. 4,733
Investments sold (regular settlement) .............................. 5,776
Investments sold (delayed settlement) .............................. 4,506
Fund shares sold ................................................... 1,001
Daily variation margin on futures contracts ........................ 9
Prepaid expenses ...................................................... 2
---------
Total assets .................................................... 578,260
Liabilities
Payables:
Investments purchased (regular settlement) ......................... $ 9,005
Investments purchased (delayed settlement) ......................... 97,009
Fund shares redeemed ............................................... 1,830
Accrued fees to affiliates ......................................... 54
Other accrued expenses ............................................. 68
Daily variation margin on futures contracts ........................ 145
Unrealized depreciation on forward foreign currency exchange contracts 28
Options written, at market value (premiums received $314) ............. 486
---------
Total liabilities ............................................... 108,625
---------
Net Assets ............................................................ $ 469,635
=========
Net Assets Consist of:
Accumulated distributions in excess of net investment income .......... $ (115)
Accumulated distributions in excess of net realized gain .............. (19,629)
Unrealized appreciation (depreciation) on:
Investments ........................................................ (10,375)
Futures contracts .................................................. (672)
Options written .................................................... (172)
Foreign currency-related transactions .............................. 140
Shares of beneficial interest ......................................... 490
Additional paid-in capital ............................................ 499,968
---------
Net Assets ............................................................ $ 469,635
=========
Net Asset Value, offering and redemption price per share:
Class E ($2,367,173 divided by 246,354 shares of $.01 par value
shares of beneficial interest outstanding) ...................... $ 9.61
=========
Class I ($467,268,109 divided by 48,733,819 shares of $.01 par value
shares of beneficial interest outstanding) ...................... $ 9.59
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
163 Fixed Income III Fund
<PAGE>
Fixed Income III Fund
Statements of Operations
Amounts in thousands (except per share amounts) Year Ended December 31, 1999
Investment Income
Interest ............................................ $ 27,352
Dividends from Money Market Fund .................... 3,118
Dividends ........................................... 527
--------
Total investment income .......................... 30,997
Expenses
Advisory fees ....................................... $ 2,287
Administrative fees ................................. 235
Custodian fees ...................................... 308
Transfer agent fees ................................. 272
Professional fees ................................... 25
Registration fees ................................... 90
Shareholder servicing fees - Class E ................ 4
Trustees' fees ...................................... 5
Miscellaneous ....................................... 33
--------
Total expenses ................................... 3,259
--------
Net investment income .................................. 27,738
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ......................................... (16,568)
Futures contracts ................................... (2,106)
Options written ..................................... 183
Foreign currency-related transactions ............... 19 (18,472)
--------
Net change in unrealized appreciation (depreciation) on:
Investments ......................................... (10,588)
Futures contracts ................................... (178)
Options written ..................................... (330)
Foreign currency-related transactions ............... 146 (10,950)
-------- --------
Net realized and unrealized gain (loss) ................ (29,422)
--------
Net increase (decrease) in net assets from operations .. $ (1,684)
========
See accompanying notes which are an integral part of the financial statements.
Fixed Income III Fund 164
<PAGE>
Fixed Income III Fund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Amounts in thousands (except per share amounts) Years Ended December 31, 1999
Increase (Decrease) in Net Assets 1999 1998
--------- ---------
<S> <C> <C>
Operations
Net investment income ........................................................ $ 27,738 $ 26,279
Net realized gain (loss) ..................................................... (18,472) 9,736
Net change in unrealized appreciation (depreciation) ......................... (10,950) (6,742)
--------- ---------
Net increase (decrease) in net assets from operations ..................... (1,684) 29,273
--------- ---------
Distributions
From net investment income
Class E ................................................................... (107) --
Class I ................................................................... (28,340) (26,641)
From net realized gain
Class I ................................................................... -- (11,870)
--------- ---------
Net decrease in net assets from distributions .......................... (28,447) (38,511)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions ................ 37,576 88,995
--------- ---------
Total net increase (decrease) in net assets ..................................... 7,445 79,757
Net Assets
Beginning of period .......................................................... 462,190 382,433
--------- ---------
End of period (including accumulated distributions in excess of net investment
income of $115 and $145, respectively) .................................... $ 469,635 $ 462,190
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
165 Fixed Income III Fund
<PAGE>
Fixed Income III Fund
Financial Highlights - Class E
The following table includes date for a share outstanding throughout the perioud
and other performance information derived from the financial statements.
1999*
---------
Net Asset Value, Beginning of Period ............................. $ 10.12
Income From Operations
Net investment income (a) ..................................... .35
Net realized and unrealized gain (loss) ....................... (.43)
---------
Total income from operations ............................... (.08)
---------
Distributions
From net investment income .................................... (.43)
---------
Net Asset Value, End of Period ................................... $ 9.61
=========
Total Return (%)(b) .............................................. (.83)
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ...................... 2,367
Ratios to average net assets (%)(c):
Operating expenses ......................................... .94
Net investment income ...................................... 5.63
Portfolio turnover rate (%) ................................... 131.38
* For the period May 14, 1999 (commencement of sale) to December 31, 1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
Fixed Income III Fund 166
<PAGE>
Fixed Income III Fund
Financial Highlights - Class I
The following table includes date 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
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 10.22 $ 10.42 $ 10.17 $ 10.34 $ 9.37
----------- ----------- ----------- ----------- -----------
Income From Operations
Net investment income (a) .............. .59 .62 .63 .64 .67
Net realized and unrealized gain (loss) (.62) .08 .32 (.16) .97
----------- ----------- ----------- ----------- -----------
Total income from operations ........ (.03) .70 .95 .48 1.64
----------- ----------- ----------- ----------- -----------
Distributions
From net investment income ............. (.60) (.62) (.64) (.65) (.67)
From net realized gain ................. -- (.28) (.06) -- --
----------- ----------- ----------- ----------- -----------
Total distributions ................. (.60) (.90) (.70) (.65) (.67)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ............ $ 9.59 $ 10.22 $ 10.42 $ 10.17 $ 10.34
=========== =========== =========== =========== ===========
Total Return (%) .......................... (.29) 6.80 9.64 4.88 17.99
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 467,268 462,190 382,433 292,077 252,465
Ratios to average net assets (%):
Operating expenses, net ............. .69 .67 .70 .73 .61
Net investment income ............... 5.91 5.91 6.13 6.32 6.83
Portfolio turnover rate (%) ............ 131.38 342.49 274.84 144.26 141.37
</TABLE>
(a) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
167 Fixed Income III Fund
<PAGE>
Frank Russell Investment Company
Institutional Funds
Notes to Financial Statements
December 31, 1999
1. Organization
Frank Russell Investment Company (the "Investment Company") is a series
mutual fund with 29 different investment portfolios (one of which has not
yet commenced operations), 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 $495,215 of unrealized depreciation, 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
$320,538,146 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 year ended December
31, 1999:
<TABLE>
<CAPTION>
Undistributed Accumulated Net Additional
Net 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>
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.
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.
Notes to Financial Statements 168
<PAGE>
Frank Russell Investment Company
Institutional Funds
Notes to Financial Statements, continued
December 31, 1999
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 and capital gains. Therefore, no
federal income tax provision was required for the Funds. From November 1,
1999 to December 31, 1999, the Funds listed below incurred net realized
capital losses. As permitted by tax regulations, these Funds have elected
to defer these losses and treat them as arising in the year ended December
31, 2000.
Deferred Net
Realized
Capital
Losses
------------
Equity III $ 611,502
Real Estate Securities 4,344,347
Short Term Bond 283,698
Fixed Income I 2,276,877
Fixed Income III 5,268,225
At December 31, 1999, 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>
12/31/01 12/31/02 12/31/03 12/31/04
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Emerging Markets $ -- $ -- $ (2,887,175) $ (348,806)
Real Estate Securities -- -- -- --
Short Term Bond (4,813,748) (5,161,817) (2,834,049) (1,947,924)
Fixed Income I -- -- -- --
Fixed Income III -- -- -- --
<CAPTION>
12/31/05 12/31/06 12/31/07 Totals
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Emerging Markets $ -- $(56,335,865) $(26,958,651) $(86,530,497)
Real Estate Securities -- (2,695,613) (22,446,311) (25,141,924)
Short Term Bond (574,853) (51,911) (3,470,874) (18,855,176)*
Fixed Income I -- -- (13,116,706) (13,116,706)
Fixed Income III -- -- (12,609,539) (12,609,539)
</TABLE>
* A portion of the loss carryforward was acquired from the Volatility
Constrained Bond Fund (see Note 1) and may be limited to offset
future capital gains of the Fund to the extent provided by
regulations.
The aggregate cost of investments and the composition of gross unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of December 31, 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 $1,211,394,863 $ 525,817,060 $ (51,703,511) $ 474,113,549
Equity II 619,601,420 203,528,394 (37,341,201) 166,187,193
Equity III 158,918,361 27,381,819 (10,095,445) 17,286,374
Equity Q 959,812,784 484,428,503 (49,813,225) 434,615,278
International 958,762,168 373,188,309 (42,417,844) 330,770,465
Emerging Markets 337,556,870 126,184,485 (25,902,585) 100,281,900
Real Estate Securities 611,206,956 48,343,981 (65,446,544) (17,102,563)
Short Term Bond 460,574,009 129,003 (6,128,457) (5,999,454)
Fixed Income I 1,205,608,268 1,781,705 (37,806,736) (36,025,031)
Fixed Income III 574,824,277 2,283,315 (15,038,007) (12,754,692)
</TABLE>
169 Notes to Financial Statements
<PAGE>
Frank Russell Investment Company
Institutional Funds
Notes to Financial Statements, continued
December 31, 1999
Dividends and distributions to shareholders: For all Funds, income
dividends and capital gain distributions, if any, are recorded on the ex-
dividend date. Dividends are generally declared and paid quarterly, except
for the International Fund, which generally declares and pays dividends
annually. Capital gain distributions are generally declared and paid
annually. An additional distribution may be paid by the Funds to avoid
imposition of federal income tax on any remaining undistributed capital
gains and net investment income.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from 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, certain securities sold at a loss
and by recording gains and losses from securities transactions on the
basis of specific identified cost incurred by each money manager for
financial reporting purposes and on the basis of specific identified cost
incurred by each Fund for tax purposes.
The following reclassifications have been made to reflect activity for the
year ended December 31, 1999:
Undistributed Accumulated
Net Investment Net Realized Additional
Income Gain (Loss) Paid-in Capital
-------------- ------------ ---------------
Equity I $ 588,081 $ (588,081) $ --
Equity II 1,127 (1,127) --
Equity III (85,240) 167,887 (82,647)
Equity Q 1,035,508 (1,035,508) --
International 441,221 (466,045) 24,824
Emerging Markets (1,011,035) 1,032,522 (21,487)
Short Term Bond (18,986) (9,054,390) 9,073,376
Fixed Income I 394,276 (394,276) --
Fixed Income III 739,287 (27,888) (711,399)
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 to a specific Fund or Class are allocated among all Funds and/
or Classes based on their relative net assets.
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.
Notes to Financial Statements 170
<PAGE>
Frank Russell Investment Company
Institutional Funds
Notes to Financial Statements, continued
December 31, 1999
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 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
December 31, 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 (not to
exceed 120 days)(i.e., a "forward commitment," "delayed settlement" or
"when issued" transaction, e.g., to be announced ("TBA")) consistent with
a Fund's ability to manage its investment portfolio and meet redemption
requests. The price of the underlying securities and the date when the
securities will be delivered and paid for are fixed at the time the
transaction is negotiated. The Funds may dispose of a forward commitment
transaction prior to settlement if it is appropriate to do so and realize
short-term gains (or losses) upon such sale. When effecting such
transactions, cash or liquid high-grade debt obligations of the Fund in a
dollar amount sufficient to make payment for the portfolio securities to
be purchased will be segregated on the Fund's records at the trade date
and maintained until the transaction is settled. A forward commitment
transaction involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date or the other party to the
transaction fails to complete the transaction.
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.
171 Notes to Financial Statements
<PAGE>
Frank Russell Investment Company
Institutional Funds
Notes to Financial Statements, continued
December 31, 1999
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. Fixed Income III Fund may
utilize futures contracts (i.e., interest rate, foreign currency and index
futures contracts) to a limited extent. The face or contract amounts of
these instruments reflect the extent of the Funds' exposure to off balance
sheet risk. The primary risks associated with the use of futures contracts
are an imperfect correlation between the change in market value of the
securities held by the Fund and the prices of futures contracts, and the
possibility of an illiquid market. Changes in the initial settlement
values of futures contracts are accounted for as unrealized appreciation
(depreciation) until the contracts are terminated, at which time realized
gains and losses are recognized.
3. Investment Transactions
Securities: During the year ended December 31, 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 I $1,582,638,600 $1,581,208,716
Equity II 751,200,378 646,512,122
Equity III 271,279,157 302,410,046
Equity Q 1,083,478,952 1,178,199,782
International 1,233,268,691 1,227,715,662
Emerging Markets 314,913,984 318,289,477
Real Estate Securities 233,099,531 183,072,057
Short Term Bond 320,528,572 221,515,031
Fixed Income I 390,611,431 357,776,111
Fixed Income III 198,968,172 210,148,991
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 $ 537,710,748 $ 536,585,617
Fixed Income I 1,214,108,875 1,067,392,214
Fixed Income III 543,708,811 496,763,412
Notes to Financial Statements 172
<PAGE>
Frank Russell Investment Company
Institutional Funds
Notes to Financial Statements, continued
December 31, 1999
Written Options Contracts: Fund transactions in written options contracts
for the year ended December 31, 1999 were as follows:
Fixed Income I
Notional Value (1) Premiums
(000) Received
------------------ ----------
Outstanding December 31, 1998 $ 19,100 $ 260,000
Opened 114,010 891,655
Closed (61,675) (664,031)
Exercised (3,500) (79,625)
Expired (51,500) (260,687)
--------- ---------
Outstanding December 31, 1999 $ 16,435 $ 147,312
========= =========
Fixed Income III
Notional Value (1) Premiums
(000) Received
------------------ ------------
Outstanding December 31, 1998 $ 18,000 $ 205,189
Opened 110,850 1,495,189
Closed (78,988) (847,263)
Exercised (5,100) (108,177)
Expired (21,247) (431,294)
----------- -----------
Outstanding December 31, 1999 $ 23,515 $ 313,644
=========== ===========
(1) Each $100,000 notional value represents 1 contract.
4. Related Parties
Advisor and Administrator: FRIMCo advises and administers all of the Funds
which comprise the Investment Company, and advises the Money Market and
the 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.
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
December 31, 1999, $470,886,000 of the Money Market Fund's net assets
represents investments by these Funds and $479,084,000 represents the
investments of other affiliated Funds not presented herein.
The advisory and administrative fees, which are based upon the average
daily net assets of each Fund and the rates specified in the table below,
are payable monthly and aggregated $43,705,305 and $3,795,771,
respectively, for the year ended December 31, 1999. FRIMCo reduces its
advisory fees for each Fund by advisory fees incurred on assets invested
in the Money Market Fund thereby eliminating any duplication of fees.
Annual Rate
-----------------------
Advisor Adinistrator
------- ------------
Equity I 0.55% 0.05%
Equity II 0.70 0.05
Equity III 0.55 0.05
Equity Q 0.55 0.05
International 0.70 0.05
Emerging Markets 1.15 0.05
Real Estate Securities 0.80 0.05
Short Term Bond 0.45 0.05
Fixed Income I 0.25 0.05
Fixed Income III 0.50 0.05
173 Notes to Financial Statements
<PAGE>
Frank Russell Investment Company
Institutional Funds
Notes to Financial Statements, continued
December 31, 1999
In accordance with the special servicing agreement entered into in
February 1999 by the Advisor, the LifePoints Funds (a group of five Fund
of Funds which invest in a combination of Class S shares of the Investment
Company's portfolios) 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 the respective LifePoints Fund.
For the year ended December 31, 1999, the special servicing expense
charged to the Underlying Funds amounted to:
Amount
Underlying Fund Paid
---------------------- ------------
Emerging Markets $ 30,586
Real Estate Securities 45,435
Short-Term Bond 35,722
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 funds
reported herein for the year ended December 31, 1999 were $5,722,442.
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.
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 year ended
December 31, 1999 were as follows:
Equity I $ 211,631
Equity II 76,428
Equity III 74,015
Equity Q 53,090
International 266,312
Emerging Markets 55,954
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 $30,000 per year plus out-of-pocket
expenses. Total Trustee expenses for the year ended December 31, 1999 were
$63,075, and were allocated to each Fund where appropriate, on a pro rata
basis, including 18 affiliated Funds not presented herein.
Notes to Financial Statements 174
<PAGE>
Frank Russell Investment Company
Institutional Funds
Notes to Financial Statements, continued
December 31, 1999
5. Fund Share Transactions
Share transactions for the year ended December 31, 1999 and the year ended
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Shares Dollars (000)
--------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Equity I
Class I
Proceeds from shares sold 14,156,753 11,649,184 $ 524,846 $ 382,855
Proceeds from reinvestment of distributions 4,034,855 2,804,239 145,015 91,198
Payments for shares redeemed (13,888,434) (12,417,244) (518,304) (413,664)
----------- ----------- ----------- -----------
Net increase (decrease) 4,303,174 2,036,179 151,557 60,389
----------- ----------- ----------- -----------
Class E (a)
Proceeds from shares sold 1,354,362 -- 51,240 --
Proceeds from reinvestment of distributions 115,629 -- 4,159 --
Payments for shares redeemed (155,939) -- (5,805) --
----------- ----------- ----------- -----------
Net increase (decrease) 1,314,052 -- 49,594 --
----------- ----------- ----------- -----------
Total net increase (decrease) 5,617,226 2,036,179 $ 201,151 $ 60,389
=========== =========== =========== ===========
Equity II
Class I
Proceeds from shares sold 8,372,629 6,590,024 $ 260,038 $ 209,065
Proceeds from reinvestment of distributions 1,054,369 1,013,507 34,320 30,141
Payments for shares redeemed (5,608,745) (4,974,795) (177,851) (158,755)
----------- ----------- ----------- -----------
Net increase (decrease) 3,818,253 2,628,736 116,507 80,451
----------- ----------- ----------- -----------
Class E (a)
Proceeds from shares sold 1,114,666 -- 35,655 --
Proceeds from reinvestment of distributions 42,280 -- 1,407 --
Payments for shares redeemed (218,128) -- (7,131) --
----------- ----------- ----------- -----------
Net increase (decrease) 938,818 -- 29,931 --
----------- ----------- ----------- -----------
Total net increase (decrease) 4,757,071 2,628,736 $ 146,438 $ 80,451
=========== =========== =========== ===========
Equity III
Class I
Proceeds from shares sold 1,957,585 1,912,599 $ 55,751 $ 57,633
Proceeds from reinvestment of distributions 577,930 832,353 15,142 23,877
Payments for shares redeemed (3,331,811) (3,641,754) (94,786) (106,698)
----------- ----------- ----------- -----------
Total net increase (decrease) (796,296) (896,802) (23,893) (25,188)
----------- ----------- ----------- -----------
Class E (a)
Proceeds from shares sold 337,230 -- 9,867 --
Proceeds from reinvestment of distributions 22,539 -- 577 --
Payments for shares redeemed (56,941) -- (1,592) --
----------- ----------- ----------- -----------
Net increase (decrease) 302,828 -- 8,852 --
----------- ----------- ----------- -----------
Total net increase (decrease) (493,468) (896,802) $ (15,041) $ (25,188)
=========== =========== =========== ===========
</TABLE>
(a) Share transactions for Class E are for the period May 14, 1999
(commencement of sale of shares) to December 31, 1999.
175 Notes to Financial Statements
<PAGE>
Frank Russell Investment Company
Institutional Funds
Notes to Financial Statements, continued
December 31, 1999
<TABLE>
<CAPTION>
Shares Dollars (000)
--------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Equity Q
Class I
Proceeds from shares sold 9,489,238 7,788,647 $ 402,156 $ 298,739
Proceeds from reinvestment of distributions 4,403,495 2,920,742 176,157 109,535
Payments for shares redeemed (10,314,554) (8,992,387) (437,835) (344,894)
----------- ----------- ----------- -----------
Total net increase (decrease) 3,578,179 1,717,002 140,478 63,380
----------- ----------- ----------- -----------
Class E (a)
Proceeds from shares sold 891,875 -- 38,092 --
Proceeds from reinvestment of distributions 101,824 -- 4,077 --
Payments for shares redeemed (254,253) -- (10,726) --
----------- ----------- ----------- -----------
Net increase (decrease) 739,446 -- 31,443 --
----------- ----------- ----------- -----------
Total net increase (decrease) 4,317,625 1,717,002 $ 171,921 $ 63,380
=========== =========== =========== ===========
International
Class I
Proceeds from shares sold 8,507,370 8,855,148 $ 342,619 $ 330,798
Proceeds from reinvestment of distributions 1,496,665 756,486 64,808 27,770
Payments for shares redeemed (9,584,595) (11,065,451) (389,449) (412,202)
----------- ----------- ----------- -----------
Total net increase (decrease) 419,440 (1,453,817) 17,978 (53,634)
----------- ----------- ----------- -----------
Class E (a)
Proceeds from shares sold 799,750 -- 31,654 --
Proceeds from reinvestment of distributions 29,732 -- 1,314 --
Payments for shares redeemed (175,179) -- (7,644) --
----------- ----------- ----------- -----------
Net increase (decrease) 654,303 -- 25,324 --
----------- ----------- ----------- -----------
Total net increase (decrease) 1,073,743 (1,453,817) $ 43,302 $ (53,634)
=========== =========== =========== ===========
Emerging Markets
Class S
Proceeds from shares sold 14,900,682 22,508,124 $ 140,982 $ 221,964
Proceeds from reinvestment of distributions 281,096 188,272 2,639 2,070
Payments for shares redeemed (15,483,258) (16,241,312) (152,294) (149,675)
----------- ----------- ----------- -----------
Total net increase (decrease) (301,480) 6,455,084 (8,673) 74,359
----------- ----------- ----------- -----------
Class E (b)
Proceeds from shares sold 852,482 4,558 8,575 38
Proceeds from reinvestment of distributions 1,091 -- 13 --
Payments for shares redeemed (353,467) -- (3,674) --
----------- ----------- ----------- -----------
Total net increase (decrease) 500,106 4,558 4,914 38
----------- ----------- ----------- -----------
Class C (a)
Proceeds from shares sold 147,290 -- 1,466 --
Proceeds from reinvestment of distributions 45 -- -- --
Payments for shares redeemed (16,617) -- (167) --
----------- ----------- ----------- -----------
Net increase (decrease) 130,718 -- 1,299 --
----------- ----------- ----------- -----------
Total net increase (decrease) 329,344 6,459,642 $ (2,460) $ 74,397
=========== =========== =========== ===========
</TABLE>
(a) Share transactions for Class E are for the period May 14, 1999
(commencement of sale of shares) to December 31, 1999.
(b) Effective May 18, 1998, Class C was renamed Class E.
Notes to Financial Statements 176
<PAGE>
Frank Russell Investment Company
Institutional Funds
Notes to Financial Statements, continued
December 31, 1999
<TABLE>
<CAPTION>
Shares Dollars (000)
--------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Real Estate Securities
Class S
Proceeds from shares sold 10,307,873 9,286,206 $ 247,786 $ 254,637
Proceeds from reinvestment of distributions 1,500,692 1,114,356 34,444 30,226
Payments for shares redeemed (9,610,223) (6,759,461) (227,746) (178,741)
----------- ----------- ----------- -----------
Total net increase (decrease) 2,198,342 3,641,101 54,484 106,122
----------- ----------- ----------- -----------
Class E (b)
Proceeds from shares sold 378,070 28,391 9,451 715
Proceeds from reinvestment of distributions 13,837 375 312 9
Payments for shares redeemed (113,177) (6,530) (2,588) (183)
----------- ----------- ----------- -----------
Total net increase (decrease) 278,730 22,236 7,175 541
----------- ----------- ----------- -----------
Class C (a)
Proceeds from shares sold 84,921 -- 2,034 --
Proceeds from reinvestment of distributions 2,678 -- 59 --
Payments for shares redeemed (9,550) -- (227) --
----------- ----------- ----------- -----------
Net increase (decrease) 78,049 -- 1,866 --
----------- ----------- ----------- -----------
Total net increase (decrease) 2,555,121 3,663,337 $ 63,525 $ 106,663
=========== =========== =========== ===========
Short Term Bond
Class S
Proceeds from shares sold 12,497,701 6,088,176 $ 229,357 $ 112,707
Shares issued in connection with acquisition
of Volatility
Constrained Bond Fund 8,934,738 -- 163,684 --
Proceeds from reinvestment of distributions 1,023,507 604,269 18,557 11,141
Payments for shares redeemed (11,748,485) (5,088,094) (214,600) (94,296)
----------- ----------- ----------- -----------
Total net increase (decrease) 10,707,461 1,604,351 196,998 29,552
----------- ----------- ----------- -----------
Class E (c)
Proceeds from shares sold 550,310 -- 10,084 --
Proceeds from reinvestment of distributions 14,963 -- 271 --
Payments for shares redeemed (84,513) -- (1,538) --
----------- ----------- ----------- -----------
Total net increase (decrease) 480,760 -- 8,817 --
----------- ----------- ----------- -----------
Class C (a)
Proceeds from shares sold 104,488 -- 1,907 --
Proceeds from reinvestment of distributions 1,225 -- 22 --
Payments for shares redeemed (61,555) -- (1,119) --
----------- ----------- ----------- -----------
Net increase (decrease) 44,158 -- 810 --
----------- ----------- ----------- -----------
Total net increase (decrease) 11,232,379 1,604,351 $ 206,625 $ 29,552
=========== =========== =========== ===========
</TABLE>
(a) Share transactions for Class C are for the period January 27, 1999
(commencement of sale of shares) to December 31, 1999.
(b) Effective May 18, 1998, Class C was renamed Class E.
(c) Share transactions for Class E are for the period February 18, 1999
(commencement of sale of shares) to December 31, 1999.
177 Notes to Financial Statements
<PAGE>
Frank Russell Investment Company
Institutional Funds
Notes to Financial Statements, continued
December 31, 1999
<TABLE>
<CAPTION>
Shares Dollars (000)
--------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Fixed Income I
Class I
Proceeds from shares sold 18,807,025 18,203,608 $ 402,034 $ 398,149
Proceeds from reinvestment of distributions 2,614,237 2,497,093 54,266 54,549
Payments for shares redeemed (14,519,562) (12,833,370) (310,433) (281,502)
----------- ----------- ----------- -----------
Total net increase (decrease) 6,901,700 7,867,331 145,867 171,196
----------- ----------- ----------- -----------
Class E (a)
Proceeds from shares sold 2,062,938 -- 43,403 --
Proceeds from reinvestment of distributions 61,886 -- 1,272 --
Payments for shares redeemed (353,494) -- (7,315) --
----------- ----------- ----------- -----------
Net increase (decrease) 1,771,330 -- 37,360 --
----------- ----------- ----------- -----------
Total net increase (decrease) 8,673,030 7,867,331 $ 183,227 $ 171,196
=========== =========== =========== ===========
Fixed Income III
Class I
Proceeds from shares sold 20,354,848 20,310,407 $ 204,642 $ 212,963
Proceeds from reinvestment of distributions 2,728,636 3,397,977 26,843 35,268
Payments for shares redeemed (19,561,642) (15,209,804) (196,406) (159,236)
----------- ----------- ----------- -----------
Total net increase (decrease) 3,521,842 8,498,580 35,079 88,995
----------- ----------- ----------- -----------
Class E (a)
Proceeds from shares sold 308,301 -- 3,102 --
Proceeds from reinvestment of distributions 10,658 -- 104 --
Payments for shares redeemed (72,605) -- (709) --
----------- ----------- ----------- -----------
Net increase (decrease) 246,354 -- 2,497 --
----------- ----------- ----------- -----------
Total net increase (decrease) 3,768,196 8,498,580 $ 37,576 $ 88,995
=========== =========== =========== ===========
</TABLE>
(a) Share transactions for Class E are for the period May 14, 1999
(commencement of sale of shares) to December 31, 1999.
6. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $75
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .10% on the average daily unused amount of the
aggregate commitment, which is allocated among each of the Participants.
Interest, at the Federal Fund Rate plus .50% annually (Federal Fund Rate
plus 1.75% prior to and including February 27, 2000), is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up
to a maximum of 10 percent of the value of its net assets under the
agreement. The agreement will expire December 30, 2000. The Fund did not
have any drawdowns during the year.
Notes to Financial Statements 178
<PAGE>
Frank Russell Investment Company
Institutional Funds
Notes to Financial Statements, continued
December 31, 1999
7. Beneficial Interest
As of December 31, 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:
<TABLE>
<CAPTION>
% % % % %
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Equity I - Class I 11.0 -- -- -- --
Equity I - Class E 39.1 -- -- -- --
Equity II - Class E 51.5 -- -- -- --
Equity III - Class I 11.2 -- -- -- --
Equity III - Class E 25.9 22.1 15.3 -- --
Equity Q - Class I 12.9 -- -- -- --
Equity Q - Class E 42.9 14.1 -- -- --
International - Class I 11.7 -- -- -- --
International - Class E 19.5 12.0 -- -- --
Emerging Markets - Class E 15.2 14.9 -- -- --
Real Estate Securities - Class E 19.6 15.7 -- -- --
Short Term Bond - Class E 39.7 -- -- -- --
Short Term Bond - Class C 57.7 12.6 11.7 -- --
Fixed Income I - Class I 17.8 -- -- -- --
Fixed Income I - Class E 27.5 17.2 11.8 -- --
Fixed Income III - Class I 15.9 -- -- -- --
Fixed Income III - Class E 27.2 22.4 12.1 11.7 10.5
</TABLE>
179 Notes to Financial Statements
<PAGE>
Report of Independent Accountants
To the Board of Trustees and Shareholders
of Frank Russell Investment Company:
In our opinion, the accompanying statements of assets and liabilities, including
the statements of net assets, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the series of Frank Russell
Investment Company (in this report comprised of Equity I, Equity II, Equity III,
Equity Q, International, Emerging Markets, Real Estates Securities, Short Term
Bond, Fixed Income I, and Fixed Income III (the "Funds")) at December 31, 1999,
and the results of each of their operations, the changes in each of their net
assets and the financial highlights for the periods indicated therein, in
conformity with generally accepted accounting principles in the United States.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards in the United States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at December 31, 1999 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Seattle, Washington
February 16, 2000
Report of Independent Accountants 180
<PAGE>
Frank Russell Investment Company
Institutional Funds
Tax Information
December 31, 1999 (Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the
following amounts as long-term capital gain dividends for their taxable year
ended December 31, 1999:
Total Long-Term
Capital Gains
--------------
Equity I $ 115,548,796
Equity II 19,266,450
Equity III 15,890,270
Equity Q 148,651,173
International 56,636,475
Fixed Income I 860,767
181 Tax Information
<PAGE>
Frank Russell Investment Company
909 A Street, Tacoma, Washington 98402
(800) 832-6688
In Washington (253) 627-7001
Trustees
Lynn L. Anderson, Chairman
Paul E. Anderson
Paul Anton, PhD
William E. Baxter
Lee C. Gingrich
Eleanor W. Palmer
Trustees Emeritus
George F. Russell, Jr.
Officers
Lynn L. Anderson, Chairman of the Board and President
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
Allan Forbes Building
150 Newport Avenue AFB35
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
Jacobs Levy Equity Management, Inc., Roseland, NJ
Lincoln Capital Management Company, Chicago, IL
Marsico Capital Management, LLC, Denver, CO
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
Westpeak Investment Advisors, L.P., Boulder, CO
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 Ltd., 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, LLC, 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 Limited, London, England
Genesis Asset Managers Limited, London, England
Nicholas Applegate Capital Management, San Diego, CA
Sanford C. Bernstein & Co., Inc., New York, NY
Schroder Investment Managment North America 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 182
<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
Lazard Asset Management, New York, NY
Miller Anderson & Sherrerd, West Conshohocken, PA
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.
183 Manager, Money Managers and Service Providers
<PAGE>
[LOGO]
Frank Russell Investment Company
909 A Street
Tacoma, WA 98402-5120
253-627-7001
800-972-0700
Fax: 253-591-3495 36-08-020(20[Illegible]
<PAGE>
1999 Annual 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
DECEMBER 31, 1999
[LOGO] Russell
<PAGE>
Frank Russell Investment
Company
Frank Russell Investment Company
is a "series mutual fund" with 29
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
Annual Report
December 31, 1999
Table of Contents
Page
Letter to Our Clients..................................................... 2
Diversified Equity Fund................................................... 3
Special Growth Fund....................................................... 21
Equity Income Fund........................................................ 41
Quantitative Equity Fund.................................................. 53
International Securities Fund............................................. 69
Emerging Markets Fund..................................................... 89
Real Estate Securities Fund............................................... 107
Short Term Bond Fund...................................................... 117
Diversified Bond Fund..................................................... 131
Multistrategy Bond Fund................................................... 151
Notes to Financial Statements............................................. 174
Report of Independent Accounts............................................ 187
Tax Information........................................................... 188
Manager, Money Managers and Service Providers............................. 189
Frank Russell Investment Company - Russell Funds Copyright(C) Frank Russell
Company 2000. 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 Comany. 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 fluctate 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>
To Our Clients
We are pleased to present the Frank Russell Investment Company 1999 Annual
Report. This report covers information on ten of the Funds and represents our
eighteenth year in operation.
We remain committed to providing our clients with superior investment solutions
through the benefits of multi-manager, multi-style diversification used in
structuring our Funds. The commitment proved worthwhile in 1999, as our Funds,
in general, provided solid returns as compared to their respective benchmarks
and attracted many new investors, both creating significant growth in assets.
Frank Russell Investment Management Company (FRIMCo) continuously evaluates the
Funds we offer our clients. Each of these Funds is carefully monitored by
Russell investment professionals to ensure that the most appropriate investment
advisors and strategies are utilized within each Fund. The advisors are
monitored by FRIMCo using the expertise and advice of the Investment Policy and
Research group of Frank Russell Company.
Since the close of 1998 we have implemented changes in our Funds' structure
which we believe will benefit current and potential investors. The Russell Funds
and the LifePoints(R) Funds both added Class C shares during 1999, and the
Russell Institutional Funds opened Class E shares for investment in May 1999.
Additionally, the Tax-Managed Small Cap Fund was opened for investment in
November 1999, providing a small cap alternative to the existing tax-managed
Russell Funds.
Thank you for your continued confidence and investment with Frank Russell
Investment Company. We look forward to 2000 and continuing to earn your support.
Sincerely,
/s/ Lynn L. Anderson. /s/ Eric A. Russell
Lynn L. Anderson. Eric A. Russell
Chairman of the Board President
Frank Russell Investment Company Frank Russell Investment Management Company
<PAGE>
Diversified Equity Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: To provide income and capital growth by investing principally in
equity securities.
Invests in: Primarily US equity securities.
Strategy: The Fund uses a multi-style, multi-manager strategy intended to
achieve higher returns with moderate risk. The Fund employed the investment
management services of eleven managers with four separate and distinct
investment styles.
[The following table was depicted as a line graph in the printed material.]
Diversified Equity Lipper(R) Growth
Dates Fund - Class S Russell 1000(R)** & Income++
-- $10,000 $10,000 $10,000
1990 $9,299 $9,684 $9,551
1991 $12,186 $12,749 $12,303
1992 $13,199 $13,901 $13,332
1993 $14,589 $15,313 $14,816
1994 $14,588 $15,371 $14,664
1995 $19,719 $21,176 $19,151
1996 $24,311 $25,990 $23,123
1997 $31,927 $34,448 $29,367
1998 $39,943 $43,757 $33,891
1999 $47,227 $52,907 $38,552
- ------------------------------------------------------------------------
Total $236,988 $255,136 $218,759
Diversified Equity Fund - Class S
Periods Ended
12/31/99 Growth of $10,000 Total Return
- ------------- ----------------- ------------
1 Year $11,821 18.21%
5 Years $32,374 26.48%ss.
10 Years $47,227 16.79%ss.
Diversified Equity Fund - Class E++
Periods Ended
12/31/99 Growth of $10,000 Total Return
- ------------- ----------------- ------------
1 Year $11,795 17.95%
5 Years $32,022 26.20%ss.
10 Years $46,713 16.66%ss.
Diversified Equity Fund - Class C+++
Periods Ended
12/31/99 Growth of $10,000 Total Return
- ------------- ----------------- ------------
1 Year $11,723 17.23%
5 Years $31,828 26.04%ss.
10 Years $46,430 16.59%ss.
Russell 1000(R)Index
Periods Ended
12/31/99 Growth of $10,000 Total Return
- ------------- ----------------- ------------
1 Year $12,091 20.91%
5 Years $34,421 28.05%ss.
10 Years $52,907 18.13%ss.
Lipper(R)Growth & Income Funds Benchmark
Periods Ended
12/31/99 Growth of $10,000 Total Return
- ------------- ----------------- ------------
1 Year $11,375 13.75%
5 Years $26,291 21.33%ss.
10 Years $38,552 14.45%ss.
3 Diversified Equity Fund
<PAGE>
Diversified Equity Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Performance Review
For the year ended December 31, 1999, the Diversified Equity Fund Class S, Class
E, and Class C shares reflected total returns of 18.21%, 17.95%, and 17.23%,
respectively, as compared to the Russell 1000(R) Index results of 20.91%. The
Fund trailed the Index primarily due to its underexposure to high valuation
technology stocks. Performance compared more favorably with the 13.75% average
return of mutual funds tracked in the Lipper(R) Growth and Income Funds
Universe.
Portfolio Highlights
The performance of stocks in 1999 was characterized by extreme differences in
returns between the various market sectors. Overall, stocks provided investors
with their fifth consecutive year of returns in excess of 20% - an unprecedented
trend in the US stock market's history. Unlike the previous four years, the
market's advance was much broader across capitalization tiers, with small cap
shares actually finishing the year slightly higher than large caps after an end
of year rally. The market was also narrower, however, by economic sector
performance, which was mostly reflective of the extreme strength of technology
issues. Technology, which gained 77% for the year, dominated other market
sectors, as excitement over the Internet created aggressive buying. Other
sectors lagged by a wide margin, as value stocks in the Russell 1000 Index
trailed their growth counterparts by 26 percentage points.
The Diversified Equity Fund fared better than the majority of its peers in the
Lipper Growth and Income Funds Universe for the year. The Fund's growth managers
produced very strong returns, though their growing reluctance to accept
increasingly extreme valuations led them to underweight several of the market's
strongest performing issues during the second half of the year. The Fund's
value-oriented managers all had very frustrating years, as their valuation
sensitivity led them away from the market's strongest performing issues.
Four new managers were funded, with Westpeak's assignment expanded to provide a
supplementary defensive role to the Fund. The challenging market environment
during the year proved difficult for the Fund, as it did for most broadly
diversified investment funds. Analysis of the Fund may result in further changes
in the manager line up, as well as changes to manager allocations, with the goal
to improve performance consistency in extreme market environments.
Top Ten Equity Holdings
(as a percent of Total Investments) December 31, 1999
Cisco Systems, Inc. 2.6%
General Electric Co. 2.4
Microsoft Corp. 2.2
Citigroup Inc. 1.9
EMC Corp. 1.5
Dell Computer Corp. 1.5
Lucent Technologies, Inc. 1.5
Home Depot, Inc. (The) 1.5
Intel Corp. 1.4
MCI WorldCom, Inc. 1.4
Portfolio Characteristics
December 31, 1999
Current P/E Ratio 25.0x
Portfolio Price/Book Ratio 4.44x
Market Capitalization - $-Weighted Average 105.39 Bil
Number of Holdings 685
Money Managers Styles
Alliance Capital Management L.P. Growth
Barclays Global Advisors Market- Oriented
Equinox Capital Management, Inc. Value
Jacobs Levy Equity Management, Inc. Market- Oriented
Lincoln Capital Management Co. Growth
Marsico Capital Management, LLC Growth
Peachtree Asset Management Market- Oriented
Sanford C. Bernstein & Co., Inc. Value
Suffolk Capital Management, Inc. Market- Oriented
Trinity Investment Management Corp. Value
Westpeak Investment Advisors, LP Defensive
Westpeak Investment Advisors, LP Market- Oriented
* Diversified Equity Fund Class S assumes initial investment on January 1,
1990.
** Russell 1000(R) Index includes the 1,000 largest companies in the Russell
3000(R) Index, the smallest of which is valued at about $1,124.8 million.
The Russell 1000 Index represents the universe of stocks from which most
active money managers typically select. The Russell 1000 Index return
reflects adjustments for income dividends and capital gains distributions
reinvested as of the ex-dividend dates.
+ Lipper(R) Growth & Income Funds Benchmark is the average total return for
the universe of funds within the Growth and Income Funds investment
objective. The total return for the funds reflects adjustments for income
dividends and capital gains distributions reinvested as of the ex-dividend
dates.
++ Diversified Equity Fund Class S performance has been linked with Class E
to provide historical perspective. For the period May 26, 1997
(commencement of sale) to May 15, 1998, Class E paid shareholder service
and Rule 12b-1 distribution fees. From May 16, 1998 through the current
period, Class E paid only shareholder service fees. Total return would
have been lower had these fees been in effect during prior reporting
periods.
+++ Diversified Equity Fund Class S and Class E performance has been linked
with Class C to provide historical perspective. From January 27, 1999
(commencement of sale) through the current period, Class C paid
shareholder service and Rule 12b-1 distribution fees. Total return would
have been lower had these fees been in effect during prior reporting
periods.
ss. Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Diversified Equity Fund 4
<PAGE>
Diversified Equity Fund
Statement of Net Assets
December 31, 1999
Market
Number Value
of (000)
Shares $
------- ---------
Common Stocks - 91.6%
Auto and Transportation - 3.0%
America West Holding Corp. Class B (a) 4,380 91
Arvin Industries, Inc. 3,100 88
AutoZone, Inc. (a) 2,900 94
Borg-Warner Automotive, Inc. 6,100 247
Burlington Northern, Inc. 37,020 898
Continental Airlines, Inc. Class B (a) 69,900 3,102
Cooper Tire & Rubber Co. 44,830 698
CSX Corp. 9,700 304
Dana Corp. 28,020 839
Delphi Automotive Systems Corp. 55,287 871
Delta Air Lines, Inc. 80,200 3,995
Eaton Corp. 2,700 196
Expeditors International of
Washington, Inc. 3,400 147
Ford Motor Co. 144,900 7,743
General Motors Corp. 99,500 7,232
Genuine Parts Co. 27,110 673
Goodyear Tire & Rubber Co. 7,100 200
Harley-Davidson, Inc. 700 45
Hertz Corp. Class A 18,720 938
Kansas City Southern Industries, Inc. 7,500 560
Koninklijke Luchtvaart Maatschappij
NV (KLM) (a) 62,429 1,557
Lear Corp. (a) 66,620 2,132
Meritor Automotive, Inc. 21,600 418
Norfolk Southern Corp. 36,400 746
Northwest Airlines Corp. Class A (a) 71,900 1,591
PACCAR, Inc. 11,190 495
Tower Automotive, Inc. (a) 5,890 91
Trinity Industries, Inc. 5,390 153
TRW, Inc. 18,780 975
UAL Corp. (a) 97,830 7,588
Union Pacific Corp. 69,540 3,034
USFreightways Corp. 3,910 185
---------
47,926
---------
Consumer Discretionary - 11.3%
Abercrombie & Fitch Co. Class A (a) 54,000 1,441
Alberto Culver Co. Class B 7,300 188
American Eagle Outfitters, Inc. NPV (a) 1,800 81
AMFM, Inc. (a) 32,900 2,574
Applebee's International, Inc. 3,400 100
AT&T Corp. - Liberty Media Group
Class A (a) 61,600 3,496
Avon Products, Inc. 3,100 102
Barnes & Noble, Inc. (a) 14,700 303
Bed Bath & Beyond, Inc. (a) 30,800 1,066
Belo (A.H.) Corp. Class A 3,200 61
Best Buy Co. (a) 15,900 798
BJ's Wholesale Club, Inc. (a) 9,500 347
Black & Decker Corp. 14,800 773
Brinker International, Inc. (a) 38,900 934
Brunswick Corp. 34,500 768
Carnival Corp. Class A NPV 60,270 2,882
Catalina Marketing Corp. (a) 2,280 264
CBS Corp. (a) 19,500 1,247
Central Newspapers, Inc. Class A 3,120 123
Circuit City Stores, Inc. 7,460 336
Claire's Stores, Inc. 2,700 60
Clear Channel Communications, Inc. (a) 73,582 6,567
CMG Information Services, Inc. (a) 1,900 526
Cost Plus, Inc. (a) 3,800 135
Costco Wholesale Corp. (a) 60,300 5,499
Darden Restaurants, Inc. 53,300 966
Dayton Hudson Corp. 66,400 4,876
Deluxe Corp. 39,200 1,076
Dillard's, Inc. Class A 21,100 426
Disney (Walt) Co. 110,240 3,225
Donnelley (R.R.) & Sons Co. 13,000 323
Eastman Kodak Co. 31,791 2,106
EchoStar Communications Corp. Class A (a) 200 19
Electronic Arts, Inc. (a) 16,700 1,403
eToys, Inc. (a) 100 3
Federated Department Stores, Inc. (a) 66,930 3,384
Fortune Brands, Inc. 55,600 1,838
Four Seasons Hotels, Inc. 34,048 1,813
Gannett Co., Inc. 18,100 1,476
Gap, Inc. 149,290 6,867
Harcourt General, Inc. 1,100 44
Harrah's Entertainment, Inc. (a) 12,600 333
Hasbro, Inc. 108,450 2,067
Home Depot, Inc. (The) 337,181 23,118
Houghton Mifflin Co. 1,000 42
Interim Services, Inc. (a) 2,760 68
International Game Technology 14,400 293
Interpublic Group Cos., Inc. 13,100 756
Intimate Brands, Inc. Class A 6,000 259
JC Penney & Co., Inc. 28,140 561
Kmart Corp. (a) 64,700 651
Knight-Ridder, Inc. 45,450 2,704
Kohl's Corp. (a) 37,500 2,707
Legato Systems, Inc. (a) 200 14
Liberty Digital, Inc. Class A (a) 900 67
Limited, Inc. (The) 5,200 225
Lowe's Cos., Inc. 89,000 5,318
Manpower, Inc. 19,600 737
5 Diversified Equity Fund
<PAGE>
Diversified Equity Fund
Statement of Net Assets (continued)
December 31, 1999
Market
Number Value
of (000)
Shares $
------- ---------
Mattel, Inc. 121,821 1,599
May Department Stores Co. 29,960 966
Maytag Corp. 7,900 379
McDonald's Corp. 44,400 1,790
McGraw-Hill, Inc. 3,400 210
MediaOne Group, Inc. (a) 160,300 12,313
Metro-Goldwyn-Mayer, Inc. (a) 8,100 191
New York Times Co. Class A 3,600 177
NIKE, Inc. Class B 6,600 327
Office Depot, Inc. (a) 19,400 212
Omnicom Group, Inc. 11,100 1,110
Pacific Sunwear of California (a) 1,700 54
Payless ShoeSource, Inc. (a) 13,200 620
Reynolds & Reynolds Co. Class A 1,200 27
Royal Caribbean Cruises, Ltd. 41,171 2,030
Russell Corp. 5,100 85
Saks, Inc. (a) 35,420 551
Scholastic Corp. (a) 1,400 87
Sears Roebuck & Co. 24,040 732
Shaw Industries, Inc. (a) 26,200 405
Stanley Works 8,300 250
Star Gas Partners, L.P. (a) 1,022 5
Starwood Hotels & Resorts Worldwide, Inc. 6,700 158
Station Casinos, Inc. (a) 5,400 121
Ticketmaster Online- CitySearch,
Inc. Class B (a) 300 12
Tiffany & Co. 40,855 3,646
Time Warner, Inc. 142,406 10,316
Times Mirror Co. Series A 7,100 476
TJX Cos., Inc. 39,800 813
TMP Worldwide, Inc. (a) 600 85
Tommy Hilfiger Corp. (a) 69,100 1,611
Toys "R" Us, Inc. (a) 49,880 714
Tribune Co. 78,200 4,306
Tricon Global Restaurants, Inc. (a) 7,800 301
Tupperware Corp. 10,300 175
UnitedGlobalCom, Inc. Class A (a) 1,300 91
Univision Communications, Inc. Class A (a) 3,100 317
USA Networks, Inc. (a) 60,700 3,350
V.F. Corp. 29,000 870
Valassis Communications, Inc. (a) 13,300 562
Viacom, Inc. Class B (a) 57,400 3,469
Viad Corp. 2,800 78
Wal-Mart Stores, Inc. 312,797 21,622
Washington Post Co. Class B 55 31
Wendy's International, Inc. 8,300 171
Whirlpool Corp. 25,410 1,653
Young & Rubicam, Inc. 5,600 396
Zale Corp. (a) 1,860 90
---------
179,990
---------
Consumer Staples - 5.3%
Albertson's, Inc. 15,600 503
Anheuser-Busch Cos., Inc. 63,713 4,516
Bestfoods 4,600 242
Campbell Soup Co. 21,200 820
Church and Dwight Co., Inc. 4,000 107
Coca-Cola Co. (The) 119,290 6,949
Colgate-Palmolive Co. 59,600 3,874
ConAgra, Inc. 88,270 1,992
Coors (Adolph) Co. Class B 1,300 68
Corn Products International, Inc. 3,030 99
CVS Corp. 90,900 3,630
Dial Corp. 2,600 63
Earthgrains Co. 3,010 48
General Mills, Inc. 14,920 533
Gillette Co. (The) 92,500 3,810
Hannaford Brothers Co. 900 62
Heinz (H.J.) Co. 16,670 664
Hormel Foods Corp. 8,500 345
IBP, Inc. 54,680 984
Interstate Bakeries Corp. 25,400 460
Jack in the Box, Inc. (a) 4,510 93
Kellogg Co. 13,700 422
Kroger Co. (The) (a) 199,100 3,758
Nabisco Holdings Corp. Class A 37,000 1,170
PepsiCo, Inc. 269,730 9,508
Philip Morris Cos., Inc. 428,230 9,930
Procter & Gamble Co. 109,780 12,028
Quaker Oats Co. 32,770 2,150
R.J. Reynolds Tobacco Holdings, Inc. (a) 10,233 180
Ralston-Purina Group 59,900 1,670
Safeway, Inc. (a) 53,000 1,885
Sara Lee Corp. 91,600 2,021
Seagram Co., Ltd. NPV 29,700 1,335
SuperValu, Inc. 82,230 1,645
SYSCO Corp. 34,480 1,364
Tyson Foods, Inc. Class A 70,700 1,149
U.S. Foodservice (a) 18,900 317
Unilever NV (a) 6,600 359
Universal Corp. 2,500 57
UST Corp. 57,000 1,436
Walgreen Co. 79,000 2,311
---------
84,557
---------
Financial Services - 15.2%
Aetna, Inc. 13,530 755
AFLAC, Inc. 35,300 1,666
Allmerica Financial Corp. 500 28
Allstate Corp. 38,800 931
AMB Property Corp. (e) 900 18
Ambac Financial Group, Inc. 22,100 1,153
Diversified Equity Fund 6
<PAGE>
Diversified Equity Fund
Statement of Net Assets (continued)
December 31, 1999
Market
Number Value
of (000)
Shares $
------- ---------
American Express Co. 12,000 1,995
American Financial Group, Inc. 22,670 598
American General Corp. 54,800 4,158
American International Group, Inc. 136,200 14,727
Ameritrade Holding Corp. Class A (a) 1,400 30
AmSouth Bancorp 92,325 1,783
Apartment Investment & Management
Co. Class A (e) 7,600 303
Archstone Communities Trust (e) 1,200 25
Arden Realty Group, Inc. (e) 2,400 48
Associates First Capital Corp. Class A 150,050 4,117
Astoria Financial Corp. 42,540 1,295
Automatic Data Processing, Inc. 56,100 3,022
Avalonbay Communities, Inc. (e) 2,300 79
Bank of America Corp. 215,128 10,797
Bank One Corp. 100,630 3,226
BB&T Corp. 6,500 178
Bear Stearns Co., Inc. 7,339 314
Block (H&R) Co., Inc. 8,400 368
Capital One Financial Corp. 67,100 3,233
CarrAmerica Realty Corp. 2,900 61
Charter One Financial, Inc. 53,403 1,021
Chase Manhattan Corp. 137,250 10,663
Chubb Corp. (The) 15,850 893
CIGNA Corp. 43,820 3,530
CIT Group, Inc. 120,180 2,539
Citigroup, Inc. 547,351 30,412
CNA Financial Corp. (a) 6,720 262
Comerica, Inc. 17,000 794
Commerce Bancshares, Inc. 24,299 834
Concord EFS, Inc. (a) 47,550 1,221
Conseco, Inc. 313,268 5,600
Countrywide Credit Industries, Inc. 33,160 837
Dime Bancorp, Inc. 54,100 818
Donaldson, Lufkin & Jenrette, Inc. - DLJ 200 10
Dow Jones & Co., Inc. 10,300 700
DST Systems, Inc. (a) 10,200 778
Duke Realty Investments, Inc. (e) 3,400 66
Dun & Bradstreet Corp. 20,760 612
E.W. Blanch Holdings, Inc. 2,470 151
Edwards (A.G.), Inc. 3,000 96
Equifax, Inc. 6,800 160
Equity Office Properties Trust (e) 4,100 101
Everest Reinsurance Holdings, Inc. 13,530 302
Fannie Mae 188,668 11,780
FBR Asset Investment Corp. (e) 29,600 414
Federal Home Loan Mortgage Corp. 137,200 6,457
FelCor Lodging Trust, Inc. (e) 1,500 26
Fifth Third Bancorp 17,700 1,298
Financial Security Assurance
Holdings, Ltd. 1,670 87
FINOVA Group, Inc. 2,550 91
First Data Corp. 19,300 952
First Union Corp. 43,830 1,438
Fleet Financial Corp. 257,490 8,964
Foundation Health Systems, Inc. (a) 43,790 435
Franklin Resources, Inc. 56,100 1,799
Fulton Financial Corp. 300 5
Gallagher (Arthur J.) & Co. 1,000 65
GATX Corp. 17,400 587
General Growth Properties, Inc. (e) 2,100 59
Golden State Bancorp, Inc. (a) 40,310 695
Golden West Financial Corp. 40,260 1,349
Goldman Sachs Group, Inc. (a) 37,000 3,485
Greenpoint Financial Corp. 50,370 1,199
Hartford Financial Services Group,
Inc. (The) 78,700 3,728
Heller Financial, Inc. Class A 2,610 52
Hibernia Corp. Class A 88,400 939
Highwoods Properties, Inc. 1,700 40
Host Marriott Corp. (e) 34,027 281
Household International Corp. 19,400 723
HRPT Properties Trust (e) 3,400 31
Huntington Bancshares, Inc. 39,100 931
Jefferson-Pilot Corp. 7,000 478
KeyCorp 59,620 1,319
Kimco Realty Corp. (e) 200 7
Knight/Trimark Group, Inc. Class A (a) 400 18
Lehman Brothers Holdings, Inc. 14,850 1,258
Leucadia National Corp. 3,200 74
Liberty Property Trust (e) 200 5
Lincoln National Corp. 55,100 2,204
Loews Corp. 14,720 893
Mack-Cali Realty Corp. (e) 14,700 383
Marsh & McLennan Cos., Inc. 7,800 746
MBIA, Inc. 16,270 859
MBNA Corp. 526,400 14,344
Meditrust Cos. (e) 2,900 16
MGIC Investment Corp. 2,800 169
MONY Group, Inc. (The) 5,900 172
Morgan (J.P.) & Co., Inc. 36,200 4,584
Morgan Stanley Dean Witter & Co. 117,194 16,729
National City Corp. 54,140 1,282
New Plan Excel Realty Trust (e) 38,600 610
North Fork Bancorp., Inc. 30,600 536
Old Kent Financial Corp. 11,634 412
Old Republic International Corp. 34,950 476
Pacific Century Financial Corp. 14,500 271
Paychex, Inc. 77,000 3,075
7 Diversified Equity Fund
<PAGE>
Diversified Equity Fund
Statement of Net Assets (continued)
December 31, 1999
Market
Number Value
of (000)
Shares $
------- ---------
PMI Group, Inc. (The) 14,500 708
PNC Bank Corp. 54,080 2,407
Post Properties, Inc. (e) 900 34
Profit Recovery Group International,
Inc. (The) (a) 2,400 64
ProLogis Trust (e) 2,600 50
Providian Financial Corp. 20,170 1,837
Public Storage, Inc. (e) 3,300 75
Radian Group, Inc. (a) 4,400 210
Regions Financial Corp. 73,000 1,830
Republic of New York Corp. 8,200 590
Ryder System, Inc. 36,700 897
SAFECO Corp. 21,460 532
Simon Property Group, Inc. (e) 3,300 76
SouthTrust Corp. 21,610 816
Sovereign Bancorp, Inc. 139,500 1,033
Spieker Properties, Inc. (e) 200 7
St. Paul Cos., Inc. 34,680 1,168
State Street Corp. 14,600 1,067
Summit Bancorp 23,510 720
SunGard Data Systems (a) 20,800 494
SunTrust Banks, Inc. 20,300 1,397
Torchmark Corp. 26,150 760
Transatlantic Holdings, Inc. 950 74
Travelers Property Casualty Corp.
Class A 20,790 712
Trustmark Corp. 700 15
U.S. Bancorp 29,300 698
U.S. Trust Corp. 1,200 96
UnionBanCal Corp. 25,090 990
UnumProvident Corp. 55,800 1,789
Vornado Realty Trust (e) 400 13
Wachovia Corp. 3,350 228
Washington Mutual, Inc. 177,590 4,617
Wells Fargo Co. 33,500 1,355
---------
243,497
---------
Health Care - 8.1%
Abbott Laboratories 26,700 970
Allergan, Inc. 36,720 1,827
ALZA Corp. (a) 46,300 1,603
American Home Products Corp. 60,600 2,390
Amgen, Inc. (a) 59,000 3,540
Andrx Corp. (a) 500 21
AstraZeneca Group PLC - ADR 60,500 2,526
Bard (C.R.), Inc. 4,800 254
Bausch & Lomb, Inc. 6,900 472
Baxter International, Inc. 102,190 6,419
Becton, Dickinson & Co. 79,400 2,124
Bergen Brunswig Corp. Class A 38,050 316
Biogen, Inc. (a) 7,250 612
Bristol-Myers Squibb Co. 269,310 17,286
Cardinal Health, Inc. 55,600 2,662
Columbia/HCA Healthcare Corp. 173,110 5,074
DENTSPLY International, Inc. 3,100 73
Elan Corp. PLC - ADR (a) 101,400 2,991
Genentech, Inc. (a) 59,129 7,953
HEALTHSOUTH Corp. (a) 24,800 133
Humana, Inc. (a) 8,570 70
ICN Pharmaceuticals, Inc. 12,800 324
IVAX Corp. (a) 26,400 680
Johnson & Johnson 78,360 7,297
Lilly (Eli) & Co. 42,800 2,846
Mallinckrodt, Inc. 34,300 1,091
Manor Care, Inc. (a) 20,600 330
MedImmune, Inc. (a) 77 13
Medtronic, Inc. 51,500 1,877
Merck & Co., Inc. 122,900 8,242
Oxford Health Plans, Inc. (a) 7,900 100
PacifiCare Health Systems, Inc. (a) 19,200 1,018
PE Corp. 1,100 132
Pfizer, Inc. 230,050 7,462
Pharmacia & Upjohn, Inc. 163,900 7,376
Priority Healthcare Corp. Class B (a) 52,740 1,526
Schering-Plough Corp. 299,100 12,618
St. Jude Medical, Inc. (a) 6,700 206
Tenet Healthcare Corp. (a) 11,480 270
Trigon Healthcare, Inc. (a) 4,870 144
United Healthcare Corp. 30,780 1,635
Warner-Lambert Co. 189,800 15,552
Wellpoint Health Networks, Inc. (a) 3,700 244
---------
130,299
---------
Integrated Oils - 3.6%
Amerada Hess Corp. 57,990 3,291
Ashland, Inc. 65,490 2,157
Atlantic Richfield Co. 51,500 4,455
Chevron Corp. 14,180 1,228
Coastal Corp. 73,850 2,617
Conoco, Inc. Class B NPV 107,625 2,677
Enron Corp. 12,900 573
Exxon Mobil Corp. NPV (a) 232,675 18,745
Kerr-McGee Corp. 13,900 862
Lyondell Petrochemical Co. 18,900 241
Phillips Petroleum Co. 54,820 2,577
Royal Dutch Petroleum Co. 58,000 3,505
Texaco, Inc. 104,550 5,678
Unocal Corp. 113,100 3,796
USX-Marathon Group 187,700 4,634
---------
57,036
---------
Diversified Equity Fund 8
<PAGE>
Diversified Equity Fund
Statement of Net Assets (continued)
December 31, 1999
Market
Number Value
of (000)
Shares $
------- ---------
Materials and Processing - 6.3%
Air Products & Chemicals, Inc. 72,710 2,440
Alcan Aluminum, Ltd. 10,600 437
Alcoa, Inc. 51,000 4,233
Allegheny Technologies, Inc. (a) 9,800 220
American Standard Cos., Inc. (a) 19,130 878
Archer-Daniels- Midland Co. 52,019 634
Armstrong World Industries, Inc. 20,300 678
Avery Dennison Corp. 2,800 204
B.F. Goodrich Co. 84,920 2,335
Ball Corp. 14,800 583
Boise Cascade Corp. 15,970 647
Cabot Corp. 18,610 379
Centex Corp. 20,900 516
Champion International Corp. 39,700 2,459
CK Witco Corp. 9,242 124
Consolidated Papers, Inc. 11,500 366
Cornerstone Properties, Inc. 400 6
Crown Cork & Seal Co., Inc. 30,830 690
Dow Chemical Co. 44,670 5,969
du Pont (E.I.) de Nemours & Co. 45,285 2,983
Eastman Chemical Co. 7,700 367
Ecolab, Inc. 2,800 109
Engelhard Corp. 11,400 215
Florida Rock Industries, Inc. 300 10
Fluor Corp. 4,600 211
FMC Corp. (a) 19,800 1,135
Fort James Corp. 35,600 974
Freeport-McMoRan Copper & Gold, Inc.
Class B (a) 17,100 361
Fuller (H.B.) Co. 990 55
Georgia Gulf Corp. 5,900 180
Georgia-Pacific Group 81,234 4,123
Great Lakes Chemical Corp. 8,400 321
Illinois Tool Works, Inc. 50,600 3,419
IMC Global, Inc. 21,100 345
International Paper Co. 143,584 8,103
Johns Manville Corp. 3,500 49
Kimberly-Clark Corp. 51,590 3,366
Lafarge Corp. 16,700 461
Louisiana Pacific Corp. 4,500 64
Lubrizol Corp. 27,800 858
Masco Corp. 60,600 1,538
Millennium Chemicals, Inc. 10,800 213
Minnesota Mining & Manufacturing Co. 23,200 2,271
Monsanto Co. 153,000 5,451
Nucor Corp. 16,200 888
OM Group 1,900 65
Owens Corning 64,890 1,253
Owens-Illinois, Inc. (a) 29,610 742
PPG Industries, Inc. 4,600 288
Praxair, Inc. 80,530 4,052
Rouse Co. (The) 400 9
Scotts Co. (The) Class A (a) 600 24
Sealed Air Corp. New (a) 21,100 1,093
Sherwin-Williams Co. 31,800 668
Sigma Aldrich Corp. 5,440 163
Smurfit-Stone Container Corp. (a) 38,460 940
Solutia, Inc. 18,800 290
Sonoco Products Co. 28,470 648
Temple-Inland, Inc. 16,130 1,064
Texas Industries, Inc. 2,210 94
Textron, Inc. 43,070 3,303
Tyco International, Ltd. 470,756 18,301
Union Carbide Corp. 13,000 868
USG Corp. 15,100 712
USX-U.S. Steel Group 29,800 983
W.R. Grace & Co. (a) 36,400 505
Waters Corp. (a) 3,500 185
Westvaco Corp. 11,500 375
Weyerhaeuser Co. 22,050 1,583
Willamette Industries, Inc. 1,200 56
---------
100,132
---------
Miscellaneous - 0.1%
Convergys Corp. NPV (a) 11,800 363
ServiceMaster Co. 11,200 138
SFX Entertainment, Inc. (a) 19,300 698
---------
1,199
---------
Other Energy - 1.1%
Apache Corp. 70,700 2,612
Baker Hughes, Inc. 4,100 86
Burlington Resources, Inc. 5,040 167
Constellation Energy Group 70,800 2,053
El Paso Energy Corp. 34,370 1,334
ENSCO International, Inc. 22,200 508
EOG Resources, Inc. 38,400 674
Noble Drilling Corp. (a) 6,300 206
Occidental Petroleum Corp. 45,400 982
Schlumberger, Ltd. 5,600 315
Sempra Energy 74,900 1,301
Sunoco, Inc. 15,150 356
Tidewater, Inc. 3,900 141
Tosco Corp. 107,440 2,921
Transocean Sedco Forex, Inc. NPV (a) 62,384 2,102
Ultramar Diamond Shamrock Corp. 99,760 2,263
Varco International, Inc. (a) 5,800 59
---------
18,080
---------
9 Diversified Equity Fund
<PAGE>
Diversified Equity Fund
Statement of Net Assets (continued)
December 31, 1999
Market
Number Value
of (000)
Shares $
------- ---------
Producer Durables - 6.1%
Applied Materials, Inc. (a) 110,400 13,979
Boeing Co. 6,020 250
Briggs & Stratton Corp. 14,100 756
Caterpillar, Inc. 33,520 1,578
CommScope, Inc. (a) 12,700 512
Cordant Technologies, Inc. 2,500 83
CTS Corp. 7,700 580
Cummins Engine Co., Inc. 28,200 1,362
D.R. Horton, Inc. 8,900 123
Deere & Co. 88,300 3,830
Dover Corp. 7,200 327
General Electric Co. 248,879 38,514
Honeywell International, Inc. (a) 99,237 5,725
Ingersoll-Rand Co. 86,100 4,741
ITT Industries, Inc. 7,960 266
Johnson Controls, Inc. 21,500 1,223
Kaufman & Broad Home Corp. 7,740 187
KLA Instruments Corp. (a) 25,900 2,883
Lexmark International Group, Inc.
Class A (a) 7,700 697
Litton Industries, Inc. (a) 7,120 355
Lockheed Martin Corp. 32,900 720
Manitowoc Co., Inc. 2,900 99
Mettler-Toledo International, Inc.
New (a) 2,800 107
Miller (Herman), Inc. 15,100 346
Molex, Inc. 475 27
National Service Industries, Inc. 10,800 319
Northrop Grumman Corp. 49,100 2,654
Novellus Systems, Inc. (a) 26,400 3,234
Pall Corp. 9,500 205
Parker-Hannifin Corp. 2,780 143
Pitney Bowes, Inc. 2,800 135
Pulte Corp. 12,030 271
Raytheon Co. Class B 106,410 2,826
Rockwell International Corp. 8,900 426
Roper Industries, Inc. 1,800 68
Snap-On Tools Corp. 12,500 332
Solectron Corp. (a) 21,000 1,998
Tecumseh Products Co. Class A 1,940 91
Teradyne, Inc. (a) 20,200 1,333
Terex Corp. (a) 3,300 92
Thermo Instrument Systems, Inc. (a) 6,000 67
Thomas & Betts Corp. 16,010 510
United Technologies Corp. 50,500 3,282
---------
97,256
---------
Technology - 22.3%
3Com Corp. (a) 130,742 6,137
Adaptec, Inc. (a) 1,300 65
ADC Telecommunications, Inc. (a) 25,200 1,827
Adobe Systems, Inc. 64,340 4,327
Adtran, Inc. (a) 35,000 1,800
Altera Corp. (a) 5,800 287
America Online, Inc. (a) 236,556 17,845
Analog Devices, Inc. (a) 32,300 3,004
Apple Computer, Inc. (a) 58,500 6,011
Applied Micro Circuits Corp. (a) 3,300 419
Arrow Electronics, Inc. (a) 14,600 370
Avnet, Inc. 5,400 327
AVX Corp. 8,800 439
BEA Systems, Inc. (a) 8,000 560
BMC Software, Inc. (a) 80,200 6,406
Broadcom Corp. Class A (a) 1,400 381
CheckFree Holdings Corp. (a) 900 94
CIENA Corp. (a) 3,400 195
Cisco Systems, Inc. (a) 390,092 41,764
Citrix Systems, Inc. (a) 3,400 418
CNET, Inc. (a) 1,200 68
Computer Associates International, Inc. 23,700 1,658
Computer Sciences Corp. (a) 11,000 1,041
Compuware Corp. (a) 51,800 1,926
Comverse Technology, Inc. (a) 2,700 391
Conexant Systems, Inc. (a) 5,700 377
Cooper Industries, Inc. 30,300 1,225
Covad Communications Group, Inc. (a) 1,700 95
Critical Path, Inc. (a) 200 19
Cypress Semiconductor Corp. (a) 67,200 2,176
Dell Computer Corp. (a) 463,157 23,592
DoubleClick, Inc. (a) 800 202
E*TRADE Group, Inc. (a) 4,400 115
EarthLink Network, Inc. (a) 19,700 837
eBay, Inc. (a) 2,600 325
Electronic Data Systems Corp. 77,198 5,167
Electronics For Imaging, Inc. (a) 4,600 269
EMC Corp. (a) 225,143 24,597
Emulex Corp. (a) 1,000 113
Exodus Communications, Inc. (a) 4,400 391
Galileo International, Inc. 25,200 754
Gateway, Inc. (a) 1,400 101
General Dynamics Corp. 36,500 1,925
General Instrument Corp. (a) 10,400 884
Harris Corp. 22,240 594
Hewlett-Packard Co. 17,200 1,960
Imation Corp. (a) 3,800 128
IMS Health, Inc. 93,000 2,528
InfoSpace.com, Inc. (a) 600 128
Ingram Micro, Inc. Class A (a) 29,690 390
Inktomi Corp. (a) 16,000 1,418
Diversified Equity Fund 10
<PAGE>
Diversified Equity Fund
Statement of Net Assets (continued)
December 31, 1999
Market
Number Value
of (000)
Shares $
------- ---------
Intel Corp. 272,566 22,419
International Business Machines Corp. 119,000 12,852
JDS Uniphase Corp. (a) 43,982 7,092
Koninklijke (Royal) Philips
Electronics NV NY Reg Share NPV (a) 26,040 3,515
Linear Technology Corp. 1,600 114
LSI Logic Corp. (a) 47,500 3,206
Lucent Technologies, Inc. 314,449 23,525
Lycos, Inc. (a) 1,800 143
Macromedia, Inc. (a) 800 59
Maxim Integrated Products, Inc. (a) 13,700 646
Mercury Interactive Corp. (a) 800 86
Microchip Technology, Inc. (a) 5,100 350
Micron Technology, Inc. (a) 35,700 2,776
Microsoft Corp. (a) 301,970 35,236
MindSpring Enterprises, Inc. (a) 33,800 887
Motorola, Inc. 54,520 8,028
National Semiconductor Corp. (a) 27,000 1,156
NCR Corp. (a) 32,900 1,246
Network Appliance, Inc. (a) 6,400 531
Network Associates, Inc. (a) 3,700 99
Network Solutions, Inc. Class A (a) 400 87
Nextel Communications, Inc. Class A (a) 32,100 3,308
Nortel Networks Corp. 18,800 1,899
Oracle Systems Corp. (a) 40,448 4,530
Portal Software, Inc. (a) 300 31
PSINET, Inc. (a) 1,100 68
QUALCOMM, Inc. (a) 75,500 13,293
Quantum Corp. DLT & Storage Systems (a) 24,700 374
Quantum Corp. Hard Disk Drive (a) 7,300 51
RealNetworks, Inc. (a) 900 108
RF Micro Devices, Inc. (a) 6,700 457
Rhythms NetConnections, Inc. (a) 1,500 47
Safeguard Scientifics, Inc. (a) 900 146
Scientific-Atlanta, Inc. 23,100 1,285
SDL, Inc. (a) 900 196
Seagate Technology (a) 15,400 717
Siebel Systems, Inc. (a) 4,200 354
Sony Corp. - ADR 3,475 990
Sterling Commerce, Inc. (a) 2,100 72
Sterling Software, Inc. (a) 5,400 170
Sun Microsystems, Inc. (a) 201,223 15,570
Symantec Corp. (a) 5,500 322
Synopsys, Inc. (a) 2,400 159
Tandy Corp. 10,500 516
Tech Data Corp. (a) 7,200 195
Tellabs, Inc. (a) 33,700 2,161
Texas Instruments, Inc. 93,436 9,052
Unisys Corp. (a) 117,400 3,749
USWeb Corp. (a) 2,000 89
Verio, Inc. (a) 1,800 83
VeriSign, Inc. (a) 3,500 669
Veritas Software Corp. (a) 12,000 1,717
Vignette Corp. (a) 600 98
Vishay Intertechnology, Inc. (a) 41,643 1,317
Xilinx, Inc. (a) 17,740 806
---------
356,722
---------
Utilities - 9.2%
Adelphia Communications Corp. (a) 30,600 2,006
Allegheny Energy, Inc. 31,080 837
Allegiance Telecom, Inc. (a) 1,300 119
Alliant Energy Corp. (a) 21,520 592
Alltel Corp. 14,010 1,158
Ameren Corp. 23,770 778
American Electric Power Co., Inc. 8,700 279
AT&T Corp. 197,995 10,048
Bell Atlantic Corp. 186,100 11,457
BellSouth Corp. 66,670 3,121
Calpine Corp. (a) 5,200 333
Centennial Cellular Corp. Class A (a) 100 8
Central & Southwest Corp. 62,900 1,258
CenturyTel, Inc. 13,050 618
Cinergy Corp. 28,420 686
CMS Energy Corp. 4,230 132
Columbia Energy Group 28,000 1,771
Comcast Corp. Special Class A 115,300 5,823
Comsat Corp. Series 1 6,324 126
Conectiv, Inc. 3,300 55
Consolidated Edison, Inc. 22,700 783
Copper Mountain Networks, Inc. (a) 200 10
Cox Communications, Inc. Class A (a) 35,100 1,808
DTE Energy Co. 26,300 825
Duke Energy Corp. 8,880 445
Edison International 39,500 1,034
Energy East Corp. 31,200 649
Entergy Corp. 30,740 792
FirstEnergy Corp. 69,240 1,571
Florida Progress Corp. 2,500 106
FPL Group, Inc. 400 17
Global Crossing, Ltd. (a) 6,380 319
GPU, Inc. 39,030 1,168
GTE Corp. 92,900 6,555
Kansas City Power & Light Co. 1,700 38
KeySpan Corp. (a) 5,300 123
MCI WorldCom, Inc. (a) 412,713 21,874
National Fuel Gas Co. 7,000 326
New Century Energies, Inc. 16,360 497
11 Diversified Equity Fund
<PAGE>
Diversified Equity Fund
Statement of Net Assets (continued)
December 31, 1999
Market
Number Value
of (000)
Shares $
------- ---------
Nokia Corp. - ADR 97,100 18,449
Northern States Power Co. 20,350 397
OGE Energy Corp. 7,000 133
Peco Energy Co. 4,800 167
PG&E Corp. 41,360 848
Pinnacle West Capital Corp. 16,800 513
Potomac Electric Power Co. 18,800 431
Powertel, Inc. (a) 600 60
PP&L Resources, Inc. 79,100 1,809
Public Service Co. of New Mexico 5,970 97
Public Service Enterprise Group, Inc. 61,490 2,141
Quanta Services, Inc. (a) 2,100 59
Questar Corp. 11,500 173
RCN Corp. (a) 7,800 378
Reliant Energy, Inc. NPV 28,920 662
SBC Communications, Inc. 258,326 12,593
Sprint Corp. 165,550 11,144
Sprint Corp. (PCS Group) (a) 50,024 5,127
Telephone & Data Systems, Inc. 5,200 655
Texas Utilities Co. 113,710 4,044
U.S. West, Inc. NPV 1,700 122
Unicom Corp. 6,820 229
UtiliCorp United, Inc. 6,630 129
Vodafone Group PLC - ADR 97,720 4,837
Western Resources, Inc. 23,270 396
Western Wireless Corp. NPV Class A (a) 8,200 546
Wisconsin Energy Corp. 18,600 358
---------
146,642
---------
Total Common Stocks
(cost $1,137,270) 1,463,336
---------
Preferred Stocks - 0.1%
Sealed Air Corp. Series A New
(conv.) 24,000 1,212
---------
Total Preferred Stocks
(cost $878) 1,212
---------
PRINCIPAL
AMOUNT
(000)
$
---------
Short-Term Investments - 8.1%
Frank Russell Investment Company
Money Market Fund, due on demand (b) 122,000 122,000
United States Treasury Bills (c)(d)
4.660% due 01/20/00 (b) 4,600 4,589
4.670% due 01/20/00 (b) 3,000 1,995
5.390% due 06/29/00 700 681
---------
Total Short-Term Investments
(cost $129,265) 129,265
---------
Total Investments - 99.8%
(identified cost $1,267,413) 1,593,813
Other Assets and Liabilities,
Net - 0.2% 3,852
---------
Net Assets - 100.0% 1,597,665
=========
* Each contract represents $100,000 notional value.
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
(c) Held as collateral in connection with futures contracts purchased by the
Fund.
(d) Rate noted is yield-to-maturity from date of acquisition.
(e) Real Estate Investment Trust (REIT).
Abbreviations:
ADR - American Depositary Receipt
NPV - No Par Value
NV - Nonvoting
See accompanying notes which are an integeral part of the financial statements.
Diversified Equity Fund 12
<PAGE>
Diversified Equity Fund
Statement of Net Assets (continued)
December 31, 1999
Unrealized
Number Appreciation
of (Depreciation)
Contracts (000)
------- --------------
Futures Contracts
Nasdaq 100 Index
expiration date 03/00 58 $2,705
S & P 500 Index
expiration date 03/00 253 2,543
---------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $5,248
=========
See accompanying notes which are an integral part of the financial statements.
13 Diversified Equity Fund
<PAGE>
Diversified Equity Fund
Statements of Assets and Liabilities
Amounts in thousands (except per share amounts)
<TABLE>
<CAPTION>
December 31, 1999
<S> <C> <C>
Assets
Investments at market (identified cost $1,267,413) .......................... $1,593,813
Foreign currency holdings (identified cost $19) ............................. 20
Receivables:
Dividends ................................................................ 2,187
Investments sold ......................................................... 3,857
Fund shares sold ......................................................... 6,205
From Advisor ............................................................. 22
Daily variation margin on futures contracts .............................. 329
Prepaid expenses ............................................................ 6
----------
Total assets .......................................................... 1,606,439
Liabilities
Payables:
Investments purchased .................................................... $ 6,080
Fund shares redeemed ..................................................... 2,165
Accrued fees to affiliates ............................................... 312
Other accrued expenses ................................................... 217
----------
Total liabilities ..................................................... 8,774
----------
Net Assets .................................................................. $1,597,665
==========
Net Assets Consist of:
Accumulated net realized gain (loss) ........................................ $126,649
Unrealized appreciation (depreciation) on:
Investments .............................................................. 326,400
Futures contracts ........................................................ 5,248
Foreign currency-related transactions .................................... 1
Shares of beneficial interest ............................................... 294
Additional paid-in capital .................................................. 1,139,073
----------
Net Assets .................................................................. $1,597,665
==========
Net Asset Value, offering and redemption price per share:
Class C ($14,786,927 divided by 273,192 shares of $.01 par value
shares of beneficial interest outstanding) ............................ $ 54.13
==========
Class E ($12,958,217 divided by 238,076 shares of $.01 par value
shares of beneficial interest outstanding) ............................ $ 54.43
==========
Class S ($1,569,919,792 divided by 28,894,921 shares of $.01 par value
shares of beneficial interest outstanding) ............................ $ 54.33
==========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Diversified Equity Fund 14
<PAGE>
Diversified Equity Fund
Statements of Operations
Amounts in thousands
<TABLE>
<CAPTION>
Year Ended December 31, 1999
<S> <C> <C>
Investment Income
Dividends ............................................... $ 16,888
Dividends from Money Market Fund ........................ 3,899
Interest ................................................ 446
----------
Total investment income .............................. 21,233
Expenses
Advisory fees ........................................... $ 10,643
Administrative fees ..................................... 734
Custodian fees .......................................... 711
Distribution fees - Class C ............................. 49
Transfer agent fees ..................................... 1,263
Professional fees ....................................... 52
Registration fees ....................................... 182
Shareholder servicing fees - Class C .................... 16
Shareholder servicing fees - Class E .................... 31
Trustees' fees .......................................... 10
Miscellaneous ........................................... 123
----------
Total expenses ....................................... 13,814
----------
Net investment income ...................................... 7,419
----------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ............................................. 246,363
Futures contracts ....................................... 11,461 257,824
----------
Net change in unrealized appreciation (depreciation) on:
Investments ............................................. (16,913)
Futures contracts ....................................... 1,995 (14,918)
---------- ----------
Net realized and unrealized gain (loss) .................... 242,906
----------
Net increase (decrease) in net assets from operations ...... $ 250,325
==========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
15 Diversified Equity Fund
<PAGE>
Diversified Equity Fund
Statement of Changes in Net Assets
Amounts in thousands
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
----------- -----------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ........................................... $ 7,419 $ 7,673
Net realized gain (loss) ........................................ 257,824 92,820
Net change in unrealized appreciation (depreciation) ............ (14,918) 174,452
----------- -----------
Net increase (decrease) in net assets from operations ........ 250,325 274,945
----------- -----------
Distributions
From net investment income
Class C ...................................................... (1) --
Class E ...................................................... (23) (9)
Class S ...................................................... (8,208) (7,563)
From net realized gain
Class C ...................................................... (1,313) --
Class E ...................................................... (1,234) (334)
Class S ...................................................... (152,916) (66,093)
----------- -----------
Net decrease in net assets from distributions ............. (163,695) (73,999)
----------- -----------
Share Transactions
Net increase (decrease) in net assets from share transactions ... 135,012 129,618
----------- -----------
Total net increase (decrease) in net assets ........................ 221,642 330,564
Net Assets
Beginning of period ............................................. 1,376,023 1,045,459
----------- -----------
End of period (including undistributed net investment
income of $109 at December 31, 1998) ......................... $ 1,597,665 $ 1,376,023
=========== ===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Diversified Equity Fund 16
<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.
1999*
--------
Net Asset Value, Beginning of Period .............................. $ 52.04
--------
Income From Operations
Net investment income (loss) (a) ............................... (.20)
Net realized and unrealized gain (loss) ........................ 8.14
--------
Total income from operations ................................ 7.94
--------
Distributions
From net investment income ..................................... (.03)
From net realized gain ......................................... (5.82)
--------
Total distributions ......................................... (5.85)
--------
Net Asset Value, End of Period .................................... $ 54.13
========
Total Return (%)(b) ............................................... 15.83
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ....................... 14,787
Ratios to average net assets (%)(c):
Operating expenses .......................................... 1.94
Net investment income (loss) ................................ (.41)
Portfolio turnover rate (%) .................................... 110.36
* For the period January 27, 1999 (commencement of sale) to December 31,
1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
17 Diversified Equity Fund
<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 Operations
Net investment income (a) .................... .13 .10 .06
Net realized and unrealized gain (loss) ...... 8.81 10.34 7.97
-------- -------- --------
Total income from operations .............. 8.94 10.44 8.03
-------- -------- --------
Distributions
From net investment income ................... (.09) (.08) (.07)
From net realized gain ....................... (5.82) (2.60) (9.87)
-------- -------- --------
Total distributions ....................... (5.91) (2.68) (9.94)
-------- -------- --------
Net Asset Value, End of Period .................. $ 54.43 $ 51.40 $ 43.64
======== ======== ========
Total Return (%)(b) ............................. 17.95 24.59 15.99
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ..... 12,958 9,007 2,839
Ratios to average net assets (%)(c):
Operating expenses ........................ 1.19 1.33 1.63
Net investment income ..................... .23 .21 .10
Portfolio turnover rate (%) .................. 110.36 100.31 114.11
</TABLE>
* For the period May 27, 1997 (commencement of sale) to December 31, 1997.
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
Diversified Equity Fund 18
<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
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ......... $ 51.39 $ 43.64 $ 41.45 $ 38.62 $ 32.26
----------- ----------- ----------- ----------- -----------
Income From Operations
Net investment income (a) ................. .28 .30 .37 .48 .60
Net realized and unrealized gain (loss) ... 8.79 10.34 12.06 8.15 10.63
----------- ----------- ----------- ----------- -----------
Total income from operations ........... 9.07 10.64 12.43 8.63 11.23
----------- ----------- ----------- ----------- -----------
Distributions
From net investment income ................ (.31) (.29) (.37) (.48) (.60)
From net realized gain .................... (5.82) (2.60) (9.87) (5.32) (4.27)
----------- ----------- ----------- ----------- -----------
Total distributions .................... (6.13) (2.89) (10.24) (5.80) (4.87)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ............... $ 54.33 $ 51.39 $ 43.64 $ 41.45 $ 38.62
=========== =========== =========== =========== ===========
Total Return (%) ............................. 18.21 25.11 31.32 23.29 35.17
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) .. 1,569,920 1,367,016 1,042,620 699,691 530,645
Ratios to average net assets (%):
Operating expenses ..................... .93 .91 .92 .94 .95
Net investment income .................. .51 .62 .80 1.18 1.56
Portfolio turnover rate (%) ............... 110.36 100.31 114.11 99.90 92.53
</TABLE>
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
19 Diversified Equity Fund
<PAGE>
Special Growth Fund
Portfolio Management Discussion
Deember 31, 1999 (Unaudited)
Objective: To maximize total return primarily through capital appreciation and
by assuming a higher level of volatility than the Diversified Equity Fund.
Invests in: Primarily small capitalization and "emerging growth-type" US equity
securities.
Strategy: The Fund uses a multi-style, multi-manager strategy intended to
achieve higher returns with moderate risk. The Fund employed the investment
management services of seven small capitalization stock fund managers with three
separate and distinct investment styles.
[The following table was depicted as a line graph in the printed material.]
Special Growth - Lipper(R) Small
Dates Class S Rusell 2500(TM)** Co. Growth++
-- $10,000 $10,000 $10,000
1990 $8,572 $8,512 $8,982
1991 $12,267 $12,467 $13,569
1992 $13,603 $14,506 $15,299
1993 $15,940 $16,906 $17,777
1994 $15,349 $16,728 $17,594
1995 $19,727 $22,033 $23,020
1996 $23,407 $26,226 $27,570
1997 $30,142 $32,614 $33,267
1998 $30,267 $32,739 $33,072
1999 $36,756 $40,645 $43,885
- --------------------------------------------------------------------------
Total $216,230 $233,402 $243,997
==========================================================================
Special Growth Fund - Class S
Periods Ended
12/31/99 Growth of $10,000 Total Return
- ------------- ----------------- ------------
1 Year $12,145 21.45%
5 Years $23,947 19.07%ss.
10 Years $36,756 13.89%ss.
Special Growth Fund - Class E+++
Periods Ended
12/31/99 Growth of $10,000 Total Return
- ------------- ----------------- ------------
1 Year $12,119 21.19%
5 Years $23,626 18.75%ss.
10 Years $36,262 13.74%ss.
Special Growth Fund - Class C++++
Periods Ended
12/31/99 Growth of $10,000 Total Return
- ------------- ----------------- ------------
1 Year $12,041 20.41%
5 Years $23,475 18.60%ss.
10 Years $36,032 13.67%ss.
Russell 2500(TM)Index
Periods Ended
12/31/99 Growth of $10,000 Total Return
- ------------- ----------------- ------------
1 Year $12,415 24.15%
5 Years $24,296 19.43%ss.
10 Years $40,645 15.05%ss.
Lipper(R)Small Co. Growth Funds Benchmark
Periods Ended
12/31/99 Growth of $10,000 Total Return
- ------------- ----------------- ------------
1 Year $13,268 32.68%
5 Years $24,943 20.06%ss.
10 Years $43,885 15.94%ss.
21 Special Growth Fund
<PAGE>
Special Growth Fund
Portfolio Management Discussion
Deember 31, 1999 (Unaudited)
Performance Review
For the year ended December 31, 1999, the Special Growth Fund Class S, Class E,
and Class C shares reflected total returns of 21.45%, 21.19%, and 20.41%,
respectively, as compared to the Russell 2500(TM) Index, which gained 24.15%.
The Fund's performance lagged the 32.68% gain of other small cap funds tracked
by Lipper(R) Analytical Services. The Fund's result reflects strong returns from
its growth managers as the more value-oriented investors struggled in an
extremely hostile environment for small cap value stocks.
Portfolio Highlights
Small capitalization stocks caught up with large cap issues at year end 1999.
The Russell 2000(R) Index gained 18.45% in the fourth quarter to bring its
annual gain to 21.26%, versus the Russell 1000(R) Index gain of 20.91%. Similar
to its large cap counterparts, the performance of small cap stocks was dominated
by technology shares, with small cap technology issues up more than 100% for the
year. Disappointing security selection results accounted for the Fund's margin
of underperformance. However, its underlying cause was tied much more to the
disparities in returns being driven by valuation. As managers grew increasingly
concerned about overvaluation, their decisions to rotate to more attractively
valued alternatives led to significant underexposure to the strongest performing
issues, generally the stocks of Internet companies. A consequent tactical value
bias in the portfolio had a severe impact on performance results, as price
momentum dominated the market.
Fund management grappled with performance trends during the period, notably late
in the year, as managers increasingly moved away from stocks on valuation
concerns. Efforts to fortify the Fund's growth exposure proved disappointing as
the Fund's growth manager was unable to rationalize share prices on some of the
market's hottest issues-which continued to post strong gains nonetheless.
Complicating matters further was a scarce supply of investment manager
alternatives or additions in the growth category, as market conditions led many
investment management firms to close to new assets. Analysis of the Fund's
structure may result in some changes in the manager line up and to manager
allocations, with an objective of improving performance consistency in extreme
market environments.
Top Ten Equity Holdings
(as a percent of Total Investments) December 31, 1999
Tiffany & Co. 0.8%
MedImmune, Inc. 0.8
Calpine Corp. 0.7
Macromedia, Inc. 0.6
BJ Services Co. 0.6
LSI Logic Corp. 0.6
Alkermes, Inc. 0.6
VeriSign, Inc. 0.6
Business Objects SA - ADR 0.6
Integrated Device Technology, Inc. 0.5
Portfolio Characteristics December 31, 1999
Current P/E Ratio 18.0x
Portfolio Price/Book Ratio 2.85x
Market Capitalization - $- Weighted Average 3.07 Bil
Number of Holdings 925
Money Managers Styles
Delphi Management, Inc. Value
Fiduciary International, Inc. Growth
GlobeFlex Capital, L.P. Market-Oriented
Jacobs Levy Equity Management, Inc. Value
Sirach Capital Management, Inc. Growth
Wellington Management Company, LLP Market-Oriented
Westpeak Investment Advisors, L.P. Market-Oriented
* Special Growth Fund Class S assumes initial investment on January 1, 1990.
** Russell 2500(TM) Index is composed of the bottom 500 stocks in the Russell
1000(R) Index and all the stocks in the Russell 2000(R) Index. The largest
security in this index has a market capitalization of about $2.0 billion.
The Russell 2500 Index return reflects adjustments for income dividends
and capital gains distributions reinvested as of the ex-dividend dates.
++ Lipper(R) Small Co. Growth Funds Benchmark is the average total return for
the universe of funds within the Small Company Growth Funds investment
objective. The total return for the funds reflects adjustments for income
dividends and capital gains distributions reinvested as of the ex-dividend
dates.
+++ Special Growth Fund Class S perfomance has been linked with Class E to
provide historical perspective. For the period November 4, 1996
(commencement of sale) to May 15, 1998, Class E paid shareholder service
and Rule 12b-1 distribution fees. From May 16, 1998 through the current
period, Class E paid only shareholder service fees. Total return would
have been lower had these fees been in effect during prior reporting
periods.
++++ Special Growth Fund Class S and Class E performance has been linked with
Class C to provide historical perspective. From January 27, 1999
(commencement of sale) through the current period, Class C paid
shareholder service and Rule 12b-1 distribution fees. Total return would
have been lower had these fees been in effect during prior reporting
periods.
ss. Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Special Growth Fund 22
<PAGE>
Special Growth Fund
Statement of Net Assets
December 31, 1999
Market
Number Value
of (000)
Shares $
------- -------
Common Stocks - 91.6%
Auto and Transportation - 3.7%
ABC Rail Products Corp. (a) 13,700 112
AirTran Holdings, Inc. (a) 2,000 9
Alaska Air Group, Inc. (a) 37,200 1,307
Alexander & Baldwin, Inc. 6,200 140
America West Holding Corp. Class B (a) 51,400 1,067
American Freightways Corp. (a) 16,800 272
Arvin Industries, Inc. 13,700 389
Avis Rent A Car, Inc. (a) 80,600 2,060
Borg-Warner Automotive, Inc. 7,600 308
Budget Group, Inc. Class A (a) 12,600 114
C.H. Robinson Worldwide, Inc. 8,500 338
Carey International, Inc. (a) 8,900 217
Coachmen Industries, Inc. 56,800 859
Cooper Tire & Rubber Co. 26,900 419
Dollar Thrifty Automotive Group, Inc. (a) 44,300 1,060
Expeditors International of Washington, Inc. 18,200 789
Fleetwood Enterprises, Inc. 18,300 377
FRP Properties, Inc. (a) 6,800 164
Lancaster Colony Corp. 25,500 845
Landair Corp. (a) 34,000 170
Landstar Systems, Inc. (a) 15,100 629
Lear Corp. (a) 26,800 858
M.S. Carriers, Inc. (a) 2,500 59
Midwest Express Holdings, Inc. (a) 5,800 185
Monaco Coach Corp. (a) 3,550 91
Monro Muffler Brake, Inc. (a) 20,300 152
Navistar International Corp. (a) 32,300 1,530
Newport News Shipbuilding, Inc. 7,100 195
Offshore Logistics, Inc. (a) 95,700 891
Pittston Burlington Group 2,400 26
Polaris Industries, Inc. 35,700 1,294
Roadway Express, Inc. 2,900 62
Skywest, Inc. 56,750 1,589
Superior Industries International, Inc 6,100 164
Tower Automotive, Inc. (a) 60,200 929
Transport Corp. of America (a) 12,000 144
Trinity Industries, Inc. 81,200 2,309
UAL Corp. (a) 6,900 535
USA Truck, Inc. (a) 14,800 115
USFreightways Corp. 70,100 3,321
Wynn's International, Inc. 10,000 141
Yellow Corp. (a) 11,400 192
-------
26,427
-------
Consumer Discretionary - 16.2%
Aaron Rents, Inc. 9,600 170
Abercrombie & Fitch Co. Class A (a) 51,100 1,364
Activision, Inc. (a) 22,800 349
Ambassadors International, Inc. (a) 15,000 164
American Eagle Outfitters, Inc. NPV (a) 43,800 1,971
American Greetings Corp. Class A 77,900 1,840
Ames Department Stores, Inc. (a) 7,200 207
AMFM, Inc. (a) 23,000 1,800
Anchor Gaming (a) 3,600 156
AnnTaylor Stores Corp. (a) 66,950 2,306
Applebee's International, Inc. 18,600 548
Argosy Gaming Co. (a) 108,600 1,690
Aztar Corp. (a) 113,500 1,234
Barnes & Noble, Inc. (a) 12,800 264
Barra, Inc. (a) 14,500 464
BHC Communications, Inc. Class A 2,400 384
BJ's Wholesale Club, Inc. (a) 34,900 1,274
BOLDER Technologies Corp. (a) 18,000 231
Bowne & Co., Inc. 7,400 100
Brinker International, Inc. (a) 8,500 204
Bristol Hotels & Resorts, Inc. (a) 34,000 172
Brown Shoe Co., Inc 6,200 88
Brunswick Corp. 55,100 1,226
Catalina Marketing Corp. (a) 2,800 324
Cato Corp. Class A 3,300 41
Cavanaughs Hospitality Corp. (a) 18,000 149
CDI Corp. (a) 5,200 125
CEC Entertainment, Inc. (a) 72,425 2,055
Central Newspapers, Inc. Class A 82,500 3,248
Children's Comprehensive Services, Inc. (a) 25,000 144
Choice Hotels International, Inc. (a) 3,900 67
Chris Craft Industries, Inc. (a) 9,927 716
Citadel Communications Corp. (a) 2,500 162
Claire's Stores, Inc. 84,300 1,886
Cole National Corp. Class A (a) 30,000 150
Cornell Corrections, Inc. (a) 18,300 153
Cox Radio, Inc. Class A (a) 1,500 150
Cyberian Outpost, Inc. (a) 6,500 64
Daisytek International Corp. (a) 7,900 184
Dan River, Inc. Class A (a) 25,200 129
Darden Restaurants, Inc. 11,700 212
David's Bridal, Inc. (a) 19,800 218
Deluxe Corp. 29,200 801
DeVry, Inc. (a) 62,000 1,155
Diamond Technology Partners, Inc. (a) 18,500 1,593
Direct Focus, Inc. NPV (a) 2,300 63
EduTrek International, Inc. Class A (a) 100,000 100
23 Special Growth Fund
<PAGE>
Special Growth Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
------- -------
Electronics Boutique Holdings Corp. (a) 7,000 126
Emmis Broadcasting Corp. Class A (a) 18,500 2,306
Entercom Communications Corp. (a) 25,000 1,650
Ethan Allen Interiors, Inc. 8,500 273
Extended Stay America, Inc. (a) 3,000 23
Family Dollar Stores, Inc. 45,800 747
Footstar, Inc. (a) 3,900 119
Fossil, Inc. (a) 72,150 1,668
Franklin Covey Co. (a) 6,200 47
Funco, Inc. (a) 10,000 111
Furniture Brands International, Inc. (a) 56,200 1,236
G & K Services, Inc. Class A 24,000 770
Genesco, Inc. (a) 65,300 849
Grey Advertising, Inc. 5,025 1,995
GTECH Holdings Corp. (a) 25,300 557
Guitar Center, Inc. (a) 23,600 235
Handleman Co. (a) 98,300 1,315
Harland (John H.) Co. 44,400 813
Harte Hanks Communications 46,500 1,011
Haverty Furniture Co., Inc. 9,400 119
Hearst-Argyle Television, Inc. (a) 45,800 1,219
Hispanic Broadcasting Corp. (a) 10,300 948
Hollywood Park, Inc. (a) 72,100 1,618
Houghton Mifflin Co. 12,400 523
IHOP Corp. (a) 1,900 32
Ikon Office Solutions, Inc. 26,400 180
Interim Services, Inc. (a) 27,700 686
Iron Mountain, Inc. (a) 5,500 216
ITT Educational Services, Inc. (a) 10,500 162
Jones Apparel Group, Inc. (a) 3,500 95
Kellwood Co. 7,900 154
Knight-Ridder, Inc. 30,700 1,827
La-Z-Boy Inc. 11,000 185
Lamar Advertising Co. Class A (a) 27,500 1,660
Learning Tree International, Inc. (a) 14,800 411
Lee Enterprises, Inc. 50,000 1,597
Legato Systems, Inc. (a) 13,400 921
Linens 'N Things, Inc. (a) 5,300 157
Lithia Motors, Inc., Class A (a) 5,100 91
Liz Claiborne, Inc. 6,200 233
Mail-Well, Inc. (a) 15,700 212
Mandalay Resort Group (a) 80,800 1,626
Manpower, Inc. 34,300 1,291
Maxim Group, Inc. (a) 26,000 140
McClatchy Co. Class A 57,575 2,490
McGraw-Hill, Inc. 20,500 1,263
Media General, Inc. Class A 3,500 182
MeriStar Hotels & Resorts, Inc. (a) 45,000 160
MGM Grand, Inc. (a) 14,000 704
Michaels Stores, Inc. (a) 8,500 240
Modem Media Poppe Tyson, Inc. (a) 19,900 1,403
Movado Group, Inc. 2,600 56
Musicland Stores Corp. (a) 15,700 132
O'Charleys, Inc. (a) 15,000 193
Ogden Corp. 12,300 147
On Assignment, Inc. (a) 45,000 1,333
Oshkosh B' Gosh, Inc. Class A 10,000 195
Pacific Sunwear of California (a) 75,800 2,411
Packaged Ice, Inc. (a) 34,000 111
Park Place Entertainment Corp. (a) 87,700 1,096
Payless ShoeSource, Inc. (a) 3,700 174
Penton Media, Inc. 60,017 1,440
Petco Animal Supplies, Inc. (a) 26,600 386
Phillips-Van Heusen Corp. 7,900 66
Pierce Leahy Corp. (a) 4,400 190
Pomeroy Computer Resources, Inc. (a) 8,000 104
Pre-Paid Legal Services, Inc. (a) 30,000 720
Quicksilver, Inc. (a) 48,600 753
R.H. Donnelley Corp. (a) 9,000 170
RARE Hospitality International, Inc. NPV (a) 3,600 78
RCM Technologies, Inc. (a) 13,000 219
RDO Equipment Co. Class A (a) 18,400 108
Regis Corp. 37,000 694
RemedyTemp, Inc. Class A (a) 9,200 161
Rent-Way, Inc. (a) 24,900 465
Reynolds & Reynolds Co. Class A 46,600 1,049
Ross Stores, Inc. 136,700 2,452
Rural/Metro Corp. (a) 20,400 87
Ryan's Family Steak Houses, Inc. (a) 116,800 989
S1 Corp. (a) 7,000 545
Saga Communications Class A (a) 10,375 210
Salton, Inc. (a) 51,550 1,724
Scholastic Corp. (a) 5,800 361
Schultz Sav-o Stores, Inc. 74,500 899
SCP Pool Corp. (a) 8,750 227
Scripps (E.W.) Co. Class A 31,400 1,407
Sport Supply Group, Inc. (a) 27,000 186
Springs Industries, Inc. 9,900 395
Stage Stores, Inc. (a) 55,000 127
Station Casinos, Inc. (a) 24,200 543
Steinway Musical Instruments, Inc. (a) 7,400 150
Sturm, Ruger & Co., Inc. 6,400 57
Talbots, Inc. 20,400 910
TETRA Technologies, Inc. (a) 51,500 792
Tiffany & Co. 63,500 5,667
Timberland Co. Class A (a) 2,100 111
Tommy Hilfiger Corp. (a) 38,100 888
Toro Co. 32,900 1,228
Special Growth Fund 24
<PAGE>
Special Growth Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
------- -------
Tupperware Corp. 17,200 291
United Stationers, Inc. (a) 4,600 131
United Television, Inc. 11,350 1,538
USinternetworking, Inc. (a) 26,175 1,825
Valassis Communications, Inc. (a) 29,400 1,242
Value City Department Stores, Inc. (a) 4,700 71
Venator Group, Inc. (a) 98,200 687
Wallace Computer Services, Inc. 3,900 65
Warnaco Group, Inc. Class A 10,000 123
Washington Post Co. Class B 4,200 2,334
West Marine, Inc. (a) 20,900 174
Wilsons The Leather Experts, Inc. (a) 15,000 276
WMS Industries, Inc. (a) 107,400 1,410
Young & Rubicam, Inc. 1,900 134
Zale Corp. (a) 31,200 1,508
-------
114,906
-------
Consumer Staples - 1.7%
Block Drug Co., Inc. Class A 25,312 778
Canandaigua Brands Inc. Class A (a) 11,200 571
Coca-Cola Bottling Co. Consolidated 23,100 1,083
Coors (Adolph) Co. Class B 4,300 226
Corn Products International, Inc. 19,200 629
Earthgrains Co. 26,300 424
IBP, Inc. 118,800 2,138
International Home Foods, Inc. (a) 16,100 280
Interstate Bakeries Corp. 16,200 294
Nature's Sunshine Products, Inc. 22,900 183
Pepsi Bottling Group, Inc. (The) 45,700 757
Performance Food Group Co. (a) 3,600 87
Ralcorp Holdings, Inc. (a) 6,900 138
Robert Mondavi Corp. Class A (a) 2,100 73
Ruddick Corp. 7,000 109
Schweitzer-Mauduit International, Inc. 14,700 198
Smithfield Foods, Inc. (a) 4,800 115
Smucker (J.M.) Co. 2,700 53
Standard Commercial Corp. 30,000 107
Suiza Foods Corp. (a) 7,200 285
SuperValu, Inc. 68,100 1,362
Tootsie Roll Industries, Inc. 28,000 922
U.S. Foodservice (a) 32,900 551
Universal Corp. 12,600 287
Universal Foods Corp. 17,200 350
-------
12,000
-------
Financial Services - 12.3%
ACE, Ltd. 55,000 918
Advanta Corp. Class A 15,500 282
Affiliated Managers Group, Inc. (a) 6,500 263
American Financial Group, Inc. 10,500 277
American Financial Holdings, Inc. (a) 13,000 163
American National Insurance Co. 1,200 76
AmeriCredit Corp. (a) 6,700 124
AmerUs Life Holdings, Inc. 3,400 78
Amplicon, Inc. 16,000 174
Andover Bancorp, Inc. 7,000 193
Area Bancshares Corp. 5,400 132
Astoria Financial Corp. 54,800 1,668
BancWest Corp. 15,600 304
Bank United Corp. Class A 14,400 389
BankAtlantic Bancorp, Inc. Class A 105,669 436
Bay View Capital Corp. 36,300 515
Bear Stearns Cos., Inc. 36,609 1,565
BISYS Group, Inc. (a) 52,000 3,387
BOK Financial Corp. (a) 12,463 252
Brookline Bancorp., Inc. 5,000 49
BSB Bancorp, Inc. 7,800 150
Capitol Federal Financial 10,300 100
Capstead Mortgage Corp. 11,700 49
Charter One Financial, Inc. 40,500 775
Citizens Banking Corp. 1,900 42
City National Corp. 36,700 1,209
Clark/Bardes Holdings, Inc. (a) 10,500 151
CNA Surety Corp. 2,400 31
Cohoes Bancorp, Inc. 13,000 130
Colonial BancGroup, Inc. 96,000 996
Commerce Bancorp, Inc. 7,035 284
Commerce Bancshares, Inc. 11,198 384
Commerce Group, Inc. 5,000 131
Commonwealth Bancorp, Inc. 4,200 70
Compass Bancshares, Inc. 3,900 87
CompuCredit Corporation NPV (a) 1,700 65
Concord EFS, Inc. (a) 56,700 1,456
Conning Corp. 19,000 159
Creditrust Corp. (a) 3,900 30
Cullen Frost Bankers, Inc. 25,600 659
Dain Rauscher Corp. 1,500 70
Data Transmission Network Corp. (a) 5,000 85
Delphi Financial Group, Inc. (a) 15,953 479
Delta Financial Corp. (a) 36,000 149
Dime Bancorp, Inc. 18,400 278
Dime Community Bancorp, Inc. 7,900 146
Donaldson, Lufkin & Jenrette, Inc. 36,000 1,742
Donegal Group, Inc. 27,000 170
Doral Financial Corp. 41,500 508
Downey Financial Corp. 15,655 316
DST Systems, Inc. (a) 41,000 3,129
E.W. Blanch Holdings, Inc. 8,900 545
East West Bancorp, Inc. 4,300 47
Edwards (A.G.), Inc. 33,200 1,064
25 Special Growth Fund
<PAGE>
Special Growth Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
------- -------
Enhance Financial Services Group, Inc. 12,100 197
Everest Reinsurance Holdings, Inc. 27,400 611
FBL Financial Group, Inc. Class A 7,200 144
Fidelity National Financial 6,490 93
Financial Security Assurance Holdings, Ltd. 12,200 636
First American Financial Corp. 18,900 235
First Commonwealth Financial Corp. 5,200 62
First Essex Bancorp, Inc. 10,000 143
First Indiana Corp. 5,900 128
First Republic Bank (a) 15,900 374
First Tennessee National Corp. 43,250 1,233
First Washington Bancorp, Inc. 2,310 34
FirstFed Financial Corp. (a) 10,400 146
Flagstar Bancorp, Inc. 7,100 122
Freedom Securities Corp. 12,000 135
Fremont General Corp. 30,600 226
GA Financial, Inc. 9,300 123
Gables Residential Trust (b) 52,000 1,248
GATX Corp. 2,300 78
Golden State Bancorp, Inc. (a) 18,900 326
Greater Bay Bancorp NPV 2,500 107
Greenpoint Financial Corp. 47,500 1,131
Hibernia Corp. Class A 12,900 137
Home Port Bancorp, Inc. 2,200 57
Hudson River Bancorp, Inc. 15,000 150
Hudson United Bancorp NPV 2,781 71
Humphrey Hospitality Trust, Inc. (b) 22,000 166
Imperial Bancorp (a) 19,600 473
Independence Community Bank Corp. 19,900 248
Insurance Management Solutions Group, Inc. (a) 52,000 130
Intercontinental Life Corp. (a) 13,200 122
Investors Financial Services Corp. 36,100 1,656
IPC Holdings, Ltd. 60,200 895
Itla Cap Corp. (a) 12,000 149
Jack Henry & Assocociates, Inc. 22,000 1,158
Jefferies Group, Inc. 47,000 1,034
JSB Financial, Inc. 2,200 114
Klamath First Bancorp, Inc. 10,300 122
LandAmerica Financial Group, Inc. 6,200 114
Legg Mason, Inc. 54,100 1,961
Lehman Brothers Holdings, Inc. 23,400 1,982
Leucadia National Corp. 11,000 254
Liberty Financial Cos., Inc. 5,400 124
LINC Capital, Inc. (a) 25,000 106
MAF Bancorp, Inc. 50,900 1,066
Markel Corp. (a) 7,500 1,163
Medical Assurance, Inc. (a) 3,200 68
Mercantile Bankshares Corp. 9,800 313
Mercury General Corp. 9,400 209
Metris Companies, Inc. 11,400 407
MGIC Investment Corp. 25,400 1,529
MONY Group, Inc. (The) 10,800 315
National City Bancorporation 5,500 92
National Commerce Bancorp 46,800 1,062
National Data Corp. 6,800 231
National Western Life Insurance Co. Class A (a) 2,000 137
Nationwide Financial Services, Inc. Class A 27,500 768
NCO Group, Inc. NPV (a) 35,600 1,061
Northrim Bank 14,000 137
OceanFirst Financial Corp. 2,800 48
Old National Bancorp 5,465 177
Old Republic International Corp. 46,000 627
One Valley Bancorp of West Virginia, Inc. 4,400 135
Pacific Century Financial Corp. 38,700 723
Pacific Gulf Properties, Inc. (b) 7,000 142
Pan Pacific Retail Properties, Inc. (b) 8,000 131
Paychex, Inc. 27,000 1,078
Penn Treaty American Corp. (a) 12,000 189
Pennsylvania Real Estate Investment Trust (b) 7,000 102
Peoples Bank 3,000 63
Peoples Heritage Financial Group 92,780 1,392
PFF Bancorp, Inc. (a) 3,300 64
PMI Group, Inc. (The) 34,800 1,699
Price (T. Rowe) & Associates, Inc. 37,500 1,380
Profit Recovery Group International, Inc. (The) (a) 32,000 848
Protective Life Corp. 21,700 690
Provident Bankshares Corp. 3,000 52
Quotesmith.com, Inc. (a) 14,700 165
Radian Group, Inc. (a) 60,200 2,875
RenaissanceRe Holdings, Ltd. 37,000 1,512
Republic Bancorp, Inc. 5,610 68
Resource Bancshares Mortgage Group 29,500 134
Richmond County Financial Corp. 8,300 149
Riggs National Corp. 15,900 209
Roslyn Bancorp, Inc. 33,200 608
Scottish Annuity & Life Holdings, Ltd. 16,000 130
SCPIE Holdings, Inc. 2,100 67
Seacoast Financial Services Corp. (a) 14,000 141
Silicon Valley Bancshares (a) 35,500 1,753
Sky Financial Group, Inc. 40,000 805
Smith (Charles E.) Residential Realty, Inc. (b) 40,000 1,415
Sovereign Bancorp, Inc. 213,366 1,580
Special Growth Fund 26
<PAGE>
Special Growth Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
------- -------
Sovran Self Storage, Inc. 38,200 723
Stancorp Financial Group, Inc. NPV 11,900 300
Staten Island Bancorp, Inc. 17,600 317
Stewart Information Services Corp. 24,100 321
SunGard Data Systems (a) 55,000 1,306
TCF Financial Corp. 10,000 249
Transatlantic Holdings, Inc. 26,000 2,030
UICI (a) 7,400 78
UMB Financial Corp. 1,760 65
Unico American Corp. NPV 17,100 120
Union Planters Corp. 31,475 1,241
Washington Federal, Inc. 20,579 404
Webster Financial Corp. 60,500 1,426
Weingarten Realty Investors (b) 4,500 175
Wellsford Real Properties, Inc. (b) 18,400 156
Westamerica Bancorporation 45,000 1,257
WesterFed Financial Corp. 8,000 119
Whitney Holding Corp. 1,600 59
XL Capital, Ltd. Class A 22,000 1,141
-------
86,882
-------
Health Care - 6.6%
Accredo Health, Inc. (a) 1,800 55
Affymetrix, Inc. NPV (a) 18,000 3,053
Alkermes, Inc. (a) 83,000 4,067
Alpharma, Inc. Class A 9,600 295
AmSurg Corp. Class A (a) 24,000 156
Apria Healthcare Group, Inc. (a) 43,000 771
Assisted Living Concepts, Inc. (a) 100,000 206
Bard (C.R.), Inc. 28,000 1,484
Bindley Western Industries, Inc. 38,533 580
Biosite Diagnostics, Inc. (a) 16,900 269
Cephalon, Inc. (a) 61,100 2,112
Conmed Corp. (a) 3,700 96
Cooper Companies, Inc. (a) 14,100 425
Cor Therapeutics, Inc. (a) 22,200 597
CorVel Corp. (a) 6,000 139
Coventry Health Care, Inc. (a) 22,700 153
Cytyc Corp. (a) 35,200 2,152
Dura Pharmaceuticals, Inc. (a) 11,000 153
First Health Group Corp. (a) 56,000 1,505
Genzyme Corp. (a) 12,100 543
Gilead Sciences, Inc. (a) 14,000 756
Healthcare Services Group, Inc. (a) 22,000 156
Humana, Inc. (a) 87,000 712
IDEC Pharmaceuticals Corp. (a) 34,000 3,334
Immucor Corp. (a) 13,300 174
IRIDEX Corp. (a) 20,000 170
IVAX Corp. (a) 87,700 2,258
Jones Pharma, Inc. 23,300 1,011
King Pharmaceuticals, Inc. NPV (a) 2,000 112
Laser Vision Centers, Inc. (a) 48,200 506
Lincare Holdings, Inc. (a) 53,200 1,845
Lunar Corp. (a) 20,400 140
Mallinckrodt, Inc. 8,200 261
MedImmune, Inc. (a) 33,600 5,569
Medquist, Inc. (a) 24,800 636
NBTY, Inc. (a) 68,800 757
Owens & Minor, Inc., Holding Co. 9,300 83
Oxford Health Plans, Inc. (a) 70,900 900
Patterson Dental Co. (a) 6,800 289
Perrigo Co. (a) 2,400 19
ProMedCo Management Co. (a) 70,000 201
Province Healthcare Co. (a) 58,100 1,104
QLT PhotoTherapeutics, Inc. NPV (a) 31,700 1,855
Quest Diagnostics, Inc. (a) 11,500 351
Renal Care Group, Inc. (a) 79,300 1,849
Res-Care, Inc. (a) 12,000 152
Respironics, Inc. (a) 15,700 125
Sierra Health Services, Inc. (a) 6,000 40
Sola International, Inc. (a) 8,000 111
St. Jude Medical, Inc. (a) 5,900 181
STAAR Surgical Co. (a) 16,900 162
Syncor International Corp. (a) 3,300 94
Techne Corp. (a) 3,900 215
Trigon Healthcare, Inc. (a) 27,700 817
Universal Health Services, Inc. Class B (a) 3,700 133
Varian Medical Systems, Inc. (a) 4,400 131
VISX, Inc. (a) 10,600 549
Zoll Medical Corp. (a) 4,400 164
-------
46,733
-------
Integrated Oils - 0.4%
Callon Petroleum Co. (a) 12,000 178
Cross Timbers Oil Co. 91,000 825
Equitable Resources, Inc. 7,800 260
Giant Industries, Inc. (a) 80,200 672
Murphy Oil Corp. 15,800 906
Tesoro Petroleum Corp. (a) 12,900 149
-------
2,990
-------
Materials and Processing - 7.4%
AK Steel Holding Corp. 63,700 1,202
AMCOL International Corp. 5,000 81
AptarGroup, Inc. 62,400 1,568
Ball Corp. 32,900 1,295
Banta Corp. 59,300 1,338
Boise Cascade Corp. 70,900 2,871
Bowater, Inc. 2,000 109
Brady Corp. Class A 5,300 180
Building Materials Holding Corp. (a) 12,000 122
27 Special Growth Fund
<PAGE>
Special Growth Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
------- -------
BWay Corp. (a) 26,000 159
Cambrex Corp. 9,500 327
Capital Automotive 900 11
Carpenter Technology Corp. 8,300 228
Centex Construction Products, Inc. 23,100 901
Centex Corp. 45,000 1,111
Channell Commercial Corp. (a) 18,000 203
Chemed Corp. 4,600 132
Cleveland-Cliffs, Inc. 9,700 302
Commercial Metals Co. 12,400 421
Cytec Industries, Inc. (a) 18,500 428
Dal-Tile International, Inc. (a) 3,600 36
Dayton Superior Corp. Class A (a) 8,000 130
Dexter Corp. 11,900 473
Engle Homes, Inc. 13,800 166
Ethyl Corp. 21,600 85
Florida Rock Industries, Inc. 5,500 189
Fluor Corp. 12,500 573
FMC Corp. (a) 3,900 224
Freeport-McMoRan Copper & Gold, Inc. Class B (a) 29,300 619
Fuller (H.B.) Co. 3,300 185
Geon Co. 21,800 709
Georgia Gulf Corp. 49,200 1,498
Granite Construction, Inc. 13,000 240
Hanna (M.A.) Co. 15,400 168
Hexcel Corp. (a) 35,000 195
IMC Global, Inc. 4,500 74
Intermet Corp. 18,500 215
Ionics, Inc. (a) 800 23
Jacob's Engineering Group, Inc. (a) 10,800 351
Justin Industries, Inc. 3,800 56
Kaydon Corp. 36,000 965
Lafarge Corp. 41,600 1,149
Lesco, Inc. 13,000 221
Louisiana Pacific Corp. 70,800 1,009
Lubrizol Corp. 63,300 1,954
Lydall, Inc. (a) 26,400 175
MacDermid, Inc. 23,000 944
Martin Marietta Materials, Inc. 20,000 820
Meritage Corp. (a) 14,000 153
Millennium Chemicals, Inc. 26,700 527
Minerals Technologies, Inc. 38,000 1,522
Morrison Knudsen Corp. (a) 10,800 84
Mueller Industries, Inc. (a) 7,800 283
NCI Building Systems, Inc. (a) 13,800 255
Newmont Mining Corp. 21,900 537
NN Ball & Roller, Inc. 25,000 169
Nortek, Inc. (a) 28,900 809
Northwest Pipe Co. (a) 10,700 146
OM Group 9,100 313
Palm Harbor Homes, Inc. (a) 10,000 180
Penford Corp. 12,200 210
Phelps Dodge Corp. 31,200 2,094
Plum Creek Timber Co., Inc. (b) 35,500 888
Potlatch Corp. 8,200 366
Quaker Fabric Corp. (a) 35,000 149
Quanex Corp. 8,400 214
Reliance Steel & Aluminum Co. 9,300 218
Rock-Tenn Co. Class A 5,200 77
RPM, Inc. (Ohio) 28,400 289
Ryerson Tull, Inc. 16,400 319
Schulman (A.), Inc. 47,000 764
Scotts Co. (The) Class A (a) 35,000 1,409
SIFCO Industries 63,000 437
Sigma Aldrich Corp. 8,400 252
Simpson Manufacturing Co., Inc. (a) 3,900 171
Solutia, Inc. 5,100 79
Southdown, Inc. 24,000 1,238
Spartech Corp. 6,200 200
SPS Technologies, Inc. (a) 2,500 80
St. Joe Co. (The) 59,500 1,447
Temple-Inland, Inc. 15,100 996
Texas Industries, Inc. 48,450 2,061
Tractor Supply Co. (a) 10,900 174
USEC, Inc. 31,200 218
USG Corp. 73,800 3,477
USX-U.S. Steel Group 39,100 1,290
Waters Corp. (a) 5,400 286
Webb (Del E.) Corp. (a) 11,800 294
Wellman, Inc. 8,000 149
Westinghouse Air Brake Co. 21,780 387
Westvaco Corp. 13,600 444
Worthington Industries, Inc. 10,900 180
-------
52,270
-------
Miscellaneous - 1.2%
Agribrands International, Inc. (a) 8,600 396
ChoicePoint, Inc. (a) 45,000 1,861
Crestline Capital Corp. (a) 5,700 118
LNR Property Corp. 65,500 1,302
MAXIMUS, Inc. (a) 37,000 1,256
Quest Education Corp. (a) 20,000 175
Safety-Kleen Corp. (a) 41,300 467
SFX Entertainment, Inc. (a) 27,500 995
Stone Energy Corp. (a) 23,700 844
URS Corp. (a) 61,100 1,325
-------
8,739
-------
Other Energy - 5.0%
Apache Corp. 6,300 233
Barrett Resources Corp. (a) 36,200 1,066
Special Growth Fund 28
<PAGE>
Special Growth Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
------- -------
BJ Services Co. (a) 103,700 4,336
Chesapeake Energy Corp. (a) 29,400 70
Clayton Williams Energy, Inc. (a) 10,500 124
Cleco Corp. 5,600 180
Cooper Cameron Corp. (a) 23,000 1,126
Devon Energy Corp. 59,600 1,959
Dynegy, Inc. 11,900 289
Edge Petroleum Corp. (a) 56,000 154
EEX Corp. (a) 19,100 56
ENSCO International, Inc. 11,000 252
EOG Resources, Inc. 106,000 1,862
Global Marine, Inc. (a) 71,700 1,192
Helmerich & Payne, Inc. 79,200 1,728
Horizon Offshore, Inc. (a) 27,300 147
Kinder Morgan, Inc. 49,400 997
Mallon Resources Corp. (a) 30,800 181
Marine Drilling Co, Inc. (a) 15,000 337
Mitcham Industries, Inc. (a) 40,000 133
Mitchell Energy & Development Corp. 2,400 52
Nabors Industries, Inc. (a) 53,000 1,640
Noble Affiliates, Inc. 47,500 1,018
Noble Drilling Corp. (a) 23,100 757
Northwestern Corp. 6,800 150
Nuevo Energy Co. (a) 13,800 259
OMNI Energy Services Corp. (a) 70,000 74
ONEOK, Inc. 15,100 379
Pioneer Natural Resources Co. (a) 91,200 815
Pride International, Inc. NPV (a) 7,100 104
Rowan Cos., Inc. (a) 64,000 1,388
Santa Fe International Corp. 67,000 1,733
Seacor Holdings, Inc. (a) 20,200 1,044
Seitel, Inc. (a) 18,700 126
Smith International, Inc. (a) 18,000 894
Supreme Industries, Inc. Class A (a) 17,405 108
Talisman Energy, Inc. (a) 37,600 968
Tidewater, Inc. 53,300 1,918
Titan Exploration, Inc. (a) 37,100 190
Transocean Sedco Forex, Inc. NPV (a) 27,000 910
Ultramar Diamond Shamrock Corp. 50,500 1,145
UniSource Energy Corp. NPV (a) 16,700 187
Unit Corp. (a) 25,000 192
UTI Energy Corp. (a) 2,800 65
Varco International, Inc. (a) 56,500 576
Veritas DGC, Inc. (a) 56,800 795
Vintage Petroleum, Inc. (a) 113,250 1,365
-------
35,274
-------
Producer Durables - 6.9%
Advanced Lighting Technologies, Inc. (a) 29,700 171
Ag-Chem Equipment Co., Inc. (a) 14,000 145
American Homestar Corp. (a) 35,000 137
ANTEC Corp. (a) 18,500 675
Applied Industrial Technology, Inc. 2,200 37
Astec Industries, Inc. (a) 7,600 143
Belden, Inc. 8,500 179
Briggs & Stratton Corp. 39,400 2,113
C&D Technologies, Inc. 5,500 234
Cascade Corp. 9,900 91
Celestica, Inc. NPV (a) 18,000 999
CFM Technologies, Inc. (a) 15,600 148
Champion Enterprises, Inc. (a) 22,700 194
Chart Industries, Inc. 47,000 188
Clayton Homes, Inc. 46,600 428
Cohu, Inc. 84,000 2,573
Columbus McKinnon Corp. 37,500 375
CommScope, Inc. (a) 34,500 1,391
Cordant Technologies, Inc. 2,300 76
Crossmann Communities, Inc. (a) 9,500 145
CTS Corp. 10,300 776
Cummins Engine Co., Inc. 36,300 1,754
D.R. Horton, Inc. 96,900 1,338
Detroit Diesel Corp. 16,200 311
Diebold, Inc. 57,100 1,342
Donaldson Co., Inc. 9,800 236
DuPont Photomasks, Inc. (a) 3,700 178
FARO Technologies, Inc. (a) 52,000 153
Farr Co. (a) 15,750 154
FLIR Systems, Inc. (a) 8,000 129
Foster Wheeler Corp. 21,700 193
Gardner Denver Machinery, Inc. (a) 12,000 200
Gemstar International Group, Ltd. (a) 27,000 1,920
GenRad, Inc. (a) 41,600 671
Helix Technology Corp. 4,000 179
Hubbell, Inc. Class B 17,500 477
inTEST Corp. (a) 16,000 288
Itron, Inc. (a) 28,000 168
Johnson Controls, Inc. 6,300 358
Jore Corp. NPV (a) 21,000 164
Kaman Corp. Class A 4,700 60
Kaufman & Broad Home Corp. 34,900 844
KLA Instruments Corp. (a) 18,500 2,059
Kulicke & Soffa Industries, Inc. (a) 21,900 931
Lennar Corp. 51,000 829
Litton Industries, Inc. (a) 31,900 1,591
M.D.C. Holdings, Inc. 7,900 124
Manitowoc Co., Inc. 15,550 529
Mark IV Industries, Inc. 21,200 375
29 Special Growth Fund
<PAGE>
Special Growth Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
------- -------
Microwave Power Devices, Inc. (a) 22,100 157
Moog, Inc. (a) 8,200 221
MTS Systems Corp. 8,400 65
NACCO Industries, Inc. Class A 2,000 111
National Service Industries, Inc. 27,900 823
NVR, Inc. (a) 26,800 1,280
Orbital Sciences Corp. Class A (a) 10,400 193
OYO Geospace Corp. (a) 21,700 222
Pall Corp. 39,900 860
Pittway Corp. Class A 45,534 2,040
Powell Industries, Inc. (a) 26,000 179
Pulte Corp. 67,700 1,523
Ryland Group, Inc. 45,200 1,042
Sauer, Inc. 16,200 147
Sawtek, Inc. (a) 28,200 1,877
Smith (A.O.) Corp. 7,800 171
Spectra-Physics Lasers, Inc. (a) 10,000 280
SPX Corp. (a) 4,400 356
Standard Pacific Corp. 12,900 142
Starrett (L.S.) Co. Class A 30,100 675
TB Wood's Corporation 20,000 170
Tecumseh Products Co. Class A 5,100 240
Tennant Co. 5,000 164
Teradyne, Inc. (a) 32,764 2,163
Terex Corp. (a) 59,900 1,662
Toll Brothers, Inc. (a) 64,000 1,192
U.S. Home Corp. (a) 7,400 189
Waste Connections, Inc. (a) 44,100 628
Watts Industries, Inc. Class A 4,300 63
York International Corp. 19,600 538
-------
48,146
-------
Technology - 24.3%
Actel Corp. (a) 7,000 168
Actuate Corp. (a) 14,000 599
Adaptec, Inc. (a) 68,750 3,425
Advanced Digital Information (a) 29,000 1,410
Advanced Micro Devices, Inc. (a) 61,700 1,785
Affiliated Computer Services, Inc. Class A (a) 34,700 1,596
Akamai Technologies, Inc. (a) 1,600 524
Allaire Corp. (a) 15,800 2,312
Alliant Techsystems, Inc. (a) 3,400 212
Alpha Industries, Inc. (a) 20,000 1,135
American Management Systems, Inc. (a) 23,800 742
American Xtal Technology, Inc. (a) 5,600 97
Amkor Technology, Inc. (a) 100,300 2,821
Amphenol Corp. Class A (a) 3,100 206
Anixter International, Inc. (a) 12,200 252
ARIS Corp. NPV (a) 16,500 190
Arrow Electronics, Inc. (a) 96,700 2,454
AstroPower, Inc. (a) 12,000 167
AudioCodes, Ltd. (a) 3,600 328
Avant! Corp. (a) 19,700 296
Avnet, Inc. 33,400 2,021
AVX Corp. 26,400 1,318
Bell & Howell Co. (a) 5,100 162
Benchmark Electronics, Inc. (a) 5,100 117
BindView Development Corp. (a) 35,300 1,752
Burr-Brown Corp. (a) 6,150 221
Business Objects SA - ADR (a) 29,750 3,931
Cable Design Technologies Corp. (a) 83,000 1,909
CACI International, Inc. Class A (a) 6,400 145
Celeritek, Inc. (a) 20,000 386
CFI ProServices, Inc. (a) 20,600 167
Check Point Software Technologies, Ltd. NPV (a) 2,000 397
China.com Corp. Class A (a) 16,500 1,304
CIENA Corp. (a) 27,300 1,570
Clarent Corp. (a) 3,600 279
Clarify, Inc. (a) 19,000 2,406
Coherent, Inc. (a) 8,000 212
Comverse Technology, Inc. (a) 23,100 3,342
Conexant Systems, Inc. (a) 11,200 740
Cotelligent Group, Inc. (a) 35,000 188
Covad Communications Group, Inc. (a) 41,300 2,297
CSG Systems International, Inc. (a) 24,000 944
CyberSource Corp. (a) 10,000 519
Cypress Semiconductor Corp. (a) 34,300 1,110
Dallas Semiconductor Corp. 13,200 851
Digex, Inc. (a) 13,000 884
DoubleClick, Inc. (a) 8,000 2,025
DSET Corp. (a) 7,900 295
DSP Group, Inc. (a) 16,000 1,486
E-Tek Dynamics, Inc. (a) 13,300 1,786
eCollege.com (a) 8,200 90
Electronics For Imaging, Inc. (a) 26,300 1,539
EMCORE Corp. NPV (a) 7,000 233
EMS Technologies, Inc. (a) 12,700 144
Equinox Systems, Inc. (a) 21,100 181
Excel Technology, Inc. (a) 10,000 175
Extreme Networks, Inc. (a) 22,600 1,887
Fairchild Corp. (The) Class A (a) 20,800 189
Globecomm Systems, Inc. (a) 14,900 372
Go2Net, Inc. (a) 37,850 3,293
Harmon Industries, Inc. 11,200 133
Harris Corp. 51,800 1,382
HotJobs.com, Ltd. (a) 24,200 1,062
i2 Technologies, Inc. (a) 9,500 1,849
iBasis, Inc. (a) 5,800 167
Special Growth Fund 30
<PAGE>
Special Growth Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
------- -------
Imation Corp. (a) 25,500 856
In Focus Systems, Inc. (a) 64,800 1,503
Informatica Corp. (a) 1,400 147
Inktomi Corp. (a) 23,600 2,092
Integrated Device Technology, Inc. (a) 124,200 3,594
Integrated Silicon Solution, Inc. (a) 144,700 2,369
Inter-Tel, Inc. 3,900 97
Internap Network Services Corp. (a) 6,000 1,037
International FiberCom, Inc. NPV (a) 24,000 188
Interphase Corp. NPV (a) 6,400 134
Intertrust Technologies Corp. (a) 4,500 529
InterVoice, Inc. (a) 8,800 205
IntraNet Solutions, Inc. (a) 12,500 459
ISS Group, Inc. (a) 30,000 2,130
ITI Technologies, Inc. (a) 6,000 180
J.D. Edwards & Co. (a) 20,800 621
JDS Uniphase Corp. (a) 15,000 2,419
Kemet Corp. (a) 24,100 1,086
Key Tronic Corp. (a) 37,000 143
Kronos, Inc. (a) 2,550 155
Lam Research Corp. (a) 12,600 1,406
Landmark Systems Corp. (a) 3,500 36
Latitude Communications, Inc. (a) 25,700 670
LCC International, Inc. Class A (a) 17,000 340
Littlefuse, Inc. (a) 4,100 99
LSI Logic Corp. (a) 62,300 4,205
Macromedia, Inc. (a) 61,950 4,530
Media Metrix, Inc. (a) 13,000 465
Mercury Interactive Corp. (a) 31,100 3,357
Microchip Technology, Inc. (a) 21,200 1,454
Micromuse, Inc. (a) 10,000 1,700
Micron Electronics, Inc. (a) 7,900 88
MICROS Systems, Inc. (a) 5,600 414
Microsemi Corp. (a) 20,000 176
MP3.com, Inc. (a) 4,000 128
MRV Communications, Inc. (a) 2,000 126
N2H2, Inc. (a) 27,400 644
National Computer Systems, Inc. 6,700 251
National Instruments Corp. (a) 36,525 1,397
National Semiconductor Corp. (a) 25,400 1,087
Net2Phone, Inc. (a) 17,700 811
Network Appliance, Inc. (a) 30,600 2,540
Network Associates, Inc. (a) 44,700 1,190
Network Equipment Technologies, Inc. (a) 17,700 209
Network Solutions, Inc. Class A (a) 2,900 631
New Era of Networks, Inc. (a) 9,000 429
nFront, Inc. NPV (a) 4,300 86
NorthPoint Communications Group, Inc. (a) 40,300 960
OnDisplay, Inc. (a) 2,700 244
Online Resources & Communications Corp. (a) 9,700 159
Open Market, Inc. (a) 12,000 542
Ortel Corp. (a) 10,000 1,198
OSI Systems, Inc. (a) 30,000 155
Park Electrochemical Corp. 14,700 390
PC-Tel, Inc. (a) 1,800 94
Pericom Semiconductor Corp. (a) 13,100 344
PerkinElmer, Inc. (a) 24,100 1,005
Photronics, Inc. (a) 30,000 857
Pioneer-Standard Electronics, Inc. 7,000 101
PMC - Sierra, Inc. (a) 9,000 1,442
Printronix, Inc. (a) 7,700 175
PSINET, Inc. (a) 35,000 2,161
QLogic Corp. (a) 21,300 3,405
Quest Software, Inc. NPV (a) 5,600 558
Rare Medium Group, Inc. (a) 14,200 479
Rational Software Corp. (a) 36,000 1,769
RealNetworks, Inc. (a) 8,100 975
Redback Networks, Inc. (a) 8,000 1,414
REMEC, Inc. (a) 8,800 224
RF Micro Devices, Inc. (a) 4,300 293
RF Monolithics, Inc. (a) 16,500 95
Rogers Corp. (a) 5,000 191
Safeguard Scientifics, Inc. (a) 21,800 3,533
Scientific-Atlanta, Inc. 26,500 1,474
SDL, Inc. (a) 9,800 2,136
SeaChange International, Inc. (a) 9,650 340
Secure Computing Corp. (a) 12,200 153
Sequa Corp. (a) 2,200 119
ShopNow.com, Inc. (a) 30,300 572
Siliconix, Inc. (a) 8,300 1,076
Sterling Software, Inc. (a) 52,700 1,660
Stoneridge, Inc. (a) 6,300 97
Sybase, Inc. (a) 11,900 202
Symantec Corp. (a) 20,000 1,172
Symbol Technologies, Inc. 13,000 826
Synopsys, Inc. (a) 15,000 997
Systemax, Inc. (a) 7,800 66
Tech-Sym Corp. (a) 41,300 852
Tekelec, Inc. (a) 10,000 223
Titan Corp. (a) 5,600 264
TSI International Software, Ltd. (a) 20,000 1,130
USWeb Corp. (a) 13,700 609
Varian Semiconductor Equipment Associates, Inc. (a) 49,000 1,662
Verio, Inc. (a) 63,600 2,937
VeriSign, Inc. (a) 20,600 3,936
Veritas Software Corp. (a) 20,000 2,860
Verity, Inc. (a) 15,800 672
ViaSat, Inc. (a) 3,200 155
31 Special Growth Fund
<PAGE>
Special Growth Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
------- -------
Vignette Corp. (a) 9,000 1,465
Vishay Intertechnology, Inc. (a) 8,600 272
Visio Corp. (a) 13,600 646
Volt Information Sciences, Inc. (a) 3,600 86
WebTrends Corp. NPV (a) 16,800 1,351
Xilinx, Inc. (a) 15,600 709
Xircom, Inc. (a) 32,000 2,400
-------
172,474
-------
Utilities - 5.9%
Alliant Energy Corp. (a) 23,000 633
Amdocs, Ltd. (a) 14,000 483
American Water Works, Inc. 800 17
Arch Communications Group, Inc. (a) 21,500 142
Associated Group, Inc. (The) Class A (a) 8,000 732
Black Hills Corp. 2,300 51
BroadWing, Inc. (a) 80,000 2,950
Calpine Corp. (a) 76,800 4,914
Cascade Natural Gas Corp. 8,000 129
CFW Communications Co. NPV 6,900 236
CH Energy Group, Inc. (a) 5,100 168
Citizens Utilities Co. Class B (a) 61,300 870
Columbia Energy Group 41,200 2,606
Commonwealth Telephone Enterprises, Inc. (a) 13,000 683
Conectiv, Inc. 41,300 694
Copper Mountain Networks, Inc. (a) 12,900 626
Dycom Industries, Inc. (a) 23,800 1,048
Energen Corp. 7,100 128
Energy East Corp. 36,900 768
Global TeleSystems Group, Inc. (a) 30,000 1,039
GST Telecommunications, Inc. (a) 24,900 226
Hawaiian Electric Industries, Inc. 33,300 962
Idacorp, Inc. 9,300 249
Illinova Corp. 35,000 1,216
Indiana Energy, Inc. 5,333 95
Jones Intercable, Inc. Class A (a) 38,500 2,634
Laclede Gas Co. 2,300 50
Leap Wireless International, Inc. (a) 1,400 109
MDU Resources Group, Inc. 11,400 228
Metrocall, Inc. (a) 60,000 98
Midcoast Energy Resources, Inc. 10,000 168
Minnesota Power, Inc. 27,400 464
National Fuel Gas Co. 1,800 84
New Jersey Resources Corp. 2,300 90
Niagara Mohawk Holdings, Inc. (a) 69,400 967
NICOR, Inc. 13,100 426
NiSource, Inc. NPV 8,200 147
North Pittsburgh Systems, Inc. 4,200 62
Northwest Natural Gas Co. 16,000 348
NUI Corp. 9,200 243
OGE Energy Corp. 19,900 378
Paging Network, Inc. (a) 170,600 133
Peoples Energy Corp. 15,500 519
Piedmont Natural Gas Co., Inc. 5,100 154
Pinnacle Holdings, Inc. (a) 7,000 298
Powerwave Technologies, Inc. (a) 11,200 653
Price Communications Corp. (a) 39,500 1,099
Primus Telecommunications Group, Inc. (a) 12,000 459
Public Service Co. of New Mexico 72,200 1,172
Questar Corp. 8,800 132
Razorfish, Inc. (a) 4,300 409
RGS Energy Group, Inc. 19,500 401
RSL Communications, Ltd. Class A (a) 33,000 563
SBA Communications Corp. (a) 14,500 264
Sierra Pacific Resources NPV 10,300 178
South Jersey Industries, Inc. 5,900 168
Southwest Gas Corp. 12,000 276
Time Warner Telecom, Inc. Class A (a) 20,000 993
TNP Enterprises, Inc. 2,900 120
UGI Corp. 35,200 719
United Illuminating Co. 6,500 334
United States Cellular Corp. (a) 21,000 2,120
UtiliCorp United, Inc. 55,200 1,072
Western Resources, Inc. 48,000 816
Wisconsin Energy Corp. 27,300 526
-------
41,739
-------
Total Common Stocks
(cost $506,490) 648,580
-------
Preferred Stocks - 0.0%
Sovereign Bancorp, Inc. (conv.) 2,500 121
-------
Total Preferred Stocks
(cost $125) 121
-------
Special Growth Fund 32
<PAGE>
Special Growth Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
------- -------
Long-Term Investments - 0.0%
Veterinary Centers of America, Inc. (conv.)
5.250% due 05/01/06 250 164
-------
Total Long-Term Investments
(cost $182) 164
-------
Short-Term Investments - 8.3%
Frank Russell Investment Company Money Market
Fund, due on demand (c) 55,670 55,670
United States Treasury Bills (c)(d)(e)
4.670% due 01/20/00 3,150 3,142
-------
Total Short-Term Investments
(cost $58,812) 58,812
-------
Total Investments - 99.9%
(identified cost $565,609) 707,677
Other Assets and Liabilities,
Net - 0.1% 935
-------
Net Assets - 100.0% 708,612
=======
* Each contract represents $100,000 notional value.
(a) Nonincome-producing security.
(b) Real Estate Investment Trust (REIT).
(c) At amortized cost, which approximates market.
(d) Held as collateral in connection with futures contracts purchased by the
Fund.
(e) Rate noted is yield-to-maturity from date of acquisition.
Abbreviations:
ADR - American Depositary Receipt
NPV - No Par Value
Number
of Depreciation
Contracts* (000)
--------- -------
Futures Contracts
S&P 400 Midcap Index
expiration date 03/00 161 $1,634
S&P 500 Index
expiration date 03/00 51 602
-------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $2,236
=======
See accompanying notes which are an integral part of the financial statements.
33 Special Growth Fund
<PAGE>
Special Growth Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amounts) December 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Investments at market (identified cost $565,609) .......................... $707,677
Receivables:
Dividends and interest ................................................. 611
Investments sold ....................................................... 1,241
Fund shares sold ....................................................... 2,003
Daily variation margin on futures contracts ............................ 269
Prepaid expenses .......................................................... 5
--------
Total assets ........................................................ 711,806
Liabilities
Payables:
Investments purchased .................................................. $ 2,190
Fund shares redeemed ................................................... 671
Accrued fees to affiliates ............................................. 227
Other accrued expenses ................................................. 106
--------
Total liabilities ................................................... 3,194
--------
Net Assets ................................................................ $708,612
========
Net Assets Consist of:
Accumulated net realized gain (loss) ...................................... $ 21,705
Unrealized appreciation (depreciation) on:
Investments ............................................................ 142,068
Futures contracts ...................................................... 2,236
Shares of beneficial interest ............................................. 144
Additional paid-in capital ................................................ 542,459
--------
Net Assets ................................................................ $708,612
========
Net Asset Value, offering and redemption price per share:
Class C ($5,989,794 divided by 124,210 shares of $.01 par value
shares of beneficial interest outstanding) .......................... $ 48.22
========
Class E ($5,410,661 divided by 111,434 shares of $.01 par value
shares of beneficial interest outstanding) .......................... $ 48.55
========
Class S ($697,211,152 divided by 14,175,680 shares of $.01 par value
shares of beneficial interest outstanding) .......................... $ 49.18
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Special Growth Fund 34
<PAGE>
Special Growth Fund
Statement of Operations
Amounts in thousands
Year Ended December 31, 1999
Investment Income
Dividends .............................................. $ 5,190
Dividends from Money Market Fund ....................... 1,597
Interest ............................................... 250
--------
Total investment income ............................. 7,037
Expenses
Advisory fees .......................................... $ 5,557
Administrative fees .................................... 310
Custodian fees ......................................... 469
Distribution fees - Class C ............................ 18
Transfer agent fees .................................... 1,139
Professional fees ...................................... 31
Registration fees ...................................... 96
Shareholder servicing fees - Class C ................... 6
Shareholder servicing fees - Class E ................... 14
Trustees' fees ......................................... 7
Miscellaneous .......................................... 70
--------
Total expenses ...................................... 7,717
--------
Net investment income (loss) .............................. (680)
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ............................................ 63,510
Futures contracts ...................................... 5,156 68,666
--------
Net change in unrealized appreciation (depreciation) on:
Investments ............................................ 59,584
Futures contracts ...................................... 333 59,917
-------- --------
Net realized and unrealized gain (loss) ................... 128,583
--------
Net increase (decrease) in net assets from operations ..... $127,903
========
See accompanying notes which are an integral part of the financial statements.
35 Special Growth Fund
<PAGE>
Special Growth Fund
Statement of Changes in Net Assets
Amounts in thousands
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
--------- ---------
<S> <C> <C>
Operations
Net investment income (loss) ................................... $ (680) $ 189
Net realized gain (loss) ....................................... 68,666 25,694
Net change in unrealized appreciation (depreciation) ........... 59,917 (28,689)
--------- ---------
Net increase (decrease) in net assets from operations ....... 127,903 (2,806)
--------- ---------
Distributions
From net investment income
Class S ..................................................... (78) (536)
From net realized gain
Class C ..................................................... (357) --
Class E ..................................................... (323) (281)
Class S ..................................................... (42,975) (32,238)
--------- ---------
Net decrease in net assets from distributions ............ (43,733) (33,055)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions .. 22,442 62,073
--------- ---------
Total net increase (decrease) in net assets ....................... 106,612 26,212
Net Assets
Beginning of period ............................................ 602,000 575,788
--------- ---------
End of period .................................................. $ 708,612 $ 602,000
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Special Growth Fund 36
<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 Operations
Net investment income (loss)(a) ............................... (.45)
Net realized and unrealized gain (loss) ....................... 9.72
---------
Total income from operations ............................... 9.27
---------
Distributions
From net realized gain ........................................ (3.22)
---------
Net Asset Value, End of Period ................................... $ 48.22
=========
Total Return (%)(b) .............................................. 22.53
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ...................... 5,990
Ratios to average net assets (%)(c):
Operating expenses ......................................... 2.23
Net investment income (loss) ............................... (1.10)
Portfolio turnover rate (%) ................................... 111.98
* For the period January 27, 1999 (commencement of sale) to December 31,
1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
37 Special Growth Fund
<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 Operations
Net investment income (loss)(a) ........... (.16) (.17) (.13) (.02)
Net realized and unrealized gain (loss) ... 9.02 .09 11.05 1.63
--------- --------- --------- ---------
Total income from operations ........... 8.86 (.08) 10.92 1.61
--------- --------- --------- ---------
Distributions
From net realized gain .................... (3.22) (2.43) (6.25) (4.34)
--------- --------- --------- ---------
Net Asset Value, End of Period ............... $ 48.55 $ 42.91 $ 45.42 $ 40.75
========= ========= ========= =========
Total Return (%)(b) .......................... 21.19 .04 27.90 4.04
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) .. 5,411 6,139 3,153 910
Ratios to average net assets (%)(c):
Operating expenses, net ................ 1.49 1.58 1.83 1.89
Net investment income (loss) ........... (.36) (.39) (.51) (.38)
Portfolio turnover rate (%) ............... 111.98 129.19 97.19 118.13
</TABLE>
* For the period November 4, 1996 (commencement of sale) to December 31,
1996.
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
Special Growth Fund 38
<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
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ......... $ 43.34 $ 45.72 $ 40.79 $ 39.17 $ 33.47
---------- ---------- ---------- ---------- ----------
Income From Operations
Net investment income (loss)(a) ........... (.05) .01 .08 .12 .18
Net realized and unrealized gain (loss) ... 9.12 .08 11.18 6.87 9.25
---------- ---------- ---------- ---------- ----------
Total income from operations ........... 9.07 .09 11.26 6.99 9.43
---------- ---------- ---------- ---------- ----------
Distributions
From net investment income ................ (.01) (.04) (.08) (.12) (.21)
From net realized gain .................... (3.22) (2.43) (6.25) (5.25) (3.52)
---------- ---------- ---------- ---------- ----------
Total distributions .................... (3.23) (2.47) (6.33) (5.37) (3.73)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ............... $ 49.18 $ 43.34 $ 45.72 $ 40.79 $ 39.17
========== ========== ========== ========== ==========
Total Return (%) ............................. 21.45 .42 28.77 18.65 28.52
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) .. 697,211 595,862 572,635 393,048 313,678
Ratios to average net assets (%):
Operating expenses ..................... 1.24 1.15 1.15 1.19 1.22
Net investment income (loss) ........... (.10) .03 .18 .28 .49
Portfolio turnover rate (%) ............... 111.98 129.19 97.19 118.13 87.56
</TABLE>
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
39 Special Growth Fund
<PAGE>
Equity Income Fund
Portfolio Management Discussion
December 31, 1999 (Undaudited)
Objective: To achieve a high level of current income while maintaining the
potential for capital appreciation.
Invests in: Primarily income-producing US equity securities.
Strategy: The Fund uses a multi-manager strategy intended to achieve a high
level of current income and the potential for capital appreciation with moderate
risk. The Fund employed the investment management services of three managers
with three separate approaches to value-oriented investment.
[The following table was depicted as a mountain chart in the printed material.]
Growth of a $10,000 Investment
Yearly periods Equity Russell Lipper(R)
ended Income 1000(R) Equity
December 31 Class S Value++ Income**
Inception* $10,000 $10,000 $10,000
1990 $9,310 $9,192 $9,373
1991 $11,872 $11,453 $11,841
1992 $13,238 $13,035 $12,953
1993 $14,989 $15,397 $14,736
1994 $15,092 $15,091 $14,363
1995 $20,337 $20,879 $18,639
1996 $24,701 $25,397 $22,099
1997 $32,996 $34,332 $28,184
1998 $37,283 $39,698 $31,307
1999 $37,376 $42,615 $32,756
-----------------------------------------------------------
Total $227,192 $237,088 $206,252
===========================================================
Equity Income Fund - Class S
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $10,025 0.25%
5 Years $24,766 19.88%ss.
10 Years $37,376 14.09%ss.
Equity Income Fund - Class E++++
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $10,004 0.04%
5 Years $24,387 19.51%ss.
10 Years $36,804 13.91%ss.
Equity Income Fund - Class C++++++
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $9,939 (0.61)%
5 Years $24,233 19.35%ss.
10 Years $36,571 13.84%ss.
Russell 1000(R)Value Index
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $10,735 7.35%
5 Years $28,238 23.07%ss.
10 Years $42,615 15.60%ss.
Lipper(R)Equity Income Funds Benchmark
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $10,463 4.63%
5 Years $22,805 17.93%ss.
10 Years $32,756 12.60%ss.
41 Equity Income Fund
<PAGE>
Equity Income Fund
Portfolio Management Discussion
December 31, 1999 (Undaudited)
Performance Review
For the year ended December 31, 1999, the Equity Income Fund Class S, Class E,
and Class C shares reflected total returns of 0.25%, 0.04%, and (0.61)%,
respectively, as compared to the Russell 1000(R) Value Index results of 7.35%.
The Fund trailed the index due to disappointing security selection linked to the
strong valuation bias of its investment managers. Performance also lagged the
4.63% average return of mutual funds tracked in the Lipper(R) Equity Income
Funds Universe.
Portfolio Highlights
The performance of stocks in 1999 was characterized by extreme differences
between returns of the various market sectors. Led by the technology sector, the
Russell 1000(R) Growth Index gained 33.16% for the year. Technology stocks
alone, despite seemingly absurd valuations, rose nearly 77% for the same time
period. Valuation-based investors found it a very frustrating environment in
which to invest. Any level of valuation sensitivity proved a severe liability as
value stocks in the Russell 1000(R) Index trailed their growth counterparts by
26 percentage points. Technology overwhelmingly dominated other market sectors
as excitement over the Internet created aggressive buying. More traditional
value sectors, such as financial services and utilities, managed gains of only
3.1% and 13.5%, respectively.
The Equity Income Fund's managers found abundant opportunities to select stocks
with strong fundamentals and very favorable market-relative valuations. However,
the market ignored these securities in favor of anything linked to the Internet.
Though overweighted in the technology sector, the Fund's Internet exposure
proved insufficient given market trends. The Fund's managers all had a very
frustrating year as their valuation sensitivity focused their investments away
from the market's strongest performing issues.
Top Ten Equity Holdings
(as a percent of Total Investments) December 31, 1999
Chase Manhattan Corp. 2.6%
MCI WorldCom, Inc. 2.6
AT&T Corp. 2.6
Citigroup, Inc. 2.6
Exxon Mobil Corp. NPV 2.5
International Business Machines Corp. 2.0
Morgan Stanley Dean Witter & Co. 1.9
Dow Chemical Co. 1.5
Morgan (J.P.) & Co., Inc. 1.4
Ford Motor Co. 1.4
Portfolio Characteristics
December 31, 1999
Current P/E Ratio 15.6x
Portfolio Price/Book Ratio 2.5x
Market Capitalization - $- Weighted Average 52.06 Bil
Number of Holdings 215
Money Managers Styles
Equinox Capital Management, Inc. Value
Trinity Investment Management Corp. Value
Westpeak Investment Advisors, L.P. Value
* Equity Income Fund Class S assumes initial investment on January 1,
1990.
** Russell 1000(R) Value Index includes stocks from the Russell 1000(R)
Index with a less than average growth orientation. The Index represents
the universe of stocks from which most price-driven managers typically
select. The Russell 1000 Value Index return reflects adjustments for
income dividends and capital gains distributions reinvested as of the
ex- dividend dates.
++ Lipper(R) Equity Income Funds Benchmark is the average total return for
the universe of funds within the Equity Income Funds investment
objective. The total return for the funds reflects adjustments for
income dividends and capital gains distributions reinvested as of the
ex-dividend dates.
++++ Equity Income Fund Class S performance has been linked with Class E to
provide historical perspective. For the period November 4, 1996
(commencement of sale) to May 15, 1998, Class E paid shareholder service
and Rule 12b-1 distribution fees. From May 16, 1998 through the current
period, Class E paid only shareholder service fees. Total return would
have been lower had these fees been in effect during prior reporting
periods.
++++++ Equity Income Fund Class S and Class E performance has been linked with
Class C to provide historical perspective. From January 27, 1999
(commencement of sale) through the current period, Class C paid
shareholder service and Rule 12b-1 distribution fees. Total return would
have been lower had these fees been in effect during prior reporting
periods.
ss. Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Equity Income Fund 42
<PAGE>
Equity Income Fund
Statement of Net Assets
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ----------
Common Stocks - 94.5%
Auto and Transportation - 4.8%
Borg-Warner Automotive, Inc. 1,100 45
Dana Corp. 5,900 177
Delta Air Lines, Inc. 22,700 1,131
Eaton Corp. 3,000 218
Ford Motor Co. 47,900 2,560
General Motors Corp. 31,000 2,252
Hertz Corp. Class A 3,700 185
Lear Corp. (a) 16,500 528
PACCAR, Inc. 1,700 75
UAL Corp. (a) 2,600 202
Union Pacific Corp. 38,700 1,688
-------
9,061
-------
Consumer Discretionary - 6.5%
AT&T Corp. - Liberty Media Group Class A (a) 23,600 1,339
Barnes & Noble, Inc. (a) 14,900 307
Brinker International, Inc. (a) 18,800 451
Brunswick Corp. 5,900 131
CBS Corp. (a) 2,700 173
Circuit City Stores, Inc. 10,200 460
Darden Restaurants, Inc. 26,900 488
Eastman Kodak Co. 14,093 934
Federated Department Stores, Inc. (a) 7,800 394
Fortune Brands, Inc. 22,400 741
Gannett Co., Inc. 8,800 718
International Game Technology 4,500 91
Knight-Ridder, Inc. 20,000 1,190
Limited, Inc. (The) 3,000 130
MediaOne Group, Inc. (a) 15,700 1,206
MGM Grand, Inc. (a) 2,900 146
Payless ShoeSource, Inc. (a) 9,500 447
Premier Parks, Inc. (a) 2,500 72
Shaw Industries, Inc. (a) 16,600 256
Times Mirror Co. Series A 4,400 295
Tribune Co. 27,500 1,514
Washington Post Co. Class B 400 222
Whirlpool Corp. 9,500 618
-------
12,323
-------
Consumer Staples - 2.5%
Albertson's, Inc. 6,100 197
Anheuser-Busch Cos., Inc. 1,100 78
ConAgra, Inc. 28,200 636
General Mills, Inc. 3,800 136
IBP, Inc. 59,600 1,073
Interstate Bakeries Corp. 14,900 270
Kellogg Co. 2,800 86
PepsiCo, Inc. 17,400 613
SuperValu, Inc. 18,700 374
Tyson Foods, Inc. Class A 15,700 255
U.S. Foodservice (a) 15,500 260
UST Corp. 28,800 725
-------
4,703
-------
Financial Services - 29.0%
Aetna, Inc. 11,100 620
AFLAC, Inc. 4,200 198
Allmerica Financial Corp. 20,500 1,140
Ambac Financial Group, Inc. 11,800 616
American Financial Group, Inc. 6,700 177
American General Corp. 18,100 1,373
American International Group, Inc. 14,400 1,557
Associates First Capital Corp. Class A 51,100 1,402
Astoria Financial Corp. 21,800 664
AXA Financial, Inc. 8,700 295
Bank of America Corp. 44,684 2,243
Bank One Corp. 20,100 644
Bear Stearns Co., Inc. 9,855 421
Chase Manhattan Corp. 64,336 4,998
CIGNA Corp. 14,700 1,184
Citigroup, Inc. 86,600 4,812
Conseco, Inc. 102,700 1,836
Dime Bancorp, Inc. 44,400 672
Federal National Mortgage Association 30,200 1,886
Federal Home Loan Mortgage Corp. 11,600 546
First Data Corp. 11,200 552
Fleet Boston Financial Corp. 60,900 2,120
Golden State Bancorp, Inc. (a) 30,200 521
Golden West Financial Corp. 17,400 583
Greenpoint Financial Corp. 14,000 333
Hartford Financial Services Group, Inc.(The) 30,300 1,435
Hartford Life, Inc. Class A 1,500 66
Hibernia Corp. Class A 27,800 295
KeyCorp 62,300 1,378
Lehman Brothers Holdings, Inc. 4,600 390
Lincoln National Corp. 31,900 1,276
Loews Corp. 7,800 473
Mack-Cali Realty Corp. (b) 5,800 151
Marshall & Ilsley Corp. 11,000 691
MGIC Investment Corp. 4,400 265
MONY Group, Inc. (The) 6,100 178
Morgan (J.P.) & Co., Inc. 20,600 2,608
Morgan Stanley Dean Witter & Co. 25,100 3,583
National City Corp. 18,400 436
New Plan Excel Realty Trust (b) 26,400 417
Old Kent Financial Corp. 21,200 750
Paine Webber Group, Inc. 8,500 330
43 Equity Income Fund
<PAGE>
Equity Income Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ----------
Peoples Heritage Financial Group 10,900 164
PMI Group, Inc. (The) 5,900 288
PNC Bank Corp. 26,900 1,197
ProLogis Trust (b) 9,300 179
Provident Financial Group, Inc. 17,400 624
Public Storage, Inc. (b) 5,000 113
Radian Group, Inc. (a) 4,500 215
Regions Financial Corp. 43,500 1,090
Ryder System, Inc. 27,000 660
SouthTrust Corp. 17,000 642
Sovereign Bancorp, Inc. 74,600 553
Trustmark Corp. 32,300 696
UnionBanCal Corp. 28,800 1,136
Washington Mutual, Inc. 24,600 640
Wells Fargo Co. 10,800 437
-------
54,749
-------
Health Care - 4.7%
Bard (C.R.), Inc. 8,800 466
Baxter International, Inc. 19,400 1,219
Bristol-Myers Squibb Co. 16,800 1,078
Columbia/HCA Healthcare Corp. 60,500 1,773
Genzyme Corp. (a) 3,700 166
IVAX Corp. (a) 35,300 909
Johnson & Johnson 10,600 987
Mallinckrodt, Inc. 9,200 293
PacifiCare Health Systems, Inc. (a) 2,000 106
Pharmacia & Upjohn, Inc. 17,200 774
United Healthcare Corp. 20,500 1,089
-------
8,860
-------
Integrated Oils - 5.9%
Amerada Hess Corp. 40,500 2,298
Ashland, Inc. 28,000 922
Chevron Corp. 17,300 1,499
Coastal Corp. 24,200 858
Murphy Oil Corp. 1,200 69
Phillips Petroleum Co. 19,900 935
Royal Dutch Petroleum Co. 18,500 1,118
Texaco, Inc. 17,600 956
Unocal Corp. 34,700 1,165
USX-Marathon Group 54,200 1,338
-------
11,158
-------
Materials and Processing - 9.9%
Alcoa, Inc. 21,600 1,793
Armstrong World Industries, Inc. 12,500 417
Ball Corp. 17,000 669
Dow Chemical Co. 21,500 2,874
du Pont (E.I.) de Nemours & Co. 13,600 896
FMC Corp. (a) 5,900 338
Georgia-Pacific Corp. (Timber Group) 26,300 648
Georgia-Pacific Group 27,900 1,416
Goodrich (B.F.) Co. 41,200 1,133
Hercules, Inc. 12,900 360
International Paper Co. 32,900 1,857
Kimberly-Clark Corp. 7,700 502
Lubrizol Corp. 17,000 525
Minnesota Mining & Manufacturing Co. 900 88
Morrison Knudsen Corp. 2003 Warrants (a) 292 1
Nucor Corp. 1,900 104
PPG Industries, Inc. 5,500 344
Praxair, Inc. 4,600 231
Temple-Inland, Inc. 5,300 349
Textron, Inc. 27,200 2,086
USG Corp. 9,800 462
USX-U.S. Steel Group 25,800 851
Westvaco Corp. 8,100 264
Weyerhaeuser Co. 5,200 373
Willamette Industries, Inc. 3,300 153
-------
18,734
-------
Other Energy - 4.9%
Anadarko Petroleum Corp. 2,600 89
Apache Corp. 27,500 1,016
El Paso Energy Corp. 12,900 501
EOG Resources, Inc. 30,600 537
Exxon Mobil Corp. NPV (a) 58,673 4,727
Helmerich & Payne, Inc. 3,400 74
Occidental Petroleum Corp. 6,300 136
Sempra Energy 42,800 744
Tosco Corp. 21,700 590
Ultramar Diamond Shamrock Corp. 36,700 833
-------
9,247
-------
Producer Durables - 4.6%
Boeing Co. 12,100 503
Briggs & Stratton Corp. 9,100 488
Caterpillar, Inc. 12,900 607
CommScope, Inc. (a) 7,500 302
Cummins Engine Co., Inc. 9,600 464
Deere & Co. 34,000 1,475
Diebold, Inc. 8,700 204
Honeywell International, Inc. (a) 4,600 265
Ingersoll-Rand Co. 10,800 595
Johnson Controls, Inc. 12,400 705
Northrop Grumman Corp. 15,500 838
Parker-Hannifin Corp. 6,000 308
Raytheon Co. Class B 33,389 887
Tecumseh Products Co. Class A 23,200 1,093
Equity Income Fund 44
<PAGE>
Equity Income Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ----------
Thomas & Betts Corp. 2,600 83
-------
8,817
-------
Technology - 7.8%
Adaptec, Inc. (a) 1,300 65
Atmel Corp. (a) 20,200 597
AVX Corp. 1,800 90
BMC Software, Inc. (a) 16,900 1,350
Computer Sciences Corp. (a) 2,700 255
Cooper Industries, Inc. 2,900 117
Electronic Data Systems Corp. 27,862 1,865
General Dynamics Corp. 22,300 1,176
Intel Corp. 18,482 1,520
International Business Machines Corp. 34,800 3,758
LSI Logic Corp. (a) 3,800 257
Motorola, Inc. 8,800 1,296
NCR Corp. (a) 19,900 754
Sybase, Inc. (a) 5,600 95
Unisys Corp. (a) 48,300 1,543
-------
14,738
-------
Utilities - 13.9%
Alltel Corp. 4,400 364
Associated Group, Inc. (The) Class A (a) 2,100 192
AT&T Corp. 98,050 4,976
Bell Atlantic Corp. 38,672 2,381
BellSouth Corp. 20,200 946
Conectiv, Inc. 4,600 77
Cox Communications, Inc. Class A (a) 3,700 191
DTE Energy Co. 29,300 919
Edison International 60,500 1,584
Energy East Corp. 18,400 383
Entergy Corp. 20,600 530
FirstEnergy Corp. 10,500 238
GPU, Inc. 53,400 1,599
GTE Corp. 17,800 1,256
MCI WorldCom, Inc. (a) 93,900 4,977
Peco Energy Co. 7,700 268
Public Service Enterprise Group, Inc. 32,800 1,142
Questar Corp. 8,900 134
SBC Communications, Inc. 41,300 2,013
Sprint Corp. 8,428 567
Telephone & Data Systems, Inc. 1,200 151
Texas Utilities Co. 32,500 1,156
United States Cellular Corp. (a) 1,700 172
-------
26,216
-------
Total Common Stocks
(cost $163,393) 178,606
-------
Principal Market
Amount Value
(000) (000)
$ $
--------- ----------
Short-Term Investments - 5.3%
Frank Russell Investment Company Money
Market Fund, due on demand (c) 8,016 8,016
United States Treasury Bills
4.670% due 1/20/00 (c)(d)(e) 2,000 1,995
-------
Total Short-Term Investments
(cost $10,011) 10,011
-------
Total Investments - 99.8%
(identified cost $173,404) 188,617
Other Assets and Liabilities,
Net - 0.2% 422
-------
Net Assets - 100.0% 189,039
=======
* Each contract represents $100,000 notional value.
(a) Nonincome-producing security.
(b) Real Estate Investment Trust (REIT).
(c) At amortized cost, which approximates market.
(d) Rate noted is yield-to-maturity from date of acquisition.
(e) Held as collateral in connection with futures contracts purchased by the
Fund.
Abbreviations:
NPV - No Par Value
See accompanying notes which are an integral part of the financial statements.
45 Equity Income Fund
<PAGE>
Equity Income Fund
Statement of Net Assets, continued
December 31, 1999
Unrealized
Number Appreciation
of (Depreciation)
Contracts* (000)
----------- --------------
Futures Contracts
S&P Barra Value Index expiration date 03/00 37 $ 76
S&P 500 Index expiration date 03/00 14 175
--------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ 251
==============
See accompanying notes which are an integral part of the financial statements.
Equity Income Fund 46
<PAGE>
Equity Income Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amounts) December 31, 1999
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Investments at market (identified cost $173,404) .......................................................... $ 188,617
Foreign currency holdings (identified cost $6) ............................................................ 6
Receivables:
Dividends ............................................................................................. 383
Investments sold ...................................................................................... 6
Fund shares sold ...................................................................................... 340
Daily variation margin on futures contracts ........................................................... 40
Prepaid expenses .......................................................................................... 2
---------
Total assets ....................................................................................... 189,394
Liabilities
Payables:
Fund shares redeemed ..................................................................... $ 264
Accrued fees to affiliates ............................................................... 62
Other accrued expenses ................................................................... 29
---------
Total liabilities .................................................................................. 355
---------
Net Assets ................................................................................................ $ 189,039
=========
Net Assets Consist of:
Undistributed net investment income ....................................................................... $ 51
Accumulated net realized gain (loss) ...................................................................... 3,997
Unrealized appreciation (depreciation) on:
Investments ........................................................................................... 15,213
Futures contracts ..................................................................................... 251
Foreign currency-related transactions ................................................................. (1)
Shares of beneficial interest ............................................................................. 51
Additional paid-in capital ................................................................................ 169,477
---------
Net Assets ................................................................................................ $ 189,039
=========
Net Asset Value, offering and redemption price per share:
Class C ($995,078 divided by 26,882 shares of $.01 par value
shares of beneficial interest outstanding) ......................................................... $ 37.02
=========
Class E ($1,060,947 divided by 28,524 shares of $.01 par value
shares of beneficial interest outstanding) ......................................................... $ 37.20
=========
Class S ($186,983,025 divided by 5,064,168 shares of $.01 par value
shares of beneficial interest outstanding) ......................................................... $ 36.92
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
47 Equity Income Fund
<PAGE>
Equity Income Fund
Statement of Operations
Amounts in thousands Year Ended December 31, 1999
<TABLE>
<CAPTION>
Investment Income
<S> <C> <C>
Dividends .................................................................................... $ 4,243
Dividends from Money Market Fund ............................................................. 460
Interest ..................................................................................... 107
--------
Total investment income ................................................................... 4,810
Expenses
Advisory fees ................................................................. $ 1,681
Administrative fees ........................................................... 113
Custodian fees ................................................................ 180
Distribution fees - Class C ................................................... 4
Transfer agent fees ........................................................... 377
Professional fees ............................................................. 23
Registration fees ............................................................. 76
Shareholder servicing fees - Class C .......................................... 1
Shareholder servicing fees - Class E .......................................... 3
Trustees' fees ................................................................ 5
Miscellaneous ................................................................. 35
--------
Total expenses ............................................................................ 2,498
--------
Net investment income ............................................................................ 2,312
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ................................................................... 16,273
Futures contracts ............................................................. 1,725
Foreign currency-related transactions ......................................... 2 18,000
--------
Net change in unrealized appreciation (depreciation) on:
Investments ................................................................... (20,112)
Futures contracts ............................................................. (39)
Foreign currency-related transactions ......................................... (1) (20,152)
-------- --------
Net realized and unrealized gain (loss) .......................................................... (2,152)
--------
Net increase (decrease) in net assets from operations ............................................ $ 160
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Equity Income Fund 48
<PAGE>
Equity Income Fund
Statement of Changes in Net Assets
Amounts in thousands
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
--------- ---------
Increase (Decrease) in Net Assets
<S> <C> <C>
Operations
Net investment income ................................................................ $ 2,312 $ 3,335
Net realized gain (loss) ............................................................. 18,000 27,006
Net change in unrealized appreciation (depreciation) ................................. (20,152) (538)
--------- ---------
Net increase (decrease) in net assets from operations ............................. 160 29,803
========= =========
Distributions
From net investment income
Class C ........................................................................... (2)
Class E ........................................................................... (7) (7)
Class S ........................................................................... (2,290) (3,291)
From net realized gain
Class C ........................................................................... (68) --
Class E ........................................................................... (101) (56)
Class S ........................................................................... (20,115) (25,440)
--------- ---------
Net decrease in net assets from distributions ................................. (22,583) (28,794)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions ........................ (39,774) 22,937
--------- ---------
Total net increase (decrease) in net assets .............................................. (62,197) 23,946
Net Assets
Beginning of period .................................................................. 251,236 227,290
--------- ---------
End of period (including undistributed net investment income of
$51 and $37, respectively) ........................................................ $ 189,039 $ 251,236
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
49 Equity Income Fund
<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.
1999*
-------
Net Asset Value, Beginning of Period ............................... $ 40.38
-------
Income From Operations
Net investment income (a) ...................................... .04
Net realized and unrealized gain (loss) ........................ .66
-------
Total income from operations ................................ .70
-------
Distributions
From net investment income ..................................... (.17)
From net realized gain ......................................... (3.89)
-------
Total distributions ......................................... (4.06)
-------
Net Asset Value, End of Period ..................................... $ 37.02
=======
Total Return (%)(b) ................................................ 2.03
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ....................... 995
Ratios to average net assets (%)(c):
Operating expenses .......................................... 2.10
Net investment income ....................................... .10
Portfolio turnover rate (%) .................................... 137.94
* For the period January 27, 1999 (commencement of sale) to December 31,
1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
Equity Income Fund 50
<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 Operations
Net investment income (a) .......................................... .33 .37 .32 .10
Net realized and unrealized gain (loss) ............................ (.44) 4.49 12.20 2.39
--------- --------- --------- ---------
Total income from operations .................................... (.11) 4.86 12.52 2.49
--------- --------- --------- ---------
Distributions
From net investment income ......................................... (.25) (.51) (.07) (.18)
From net realized gain ............................................. (3.89) (4.33) (11.24) (3.95)
--------- --------- --------- ---------
Total distributions ............................................. (4.14) (4.84) (11.31) (4.13)
--------- --------- --------- ---------
Net Asset Value, End of Period ......................................... $ 37.20 $ 41.45 $ 41.43 $ 40.22
========= ========= ========= =========
Total Return (%)(b) .................................................... .04 12.41 32.68 6.23
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ........................... 1,061 745 338 122
Ratios to average net assets (%)(c):
Operating expenses .............................................. 1.35 1.42 1.74 1.77
Net investment income ........................................... .80 .90 .77 1.50
Portfolio turnover rate (%) ........................................ 137.94 149.63 139.33 106.40
</TABLE>
* For the period November 4, 1996 (commencement of sale) to December 31,
1996.
(a) For the periods subsequent to December 31, 1997, average month-end
shares outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
51 Equity Income Fund
<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
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................... $ 41.26 $ 41.08 $ 40.22 $ 38.43 $ 32.21
----------- ----------- ----------- ----------- -----------
Income From Operations
Net investment income (a) ........................... .41 .55 .69 .82 .94
Net realized and unrealized gain (loss) ............. (.44) 4.49 12.11 7.03 10.08
----------- ----------- ----------- ----------- -----------
Total income from operations ..................... (.03) 5.04 12.80 7.85 11.02
----------- ----------- ----------- ----------- -----------
Distributions
From net investment income .......................... (.42) (.53) (.70) (.83) (.97)
From net realized gain .............................. (3.89) (4.33) (11.24) (5.23) (3.83)
----------- ----------- ----------- ----------- -----------
Total distributions .............................. (4.31) (4.86) (11.94) (6.06) (4.80)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period .......................... $ 36.92 $ 41.26 $ 41.08 $ 40.22 $ 38.43
=========== =========== =========== =========== ===========
Total Return (%) ........................................ .25 12.99 33.59 21.45 34.76
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ............ 186,983 250,491 226,952 195,132 180,116
Ratios to average net assets (%):
Operating expenses ............................... 1.11 1.01 1.04 1.07 1.06
Net investment income ............................ 1.03 1.30 1.51 2.03 2.51
Portfolio turnover rate (%) ......................... 137.94 149.63 139.33 106.40 92.40
</TABLE>
(a) For the periods subsequent to December 31, 1997, average month-end
shares outstanding were used for this calculation.
Equity Income Fund 52
<PAGE>
Quantitative Equity Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: To provide 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.
Invests in: Primarily US equity securities.
Strategy: The Fund uses a multi-manager strategy intended to achieve higher
returns through security selection with sector diversification similar to the
Russell 1000 Index. The Fund employed the investment management services of four
managers using four distinctive quantitative approaches to investment.
[The following table was depicted as a mountain chart in the printed material.]
Growth of a $10,000 Investment
Yearly periods Quantitative Lipper(R)
ended Equity Russell Growth &
December 31 Class S 1000(R)** Income++
Inception* $10,000 $10,000 $10,000
1990 $9,440 $9,584 $9,551
1991 $12,433 $12,749 $12,303
1992 $13,510 $13,901 $13,322
1993 $15,208 $15,319 $14,816
1994 $15,238 $15,371 $14,664
1995 $20,980 $21,176 $19,151
1996 $25,822 $25,930 $23,123
1997 $34,265 $34,448 $29,387
1998 $42,767 $43,757 $33,891
1999 $51,905 $52,907 $38,552
------------------------------------------------------------
Total $251,566 $255,136 $218,759
============================================================
Quantitative Equity Fund - Class S
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $12,137 21.37%
5 Years $34,067 27.76%ss.
10 Years $51,905 17.89%ss.
Quantitative Equity Fund - Class E++++
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $12,111 21.11%
5 Years $33,575 27.39%ss.
10 Years $51,154 17.72%ss.
Quantitative Equity Fund - Class C++++++
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $12,035 20.35%
5 Years $33,361 27.23%ss.
10 Years $50,828 17.64%ss.
Russell 1000(R)Index
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $12,091 20.91%
5 Years $34,421 28.05%ss.
10 Years $52,907 18.13%ss.
Lipper(R)Growth & Income Funds Benchmark
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $11,375 13.75%
5 Years $26,291 21.33%ss.
10 Years $38,552 14.45%ss.
53 Quantitative Equity Fund
<PAGE>
Quantitative Equity Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Performance Review
For the year ended December 31, 1999, the Quantitative Equity Fund Class S,
Class E, and Class C shares provided total returns of 21.37%, 21.11%, and
20.35%, respectively, as compared to the Russell 1000(R) Index results of
20.91%. The Fund exceeded the index primarily due to effective security
selection. Performance also compared favorably with the 13.75% average return of
mutual funds tracked in the Lipper(R) Growth and Income Funds Universe.
Portfolio Highlights
The performance of stocks in 1999 was characterized by extreme differences in
returns between the various market sectors. Overall, stocks provided investors
with their fifth consecutive year of returns in excess of 20% - an unprecedented
trend in the US stock market's history. Unlike the previous four years, the
market's advance was much broader across capitalization tiers, with small cap
shares actually finishing the year slightly higher than large caps after an end
of year rally. The market was also narrower, however, by economic sector
performance, which was mostly reflective of the extreme strength of technology
issues. Technology, which gained 77% for the year, dominated other market
sectors, as excitement over the Internet created aggressive buying. Other
sectors lagged by a wide margin, as value stocks in the Russell 1000 Index
trailed their growth counterparts by 26 percentage points.
The Quantitative Equity Fund fared better than both the Russell 1000 Index and
the majority of its peers in the Lipper Growth and Income Funds Universe. Its
mix of quantitative approaches proved effective in capturing stock selection
opportunities within a risk-controlled portfolio. The Fund's four managers
sustained performance through the year by focusing on opportunities within
economic sectors, with the sectors themselves weighted in line with the index.
This had the desirable effect of maintaining exposure to aggressively-valued
sectors, which continued to outperform.
A new manager was added to the Fund during the year, bringing the total to four.
The new manager, Jacobs Levy, employs a solid quantitative approach to
investing.
Top Ten Equity Holdings
(as a percent of Total Investments) December 31, 1999
General Electric Co. 3.9%
Cisco Systems, Inc. 3.7
Microsoft Corp. 3.2
Exxon Mobil Corp. NPV 2.0
Wal-Mart Stores, Inc. 2.0
Lucent Technologies, Inc. 1.9
Intel Corp. 1.8
MCI WorldCom, Inc. 1.6
Oracle Systems Corp. 1.6
Bank of America Corp. 1.5
Portfolio Characteristics
December 31, 1999
Current P/E Ratio 25.8x
Portfolio Price/Book Ratio 4.62x
Market Capitalization - $- Weighted Average 126.48 Bil
Number of Holdings 553
Money Managers Styles
Barclays Global Investors, N.A. Market- Oriented
Franklin Portfolio Associates, LLC Market- Oriented
J.P. Morgan Investment Management, Inc. Market- Oriented
Jacobs Levy Equity Management, Inc. Market- Oriented
* Quantitative Equity Fund Class S assumes initial investment on January
1, 1990.
** Russell 1000(R) Index includes the 1,000 largest companies in the
Russell 3000(R) Index, the smallest of which is valued at about $1,124.8
million. The Russell 1000 Index represents the universe of stocks from
which most active money managers typically select. The Russell 1000
Index return reflects adjustments for income dividends and capital gains
distributions reinvested as of the ex-dividend dates.
++ Lipper(R) Growth & Income Funds Benchmark is the average total return
for the universe of funds within the Growth and Income Funds investment
objective. The total return for the funds reflects adjustments for
income dividends and capital gains distributions reinvested as of the
ex-dividend dates.
++++ Quantitative Equity Fund Class S performance has been linked with Class
E to provide historical perspective. For the period November 4, 1996
(commencement of sale) to May 15, 1998, Class E paid shareholder service
and Rule 12b-1 distribution fees. From May 16, 1998 through the current
period, Class E paid only shareholder service fees. Total return would
have been lower had these fees been in effect during prior reporting
periods.
++++++ Quantitative Equity Fund Class S and Class E performance has been linked
with Class C to provide historical perspective. From January 27, 1999
(commencement of sale) through the current period, Class C paid
shareholder service and Rule 12b-1 distribution fees. Total return would
have been lower had these fees been in effect during prior reporting
periods.
ss. Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Quantitative Equity Fund 54
<PAGE>
Quantitative Equity Fund
Statement of Net Assets
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ----------
Common Stocks - 93.5%
Auto and Transportation - 1.8%
Alaska Air Group, Inc. (a) 9,600 337
America West Holding Corp. Class B (a) 12,300 255
Arvin Industries, Inc. 7,100 201
Burlington Northern, Inc. 78,900 1,913
CNF Transportation, Inc. 4,900 169
Cooper Tire & Rubber Co. 6,400 100
CSX Corp. 21,900 687
Dana Corp. 41,800 1,251
Delphi Automotive Systems Corp. 75,427 1,188
Delta Air Lines, Inc. 58,300 2,904
Eaton Corp. 12,200 886
Expeditors International of Washington, Inc. 7,200 312
Ford Motor Co. 165,892 8,865
General Motors Corp. 24,600 1,788
Genuine Parts Co. 11,700 290
Goodyear Tire & Rubber Co. 30,600 863
Lear Corp. (a) 31,000 992
Meritor Automotive, Inc. 45,900 889
Norfolk Southern Corp. 22,600 463
PACCAR, Inc. 15,100 668
Tower Automotive, Inc. (a) 13,500 208
Trinity Industries, Inc. 4,300 122
TRW, Inc. 8,092 420
UAL Corp. (a) 10,800 838
Union Pacific Corp. 37,666 1,644
USFreightways Corp. 8,800 418
Wisconsin Central Transportation Corp. (a) 2,900 40
---------
28,711
---------
Consumer Discretionary - 11.0%
Abercrombie & Fitch Co. Class A (a) 109,800 2,930
Alberto Culver Co. Class B 9,500 245
Amazon.com, Inc. (a) 6,400 487
American Eagle Outfitters, Inc. NPV (a) 5,200 234
Applebee's International, Inc. 7,300 215
AT&T Corp. - Liberty Media Group Class A (a) 49,600 2,815
Best Buy Co. (a) 73,995 3,714
BJ's Wholesale Club, Inc. (a) 15,900 580
Brunswick Corp. 100,004 2,225
Buffets, Inc. (a) 1,500 15
Callaway Golf Co. 60,700 1,074
Catalina Marketing Corp. (a) 4,900 567
CEC Entertainment, Inc. (a) 1,500 43
Cendant Corp. (a) 278,800 7,406
Central Newspapers, Inc. Class A 5,900 232
Circuit City Stores, Inc. 8,500 383
Clear Channel Communications, Inc. (a) 54,300 4,846
CMG Information Services, Inc. (a) 1,100 304
Cost Plus, Inc. (a) 8,600 305
Costco Wholesale Corp. (a) 16,700 1,523
Darden Restaurants, Inc. 64,800 1,175
Dayton Hudson Corp. 100,636 7,390
Delhaize America, Inc. 11,100 225
Deluxe Corp. 17,700 486
Disney (Walt) Co. 153,000 4,475
Eastman Kodak Co. 38,683 2,563
Enesco Group, Inc. 3,300 37
Extended Stay America, Inc. (a) 11,100 85
Federated Department Stores, Inc. (a) 90,000 4,551
Fortune Brands, Inc. 32,820 1,085
Furniture Brands International, Inc. (a) 8,700 191
Gannett Co., Inc. 26,500 2,161
Gap, Inc. 107,600 4,950
GTECH Holdings Corp. (a) 16,500 363
Harland (John H.) Co. 6,500 119
Hasbro, Inc. 10,800 206
Hilton Hotels Corp. (a) 74,400 716
Home Depot, Inc. (The) 217,622 14,921
Huffy Corp. 1,500 8
Interim Services, Inc. (a) 6,000 149
International Game Technology 26,900 546
Intimate Brands, Inc. Class A 11,400 492
JC Penney & Co., Inc. 60,848 1,213
Jones Apparel Group, Inc. (a) 19,500 529
Jostens, Inc. 5,300 129
Kmart Corp. (a) 171,300 1,724
Knight-Ridder, Inc. 27,100 1,612
Land's End, Inc. (a) 42,200 1,466
Leggett & Platt, Inc. 34,100 731
Lowe's Cos., Inc. 28,549 1,706
Mandalay Resort Group (a) 12,900 260
Manpower, Inc. 68,800 2,589
Mattel, Inc. 55,500 728
May Department Stores Co. 37,600 1,213
McDonald's Corp. 1,700 69
MediaOne Group, Inc. (a) 89,900 6,905
Micro Warehouse, Inc. (a) 3,700 68
Mirage Resorts, Inc. (a) 47,800 732
New York Times Co. Class A 26,700 1,312
Nordstrom, Inc. 7,800 204
Office Depot, Inc. (a) 108,200 1,183
Omnicom Group, Inc. 19,300 1,930
Pacific Sunwear of California (a) 3,600 115
Priceline.com, Inc. (a) 15,800 749
55 Quantitative Equity Fund
<PAGE>
Quantitative Equity Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ----------
Reebok International, Ltd. (a) 10,800 88
Scholastic Corp. (a) 2,900 180
Sears Roebuck & Co. 230,100 7,004
Service Corp. International 84,400 586
Shaw Industries, Inc. (a) 75,100 1,159
Springs Industries, Inc. 400 16
Starwood Hotels & Resorts Worldwide, Inc. 50,900 1,196
Station Casinos, Inc. (a) 13,800 310
Tiffany & Co. 14,900 1,330
Time Warner, Inc. 103,100 7,468
Times Mirror Co. Series A 7,200 482
TJX Cos., Inc. 59,400 1,214
TMP Worldwide, Inc. (a) 800 113
Toys "R" Us, Inc. (a) 188,424 2,697
Tribune Co. 9,670 532
Tricon Global Restaurants, Inc. (a) 112,900 4,361
Tupperware Corp. 28,200 478
Univision Communications, Inc. Class A (a) 3,400 347
Valassis Communications, Inc. (a) 10,200 431
Viacom, Inc. Class B (a) 74,657 4,512
Wal-Mart Stores, Inc. 449,716 31,087
Washington Post Co. Class B 366 203
Whirlpool Corp. 15,600 1,015
Young & Rubicam, Inc. 13,000 920
Zale Corp. (a) 4,200 202
---------
172,135
---------
Consumer Staples - 5.9%
Albertson's, Inc. 24,100 777
Anheuser-Busch Cos., Inc. 40,946 2,902
Church and Dwight Co., Inc. 9,400 251
Clorox Co. (The) 24,400 1,229
Coca-Cola Co. (The) 9,700 565
Colgate-Palmolive Co. 22,800 1,482
ConAgra, Inc. 192,793 4,350
Corn Products International, Inc. 6,200 203
Earthgrains Co. 6,400 103
General Mills, Inc. 43,900 1,569
Gillette Co. (The) 81,600 3,361
Heinz (H.J.) Co. 30,000 1,194
Hershey Foods Corp. 13,000 618
Hormel Foods Corp. 47,200 1,918
IBP, Inc. 217,800 3,920
International Flavors & Fragrances, Inc. 13,503 510
Interstate Bakeries Corp. 5,800 105
Jack in the Box, Inc. (a) 11,000 228
Kroger Co. (The) (a) 110,000 2,076
PepsiCo, Inc. 246,800 8,700
Philip Morris Cos., Inc. 419,720 9,732
Procter & Gamble Co. 194,700 21,332
Quaker Oats Co. 43,800 2,874
Ralston-Purina Group 97,300 2,712
Safeway, Inc. (a) 99,528 3,539
Sara Lee Corp. 263,300 5,809
Seagram Co., Ltd. NPV 110,400 4,961
SuperValu, Inc. 5,200 104
SYSCO Corp. 49,400 1,954
Tyson Foods, Inc. Class A 38,200 621
U.S. Foodservice (a) 16,000 268
Unilever NV (a) 42,800 2,330
Universal Corp. 32,200 736
---------
93,033
---------
Financial Services - 13.6%
Aetna, Inc. 35,108 1,959
Allstate Corp. 172,700 4,145
Ambac Financial Group, Inc. 14,300 746
American Financial Group, Inc. 3,700 98
American International Group, Inc. 214,268 23,168
AmSouth Bancorp 96,275 1,859
AON Corp. 90,749 3,630
Associates First Capital Corp. Class A 121,660 3,338
Astoria Financial Corp. 22,200 676
Automatic Data Processing, Inc. 8,900 479
AXA Financial, Inc. 8,500 288
Bank of America Corp. 471,150 23,646
Bank One Corp. 158,900 5,095
BB&T Corp. 16,800 460
Bear Stearns Co., Inc. 26,985 1,154
Block (H&R) Co., Inc. 21,931 959
Capital One Financial Corp. 17,700 853
Charter One Financial, Inc. 19,530 374
Chase Manhattan Corp. 63,293 4,917
CIGNA Corp. 32,400 2,610
Cincinnati Financial Corp. 9,800 304
CIT Group, Inc. 22,000 465
Citigroup, Inc. 392,425 21,804
City National Corp. 2,800 92
CNA Financial Corp. (a) 9,800 382
Colonial BancGroup, Inc. 6,000 62
Comerica, Inc. 62,650 2,925
Compass Bancshares, Inc. 5,600 125
Conseco, Inc. 14,400 257
Countrywide Credit Industries, Inc. 31,900 805
Dime Bancorp, Inc. 21,700 328
Dow Jones & Co., Inc. 22,600 1,537
DST Systems, Inc. (a) 1,700 130
E.W. Blanch Holdings, Inc. 5,300 325
Equifax, Inc. 39,300 926
Quantitative Equity Fund 56
<PAGE>
Quantitative Equity Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ----------
Everest Reinsurance Holdings, Inc. 7,700 172
Fannie Mae 38,300 2,391
Federal Home Loan Mortgage Corp. 192,012 9,037
Financial Security Assurance Holdings, Ltd. 600 31
FINOVA Group, Inc. 13,100 465
First Data Corp. 34,100 1,682
First Tennessee National Corp. 15,600 445
First Union Corp. 164,000 5,381
Firstar Corp. 33,700 712
FirstMerit Corp. 5,400 125
Fleet Financial Corp. 95,020 3,308
Foundation Health Systems, Inc. (a) 10,800 107
Franklin Resources, Inc. 900 29
Fremont General Corp. 10,000 74
Golden State Bancorp, Inc. (a) 12,000 207
Golden West Financial Corp. 42,000 1,407
Greenpoint Financial Corp. 22,900 545
Hartford Financial Services Group, Inc. (The) 44,200 2,094
Heller Financial, Inc. Class A 6,100 122
Hibernia Corp. Class A 19,100 203
Household International Corp. 29,200 1,088
Huntington Bancshares, Inc. 27,500 655
KeyCorp 79,800 1,766
Lehman Brothers Holdings, Inc. 7,600 644
Leucadia National Corp. 7,100 164
Loews Corp. 11,200 680
M & T Bank Corp. 700 290
Marsh & McLennan Cos., Inc. 16,394 1,569
MBIA, Inc. 20,000 1,056
MBNA Corp. 132,408 3,608
Mercantile Bankshares Corp. 8,300 265
Mercury General Corp. 8,700 194
Merrill Lynch & Co., Inc. 51,883 4,332
MONY Group, Inc. (The) 6,200 181
Morgan (J.P.) & Co., Inc. 17,083 2,163
Morgan Stanley Dean Witter & Co. 115,458 16,482
National City Corp. 67,020 1,588
North Fork Bancorp., Inc. 39,050 683
Ocwen Financial Corp. (a) 4,000 25
Old Republic International Corp. 27,100 369
Pacific Century Financial Corp. 6,800 127
Paine Webber Group, Inc. 14,400 559
Paychex, Inc. 34,209 1,366
Peoples Heritage Financial Group 9,600 144
PMI Group, Inc. (The) 38,050 1,857
PNC Bank Corp. 111,705 4,971
Profit Recovery Group International, Inc.(The) (a) 5,100 135
Provident Financial Group, Inc. 3,400 122
Providian Financial Corp. 13,545 1,233
Radian Group, Inc. (a) 4,100 196
Regions Financial Corp. 26,700 669
Ryder System, Inc. 6,800 166
SAFECO Corp. 26,300 653
Schwab (Charles) Corp. 4,386 168
SouthTrust Corp. 80,500 3,039
Sovereign Bancorp, Inc. 67,900 503
St. Paul Cos., Inc. 42,220 1,422
Summit Bancorp 21,300 652
SunTrust Banks, Inc. 18,418 1,267
TCF Financial Corp. 8,400 209
TD Waterhouse Group, Inc. (a) 18,400 302
Transatlantic Holdings, Inc. 2,200 172
Travelers Property Casualty Corp. Class A 12,500 428
U.S. Bancorp 83,500 1,988
Union Planters Corp. 17,100 674
UnionBanCal Corp. 80,249 3,165
UnumProvident Corp. 70,700 2,267
Wachovia Corp. 7,340 499
Washington Federal, Inc. 4,700 92
Washington Mutual, Inc. 118,800 3,089
Wells Fargo Co. 104,500 4,226
---------
213,620
---------
Health Care - 8.4%
Abbott Laboratories 800 29
Allergan, Inc. 151,852 7,555
ALZA Corp. (a) 47,500 1,645
American Home Products Corp. 143,300 5,651
Apria Healthcare Group, Inc. (a) 5,700 102
Baxter International, Inc. 38,300 2,406
Becton, Dickinson & Co. 3,400 91
Bergen Brunswig Corp. Class A 27,406 228
Biogen, Inc. (a) 29,270 2,471
Biomet, Inc. 12,700 507
Bristol-Myers Squibb Co. 318,600 20,450
Cardinal Health, Inc. 46,743 2,238
Chiron Corp. (a) 65,979 2,792
Columbia/HCA Healthcare Corp. 129,690 3,802
Forest Labs, Inc. (a) 60,800 3,735
Genzyme Corp. (a) 91,300 4,097
HEALTHSOUTH Corp. (a) 51,500 277
Human Genome Sciences, Inc. (a) 2,500 381
Humana, Inc. (a) 20,100 165
ICN Pharmaceuticals, Inc. 40,300 1,020
IDEC Pharmaceuticals Corp. (a) 1,000 98
Immunex Corp. (a) 8,392 918
IVAX Corp. (a) 89,400 2,302
Johnson & Johnson 155,400 14,472
57 Quantitative Equity Fund
<PAGE>
Quantitative Equity Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ----------
Lilly (Eli) & Co. 123,400 8,206
Mallinckrodt, Inc. 70,800 2,252
MedImmune, Inc. (a) 7,195 1,193
Medtronic, Inc. 32,000 1,166
Merck & Co., Inc. 160,740 10,780
PacifiCare Health Systems, Inc. (a) 49,700 2,634
PE Corp. 3,500 421
Pfizer, Inc. 193,100 6,264
Pharmacia & Upjohn, Inc. 70,257 3,162
Schering-Plough Corp. 118,100 4,982
St. Jude Medical, Inc. (a) 3,700 114
Tenet Healthcare Corp. (a) 85,700 2,014
Trigon Healthcare, Inc. (a) 6,400 189
United Healthcare Corp. 39,754 2,112
Warner-Lambert Co. 71,300 5,842
Watson Pharmaceuticals, Inc. (a) 14,800 530
Wellpoint Health Networks, Inc. (a) 29,135 1,920
---------
131,213
---------
Integrated Oils - 3.5%
Amerada Hess Corp. 7,800 443
Ashland, Inc. 14,600 481
Atlantic Richfield Co. 12,400 1,073
Chevron Corp. 44,600 3,863
Coastal Corp. 12,400 439
Conoco, Inc. Class B NPV 30,219 752
Enron Corp. 92,182 4,091
Exxon Mobil Corp. NPV (a) 392,980 31,659
Kerr-McGee Corp. 7,000 434
Lyondell Petrochemical Co. 33,300 425
Phillips Petroleum Co. 15,000 705
Royal Dutch Petroleum Co. 100,900 6,098
Texaco, Inc. 50,600 2,748
USX-Marathon Group 59,367 1,465
---------
54,676
---------
Materials and Processing - 5.7%
Air Products & Chemicals, Inc. 50,700 1,702
AK Steel Holding Corp. 20,400 385
Alcoa, Inc. 58,000 4,814
Allegheny Technologies, Inc. (a) 17,900 402
Archer-Daniels- Midland Co. 114,283 1,393
B.F. Goodrich Co. 13,900 382
Banta Corp. 6,700 151
Boise Cascade Corp. 6,000 243
Bowater, Inc. 8,100 440
Centex Corp. 15,100 373
Dow Chemical Co. 98,367 13,144
Fort James Corp. 27,700 758
Fuller (H.B.) Co. 2,100 117
Georgia Gulf Corp. 14,600 444
Georgia-Pacific Group 145,200 7,369
Illinois Tool Works, Inc. 27,435 1,854
IMC Global, Inc. 61,000 999
International Paper Co. 15,041 849
Kimberly-Clark Corp. 28,143 1,836
Lafarge Corp. 7,700 213
Louisiana Pacific Corp. 31,600 450
Lubrizol Corp. 17,900 553
Minnesota Mining & Manufacturing Co. 108,264 10,596
Monsanto Co. 138,800 4,945
Nucor Corp. 20,200 1,107
OM Group 4,400 152
Owens Corning 4,300 83
PPG Industries, Inc. 11,600 726
Praxair, Inc. 1,800 91
Reynolds Metals Co. 10,300 789
Rohm & Haas Co. 78,111 3,178
Sherwin-Williams Co. 16,176 340
Sigma Aldrich Corp. 65,300 1,959
Smurfit-Stone Container Corp. (a) 43,100 1,053
Solutia, Inc. 61,800 954
Temple-Inland, Inc. 8,500 560
Texas Industries, Inc. 4,700 200
Textron, Inc. 8,500 652
Tyco International, Ltd. 336,914 13,098
Unifi, Inc. (a) 10,600 131
Union Carbide Corp. 8,600 574
USEC, Inc. 9,900 69
USG Corp. 98,500 4,642
USX-U.S. Steel Group 4,700 155
W.R. Grace & Co. (a) 14,372 199
Weyerhaeuser Co. 52,615 3,778
---------
88,902
---------
Miscellaneous - 0.1%
Convergys Corp. NPV (a) 48,700 1,498
Senior Housing Properties Trust 5,640 70
---------
1,568
---------
Other Energy - 1.0%
Apache Corp. 99,500 3,675
Cooper Cameron Corp. (a) 8,400 411
El Paso Energy Corp. 20,300 788
ENSCO International, Inc. 6,200 142
Global Marine, Inc. (a) 32,000 532
Input/Output, Inc. (a) 2,800 14
Noble Drilling Corp. (a) 57,600 1,886
Pioneer Natural Resources Co. (a) 3,813 34
R&B Falcon Corp. (a) 30,200 400
Smith International, Inc. (a) 1,600 80
Quantitative Equity Fund 58
<PAGE>
Quantitative Equity Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ----------
Sunoco, Inc. 11,900 280
Tidewater, Inc. 3,900 140
Tosco Corp. 85,200 2,316
Transocean Sedco Forex, Inc. NPV (a) 24,113 812
Ultramar Diamond Shamrock Corp. 114,200 2,591
Union Pacific Resources Group, Inc. 100,100 1,276
Valero Energy Corp. 7,000 140
Varco International, Inc. (a) 12,600 129
---------
15,646
---------
Producer Durables - 7.3%
Applied Materials, Inc. (a) 42,512 5,383
Boeing Co. 15,700 653
Boston Scientific Corp. (a) 23,900 523
Briggs & Stratton Corp. 15,000 804
CommScope, Inc. (a) 25,000 1,008
CTS Corp. 17,700 1,334
Cummins Engine Co., Inc. 18,600 899
D.R. Horton, Inc. 25,000 345
Deere & Co. 33,900 1,470
Diebold, Inc. 75,400 1,772
Dover Corp. 79,400 3,603
Emerson Electric Co. 12,300 706
General Electric Co. 393,700 60,925
Honeywell International, Inc. (a) 15,300 883
Hubbell, Inc. Class B 8,300 226
Ingersoll-Rand Co. 48,878 2,691
ITT Industries, Inc. 36,500 1,220
Kaufman & Broad Home Corp. 16,700 404
Lexmark International Group, Inc. Class A (a) 35,582 3,220
Litton Industries, Inc. (a) 3,900 195
Lockheed Martin Corp. 101,500 2,220
Manitowoc Co., Inc. 6,800 231
Mettler-Toledo International, Inc. New (a) 6,000 229
Milacron, Inc. 3,600 55
Miller (Herman), Inc. 3,000 69
NACCO Industries, Inc. Class A 1,400 78
Northrop Grumman Corp. 44,300 2,395
Pall Corp. 14,839 320
Parker-Hannifin Corp. 6,100 313
Pulte Corp. 14,100 317
Raytheon Co. Class A 18,900 469
Raytheon Co. Class B 40,200 1,068
Rockwell International Corp. 29,479 1,411
Roper Industries, Inc. 3,600 136
Solectron Corp. (a) 38,410 3,654
Tecumseh Products Co. Class A 4,000 189
Teradyne, Inc. (a) 133,000 8,778
Terex Corp. (a) 7,200 200
Waste Management, Inc. 108,500 1,865
Xerox Corp. 64,900 1,472
---------
113,733
---------
Technology - 26.4%
3Com Corp. (a) 135,300 6,351
Adaptec, Inc. (a) 22,766 1,134
Adobe Systems, Inc. 110,300 7,418
Altera Corp. (a) 24,991 1,239
America Online, Inc. (a) 256,202 19,327
Analog Devices, Inc. (a) 9,500 884
Anixter International, Inc. (a) 3,500 72
Apple Computer, Inc. (a) 25,269 2,596
Applied Micro Circuits Corp. (a) 5,200 660
At Home Corp. Series A (a) 39,000 1,675
AVX Corp. 15,300 764
BEA Systems, Inc. (a) 7,400 518
BMC Software, Inc. (a) 20,600 1,645
Broadcom Corp. Class A (a) 400 109
Cisco Systems, Inc. (a) 540,362 57,853
Citrix Systems, Inc. (a) 7,100 873
CNET, Inc. (a) 1,600 91
COMPAQ Computer Corp. 15,500 419
CompUSA, Inc. (a) 16,500 85
Computer Associates International, Inc. 152,900 10,693
Comverse Technology, Inc. (a) 5,400 781
Conexant Systems, Inc. (a) 8,500 562
Cooper Industries, Inc. 18,600 752
Cypress Semiconductor Corp. (a) 11,900 385
Dell Computer Corp. (a) 219,600 11,186
eBay, Inc. (a) 1,100 138
Electronic Data Systems Corp. 59,151 3,959
EMC Corp. (a) 175,588 19,183
Emulex Corp. (a) 1,600 181
Exodus Communications, Inc. (a) 17,600 1,563
Galileo International, Inc. 120,900 3,619
General Dynamics Corp. 22,593 1,192
General Instrument Corp. (a) 25,070 2,131
Inktomi Corp. (a) 10,000 886
Integrated Device Technology, Inc. (a) 15,600 451
Intel Corp. 336,300 27,661
International Business Machines Corp. 45,200 4,882
JDS Uniphase Corp. (a) 34,000 5,483
Lanier Worldwide, Inc. (a) 5,000 19
Linear Technology Corp. 17,100 1,224
LSI Logic Corp. (a) 14,500 979
Lucent Technologies, Inc. 397,877 29,766
Maxim Integrated Products, Inc. (a) 34,000 1,602
Mercury Interactive Corp. (a) 1,700 183
59 Quantitative Equity Fund
<PAGE>
Quantitative Equity Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ----------
Microchip Technology, Inc. (a) 25,600 1,755
Micron Technology, Inc. (a) 113,274 8,807
Microsoft Corp. (a) 424,151 49,493
Motorola, Inc. 51,900 7,642
National Semiconductor Corp. (a) 206,503 8,841
NCR Corp. (a) 4,983 189
Network Appliance, Inc. (a) 6,200 515
Network Solutions, Inc. Class A (a) 500 109
Nextel Communications, Inc. Class A (a) 23,215 2,393
Nortel Networks Corp. 132,380 13,370
Novell, Inc. (a) 31,200 1,244
Oracle Systems Corp. (a) 218,080 24,425
QUALCOMM, Inc. (a) 71,788 12,639
Quantum Corp. DLT & Storage Systems (a) 70,600 1,068
RealNetworks, Inc. (a) 5,300 638
SDL, Inc. (a) 1,700 371
Seagate Technology (a) 40,768 1,898
Siebel Systems, Inc. (a) 8,100 682
Silicon Graphics, Inc. (a) 38,400 377
Sterling Commerce, Inc. (a) 4,200 143
Sun Microsystems, Inc. (a) 204,600 15,831
SunGard Data Systems (a) 158,300 3,760
Symantec Corp. (a) 6,500 381
Tandy Corp. 62,100 3,055
Tech Data Corp. (a) 3,500 95
Tellabs, Inc. (a) 15,800 1,013
Texas Instruments, Inc. 80,000 7,750
Unisys Corp. (a) 15,843 506
USWeb Corp. (a) 4,000 178
VeriSign, Inc. (a) 6,400 1,223
Veritas Software Corp. (a) 22,168 3,171
Vishay Intertechnology, Inc. (a) 22,925 725
Xilinx, Inc. (a) 42,580 1,934
Yahoo!, Inc. (a) 9,000 3,893
---------
413,288
---------
Utilities - 8.8%
Allegheny Energy, Inc. 16,300 439
Alltel Corp. 10,900 901
AT&T Corp. 184,217 9,349
Bell Atlantic Corp. 294,971 18,159
BellSouth Corp. 366,058 17,136
Calpine Corp. (a) 11,600 742
Carolina Power & Light Co. 33,900 1,032
Central & Southwest Corp. 72,800 1,456
Cinergy Corp. 18,200 439
CMS Energy Corp. 25,600 798
Columbia Energy Group 10,700 677
Comcast Corp. Special Class A 80,446 4,063
Consolidated Natural Gas Co. 5,900 383
Copper Mountain Networks, Inc. (a) 1,200 58
Cox Communications, Inc. Class A (a) 4,472 230
Dominion Resources, Inc. 8,900 349
DTE Energy Co. 97,100 3,047
Duke Energy Corp. 69,600 3,489
Edison International 82,600 2,163
Energy East Corp. 11,000 229
Entergy Corp. 17,700 456
FirstEnergy Corp. 39,800 903
FPL Group, Inc. 8,800 377
Global Crossing, Ltd. (a) 78,800 3,935
GPU, Inc. 25,800 772
GTE Corp. 53,800 3,796
Kansas City Power & Light Co. 2,800 62
KeySpan Corp. (a) 11,800 274
Level 3 Communications, Inc. (a) 51,600 4,218
MCI WorldCom, Inc. (a) 478,391 25,355
NiSource, Inc. NPV 14,300 256
Northern States Power Co. 43,600 850
OGE Energy Corp. 7,200 137
PG&E Corp. 117,100 2,401
Pinnacle West Capital Corp. 11,900 364
Powertel, Inc. (a) 1,300 130
PP&L Resources, Inc. 34,400 787
Public Service Co. of New Mexico 13,300 216
Public Service Enterprise Group, Inc. 86,300 3,004
Quanta Services, Inc. (a) 4,700 133
Reliant Energy, Inc. NPV 17,600 403
SBC Communications, Inc. 363,941 17,742
Sprint Corp. 26,400 1,777
TECO Energy, Inc. 15,100 280
Texas Utilities Co. 52,200 1,856
U.S. West, Inc. NPV 19,100 1,375
Unicom Corp. 8,100 271
UtiliCorp United, Inc. 14,400 280
Western Resources, Inc. 10,100 172
Western Wireless Corp. NPV Class A (a) 3,400 227
Wisconsin Energy Corp. 16,400 315
---------
138,263
---------
Total Common Stocks
(cost $1,074,982) 1,464,788
---------
Quantitative Equity Fund 60
<PAGE>
Quantitative Equity Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ----------
Short-Term Investments - 6.2%
Frank Russell Investment Company Money
Market Fund, due on demand (b) 91,680 91,680
United States Treasury Bills (c)(d)
4.670% due 01/20/00(b) 4,350 4,339
5.390% due 06/29/00 600 584
---------
Total Short-Term Investments
(cost $96,603) 96,603
---------
Total Investments - 99.7%
(identified cost $1,171,585) 1,561,391
Other Assets and Liabilities, Net - 0.3% 5,230
---------
Net Assets - 100.0% 1,566,621
=========
* Each contract represents $100,000 notional value.
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
(c) Rate noted is yield-to-maturity from date of acquisition.
(d) Held as collateral in connection with futures contracts purchased by the
Fund.
Abbreviations:
NPV - No Par Value
NV - Nonvoting
Unrealized
Number Appreciation
of (Depreciation)
Contracts* (000)
----------- --------------
Futures Contracts
S&P 500 Index
expiration date 03/00 192 $ 1,720
S&P 400 Midcap Index
expiration date 03/00 73 694
-------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ 2,414
=============
See accompanying notes which are an integral part of the financial statements.
61 Quantitative Equity Income Fund
<PAGE>
Quantitative Equity Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amounts) December 31, 1999
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Investments at market (identified cost $1,171,585) ......................................................... $1,561,391
Receivables:
Dividends .............................................................................................. 1,959
Investments sold ....................................................................................... 289
Fund shares sold ....................................................................................... 5,395
From Advisor ........................................................................................... 22
Daily variation margin on futures contracts ............................................................ 265
Prepaid expenses ........................................................................................... 4
----------
Total assets ........................................................................................ 1,569,325
Liabilities
Payables:
Investments purchased ...................................................................... $ 217
Fund shares redeemed ....................................................................... 1,947
Accrued fees to affiliates ................................................................. 314
Other accrued expenses ..................................................................... 226
----------
Total liabilities ................................................................................... 2,704
----------
Net Assets ................................................................................................. $1,566,621
==========
Net Assets Consist of:
Accumulated net realized gain (loss) ....................................................................... $ 99,956
Unrealized appreciation (depreciation) on:
Investments ............................................................................................ 389,806
Futures contracts ...................................................................................... 2,414
Shares of beneficial interest .............................................................................. 347
Additional paid-in capital ................................................................................. 1,074,098
----------
Net Assets ................................................................................................. $1,566,621
==========
Net Asset Value, offering and redemption price per share:
Class C ($13,612,611 divided by 302,926 shares of $.01 par value
shares of beneficial interest outstanding) .......................................................... $ 44.94
==========
Class E ($7,986,890 divided by 176,726 shares of $.01 par value
shares of beneficial interest outstanding) .......................................................... $ 45.19
==========
Class S ($1,545,021,138 divided by 34,186,994 shares of $.01 par value
shares of beneficial interest outstanding) .......................................................... $ 45.19
==========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Quantitative Equity Fund 62
<PAGE>
Quantitative Equity Fund
Statement of Operations
Amounts in thousands
<TABLE>
<CAPTION>
Year Ended December 31, 1999
<S> <C> <C>
Investment Income
Dividends ............................................................................... $ 18,946
Dividends from Money Market Fund ........................................................ 1,650
Interest ................................................................................ 243
--------
Total investment income ............................................................... 20,839
Expenses
Advisory fees ............................................................... $ 10,414
Administrative fees ......................................................... 715
Custodian fees .............................................................. 580
Distribution fees - Class C ................................................. 44
Transfer agent fees ......................................................... 1,248
Professional fees ........................................................... 53
Registration fees ........................................................... 177
Shareholder servicing fees - Class C ........................................ 15
Shareholder servicing fees - Class E ........................................ 20
Trustees' fees .............................................................. 10
Miscellaneous ............................................................... 114
--------
Total expenses ........................................................................ 13,390
--------
Net investment income ...................................................................... 7,449
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ................................................................. 249,787
Futures contracts ........................................................... 5,707 255,494
--------
Net change in unrealized appreciation (depreciation) on:
Investments ................................................................. 17,217
Futures contracts ........................................................... 533 17,750
-------- --------
Net realized and unrealized gain (loss) .................................................... 273,244
--------
Net increase (decrease) in net assets from operations ...................................... $280,693
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
63 Quantitative Equity Fund
<PAGE>
Quantitative Equity Fund
Statement of Changes in Net Assets
Amounts in thousands
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
----------- -----------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ....................................... $ 7,449 $ 7,998
Net realized gain (loss) .................................... 255,494 102,532
Net change in unrealized appreciation (depreciation) ........ 17,750 149,884
----------- -----------
Net increase (decrease) in net assets from operations ..... 280,693 260,414
----------- -----------
Distributions
From net investment income
Class C ................................................... (5) --
Class E ................................................... (19) (13)
Class S ................................................... (7,550) (7,962)
From net realized gain
Class C ................................................... (1,371) --
Class E ................................................... (927) (384)
Class S ................................................... (179,302) (81,901)
----------- -----------
Net decrease in net assets from distributions .......... (189,174) (90,260)
----------- -----------
Share Transactions
Net increase (decrease) in net assets from share transactions 151,572 154,152
----------- -----------
Total net increase (decrease) in net assets .................... 243,091 324,306
Net Assets
Beginning of period ......................................... 1,323,530 999,224
----------- -----------
End of period (including undistributed net investment
income of $3 at December 31, 1998) ........................ $ 1,566,621 $ 1,323,530
=========== ===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Quantitative Equity Fund 64
<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.
1999*
----------
Net Asset Value, Beginning of Period ............................ $ 43.02
----------
Income From Operations
Net investment income (loss)(a) .............................. (.20)
Net realized and unrealized gain (loss) ...................... 8.00
----------
Total income from operations ............................... 7.80
----------
Distributions
From net investment income ................................... (.04)
From net realized gain ....................................... (5.84)
----------
Total distributions ........................................ (5.88)
----------
Net Asset Value, End of Period .................................. $ 44.94
==========
Total Return (%)(b) ............................................. 18.89
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ..................... 13,613
Ratios to average net assets (%)(c):
Operating expenses ......................................... 1.93
Net investment income (loss) ............................... (.47)
Portfolio turnover rate % .................................. 89.52
* For the period January 27, 1999 (commencement of sale) to December 31,
1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
65 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 Operations
Net investment income (a) .............. .13 .12 .14 .05
Net realized and unrealized gain (loss) 8.50 8.54 9.95 1.87
--------- --------- --------- ---------
Total income from operations ......... 8.63 8.66 10.09 1.92
--------- --------- --------- ---------
Distributions
From net investment income ............. (.10) (.16) (.07) (.08)
From net realized gain ................. (5.84) (2.80) (6.27) (2.60)
--------- --------- --------- ---------
Total distributions .................. (5.94) (2.96) (6.34) (2.68)
--------- --------- --------- ---------
Net Asset Value, End of Period ............ $ 45.19 $ 42.50 $ 36.80 $ 33.05
========= ========= ========= =========
Total Return (%)(b) ....................... 21.11 24.34 31.70 5.91
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 7,987 7,479 2,344 322
Ratios to average net assets (%)(c):
Operating expenses ................... 1.18 1.31 1.59 1.65
Net investment income ................ .28 .30 .33 .81
Portfolio turnover rate (%) ............ 89.52 77.23 87.67 74.33
</TABLE>
* For the period November 4, 1996 (commencement of sale) to December 31,
1996.
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
Quantitative Equity Fund 66
<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
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 42.53 $ 36.78 $ 33.05 $ 30.76 $ 24.84
---------- ---------- ---------- ---------- ----------
Income From Operations
Net investment income (a) .............. .24 .27 .38 .51 .50
Net realized and unrealized gain (loss) 8.50 8.55 10.00 6.24 8.72
---------- ---------- ---------- ---------- ----------
Total income from operations ......... 8.74 8.82 10.38 6.75 9.22
---------- ---------- ---------- ---------- ----------
Distributions
From net investment income ............. (.24) (.27) (.38) (.51) (.51)
From net realized gain ................. (5.84) (2.80) (6.27) (3.95) (2.79)
---------- ---------- ---------- ---------- ----------
Total distributions .................. (6.08) (3.07) (6.65) (4.46) (3.30)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ............ $ 45.19 $ 42.53 $ 36.78 $ 33.05 $ 30.76
========== ========== ========== ========== ==========
Total Return (%) .......................... 21.37 24.82 32.70 23.08 37.69
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 1,545,021 1,316,051 996,880 663,925 488,948
Ratios to average net assets (%):
Operating expenses ................... .93 .91 .91 .93 .93
Net investment income ................ .53 .69 1.04 1.59 1.71
Portfolio turnover rate (%) ............ 89.52 77.23 87.67 74.33 78.83
</TABLE>
(a) Periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
67 Quantitative Equity Fund
<PAGE>
International Securities Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: To provide favorable total return and additional diversification for
US investors.
Invests in: Primarily the equity securities of non-US companies in developed
foreign markets.
Strategy: The Fund uses a multi-manager strategy intended to achieve higher
returns than its benchmark index with moderate risk by employing the investment
management services of eight managers with separate and distinct investment
approaches. The Fund's primary source of added value is intended to be stock
selection with only moderate country allocations relative to the index to
capture the diversification benefits of international investment in an asset
allocation context.
[The following table was depicted as a mountain chart in the printed material.]
Growth of a $10,000 Investment
International Securities Lipper(R)
Dates - Class S MSCI EAFE ** International ++
Yearly periods
ended
December 31
* $10,000 $10,000 $10,000
1990 $8,466 $7,660 $8,606
1991 $9,481 $8,640 $9,900
1992 $8,822 $7,616 $9,490
1993 $11,776 $10,126 $13,247
1994 $12,347 $10,942 $13,113
1995 $13,607 $12,206 $14,323
1996 $14,643 $12,983 $15,976
1997 $14,681 $13,250 $16,796
1998 $16,573 $15,944 $18,967
1999 $21,631 $20,296 $26,504
- --------------------------------------------------------------------------------
Total $142,027 $129,663 $157,127
================================================================================
International Securities Fund - Class S
Periods Ended
12/31/99 Growth of $10,000 Total Return
------------- ----------------- ------------
1 Year $13,052 30.52%
5 Years $17,520 11.86%ss.
10 Years $21,631 8.02%ss.
International Securities Fund - Class E++++
Periods Ended
12/31/99 Growth of $10,000 Total Return
------------- ----------------- ------------
1 Year $13,021 30.21%
5 Years $17,284 11.56%ss.
10 Years $21,341 7.87%ss.
International Securities Fund - Class C++++++
Periods Ended
12/31/99 Growth of $10,000 Total Return
------------- ----------------- ------------
1 Year $12,935 29.35%
5 Years $17,171 11.41%ss.
10 Years $21,202 7.80%ss.
MSCI EAFE Index
Periods Ended
12/31/99 Growth of $10,000 Total Return
------------- ----------------- ------------
1 Year $12,730 27.30%
5 Years $18,549 13.15%ss.
10 Years $20,296 7.34%ss.
Lipper(R) International Funds Benchmark
Periods Ended
12/31/99 Growth of $10,000 Total Return
------------- ----------------- ------------
1 Year $13,974 39.74%
5 Years $20,212 15.11%ss.
10 Years $26,504 10.24%ss.
Salomon Smith Barney Broad Market Index (BMI) ex-US +
Periods Ended
12/31/99 Growth of $10,000 Total Return
------------- ----------------- ------------
1 Year $12,873 28.73%
5 Years $18,806 13.47%ss.
10 Years $20,293 7.33%ss.
69 International Securities Fund
<PAGE>
International Securities Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Performance Review
For the year ended December 31, 1999, the International Securities Fund Class S,
Class E, and Class C shares had total returns of 30.52%, 30.21%, and 29.35%,
respectively, as compared to the Salomon Smith Barney BMI World ex-US, which
gained 28.73% for the year. Fund results were also favorable versus the MSCI
EAFE Index, which gained 27.30%. The Fund's performance advantage over the
benchmarks was primarily due to the strong results of its growth- oriented
managers.
Portfolio Highlights
Dominant trends in the non-US developed markets were once again similar to those
in the US. Technology dominated other sectors, particularly late in the year, as
Internet enthusiasm spread globally. Japan led all other international markets
with the BMI-Japan Index up 68% for the year. Continental European markets were
strong performers as the European Union continued to foster optimism in the
stock market. The United Kingdom performed well, but trailed the majority of
other major markets as it struggled with inflationary pressures.
The Fund's value managers struggled during the year, though their results were
relatively consistent with value-biased peers. The growth managers produced
strong gains, well ahead of the BMI-ex US Index. Security selection and country
selection were generally positive contributors, with the technology and
telecommunications holdings of the growth managers offsetting the deeper value
holdings of their counterparts. The Fund trailed the average international fund
tracked by Lipper Analytical Services, which gained 39.74% for the year. Reduced
exposure to emerging markets, technology and telecommunications shares versus
many peer funds accounted for much of the difference. Transaction costs
associated with manager changes early in 1999 also impacted index- and
peer-relative results.
Top Ten Equity Holdings
(as a percent of Total Investments) December 31, 1999
Mannesmann AG NPV (Germany) 1.6%
Koninklijke KPN NV (Netherlands) 1.5
Nippon Telegraph & Telephone Corp. (Japan) 1.3
Hitachi, Ltd. (Japan) 1.2
NTT Mobile Communication Network, Inc. NPV (Japan) 1.1
Total Co. SA Class B (France) 1.1
Sony Corp. (Japan) 1.0
Vodafone Group PLC (United Kingdom) 1.0
Glaxo Wellcome PLC (United Kingdom) 1.0
Canon, Inc. (Japan) 1.0
Portfolio Characteristics
December 31, 1999
Current P/E Ratio 26.39x
Portfolio Price/Book Ratio 3.08x
Market Capitalization - $-Weighted Average 48.6 Bil
Number of Holdings 793
Money Managers Styles
Delaware International Advisors, Ltd. Value
Fidelity Management Trust Company Market-Oriented
J.P. Morgan Investment Management, Inc. Market-Oriented
Montgomery Asset Management, LLC Growth
Mastholm Asset Management, LLC Growth
Oechsle International Advisors, LLC Growth
Sanford C. Bernstein & Co., Inc. Value
The Boston Company Asset Management, Inc. Value
* International Securities Fund Class S assumes initial investment on
January 1, 1990.
** Morgan Stanley Capital International Europe, Australia, Far East (MSCI
EAFE) Index is an index composed of an arithmetic, market value-weighted
average of the performance of approximately 1,600 securities listed on
the stock exchange of the countries of Europe, Australia, and the Far
East. The index is calculated on a total-return basis, which includes
reinvestment of gross dividends before deduction of withholding taxes.
++ Lipper(R) International Funds Benchmark is the average total return for
the universe of funds within the International Funds investment
objective. The total return for the funds reflects adjustments for
income dividends and capital gains distributions reinvested as of the
ex-dividend dates.
++++ International Securities Fund Class S perfomance has been linked with
Class E to provide historical perspective. For the period November 4,
1996 (commencement of sale) to May 15, 1998, Class E paid shareholder
service and Rule 12b-1 distribution fees. From May 16, 1998 through the
current period, Class E paid only shareholder service fees. Total return
would have been lower had these fees been in effect during prior
reporting periods.
++++++ International Securities Fund Class S and Class E performance has been
linked with Class C to provide historical perspective. From January 27,
1999 (commencement of sale) through the current period, Class C paid
shareholder service and Rule 12b-1 distribution fees. Total return would
have been lower had these fees been in effect during prior reporting
periods.
+ Salomon Smith Barney BMI Index ex-US is a comprehensive float-weighted
equity index consisting of every company with an investable market
capitalization of over $100 million in 22 countries. This Index has
broader representation than the MSCI EAFE Index.
ss. Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Investments in securities of non-US issuers and foreign currencies involve
investment risks different from those of US issuers. The Prospectus contains
further information and details regarding these risks.
International Securities Fund 70
<PAGE>
International Securities Fund
Statement of Net Assets
December 31, 1999
Market
Number Value
of (000)
Shares $
---------- ----------
Common Stocks - 91.2%
Australia - 2.5%
Amcor, Ltd. 433,365 2,030
AMP, Ltd. 24,200 267
Australia & New Zealand Bank
Group, Ltd. 912,680 6,639
Australian Gas & Light Co. 4,000 23
Brambles Industries, Ltd. 2,300 64
Broken Hill Proprietary Co. 40,418 531
Cable & Wireless Optus, Ltd. NPV (a) 1,134,500 3,791
Coles Myer, Ltd. 10,692 55
Colonial, Ltd. 8,500 38
CSR, Ltd. 922,900 2,242
F.H. Faulding & Co., Ltd. 3,000 20
Foster's Brewing Group, Ltd. 842,600 2,417
Goldfields Ltd. 57,443 41
Goodman Fielder Wattie 746,297 666
Harvey Norman Holdings, Ltd. NPV 23,400 45
Leighton Holdings, Ltd. Class A 4,300 17
Lend Lease Corp. 21,400 300
Macquarie Bank, Ltd. NPV 1,400 24
National Australia Bank, Ltd. 229,100 3,504
National Foods, Ltd. 9,100 16
National Mutual Holdings, Ltd. 543,000 952
News Corp., Ltd. 23,197 225
Oil Search, Ltd. (Australia Regd) (a) 8,900 12
Orica, Ltd. 166,000 895
Pacific Dunlop, Ltd. 501,857 710
Rio Tinto Ltd. NPV 2,700 58
Seven Network, Ltd. NPV 4,900 17
Southcorp Holdings, Ltd. 77,700 274
Tabcorp. Holdings, Ltd. 126,000 853
Telstra Corp., Ltd. (a) 39,440 139
Telstra Corp., Ltd. NPV 105,600 574
Wesfarmers, Ltd. 3,700 31
Westfield Holdings, Ltd. NPV 7,300 45
Westfield Trust NPV (a) 13,017 26
Westpac Banking Corp. 39,000 269
WMC, Ltd. 35,100 194
Woodside Petroleum, Ltd. 3,900 29
Woolworth's, Ltd. 9,992 33
----------
28,066
----------
Austria - 0.2%
Bank Austria AG 33,978 1,917
VA Technologie AG (BR) 3,335 220
Voest-Alpine Stahl AG 11,000 429
Wienerberger Baustoffindustrie
AG NPV (a) 10,400 226
----------
2,792
----------
Belgium - 0.3%
Dexia (a) 8,185 1,354
Electrabel NPV 5,400 1,768
----------
3,122
----------
Canada - 3.3%
Abitibi-Consolidated, Inc. 5,970 70
Air Canada Inc. Class A (a) 14,200 99
Air Canada, Inc. (a) 8,971 68
Alberta Energy Co., Ltd. 8,480 264
Alcan Aluminum, Ltd. 3,630 149
Anderson Exploration, Ltd. (a) 3,990 48
ATI Technologies, Inc. NPV (a) 92,800 1,228
Bank of Nova Scotia 9,509 205
Barrick Gold Corp. NPV 11,690 209
BCE Emergis, Inc. NPV (a) 54,200 2,910
BCE, Inc. 55,912 5,080
Biovail Corp. International NPV New (a) 710 66
Bombardier, Inc. Class B 84,186 1,729
Canada Life Financial Corp. NPV (a) 5,750 89
Canadian Imperial Bank of Commerce 17,385 416
Canadian Natural Resources, Ltd. (a) 2,056 50
Canadian Occidental Petroleum, Ltd. 1,420 28
Canadian Pacific, Ltd. 9,860 212
Canfor Corp. (a) 1,840 22
Celestica, Inc. (a) 1,310 73
Celestica, Inc. NPV (a) 1,780 99
CGI Group, Inc. Class A (a) 52,900 2,263
Crestar Energy, Inc. (a) 1,340 18
Dofasco, Inc. NPV 16,781 331
Domtar, Inc. NPV 5,860 69
Enbridge, Inc. 2,360 47
Falconbridge, Ltd. New 2,800 50
Finning International, Inc. New 17,000 159
Franco-Nevada Mining Corp., Ltd. 2,515 39
Hudson's Bay Co. 1,340 16
Imasco, Ltd. New 6,800 188
Imperial Oil, Ltd. 11,667 251
Inco, Ltd. (a) 100 2
Inco, Ltd. NPV (a) 9,980 233
JDS Uniphase Canada, Ltd. NV (a) 510 83
Magna International, Inc. Class A 3,500 149
Mitel Corp. NPV (a) 165,000 2,286
National Bank of Canada 29,500 378
Newbridge Networks Corp. (a) 900 20
Noranda, Inc. 13,040 175
Nortel Networks Corp. 5,290 534
Nortel Networks Corp. NPV 25,240 2,550
NOVA Chemicals Corp. NPV 1,430 28
71 International Securities Fund
<PAGE>
International Securities Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
---------- ----------
Petro-Canada 2,280 32
Placer Dome, Inc. 5,621 60
Precision Drilling Corp. (a) 28,700 736
QLT PhotoTherapeutics, Inc. (a) 44,030 2,593
QLT PhotoTherapeutics, Inc. NPV (a) 800 47
Quebecor Printing, Inc. 53,310 1,191
Rogers Cantel Mobile Communications, Inc.
Class B (a) 1,120 41
Rogers Communications, Inc. Class B (a) 49,450 1,222
Royal Bank of Canada 13,690 602
Royal Group Technologies, Ltd. NPV (a) 29,000 618
Seagram Co., Ltd. 39,076 1,751
Seagram Co., Ltd. NPV 27,170 1,221
Shell Canada, Ltd. Class A 9,000 183
St Laurent Paperboard, Inc. (a) 91,300 1,218
Stelco, Inc. Class A 4,170 31
Suncor, Inc. NPV 4,953 207
Talisman Energy, Inc. (a) 2,110 54
TD Waterhouse Group, Inc. (a) 10,300 170
Teleglobe, Inc. 540 12
Telesystem International
Wireless, Inc. (a) 1,090 40
Tembec, Inc. Class A (a) 27,470 306
Thomson Corp. (The) 9,940 262
Toronto Dominion Bank (The) 13,868 372
Torstar Corp. Class B 31,200 340
TransAlta Corp. 9,000 88
TransCanada Pipelines, Ltd. 9,200 80
Westcoast Energy, Inc. 51,791 831
----------
37,291
----------
Denmark - 0.2%
ISS International Series B (a) 15,795 1,062
Jyske Bank A/S (Regd) (a) 61,500 1,240
Novo Nordisk AS Series B 1,900 252
Ratin A/S Series B 1,205 135
Sydbank A/S 2,785 116
----------
2,805
----------
Finland - 1.5%
Comptel Oyj NPV (a) 753 53
Helsinki Telephone Corp. Series E 42,600 3,549
Kesko Oyj 92,300 1,172
Nokia Oyj 51,329 9,307
Pohjola Group Insurance Corp. Series B 5,600 338
Sampo Insurance Co., Ltd. Series A 15,893 556
Sonera Group Oyj 9,210 631
Stora Enso OYJ Series R 32,900 574
Tietoenator Oyj NPV 4,202 262
UPM-Kymmene Oyj 10,482 422
Valmet - Rauma Oyj (a) 22,729 296
----------
17,160
----------
France - 11.3%
Alcatel Alsthom 48,543 11,149
Alstom 156,709 5,225
Assurances Generales de France 27,870 1,510
Atos SA (a) 890 148
Aventis SA (a) 74,920 4,347
AXA - UAP 21,698 3,025
Banque Nationale Paris 78,974 7,287
Bongrain SA 2,170 720
Bouygues 6,098 3,876
Carrefour SA (a) 32,825 6,054
Castorama Dubois 16,920 5,147
Chargeurs International SA 2,550 144
Christian Dior SA 9,107 2,257
Cie de St. Gobain 13,570 2,552
CNP Assurances 3,700 136
Coflexip SA 9,146 665
Credit Commercial de France 1,857 231
Eridania Beghin-Say SA 1,605 173
France Telecom SA 26,240 3,471
Galeries Lafayette (a) 2,000 332
Gecina 1,224 138
Groupe Danone 1,448 341
Havas Advertising SA 2,132 908
L'Air Liquide 22,437 3,756
Lafarge SA 6,085 709
Lagardere Groupe (Regd) 4,326 235
Legris Industries SA 3,900 157
LVMH Moet-Hennessy 2,114 947
Michelin (Cie Gen) Class B (Regd) 36,024 1,415
Neopost SA (a) 30,500 1,283
Peugeot SA 5,705 1,295
Pinault-Printemps- Redoute SA 1,635 432
Renault (Regie Nationale) 3,192 154
Rhodia SA 82,940 1,875
Rhone-Poulenc SA Class A - ADR 186,858 10,861
Sanofi-Synthelabo SA (a) 8,566 357
Schneider Electric SA 8,215 645
Scor SA 9,000 397
Sidel SA 4,132 427
Simco (Regd) 3,300 267
Societe Generale 21,703 5,050
Suez Lyonnaise des Eaux 33,128 5,309
Sylea 2,400 117
Thomson Multimedia (a) 46,300 2,495
Thomson-CSF 42,601 1,407
International Securities Fund 72
<PAGE>
International Securities Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
---------- ----------
Total Co. SA Class B 93,947 12,539
Total Fina SA - ADR 25,422 1,760
TV Francaise (TF1) 5,822 3,050
Usinor Sacilor 76,342 1,435
Valeo SA 31,000 2,393
Vallourec (Usin) 360 16
Vivendi 98,855 8,928
----------
129,547
----------
Germany - 7.4%
AMB Aachener & Muenchener
Beteiligungs AG 1,792 125
BASF AG 28,866 1,483
Bayer AG 119,468 5,656
Bayerische Hypo Vereinsbank AG 57,900 3,954
Bayerische Motoren Werke AG (a) 57,699 1,761
Bilfinger & Berger BAU AG 4,900 107
Celanese AG NPV (a) 5,251 96
Commerzbank AG 22,800 837
Consors Discount Broker AG NPV (a) 1,655 138
Continental AG 83,800 1,676
DaimlerChrysler AG 8,216 639
Deutsche Bank AG (Regd) NPV (a) 40,988 3,462
Deutsche Lufthansa AG 153,452 3,571
Deutsche Pfandbrief &
Hypothekenbank AG 7,000 523
Deutsche Telekom AG 46,403 3,305
Entrium Direct Bankers AG NPV (a) 4,400 67
Epcos AG NPV (a) 51,567 3,870
Gerresheimer Glas AG 10,500 164
Hannover Rueckversicherungs AG 5,773 445
Hochtief AG 3,665 137
IKB Deutsche Industriebank AG 1,750 31
Jenoptik AG 146,300 2,461
Mannesmann AG NPV (a) 76,780 18,524
Mannheimer Aktiengesellschaft NPV (a) 4,000 205
Merck KGAA 52,000 1,613
Metallgesellschaft AG 41,199 826
Muenchener Rueckversicherungs-
Gesellschaft AG NPV 2,985 757
Phoenix AG 10,000 129
RWE AG 46,750 1,832
SAP AG 856 422
SAP AG - ADR 12,400 646
Schering AG 3,760 455
Siemens AG NPV (a) 81,777 10,404
Software AG NPV (a) 85,623 5,218
Stinnes AG NPV (a) 16,798 355
Thyssen Krupp AG NPV (a) 9,397 286
Veba AG 117,775 5,724
Viag AG NPV (a) 26,380 484
Volkswagen AG 35,250 1,987
----------
84,375
----------
Greece - 0.2%
Hellenic Telecommunication Organization SA
- ADR 167,300 1,997
----------
Hong Kong - 1.3%
Asia Satellite Telecommunications Holdings,
Ltd. 8,000 25
Cathay Pacific Airways 14,000 25
CDL Hotels International 715,000 285
Cheung Kong Holdings, Ltd. 245,800 3,115
China Telecom (Hong Kong), Ltd. (a) 8,000 50
CLP Holdings, Ltd. 56,400 260
Dao Heng Bank Group, Ltd. 48,000 248
Giordano International, Ltd. 37,000 38
Great Eagle Holdings 183,041 325
Hang Lung Development Co. 192,000 217
Hang Seng Bank 6,900 79
Henderson Investment, Ltd. 628,000 650
Henderson Land Development Co., Ltd. 205,000 1,319
Hong Kong & China Gas Co., Ltd. 48,360 66
Hong Kong Electric Holding, Ltd. 1,054,573 3,297
Hong Kong Telecommunications, Ltd. 110,500 319
Hutchison Whampoa, Ltd. 64,300 935
Jardine Matheson Holdings, Ltd.
- ADR (a) 214,100 844
Jardine Strategic Holdings, Ltd.
- ADR (a) 70,000 139
JCG Holdings, Ltd. NPV 50,400 28
Johnson Electric Holdings, Ltd. 9,200 59
Li & Fung, Ltd. (a) 22,800 57
New World Development Co., Ltd. 19,800 45
New World Infrastructure, Ltd. (a) 11,000 14
Orient Overseas International Ltd. (a) 121,000 47
QPL International Holdings, Ltd. (a) 600,000 448
SmarTone Telecommunications
Holdings, Ltd. 39,500 191
Sun Hung Kai Properties, Ltd. 43,600 454
Swire Pacific, Ltd. Class A 14,800 87
Tai Cheung Holdings 56,000 14
Television Broadcast 5,000 34
Wharf Holdings 684,862 1,590
Wheelock & Co. 13,000 13
Wing Hang Bank, Ltd. 10,200 34
----------
15,351
----------
73 International Securities Fund
<PAGE>
International Securities Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
---------- ----------
Ireland - 0.2%
Bank of Ireland 67,273 535
CRH PLC 38,825 839
Irish Life & Permanent PLC 11,458 108
Jefferson Smurfit Group PLC 94,400 285
Waterford Wedgwood (Units) 939,631 957
----------
2,724
----------
Italy - 3.8%
Assicurazioni Generali SPA 4,924 163
Banca Commerciale Italiana 221,000 1,202
Banca Nazionale del Lavoro (a) 740,830 2,470
Banca Pop di Milano 49,000 382
Banca Popolare di Bergamo CV 34,900 807
Banca Popolare di Brescia 1,593 141
Banco Fideuram SPA 30,600 363
Bulgari SPA 100,800 906
ENI SPA - ADR 27,700 1,527
Ente Nazionale Idrocarburi SPA (Regd) 373,494 2,054
Fiat SPA (a) 5,740 164
Fiat SPA (a) 17,930 264
Finmeccanica SPA (a) 543,640 716
Ifil (Finanziaria di
Partecipazioni) SPA (a) 30,000 125
Istituto Mobiliare Italiano SPA 187,347 2,546
Magneti Marelli SPA (a) 28,000 107
Mediaset SPA 423,159 6,582
Mediolanum SPA 38,206 500
Mondadori (Arnoldo) Editore SPA 39,300 1,247
Montefibre di Risp 67,000 33
Montefibre SPA 240,000 127
Olivetti Group SPA (a) 1,270,000 3,678
Pirelli SPA 165,000 453
Saipem SPA 23,400 85
Telecom Italia Mobile SPA 743,416 8,305
Telecom Italia SPA 585,211 3,567
Telecom Italia SPA di Risp 307,762 4,340
Unicredito Italiano SPA 234,598 1,153
----------
44,007
----------
Japan - 23.3%
77th Bank, Ltd. (The) 133,000 1,394
Able, Inc. 21,000 1,258
Advantest Corp. 3,100 819
Aiful Corp. 6,400 783
Ajinomoto Co., Inc. 15,000 156
Amada Co., Ltd. 6,000 33
Aoki International 32,000 116
Aoyama Trading Co. 29,900 641
Asahi Bank, Ltd. 71,000 438
Asahi Glass Co., Ltd. 222,000 1,719
Bank of Fukuoka, Ltd. (The) 20,000 139
Bank of Tokyo - Mitsubishi, Ltd. 236,000 3,289
Belluna Co., Ltd. 89,000 2,300
Bridgestone Tire Corp. 9,000 198
Canon, Inc. 283,000 11,246
Chubu Electric Power Co., Inc. 5,600 91
Chugai Pharmaceutical Co., Ltd. 59,000 638
Citizen Watch Co., Ltd. 23,000 146
Credit Saison Co. 88,950 1,550
CSK Corp., Ltd. 10,700 1,738
Dai Ichi Kangyo Bank 12,000 112
Dai Ichi Pharmaceutical Co. 33,000 429
Dai Nippon Printing, Ltd. 8,000 128
Dai-Tokyo Fire & Marine 347,000 1,416
Daikin Industries, Ltd. 8,000 109
Daito Trust Construction 19,350 216
Daiwa Kosho Lease Co., Ltd. 87,000 280
Daiwa Securities Group, Inc. 467,000 7,309
DDI Corp. 192 2,631
Deodeo Corp. 15,000 183
East Japan Railway Co. 24 129
Ebara Corp. 33,000 368
Eisai Co. 95,000 1,827
Enix Corp. 14,400 1,564
Familymart, Co. 1,800 120
Fanuc Co. 4,700 598
Fuji Bank, Ltd. 503,000 4,889
Fuji Heavy Industries, Ltd. 45,000 308
Fuji Machine Manufacturing Co. 39,300 3,170
Fuji Photo Film Co. 5,000 183
Fujisawa Pharmaceutical 5,000 121
Fujitsu, Ltd. 240,000 10,946
Funai Electric Co., Ltd. 600 354
Furukawa Electric Co. 42,000 637
Futaba Corp. 5,000 220
General Sekiyu KK 26,000 58
Hikari Tsushin, Inc. 300 602
Hitachi Chemical Co., Ltd. 5,000 93
Hitachi Software Engineering Co., Ltd. 2,000 292
Hitachi, Ltd. 851,000 13,660
Hokkaido Electric Power Co., Inc. 20,700 304
Honda Motor Co., Ltd. 49,000 1,822
Hosiden Electronics 3,000 193
Hoya Corp. 5,000 394
Inax Corp. 13,000 73
ITO EN, Ltd. 1,300 182
Ito-Yokado Co., Ltd. 22,000 2,390
Itochu Corp. (a) 182,000 907
Japan Telecom Co., Ltd. 5 201
International Securities Fund 74
<PAGE>
International Securities Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
---------- ----------
Japan Tobacco, Inc. 19 145
Kaken Pharmaceutical Co., Ltd. 8,000 44
Kaneka Corp. 15,000 192
Kao Corp. 143,000 4,080
Kawasaki Steel Corp. (a) 89,000 159
Keyence Corp. 200 81
Kinki Coca-Cola Bottling 27,000 383
Kissei Pharmaceutical Co. 34,000 493
Koa Fire & Marine 82,000 245
Kokusai Denshin Denwa 1,800 249
Konami Co., Ltd. 3,200 572
Kuraya Corp. 4,000 47
Kurimoto Iron Works 90,000 215
Kyocera Corp. 29,800 7,729
Kyorin Pharmaceutical Co., Ltd. 46,000 1,625
Kyushu Electric Power 34,900 516
Laox 10,000 78
Mabuchi Motor Co., Ltd. 17,800 3,106
Makita Corp. 91,000 819
Marubeni Corp. 731,000 3,069
Marui Co., Ltd. 3,000 45
Maruichi Steel Tube 38,000 427
Matsumotokiyoshi 27,600 2,137
Matsushita Communication 10,800 2,854
Matsushita Electric Industrial Co., Ltd. 270,000 7,479
Minebea Co., Ltd. 193,000 3,311
Mitsubishi Chemical 176,000 620
Mitsubishi Corp. 73,000 564
Mitsubishi Electric Corp. 34,000 220
Mitsubishi Estate Co., Ltd. 106,000 1,034
Mitsubishi Heavy Industries 329,000 1,098
Mitsui Fudosan Co., Ltd. 102,000 691
Mitsui Marine & Fire Insurance Co., Ltd. 23,000 136
Mitsui Trust & Banking Co., Ltd. 25,000 57
Mitsumi Electric Co. 4,000 125
Murata Manufacturing Co., Ltd. 8,000 1,879
Namco 53,100 3,441
Nanto Bank 57,000 418
NEC Corp. 40,000 953
NHK Spring Co. 10,000 49
Nichicon Corp. 11,000 340
Nichido Fire & Marine 172,000 990
Nichiei Co., Ltd. 26,800 582
NIDEC COPAL Corp. (a) 6,000 156
NIDEC Corp. 1,300 375
Nihon Unisys 5,000 172
Nikko Securities Co., Ltd. 384,000 4,860
Nintendo Co., Ltd. 2,700 449
Nippon Comsys Corp. 10,000 207
Nippon Express Co., Ltd. 375,000 2,074
Nippon Fire & Marine 80,000 239
Nippon Meat Packers, Inc. 5,000 65
Nippon Sheet Glass 45,000 233
Nippon Steel Corp. 407,000 952
Nippon System Development 2,500 365
Nippon Telegraph & Telephone Corp. 869 14,885
Nippon Yusen 128,000 524
Nippon Zeon Co., Ltd. 18,000 114
Nishimatsu Construction 217,000 871
Nissan Chemical Industries, Ltd. 12,000 59
Nissan Motor Co., Ltd. (a) 415,000 1,633
Nitto Denko Corp. 7,000 350
Nomura Securities Co., Ltd. 128,000 2,311
NTT Data Corp. 13 299
NTT Mobile Communication
Network, Inc. NPV 327 12,578
Omron Corp. 77,000 1,775
Orix Corp. 2,700 608
Osaka Gas Co. 70,000 169
Otsuka Kagu 400 108
Paris Miki, Inc. 2,300 165
Pioneer Electronics Corp. 18,000 476
Promise Co., Ltd. 4,800 244
Ricoh Co., Ltd. 25,000 471
Rinnai Corp. 66,400 1,235
Rohm Co. 19,000 7,811
Ryohin Keikaku Co., Ltd. 800 161
Sailor Pen Co., Ltd. (The) 140,000 2,878
Sakura Bank, Ltd. 434,000 2,515
Sanden Corp. 12,000 72
Sankyo Co., Ltd. 62,000 1,274
Sankyo Co., Ltd. GUNMA 5,700 427
Sanwa Bank 122,000 1,484
Sanyo Electric Co., Ltd. 39,000 158
Secom Co. 37,000 4,074
Sekisui Chemical Co., Ltd. 196,000 869
Sekisui House, Ltd. 17,000 151
Sharp Corp. 63,000 1,612
Shin-Etsu Chemical Co., Ltd. 31,050 1,337
Shohkoh Fund & Co., Ltd. 4,850 1,920
SMC Corp. 1,200 266
Snow Brand Milk Products Co., Ltd. 12,000 48
Softbank Corp. 3,900 3,733
Sony Corp. 39,200 11,625
Sony Music Entertainment, Inc. 8,900 1,775
Sumitomo Bakelite Co., Ltd. 12,000 107
Sumitomo Bank 37,000 507
Sumitomo Rubber Industries 40,000 177
Sumitomo Trust & Banking 11,000 74
Sunkus & Associates, Inc. 1,500 66
75 International Securities Fund
<PAGE>
International Securities Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
---------- ----------
Suruga Bank, Ltd. 16,000 223
Suzuki Motor Corp. 21,000 306
Taiheiyo Cement Corp. 35,000 67
Taisho Pharmaceutical Co., Ltd. 60,000 1,762
Taiyo Yuden Co., Ltd. 48,000 2,847
Takeda Chemical Industries 40,000 1,977
Takefuji Corp. 11,800 1,477
Terumo Corp. 9,000 240
THK Co., Ltd. 6,300 255
Toc Co. 42,000 280
Toho Bank 83,000 383
Tohoku Electric Power 16,500 245
Tokuyama Corp. 27,000 99
Tokyo Electric Power 14,800 397
Tokyo Electron, Ltd. 17,000 2,329
Tokyo Gas Co. 61,000 149
Tokyo Seimitsu Co., Ltd. 2,700 436
Tokyo Steel Manufacturing 24,400 86
Tokyo Tomin Bank, Ltd. (a) 1,400 54
Toppan Printing Co., Ltd. 32,000 319
Toshiba Corp. 392,000 2,993
Tostem Corp. 13,000 233
Toyo Trust & Banking Co., Ltd. (The) 63,000 259
Toyoda Gosei Co., Ltd. 10,000 548
Toyota Motor Corp. 122,000 5,911
Trend Micro, Inc. 500 126
UNION TOOL Co. 500 81
UNY Co., Ltd. 14,000 137
West Japan Railway Co. 561 1,988
World Co., Ltd. 900 112
Yakult Honsha Co., Ltd. 12,000 89
Yamaha Corp. 13,000 84
Yamanouchi Pharmaceutical 109,000 3,809
Yamato Kogyo Co. 34,000 153
Yamato Transport 5,000 195
Yodogawa Steel Works, Ltd. 122,000 369
York-Benimaru Co., Ltd. 2,000 53
Yoshitomi Pharmaceutical Ind., Ltd. 25,000 319
----------
266,940
----------
Netherlands - 8.1%
ABN Amro Holding NV 158,548 3,961
Aegon NV 16,866 1,629
AKZO Nobel NV 48,400 2,428
AKZO Nobel NV - ADR 26,200 1,307
Buhrmann NV 83,094 1,251
Elsevier NV 117,000 1,398
Endemol Entertainment Holding NV 29,054 1,561
Equant NV - NY Reg Share (a) 39,665 4,503
Exact Holding NV (a) 16,580 884
Fortis (NL) NV 61,524 2,216
Getronics NV 2,687 214
Heineken Holding NV Class A 13,125 462
Heineken NV 50,550 2,466
Hollandsche Beton Groep NV 67,975 651
Hunter Douglas NV 52,627 1,431
ING Groep NV 138,380 8,355
Koninklijke (Royal) Philips
Electronics NV (a) 10,810 1,470
Koninklijke Ahold NV 7,946 235
Koninklijke KPN NV 170,880 16,680
Koninklijke KPN NV- ADR 9,619 925
Koninklijke Numico NV 7,044 263
Koninklijke Vopak NV (a) 5,052 120
KPNQwest NV (a) 7,357 490
Laurus NV 66,972 1,208
Libertel NV (a) 8,900 233
Royal Dutch Petroleum Co. 103,556 6,348
STMicroelectronics (a) 40,497 6,233
Stork NV 66,379 970
TNT Post Group NV 27 1
Unilever NV (a) 31,700 1,726
United Pan-Europe
Communications NV (a) 23,335 2,985
Vedior 65,537 673
Vendex NV 194,255 5,166
Verenigde Nederlandse Uitgeversbedrijven NV 187,839 9,873
Wereldhave NV 8,966 403
Wolters Kluwer NV (a) 73,567 2,490
----------
93,209
----------
New Zealand - 0.7%
Carter Holt Harvey 710,381 928
Fletcher Challenge Building 17,000 25
Fletcher Challenge Energy 9,500 25
Fletcher Challenge Paper 1,036,186 725
Lion Nathan, Ltd. 8,000 19
Telecom Corp. of New
Zealand, Ltd. NPV 1,391,198 6,542
Warehouse Group (The), Ltd. NPV 3,300 15
Westpac Trust Investments, Ltd. - ADR 3,400 15
----------
8,294
----------
Norway - 0.4%
Christiania Bank OG Kreditkasse 44,000 217
Den Norske Bank ASA (a) 75,250 309
Kvaerner Industries ASA (a) 1,000 21
Kvaerner Industries ASA Series B (a) 1,000 18
Norsk Hydro AS 21,466 901
International Securities Fund 76
<PAGE>
International Securities Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
---------- ----------
Norske Skogindustrier AS Class A 4,000 209
Orkla SA Class A 62,613 1,079
Petroleum Geo- Services ASA - ADR (a) 102,300 1,822
----------
4,576
----------
Portugal - 0.3%
Banco Pinto & Sotto Mayor SA 28,426 609
Electricidade de Portugal SA 36,000 628
ParaRede, SGPS SA (a) 26,111 261
Portugal Telecom SA (a) 152,500 1,673
PT MULTIMEDIA - Servicos de
Telecomunicacoes e Multimedia SGPS SA (a) 3,529 201
Telecel - Comunicacoes Pessoais SA (a) 20,360 355
----------
3,727
----------
Singapore - 0.7%
Chartered Semiconductor Manufacturing, Ltd (a) 4,000 22
City Developments 6,400 37
Creative Technology, Ltd. (a) 74,400 1,274
Datacraft Asia, Ltd. (a) 5,400 45
DBS Group Holdings, Ltd. (a) 159,425 2,613
DBS Land 13,000 26
Development Bank 1,033 12
Natsteel Electronics, Ltd. 9,000 48
Natsteel, Ltd. 8,000 16
Neptune Orient Lines, Ltd. (a) 72,000 96
Oversea-Chinese Banking Corp., Ltd. 90,120 828
Overseas Union Bank 83,664 490
Singapore Airlines, Ltd. (Alien Market) 9,800 111
Singapore Land 40,000 105
Singapore Press Holdings, Ltd. 8,100 176
Singapore Technologies
Engineering, Ltd. 22,800 35
Singapore Telecommunications, Ltd. 86,000 178
Straits Steamship Land, Ltd. 95,000 155
United Overseas Bank, Ltd. 163,117 1,440
Venture Manufacturing (Singapore), Ltd. 14,000 160
----------
7,867
----------
South Korea - 0.7%
Pohang Iron & Steel Co., Ltd. - ADR 44,400 1,554
Samsung Electronics - GDR (a) 53,816 6,525
----------
8,079
----------
Spain - 3.3%
Acciona SA 5,761 325
Banco Bilbao Vizcaya SA 13,457 192
Banco Popular Espanol SA 42,106 2,746
Banco Santander Central Hispano SA 352,416 3,990
Centros Comerciales Continente S.A. 5,488 111
Corporacion Bancaria de
Espana SA (Regd) 175,842 4,133
Endesa SA 155,529 3,088
Grupo Dragados SA 15,900 140
Iberdrola SA 245,674 3,405
Indra Sistemas SA 11,848 223
Repsol SA 50,117 1,162
Repsol SA - ADR 83,200 1,934
Sogecable SA (a) 21,000 1,341
Tabacalera SA Class A (Regd) 205,954 2,946
Telefonica SA (a) 445,025 11,118
Union Electrica Fenosa SA 41,000 717
----------
37,571
----------
Sweden - 1.6%
ABB, Ltd. (a) 2,059 251
Assa Abloy AB Series B (a) 78,427 1,101
Autoliv, Inc. 52,614 1,540
Celsius Industrier AB Series B 12,000 248
Electrolux AB Series B 23,543 592
Foreningssparbanken AB Series A 11,059 162
Framtidsfabriken AB (a) 200 36
Mo och Domsjo AB Series B 4,400 159
Modern Times Group MTG AB
Series B (a) 2,348 116
Skandia Forsakrings AB 58,216 1,758
SKF AB Series B 72,655 1,767
Stora Enso Oyj Class R 29,999 515
Svenska Handelsbanken AB Series A (a) 28,890 364
Telefonaktiebolaget Ericsson (LM) Series B 132,677 8,529
Telefonaktiebolaget LM Ericsson
Class B - ADR 11,100 729
Tornet Fastighets AB 7,500 105
----------
17,972
----------
77 International Securities Fund
<PAGE>
International Securities Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
---------- ----------
Switzerland - 2.5%
ABB, Ltd. (a) 7,156 875
Baloise Holding, Ltd. 700 551
Barry Callebaut AG (Regd) 7,735 1,125
Bobst AG (BR) 250 301
Clariant AG (Regd) 7,668 3,655
Forbo Holding AG (Regd) 2,340 1,102
Geberit International AG (a) 490 168
Gretag Imaging Group 3,880 562
Holderbank Financiere Glarus AG (BR) 100 137
Julius Baer Holding Ltd., Class B 562 1,698
Kuoni Reisen AG Series B 120 498
Nestle SA (Regd) 968 1,773
Novartis AG (Regd) 3,393 4,982
Richemont Series A (BR) 283 675
Roche Holdings Genusscheine AG NPV 106 1,258
Schweizerische Lebensversicherungs -
und Rentenanstalt (a) 283 164
SGS Holding (BR) (a) 120 153
Sulzer AG (Regd) 1,540 1,001
Swisscom AG (Regd) 5,111 2,067
UBS AG (Regd) 17,534 4,735
Valora Holding AG (Regd) 800 215
Zurich Allied AG 1,133 647
----------
28,342
----------
Taiwan - 0.1%
Hon Hai Precision Industry
Co., Ltd. GDR (a) 39,500 763
----------
United Kingdom - 16.9%
3i Group PLC 59,811 1,068
Alliance UniChem PLC 100,000 666
Allied Zurich AG 206,441 2,434
Anglian Water PLC 218,227 1,953
Arjo, Wiggins, Appleton PLC 380,000 1,283
ARM Holdings PLC (a) 2,300 155
Arriva PLC 25,000 97
Ashtead Group PLC 204,241 554
Associated British Foods PLC 236,720 1,290
AstraZeneca Group PLC 9,239 391
Bank of Scotland Governor & Co. PLC 41,856 486
Barclays Bank PLC 174,846 5,024
Barratt Development PLC 41,642 194
Bass PLC 179,571 2,260
BBA Group PLC 99,232 822
BG Group PLC (a) 391,173 2,526
Billiton PLC 65,200 387
Blue Circle Industries PLC 345,000 2,017
BOC Group PLC 62,757 1,353
Boots Co. PLC 252,001 2,467
BP Amoco PLC 637,902 6,439
British Aerospace PLC 813,347 5,347
British Airways PLC 433,342 2,828
British American Tobacco PLC 26,300 149
British Sky Broadcasting Group PLC 28,800 465
British Telecom PLC 300,911 7,291
Bunzl PLC 404,118 2,219
Burmah Castrol PLC 22,847 404
Cable & Wireless PLC 288,000 4,940
Cadbury Schweppes PLC 43,000 259
Carillion PLC 189,825 346
CMG PLC 2,300 169
Coats Viyella PLC 268,000 177
Commercial Union Assurance Co. PLC 204,487 3,300
Compass Group PLC 44,100 605
Corus Group PLC (a) 971,800 2,527
Courtaulds Textile Co. PLC 111,200 117
Diageo PLC 902,565 7,202
Dixons Group PLC 11,100 267
Elementis PLC 200,000 262
Energis PLC (a) 8,400 404
Enterprise Oil PLC 11,100 75
Fairview Holdings PLC 67,262 174
FirstGroup PLC 26,000 101
Freeserve PLC (a) 122,100 1,243
Gallaher Group PLC 67,457 283
GKN PLC 162,000 2,653
Glaxo Wellcome PLC 400,485 11,347
Glynwed International PLC 59,700 231
Granada Group PLC 299,400 3,023
Great University Stores PLC 322,100 1,873
Hanson PLC 27,200 228
Hays PLC 10,500 168
HSBC Holdings PLC 295,855 4,102
Hyder PLC 196,007 915
Imperial Chemical Industries PLC 157,572 1,665
Invensys PLC 617,900 3,267
Kingfisher PLC 63,151 701
Ladbroke Group, Ltd. PLC 607,200 1,971
Laird Group PLC 202,262 791
LASMO PLC 350,000 678
Lloyds TSB Group PLC 187,332 2,327
Marconi PLC 102,663 1,811
Marks & Spencer PLC 260,200 1,244
Medeva PLC 3,859 11
MEPC PLC 210,660 1,582
Meyer International PLC 35,600 221
International Securities Fund 78
<PAGE>
International Securities Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
---------- ----------
MFI Furniture Group PLC 123,276 90
Morgan Crucible PLC 376,325 1,757
National Grid Group PLC 83,118 632
National Power PLC 423,268 2,441
NDS Group PLC - ADR (a) 1,185 36
Northern Foods PLC 7,500 12
Northern Rock PLC 16,800 108
Norwich Union PLC 14,200 109
Nycomed Amersham PLC 19,852 125
Ocean Group PLC 11,000 205
Pearson PLC 19,300 628
Pen & Orient DFD PLC 306,857 5,090
Pilkington Brothers PLC 62,600 85
Powell Duffryn PLC 55,000 424
PowerGen PLC 395,705 2,844
Premier Consolidated Oil PLC (a) 848,396 199
Prudential Corp. PLC 96,000 1,873
Racal Electronics PLC 51,500 464
Railtrack Group PLC 104,462 1,755
Rank Group PLC 200,000 646
Reckitt Benckiser PLC 13,500 128
Reed International 422,331 3,172
Reuters Group PLC 18,700 260
Rexam PLC 402,172 1,637
Rio Tinto Corp. PLC (Regd) 187,062 4,490
Royal & Sun Alliance Insurance
Group PLC 673,134 5,045
Royal Bank of Scotland Group PLC 99,028 1,753
Safeway PLC 397,016 1,377
Sage Group PLC (The) 16,000 196
Scottish & Newcastle PLC 196,000 1,361
Scottish & Southern Energy PLC 147,687 1,175
ScottishPower PLC 58,200 442
SEMA Group PLC 6,000 108
Shell Transport &
Trading Co. PLC (Regd) 404,117 3,359
Smith & Nephew PLC 590,300 1,983
SmithKline Beecham PLC 151,392 1,920
Somerfield PLC 505,401 737
South West Water PLC 75,356 655
Storehouse PLC 100,000 75
Tarmac PLC (a) 189,825 1,686
Tate & Lyle, Ltd. PLC 58,500 375
TeleWest Communications PLC (a) 424,644 2,253
Tesco Store Holdings PLC 104,300 317
Thames Water PLC 52,250 646
Thistle Hotels PLC (a) 186,666 558
Thus PLC (a) 16,000 101
TI Group PLC 16,700 121
Tomkins PLC 613,616 2,002
Trinity PLC 117,000 1,249
Unilever PLC 98,382 723
United Biscuits (Holdings) PLC 152,516 653
Vodafone Group PLC 2,310,196 11,516
Williams PLC 23,500 107
Wimpey (George), Ltd. PLC 160,000 287
Wolseley PLC 237,549 1,823
Woolwich PLC 46,500 249
WPP Group PLC 61,145 958
Zeneca Group PLC 67,045 2,784
----------
193,633
----------
United States - 0.4%
Global TeleSystems Group, Inc. (a) 64,320 2,227
Infonet Services Corp. Class B (a) 57,500 1,509
MIH, Ltd. NPV (a) 22,900 1,343
----------
5,079
----------
Total Common Stocks
(cost $795,271) 1,045,289
----------
Preferred Stocks - 1.1%
Australia - 0.1%
News Corp., Ltd. 76,621 656
----------
Brazil - 0.2%
Telecomunicacoes Brasileiras
SA - ADR (a) 17,400 2,236
----------
Germany - 0.8%
Dyckerhoff AG NPV (a) 2,000 61
Hugo Boss AG (a) 8,767 1,122
Krones AG NPV (a) 12,000 302
M.A.N. AG (a) 2,000 44
Marschollek, Lautenschlaeger
und Partner AG NPV (a) 290 88
Porsche AG 571 1,565
ProSieben Media AG NV 16,543 962
Rheinmetall AG 22,800 241
SAP AG 7,984 4,810
Volkswagen AG 2,400 76
Wella AG - NPV (a) 23,488 521
----------
9,792
----------
Italy - 0.0%
Fiat SPA (a) 3,530 51
----------
79 International Securities Fund
<PAGE>
International Securities Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
---------- ----------
Japan - 0.0%
Sanwa International Financial Bermuda Trust
(conv.) 15,000,000 161
----------
Total Preferred Stocks
(cost $10,491) 12,896
----------
Principal
Amount
(000)
$
----------
Long-Term Investments - 0.0%
United Kingdom - 0.0%
BG Transco Holdings PLC
7.057% due 12/14/09 (e) GBP 55 89
4.188% due 12/14/22 GBP 55 89
7.000% due 12/16/24 GBP 55 87
----------
Total Long-Term Investments
(cost $285) 265
----------
Short-Term Investments - 6.9%
United States - 6.9%
Frank Russell Investment Company Money
Market Fund, due on demand (b) 74,126 74,126
United States Treasury Bills
4.670% due 01/20/00 (b)(c)(d) 5,000 4,988
----------
Total Short-Term Investments
(cost $79,114) 79,114
----------
Total Investments - 99.2%
(identified cost $885,161) 1,137,564
Other Assets and Liabilities,
Net - 0.8% 9,005
----------
Net Assets - 100.0% 1,146,569
==========
* Each contract represents $100,000 notional value.
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
(c) Held as collateral in connection with futures contracts purchased by the
Fund.
(d) Rate noted is yield-to-maturity from date of acquisition.
(e) Floating rate note.
Abbreviations:
ADR - American Depositary Receipt
BR - Bearer
GDR - Global Depositary Receipt
NPV - No Par Value
NV - Nonvoting
Foreign Currency Abbreviations:
AUD - Australian dollar
EUR - Euro dollar
GPB - British pound
HKD - Hong Kong dollar
JPY - Japanese yen
USD - U.S. dollar
See accompanying notes which are an integral part of the financial statements.
International Securities Fund 80
<PAGE>
International Securities Fund
Statement of Net Assets, continued
December 31, 1999
Unrealized
Number Appreciation
of (Depreciation)
Contracts* (000)
---------- ----------
Futures Contracts
CAC-40 Index
Futures Contracts (France)
expiration date 03/00 292 $ 1,424
DAX Index
Futures Contracts (Germany)
expiration date 03/00 92 2,136
FTSE - 100 Index
Futures Contracts (UK)
expiration date 03/00 210 806
TOPIX Index
Futures Contracts (Japan)
expiration date 03/00 140 1,076
----------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ 5,442
==========
Market
% of Value
Industry Diversification Net (000)
(Unaudited) Assets $
- ----------------------------------- --------- ---------
Auto & Transportation 4.3% 48,789
Consumer Discretionary 14.0 160,225
Consumer Staples 3.9 44,810
Financial Services 15.7 180,386
Health Care 4.5 51,852
Integrated Oils 0.8 8,917
Materials & Processing 9.7 111,056
Miscellaneous 1.6 18,356
Other Energy 3.6 41,457
Producer Durables 11.4 129,369
Technology 8.8 101,213
Utilities 14.0 161,755
Short-Term Investments 6.9 79,114
Long-Term Investments 0.0 265
--------- ---------
Total Investments 99.2 1,137,564
Other Assets and Liabilities, Net 0.8 9,005
--------- ---------
Net Assets 100.0% 1,146,569
========= =========
Market
% of Value
Geographic Diversification Net (000)
(Unaudited) Assets $
- ----------------------------------- --------- ---------
Europe 42.2% 483,766
Japan 23.3 267,102
United Kingdom 16.9 193,633
Pacific Basin 6.0 69,077
Short-Term Investments 6.9 79,114
Long-Term Investments 0.0 265
Other 3.9 44,607
--------- ---------
Total Investments 99.2 1,137,564
Other Assets and Liabilities, Net 0.8 9,005
--------- ---------
Net Assets 100.0% 1,146,569
========= =========
See accompanying notes which are an integral part of the financial statements.
81 International Securities Fund
<PAGE>
International Securities Fund
Statement of Net Assets, continued
December 31, 1999
Forward Foreign Currency Exchange
Unrealized
Contracts to In Exchange Appreciation
Deliver For (Depreciation)
(000) (000) Settlement Date (000)
- -------------- -------------- --------------- --------------
USD 17,281 EUR 17,000 03/24/00 $ (49)
USD 7,074 EUR 7,000 03/24/00 21
USD 2,063 EUR 2,000 03/24/00 (36)
USD 12,711 EUR 12,500 03/24/00 (41)
USD 12,555 GBP 7,850 03/24/00 125
USD 3,205 GBP 2,000 03/24/00 25
USD 2,435 GBP 1,500 03/24/00 (11)
USD 9,606 GBP 6,000 03/24/00 87
USD 9,470 JPY 950,000 03/24/00 (44)
USD 2,974 JPY 300,000 03/24/00 2
USD 2,468 JPY 250,000 03/24/00 12
USD 986 JPY 100,000 03/24/00 6
USD 12,425 JPY 1,250,000 03/24/00 (23)
EUR 6,000 USD 6,104 03/24/00 22
GBP 2,500 USD 4,015 03/24/00 (24)
JPY 50,000 USD 498 03/24/00 2
JPY 450,000 USD 4,425 03/24/00 (40)
JPY 75,000 USD 739 03/24/00 (5)
--------------
$ 29
==============
Forward Currency Exchange Spot Contracts
Unrealized
Contracts to In Exchange Appreciation
Deliver For (Depreciation)
(000) (000) Settlement Date (000)
- -------------- -------------- --------------- --------------
USD 127 EUR 125 01/03/00 $ (1)
USD 64 GBP 40 01/04/00 --
USD 164 JPY 16,706 01/04/00 --
USD 12 JPY 1,250 01/05/00 --
AUD 170 USD 110 01/04/00 (1)
HKD 600 USD 77 01/04/00 --
--------------
$ (2)
==============
See accompanying notes which are an integral part of the financial statements.
International Securities Fund 82
<PAGE>
International Securities Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amounts)
<TABLE>
<CAPTION>
December 31, 1999
<S> <C> <C>
Assets
Investments at market (identified cost $885,161) ......................................................... $ 1,137,564
Foreign currency holdings (identified cost $5,751) ....................................................... 5,770
Unrealized appreciation on forward foreign currency exchange contracts ................................... 302
Receivables:
Dividends and interest ................................................................................ 1,066
Investments sold ...................................................................................... 1,884
Fund shares sold ...................................................................................... 3,761
Foreign taxes recoverable ............................................................................. 968
From Advisor .......................................................................................... 4
Daily variation margin on futures contracts ........................................................... 18
Prepaid expenses ......................................................................................... 3
-----------
Total assets ........................................................................................ 1,151,340
Liabilities
Payables:
Investments purchased ................................................................... $ 2,542
Fund shares redeemed .................................................................... 1,277
Accrued fees to affiliates .............................................................. 248
Other accrued expenses .................................................................. 429
Unrealized depreciation on forward foreign currency exchange contracts ..................... 273
Unrealized depreciation on foreign currency exchange spot contracts ........................ 2
-----------
Total liabilities ................................................................................... 4,771
-----------
Net Assets ............................................................................................... $ 1,146,569
===========
Net Assets Consist of:
Accumulated distributions in excess of net investment income ............................................. $ (3,812)
Accumulated net realized gain (loss) ..................................................................... 82,758
Unrealized appreciation (depreciation) on:
Investments ........................................................................................... 252,403
Futures contracts ..................................................................................... 5,442
Foreign currency-related transactions ................................................................. 5
Shares of beneficial interest ............................................................................ 153
Additional paid-in capital ............................................................................... 809,620
-----------
Net Assets ............................................................................................... $ 1,146,569
===========
Net Asset Value, offering and redemption price per share:
Class C ($7,522,405 divided by 100,952 shares of $.01 par value
shares of beneficial interest outstanding) .......................................................... $ 74.51
===========
Class E ($5,551,481 divided by 74,069 shares of $.01 par value
shares of beneficial interest outstanding) .......................................................... $ 74.95
===========
Class S ($1,133,494,857 divided by 15,090,804 shares of $.01 par value
shares of beneficial interest outstanding) .......................................................... $ 75.11
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
83 International Securities Fund
<PAGE>
International Securities Fund
Statement of Operations
Amounts in thousands
<TABLE>
<CAPTION>
Year Ended December 31, 1999
<S> <C> <C>
Investment Income
Dividends ........................................................................ $ 20,257
Dividends from Money Market Fund ................................................. 2,478
Interest ......................................................................... 489
Less foreign taxes withheld ...................................................... (2,303)
---------
Total investment income ........................................................ 20,921
Expenses
Advisory fees .................................................................... $ 8,947
Administrative fees .............................................................. 500
Custodian fees ................................................................... 2,093
Distribution fees - Class C ...................................................... 23
Transfer agent fees .............................................................. 1,126
Professional fees ................................................................ 70
Registration fees ................................................................ 140
Shareholder servicing fees - Class C ............................................. 8
Shareholder servicing fees - Class E ............................................. 13
Trustees' fees ................................................................... 9
Miscellaneous .................................................................... 129
---------
Total expenses ................................................................. 13,058
---------
Net investment income ............................................................... 7,863
---------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ...................................................................... 122,855
Futures contracts ................................................................ 15,568
Foreign currency-related transactions ............................................ (9,722) 128,701
---------
Net change in unrealized appreciation (depreciation) on:
Investments ...................................................................... 134,124
Futures contracts ................................................................ 4,278
Foreign currency-related transactions ............................................ 2,297 140,699
--------- ---------
Net realized and unrealized gain (loss) ............................................. 269,400
---------
Net increase (decrease) in net assets from operations ............................... $ 277,263
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
International Securities Fund 84
<PAGE>
International Securities Fund
Statement of Changes in Net Assets
Amounts in thousands
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
----------- -----------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ......................................... $ 7,863 $ 10,770
Net realized gain (loss) ...................................... 128,701 22,759
Net change in unrealized appreciation (depreciation) .......... 140,699 73,736
----------- -----------
Net increase (decrease) in net assets from operations ....... 277,263 107,265
----------- -----------
Distributions
From net investment income
Class C ..................................................... (12) --
Class E ..................................................... (19) (42)
Class S ..................................................... (7,238) (9,775)
From net realized gain
Class C ..................................................... (335) --
Class E ..................................................... (248) (5)
Class S ..................................................... (51,360) (3,176)
----------- -----------
Net decrease in net assets from distributions ............ (59,212) (12,998)
----------- -----------
Share Transactions
Net increase (decrease) in net assets from share transactions . (16,692) 9,906
----------- -----------
Total net increase (decrease) in net assets ...................... 201,359 104,173
Net Assets
Beginning of period ........................................... 945,210 841,037
----------- -----------
End of period (including accumulated distributions in excess of
net investment income of $3,812 and $2,960, respectively) .. $ 1,146,569 $ 945,210
=========== ===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
85 International Securities Fund
<PAGE>
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*
---------
Net Asset Value, Beginning of Period ............................. $ 60.66
---------
Income From Operations
Net investment income (loss)(a) ............................... (.32)
Net realized and unrealized gain (loss) ....................... 17.92
---------
Total income from operations ................................ 17.60
---------
Distributions
From net investment income .................................... (.17)
From net realized gain ........................................ (3.58)
---------
Total distributions ......................................... (3.75)
---------
Net Asset Value, End of Period ................................... $ 74.51
=========
Total Return (%)(b) .............................................. 29.39
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ...................... 7,522
Ratios to average net assets (%)(c):
Operating expenses .......................................... 2.30
Net investment income (loss) ................................ (.51)
Portfolio turnover rate (%) ................................... 120.52
* For the period January 27, 1999 (commencement of sale) to December 31,
1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
International Securities Fund 86
<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 Operations
Net investment income (a) .............. .40 .28 .35 (.03)
Net realized and unrealized gain (loss) 17.72 6.53 (.64) 1.68
--------- --------- --------- ---------
Total income from operations ......... 18.12 6.81 (.29) 1.65
--------- --------- --------- ---------
Distributions
From net investment income ............. (.27) (.57) (.29) (.43)
From net realized gain ................. (3.58) (.20) (3.25) (1.31)
--------- --------- --------- ---------
Total distributions .................. (3.85) (.77) (3.54) (1.74)
--------- --------- --------- ---------
Net Asset Value, End of Period ............ $ 74.95 $ 60.68 $ 54.64 $ 58.47
========= ========= ========= =========
Total Return (%)(b) ....................... 30.21 12.53 (.41) 2.86
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 5,552 4,431 1,271 623
Ratios to average net assets (%)(c):
Operating expenses ................... 1.55 1.64 1.96 2.00
Net investment income ................ .61 .49 .19 (.61)
Portfolio turnover rate (%) ............ 120.52 68.46 73.54 42.43
</TABLE>
* For the period November 4, 1996 (commencement of sale) to December 31,
1996.
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
87 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
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 60.86 $ 54.69 $ 58.48 $ 56.61 $ 53.96
------------- ------------- ------------- ------------- -------------
Income From Operations
Net investment income (a) .............. .51 .69 .56 .53 .56
Net realized and unrealized gain (loss) 17.82 6.32 (.46) 3.72 4.89
------------- ------------- ------------- ------------- -------------
Total income from operations ......... 18.33 7.01 .10 4.25 5.45
------------- ------------- ------------- ------------- -------------
Distributions
From net investment income ............. (.50) (.64) (.64) (.48) (1.11)
From net realized gain ................. (3.58) (.20) (3.25) (1.90) (1.69)
------------- ------------- ------------- ------------- -------------
Total distributions .................. (4.08) (.84) (3.89) (2.38) (2.80)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of Period ............ $ 75.11 $ 60.86 $ 54.69 $ 58.48 $ 56.61
============= ============= ============= ============= =============
Total Return (%) .......................... 30.52 12.90 .26 7.63 10.20
Ratios/Supplemental Data:
Net Assets, end of period (in thousands)
1,133,495 940,779 839,767 743,615 623,389
Ratios to average net assets (%):
Operating expenses, net .............. 1.30 1.22 1.26 1.30 1.30
Operating expenses, gross ............ 1.30 1.22 1.26 1.31 1.31
Net investment income ................ .79 1.15 .91 .91 .97
Portfolio turnover rate (%) ............ 120.52 68.46 73.54 42.43 42.96
</TABLE>
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
International Securities Fund 88
<PAGE>
Emerging Markets Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: To provide maximum total return, primarily through capital
appreciation and by assuming a higher level of volatility than is ordinarily
expected from developed market international portfolios, by investing
principally in equity securities.
Invests in: Primarily emerging market equity securities.
Strategy: The Fund uses a multi-manager strategy intended to achieve higher
returns with moderate risk when compared to either single country or region
emerging markets investments. The Fund employed the investment management
services of five managers with four separate approaches to global emerging
markets investment.
[GRAPHIC OMITTED]
[The following table was depicted as a mountain chart in the printed material.]
Growth of a $10,000 Investment
Yearly periods Emerging Extended IFC
ended Markets Barings Investible
December 31 Class S++ EM++++ Composite**
Inception* $10,000 $10,000 $10,000
1993 $14,160 $17,628 $18,040
1994 $13,356 $16,793 $15,876
1995 $12,260 $15,856 $14,536
1996 $13,780 $17,288 $15,903
1997 $13,289 $15,672 $13,566
1998 $8,625 $12,733 $10,572
1999 $14,344 $20,977 $17,871
$100,820 $127,047 $116,150
Emerging Markets Fund - Class S
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- --------- ---------
1 Year $14,903 49.03%
5 Years $10,740 1.44%ss.
Inception $14,344 5.35%ss.
Emerging Markets Fund - Class E ss.ss.
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- --------- ---------
1 Year $14,871 48.71%
5 Years $10,711 1.38%ss.
Inception $14,306 5.31%ss.
Emerging Markets Fund - Class C ss.ss.ss.
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- --------- ---------
1 Year $14,791 47.91%
5 Years $10,654 1.28%ss.
Inception $14,230 5.23%ss.
IFC Investable Composite Index
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- --------- ---------
1 Year $16,711 67.11%
5 Years $11,131 2.17%ss.
Inception $17,671 8.58%ss.
Extended Barings Emerging Markets Index
Periods Ended Growth of Total
12/31/99 $10,000 Return
- ------------- --------- ---------
1 Year $16,474 64.74%
5 Years $12,492 4.55%ss.
Inception $20,977 11.31%ss.
89 Emerging Markets Fund
<PAGE>
Emerging Markets Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Performance Review
For the year ended December 31, 1999, the Emerging Markets Fund Class S, Class
E, and Class C shares reflected total returns of 49.03%, 48.71%, and 47.91%,
respectively, as compared to the IFC Investable Composite Index results of
67.11%. The Fund trailed the Index primarily due to poor country and security
selection as well as costs associated with changes to the investment managers.
Performance also lagged the Extended Barings Emerging Markets Index.
Portfolio Highlights
The year proved to be one of strong recovery for emerging markets globally.
Asian markets led the recovery early in the year, but were joined by Latin
American, European, Middle Eastern, and African (EMEA) markets as the year
progressed. As strong as the recovery was, emerging markets still ended the year
below their pre-Asian currency "meltdown" highs.
The Fund's return was impressive in absolute terms, but a disappointment
relative to the benchmark. A strong fourth quarter failed to compensate for weak
performance earlier in the year. Performance difficulties specific to the Fund's
investment managers led to corrective action. However, the laborious and costly
change of managers in a highly illiquid asset class also negatively impacted
results. Two of the three managers in the Fund at the start of the year were
replaced and four new managers were hired to improve the Fund's style
diversification and reflect the efforts of Russell's manager research process.
Top Ten Equity Holdings
(as a percent of Total Investments) December 31, 1999
Telefonos de Mexico SA Series L - ADR (Mexico) 3.4%
Yapi ve Kredi Bankasi AS (Turkey) 2.6
Samsung Electronics (South Korea) 2.6
Genesis India Investment Co. (India) 2.2
SK Telecomm Co., Ltd. (South Korea) 1.1
Taiwan Semiconductor Manufacturing Co., Ltd. - ADR 1.1
(Taiwan)
Migros (Turkey) 1.0
Acer, Inc. - GDR (Taiwan) 1.0
Credit Bank (Regd)(Greece) 0.9
Infosys Technologies, Ltd. - ADR (India) 0.9
Portfolio Characteristics
December 31, 1999
Current P/E Ratio 18.57x
Portfolio Price/Book Ratio 2.17x
Market Capitalization - $- Weighted Average 8.1 Bil
Number of Holdings 513
Money Managers Styles
Genesis Asset Managers Limited Global/Market-
Oriented
Foreign & Colonial Emerging Markets Limited Market-Oriented
Nicholas Applegate Capital Management Growth
Sanford C. Bernstein & Co., Inc. Value
Schroder Investment Management North America, Ltd. Market-Oriented
* Emerging Markets Fund Class S assumes initial investment on January
29, 1993. IFC Index and Barings Index assumes initial investment on
February 1, 1993.
** International Finance Corporation (IFC) Investable Composite Index is
a market capitalization-weighted index of the performance of
securities listed on the stock exchange(s) of the countries included
in the index, calculated on a total-return basis. The investable index
reflects the accessibility of markets and individual stocks to foreign
investors.
++ Prior to April 1, 1995, Fund performance results are reported gross of
investment management fees. For the period following April 1, 1995,
Fund performance results are reported net of investment management
fees but gross of any investment services fees. Information concerning
these fees can be obtained from the Fund's Advisor upon request.
++++ Extended Barings Emerging Markets Index is a market
capitalization-weighted index of companies' performance within 20
countries in Africa, Asia, Europe and Latin America.
ss. Annualized.
ss.ss. Emerging Markets Fund Class S performance has been linked with Class E
to provide historical perspective. For the period September 22, 1998
(commencement of sale) through the current period, Class E paid
shareholder servicing and Rule 12b-1 distribution fees. Total return
would have been lower had these fees been in effect during prior
reporting periods.
ss.ss.ss. Emerging Markets Fund Class S and Class E performance has been linked
with Class C to provide historical perspective. From January 27, 1999
(commencement of sale) through the current period, Class C paid
shareholder service and Rule 12b-1 distribution fees. Total return
would have been lower had these fees been in effect during prior
reporting periods.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Emerging Markets Fund 90
<PAGE>
Emerging Markets Fund
Statement of Net Assets
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- -----------
Common Stocks - 87.9%
Argentina - 1.9%
Astra cia Argentina de Petro (a) 240,000 511
Banco de Galicia y Buenos Aires SA de CV
Class B - ADR 14,329 284
Banco Frances del Rio la Plata - ADR 14,500 343
Central Costanera SA Class B 187,100 425
Central Puerto SA Class B 120,000 194
Inversiones Y Representaciones SA
Class B 99,137 321
Naviera Perez Companc Class B 277,031 1,419
Nobleza Piccardo SA 51,100 108
Perez Companc SA Class B - ADR 3,010 31
Quilmes Industrial (Regd)(a) 71,000 639
Siderar SA Series A 18,800 77
Siderca SAIC 250,000 525
Telecom Argentina SA Class B - ADR 20,700 709
Telefonica de Argentina Class B 340,000 1,044
Telefonica de Argentina SA
Class B - ADR 26,100 806
Transportadora de Gas del Sur SA
Class B 400,000 752
-----------
8,188
-----------
Australia - 0.6%
Lihir Gold, Ltd. (a) 1,083,000 789
Oil Search, Ltd. (Australia Regd)(a) 800,000 1,050
Orogen Minerals, Ltd. 800,000 946
-----------
2,785
-----------
Austria - 0.0%
Elektrim SA 20,250 201
-----------
Brazil - 1.8%
Centrais Eletricas Brasileiras SA NPV 36,009,000 788
Companhia Cervejaria Brahma - ADR 21,900 307
Companhia de Tecidos Norte de
Minas NPV 1999 Rights (a) 1,492,066 136
Companhia Energetica de Minas Gerais SA -
ADR 23,547 532
Companhia Siderurgica Nacional NPV 17,800,000 690
Companhia Siderurgica Nacional NPV - ADR 2,800 103
Companhia Vale do Rio Doce NPV 6,000 139
Embratel Participacoes SA (a) 31,214,000 522
Globo Cabo SA - ADR NPV 35,300 622
Light Servicos de Eletricidade SA NPV (a) 7,902,914 871
Petroleo Brasileiro Petrobras SA - ADR 26,700 685
Tele Centro Sul Participacoes SA NPV (a) 34,233,000 368
Tele Norte Leste Participacoes SA NPV 26,105,000 470
Tele Sudeste Celular Participacoes SA NPV 68,617,000 273
Telecomunicacoes Brasileiras SA NPV 3,620,000 309
Telesp Celular Participacoes SA NPV 34,060,000 322
Telesp Participacoes SA NPV 33,112,000 458
Ultrapar Participacoes SA - ADR NPV (a) 10,100 116
White Martins SA NPV 331,407 232
-----------
7,943
-----------
Chile - 3.5%
Antofagasta Holdings PLC 408,036 2,834
Banco de A. Edwards Series A NPV - ADR 9,944 165
Banco Santander Chile Series A - ADR 10,200 156
Banco Santiago - ADR 20,000 428
BBV Banco BHIF - ADR (a) 25,000 378
Chilectra SA NPV - ADR 3,000 60
Compania de Telecomunicaciones de Chile SA
- ADR 41,769 762
Distribucion Y Servicio D&S SA - ADR 125,600 2,449
Embotelladora Andina SA - ADR Series A 62,000 1,104
Embotelladora Andina SA - ADR Series B 58,000 848
Embotelladora Arica SA -ADR (a) 79,300 793
Enersis SA - ADR 55,652 1,308
Gener SA - ADR 25,000 388
Laboratorio Chile SA - ADR 30,000 546
Maderas y Sinteticos SA - ADR 103,000 1,326
Quinenco SA 166,300 1,850
Sociedad Quimica Y Minera de Chile SA - ADR 3,750 118
-----------
15,513
-----------
China - 2.3%
Beijing Datang Power Generation Company,
Ltd. 732,000 121
Beijing Enterprises Holdings, Ltd. 182,000 287
Beijing Yanhua Petrochemical Co., Ltd.
Class H 950,000 110
China Merchants Holdings International Co.
Ltd. 1,024,000 843
China Resources Enterprise, Ltd. 210,000 336
91 Emerging Markets Fund
<PAGE>
Emerging Markets Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- -----------
China Southern Airlines (a) 1,060,000 232
China Steel Corp. - ADR (a) 25,000 365
China Telecom (Hong Kong), Ltd. (a) 358,000 2,234
China Telecom (Hong Kong), Ltd. - ADR (a) 8,500 1,093
Cosco Pacific, Ltd. 200,000 166
Guangdong Kelon Electrical Holdings Co.,
Ltd. 470,000 357
Huaneng Power International, Inc. Series N
- ADR 136,500 1,442
Jiangsu Expressway Co., Ltd. Class H 4,590,000 750
Jilin Chemical Industrial Company, Ltd.
Class H 1,800,000 139
New World China Land, Ltd. (a) 1,994,000 737
Shanghai Petrochemical Co., Ltd. Class H 260,000 41
Yanzhou Coal Mining Co., Ltd. Series H 1,740,000 481
Yizheng Chemical Fibre Class H (a) 1,985,000 556
-----------
10,290
-----------
Croatia - 0.3%
Pliva d.d. 11,600 148
Pliva d.d. - GDR 85,230 1,091
-----------
1,239
-----------
Czech Republic - 0.4%
Ceska Sporitelna AS (Regd) - GDR (a) 27,270 125
Ceske Energeticke Zavody AS (a) 33,000 82
Ceske Radiokomunikace AS - GDR (a) 13,000 468
Komercni Banka AS - ADR (a) 24,400 127
SPT Telecom AS (a) 8,280 134
Tabak AS 3,500 705
-----------
1,641
-----------
Ecuador - 0.0%
La Cemento Nacional - GDR (144A)(a) 700 34
La Cemento National - GDR (a) 3,700 177
-----------
211
-----------
Egypt - 1.6%
Al Ahram Beverage Co. SAE - GDR (144A) 21,130 412
Al-Ahram Beverages Co. S.A.E. - GDR (a) 83,200 1,622
Arabian International Construction (a) 3,750 14
Commercial International Bank 62,400 912
Commercial International Bank (Regd.) - GDR 4,000 57
Eastern Company for Tobacco & Cigarettes 3,300 87
Egypt International Pharmaceutical
Industries Co. 2,000 98
Egyptian Mobile Phone Network (a) 52,018 2,384
Madinet NASR for Housing & Development 2,950 29
Misr International Bank 7,400 151
Orascom Construction (a) 42,700 880
Oriental Weavers Co. 4,100 74
Suez Cement Co. (Regd) - GDR 5,889 97
-----------
6,817
-----------
Greece - 3.6%
Aluminum Co. of Greece SA 20,100 988
Attica Enterprises Holdings SA 6,175 119
Bank of Piraues 6,870 171
Commercial Bank of Greece 35,426 2,704
Credit Bank (Regd) 51,240 4,012
Hellenic Bottling Co. SA 15,837 364
Hellenic Telecommunication Organization SA
- ADR 5,600 67
Hellenic Telecommunication Organization SA
- GDR 142,139 3,366
Intracom SA 20,192 924
National Bank of Greece SA 19,159 1,412
Panafon Hellenic Telecom SA (a) 35,920 482
STET Hellas Telecommunications SA - ADR (a) 11,000 333
Titan Cement Co. (a) 15,836 944
-----------
15,886
-----------
Hong Kong - 0.6%
Chen Hsong Holdings, Ltd. 1,900,000 501
New World Infrastructure, Ltd. (a) 1,222,100 1,564
Pacific Century CyberWorks, Ltd. (a) 192,000 446
-----------
2,511
-----------
Hungary - 2.8%
BorsodChem - GDR 42,000 1,649
BorsodChem Rt. 12,000 492
Magyar Olaj Es Gas 5,200 108
Magyar Tavkozlesi Rt - ADR 67,550 2,432
Magyar Tavkozlesi Rt. (Regd) 255,476 1,790
Mol Magyar Olaj-Es Gazipari Rt. - GDR 101,900 2,089
Mol Magyar Olay-Es Gazipari - GDR 16,266 336
OTP Bank Rt. 14,160 829
Richter Gedeon, Ltd. - GDR 31,280 2,033
Emerging Markets Fund 92
<PAGE>
Emerging Markets Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- -----------
Synergon Information Systems, Ltd. - GDR
(a) 3,000 29
Tiszai Vegyi Kombinat Rt. 21,400 402
-----------
12,189
-----------
India - 5.8%
Bajaj Auto, Ltd. - GDR 52,820 489
BSES, Ltd. - GDR 27,000 342
BSES, Ltd. (a) 22,800 288
Genesis India Investment Co. (a) 710,000 9,450
Grasim Industries, Ltd. - GDS (a) 9,500 128
Hindalco Industries, Ltd. - GDR 11,600 270
ICICI, Ltd. - ADR (a) 62,900 918
Indo Gulf Fertilizers & Chemicals - GDR (a) 419,000 608
Infosys Technologies, Ltd. - ADR 11,700 3,767
ITC, Ltd. - GDR (a) 28,300 549
Larsen & Toubro, Ltd. - GDR 53,350 1,761
Mahanagar Telephone Nigam, Ltd. - GDR (a) 52,700 580
Mahindra & Mahindra , Ltd. - GDR (a) 35,700 384
Perusahaan Persero Telekom - ADR 83,528 919
Reliance Industries, Ltd. - GDR (a) 99,311 1,400
State Bank of India - GDR 25,600 305
Tata Engineering & Locomotive Co. - GDR (a) 104,400 548
Videsh Sanchar Nigam, Ltd. - GDR (a) 106,557 2,608
-----------
25,314
-----------
Indonesia - 1.7%
Gulf Indonesia Resources, Ltd. (a) 81,300 661
Indah Kiat Pulp & Paper (Alien Market) (a) 972,000 383
PT Astra International, Inc. (a) 564,000 303
PT Bank Internasional Indonesia (Alien
Market)(a) 5,965,000 128
PT Bank Pan Indonesia Tbk (a) 1,364,000 132
PT Gudang Garam Tbk 211,000 568
PT Hanjaya Mandala Sampoerna Tbk (a) 245,000 623
PT Indofood Sukses Makmur Tbk (a) 414,000 518
PT Indosat (Persero) Tbk 144,000 321
PT Indosat (Persero) Tbk - ADR 21,900 474
PT Matahari Putra Prima Tbk (a) 8,800,000 1,480
PT Ramayana Lestari Sentosa 1,670,000 1,410
PT Telekomunikasi Indonesia Series B (a) 350,000 199
Semen Gresik 232,000 367
-----------
7,567
-----------
Israel - 2.7%
Bank Hapoalim, Ltd. 467,090 1,455
Bank Leumi Le-Israel 726,733 1,529
Bezeq Israeli Telecommunication Corp., Ltd.
(a) 107,292 535
Blue Square Israel, Ltd. NPV - ADR 13,720 175
Clal Industries, Ltd. 24,400 230
Delta-Galil Industries, Ltd. 32,000 582
Discount Investment Corp. (Regd.) 6,328 321
ECI Telecom, Ltd. 3,460 109
ECtel, Ltd. (a) 7,600 138
Elbit Systems, Ltd. 13,243 207
Gilat Satellite Networks, Ltd. (a) 5,300 628
IDB Holding Corp., Ltd. 3,864 128
Israel Chemicals, Ltd. 161,724 178
Israel Discount Bank Series A (a) 300,000 373
Koor Industries, Ltd. 1,394 139
Koor Industries, Ltd. - ADR 25,000 500
Matav-Cable Systems Media, Ltd. 12,100 350
Nice Systems, Ltd. - ADR (a) 10,730 528
Orbotech, Ltd. NPV (a) 3,750 291
Orekit Communications, Ltd. - GDR (a) 3,800 130
Partner Communications Co., Ltd. - ADR (a) 26,400 683
Property & Building Corp., Ltd. 666 71
RADWARE, Ltd. (a) 7,800 330
Scitex Corp., Ltd. (a) 19,000 273
Tecnomatix Technologies, Ltd. (a) 41,500 1,172
Teva Pharmaceutical Industries, Ltd. - ADR 14,473 1,036
-----------
12,091
-----------
Jordan - 0.2%
Arab Bank Group 3,510 954
-----------
Lebanon - 0.1%
Solidere - GDR (a) 70,000 515
-----------
Luxembourg - 0.7%
Millicom International Cellular SA (a) 43,000 2,666
Ritek, Inc. - GDR (a) 17,690 198
-----------
2,864
-----------
93 Emerging Markets Fund
<PAGE>
Emerging Markets Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- -----------
Malaysia - 3.7%
AMMB Holdings Berhad 220,000 527
Commerce Asset-Holding Berhad 482,000 1,237
Genting Berhad 346,000 1,229
Golden Hope Plantation 454,000 409
Malakoff Berhad 231,000 608
Malayan Banking Berhad 493,000 1,751
Malaysian International Shipping Corp.
Berhad (Alien Market) 175,000 288
Malaysian Pacific 210,000 1,354
O.Y.L. Industries Berhad 104,800 270
Oriental Holdings Berhad 407,000 889
Petronas Gas Berhad 329,000 771
Public Bank Berhad 311,000 272
Public Bank Berhad (Alien Market) 339,000 351
Resorts World Berhad 361,000 1,036
RHB Capital Berhad (a) 323,000 335
Rothmans of Pall Mall (Malaysia) Berhad 80,200 612
Sime Darby Berhad 679,000 861
Telekom Malaysia Berhad 350,000 1,354
Tenaga Nasional Berhad 604,000 1,558
United Engineers (Malaysia) Berhad (a) 286,000 455
YTL Corp. Berhad 66,000 105
YTL Corp. Berhad 2009 Warrants (a) 16,500 10
-----------
16,282
-----------
Mexico - 12.5%
Alfa SA de CV Class A NPV (a) 194,000 911
Apasco SA de CV NPV 28,000 174
Carso Global Telecom Series A1 NPV (a) 328,100 3,082
Cemex SA de CV 2002 Warrants (a) 35,000 20
Cemex SA de CV - ADR (a) 65,754 1,833
Cemex SA de CV NPV (a) 434,440 2,430
Cemex SA de CV NPV 2002 Warrants (a) 3,790 16
Cifra SA de CV Class C NPV (a) 452,700 862
Cifra SA de CV Series V NPV (a) 555,000 1,113
Compania Cervecerias Unidas SA - ADR 49,900 1,600
Controladora Comercial Mexicana SA de CV
NPV 1,134,000 1,520
Corporacion Interamericana de
Entretenimiento SA Series B NPV (a) 280,300 1,120
Corporacion Interamericana de
Entretenimiento SA Series L NPV (a) 105,000 410
Cydsa SA Series A NPV 277,000 257
Desc SA de CV Series B NPV (a) 180,000 148
Desc SA de CV Series C - ADR (a) 81,000 1,357
Empaques Ponderosa (a) 327,500 131
Empresa Nacional de Electricidad SA - ADR 41,438 588
Fomento Economico Mexicano SA de CV 160,500 717
Fomento Economico Mexicano SA de CV Series
B - ADR 61,950 2,757
Grupo Bimbo SA de CV Series A NPV (a) 224,000 500
Grupo Carso Series A NPV (a) 79,500 396
Grupo Continental SA Series CP 149,000 217
Grupo Financiero Banamex Accival SA de CV
(Banacci) Series O (a) 396,483 1,590
Grupo Financiero Bancomer SA de CV NPV
Series O (a) 267,000 112
Grupo Financiero Banorte SA de CV NPV (a) 220,000 332
Grupo Financiero Inbursa SA de CV NPV Class
O (a) 96,000 393
Grupo Industrial Durango SA - ADR (a) 17,250 205
Grupo Industrial Saltillo SA de CV NPV 54,500 174
Grupo Mexico SA Series B NPV 232,700 1,153
Grupo Modelo SA de CV Series C NPV 212,000 582
Grupo Sanborns SA NPV Series B (a) 151,000 335
Grupo Television SA de CV - GDR (a) 42,000 2,867
Hylsamex SA de CV Series B NPV (a) 170,000 499
Kimberly-Clark, Mexico Class A NPV 840,500 3,282
Nuevo Grupo Iusacell SA de CV Series V -
ADR (a) 65,000 971
Organizacion Soriana SA de CV Series B NPV
(a) 104,000 477
Panamerican Beverages, Inc. Class A 112,000 2,303
Seguros Comercial America NPV Series B (a) 87,000 321
Telefonos de Mexico SA Series L - ADR 134,287 15,107
Tubos de Acero de Mexico SA 37,700 511
TV Azteca SA de CV - ADR (a) 177,100 1,593
-----------
54,966
-----------
Panama - 0.2%
Banco Latinoamericano de Exportaciones SA
Class E 40,000 940
-----------
Emerging Markets Fund 94
<PAGE>
Emerging Markets Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- -----------
Peru - 0.9%
Compania de Minas Buenaventura Series B -
ADR 38,700 622
Companiade Minas Buenaventura SA Series B 22,000 178
Credicorp, Ltd. 29,450 353
Enrique Ferreyros 236,970 128
Minas Buenaventura 5,600 45
Minsur SA 64,000 132
Southern Peru Copper Corp. 10,800 167
Telefonica Del Peru SA Class B - ADR 166,938 2,233
-----------
3,858
-----------
Philippines - 1.8%
Ayala Corp. (a) 203,000 59
Ayala Land, Inc. 395,013 103
Equitable PCI Bank 480,200 1,066
First Philippine Holdings Corp. 653,360 559
Manila Electric Co. Class B 875,200 2,497
Metropolitan Bank & Trust Co. 35,700 257
Philippine Long Distance Telephone Co. 6,100 155
Philippine Long Distance Telephone Co. -
ADR 81,027 2,097
San Miguel Corp. Class B 67,500 95
Security Bank Corp. (a) 350,000 317
SM Prime Holdings 878,000 166
Universal Robina 2,000,000 358
-----------
7,729
-----------
Poland - 0.9%
Agora SA - GDR (a) 7,100 105
Bank Handlowy W. Warszawie SA - GDR (a) 27,355 410
BRE Bank SA 9,900 314
Elektrim Spolka Akcyjna SA (a) 44,100 437
KGHM Polska Miedz SA - GDR (a) 34,600 462
Orbis SA (a) 21,600 187
Polski Koncern Naftowy SA - GDR (a) 90,930 1,114
Softbank SA - GDR 8,480 288
Telekomunikacja Polska SA Class S - GDR 34,300 214
Telekomunikacja Polska SA Series A - GDR 29,710 195
WBK 27,662 188
-----------
3,914
-----------
Russia - 1.0%
Lukoil Oil Co. - ADR 26,930 1,066
OAO Gazprom - ADR (a) 6,000 50
Surgutneftegaz SP - ADR (a) 142,350 2,491
Unified Energy Systems - GDR 22,700 272
Vimpel-Communications - ADR (a) 15,950 713
-----------
4,592
-----------
Singapore - 0.4%
Asia Pulp & Paper Co, - ADR Ltd. (a) 79,000 622
Datacraft Asia, Ltd. (a) 122,000 1,013
-----------
1,635
-----------
South Africa - 7.0%
AECI, Ltd. 131,000 267
Alexander Forbes, Ltd. 482,000 1,288
Amalgamated Banks of South Africa 216,267 970
Amalgamated Beverage Industries, Ltd. 50,971 435
Anglo American Platinum Corp., Ltd. 22,300 678
Anglo American PLC (a) 22,100 1,422
AngloGold, Ltd. 21,210 1,091
Ashanti Goldfields, Ltd. - ADR 216,178 567
Barlow, Ltd. 68,737 495
DataTec, Ltd. (a) 37,000 653
De Beers Centenary Linked Units 40,154 1,168
Dimension Data Holdings, Ltd. (a) 293,857 1,843
Fedsure Holdings, Ltd. 32,900 267
FirstRand, Ltd. 577,600 826
Impala Platinum Holdings, Ltd. 12,900 522
Imperial Holdings, Ltd. (a) 40,666 445
Iscor, Ltd. (a) 74,960 284
Ixchange Technology Holdings, Ltd. (a) 68,500 289
JD Group, Ltd. 41,600 358
Liberty Life Association of Africa 48,886 564
Lonrho Africa PLC 437,204 219
Lonrho PLC 184,676 1,870
Metro Cash and Carry, Ltd. NPV 392,500 446
MIH, Ltd. NPV (a) 6,900 405
Nampak, Ltd. 90,000 271
Nedcor Investment Bank Holdings (a) 31,800 20
Nedcor, Ltd. 24,062 536
PepsiCo International, Inc. (a) 1,190 10
Profurn, Ltd. NPV 296,400 327
Real Africa Holdings, Ltd. (a) 38,400 54
Rembrandt Group, Ltd. 273,600 2,605
Sanlam, Ltd. (a) 940,100 1,314
Sappi, Ltd. 104,400 1,031
Sasol NPV 443,463 3,739
South African Breweries PLC (a) 229,920 2,326
Standard Bank Investment Corporation, Ltd. 85,060 352
95 Emerging Markets Fund
<PAGE>
Emerging Markets Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- -----------
Tongaat-Hulett Group, Ltd. 103,000 869
Truworths International, Ltd. 552 1
Woolworths Holdings, Ltd. 892 1
-----------
30,828
-----------
South Korea - 12.4%
Dacom Corp. 2,400 1,236
Daewoo Securities (a) 14,934 169
Doosan Corp. (a) 40,172 1,038
Hanil Cement Manufacturing Co., Ltd. 20,430 363
Hankuk Glass Industries, Inc. 17,000 322
Hansol Paper Co. (a) 33,960 307
Hanvit Bank (a) 102,000 345
Honam Petrochemical Corp. 20,500 287
Housing & Commercial Bank, Korea - GDR 10,000 293
Housing & Commercial Bank, Korea (a) 45,790 1,452
Hyundai Electronics Industries Co. (a) 76,498 1,624
Hyundai Industrial Development &
Construction 27,566 204
Hyundai Merchant Marine 41,164 269
Hyundai Motor Co., Ltd. (a) 62,530 991
Hyundai Motor Co., Ltd. - GDR (a) 31,234 326
Kookmin Bank 115,308 1,808
Korea Electric Power Corp. 65,818 2,040
Korea Electric Power Corp. - ADR 38,700 648
Korea Exchange Bank (a) 249,500 956
Korea Telecom Corp. 8,180 1,289
Korea Telecom Corp. - ADR (a) 41,790 3,124
LG Chemical, Ltd. 28,520 902
LG Electronics 26,790 1,109
Lotte Confectionery Co. 4,500 535
Medison Co. 16,400 239
Pohang Iron & Steel Co., Ltd. 19,451 2,141
Pohang Iron & Steel Co., Ltd. - ADR 26,600 931
S1 Corp. (a) 46,760 807
Samsung Corp. (a) 51,950 778
Samsung Display Devices Co. - GDR 52,250 523
Samsung Electronics 48,585 11,381
Samsung Electronics, Ltd. - GDS (a) 45,719 3,578
Samsung Fire & Marine Insurance (a) 5,600 179
Samsung Fire & Marine Insurance 2000 Rights
(a) 1,145 9
Samsung Securities Co., Ltd. 21,078 639
Seoul City Gas Co., Ltd. 5,000 92
Shin Han Bank 137,000 1,484
Shinwon Corp. (a) 159,136 193
SK Corp. 27,362 829
SK Telecom Co., Ltd. - ADR 39,892 1,531
SK Telecomm Co., Ltd. 1,368 4,903
Ssangyong Oil Refining Co. 69,440 1,827
Tae Young Corp. 17,639 683
-----------
54,384
-----------
Sri Lanka - 0.1%
Ceylon Theatre 13,660 38
Development Finance Corp. of Ceylon 97,221 169
John Keells Holdings, Ltd. 52,242 148
-----------
355
-----------
Switzerland - 0.2%
UBS AG 2000 Warrants (a) 4,500 711
-----------
711
-----------
Taiwan - 6.3%
Accton Technology Corp. - GDR (a) 51,000 365
Acer, Inc. - GDR (144A) 39,700 556
Acer, Inc. - GDR (a) 317,282 4,442
Advanced Semiconductor Engineering, Inc. -
GDR (a) 16,605 319
ASE Test, Ltd. (a) 39,800 940
Asia Cement Corp. - GDR (a) 96,461 931
Asustek Computer, Inc. - GDR (Regd) 83,840 1,136
Asustek Computer, Inc. 2000 Warrants (a) 47,000 539
Asustek Computer, Inc. - GDR 110 1
China Steel Corp. - GDS (a) 96,102 1,403
Evergreen Marine Corp. - GDR (a) 61,642 518
Far Eastern Textile, Ltd. - GDR (a) 54,000 1,284
First Bank 2000 Warrants (a) 180,000 226
Formosa Plastic Corp. 2000 Warrants (a) 115,700 230
Fubon Insurance Co., Ltd. - GDR 78,980 644
Hon Hai Precision Industry Co., Ltd. GDR (a) 124,340 2,403
Hua Nan Commercial Bank 2000 Warrants (a) 183,000 230
Powerchip Semiconductor Corp. - GDR (a) 7,000 93
Siliconware Precision Industries Co. - GDR
(a) 98,158 1,384
Synnex Technology International Corp. 23,416 605
Synnex Technology International Corp.
(Regd) - GDR 55,060 1,421
Taiwan Semiconductor Manufacturing Co.,
Ltd. 2000 Warrants (a) 234,146 1,531
Taiwan Semiconductor Manufacturing Co., Ltd
- ADR (a) 105,626 4,753
Emerging Markets Fund 96
<PAGE>
Emerging Markets Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- -----------
Windbond Electronics Corp. - GDR (a) 64,300 1,473
Yageo Corp. - GDR (a) 63,517 374
-----------
27,801
-----------
Thailand - 1.5%
Advanced Information Services (Alien
Market)(a) 42,000 705
Bangkok Bank PLC (Alien Market)(a) 352,000 888
Bangkok Expressway PLC (Alien Market)(a) 288,000 138
BEC World PLC, Ltd. (Alien Market) 34,939 213
Delta Electronics (Thailand) PLC 50,000 595
Electricity Generating PLC (Alien Market) 61,000 76
Hana Microelectronics PLC (Alien Market)(a) 145,000 654
Jasmine International PLC (Alien Market)(a) 700,000 423
National Petrochemical PLC (Alien Market)(a) 410,000 446
PTT Exploration and Production PLC, Ltd.
(Alien Market)(a) 20,000 123
Siam Cement Co. (Alien Market)(a) 9,581 318
Siam City Cement PLC (Alien Market)(a) 45,000 241
TelecomAsia (Alien Market)(a) 240,000 312
Thai Farmers Bank (Alien Market)(a) 755,700 1,265
-----------
6,397
-----------
Turkey - 6.9%
Akansa Cimento AS 1,370,000 31
Akbank TAS 63,320,352 1,868
Arcelik AS (a) 13,923,920 911
EGE Biracilik Ve Malt Sanayii AS 16,750,000 1,282
Erciyas Biracilik ve Malt Sanayii AS (a) 3,500,000 168
Eregli Demir ve Celik Fabrikalari TAS (a) 8,000,000 332
Ford Otomotiv Sanayi AS (a) 21,546,000 953
Haci Omer Sabanci Holding AS 51,310,000 2,980
Haci Omer Sabanci Holding AS - ADR (a) 70,500 917
Hurriyet Gazetecilik ve Matbaacilik AS (a) 20,207,000 373
Koc Holding AS 5,239,390 966
Migros 7,068,800 4,561
Sasa Suni ve Sentetik Elyaf Sanayii Anonim
Sirketi 5,000,000 150
Tupras 1,491,350 168
Turkiye Garanti Bankasi AS (a) 81,442,800 1,231
Turkiye Is Bankasi 32,287,164 1,548
Vestel Elektronik Sanayi ve Ticaret AS (a) 941,900 226
Yapi ve Kredi Bankasi AS 369,106,168 11,397
-----------
30,062
-----------
United Kingdom - 0.8%
Billiton PLC 204,300 1,211
Genesis Smaller Companies Fund (a) 172,135 2,375
-----------
3,586
-----------
United States - 0.2%
Comverse Technology, Inc. (a) 4,900 709
-----------
Venezuela - 0.4%
Companhia Anonima Nacional Telefonos de
Venezuela - ADR 44,946 1,107
Mavesa SA - ADR 151,875 465
Siderurgica Venezolana "Sivensa" S.A.C.A.
Class B - GDR 13,167 32
-----------
1,604
-----------
Zimbabwe - 0.1%
Delta Corp. 1,010,343 360
-----------
Total Common Stocks
(cost $301,998) 385,432
-----------
Preferred Stocks - 10.0%
Argentina - 0.3%
Quilmes Industrial Quinsa Societe - ADR 120,300 1,436
-----------
Brazil - 9.6%
Aracruz Celulose SA NPV - ADR 35,870 942
Banco Bradesco SA NPV 135,183,000 1,060
Banco do Estado de Sao Paulo NPV (a) 26,849,000 951
Banco Itau SA NPV 31,214,180 2,678
Banco Votorantim SA NPV (a) 20,700,000 951
Brasmotor SA NPV 14,640,000 2,053
CIA Energetica De Minas Gerais 74,997,148 1,681
Companhia Brasileira de Distribuicao Grupo
Pao de Acucar - ADR 29,300 947
Companhia Energetica de Minas Gerais - ADR 25,356 573
Companhia Paranaense de Energia - Copel 157,282,000 1,524
Companhia Paranaense de Energia Copel Class
B - ADR 15,800 147
Companhia Siderurgica de Tubarao NPV (a) 31,000,000 506
97 Emerging Markets Fund
<PAGE>
Emerging Markets Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- -----------
Companhia Vale Do Rio Doce Series A NPV 67,900 1,879
Companmia Cervejaria Brahma NPV 823,000 601
Coteminas (Cia Tec) NPV 6,075,105 555
Eletropaulo Metropolitana-Electricidade
de Sao Paulo SA NPV (a) 17,090,000 1,107
Embratel Participacoes SA - ADR 117,534 3,203
Embratel Participacoes SA NPV 12,591,500 324
Gerdau SA NPV 9,300,000 247
Itausa Investimentos Itau SA 848,000 878
Marcopolo SA NPV 521,000 1
Petroleo Brasileiro SA NPV 14,123,000 3,596
Tele Centro Sul Participacoes SA - ADR 12,700 1,153
Tele Centro Sul Participacoes SA NPV 59,380,300 1,084
Tele Norte Leste Participacoes SA - ADR 71,780 1,830
Tele Norte Leste Participacoes SA NPV 28,795,000 773
Telecomunicacoes Brasileiras SA NPV 4,109,000 540
Telecomunicacoes de Sao Paulo NPV (a) 114,198,586 2,687
Telemig Celular SA Class C NPV (a) 35,333 1
Telesp Celular Participacoes SA NPV 17,818,176 316
Telesp Celular SA Class B NPV 45,852,841 3,630
Telesp Participacoes SA - ADR 13,800 337
Telesp Participacoes SA NPV 30,231,000 733
Uniao de Bancos Brasileiros SA - (Units) 9,720,000 646
Uniao de Bancos Brasileiros SA - GDR 7,300 220
Usinas Siderurgicas de Minas Gerais SA NPV (a) 296,100 1,605
-----------
41,959
-----------
Russia - 0.1%
Lukoil Holding Oil Co. - ADR 57,300 530
-----------
Thailand - 0.0%
Siam Commercial Bank 140,000 171
-----------
Total Preferred Stocks
(cost $35,158) 44,096
-----------
Principal Market
Amount Value
(000) (000)
$ $
--------- -----------
Long-Term Investments - 0.0%
Indonesia - 0.0%
Modernland Realty
6.000% due 01/04/03 (conv.)(c) IDR 30 0
-----------
Total Long-Term Investments
(cost $32) 0
-----------
Short-Term Investments - 1.9%
United States - 1.9%
Frank Russell Investment Company Money
Market Fund, due on demand (b) 8,311 8,311
-----------
Total Short-Term Investments
(cost $8,311) 8,311
-----------
Total Investments - 99.8%
(identified cost $345,499) 437,839
Other Assets and Liabilities,
Net - 0.2% 900
-----------
Net Assets - 100.0% 438,739
===========
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
(c) This security has been valued by the Security Valuation Committee of the
Board of Trustees. It is possible that the estimated value may differ
significantly from the amount that might ultimately be realized.
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:
BRL - Brazilian real
IDR - Indonesian rupiah
MXN - Mexican peso
SGD - Singapore dollar
USD - U.S. dollar
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 98
<PAGE>
Emerging Markets Fund
Statement of Net Assets, continued
December 31, 1999
Market
% of Value
Industry Diversification Net (000)
(Unaudited) Assets $
--------- -----------
Auto & Transportation 1.7% 7,511
Consumer Discretionary 8.5 37,178
Consumer Staples 7.1 31,098
Financial Services 20.2 88,744
Health Care 0.9 4,155
Integrated Oils 2.4 10,245
Material & Processing 12.6 55,273
Miscellaneous 3.2 14,152
Other Energy 3.3 14,602
Producer Durables 5.8 25,239
Technology 12.1 53,115
Utilities 20.1 88,216
Short-Term Investments 1.9 8,311
Long-Term Investments 0.0 --
--------- -----------
Total Investments 99.8 437,839
Other Assets and Liabilities, Net 0.2 900
--------- -----------
Net Assets 100.0% 438,739
========= ===========
Market
% of Value
Geographic Diversification Net (000)
(Unaudited) Assets $
--------- -----------
Pacific Basin 31.4% 137,552
Latin America 31.1 136,619
Middle East 17.2 75,660
Europe 9.8 42,860
Africa 6.3 27,462
Other 2.1 9,375
Short-Term Investments 1.9 8,311
Long-Term Investments 0.0 --
--------- -----------
Total Investments 99.8 437,839
Other Assets and Liabilities, Net 0.2 900
--------- -----------
Net Assets 100.0% 438,739
========= ===========
Foreign Currency Exchange Spot Contracts
Sold Contracts Bought In Unrealized
to Deliver Exchange Appreciation
Out For Settlement (Depreciation)
(000) (000) Date (000)
- ------------- --------- ---------- --------------
BRL 51 USD 28 01/03/00 $ --
MXN 258 USD 27 01/03/00 --
SGD 2 USD 1 01/03/00 --
-------------
$ --
=============
See accompanying notes which are an integral part of the financial statements.
99 Emerging Markets Fund
<PAGE>
Emerging Markets Fund
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Amounts in thousands (except per share amounts) December 31, 1999
Assets
<S> <C> <C>
Investments at market (identified cost $345,499) ....................... $ 437,839
Foreign currency holdings (identified cost $708) ....................... 708
Receivables:
Dividends .......................................................... 636
Investments sold ................................................... 591
Fund shares sold ................................................... 1,005
---------
Total assets .................................................... 440,779
Liabilities
Payables:
Investments purchased .............................................. $ 229
Fund shares redeemed ............................................... 1,346
Accrued fees to affiliates ......................................... 261
Other accrued expenses ............................................. 204
---------
Total liabilities ............................................... 2,040
---------
Net Assets ............................................................. $ 438,739
=========
Net Assets Consist of:
Accumulated distributions in excess of net investment income ........... $ (2,814)
Accumulated net realized gain (loss) ................................... (74,121)
Unrealized appreciation (depreciation) on:
Investments ........................................................ 92,340
Foreign currency-related transactions .............................. (11)
Shares of beneficial interest .......................................... 350
Additional paid-in capital ............................................. 422,995
---------
Net Assets ............................................................. $ 438,739
=========
Net Asset Value, offering and redemption price per share:
Class C ($1,630,585 divided by 130,718 shares of $.01 par value
shares of beneficial interest outstanding) ...................... $ 12.47
=========
Class E ($6,314,481 divided by 504,665 shares of $.01 par value
shares of beneficial interest outstanding) ...................... $ 12.51
=========
Class S ($430,794,084 divided by 34,407,709 shares of $.01 par value
shares of beneficial interest outstanding) ...................... $ 12.52
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 100
<PAGE>
Emerging Markets Fund
Statement of Operations
<TABLE>
<CAPTION>
Amounts in thousands Year Ended December 31, 1999
Investment Income
<S> <C> <C>
Dividends .......................................................... $ 7,347
Dividends from Money Market Fund ................................... 894
Less foreign taxes withheld ........................................ (607)
---------
Total investment income ......................................... 7,634
Expenses
Advisory fees ...................................................... $ 4,046
Administrative fees ................................................ 177
Custodian fees ..................................................... 1,137
Distribution fees - Class C ........................................ 4
Transfer agent fees ................................................ 1,161
Professional fees .................................................. 48
Registration fees .................................................. 95
Shareholder servicing fees - Class C ............................... 1
Shareholder servicing fees - Class E ............................... 8
Trustees' fees ..................................................... 6
Miscellaneous ...................................................... 72
---------
Total expenses .................................................. 6,755
---------
Net investment income .................................................. 879
---------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ........................................................ (2,140)
Foreign currency-related transactions .............................. (2,085) (4,225)
--------- ---------
Net change in unrealized appreciation (depreciation) on:
Investments ........................................................ 153,342
Foreign currency-related transactions .............................. (7) 153,335
--------- ---------
Net realized and unrealized gain (loss) ................................ 149,110
---------
Net increase (decrease) in net assets from operations .................. $ 149,989
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
101 Emerging Markets Fund
<PAGE>
Emerging Markets Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Amounts in thousands Years Ended December 31, 1999
1999 1998
--------- ---------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ........................................ $ 879 $ 4,050
Net realized gain (loss) ..................................... (4,225) (57,573)
Net change in unrealized appreciation (depreciation) ......... 153,335 (57,066)
--------- ---------
Net increase (decrease) in net assets from operations ..... 149,989 (110,589)
--------- ---------
Distributions
From net investment income
Class E ................................................... (16) --
Class S ................................................... (3,161) (2,472)
--------- ---------
Net decrease in net assets from distributions ......... (3,177) (2,472)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions (2,461) 74,397
--------- ---------
Total net increase (decrease) in net assets ...................... 144,351 (38,664)
Net Assets
Beginning of period .......................................... 294,388 333,052
--------- ---------
End of period (including accumulated distribution in excess of
net investment income of $2,814 and undistributed
net investment income of $495, respectively) .............. $ 438,739 $ 294,388
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 102
<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 Operations
Net investment income (loss)(a) .............................. (.12)
Net realized and unrealized gain (loss) ...................... 4.57
---------
Total income from operations .............................. 4.45
---------
Distributions
From net investment income ................................... (.05)
---------
Net Asset Value, End of Period ................................... $ 12.47
=========
Total Return (%)(b) .............................................. 55.43
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ..................... 1,631
Ratios to average net assets (%)(c):
Operating expenses ........................................ 2.91
Net investment income (loss) .............................. (1.23)
Portfolio turnover rate (%) .................................. 94.85
* For the period January 27, 1999 (commencement of sale) to December 31,
1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
103 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.
Years Ended December 31,
------------------------
1999 1998*
---------- ---------
Net Asset Value, Beginning of Period ................. $ 8.48 $ 7.37
--------- ---------
Income From Operations
Net investment income (loss)(a) .................. (.04) (.02)
Net realized and unrealized gain (loss) .......... 4.14 1.13
--------- ---------
Total income from operations .................. 4.10 1.11
--------- ---------
Distributions
From net investment income ....................... (.07) --
--------- ---------
Net Asset Value, End of Period ....................... $ 12.51 $ 8.48
========= =========
Total Return (%)(b) .................................. 48.71 15.06
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ......... 6,314 39
Ratios to average net assets (%)(c)(d):
Operating expenses ............................ 2.17 --
Net investment income (loss) .................. (.40) --
Portfolio turnover rate (%) ...................... 94.85 59.35
* For the period September 22, 1998 (commencement of sale) to December 31,
1998.
(a) Average month-end shares outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
(d) The ratios for the period ended December 31, 1998 are not meaningful due
to the Class's short period of operation.
Emerging Markets Fund 104
<PAGE>
Emerging Markets 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
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ....... $ 8.48 $ 11.79 $ 12.35 $ 11.16 $ 12.25
----------- ----------- ----------- ----------- -----------
Income From Operations
Net investment income (a) .............. .03 .12 .14 .10 .11
Net realized and unrealized gain (loss) 4.10 (3.35) (.56) 1.26 (1.12)
----------- ----------- ----------- ----------- -----------
Total income from operations ........ 4.13 (3.23) (.42) 1.36 (1.01)
----------- ----------- ----------- ----------- -----------
Distributions
From net investment income ............. (.09) (.08) (.14) (.17) (.05)
From net realized gain ................. -- -- -- -- (.03)
----------- ----------- ----------- ----------- -----------
Total distributions ................. (.09) (.08) (.14) (.17) (.08)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ............. $ 12.52 $ 8.48 $ 11.79 $ 12.35 $ 11.16
=========== =========== =========== =========== ===========
Total Return (%)(b) ........................ 49.03 (27.57) (3.45) 12.26 (8.21)
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 430,794 294,349 333,052 271,490 172,673
Ratios to average net assets (%)(b):
Operating expenses, net ............. 1.91 1.75 1.64 1.71 1.75
Operating expenses, gross ........... 1.91 1.75 1.64 1.72 1.80
Net investment income ............... .26 1.20 .87 .77 .88
Portfolio turnover rate (%) ............ 94.85 59.35 50.60 34.62 71.16
</TABLE>
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) 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.
105 Emerging Markets Fund
<PAGE>
Real Estate Securities Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: To generate a high level of total return through above-average
current income, while maintaining the potential for capital appreciation.
Invests in: Equity securities of companies in the real estate industry.
Strategy: The Fund uses a multi-manager strategy intended to achieve higher
returns with moderate risk. The Fund employed the investment management services
of two managers with distinct approaches to investing in real estate equity
securities.
[The following table was depicted as a mountain chart in the printed material.]
Growth of a $10,000 Investment
Real Estate Securities NAREIT Equity Lipper(R)
Dates - Class S REIT ** Real Estate ++
Yearly periods
ended
December 31
Inception* $10,000 $10,000 $10,000
1990 $8,407 $8,466 $8,351
1991 $11,525 $11,474 $11,053
1992 $13,517 $13,141 $12,478
1993 $15,872 $15,726 $15,305
1994 $17,021 $16,224 $15,078
1995 $18,872 $18,699 $17,054
1996 $25,819 $25,292 $22,344
1997 $30,724 $30,424 $27,332
1998 $25,824 $25,096 $23,160
1999 $25,965 $23,937 $22,330
- --------------------------------------------------------------------------------
Total $203,546 $198,460 $184,554
================================================================================
Real Estate Securities Fund - Class S
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $10,055 0.55%
5 Years $15,255 8.81%ss.
Inception* $25,965 10.01%ss.
Real Estate Securities Fund - Class E++++
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $10,030 0.30%
5 Years $15,037 8.50%ss.
Inception* $25,595 9.85%ss.
Real Estate Securities Fund - Class C++++++
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $ 9,961 (0.39)%
5 Years $14,936 8.35%ss.
Inception* $25,422 9.77%ss.
NAREIT Equity REIT Index
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $ 9,538 (4.62)%
5 Years $14,754 8.09%ss.
Inception* $23,937 9.12%ss.
Lipper(R) Real Estate Benchmark
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $ 9,646 (3.54)%
5 Years $14,810 8.17%ss.
Inception* $22,330 8.37%ss.
107 Real Estate Securities Fund
<PAGE>
Real Estate Securities Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Performance Review
For the year ended December 31, 1999, the Real Estate Securities Fund Class S
and Class E shares gained 0.55% and 0.30%, respectively, while Class C shares
fell 0.39%, as compared to the NAREIT Equity REIT Index, which lost 4.62%. The
Fund's margin of performance over the benchmark was primarily due to effective
security selection.
Portfolio Highlights
REITs suffered through one of their worst years in history, saved only by a
December rally that cut losses for the year. REITs suffered from a number of
negative trends, including weakness in small cap value equity investments. Also
impacting the REIT market's performance was concern that late economic cycle
prospects would impair the ability of the underlying properties to generate
internal growth through increased rentals and higher occupancy rates. External
growth opportunities were also questioned, given unattractive capital raising
prospects as depressed prices discouraged equity issuance and rising interest
rates and credit spreads limited debt financing.
The Real Estate Securities Fund fared better during the year. Effective security
selection by both managers helped the Fund limit downside, with Class S results
517 basis points ahead of the benchmark. Both managers gravitated towards higher
quality issues during the year as firms with access to capital were viewed as
having a decided advantage in sustaining business momentum.
Top Ten Equity Holdings
(as a percent of Total Investments) December 31, 1999
Vornado Realty Trust 5.7%
Apartment Investment & Management Co. Class A 5.1
Avalonbay Communities, Inc. 4.9
Equity Office Properties Trust 4.7
Spieker Properties, Inc. 4.3
Starwood Hotels & Resorts Worldwide, Inc. 4.0
Mack-Cali Realty Corp. 3.6
Reckson Services Industries, Inc. 3.3
Simon Property Group, Inc. 3.1
ProLogis Trust 3.1
Portfolio Characteristics
December 31, 1999
Current P/E Ratio 15.9x
Portfolio Price/Book Ratio 1.32x
Market Capitalization - $- Weighted Average 2.28 Bil
Number of Holdings 65
Money Managers
AEW Capital Management, L.P.
Cohen & Steers Capital Management, Inc.
* Real Estate Securities Fund Class S assumes initial investment on July
28, 1989. NAREIT Index comparison for the initial investment began August
1, 1989. Lipper index comparison for the initial investment began October
1, 1989.
** NAREIT Equity REIT Index is an index composed of all the data based on
the last closing price of the month for all tax-qualified REITs listed on
the New York Stock Exchange, American Stock Exchange, and the NASDAQ
National Market System. The data is market value-weighted. The
total-return calculation is based upon whether it is 1-month, 3-months or
12-months. Only those REITs listed for the entire period are used in the
total return calculation.
++ Lipper(R) Real Estate Benchmark is the average total return for the
universe of funds within the Real Estate Funds investment objective. The
total return for the funds reflects adjustments for income dividends and
capital gains distributions reinvested as of the ex-dividend dates.
++++ Real Estate Securities Fund Class S performance has been linked with
Class E to provide historical perspective. For the period, November 4,
1996 (commencement of sale) through May 15, 1998, Class E paid
shareholder service and Rule 12b-1 distribution fees. From May 16, 1998
through the current period, Class E paid only shareholder service fees.
Total return would have been lower had these fees been in effect during
prior reporting periods.
++++++ Real Estate Securities Fund Class S and Class E performance has been
linked with Class C to provide historical perspective. From January 27,
1999 (commencement of sale) through the current period, Class C paid
shareholder service and Rule 12b-1 distribution fees. Total return would
have been lower had these fees been in effect during prior reporting
periods.
ss. Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Real Estate Securities Fund 108
<PAGE>
Real Estate Securities Fund
Statement of Net Assets
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- -------
Common Stocks (b) - 95.0%
Apartment - 20.4%
Apartment Investment &
Management Co. Class A 767,315 30,549
Archstone Communities
Trust 398,724 8,174
Avalonbay Communities,
Inc 841,930 28,889
Brookfield Properties
Corp 323,800 3,400
Camden Property Trust 219,229 6,001
Equity Residential
Properties Trust 322,588 13,770
Essex Property Trust,
Inc 216,000 7,344
Post Properties, Inc. 237,146 9,071
Smith (Charles E.)
Residential Realty,
Inc 279,950 9,903
Summit Properties, Inc. 159,000 2,842
Sun Communities, Inc. 61,700 1,986
-------
121,929
-------
Health Care - 4.7%
Health Care Property
Investors, Inc. 446,600 10,663
Manor Care, Inc. (a) 483,000 7,728
Nationwide Health
Properties, Inc. 715,800 9,842
-------
28,233
-------
Hotels/Leisure - 5.9%
Golf Trust of America,
Inc 51,700 876
Hospitality Properties
Trust 219,000 4,175
Marriot International,
Inc. Class A 157,700 4,977
Starwood Hotels & Resorts
Worldwide, Inc. 1,023,500 24,052
Wyndham International,
Inc. Class A (a) 446,500 1,312
-------
35,392
-------
Leasing - 0.6%
Entertainment Properties
Trust 98,700 1,302
Franchise Finance Corp.
of America 85,700 2,051
Starwood Financial, Inc. 392 7
-------
3,360
-------
Office/Industrial - 40.0%
AMB Property Corp. 853,300 17,013
Arden Realty Group, Inc. 894,550 17,947
Boston Properties, Inc. 234,850 7,310
Cabot Industrial Trust 97,700 1,795
CarrAmerica Realty Corp. 198,800 4,200
Cornerstone Properties,
Inc 335,100 4,901
Cousins Properties, Inc. 194,500 6,601
Crescent Operating, Inc.
(a) 47,900 126
Crescent Real Estate
Equities, Inc. 188,200 3,458
Duke Realty Investments,
Inc 320,919 6,258
Equity Office Properties
Trust 1,136,148 27,978
First Industrial Realty
Trust, Inc. 274,900 7,543
Highwoods Properties,
Inc 491,800 11,434
Kilroy Realty Corp. 172,100 3,786
Liberty Property Trust 183,900 4,460
Mack-Cali Realty Corp. 816,200 21,272
Prentiss Properties Trust 175,500 3,686
ProLogis Trust 946,218 18,215
PS Business Parks, Inc. 235,800 5,364
Reckson Associates Realty
Corp 500,400 10,258
Reckson Services
Industries, Inc. (a) 311,500 19,430
SL Green Realty Corp. 333,600 7,256
Spieker Properties, Inc. 696,700 25,385
Trizec Hahn Corp. 230,300 3,885
-------
239,561
-------
Outlet Centers - 0.4%
Prime Retail, Inc. 212,800 1,197
Tanger Factory Outlet
Centers, Inc. 47,000 975
-------
2,172
-------
Regional Malls - 9.5%
General Growth
Properties, Inc. 455,500 12,754
Macerich Co. (The) 511,100 10,637
Rouse Co. (The) 390,900 8,307
Simon Property Group,
Inc 801,350 18,381
Taubman Centers, Inc. 376,200 4,044
Urban Shopping Centers,
Inc 92,500 2,509
-------
56,632
-------
Self Storage - 3.3%
Public Storage, Inc. 765,056 17,357
Shurgard Storage Centers,
Inc
Class A 117,800 2,732
-------
20,089
-------
Shopping Center - 10.2%
Bradley Real Estate, Inc. 219,300 3,824
Developers Diversified
Realty Corp. 273,800 3,525
Glimcher Realty Trust 155,100 1,997
JDN Realty Corp. 42,950 693
Kimco Realty Corp. 361,300 12,239
Philips International
Realty Corp. 110,800 1,821
Regency Realty Corp. 148,200 2,963
Vornado Realty Trust 1,040,000 33,800
-------
60,862
-------
Total Common Stocks
(cost $590,650) 568,230
-------
109 Real Estate Securities Fund
<PAGE>
Real Estate Securities Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- -------
Short-Term Investments - 4.3%
Frank Russell Investment
Company Money Market
Fund, due on demand (c) 25,874 25,874
-------
Total Short-Term Investments
(cost $25,874) 25,874
-------
Total Investments - 99.3%
(identified cost $616,524) 594,104
Other Assets and Liabilities,
Net - 0.7% 4,101
-------
Net Assets - 100.0% 598,205
=======
(a) Nonincome-producing security.
(b) All common stocks held are Real Estate Investment Trusts (REIT) with the
exception of the following:
Brookfield Properties Corp.
Crescent Operating, Inc.
Manor Care, Inc.
Marriot International, Inc.
Reckson Services Industries, Inc.
Starwood Hotels & Resorts Worldwide, Inc.
Trizec Hahn Corp.
(c) At amortized cost, which approximates market.
See accompanying notes which are an integral part of the financial statements.
Real Estate Securities Fund 110
<PAGE>
Real Estate Securities Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amounts)
December 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $616,524) .................................... $ 594,104
Receivables:
Dividends ......................................................................... 4,605
Investments sold .................................................................. 301
Fund shares sold .................................................................. 1,854
---------
Total assets .................................................................... 600,864
Liabilities
Payables:
Investments purchased .............................................. $ 455
Fund shares redeemed ............................................... 1,855
Accrued fees to affiliates ......................................... 259
Other accrued expenses ............................................. 90
---------
Total liabilities ............................................................... 2,659
---------
Net Assets .......................................................................... $ 598,205
=========
Net Assets Consist of:
Accumulated distributions in excess of net investment income ........................ $ (6,282)
Accumulated net realized gain (loss) ................................................ (24,722)
Unrealized appreciation (depreciation) on:
Investments ....................................................................... (22,420)
Shares of beneficial interest ....................................................... 262
Additional paid-in capital .......................................................... 651,367
---------
Net Assets .......................................................................... $ 598,205
=========
Net Asset Value, offering and redemption price per share:
Class C ($1,771,086 divided by 78,049 shares of $.01 par value
shares of beneficial interest outstanding) ...................................... $ 22.69
=========
Class E ($7,133,784 divided by 313,490 shares of $.01 par value
shares of beneficial interest outstanding) ...................................... $ 22.76
=========
Class S ($589,299,947 divided by 25,782,227 shares of $.01 par value
shares of beneficial interest outstanding) ...................................... $ 22.86
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
111 Real Estate Securities Fund
<PAGE>
Real Estate Securities Fund
Statement of Operations
Amounts in thousands
Year Ended December 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Dividends .......................................................................... $ 38,576
Dividends from Money Market Fund ................................................... 1,751
Interest 2
--------
Total investment income .......................................................... 40,329
Expenses
Advisory fees ....................................................... $ 4,886
Administrative fees ................................................. 308
Custodian fees ...................................................... 250
Distribution fees - Class C ......................................... 6
Transfer agent fees ................................................. 1,339
Professional fees ................................................... 28
Registration fees ................................................... 123
Shareholder servicing fees - Class C ................................ 2
Shareholder servicing fees - Class E ................................ 11
Trustees' fees ...................................................... 7
Miscellaneous ....................................................... 71
--------
Total expenses ................................................................... 7,031
--------
Net investment income ................................................................ 33,298
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on investments .............................................. (22,242)
Net change in unrealized appreciation (depreciation) on investments .................. (10,653)
--------
Net realized and unrealized gain (loss) .............................................. (32,895)
--------
Net increase (decrease) in net assets from operations ................................ $ 403
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Real Estate Securities Fund 112
<PAGE>
Real Estate Securities Fund
Statement of Changes in Net Assets
Amounts in thousands
Years Ended December 31,
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ........................................... $ 33,298 $ 30,253
Net realized gain (loss) ........................................ (22,242) (1,281)
Net change in unrealized appreciation (depreciation) ............ (10,653) (137,901)
--------- ---------
Net increase (decrease) in net assets from operations ......... 403 (108,929)
--------- ---------
Distributions
From net investment income
Class C ....................................................... (67)
Class E ....................................................... (358) (26)
Class S ....................................................... (42,467) (26,915)
From net realized gain
Class E ....................................................... (7)
Class S ....................................................... (9,488)
Net decrease in net assets from distributions ............... (42,892) (36,436)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions ... 63,525 106,663
--------- ---------
Total net increase (decrease) in net assets ....................... 21,036 (38,702)
Net Assets
Beginning of period ............................................. 577,169 615,871
--------- ---------
End of period (including accumulated distributions in excess of
net investment income of $6,282 and undistributed net
investment income of $3,312, respectively ..................... $ 598,205 $ 577,169
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
113 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 Operations
Net investment income (a) ............................... 1.08
Net realized and unrealized gain (loss) ................. (1.06)
---------
Total income from operations .......................... .02
---------
Distributions
From net investment income .............................. (1.46)
---------
Net Asset Value, End of Period ............................ $ 22.69
=========
Total Return (%)(b) ....................................... .19
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ................ 1,771
Ratios to average net assets (%)(c):
Operating expenses .................................... 2.14
Net investment income ................................. 5.12
Portfolio turnover rate (%) ............................. 42.69
* For the period January 27, 1999 (commencement of sale) to December 31,
1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
Real Estate Securities Fund 114
<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 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 Operations
Net investment income (a) .............. 1.28 1.26 1.14 .24
Net realized and unrealized gain (loss) (1.24) (6.12) 3.95 3.85
--------- --------- --------- ---------
Total income from operations ......... .04 (4.86) 5.09 4.09
--------- --------- --------- ---------
Distributions
From net investment income ............. (1.55) (1.43) (1.04) (.32)
From net realized gain ................. -- (.46) (2.21) (1.26)
--------- --------- --------- ---------
Total distributions .................. (1.55) (1.89) (3.25) (1.58)
--------- --------- --------- ---------
Net Asset Value, End of Period ........... $ 22.76 $ 24.27 $ 31.02 $ 29.18
========= ========= ========= =========
Total Return (%)(b) ...................... .30 (16.25) 18.20 15.75
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 7,134 843 388 101
Ratios to average net assets (%)(c):
Operating expenses ................... 1.39 1.47 1.71 1.77
Net investment income ................ 5.42 4.90 3.94 5.31
Portfolio turnover rate (%) ............ 42.69 42.58 49.40 51.75
</TABLE>
* For the period November 4, 1996 (commencement of sale) to December 31,
1996.
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are not annualized.
115 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
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ..... $ 24.44 $ 30.86 $ 29.19 $ 23.51 $ 22.53
-------- -------- -------- -------- ---------
Income From Operations
Net investment income (a) .............. 1.30 1.34 1.36 1.39 1.32
Net realized and unrealized gain (loss) (1.20) (6.13) 3.93 6.89 1.03
-------- -------- -------- -------- ---------
Total income from operations ......... .10 (4.79) 5.29 8.28 2.35
-------- -------- -------- -------- ---------
Distributions
From net investment income ............. (1.68) (1.17) (1.41) (1.34) (1.35)
From net realized gain ................. -- (.46) (2.21) (1.26) (.02)
-------- -------- -------- -------- ---------
Total distributions .................. (1.68) (1.63) (3.62) (2.60) (1.37)
-------- -------- -------- -------- ---------
Net Asset Value, End of Period ........... $ 22.86 $ 24.44 $ 30.86 $ 29.19 $ 23.51
======== ======== ======== ======== =========
Total Return (%) ......................... .55 (15.94) 18.99 36.81 10.87
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 589,300 576,326 615,483 445,619 290,990
Ratios to average net assets (%):
Operating expenses ................... 1.14 1.05 1.02 1.04 1.04
Net investment income ................ 5.41 4.93 4.57 5.64 6.10
Portfolio turnover rate (%) ............ 42.69 42.58 49.40 51.75 23.49
</TABLE>
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
Real Estate Securities Fund 116
<PAGE>
Short-Term Bond Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: The preservation of capital and the generation of current income
consistent with the preservation of capital by investing primarily in
fixed-income securities with low-volatility characteristics.
Invests in: Fixed-income securities with low-volatility characteristics.
Strategy: The Fund uses a multi-style, multi-manager strategy intended to
achieve higher returns with moderate risk relative to other short-term bond
investments. The Fund employed the investment management services of three
managers using three approaches to investment in short-term fixed income
securities.
[The following table was depicted as a mountain chart in the printed material.]
Growth of a $10,000 Investment
Short Term Bond Lipper(R) Short
Dates - Class S ++ ML 1-2.99 ** 1-5 Yr ++++
Yearly periods
ended
December 31
Inception* $10,000 $10,000 $10,000
1990 $10,971 $10,972 $10,808
1991 $12,321 $12,254 $12,093
1992 $12,659 $13,026 $12,782
1993 $13,543 $13,731 $13,569
1994 $13,653 $13,809 $13,519
1995 $15,011 $15,328 $14,972
1996 $15,726 $16,091 $15,639
1997 $16,673 $17,162 $16,595
1998 $17,687 $18,362 $17,544
1999 $18,222 $18,925 $18,062
- --------------------------------------------------------------------------------
Total $156,466 $159,659 $155,584
================================================================================
Short Term Bond Fund - Class S
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $10,303 3.03%
5 Years $13,347 5.94%ss.
10 Years $18,222 6.18%ss.
Short Term Bond Fund - Class Ess.ss.
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $10,281 2.81%
5 Years $13,319 5.90%ss.
10 Years $18,185 6.16%ss.
Short Term Bond Fund - Class Css.ss.ss.
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $10,219 2.19%
5 Years $13,239 5.77%ss.
10 Years $18,076 6.10%ss.
Merrill Lynch 1-2.99 Years Treasury Index
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $10,306 3.06%
5 Years $13,705 6.51%ss.
10 Years $18,925 6.59%ss.
Lipper(R) Short Investment Grade Debt Funds Benchmark
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $10,295 2.95%
5 Years $13,360 5.97%ss.
10 Years $18,062 6.09%ss.
117 Short-Term Bond Fund
<PAGE>
Short Term Bond Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Performance Review
For the year ended December 31, 1999, the Short Term Bond Fund Class S, Class E
and Class C shares reflected total returns of 3.03%, 2.81% and 2.19%
respectively, as compared to the Merrill Lynch 1-2.99 Years Treasury Index,
which rose 3.06%. Performance compared more favorably with the 2.95% gain of the
Lipper(R) Short Investment Grade Debt Funds Benchmark The Fund benefited from
its emphasis on spread sector holdings, which outperformed relative to
comparable maturity treasuries.
Portfolio Highlights
Bonds suffered their worst setback since 1994 and their second worst year in
over two decades. Strong US economic growth led to significantly higher interest
rates and aggressive Fed intervention via actual policy tightening. US
treasuries were most severely impacted relative to other sectors of the US bond
market during the year, with the 30-year US treasury bond losing nearly 15% for
the year. Shorter maturities were less vulnerable to rising rates but also fared
poorly. Spread sectors, including corporate bonds and mortgage- and asset-backed
securities, fared better, as the post-emerging markets crisis spread widening
reversed.
The Fund's spread sector emphasis proved critical in this market environment, as
narrowing spreads helped offset the impact of rising interest rates. Large
allocations to corporate, mortgage, and asset-backed securities added value
relative to comparable duration treasuries. A neutral-to-benchmark duration also
helped avoid weaker returns to longer duration securities.
Top Ten Issuers
(as a percent of Total Investments) December 31, 1999
Federal Home Loan Bank 4.8%
Federal National Mortgage Association 4.0
General Motors Acceptance Corp. 3.5
Daimler Chrysler North America 3.1
General Electric Capital Corp. 3.1
Ford Motor Credit Co. 3.0
Associates Corp. of North America 2.8
CIT Group, Inc. 2.8
American Express Credit 2.7
Citibank Credit Card Master Trust 2.5
Portfolio Characteristics
December 31, 1999
Weighted Average Quality Diversification AA
Weighted Average Years-to-Maturity 2.1 Years
Weighted Average Duration 1.6 Years
Current Yield (SEC 30-day standardized)
Class S 6.1%
Class E 5.8%
Class C 4.8%
Number of Issues 234
Number of Issuers 175
Money Managers Styles
BlackRock Financial Management Mortgage/Asset-
Backed Specialist
Standish, Ayer & Wood, Inc. Corporate Specialist
STW Fixed Income Management, Ltd. Sector Rotation
* Short-Term Bond Fund Class S assumes initial investment on January 1,
1990.
** Merrill Lynch 1-2.99 Years Treasury Index is an index composed of
approximately 160 issues in the form of publicly placed,
coupon-bearing US Treasury debt. Issues must carry a term to maturity
of at least one year, and par amounts outstanding must be no less
than $10 million at the start and at the close of the performance
measurement periods.
++ Prior to April 1, 1995, Fund performance results are reported gross
of investment management fees. For the period following April 1,
1995, Fund performance results are reported net of investment
management fees but gross of any investment services fees.
Information concerning these fees can be obtained from the Fund's
Advisor upon request.
++++ Lipper(R) Short (1-5 Yr.) Investment Grade Debt Funds Benchmark is
the average total return for the universe of funds within the Short
Investment Grade Debt Funds investment objective. The total return
for the funds reflects adjustments for income dividends and capital
gains distributions reinvested as of the ex-dividend dates. This type
of fund which invests at least 65% of assets in investment grade debt
issues (rated in top four grades) with average maturities of five
years or less.
ss. Annualized.
ss.ss. Short-Term Bond Fund Class S performance has been linked with Class E
to provide historical perspective. From February 18, 1999
(commencement of sale) through the current period, Class E paid
shareholder service fees. Total return would have been lower had
these fees been in effect during prior reporting periods.
ss.ss.ss. Short-Term Bond Fund Class S and Class E performance has been linked
with Class C to provide historical perspective. From March 3, 1999
(commencement of sale) through the current period, Class C paid
shareholder service and Rule 12b-1 distribution fees. Total return
would have been lower had these fees been in effect during prior
reporting periods.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Short-Term Bond Fund 118
<PAGE>
Short Term Bond Fund
Statement of Net Assets
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ----------
Long-Term Investments - 96.3%
Asset-Backed Securities - 34.6%
ABFS Equipment Contract Trust
Series 1998-A Class A
6.100% due 10/15/05 479 469
American Express Credit Account Master Trust
Series 1996-1, Class A
6.800% due 12/15/03 5,000 5,002
Series 1997-1, Class A
6.400% due 04/15/05 7,500 7,404
Amresco Residential Securities Mortgage
Loan Trust Step Up Bond
Series 1998-2 Class B1A
6.7400% due 06/25/28 (b) 2,000 1,874
Arcadia Automobile Receivables Trust
Series 1998-B Class A3
5.950% due 11/15/02 1,000 995
Banc One Auto Grantor Trust
Series 1997-A, Class A
6.270% due 11/20/03 1,966 1,961
Barnett Auto Trust
Series 1997-A Class A3
6.030% due 11/15/01 828 828
Boston Edison Co.
Series 1999-1 Class A2
6.450% due 09/15/05 9,350 9,143
California Infrastructure PG&E
Series 1997-1 Class A3
6.150% due 06/25/02 513 513
Captec Franchise Trust
Series 1999-1 Class A1
6.504% due 05/25/05 (b) 1,368 1,334
Case Equipment Loan Trust
Series 1997-B, Class C
6.410% due 09/15/04 88 87
Chase Manhattan Auto Owner Trust
Series 1998-B Class A4
5.800% due 02/17/03 2,000 1,969
Chase Manhattan Credit Card Master Trust
Series 1996-3 Class A
7.040% due 02/15/05 11,000 11,024
Chemical Master Credit Card Trust I
Series 1996-1, Class A
5.550% due 09/15/03 8,000 7,905
Chevy Chase Auto Receivables Trust
Series 1997-1, Class A
6.500% due 10/15/03 785 785
Series 1997-2, Class A
6.350% due 01/15/04 261 260
Series 1997-3, Class A
6.200% due 03/20/04 (b) 530 527
Citibank Credit Card Master Trust I
Series 1997-2 Class A
6.550% due 02/15/04 11,500 11,399
Copelco Capital Funding Corp.
Series 1997-A Class A3
6.270% due 04/20/05 397 397
Series 1999-A Class A2
5.500% due 03/15/01 1,400 1,396
Series 1999-A Class A3
5.665% due 03/15/02 750 740
Series 1999-A Class A5
5.950% due 06/15/04 1,250 1,205
Dayton Hudson Credit Card Master Trust
Series 1997-1 Class A
6.250% due 08/25/05 800 779
Delta Funding Home Equity Loan Trust
Series 1998-1 Class A2A
5.616% due 05/25/30 (b) 170 168
Discover Card Master Trust I
Series 1998-2 Class A
5.800% due 09/16/03 1,000 990
Series 1998-7 Class A
5.600% due 05/15/06 2,000 1,898
Series 1999-1 Class B
5.550% due 08/15/04 (b) 650 629
First Security Auto Grantor Trust
Series 1997-A, Class A
6.300% due 08/15/03 340 339
First Security Automobile Owner Trust
Series 1999-2 Class A3
6.000% due 10/15/03 1,750 1,734
FMAC Loan Receivables Trust
Series 1998-CA Class A1
5.990% due 11/15/04 699 673
119 Short Term Bond Fund
<PAGE>
Short Term Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ----------
Ford Credit Automobile Owner Trust
Series 1997-B Class B
6.400% due 05/15/02 825 817
Series 1999-A Class A4
5.310% due 11/15/01 1,700 1,685
Series 1999-B Class A4
5.800% due 06/15/02 1,225 1,211
Series 1999-C Class A4
6.080% due 09/16/02 4,675 4,627
Franchise Loan Trust
Series 1998-I Class A1
6.240% due 07/15/04 643 626
Green Tree Financial Corp.
Series 1998-1, Class A3
5.950% due 04/01/13 1,250 1,235
Series 1998-6 Class A2
5.910% due 01/01/07 486 485
Green Tree Home Improvement Loan Trust
Series 1997-A, Class HIA3
7.050% due 08/15/23 755 755
Green Tree Recreational, Equipment &
Consumer Loan Trust
Series 1998-C Class A4
6.170% due 02/15/11 1,000 986
Series 1997-C Class A1
6.490% due 02/15/18 556 549
Greenpoint Manufactured Housing
Series 1999-1 Class A2
6.010% due 08/15/15 1,000 963
Honda Automobile Lease Trust
Series 1999-A Class A3
6.100% due 01/15/02 3,500 3,474
Series 1999-A Class A4
6.450% due 09/16/02 2,450 2,439
Honda Automobile Receivables Grantor Trust
Series 1998-A Class A
5.500% due 07/15/04 1,131 1,112
IMC Home Equity Loan Trust
Series 1998-1 Class A3
6.410% due 04/20/18 1,050 1,036
MBNA Master Credit Card Trust
Series-F Class A
6.600% due 11/15/04 10,000 9,938
Mellon Auto Grantor Trust
Series 1999-1 Class A
5.460% due 10/17/05 1,293 1,269
Missouri Higher Education Loan Authority
Series 97 Class P
5.286% due 07/25/08 (b) 967 958
Navistar Financial Corp. Owner Trust
Series 1999-A Class A3
5.950% due 04/15/03 1,675 1,652
Newcourt Equipment Trust Securities
Series 1998-1 Class A3
5.240% due 12/20/02 1,375 1,331
Series 1998-2 Class A3
5.450% due 10/15/02 600 595
Nissan Automobile Receivables Owner Trust
Series 1999-A Class A3
6.470% due 09/15/03 1,025 1,017
NPF VI Inc.
Series 1998-1A, Class A
6.220% due 06/01/02 1,000 986
Olympic Automobile Receivables Trust
Series 1996-B Class A4
6.700% due 03/15/02 668 669
Series 1996-D Class CTFS
6.125% due 04/15/02 2,511 2,463
Onyx Acceptance Auto Trust
Series 1999-B Class A3
5.780% due 02/15/03 (b) 2,025 1,992
PBG Equipment Trust
Series 1A Class A
6.270% due 01/20/12 1,021 993
PNC Student Loan Trust I
Series 1997-2 Class A3
6.314% due 01/25/01 6,197 6,132
Premier Automobile Trust
Series 1999-1 Class A3
5.690% due 11/08/02 8,495 8,384
Series 1999-3 Class A4
6.430% due 03/08/04 (b) 1,600 1,577
Ryder Vehicle Lease Trust
Series 1998-A, Class A
6.100% due 09/15/08 (b) 586 578
Series 1999-A Class A4
6.890% due 04/15/05 1,100 1,090
Sears Credit Account Master Trust
Series 1995-2 Class A
8.100% due 06/15/04 2,329 2,348
Series 1996-4 Class A
6.450% due 10/16/06 5,000 4,950
Series 1998-1 Class A
5.800% due 08/15/05 1,500 1,485
Standard Credit Card Master Trust I
Series 1995-3 Class A
7.850% due 02/07/02 1,025 1,027
Short Term Bond Fund 120
<PAGE>
Short Term Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ----------
Team Fleet Financing Corp.
Series 1998-2A Class A
6.070% due 07/25/02 1,625 1,604
The Money Store Auto Grantor Trust
Series 1997-4, Class A2
6.350% due 03/20/04 212 212
The Money Store Small Business
Administration Loan Trust
Series 1996-2 Class A
6.070% due 04/15/24 (b) 764 758
Series 1997-1 Class A
5.990% due 01/15/25 (b) 1,073 1,059
Series 1997-1 Class B
6.469% due 01/15/25 (b) 715 711
UCFC Home Equity Loan
Series 1993-B1 Class A-1
6.075% due 07/25/14 42 41
USAA Automobile Loan Grantor Trust
Series 1999-1 Class A
6.100% due 02/15/06 (b) 2,039 2,018
Wilshire Funding Corp.
Series 1998-WFC2 Class A3
7.000% due 12/28/37 768 758
World Omni Automobile Lease Securitization
Trust
Series 1996-B Class A3
6.250% due 11/15/02 775 775
Series 1997-A Class A2
6.750% due 06/25/03 (b) 118 117
Series 1997-A, Class A4
6.900% due 06/25/03 2,318 2,315
--------
158,229
--------
Corporate Bonds and Notes - 41.0%
Aerofreighter Finance Trust
7.850% due 10/30/09 675 674
Aristar, Inc.
6.125% due 12/01/00 1,225 1,214
Associates Corp. of North America
5.875% due 07/15/02 9,500 9,253
6.500% due 07/15/02 2,700 2,671
5.750% due 11/01/03 1,000 954
AT&T Capital Corp.
6.250% due 05/15/01 (MTN) 1,750 1,733
Avon Energy Partners Holdings
6.730% due 12/11/02 310 302
Banco De Latinoamerica
6.500% due 04/02/01 2,200 2,188
Bank One Corp.
6.400% due 08/01/02 2,725 2,679
Bear Stearns Co., Inc.
9.375% due 06/01/01 2,000 2,061
Business Loan Center, Inc.
Series 1998-1A
6.750% due 04/02/05 1,100 1,106
Carramerica Realty Corp.
6.625% due 10/01/00 1,575 1,560
Chase Manhattan Corp.
10.125% due 11/01/00 2,009 2,064
CIT Group, Inc.
5.000% due 10/06/00 (MTN) 750 740
6.125% due 12/15/00 (MTN) 8,100 8,045
6.500% due 06/14/02 (MTN) 3,800 3,754
Coca-Cola Put Asset Trust
6.000% due 03/15/01 1,950 1,934
Comdisco, Inc.
6.000% due 01/30/02 2,000 1,939
Conseco, Inc.
6.400% due 06/15/01 1,850 1,794
Cox Communications, Inc.
7.000% due 08/15/01 2,000 1,996
DaimlerChrysler AG
6.371% due 08/23/02 (b) 2,250 2,254
Series B
6.460% due 12/07/01 (MTN) 12,000 11,908
Donaldson, Lufkin & Jenrette, Inc.
5.875% due 04/01/02 1,150 1,116
El Paso Energy Corp.
12.000% due 12/15/00 1,925 1,973
Series B
6.625% due 07/15/01 1,050 1,043
Enron Corp.
6.450% due 11/15/01 1,825 1,799
ERAC USA Finance Co.
6.375% due 05/15/03 1,900 1,825
Finova Capital Corp.
6.625% due 09/15/01 2,000 1,980
First Bank South Dakota
6.533% due 12/20/00 (b) 500 501
Firstar Corp.
6.500% due 07/15/02 545 537
Fleet Credit Card, LLC
6.450% due 10/30/00 250 249
Ford Motor Credit Co.
6.500% due 02/28/02 12,000 11,874
6.700% due 07/16/04 1,600 1,566
Franchise Finance Corp.
7.000% due 11/30/00 1,575 1,556
121 Short Term Bond Fund
<PAGE>
Short Term Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ----------
General Electric Capital Corp. (MTN)
5.430% due 02/25/02 4,000 3,889
Series A
6.330% due 09/17/01 5,500 5,462
5.180% due 02/01/02 2,380 2,301
6.520% due 10/08/02 2,500 2,474
General Motors Acceptance Corp.
5.350% due 04/16/01 (MTN) 12,000 11,780
6.850% due 04/17/01 (MTN) 750 750
8.500% due 01/01/03 1,500 1,554
7.137% due 04/01/20 (b) 1,872 1,874
Hertz Corp.
6.500% due 04/01/00 450 450
6.625% due 07/15/00 900 900
Homeside Lending, Inc.
6.875% due 05/15/00 (MTN) 2,025 2,028
Household Finance Corp.
6.125% due 07/15/02 (MTN)(b) 450 438
IBM Credit Corp.
6.450% due 11/12/02 (MTN) 1,300 1,286
International Lease Finance Corp.
8.875% due 04/15/01 1,500 1,536
Lehman Brothers Holdings, Inc.
6.000% due 02/26/01 (MTN) 1,500 1,483
MBNA Corp.
Series B
6.500% due 09/15/00 (MTN) 1,375 1,371
Metropolitan Life Insurance Co.
6.300% due 11/01/03 730 705
Midlantic Corp.
9.200% due 08/01/01 1,123 1,156
Morgan Stanley Dean Witter & Co.
7.125% due 01/15/03 935 934
5.625% due 01/20/04 (MTN) 1,750 1,648
Nabisco, Inc.
6.000% due 02/15/01 415 409
National Westminster Bank PLC
9.450% due 05/01/01 5,500 5,670
NationsBank Corp.
8.125% due 06/15/02 2,750 2,812
News America Holdings, Inc.
7.450% due 06/01/00 775 778
Norwest Financial, Inc.
6.375% due 09/15/02 1,000 984
Panamsat Corp.
6.000% due 01/15/03 1,100 1,020
Paramount Communications, Inc.
7.500% due 01/15/02 875 877
Popular North America, Inc.
Series D
6.875% due 06/15/01 (MTN) 1,100 1,093
Procter & Gamble
9.625% due 01/14/01 6,920 7,107
Reilly
7.430% due 03/01/19 1,154 1,156
Safeway, Inc.
7.000% due 09/15/02 2,100 2,091
Salomon Smith Barney Holdings, Inc.
6.625% due 07/01/02 75 74
6.500% due 10/15/02 300 296
Salomon, Inc.
7.750% due 05/15/00 1,000 1,005
Sears Roebuck Acceptance Corp. (MTN)
Series II
6.690% due 04/30/01 1,800 1,783
Series III
6.820% due 10/17/02 6,000 5,868
Tele-Communications, Inc.
8.250% due 01/15/03 2,000 2,070
Textron, Inc.
6.750% due 09/15/02 11,000 10,890
US Bank National Association Minnesota
6.350% due 09/28/01 2,000 1,989
US West Capital Funding, Inc.
6.875% due 08/15/01 1,230 1,219
Wal-Mart Stores, Inc.
6.150% due 08/10/01 2,300 2,280
Waste Management, Inc.
7.100% due 08/01/26 1,175 1,089
Wells Fargo Co.
6.500% due 09/03/02 1,500 1,485
Williams Companies, Inc.
6.125% due 02/01/01 285 283
--------
187,189
--------
Eurodollar Bonds - 1.7%
American Express Travel
6.323% due 10/24/01 (b) 1,500 1,496
Argentina, Republic of
Series B
Zero Coupon due 04/ 15/01 1,500 1,331
Diageo Capital PLC
6.625% due 06/24/04 545 533
Lehman Brothers Holdings, Inc.
6.089% due 06/10/03 (b) 2,278 2,227
St. George Bank, Ltd.
Series E
6.231% due 11/29/01 (MTN)(b) 2,000 1,998
--------
7,585
--------
Short Term Bond Fund 122
<PAGE>
Short Term Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ----------
Mortgage-Backed Securities - 8.9%
Asset Securitization Corp.
Series 1997-D5 Class A1A
6.500% due 02/14/41 898 888
Bayview Financial Acquisition Trust
Series 1998-1, Class A1
7.010% due 05/25/29 936 923
Bear Stearns Mortgage Securities, Inc.
Series 1996-6 Class A2
7.000% due 11/25/27 133 132
Chase Commercial Mortgage Securities Corp.
Series 1997-2 Class A1
6.450% due 12/19/04 1,909 1,866
Citicorp Mortgage Securities, Inc.
Series 1994-4 Class A6
6.000% due 02/25/09 975 911
Deutsche Mortgage & Asset Receiving Corp.
Series 1998-C1 Class A1
6.220% due 09/15/07 424 408
DLJ Mortgage Acceptance Corp.
Series 1995-CF2 Class A1A
6.650% due 12/17/27 348 346
Series 1996-CF2 Class A1A
6.860% due 11/12/21 621 616
Series 1997-CF1 Class A1A
7.400% due 05/15/06 1,101 1,101
Series 1999-STF1 Class A1
6.880% due 09/05/01 (b) 675 675
Federal Home Loan Mortgage Corp.
6.964% due 2027 (b) 2,323 2,317
Federal Home Loan Mortgage Corp.
Participation Certificate
7.500% due 2000 13 13
7.500% due 2002 6 6
9.000% due 2005 172 174
6.250% due 2007 36 35
5.500% due 2009 2,396 2,269
7.000% due 2011 1,299 1,289
Federal National Mortgage Association
7.000% due 2004 665 664
8.750% due 2004 29 29
6.500% due 2008 1,550 1,522
5.500% due 2009 7,813 7,411
8.000% due 2009 1,755 1,772
7.000% due 2014 (b) 666 659
7.500% due 2014 1,385 1,395
8.500% due 2014 680 691
5.812% due 2029 (b) 354 339
Series 1998-32 Class TB
6.000% due 05/18/13 1,000 979
Government National Mortgage Association
7.250% due 2006 1,312 1,316
7.000% due 2007 68 67
7.000% due 2008 843 835
7.000% due 2009 893 884
8.250% due 2009 693 719
7.000% due 2011 436 431
7.000% due 2012 391 387
9.500% due 2017 592 628
Series 1994-1 Class PE
7.500% due 07/16/22 1,150 1,159
Series 1997-11 Class M
8.000% due 05/16/24 1,045 1,054
Morgan Stanley Capital I, Inc.
Series 1998-CF1 Class A1
6.330% due 10/15/07 409 395
Prudential Home Mortgage Securities
Series 1994-19, Class A2
7.050% due 05/25/24 317 316
Residential Accredited Loans, Inc.
Series 1997-QS7, Class A1
7.500% due 07/25/27 102 102
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 03/25/28 173 172
Series 1998-A2, Class A1
6.750% due 04/25/28 417 414
Residential Funding Mortgage Securities
Series 1998-NS1 Class A2
6.375% due 01/25/09 802 792
Resolution Trust Corp. Mortgage Pass-thru
Certificate
Series 1995-2, Class C1
7.650% due 05/25/29 (b) 365 356
Union Planters Mortgage Finance Corp.
Series 1998-A, Class A1
6.350% due 01/25/28 451 448
Series 1999-1 Class A1
6.250% due 04/01/29 547 529
Wilshire Funding Corporation
Series 1997-WFC1, Class AI
7.250% due 08/25/27 500 499
--------
40,939
--------
123 Short Term Bond Fund
<PAGE>
Short-Term Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ----------
Municipal Bonds - 0.3%
Philadelphia, Pennsylvania, Authority for
Industrial Development
Series 1997 Class A
6.488% due 06/15/04 1,386 1,289
--------
United States Government Agencies - 5.6%
Federal Farm Credit Bank
5.220% due 09/11/01 1,250 1,225
Federal Home Loan Bank
5.875% due 08/15/01 1,000 991
5.875% due 09/17/01 18,000 17,823
5.250% due 04/25/02 2,000 1,940
Federal National Mortgage Association
6.140% due 06/12/02 (MTN) 2,900 2,858
Tennessee Valley Authority
Series D
6.000% due 11/01/00 750 747
--------
25,584
--------
United States Government Treasuries - 1.4%
United States Treasury Notes
5.375% due 02/15/01 1,300 1,289
5.500% due 08/31/01 2,100 2,076
3.375% due 01/15/07 2,503 2,358
3.625% due 01/15/08 929 885
--------
6,608
--------
Yankee Bonds - 2.8%
Edperbrascan Corp.
7.375% due 10/01/02 2,000 1,961
Manitoba, Province of
8.000% due 04/15/02 5,600 5,738
Tyco International, Ltd.
6.500% due 11/01/01 3,000 2,953
Westpac Banking, Ltd.
7.875% due 10/15/02 2,006 2,042
--------
12,694
--------
Total Long-Term Investments
(cost $447,167) 440,117
--------
Short-Term Investments - 3.2%
Federal Home Loan Bank Discount Note
5.680% due 01/19/00 1,250 1,247
Frank Russell Investment Company Money
Market Fund, due on demand (a) 13,211 13,211
--------
Total Short-Term Investments
(cost $14,458) 14,458
--------
Total Investments - 99.5%
(identified cost $461,625) 454,575
Other Assets and Liabilities, Net - 0.5% 2,509
--------
Net Assets - 100.0% 457,084
========
(a) At amortized 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 124
<PAGE>
Short Term Bond Fond
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Amounts in thousands (except per share amounts) December 31, 1999
Assets
<S> <C> <C>
Investments at market (identified cost $461,625) ........................................................... $ 454,575
Receivables:
Dividends and interest ................................................................................. 5,753
Fund shares sold ....................................................................................... 751
From Advisor ........................................................................................... 100
---------
Total assets ........................................................................................ 461,179
Liabilities
Payables:
Fund shares redeemed ........................................................................ $ 3,844
Accrued fees to affiliates .................................................................. 224
Other accrued expenses ...................................................................... 27
---------
Total liabilities ................................................................................... 4,095
---------
Net Assets ................................................................................................. $ 457,084
=========
Net Assets Consist of:
Undistributed net investment income ........................................................................ $ 168
Accumulated net realized gain (loss) ....................................................................... (18,035)
Unrealized appreciation (depreciation) on investments ...................................................... (7,050)
Shares of beneficial interest .............................................................................. 253
Additional paid-in capital ................................................................................. 481,748
---------
Net Assets ................................................................................................. $ 457,084
=========
Net Asset Value, offering and redemption price per share:
Class C ($800,598 divided by 44,158 shares of $.01 par value
shares of beneficial interest outstanding) .......................................................... $ 18.13
=========
Class E ($8,693,112 divided by 480,760 shares of $.01 par value
shares of beneficial interest outstanding) .......................................................... $ 18.08
=========
Class S ($447,589,936 divided by 24,818,524 shares of $.01 par value
shares of beneficial interest outstanding) .......................................................... $ 18.03
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
125 Short Term Bond Fund
<PAGE>
Short Term Bond Fond
Statement of Operations
<TABLE>
<CAPTION>
Amounts in thousands Year Ended December 31, 1999
<S> <C> <C>
Investment Income
Interest .............................................................................................. $ 26,239
Dividends from Money Market Fund ...................................................................... 1,092
--------
Total investment income ............................................................................ 27,331
Expenses
Advisory fees ................................................................................ $ 2,041
Administrative fees .......................................................................... 229
Custodian fees ............................................................................... 334
Distribution fees - Class C .................................................................. 4
Transfer agent fees .......................................................................... 607
Professional fees ............................................................................ 10
Registration fees ............................................................................ 159
Shareholder servicing fees - Class C ......................................................... 1
Shareholder servicing fees - Class E ......................................................... 15
Trustees' fees ............................................................................... 12
Miscellaneous ................................................................................ 3
--------
Total expenses ..................................................................................... 3,415
--------
Net investment income ..................................................................................... 23,916
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on investments ................................................................... (2,426)
Net change in unrealized appreciation (depreciation) on investments ....................................... (7,220)
--------
Net realized and unrealized gain (loss) ................................................................... (9,646)
--------
Net increase (decrease) in net assets from operations ..................................................... $ 14,270
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Short Term Bond Fund 126
<PAGE>
Short Term Bond Fond
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Amounts in thousands Years Ended December 31,
1999 1998
--------- ---------
Increase (Decrease) in Net Assets
<S> <C> <C>
Operations
Net investment income ................................................................ $ 23,916 $ 13,185
Net realized gain (loss) ............................................................. (2,426) 1,126
Net change in unrealized appreciation (depreciation) ................................. (7,220) 355
--------- ---------
Net increase (decrease) in net assets from operations ............................. 14,270 14,666
--------- ---------
Distributions
From net investment income
Class C ........................................................................... (24) --
Class E ........................................................................... (303) --
Class S ........................................................................... (24,023) (13,149)
--------- ---------
Net decrease in net assets from distributions ................................. (24,350) (13,149)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions ........................ 206,625 29,552
--------- ---------
Total net increase (decrease) in net assets .............................................. 196,545 31,069
Net Assets
Beginning of period .................................................................. 260,539 229,470
--------- ---------
End of period (including undistributed net investment income of
$168 and $621, respectively) ...................................................... $ 457,084 $ 260,539
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
127 Short Term Bond Fund
<PAGE>
Short Term Bond Fond
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 Operations
Net investment income (a) ...................................... .68
Net realized and unrealized gain (loss) ........................ (.31)
-------
Total income from operations ................................ .37
-------
Distributions
From net investment income ..................................... (.60)
-------
Net Asset Value, End of Period ..................................... $ 18.13
=======
Total Return (%)(b) ................................................ 2.02
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ....................... 801
Ratios to average net assets (%)(c):
Operating expenses .......................................... 1.72
Net investment income ....................................... 4.41
Portfolio turnover rate (%) .................................... 177.08
* For the period March 3, 1999 (commencement of sale) to December 31, 1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
Short Term Bond Fund 128
<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 Operations
Net investment income (a) .................................... .80
Net realized and unrealized gain (loss) ...................... (.34)
---------
Total income from operations .............................. .46
---------
Distributions
From net investment income ................................... (.89)
---------
Net Asset Value, End of Period ................................... $ 18.08
=========
Total Return (%)(b) .............................................. 2.53
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ..................... 8,693
Ratios to average net assets (%)(c):
Operating expenses ........................................ .97
Net investment income ..................................... 5.05
Portfolio turnover rate (%) .................................. 177.08
* For the period February 18, 1999 (commencement of sale) to December 31,
1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
129 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
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................... $ 18.46 $ 18.35 $ 18.36 $ 18.55 $ 17.98
----------- ----------- ----------- ----------- -----------
Income From Operations
Net investment income (a) ........................... .90 .99 1.08 1.04 1.16
Net realized and unrealized gain (loss) ............. (.36) .11 -- (.19) .59
----------- ----------- ----------- ----------- -----------
Total income from operations ..................... .54 1.10 1.08 .85 1.75
----------- ----------- ----------- ----------- -----------
Distributions
From net investment income .......................... (.97) (.99) (1.09) (1.04) (1.18)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period .......................... $ 18.03 $ 18.46 $ 18.35 $ 18.36 $ 18.55
=========== =========== =========== =========== ===========
Total Return (%)(b) ..................................... 3.03 6.09 6.02 4.76 9.95
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ............ 447,590 260,539 229,470 222,983 183,577
Ratios to average net assets (%)(b):
Operating expenses ............................... .74 .66 .66 .70 .58
Net investment income ............................ 5.22 5.37 5.70 5.70 6.41
Portfolio turnover rate (%) ......................... 177.08 129.85 213.14 264.40 269.31
</TABLE>
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) 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.
Short Term Bond Fund 130
<PAGE>
Diversified Bond Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: To provide effective diversification against equities and a stable
level of cash flow by investing in fixed-income securities.
Invests in: Fixed-income securities.
Strategy: The Fund uses a multi-style, multi-manager strategy and employed three
managers with distinct approaches to managing portfolios of intermediate-
maturity, investment-grade fixed income securities.
[The following table was depicted as a mountain chart in the printed material.]
Growth of a $10,000 Investment
Diversified
Bond- LB Lipper(R)
Dates Class S Aggregate** Intermediate++
-- $10,000 $10,000 $10,000
1990 $10,758 $10,896 $10,708
1991 $12,404 $12,640 $12,334
1992 $13,218 $13,575 $13,165
1993 $14,541 $14,596 $14,416
1994 $14,069 $14,464 $13,935
1995 $16,567 $17,136 $16,246
1996 $17,134 $17,758 $16,762
1997 $18,692 $19,473 $18,177
1998 $20,205 $21,164 $19,528
1999 $19,950 $20,991 $19,278
- --------------------------------------------------------------------------------
Total $167,536 $172,996 $164,550
================================================================================
Yearly periods ended December 31
Diversified Bond Fund - Class S
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $9,874 (1.26)%
5 Years $14,180 7.23%ss.
10 Years $19,950 7.15%ss.
Diversified Bond Fund - Class E++++
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $9,849 (1.51)%
5 Years $13,974 6.92%ss.
10 Years $19,660 6.99%ss.
Diversified Bond Fund - Class C++++++
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $9,786 (2.14)%
5 Years $13,885 6.78%ss.
10 Years $19,534 6.92%ss.
Lehman Brothers Aggregate Bond Index
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $9,918 (0.82)%
5 Years $14,512 7.73%ss.
10 Years $20,991 7.70%ss.
Lipper(R) Intermediate Investment Grade Debt Funds Benchmark
Periods Ended 12/31/99 Growth of $10,000 Total Return
- ---------------------- ----------------- ------------
1 Year $9,872 (1.28)%
5 Years $13,834 6.71%ss.
10 Years $19,278 6.78%ss.
131 Diversified Bond Fund
<PAGE>
Diversified Bond Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Performance Review
For the year ended December 31, 1999, the Diversified Bond Fund Class S, Class E
and Class C shares reflected losses of 1.26%, 1.51% and 2.14%, respectively, as
compared to the Lehman Brothers Aggregate Bond Index, which fell 0.82%. The year
proved challenging for the Fund's managers as spread widening, yield curve
strategies, and duration strategies all negatively impacted Fund results at
different times during the year. Spread sector holdings helped dampen market
weakness in the latter half of the year as favorable economic trends supported
narrowing credit spreads. Higher yields on these sectors helped offset some of
the impact of the impact of rising interest rates.
Portfolio Highlights
Bonds suffered their worst setback since 1994 and their second worst year in
over two decades. Strong US economic growth led to significantly higher interest
rates and aggressive Fed intervention via actual policy tightening. US
treasuries were most severely impacted relative to other sectors of the US bond
market during the year, with the 30-year US treasury bond losing nearly 15% for
the year. Spread sectors, including corporate bonds and mortgage- and
asset-backed securities, fared better as the post-emerging markets crisis spread
widening reversed.
The Fund's emphasis on spread sector holdings was a source of returns for the
year, however, results attributable to other decisions were generally mixed.
High-grade corporates and mortgage-backed securities were overweighted relative
to the Lehman Brothers Aggregate Bond Index and were a net positive contributor
for the year. Duration strategies helped mitigate market weakness, but detracted
during the third quarter. Security selection helped, while yield curve
strategies were only a slight negative. In a difficult market, all three
managers were limited in their effectiveness.
Top Ten Issuers
(as a percent of Total Investments) December 31, 1999
Federal National Mortgage Association 17.6%
United States Treasury 13.3
Government National Mortgage Association 12.1
Federal Home Loan Mortgage Corp. 10.5
Federal Home Loan Bank 3.7
General Motors Acceptance Corp. 1.2
DLJ Mortgage Acceptance Corp. 0.8
Ford Motor Credit Corp. 0.8
Tennessee Valley Authority 0.7
ICI Wilmington, Inc. 0.6
Portfolio Characteristics
December 31, 1999
Weighted Average Quality Diversification AAA
Weighted Average Years-to-Maturity 8.1 Years
Weighted Average Duration 4.8 Years
Current Yield (SEC 30-day standardized)
Class S 6.6%
Class E 6.2%
Class C 5.6%
Number of Issues 1078
Number of Issuers 684
Money Managers Styles
Lincoln Capital Management Co. Enhanced Core
Pacific Investment Management Co. Broad Market- Sector
Rotation
Standish, Ayer & Wood, Inc. Broad Market- Sector
Rotation
* Diversified Bond Fund Class S assumes initial investment on January
1, 1990.
** Lehman Brothers Aggregate Bond Index is composed of securities from
Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed
Securities Index, and the Asset-Backed Securities Index. Total return
comprises price appreciation/depreciation and income as a percentage
of the original investment. Indexes are rebalanced monthly by market
capitalization.
++ Lipper(R) Intermediate (5-10 Yr.) Investment Grade Debt Funds
Benchmark total return for the universe of funds within the
Intermediate Investment Grade Debt Funds investment objective. The
total return for the funds reflects adjustments for income dividends
and capital gains distributions reinvested as of the ex-dividend
dates.
++++ Diversified Bond Fund Class S performance has been linked with Class
E to provide historical perspective. For the period November 4, 1996
(commencement of sale) to May 15, 1998, Class E paid shareholder
service and Rule 12b-1 distribution fees. From May 16, 1998 through
the current period, Class E paid only shareholder service fees. Total
return would have been lower had these fees been in effect during
prior reporting periods.
++++++ Diversified Bond Fund Class S and Class E performance has been linked
with Class C to provide historical perspective. From January 27, 1999
(commencement of sale) through the current period, Class C paid
shareholder service and Rule 12b-1 distribution fees. Total return
would have been lower had these fees been in effect during prior
reporting periods.
ss. Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Diversified Bond Fund 132
<PAGE>
Diversified Bond Fund
Statement of Net Assets
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ----------
Long-Term Investments - 100.2%
Asset-Backed Securities - 8.5%
ANRC Automobile Owner Trust
Series 1999-A Class A4
6.940% due 04/17/06 3,075 3,059
Arcadia Automobile Receivables Trust
Series 1998-B Class A3
5.950% due 11/15/02 610 607
BankAmerica Manufactured Housing Contract
Series 1997-1 Class A4
6.200% due 06/10/10 (c) 707 704
Bombardier Capital Mortgage Securitization
Series 1999-B Class A3
7.180% due 12/15/15 1,050 1,045
Boston Edison Co.
Series 1999-1 Class A3
6.620% due 03/15/07 (c) 500 481
California Infrastructure PG&E-1
Series 1997-1 Class A7
6.420% due 09/25/08 410 397
California Infrastructure SDG&E
6.310% due 09/25/08 2,230 2,161
Carco Auto Loan Master Trust
Series 1994-4 Class A
6.430% due 11/15/04 1,580 1,565
Centex Home Equity
Series 1999-2 Class A3
6.260% due 07/25/25 1,120 1,091
Charter Financial, Inc.
Series 1999-1 Class A4
7.070% due 01/25/06 1,890 1,889
Chase Credit Card Master Trust
Series 1999-3 Class B
6.950% due 01/15/07 975 965
Citibank Credit Card Master Trust I
Series 1997-3 Class A
6.839% due 02/10/04 (c) 980 972
Conseco Finance
Series 1999-F Class A2
6.720% due 10/15/30 855 849
First Omni Credit Card Master Trust
Series 1996-A Class A
6.650% due 09/15/03 1,290 1,286
Fleetwood Credit Corporation Grantor Trust
Series 1997-B Class A
6.400% due 05/15/13 (c) 1,966 1,952
Ford Credit Automobile Owner Trust
Series 1999-D Class A5
6.520% due 09/15/03 1,785 1,767
GE Capital Mortgage Services, Inc.
Series 1999-HE1 Class A4
6.185% due 01/25/23 585 567
Series 1999-HE1 Class A7
6.265% due 04/25/29 1,250 1,181
Green Tree Home Improvement Loan Trust
Series 1998-D Class HEA5
6.320% due 08/15/29 1,360 1,313
Series 1998-D Class HIA2
5.940% due 06/15/29 207 207
Series 1998-E Class HIA1
5.907% due 08/15/07 463 461
Green Tree Lease Finance
Series 1998-1 Class A4
5.740% due 01/20/04 540 526
Green Tree Recreational, Equipment &
Consumer Loan Trust
Series 1998-A Class A1C
6.180% due 06/15/19 305 300
Series 1998-C Class A4
6.170% due 02/15/11 400 395
Heller Equipment Asset Receivables Trust
Series 1999-1 Class A3
5.500% due 07/13/03 2,115 2,078
Series 1999-2 Class A3
6.650% due 03/14/04 1,500 1,491
Ikon Receivables, L.L.C.
Series 1999-1 Class A3
5.990% due 05/15/05 2,580 2,547
Indymac Home Equity Loan Trust Step Up Bond
Series 1998-A Class AF4
6.310% due 10/25/29 (c) 855 821
MBNA Master Credit Card Trust
Series 1999-G Class B
6.600% due 12/15/06 1,500 1,461
Metris Master Trust
Series 1997-1 Class A
6.870% due 10/20/05 2,695 2,698
MMCA Auto Owner Trust
Series 1999-2 Class A3
7.000% due 05/15/04 2,065 2,072
NationsBank Credit Card Master Trust
Series 1993-2 Class A
6.000% due 12/15/05 460 444
133 Diversified Bond Fund
<PAGE>
Diversified Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ----------
Onyx Acceptance Grantor Trust
Series 1998-C Class A2
5.550% due 09/15/01 457 457
PacificAmerica Home Equity Loan
Step Up Bond
Series 1998-2 Class AF
6.590% due 09/15/27 (c) 1,175 1,154
Peco Energy Transition Trust
Series 1999-A Class A4
5.800% due 03/01/07 1,600 1,518
Preferred Credit Corp.
Series 1997-1 Class A6
7.590% due 07/25/26 850 851
Premier Auto Trust
Series 1998-5 Class A4
5.190% due 04/08/03 1,455 1,408
Series 1999-3 Class A4
6.430% due 03/08/04 890 877
Provident Bank Home Equity Loan Trust
Series 1998-4 Class A2
5.970% due 11/25/13 1,095 1,080
Series 1998-4 Class A4
6.170% due 04/25/22 1,070 1,036
Residential Funding Mortgage Securities II, Inc.
Series 1999-HI6 Class AI3
7.340% due 07/25/12 1,330 1,324
Series 1999-HI1 Class A3
6.310% due 09/25/29 835 819
Saxon Asset Securities Trust
Series 1999-3 Class AF3
7.205% due 01/25/19 835 830
Series 1998-4 Class AF3
6.265% due 07/25/23 1,290 1,263
Sears Credit Account Master Trust
Series 1999-2 Class A
6.350% due 02/15/07 3,645 3,585
Sears Credit Account Master Trust II
Series 1996-4 Class A
6.450% due 10/16/06 1,180 1,168
Student Loan Marketing Association
Series 1996-3 Class A1
5.354% due 10/25/04 (c) 1,248 1,241
Team Fleet Financing Corp.
Series 1997-1 Class A
7.350% due 05/15/03 1,800 1,782
The Money Store Home Equity Loan Trust
Series 1998-A Class AF5
6.370% due 12/15/23 1,170 1,152
UCFC Home Equity Loan
Series 1996-B1 Class A4
7.525% due 12/15/17 454 454
USAA Auto Loan Grantor Trust
Series 1998-1 Class A
5.800% due 01/15/05 1,445 1,437
Vanderbilt Mortgage & Finance, Inc.
Series 1999-A Class 1A3
6.080% due 12/07/15 690 648
Series 1999-B Class 1A3
6.280% due 03/07/13 905 875
Series 1999-D Class IA2
6.815% due 08/07/12 505 498
World Omni Automobile Lease Securitization Trust
Series 1997-A Class B
7.300% due 06/25/03 (c) 732 731
--------
65,540
--------
Bankers Acceptance Notes - 0.1%
Mellon Bank, NA
7.625% due 09/15/07 355 357
Signet Bank
7.800% due 09/15/06 255 257
--------
614
--------
Corporate Bonds and Notes - 21.0%
Ahold Finance USA, Inc.
6.250% due 05/01/09 2,135 1,913
Air Products & Chemicals, Inc
8.750% due 04/15/21 250 256
Allegiance Corp.
7.000% due 10/15/26 130 126
America West Airlines
Series A
6.850% due 07/02/09 459 428
American Financial Group, Inc.
7.125% due 04/15/09 1,275 1,142
American General Corp.
7.125% due 02/15/04 340 334
American Health Properties, Inc.
7.050% due 01/15/02 550 532
Archer Daniels Co.
8.375% due 04/15/17 665 699
ARG Funding Corp.
Series 1999-1A Class A3
6.020% due 05/20/05 (c) 1,225 1,160
Aristar, Inc.
6.000% due 05/15/02 1,635 1,585
Diversified Bond Fund 134
<PAGE>
Diversified Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ----------
Associates Corp. of North America
6.500% due 10/15/02 450 444
5.750% due 11/01/03 3,000 2,861
5.500% due 02/15/04 875 821
Series H
7.090% due 04/11/03 (MTN) 400 400
AT&T Corp.
8.625% due 12/01/31 220 220
Atlantic Richfield Co.
9.125% due 08/01/31 550 645
Avco Financial Services, Inc.
6.000% due 08/15/02 800 779
Baltimore Gas & Electric Co.
7.250% due 07/01/02 500 504
6.500% due 02/15/03 840 829
Bank of New York, Inc.
7.875% due 11/15/02 350 357
Bank One Corp.
6.875% due 08/01/06 800 775
BankAmerica Corp.
6.850% due 03/01/03 425 419
6.875% due 06/01/03 260 257
Series H
5.750% due 03/01/04 (MTN) 400 379
BankBoston Corp.
6.125% due 03/15/02 (MTN) 250 245
Barnett Bank, Inc.
6.900% due 09/01/05 405 394
Baxter International, Inc.
6.630% due 02/15/28 825 700
Bear Stearns Co., Inc.
6.661% due 02/16/01 (MTN)(c) 2,000 2,001
Series B
6.396% due 05/16/03 (MTN)(c) 500 499
Bell Telephone Co. of Pennsylvania
8.350% due 12/15/30 355 384
BellSouth Telecommunications, Inc.
7.000% due 12/01/95 385 341
Beneficial Corp.
8.400% due 05/15/08 1,235 1,264
Boeing Co.
8.750% due 08/15/21 550 606
Burlington Northern Santa Fe
7.082% due 05/13/29 (c) 1,200 1,114
Camden Property Trust
7.000% due 04/15/04 600 579
Campbell Soup Co.
8.875% due 05/01/21 420 469
Carolina Power & Light Co.
6.875% due 08/15/23 410 363
Case Corp.
7.250% due 08/01/05 330 313
7.250% due 01/15/16 295 273
Caterpillar Financial Services Corp.
9.500% due 02/06/07 (MTN) 420 466
Series 2
6.154% due 02/12/01 (c) 4,000 4,001
Caterpillar, Inc.
8.000% due 02/15/23 200 204
Central Fidelity Banks, Inc.
8.150% due 11/15/02 170 174
Central Power & Light Co.
Series FF
6.875% due 02/01/03 600 594
Champion International Corp.
6.400% due 02/15/26 460 430
Chase Manhattan Corp.
Series C
6.750% due 12/01/04 (MTN) 700 711
Chase Manhattan Corp.
6.500% due 08/01/05 300 287
Chesapeake & Potomac Telephone Co.
8.375% due 10/01/29 230 239
Chrysler Financial Corp.
6.492% due 06/11/01 (MTN)(c) 2,000 1,998
Cincinnati Gas & Electric Co.
7.200% due 10/01/23 410 361
CIT Group, Inc.
6.150% due 12/15/02 (MTN) 500 486
5.625% due 10/15/03 1,920 1,814
Citicorp
6.227% due 05/24/01 (MTN) (c) 2,000 2,000
9.500% due 02/01/02 120 126
7.125% due 06/01/03 390 389
Citigroup, Inc.
6.875% due 02/15/98 790 659
City National Bank
6.375% due 01/15/08 600 537
Coca Cola Enterprises, Inc.
7.000% due 10/01/26 675 663
6.750% due 01/15/38 250 216
Comcast Cable Communications
8.375% due 05/01/07 850 882
Comerica Bank
7.250% due 06/15/07 700 683
6.000% due 10/01/08 400 358
Commercial Credit Group, Inc.
7.875% due 07/15/04 805 823
6.500% due 06/01/05 540 519
8.700% due 06/15/10 380 408
135 Diversified Bond Fund
<PAGE>
Diversified Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ----------
Commonwealth Edison Co.
Series 85
7.375% due 09/15/02 945 952
Conagra, Inc.
8.100% due 05/20/02 (MTN) 300 307
Conoco, Inc.
6.950% due 04/15/29 620 559
Cooper Tire & Rubber Co.
7.125% due 12/16/02 1,075 1,063
Countrywide Home Loan
Series H
6.250% due 04/15/09 (MTN) 500 451
Cox Communications, Inc.
6.500% due 11/15/02 550 535
7.500% due 08/15/04 1,200 1,206
6.690% due 09/20/04 (MTN) 400 390
CSX Corp.
7.250% due 05/01/04 750 745
7.900% due 05/01/17 400 396
CVS Corp.
5.500% due 02/15/04 300 280
Daimler Chrysler North America Holding
6.900% due 09/01/04 1,625 1,608
DaimlerChrysler AG
7.450% due 03/01/27 800 775
Delta Air Lines, Inc.
Series C
6.650% due 03/15/04 (MTN) 1,130 1,082
Dillards Inc.
6.430% due 08/01/04 1,025 955
Duke Capital Corp.
7.250% due 10/01/04 900 881
Duke Energy Corp.
7.000% due 07/01/33 395 339
Duke Weeks Realty, L.P.
7.750% due 11/15/09 635 616
Eastman Chemical Co.
7.250% due 01/15/24 300 270
Electronic Data Systems Corp.
7.450% due 10/15/29 450 436
EOP Operating, L.P.
6.500% due 01/15/04 685 653
Federal Express Corp.
7.600% due 07/01/97 300 259
Fifth Third Capital Trust I
Series A
8.136% due 03/15/27 315 292
Finova Capital Corp.
7.250% due 11/08/04 1,520 1,499
First Bank Systems, Inc.
8.000% due 07/02/04 700 712
First Chicago Corp.
6.170% due 11/14/01 (MTN) (c) 3,000 2,983
First Interstate Bancorp
9.375% due 01/23/02 (MTN) 135 141
First Union Corp.
6.875% due 09/15/05 400 389
7.500% due 07/15/06 425 424
First Union Institutional Capital Trust I
8.040% due 12/01/26 225 210
First Union National Bank
7.125% due 10/15/06 (MTN) 500 491
Firstar Bank North America
7.125% due 12/01/09 950 920
Fleet Financial Group, Inc.
6.875% due 03/01/03 300 295
8.125% due 07/01/04 595 609
Ford Motor Credit Co.
7.750% due 11/15/02 2,000 2,033
7.500% due 06/15/04 300 303
6.700% due 07/16/04 4,000 3,915
6.750% due 05/15/05 350 341
Fort James Corp.
6.625% due 09/15/04 895 863
6.875% due 09/15/07 375 356
Fortune Brands, Inc.
7.875% due 01/15/23 380 369
General Electric Capital Corp.
8.300% due 09/20/09 235 250
Series A
6.650% due 09/03/02 (MTN) 795 789
6.267% due 07/23/03 (MTN) 1,225 1,194
General Motors Acceptance Corp.
5.480% due 12/16/02 (MTN) 2,535 2,428
6.750% due 03/15/03 4,000 3,957
Grand Metropolitan Investment Corp.
7.450% due 04/15/35 300 307
Great Lakes Chemical Corp.
7.000% due 07/15/09 1,225 1,169
GTE California, Inc.
6.750% due 05/15/27 550 489
Harrahs Operating Co., Inc.
7.500% due 01/15/09 515 481
Heller Financial, Inc.
7.000% due 05/15/02 890 887
Hertz Corp.
7.625% due 08/01/02 550 557
9.000% due 11/01/09 230 251
Diversified Bond Fund 136
<PAGE>
Diversified Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ----------
Household Finance Corp.
6.125% due 07/15/02 (MTN) 325 316
7.200% due 07/15/06 370 364
ICI Wilmington, Inc.
9.500% due 11/15/00 5,000 5,097
Illinois Power
7.500% due 06/15/09 1,300 1,262
International Business Machines Corp.
7.125% due 12/01/96 780 708
ITT Financial Corp.
7.400% due 11/15/25 955 860
JPM Capital Trust I
7.540% due 01/15/27 225 201
KeyCorp
8.000% due 07/01/04 150 153
7.500% due 06/15/06 750 747
Knight-Ridder, Inc.
6.875% due 03/15/29 900 789
Kroger Co.
6.800% due 12/15/18 600 520
Liberty Mutual Insurance Co.
7.697% due 10/15/97 1,650 1,381
Lincoln National Corp.
7.250% due 05/15/05 450 441
6.500% due 03/15/08 200 183
7.000% due 03/15/18 450 407
Loral Corp.
7.000% due 09/15/23 675 570
Lowes Cos., Inc.
6.875% due 02/15/28 680 599
Manufacturers & Traders Trust Co.
7.000% due 07/01/05 435 413
Marsh & McLennan Cos., Inc.
6.625% due 06/15/04 475 460
Mattel, Inc.
6.000% due 07/15/03 500 472
May Department Stores Co.
6.875% due 11/01/05 480 472
MCI WorldCom, Inc.
6.400% due 08/15/05 1,150 1,102
6.950% due 08/15/28 500 454
Mercantile Bancorp.
7.050% due 06/15/04 825 811
Merck & Co., Inc.
6.400% due 03/01/28 325 286
Series B
5.760% due 05/03/37 (MTN) 1,200 1,198
Merrill Lynch & Co., Inc.
6.000% due 02/12/03 800 775
Mirage Resorts, Inc.
6.625% due 02/01/05 955 873
Morgan (J.P.) & Co., Inc.
5.750% due 02/25/04 200 189
Nabisco, Inc.
6.375% due 02/01/35 850 789
Natexix Ambs Co., LLC
Series A
8.440% due 12/29/49 (g) 150 141
Nationsbank Corp.
7.750% due 08/15/04 450 458
New England Telephone & Telegraph Co.
7.875% due 11/15/29 235 239
News America Holdings, Inc.
8.875% due 04/26/23 500 527
7.750% due 01/20/24 450 422
Norfolk Southern Corp.
6.950% due 05/01/02 750 747
Northern Trust Corp.
7.100% due 08/01/09 490 475
Northwestern Bell Telephone Co.
7.750% due 05/01/30 630 599
Norwest Corp.
Series H
6.750% due 06/15/07 (MTN) 300 286
Norwest Financial, Inc.
6.250% due 11/01/02 525 514
6.375% due 11/15/03 575 560
6.000% due 02/01/04 600 574
6.750% due 06/01/05 200 194
NYNEX Capital Funding Co.
8.750% due 12/01/04 (MTN) 450 475
NYNEX Corp.
9.550% due 05/01/10 322 350
Panamsat Corp.
6.125% due 01/15/05 600 532
Park Place Entertainment
8.500% due 11/15/06 700 693
Philadelphia Electric Co.
7.125% due 09/01/02 550 551
Philip Morris Cos., Inc.
6.950% due 06/01/06 295 291
7.200% due 02/01/07 1,000 936
7.650% due 07/01/08 310 296
Pitney Bowes Credit Corp.
8.550% due 09/15/09 460 495
PNC Funding Corp.
6.875% due 07/15/07 800 762
Praxair, Inc.
6.850% due 06/15/05 700 676
137 Diversified Bond Fund
<PAGE>
Diversified Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ----------
Procter & Gamble Co.
Series A
9.360% due 01/01/21 90 104
Prologis Trust
6.700% due 04/15/04 650 620
Provident Cos., Inc.
6.375% due 07/15/05 1,000 933
Ralston Purina Co.
7.875% due 06/15/25 615 569
Raytheon Co.
6.300% due 03/15/05 880 830
Safeway, Inc.
7.000% due 09/15/02 650 647
6.050% due 11/15/03 440 419
7.250% due 09/15/04 575 569
Sears Roebuck Acceptance Corp.
7.000% due 06/15/07 245 231
6.750% due 01/15/28 800 652
Security Capital Group, Inc.
6.950% due 06/15/05 600 549
Shopping Center Associates
6.750% due 01/15/04 750 714
Simon Property Group, Inc.
6.750% due 02/09/04 1,000 949
Societe Generale
7.850% due 04/29/49 (g) 625 603
Spieker Properties, L.P.
8.000% due 07/19/05 (MTN) 700 700
Sprint Capital Corp.
6.125% due 11/15/08 1,150 1,043
6.900% due 05/01/19 900 819
SunTrust Banks, Inc.
7.375% due 07/01/02 700 704
6.250% due 06/01/08 150 138
TCI Communications, Inc.
6.375% due 05/01/03 625 612
Texaco Capital, Inc.
9.750% due 03/15/20 440 527
8.875% due 09/01/21 220 246
Time Warner, Inc.
7.975% due 08/15/04 300 304
7.750% due 06/15/05 400 404
8.110% due 08/15/06 600 618
8.180% due 08/15/07 600 617
6.875% due 06/15/18 950 852
Times Mirror Co.
7.450% due 10/15/09 350 348
Transamerica Finance Corp.
7.250% due 08/15/02 1,000 998
TRW, Inc.
7.125% due 06/01/09 1,200 1,148
Union Carbide Corp.
7.875% due 04/01/23 590 589
Union Oil Co.
9.400% due 02/15/11 (MTN) 470 522
Union Pacific Corp.
7.600% due 05/01/05 570 572
Union Pacific Railroad Trust Pass-thru
Certificate
Series 1996-A2
7.060% due 05/15/03 500 496
Union Planters Bank
6.500% due 03/15/18 670 592
United Technologies Corp.
8.750% due 03/01/21 380 418
US Bank National Association Minnesota
6.572% due 12/19/01 (c) 2,000 2,012
5.625% due 11/30/05 1,500 1,372
US West Communications, Inc.
7.200% due 11/10/26 500 437
USX Marathon Group
8.500% due 03/01/23 800 831
Virginia Electric & Power Co.
8.750% due 04/01/21 200 199
Wachovia Corp.
6.800% due 06/01/05 305 297
Wal-Mart Stores, Inc.
7.500% due 05/15/04 300 306
Series 1994-B3
8.800% due 12/30/14 315 341
Waste Management, Inc.
6.375% due 12/01/03 325 293
Wells Fargo & Co.
6.625% due 07/15/04 600 586
6.875% due 04/01/06 500 487
Wellsford Residential Property Trust
9.375% due 02/01/02 750 774
Westdeutsche Landesbank NY
6.050% due 01/15/09 3,000 2,675
Westvaco Corp.
9.750% due 06/15/20 115 135
Willamette Industries, Inc.
7.850% due 07/01/26 520 515
Wilmington Trust
10.370% due 01/02/07 1,484 1,637
Wisconsin Central Transportation Corp.
6.625% due 04/15/08 850 779
World Financial Properties Tower
Series 1996 WBF-B
6.910% due 09/01/13 1,129 1,057
--------
163,174
--------
Diversified Bond Fund 138
<PAGE>
Diversified Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ----------
Eurodollar Bonds - 1.8%
Australian Gas Light Co.
6.400% due 04/15/08 1,000 907
Banco de Latinoamerica de Exportaciones SA
6.500% due 04/02/01 1,225 1,219
Korea Development Bank
7.125% due 09/17/01 2,000 1,985
Merita Bank, Ltd.
7.150% due 12/29/49 (g) 250 242
7.500% due 12/29/49 (g) 850 807
Nationsbank Corp.
6.271% due 06/17/02 (MTN)(c) 3,000 2,994
Ontario, Province of
5.500% due 10/01/08 2,000 1,772
Poland, Government of
3.000% due 10/27/24 (c) 1,000 618
Sanwa Finance Aruba AEC
8.350% due 07/15/09 2,000 2,007
Tyco International Group SA
6.875% due 09/05/02 1,200 1,184
--------
13,735
--------
Mortgage-Backed Securities - 40.3%
ACLC Franchise Loan Receivables
1997 Pass-thru Class A1
7.120% due 03/15/12 753 733
American Southwest Financial Corp.
Series G Class G-4
12.250% due 11/01/14 129 133
Capital Equipment Receivables Trust
Series 1996-1 Class A4
6.280% due 06/15/00 144 144
Chase Commercial Mortgage Securities Corp.
Series 1997-1 Class E
7.370% due 12/19/07 (c) 1,475 1,338
Chase Mortgage Finance Corp. Series 1998-S4
Class A4
6.550% due 08/25/28 2,000 1,936
Collateralized Mortgage Obligation Trust 56
Class B CMO
9.985% due 12/01/18 128 134
Credit Suisse First Boston Mortgage
Securities Corp.
Series 1999-C1 Class A2
7.290% due 09/15/09 1,285 1,262
DLJ Commercial Mortgage Corp.
Series 1998-CF2 Class A1A
5.880% due 11/12/31 903 852
Series 1999-CG1 Class A1A
6.080% due 07/10/08 (c) 1,237 1,177
DLJ Mortgage Acceptance Corp.
Series 1993 Class A-2 CMO
7.650% due 09/18/03 2,500 2,506
Series 1996-CF1 Class A1B
7.580% due 02/12/06 2,000 2,024
Series 1999-CG3 Class A1B
7.340% due 09/10/09 400 396
Federal Home Loan Mortgage Corp.
5.500% due 2006 3,808 3,594
6.500% due 2029 490 462
Series 2006 Class B
6.500% due 2023 4,546 4,482
Federal Home Loan Mortgage Corp. (b)
6.000% 15 Year TBA 3,010 2,858
6.500% 30 Year Gold TBA 7,200 6,788
7.500% 30 Year TBA 1,630 1,613
8.000% 30 Year TBA 1,855 1,873
Federal Home Loan Mortgage Corp.
Participation Certificate
7.500% due 2001 82 83
7.000% due 2002 37 38
6.500% due 2003 69 68
7.000% due 2003 189 191
6.750% due 2007 230 225
7.500% due 2007 413 416
7.000% due 2008 331 329
8.000% due 2008 59 60
8.500% due 2008 69 70
6.500% due 2009 1,194 1,169
7.500% due 2009 1,093 1,102
7.500% due 2009 (c) 72 73
8.000% due 2009 123 125
6.500% due 2010 78 76
7.000% due 2010 271 270
7.500% due 2010 26 26
8.000% due 2010 20 21
6.000% due 2011 3,348 3,199
7.000% due 2011 81 81
7.500% due 2011 201 202
8.000% due 2011 247 251
6.000% due 2012 67 63
7.500% due 2012 390 393
8.000% due 2012 156 159
5.500% due 2014 3,606 3,346
6.500% due 2014 762 739
7.000% due 2014 483 478
12.000% due 2014 78 85
12.000% due 2015 44 49
9.000% due 2016 375 388
12.500% due 2016 41 46
8.000% due 2017 312 315
9.000% due 2017 2 2
139 Diversified Bond Fund
<PAGE>
Diversified Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ----------
9.000% due 2018 737 769
9.000% due 2020 356 376
9.000% due 2022 101 105
6.500% due 2024 2,613 2,487
9.000% due 2024 425 442
6.500% due 2025 545 518
8.500% due 2025 402 413
9.000% due 2025 117 122
9.000% due 2026 9 10
8.500% due 2027 1,619 1,663
6.000% due 2028 2,835 2,595
6.500% due 2028 2,777 2,618
6.000% due 2029 855 782
6.500% due 2029 6,662 6,281
Federal Home Loan Mortgage Corp.
Participation Certificate
Series 1053 Class G
7.000% due 03/15/21 793 782
Federal National Mortgage Association (b)
6.500% 15 Year TBA 6,160 5,975
7.000% 15 Year TBA 195 193
6.500% 30 Year TBA 3,560 3,354
7.500% 30 Year TBA 9,915 9,803
Federal National Mortgage Association Pools
7.000% due 2000 323 322
9.500% due 2001 18 18
8.000% due 2002 179 180
9.500% due 2002 34 34
6.000% due 2003 276 270
7.000% due 2003 257 257
7.500% due 2003 348 348
8.000% due 2003 67 68
9.500% due 2003 76 79
6.500% due 2004 7,997 7,896
8.000% due 2004 76 77
9.500% due 2005 60 62
9.500% due 2006 58 60
7.000% due 2007 64 64
7.200% due 2007 983 975
7.280% due 2007 655 640
7.000% due 2008 260 257
7.000% due 2009 376 372
8.000% due 2010 21 21
10.500% due 2010 15 16
7.000% due 2011 170 168
7.500% due 2011 100 101
8.000% due 2011 41 42
6.500% due 2012 342 332
7.000% due 2012 834 824
7.500% due 2012 64 65
8.500% due 2012 50 52
5.500% due 2013 250 232
6.000% due 2013 1,270 1,206
5.500% due 2014 1,631 1,514
6.000% due 2014 1,950 1,850
7.000% due 2014 1,670 1,650
9.000% due 2016 13 14
8.000% due 2017 386 391
9.000% due 2017 368 384
8.000% due 2019 209 212
8.000% due 2020 20 21
7.500% due 2022 696 692
7.000% due 2023 198 192
7.500% due 2023 20 20
6.500% due 2024 4,245 4,043
7.500% due 2024 638 633
8.000% due 2024 1,577 1,594
7.000% due 2025 288 280
7.500% due 2025 208 206
8.500% due 2025 144 148
9.000% due 2025 1,773 1,845
7.500% due 2026 131 130
8.500% due 2026 365 374
9.000% due 2026 244 254
7.500% due 2027 376 373
8.000% due 2027 1,278 1,289
8.500% due 2027 1,351 1,387
6.000% due 2028 6,630 6,064
6.500% due 2028 3,294 3,104
7.500% due 2028 1,281 1,268
8.000% due 2028 2,395 2,415
8.500% due 2028 718 737
6.000% due 2029 13,745 12,574
6.500% due 2029 22,976 21,647
7.000% due 2029 5,157 4,986
8.000% due 2029 117 118
Federal National Mortgage
Association (REMIC)
Series 1992-10 Class ZD
8.000% due 11/25/21 1,925 1,882
Federal National Mortgage Association Aces
6.250% due 01/25/08 1,250 1,165
Series 1999-M4 Class A
7.354% due 12/25/09 1,722 1,701
Federal National Mortgage Association
Interest Only Inverse Floater
Series 1993-208 Class SA
0.206% due 02/25/23 (c)(d) 23,442 198
Federal National Mortgage Association
Principal Only Strip Zero Coupon due 03/ 01/20 71 56
Diversified Bond Fund 140
<PAGE>
Diversified Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ----------
First Union Lehman Brothers Commercial
Mortgage Trust
Series 1997-C1 Class C
7.440% due 04/18/07 750 734
First Union Lehman Brothers Commercial
Mortgage Trust Pass-thru Certificates
Series 1997-C1 Class D
7.500% due 10/18/08 300 285
GMAC Commercial Mortgage Securities, Inc.
Series 1996-C1 Class A2A
6.790% due 09/15/03 722 716
Series 1999-C1 Class A1
5.830% due 05/15/33 1,779 1,679
Series 1999-C2 Class A1
6.570% due 09/15/33 1,360 1,318
Government National Mortgage Association (b)
6.000% 30 Year TBA 1,200 1,091
6.500% 30 Year TBA 2,000 1,877
7.000% 30 Year TBA 2,175 2,100
8.000% 30 Year TBA 4,230 4,272
Government National Mortgage Association
6.500% due 2008 128 125
6.500% due 2009 1,185 1,157
7.000% due 2011 15 15
9.000% due 2016 886 935
9.500% due 2016 38 40
8.000% due 2017 104 106
9.000% due 2017 1,404 1,481
9.000% due 2020 14 15
10.500% due 2020 161 175
7.000% due 2022 487 474
8.000% due 2022 335 340
8.500% due 2022 191 198
6.125% due 2023 (c) 4,088 4,152
6.375% due 2023 (c) 2,143 2,178
7.000% due 2023 5,987 5,822
7.500% due 2023 4,993 4,962
6.375% due 2024 (c) 815 821
7.000% due 2024 10,900 10,593
7.500% due 2024 870 864
7.500% due 2025 260 258
8.000% due 2025 1,648 1,667
9.000% due 2025 3,044 3,205
6.500% due 2026 222 209
7.000% due 2026 268 260
7.000% due 2027 394 381
8.000% due 2027 19 20
6.000% due 2028 4,658 4,233
6.500% due 2028 7,355 6,903
7.000% due 2028 11,903 11,494
8.000% due 2028 267 270
6.000% due 2029 2,371 2,157
6.500% due 2029 4,729 4,443
7.000% due 2029 4,918 4,749
7.500% due 2029 (c) 2,731 2,700
7.500% due 2029 1,114 1,101
8.000% due 2029 (c) 1,172 1,184
8.000% due 2029 6,671 6,736
Government National Mortgage Association
REMIC Series 1998-23 Class ZA
6.500% due 09/20/28 5,391 4,301
GS Mortgage Securities Corp. II
Series 1997-GL Class A2A
6.940% due 07/13/30 1,842 1,835
Series 1997-GL Class A2B
6.860% due 07/13/30 1,300 1,283
Housing Securities, Inc.
Series 1994-2 Class A1
6.500% due 07/25/09 614 598
LB Commercial Conduit Mortgage Trust
Series 1999-C2 Class A1
7.105% due 07/15/08 807 799
Merrill Lynch Mortgage Investors, Inc.
Series 1998-C3 Class A1
5.650% due 12/15/30 1,103 1,039
Merrill Lynch Mortgage Investors, Inc.
Pass-thru Certificates Series 1999-C1 Class A2
7.560% due 09/15/09 1,165 1,157
Mortgage Capital Funding, Inc.
Series 1996-MC1 Class A2B
7.900% due 02/15/06 775 796
Nationslink Funding Corp.
Series 1999-2 Class A2C
7.229% due 10/20/08 1,455 1,455
Series 1999-2 Class A3
7.181% due 12/20/06 (c) 1,151 1,139
Residential Accredit Loans, Inc.
Series 1999-QS6 Class NB3
6.500% due 05/25/29 3,000 2,679
Residential Funding Mortgage Securities
Series 1998-S20 Class A24
6.750% due 09/25/28 1,000 921
141 Diversified Bond Fund
<PAGE>
Diversified Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ----------
Resolution Trust Corp.
Series 1995 - C1 Class D
6.900% due 02/25/27 775 748
Ryland Acceptance Corp. Four
Series 88, Class E CMO
7.950% due 01/01/19 1,376 1,374
Small Business Investment Cos.
Series 1999-P10B Class 1
7.540% due 08/10/09 5,000 4,898
Structured Asset Mortgage Investments, Inc.
Series 1998-11 Class A18
6.750% due 01/25/29 5,000 4,608
Structured Asset Securities Corp.
Series 1997-LLI Class A1
6.790% due 06/12/04 1,756 1,743
--------
312,048
--------
Non-US Bonds - 0.4%
Banque Centrale de Tunisie
7.500% due 08/06/09 TND 1,700 1,666
Italy, Republic of
6.875% due 09/27/23 ITL 150 142
Korea Development Bank
7.375% due 09/17/04 KRW 1,000 981
New Zealand, Government of
10.000% due 03/15/02 NZD 600 335
Series 403
5.500% due 04/15/03 NZD 600 300
--------
3,424
--------
United States Government Agencies - 11.0%
Federal Home Loan Bank
5.570% due 08/17/00 5,000 4,977
5.625% due 03/19/01 200 198
6.450% due 03/13/02 4,250 4,215
5.233% due 11/17/03 1,600 1,514
5.790% due 04/27/09 2,580 2,347
Federal Home Loan Mortgage Corp.
5.750% due 06/15/01 1,055 1,045
6.000% due 07/20/01 14,100 13,925
6.250% due 10/15/02 385 382
6.300% due 06/01/04 3,000 2,922
5.750% due 03/15/09 425 388
6.625% due 09/15/09 7,705 7,486
6.750% due 09/15/29 1,460 1,389
Federal National Mortgage Association
5.820% due 07/19/01 (MTN) 1,080 1,068
6.250% due 11/15/02 900 892
6.250% due 11/20/02 (MTN) 1,335 1,309
5.750% due 04/15/03 990 962
6.100% due 06/26/03 (MTN) 505 490
6.010% due 07/17/03 (MTN) 2,000 1,935
5.300% due 11/13/03 (MTN) 1,600 1,517
5.625% due 05/14/04 (h) 7,125 6,809
6.940% due 03/19/07 (MTN) 1,065 1,028
6.750% due 07/30/07 365 350
6.900% due 08/21/07 (MTN) 2,155 2,075
6.375% due 06/15/09 4,586 4,379
6.625% due 09/15/09 6,295 6,114
6.080% due 09/01/28 (MTN) 2,275 1,972
6.210% due 08/06/38 2,850 2,460
Government Backed Trust Certificates
Class 1-C
9.250% due 11/15/01 1,056 1,088
Series T-3
9.625% due 05/15/02 (c) 277 285
Resolution Funding Corp.
8.875% due 07/15/20 1,855 2,212
8.625% due 01/15/21 715 835
8.625% due 01/15/30 390 472
Tennessee Valley Authority
Series A
6.375% due 06/15/05 2,730 2,665
Series E
6.250% due 12/15/17 610 550
6.750% due 11/01/25 2,900 2,688
--------
84,943
--------
United States Government Treasuries - 14.2%
United States Treasury Bonds
10.750% due 08/15/05 3,855 4,598
11.750% due 02/15/10 940 1,143
12.750% due 11/15/10 6,170 7,955
12.000% due 08/15/13 9,440 12,605
13.250% due 05/15/14 680 980
12.500% due 08/15/14 4,620 6,454
9.875% due 11/15/15 695 899
9.250% due 02/15/16 1,250 1,543
8.875% due 08/15/17 5,405 6,532
8.875% due 02/15/19 8,180 9,957
8.125% due 05/15/21 (h) 5,100 5,846
8.000% due 11/15/21 9,385 10,650
6.875% due 08/15/25 25 25
6.000% due 02/15/26 600 549
6.500% due 11/15/26 625 609
6.375% due 08/15/27 8,200 7,876
United States Treasury Notes
7.875% due 08/15/01 3,275 3,357
5.625% due 09/30/01 300 297
Diversified Bond Fund 142
<PAGE>
Diversified Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ----------
6.375% due 09/30/01 3,485 3,492
7.500% due 11/15/01 7,155 7,310
6.125% due 12/31/01 1,265 1,262
6.250% due 01/31/02 30 30
6.250% due 02/28/02 785 785
6.625% due 04/30/02 1,750 1,763
3.625% due 07/15/02 (h) 1,100 1,089
5.750% due 11/30/02 5,505 5,424
3.375% due 01/15/07 2,648 2,495
3.625% due 01/15/08 2,063 1,964
3.875% due 01/15/09 2,125 2,054
--------
109,543
--------
Yankee Bonds - 2.9%
Abbey National PLC
6.700% due 06/29/49 (g) 2,125 1,932
African Development Bank
9.750% due 12/15/03 325 353
6.750% due 10/01/04 300 294
6.875% due 10/15/15 1,245 1,142
8.800% due 09/01/19 295 331
Asian Development Bank
6.250% due 10/24/05 315 301
Canadian National Railway Co.
6.800% due 07/15/18 450 405
Carnival Corp.
7.050% due 05/15/05 500 487
Carter Holt Harvey, Ltd.
8.875% due 12/01/04 350 361
Diageo Capital PLC
6.125% due 08/15/05 1,800 1,703
Hydro Quebec
Series GH
8.250% due 04/15/26 505 526
International American Development Bank
6.950% due 08/01/26 155 156
Manitoba, Province of
Series CB
8.800% due 01/15/20 200 228
Series CD
9.250% due 04/01/20 200 237
National Westminster Bank PLC
7.750% due 04/29/49 (g) 1,275 1,225
New Brunswick, Province of
7.125% due 10/01/02 400 400
9.750% due 05/15/20 190 231
Newfoundland, Province of
10.000% due 12/01/20 90 110
Noranda Forest, Inc.
6.875% due 11/15/05 250 231
Nova Scotia, Province of
9.125% due 05/01/21 690 782
Pemex Finance, Ltd.
6.125% due 11/15/03 3,000 2,926
Quebec, Province of
7.000% due 01/30/07 735 719
7.125% due 02/09/24 985 915
7.500% due 09/15/29 1,100 1,066
Royal Caribbean Cruises, Ltd.
7.250% due 03/15/18 640 578
7.500% due 10/15/27 300 269
Saskatchewan, Province of
8.000% due 07/15/04 1,045 1,081
Stagecoach Holdings PLC
8.625% due 11/15/09 575 571
Trans-Canada Pipelines, Ltd.
7.150% due 06/15/06 800 777
Tyco International Group SA
6.375% due 06/15/05 700 655
United News & Media PLC
7.250% due 07/01/04 1,100 1,073
--------
22,065
--------
Total Long-Term Investments
(cost $798,356) 775,086
--------
Notional
Amount
(000)
$
--------
Options Purchased - 0.0%
United States Treasury Bills (e)
Mar 100.77 Call 1,250 1
May 100.66 Call 2,600 7
United States Treasury Notes (e)
Feb 99.21 Call 869 1
Feb 98.73 Call 1,641 4
--------
Total Options Purchased
(cost $89) 13
--------
143 Diversified Bond Fund
<PAGE>
Diversified Bond Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ----------
Preferred Stocks - 0.3%
Credit Lyonnais Capital S.C.A. - ADR 60,000 1,470
Equity Office Properties Trust Series B 21,500 839
--------
Total Preferred Stocks
(cost $2,605) 2,309
--------
Principal
Amount
(000)
$
---------
Short-Term Investments - 6.3%
Federal Home Loan Mortgage Corp. Discount
Note
5.480% due 01/25/00 (a)(f) 2,300 2,290
5.600% due 01/25/00 (a)(f) 1,260 1,254
Frank Russell Investment Company Money
Market Fund, due on demand (a) 45,372 45,372
--------
Total Short-Term Investments
(cost $48,916) 48,916
--------
Total Investments - 106.8%
(identified cost $849,966) 826,324
Other Assets and Liabilities,
Net, Including Options Written - (6.8%) (52,359)
--------
Net Assets - 100.0% 773,965
========
Principal Market
Amount Value
(000) (000)
$ $
--------- ----------
Options Written
Government National Mortgage Association*
Feb 97.98 Call 1,260 4
Feb 97.61 Call 2,322 9
United States Treasury Bills*
Mar 104.77 Call 1,250 --
May 104.66 Call 2,600 --
Mar 96.66 Put 1,250 12
May 97.28 Put 2,600 45
United States Treasury Bonds*
Feb 93.84 Put 1,900 106
Feb 93.80 Put 1,900 106
--------
Total Liability for Options Written
(premiums received $141) 282
========
* Each contract represents $100,000 notional value.
(a) At amortized cost, which approximates market.
(b) Forward commitment.
(c) Adjustable or floating rate security.
(d) Represents notional amounts.
(e) Nonincome-producing security.
(f) Rate noted is yield-to-maturity from date of acquisition.
(g) Perpetual floating rate note.
(h) Held as collateral in connection with options written by the Fund.
Abbreviations:
ADR - American Depositary Receipt
CMO - Collateralized Mortgage Obligation
MTN - Medium Term Note
REMIC - Real Estate Mortgage Investment Conduit
TBA - To Be Announced Security
Foreign Currency Abbreviations:
ITL - Italian lira
KRW - South Korean won
NZD - New Zealand dollar
TND - Tunisian dinar
See accompanying notes which are an integral part of the financial statements.
Diversified Bond Fund 144
<PAGE>
Diversified Bond Fund
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Amounts in thousands (except per share amounts) December 31, 1999
<S> <C> <C>
Assets
Investments at market (identified cost $849,966) .......................................................... $ 826,324
Receivables:
Dividends and interest ................................................................................. 9,424
Investments sold (regular settlement) .................................................................. 12,053
Investments sold (delayed settlement) .................................................................. 9,184
Fund shares sold ....................................................................................... 2,427
From Advisor ........................................................................................... 44
Prepaid expenses .......................................................................................... 3
---------
Total assets ......................................................................................... 859,459
Liabilities
Payables:
Investments purchased (regular settlement) ................................................. $ 32,554
Investments purchased (delayed settlement) ................................................. 51,329
Fund shares redeemed ....................................................................... 1,005
Accrued fees to affiliates ................................................................. 121
Other accrued expenses ..................................................................... 203
Options written, at market value (premiums received $141) ..................................... 282
---------
Total liabilities .................................................................................... 85,494
---------
Net Assets ................................................................................................ $ 773,965
=========
Net Assets Consist of:
Accumulated net realized gain (loss) $ (28,307)
Unrealized appreciation (depreciation) on:
Investments ............................................................................................ (23,642)
Options written ........................................................................................ (141)
Shares of beneficial interest ............................................................................. 355
Additional paid-in capital ................................................................................ 825,700
---------
Net Assets ................................................................................................ $ 773,965
=========
Net Asset Value, offering and redemption price per share:
Class C ($4,652,028 divided by 209,198 shares of $.01 par value
shares of beneficial interest outstanding) ........................................................... $ 22.24
=========
Class E ($3,639,205 divided by 163,685 shares of $.01 par value
shares of beneficial interest outstanding) ........................................................... $ 22.23
=========
Class S ($765,673,671 divided by 35,169,015 shares of $.01 par value
shares of beneficial interest outstanding) ........................................................... $ 21.77
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
145 Diversified Bond Fund
<PAGE>
Diversified Bond Fund
Statement of Operations
<TABLE>
<CAPTION>
Amounts in thousands Year Ended December 31, 1999
<S> <C> <C>
Investment Income
Interest ...................................................................................... $ 49,620
Dividends from Money Market Fund .............................................................. 3,655
Dividends ..................................................................................... 226
--------
Total investment income ..................................................................... 53,501
Expenses
Advisory fees ..................................................................... $ 3,277
Administrative fees ............................................................... 419
Custodian fees .................................................................... 529
Distribution fees - Class C ....................................................... 19
Transfer agent fees ............................................................... 598
Professional fees ................................................................. 48
Registration fees ................................................................. 138
Shareholder servicing fees - Class C .............................................. 6
Shareholder servicing fees - Class E .............................................. 12
Trustees' fees .................................................................... 9
Miscellaneous ..................................................................... 79
--------
Total expenses .............................................................................. 5,134
--------
Net investment income ............................................................................ 48,367
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ....................................................................... (18,318)
Options written ................................................................... 434
Foreign currency-related transactions ............................................. 42 (17,842)
--------
Net change in unrealized appreciation (depreciation) on:
Investments ....................................................................... (41,035)
Options written ................................................................... (243) (41,278)
-------- --------
Net realized and unrealized gain (loss) .......................................................... (59,120)
--------
Net increase (decrease) in net assets from operations ............................................ $(10,753)
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Diversified Bond Fund 146
<PAGE>
Diversified Bond Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Amounts in thousands Years Ended December 31,
1999 1998
--------- ---------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ....................................... $ 48,367 $ 45,167
Net realized gain (loss) .................................... (17,842) 15,381
Net change in unrealized appreciation (depreciation) ........ (41,278) (183)
--------- ---------
Net increase (decrease) in net assets from operations ..... (10,753) 60,365
--------- ---------
Distributions
From net investment income
Class C ................................................... (122) --
Class E ................................................... (255) (241)
Class S ................................................... (48,247) (45,737)
From net realized gain
Class C ................................................... (2) --
Class E ................................................... (29) (67)
Class S ................................................... (4,549) (11,680)
Tax return of capital
Class S ................................................... (880) --
--------- ---------
Net decrease in net assets from distributions .......... (54,084) (57,725)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions 25,338 121,024
--------- ---------
Total net increase (decrease) in net assets .................... (39,499) 123,664
Net Assets
Beginning of period ......................................... 813,464 689,800
--------- ---------
End of period ............................................... $ 773,965 $ 813,464
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
147 Diversified Bond Fund
<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 Operations
Net investment income (a) ..................................... 1.03
Net realized and unrealized gain (loss) ....................... (1.61)
---------
Total income from operations ................................ (.58)
---------
Distributions
From net investment income .................................... (1.05)
From net realized gain ........................................ (.13)
---------
Total distributions ......................................... (1.18)
---------
Net Asset Value, End of Period ................................... $ 22.24
=========
Total Return (%)(b) .............................................. (2.47)
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ...................... 4,652
Ratios to average net assets (%)(c):
Operating expenses .......................................... 1.62
Net investment income ....................................... 4.88
Portfolio turnover rate (%) ................................... 152.23
* For the period January 27, 1999 (commencement of sale) to December 31,
1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
Diversified Bond Fund 148
<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 Operations
Net investment income (a) .............. 1.30 1.32 1.22 .25
Net realized and unrealized gain (loss) (1.65) .45 .66 (.09)
--------- --------- --------- ---------
Total income from operations ......... (.35) 1.77 1.88 .16
--------- --------- --------- ---------
Distributions
From net investment income ............. (1.21) (1.56) (.72) (.34)
From net realized gain ................. (.13) (.35) (.08) --
--------- --------- --------- ---------
Total distributions .................. (1.34) (1.91) (.80) (.34)
--------- --------- --------- ---------
Net Asset Value, End of Period ............ $ 22.23 $ 23.92 $ 24.06 $ 22.98
========= ========= ========= =========
Total Return (%)(b) ....................... (1.51) 7.63 8.35 .67
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 3,639 4,703 2,469 962
Ratios to average net assets (%)(c):
Operating expenses ................... .87 .98 1.29 1.31
Net investment income ................ 5.49 5.42 5.64 5.75
Portfolio turnover rate (%) ............ 152.23 216.88 172.43 138.98
</TABLE>
* For the period November 4, 1996 (commencement of sale) to December 31,
1996.
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
149 Diversified Bond Fund
<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
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 23.53 $ 23.43 $ 22.97 $ 23.69 $ 21.53
----------- ----------- ----------- ----------- -----------
Income From Operations
Net investment income (a) .............. 1.31 1.38 1.45 1.47 1.54
Net realized and unrealized gain (loss) (1.60) .47 .56 (.71) 2.18
----------- ----------- ----------- ----------- -----------
Total income from operations ......... (.29) 1.85 2.01 .76 3.72
----------- ----------- ----------- ----------- -----------
Distributions
From net investment income ............. (1.32) (1.40) (1.47) (1.48) (1.56)
From net realized gain ................. (.13) (.35) (.08) -- --
Tax return of capital .................. (.02) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total distributions .................. (1.47) (1.75) (1.55) (1.48) (1.56)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ............ $ 21.77 $ 23.53 $ 23.43 $ 22.97 $ 23.69
=========== =========== =========== =========== ===========
Total Return (%)(b) ....................... (1.26) 8.09 9.09 3.43 17.76
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 765,674 808,761 687,331 554,804 513,808
Ratios to average net assets (%)(b):
Operating expenses ................... .61 .57 .60 .61 .59
Net investment income ................ 5.78 5.83 6.35 6.46 6.69
Portfolio turnover rate (%) ............ 152.23 216.88 172.43 138.98 135.85
</TABLE>
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) 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 the periods thereafter, they are reported net of
investment management fees but gross of any investment services fees. See
Note 4.
Diversified Bond Fund 150
<PAGE>
Multistrategy Bond Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: 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.
Invests in: Fixed-income securities.
Strategy: The Fund uses a multi-style, multi-manager strategy intended to
achieve higher returns by assuming the additional risk of investment in
non-investment grade US fixed income securities, and foreign bonds including
emerging markets debt in addition to US investment grade fixed income
instruments. The Fund employed the investment management services of four
managers, each employing a distinct approach to the Broad Market- Sector
Rotation style.
[The following table was depicted as a mountain chart in the printed material.]
Growth of a $10,000 Investment
Yearly periods ended December 31
Multistrategy Lipper(R)
Dates Bond - Class S LB Aggregate ** Intermediate ++
Inception* $10,000 $10,000 $10,000
1993 $10,874 $10,768 $10,950
1994 $10,401 $10,454 $10,585
1995 $12,265 $12,386 $12,340
1996 $12,875 $12,835 $12,732
1997 $14,098 $14,075 $13,807
1998 $15,055 $15,297 $14,833
1999 $14,934 $15,172 $14,643
- --------------------------------------------------------------------------------
Total $100,502 $100,987 $99,890
================================================================================
Multistrategy Bond Fund - Class S
Periods Ended
12/31/99 Growth of $10,000 Total Return
- -------------- ----------------- ------------
1 Year $ 9,919 (0.81)%
5 Years $14,358 7.50%ss.
Inception* $14,934 5.96%ss.
Multistrategy Bond Fund - Class E ++++
Periods Ended
12/31/99 Growth of $10,000 Total Return
- -------------- ----------------- ------------
1 Year $ 9,892 (1.08)%
5 Years $14,291 7.40%ss.
Inception* $14,865 5.89%ss.
Multistrategy Bond Fund - Class C ++++++
Periods Ended
12/31/99 Growth of $10,000 Total Return
- -------------- ----------------- ------------
1 Year $ 9,829 (1.71)%
5 Years $14,200 7.26%ss.
Inception* $14,769 5.79%ss.
Lehman Brothers Aggregate Bond Index
Periods Ended
12/31/99 Growth of $10,000 Total Return
- -------------- ----------------- ------------
1 Year $ 9,918 (0.82)%
5 Years $14,512 7.73%ss.
Inception* $15,172 6.21%ss.
Lipper(R) Intermediate Investment Grade Debt Funds Benchmark
Periods Ended
12/31/99 Growth of $10,000 Total Return
- -------------- ----------------- ------------
1 Year $ 9,872 (1.28)%
5 Years $13,834 6.71%ss.
Inception* $14,643 5.60%ss.
151 Multistrategy Bond Fund
<PAGE>
Multistrategy Bond Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Performance Review
For the year ended December 31, 1999, the Multistrategy Bond Fund Class S, Class
E, and Class C shares reflected losses of 0.81%, 1.08%, and 1.71%, respectively,
as compared to the Lehman Brothers Aggregate Bond Index, which fell 0.82%. The
Fund's performance was negatively impacted by the sporadic weakness in the bond
market.
Portfolio Highlights
Bonds suffered their worst setback since 1994 and their second worst year in
over two decades. Strong US economic growth led to significantly higher interest
rates and aggressive Fed intervention via actual policy tightening. US
treasuries were most severely impacted relative to other sectors of the US bond
market, with the 30-year US treasury bond losing nearly 15% for the year. Spread
sectors, including corporate bonds and mortgage- and asset-backed securities,
fared better as the post-emerging markets crisis spread widening reversed.
The underlying strategies employed in the Fund fared well during the year.
Emerging markets debt and lower quality corporate issues fared well, as evidence
of continued economic strength helped narrow credit spreads. Duration strategies
were generally neutral for the year, as the Fed's bias towards tightening was
tempered by data showing little inflationary pressure in the US economy. Manager
changes had a slightly negative impact on results due to transition costs.
Professional turnover at Credit Suisse Asset Management led to their replacement
with two new firms. The hires of Miller Anderson & Sherrerd, LLP and Lazard
Asset Management eroded some of the value added through investment strategies,
as the transition led to material turnover and portfolio repositioning.
Top Ten Issuers
(as a percent of Total Investments) December 31, 1999
Government National Mortgage Association 16.1%
Federal Home Loan Mortgage Corp. 12.2
Federal National Mortgage Association 9.4
United States Treasury 8.8
Ford Motor Credit Co. 2.3
Morgan Stanley Dean Witter 1.4
Lehman Brothers Holdings, Inc. 1.4
AT&T Corp. 1.3
Bank of Tokyo Mitsubishi 0.9
Citicorp 0.8
Portfolio Characteristics
December 31, 1999
Weighted Average Quality Diversification AA
Weighted Average Years-to-Maturity 6.8 Years
Weighted Average Duration 4.8 Years
Current Yield (SEC 30-day standardized)
Class S 6.3%
Class E 6.0%
Class C 5.2%
Number of Issues 591
Number of Issuers 450
Money Managers Styles
Lazard Asset Management Broad Market-Sector
Rotation
Miller Anderson & Sherrerd, LLP Broad Market-Sector
Rotation
Pacific Investment Management Co. Broad Market-Sector
Rotation
Standish, Ayer & Wood, Inc. Broad Market-Sector
Rotation
* Multistrategy Bond Fund Class S assumes initial investment on January
29, 1993. Lehman Brothers Index comparison for the initial investment
began February 1, 1993. Lipper Index comparison for the initial
investment began January 1, 1993.
** Lehman Brothers Aggregate Bond Index is composed of securities from
Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed
Securities Index, and the Asset-Backed Securities Index. Total return
comprises price appreciation/depreciation and income as a percentage of
the original investment. Indexes are rebalanced monthly by market
capitalization.
++ Lipper(R) Intermediate (5-10 Yr.) Investment Grade Debt Funds Benchmark
is the average total return for the universe of funds within the
Intermediate Investment Grade Debt Funds investment objective. The total
return for the funds reflects adjustments for income dividends and
capital gains distributions reinvested as of the ex-dividend dates. This
type of fund which invests at least 65% of assets in U.S. Treasury
Bills, Notes and Bonds with average maturities of five to ten years.
++++ Multistrategy Bond Fund S performance has been linked with Class E to
provide historical perspective. For the period September 11, 1998
(commencement of sale) through the current period, Class E paid
shareholder service and Rule 12b-1 distribution fees. Total return would
have been lower had these fees been in effect during prior reporting
periods.
++++++ Multistrategy Bond Fund Class S and Class E performance has been linked
with Class C to provide historical perspective. From January 27, 1999
(commencement of sale) through the current period, Class C paid
shareholder service and Rule 12b-1 distribution fees. Total return would
have been lower had these fees been in effect during prior reporting
periods.
ss. Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Multistrategy Bond Fund 152
<PAGE>
Multistrategy Bond Fund
Statement of Net Assets
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Long-Term Investments - 105.6%
Asset-Backed Securities - 7.6%
ACLC Franchise Loan Receivables
Series 1997-B Class A1
6.728% due 04/15/14 932 887
Amresco Residential Securities Mortgage
Loan Trust
Series 1998-2 Class A1
6.500% due 11/25/15 (b) 68 67
Arcadia Automobile Receivables Trust
Series 1997-D Class A3
6.200% due 05/15/03 479 477
Caterpillar Financial Asset Trust
Series 1999-A Class A2
5.900% due 03/25/02 475 473
Chase Credit Card Master Trust
Series 1997-3 Class A
6.777% due 05/15/07 2,482 2,401
Chase Manhattan Auto Owner Trust
Series 1998-A Class A3
5.700% due 09/17/01 452 452
Citibank Credit Card Master Trust I
5.750% due 07/16/07 1,000 509
Series 1999-1 Class B
5.750% due 02/15/06 1,205 1,137
Cityscape Home Equity Loan Trust Pass- thru
Certificate
Series 1996-2 Class A2
7.200% due 04/25/11 2 2
Conseco Finance
Series 1999-H Class AF1
6.450% due 12/15/29 489 488
Contimortgage Home Equity Loan Trust
Series 1999-3
6.420% due 04/25/14 584 580
Cross Country Master Credit Card Trust II
Series 1999-1 Class A
5.900% due 09/15/05 (b) 1,700 1,700
Discover Card Master Trust I
Series 1998-7 Class A
5.600% due 05/15/06 485 460
Series 1999-6 Class A
6.850% due 07/17/07 1,500 1,486
Duck Automobile Grantor Trust Step-Up Bond
Series 1999-B Class A
6.450% due 04/15/04 (b) 1,344 1,340
EQCC Home Equity Loan Trust
Series 1999-1 Class A1F
5.770% due 05/20/10 237 235
Federal Housing Authority
7.430% due 07/01/22 1,668 1,630
First Plus Home Loan Trust Step-Up Bond
Series 1998-5 Class A3
6.060% due 09/10/11 3,000 2,981
First Security Auto Owner Trust
Series 1998-1 Class A2
5.182% due 06/15/01 201 201
Ford Credit Auto Owner Trust
Series 1998-B Class A3
5.850% due 10/15/01 471 470
Series 1999-B Class A3
5.470% due 09/15/01 1,075 1,070
Series 1999-C Class A3
5.770% due 11/15/01 1,000 995
Series 1999-D Class A3
6.200% due 04/15/02 625 623
General Motors Acceptance Corp. Grantor Trust
Series 1997-A Class A
6.500% due 04/15/02 468 468
GMAC Commercial Mortgage Securities, Inc.
Series 1996-C1 Class F
7.860% due 11/15/06 500 394
Green Tree Financial Corp.
Series 1998-1 Class A2
5.850% due 11/01/29 258 257
Series 1998-6 Class M1
6.630% due 06/01/30 (b) 1,800 1,628
Series 1998-8 Class B1
7.690% due 09/01/30 2,115 1,907
Green Tree Lease Finance LLC
Series 1997-1 Class A3
6.170% due 09/20/05 449 449
Greenpoint Manufactured Housing
Series 1999-5 Class A1
6.750% due 04/15/11 (b) 491 489
Greenwich Capital Acceptance, Inc.
Series 1994 Class A-1
8.040% due 11/25/24 (b) 31 32
Harley-Davidson Eaglemark Motorcycle Trust
Series 1999-3 Class A1
6.220% due 02/15/04 483 481
153 Multistrategy Bond Fund
<PAGE>
Multistrategy Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Household Home Equity Loan Trust
Series 1999-1 Class A1
6.830% due 12/20/16 (b) 472 470
MBNA Master Credit Card Trust
Series 1999-B Class A
5.900% due 08/15/11 659 600
Series 1999-G Class A
6.350% due 12/15/06 950 925
MMCA Auto Owner Trust
Series 1999-2 Class A1
6.300% due 06/15/02 442 442
Premier Auto Trust
6.400% due 10/06/01 465 465
Series 1998-5 Class A3
5.070% due 07/08/02 500 493
Series 1999-2 Class A2
5.280% due 11/08/01 455 453
Series 1999-3 Class A2
5.820% due 02/08/02 700 697
Student Loan Marketing Association
Series 1997-3 Class A1
5.460% due 04/25/06 (b) 1,851 1,836
Series 1996-4, Class A1
5.340% due 07/25/04 (b) 1,937 1,924
The Money Store Home Equity Trust
Series 1998-B Class AF3
6.040% due 08/15/17 3,843 3,822
USAA Auto Loan Grantor Trust
Series 1997-1 Class A
6.000% due 05/15/04 758 753
WFS Financial Owner Trust
Series 1998-C Class A2
5.524% due 08/20/01 189 189
Series 1998-C Class A3
5.650% due 11/20/02 (b) 3,000 2,969
---------
42,807
---------
Corporate Bonds and Notes - 29.4%
AAG Holding Co., Inc.
6.875% due 06/01/08 450 395
Adelphia Communications Corp.
9.375% due 11/15/09 50 49
Series B
8.375% due 02/01/08 650 603
Agrilink Foods, Inc.
11.875% due 11/01/08 20 20
Ahold Finance USA, Inc.
6.250% due 05/01/09 1,025 919
6.875% due 05/01/29 90 78
Airgate Pcs, Inc. Step-Up Bond
Zero Coupon due 10/ 01/09 (b) 40 22
Albertson's, Inc.
7.450% due 08/01/29 1,055 1,005
Allied Waste North America, Inc.
10.000% due 08/01/09 60 54
Series B
7.375% due 01/01/04 550 506
7.625% due 01/01/06 1,025 920
American Airlines, Inc.
Series 1990-H
9.800% due 01/02/08 1,190 1,294
Series 91-A
9.710% due 01/02/07 (a) 297 306
American General Corp.
7.500% due 07/15/25 110 105
American General Institutional Capital
Series B
8.125% due 03/15/46 1,260 1,257
American Restaurant Group, Inc.
Series B
11.500% due 02/15/03 45 36
AMR Corp.
9.950% due 03/07/01 (MTN) 1,000 1,028
Amresco, Inc.
Series 98-A
9.875% due 03/15/05 650 416
AMSC Acquisition Co., Inc.
Series B
12.250% due 04/01/08 35 28
Amtrol, Inc.
10.625% due 12/31/06 45 43
Aramark Corp.
6.750% due 08/01/04 1,450 1,356
Arco Chemical Co.
9.800% due 02/01/20 65 66
ARG Funding Corp.
Series 1999-1A Class A3
6.020% due 05/20/05 (b) 1,825 1,728
AT&T Capital Corp.
7.000% due 08/15/01 (MTN) 5,700 5,689
7.110% due 09/13/01 (MTN)(b) 2,650 2,648
AT&T Corp.
6.500% due 03/15/29 560 480
Atlas Air, Inc.
9.250% due 04/15/08 80 76
AXA Financial, Inc.
6.500% due 04/01/08 250 233
Multistrategy Bond Fund 154
<PAGE>
Multistrategy Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Banc One Corp.
7.625% due 10/15/26 305 292
8.000% due 04/29/27 150 150
Banesto Delaware, Inc.
8.250% due 07/28/02 500 506
BankAmerica Corp.
6.141% due 03/05/01 (MTN)(b) 5,000 4,993
Bank One Corp.
5.625% due 02/17/04 (MTN) 900 844
Series A
6.000% due 02/17/09 (MTN) 175 156
Bankboston NA
6.375% due 04/15/08 495 456
Bankers Trust Corp.
5.100% due 05/11/03 (b) 2,000 1,997
Bay View Capital Corp.
9.125% due 08/15/07 400 340
Beneficial Corp.
6.214% due 04/01/02 (MTN)(b) 2,000 2,005
Budget Group, Inc.
9.125% due 04/01/06 50 47
Buhrmann US, Inc.
12.250% due 11/01/09 60 62
Building Materials Corp.
8.000% due 10/15/07 650 592
Building One Services Corp.
10.500% due 05/01/09 60 58
Burlington Northern Santa Fe Corp.
6.700% due 08/01/28 400 343
Charter Communications Holdings, LLC
8.250% due 04/01/07 750 698
8.625% due 04/01/09 125 116
Chase Manhattan Corp.
7.000% due 11/15/09 510 491
Cheasapeake Energy
9.625% due 05/01/05 25 24
Chippac, Intl., Ltd.
12.750% due 08/01/09 45 47
CIT Group, Inc.
7.125% due 10/15/04 165 164
Citibank
Zero Coupon due 12/ 03/01 40 40
Citibank Crc Linked Deposit
1.000% due 02/03/00 (d) 85 84
Citicorp
6.610% due 08/13/02 (MTN)(b) 2,000 2,002
6.375% due 11/15/08 (MTN) 550 508
CMS Energy Corp.
7.500% due 01/15/09 435 393
Coastal Corp.
6.200% due 05/15/04 1,850 1,755
Columbia/ HCA Healthcare Corp.
8.020% due 08/05/02 (MTN) 2,000 1,946
7.190% due 11/15/15 250 203
7.500% due 12/15/23 645 511
Commercial Federal Corp.
7.950% due 12/01/06 100 90
Comstock Res, Inc.
11.250% due 05/01/07 40 41
Conmed Corp.
9.000% due 03/15/08 350 317
Connecticut Light & Power Co.
7.875% due 10/01/24 800 805
Conoco, Inc.
6.950% due 04/15/29 735 663
Courtyard Marriott II, Ltd.
Series B
10.750% due 02/01/08 70 69
Crescent Real Estate Equities
7.000% due 09/15/02 (b) 900 812
7.500% due 09/15/07 (b) 1,000 795
CSC Holdings, Inc.
7.875% due 12/15/07 690 677
7.250% due 07/15/08 395 372
7.625% due 07/15/18 1,000 924
Csfb Trl Weekly Reset 3
63.420% due 11/30/00 27 27
Delphi Automotive Systems Corp.
7.125% due 05/01/29 415 365
Dictaphone Corp.
11.750% due 08/01/05 50 38
Dresser Industries, Inc.
7.600% due 08/15/96 910 868
EOP Operating, L.P.
6.500% due 01/15/04 1,100 1,049
ERAC USA Finance Co.
6.350% due 01/15/01 (MTN) 725 718
Exide Corp.
2.900% due 12/15/05 750 394
Extendicare Health Services, Inc.
9.350% due 12/15/07 1,150 676
Federated Department Stores, Inc.
6.900% due 04/01/29 110 96
First Republic Bancorp
7.750% due 09/15/12 750 664
First Security Corp.
5.875% due 11/01/03 3,000 2,815
Ford Motor Co.
6.625% due 10/01/28 145 126
155 Multistrategy Bond Fund
<PAGE>
Multistrategy Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Ford Motor Credit Co.
8.200% due 02/15/02 2,755 2,818
6.304% due 05/21/04 (MTN)(b) 5,000 4,977
6.700% due 07/16/04 2,600 2,545
5.800% due 01/12/09 500 443
Fugi JGB Investment LLC
9.870% due 12/31/49 (e) 575 570
General Motors Corp.
6.750% due 05/01/28 140 123
GEO Specialty Chemicals, Inc.
10.125% due 08/01/08 55 51
Global Crossing Holdings, Ltd.
9.125% due 11/15/06 310 306
9.625% due 05/15/08 450 449
Globix Corp.
13.000% due 05/01/05 35 35
Gold Eagle Capital, Ltd.
11.453% due 04/15/01 (b) 285 284
Golden State Holdings
7.125% due 08/01/05 1,835 1,664
Goldman Sachs Group, Inc.
6.331% due 02/22/02 (MTN)(b) 5,000 5,002
7.350% due 10/01/09 (MTN) 500 488
Grove Holdings, LLC
Step-Up Bond
Zero Coupon due 05/ 01/09 (b) 250 24
Grove Worldwide, LLC
9.250% due 05/01/08 150 44
GS Escrow Corp.
7.000% due 08/01/03 1,700 1,573
GTE Corp.
6.940% due 04/15/28 670 607
GTE North, Inc.
6.900% due 11/01/08 195 189
Hartford Life, Inc.
7.650% due 06/15/27 220 214
Health Care REIT, Inc.
7.625% due 03/15/08 575 506
Hertz Corp.
7.625% due 08/15/07 130 130
HMH Properties, Inc.
Series A
7.875% due 08/01/05 320 295
Home Interiors & Gifts, Inc.
10.125% due 06/01/08 60 51
Horseshoe Gaming Holding Corp.
8.625% due 05/15/09 925 890
Household Finance Corp.
5.875% due 02/01/09 560 495
6.375% due 08/01/10 235 212
Hyperion Telecommunication, Inc.
12.000% due 11/01/07 20 21
Imperial Capital Trust I
Series B
9.980% due 12/31/26 250 228
Intermedia Communications, Inc.
8.600% due 06/01/08 350 323
Series B
8.500% due 01/15/08 205 187
International Business Machines Corp.
8.375% due 11/01/19 900 986
Interpool Capital Trust
Series B
9.875% due 02/15/27 415 316
IPC Information Systems, Inc. Step-Up Bond
Zero Coupon due 05/ 01/08 (b) 40 30
IT Group, Inc.
Series B
11.250% due 04/01/09 50 49
ITC Deltacom, Inc.
11.000% due 06/01/07 45 47
ITT Corp.
6.250% due 11/15/00 3,000 2,942
K Mart Funding Corp.
Series F
8.800% due 07/01/10 460 455
Kaufman and Broad Home Corp.
7.750% due 10/15/04 300 279
Kroger Co.
7.250% due 06/01/09 750 716
LCI International, Inc.
7.250% due 06/15/07 850 817
Lear Corp.
7.960% due 05/15/05 1,850 1,774
Lehman Brothers Holdings, Inc.
6.625% due 04/01/04 1,803 1,745
7.625% due 06/01/06 475 471
6.700% due 11/30/06 (b) 4,640 4,222
Series E
6.904% due 04/02/02 (MTN)(b) 3,000 3,021
Series F
7.000% due 05/15/03 (MTN) 280 276
Lenfest Communications, Inc.
8.375% due 11/01/05 560 570
Level 3 Communications, Inc.
9.125% due 05/01/08 65 61
Lockheed Martin Corp.
6.850% due 05/15/01 5,000 4,966
7.950% due 12/01/05 450 444
Multistrategy Bond Fund 156
<PAGE>
Multistrategy Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Louisiana Land and Exploration Co.
7.650% due 12/01/23 494 471
Lowes Cos., Inc.
6.875% due 02/15/28 535 471
6.500% due 03/15/29 205 173
MCI WorldCom, Inc.
6.125% due 04/15/02 (b) 765 753
McLeodUSA, Inc.
8.375% due 03/15/08 825 784
8.125% due 02/15/09 950 886
Merrill Corp.
Series Unit
12.000% due 05/01/09 60 59
Merrill Lynch & Co., Inc.
5.075% due 11/01/01 (MTN) 5,000 5,004
6.875% due 11/15/18 605 550
Midwest Energy, Inc.
9.375% due 10/15/29 105 108
MMI Capital Trust I
Series B
7.625% due 12/15/27 1,425 1,214
Monsanto Co.
6.600% due 12/01/28 450 397
Morgan Stanley Dean Witter & Co.
Series C
5.820% due 06/19/00 (MTN)(b) 3,000 2,965
Namazu Re, Ltd.
10.606% due 12/02/04 285 285
Natexix Ambs Co., LLC
Series A
8.440% due 12/29/49 (e) 425 400
Nationsbank Corp.
6.800% due 03/15/28 450 393
New England Education Loan Marketing Corp.
6.290% due 06/11/01 (MTN)(b) 4,000 3,999
News America Holdings, Inc.
8.875% due 04/26/23 275 290
Nextel Communications, Inc.
9.950% due 02/15/08 425 299
Zero Coupon due 08/15/04 1,405 1,447
Step-Up Bond
10.125% due 01/15/04 160 166
Step-Up Bond
Zero Coupon due 09/ 15/07 (b) 705 527
NEXTLINK Communications, Inc.
10.750% due 11/15/08 1,000 1,030
10.750% due 06/01/09 45 46
Step-Up Bond
Zero Coupon due 04/ 15/08 (b) 625 397
Zero Coupon due 06/ 01/09 (b) 400 250
Niagara Mohawk Power Corp.
8.750% due 04/01/22 500 495
Series B
7.000% due 10/01/00 2,268 2,267
Norfolk Southern Corp.
7.050% due 05/01/37 1,110 1,100
North American Van Lines, Inc.
13.375% due 12/01/09 75 75
Ocwen Capital Trust
10.875% due 08/01/27 385 246
Paine Webber Group, Inc.
6.450% due 12/01/03 500 479
6.375% due 05/15/04 425 404
Paxson Communications Corp.
11.625% due 10/01/02 550 568
Petro Stopping Centers
10.500% due 02/01/07 50 46
Philip Morris Cos., Inc.
6.150% due 03/15/00 3,000 2,995
Plains Resources, Inc.
Series E
10.250% due 03/15/06 50 49
PNC Funding Corp.
6.125% due 02/15/09 105 94
Premier Parks, Inc.
Step-Up Bond
Zero Coupon due 04/ 01/08 375 259
Procter & Gamble Co.
6.600% due 12/15/04 1,195 1,181
Prudential Insurance Co. of America
6.875% due 04/15/03 700 690
6.375% due 07/23/06 475 444
Psinet, Inc.
11.500% due 11/01/08 145 152
PX Escrow Corp.
Step-Up Bond
Zero Coupon due 02/ 01/06 (b) 1,275 625
Qwest Communications International, Inc.
Series B
7.250% due 11/01/08 200 191
Railworks Corp.
11.500% due 04/15/09 70 71
RBF Finance Co.
11.000% due 03/15/06 60 64
Republic Services, Inc.
7.125% due 05/15/09 175 157
Revlon Consumer Products Corp.
8.625% due 02/01/08 675 331
157 Multistrategy Bond Fund
<PAGE>
Multistrategy Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Revlon Worldwide Corp.
Series B
Zero Coupon due 03/ 15/01 900 176
Rhythms Netconnections, Inc.
12.750% due 04/15/09 50 49
Rose Hills Corp.
9.500% due 11/15/04 500 400
Sabreliner Corp.
11.000% due 06/15/08 25 20
Saks, Inc.
7.375% due 02/15/19 320 271
Salomon, Inc.
6.356% due 11/28/00 45 43
Seagate Technology, Inc.
7.450% due 03/01/37 850 741
Shopping Center Associates
7.625% due 05/15/05 500 484
Simon Debartolo Group, LP
6.625% due 06/15/03 500 477
Societe Generale
7.850% due 04/29/49 (e) 300 289
Societe Generale Real Estate Co. LLC
7.640% due 12/29/49 150 135
Spieker Properties, LP
6.950% due 12/15/02 500 489
TCI, Inc.
4.795% due 09/11/00 (MTN)(b) 2,000 1,996
Teligent, Inc. Step- Up Bond
Series B
Zero Coupon due 03/ 01/08 (b) 40 24
Tenet Healthcare Corp.
7.875% due 01/15/03 50 49
6.000% due 12/01/05 1,425 1,151
7.625% due 06/01/08 375 348
Time Warner, Inc.
7.975% due 08/15/04 225 228
8.110% due 08/15/06 600 618
8.180% due 08/15/07 450 462
6.625% due 05/15/29 1,300 1,108
Tokai Preferred Capital Co. LLC
9.980% due 12/29/49 (e) 1,500 1,481
Toledo Edison Co.
8.700% due 09/01/02 500 505
Toll Brothers Corp.
7.750% due 09/15/07 1,175 1,102
Transdigm, Inc.
10.375% due 12/01/08 60 54
Trenwick Capital Trust I
8.820% due 02/01/37 625 492
U.S. Bancorp
Series J
6.000% due 05/15/04 (MTN) 950 901
Union Pacific Corp.
6.625% due 02/01/08 600 559
Union Planters Bank
6.500% due 03/15/18 475 420
United Rentals, Inc.
Series B
8.800% due 08/15/08 50 47
URS Corp.
Series B
12.250% due 05/01/09 45 46
US Unwired, Inc.
Step-Up Bond
13.375% due 11/01/09 (b) 30 18
US West Capital Funding, Inc.
6.875% due 08/15/01 1,900 1,883
6.875% due 07/15/28 750 656
Verio, Inc.
11.250% due 12/01/08 10 11
10.625% due 11/15/09 40 41
Viatel, Inc. Step-Up Bond
Zero Coupon due 04/ 15/08 (b) 50 31
Walt Disney Co.
Series E
5.125% due 12/15/03 (MTN) 1,350 1,262
Washington Mutual, Inc.
7.500% due 08/15/06 478 473
Waste Management Inc.
6.875% due 05/15/09 575 486
7.000% due 07/15/28 400 302
Webster Capital Trust I
9.360% due 01/29/27 250 237
Wells Fargo & Co.
6.625% due 07/15/04 2,000 1,952
Wellsford Residential Property Trust
9.375% due 02/01/02 475 490
Williams Communications Group, Inc.
10.700% due 10/01/07 500 525
10.875% due 10/01/09 55 58
WRC Media, Inc.
Series Unit
12.750% due 11/15/09 60 60
---------
166,512
---------
Multistrategy Bond Fund 158
<PAGE>
Multistrategy Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Eurodollar Bonds - 6.4%
Argentina, Republic of
11.786% due 04/10/05 (b) 2,000 1,835
Series L
6.813% due 03/31/05 (b) 53 48
Asia Pulp & Paper International Finance Bond
Zero Coupon due 07/ 07/00 675 614
British Sky Broadcasting Group PLC
8.200% due 07/15/09 1,100 1,057
Bulgaria, Republic of
Series A
6.500% due 07/28/24 (b) 45 36
Bundesrepublik Deutschland
4.250% due 11/26/04 2,520 2,477
Cemex SA
8.500% due 08/31/00 (MTN) 1,000 1,012
Citicorp
6.231% due 06/27/02 (MTN)(b) 3,000 2,988
Colt Telecom Group PLC
7.625% due 12/15/09 5 5
Countrywide Home Loan
5.250% due 12/15/05 200 99
Credit Lyonnais
5.688% due 07/10/00 (b) 4,000 3,990
Dolphin Telecom PLC
Step-Up Bond
Zero Coupon due 06/ 01/08 (b) 40 20
Exodus Communications, Inc.
10.750% due 12/15/09 5 5
Ford Credit of Canada, Ltd.
6.280% due 12/16/02 (b) 5,000 4,981
Ford Motor Credit Co.
6.311% due 01/17/02 (b) 2,175 2,171
5.813% due 02/13/03 2,000 1,993
Global TeleSystems Group, Inc.
10.500% due 12/01/06 20 20
Household Bank Nevada NA
6.410% due 10/22/03 (MTN)(b) 4,000 3,976
Jazztel PLC
13.250% due 12/15/09 5 5
Kappa Beheer BV
10.625% due 07/15/09 30 32
Merita Bank, Ltd.
7.150% due 12/29/49 (e) 1,200 1,160
Morgan Stanley Dean Witter
6.308% due 03/11/03 (MTN)(b) 1,700 1,696
Netia Holdings II BV
13.500% due 06/15/09 2 2
North America Capital Corp.
8.250% due 11/17/03 110 179
NTL Communications Corp.
9.250% due 11/15/06 30 30
Ono Finance PLC
13.000% due 05/01/09 30 32
Panama, Republic of
Step-Up Bond
4.250% due 07/17/14 (b) 35 27
Peru, Republic of
4.500% due 03/07/17 (b) 50 35
Phillippines, Republic of
9.500% due 10/21/24 859 868
Poland, Republic of Step-Up Bond
4.000% due 10/27/24 1,250 819
PTC International Finance II
11.250% due 12/01/09 10 10
Skandinaviska Enskilda Banken (e)
8.125% due 09/06/49 475 449
6.500% due 06/29/49 (b) 1,200 1,120
Tele1 Europe BV
11.875% due 12/01/09 5 5
Tyco International Group SA
6.875% due 09/05/02 1,875 1,849
United Pan-Europ
10.875% due 11/01/07 30 31
Upm-Kymmene Corp.
7.450% due 11/26/27 750 680
Versatel Telecom International NV
11.875% due 07/15/09 15 16
Viatel, Inc.
11.500% due 03/15/09 20 20
Worldwide Fiber, Inc.
12.000% due 08/01/09 55 57
---------
36,449
---------
Mortgage-Backed Securities - 47.0%
Advanta Mortgage Loan Trust
Series 97-4 Class M1
7.040% due 01/25/29 1,600 1,577
Bear Stearns Mortgage Securities Inc.
Series 1998-2 Class B
6.750% due 04/30/30 (b) 1,615 1,516
Chase Commercial Mortgage Securities Corp.
Series 1997-2 Class D
6.600% due 12/19/07 1,500 1,349
CMC Securities Corp. III
Series 1998-I Class A19
6.750% due 05/25/28 5,000 4,615
159 Multistrategy Bond Fund
<PAGE>
Multistrategy Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Credit Suisse First Boston Mortgage
Securities Corp.
Series 1999-C1 Class A2
7.290% due 09/15/09 (b) 450 442
DLJ Mortgage Acceptance Corp.
Series 1996-Q5 Class A1
6.125% due 06/01/26 (b) 679 672
Federal Home Loan Mortgage Corp.
7.500% 15 Year TBA (d) 2,880 2,847
8.000% 15 Year TBA (d) 3,950 3,973
6.000% 30 Year TBA Gold (d) 8,800 8,055
6.500% 30 Year TBA Gold (d) 7,500 7,071
7.000% 30 Year TBA (d) 3,900 3,774
7.500% 30 Year TBA (d) 12,450 12,306
8.000% 30 Year TBA Gold (d) 950 959
Series 1037 Class Z
9.000% due 02/15/21 693 714
Series 2006 Class B
6.500% due 08/15/23 4,546 4,482
Federal Home Loan Mortgage Corp.
Participation Certificate
7.000% due 2009 312 310
8.500% due 2025 671 690
8.500% due 2027 3,219 3,307
6.000% due 2028 922 844
6.000% due 2029 4,671 4,275
6.500% due 2029 16,071 15,151
Federal National Mortgage Association
6.000% 30 Year TBA (d) 9,500 8,684
7.500% 30 Year TBA (d) 3,275 3,238
6.000% due 2003 155 151
10.000% due 2005 113 117
7.000% due 2014 3,706 3,663
7.448% due 2023 (b) 413 417
9.000% due 2025 2,170 2,258
6.975% due 2026 (b) 3,076 3,177
8.500% due 2026 1,720 1,765
6.000% due 2028 559 511
6.000% due 2029 14,116 12,912
6.500% due 2029 18,196 17,144
Series 1997-77 Class G
6.500% due 05/18/23 2,278 2,245
Federal National Mortgage Association (REMIC)
Series 1992-10 Class ZD
8.000% due 11/25/21 1,880 1,837
First Union Lehman Brothers Commercial
Mortgage Trust Pass-thru Certificates
Series 1997-C1 Class D
7.500% due 10/18/08 250 237
GMAC Commercial Mortgage Securities, Inc.
Series 1997-C1 Class A2
6.850% due 09/15/06 230 225
Government National Mortgage Association
9.000% due 2017 1,756 1,853
6.375% due 2023 (b) 1,028 1,045
6.625% due 2023 (b) 329 332
7.000% due 2023 (b) 519 527
6.125% due 2024 (b) 2,261 2,299
7.000% due 2024 (b) 2,087 2,105
8.000% due 2024 172 174
6.375% due 2025 (b) 1,326 1,346
6.750% due 2025 (b) 182 184
7.000% due 2025 726 703
8.000% due 2025 679 687
6.125% due 2026 (b) 1,386 1,400
7.000% due 2026 1,872 1,881
8.500% due 2026 1,227 1,258
6.875% due 2027 (b) 1,852 1,880
6.750% due 2027 (b) 946 952
7.000% due 2027 (f) 1,585 1,554
6.500% due 2028 2,551 2,393
7.000% due 2028 9,270 8,952
7.000% due 2029 891 860
7.500% due 2029 (b) 6,833 6,756
8.000% due 2029 (b) 10,677 10,784
6.000% 30 Year TBA (d) 11,500 10,423
6.500% 30 Year TBA (d) 18,650 17,502
7.000% 30 Year TBA (d) 25,870 24,956
8.000% 30 Year TBA (d) 6,000 6,060
Government National Mortgage Association
Pass- thru Certificate
Series 1999-43 Class UD
1.540% due 11/16/29 (b) 3,025 140
Series 1999-44 Class SA
2.750% due 12/16/29 2,375 151
Heller Financial Commercial Mortgage Asset
Co.
Series 1999-PH1 Class A2
6.847% due 05/15/31 820 787
Midland Realty Acceptance Corp.
Series 1996-C2 Class A2
7.233% due 01/25/29 1,000 991
Morgan Stanley Capital I, Inc.
Series 1998-XL1 Class A3
6.480% due 05/03/08 1,860 1,757
Multistrategy Bond Fund 160
<PAGE>
Multistrategy Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Norwest Asset Securities Corp.
Series 1997-21 Class A2
7.000% due 01/25/28 2,328 2,284
Series 1999-2 Class A16
6.500% due 02/25/29 3,000 2,692
Prudential Securities Secured Financing
Corp.
Series 1999-C2 Class A2
7.193% due 04/15/09 880 859
Residential Funding Mortgage Securities I
Series 1993-S20 Class A8
6.980% due 06/25/08 900 890
Series 1997-S6 Class A5
7.000% due 05/25/12 896 844
Residential Funding Mortgage Securities II
Series 1997-HS5 Class M1
7.010% due 05/25/27 1,400 1,359
Resolution Trust Corp.
Series 1994 - C2 Class G
8.000% due 04/25/25 235 224
Series 1994-1 Class M-2
7.750% due 09/25/29 (b) 366 363
Resolution Trust Corp. Mortgage Pass-thru
Certificate
Series 1995-1 Class 2-C
7.500% due 10/25/28 (b) 3 3
Salomon Brothers Mortgage Securities VII
Series 1999-NC3 Class A
5.940% due 06/25/29 (b) 4,578 4,578
Salomon Brothers Mortgage Securities VII,
Inc. Mortgage Pass-thru Certificate
Series 1994-16 Class A
8.260% due 11/25/24 (b) 324 330
Structured Asset Mortgage Investments, Inc.
Series 1998-11 Class A18
6.750% due 01/25/29 2,000 1,844
---------
266,472
---------
Non-US Bonds - 0.4%
Argentina, Republic of
Series PRE1
2.868 due 04/01/01 (b) ARS 100 40
Citicorp
5.500% due 06/30/10 EUR 240 117
Coca Cola Enterprises PLC
6.750% due 03/12/08 (MTN) GBP 80 127
Energis PLC
9.500% due 06/15/09 GBP 35 59
Greece, Republic of
6.500% due 01/11/14 GRD 5,800 18
Lesotho Highlands Water
13.000% due 09/15/10 ZAR 1,000 151
New Zealand, Government of
10.000% due 03/15/02 NZD 700 390
Series 403
5.500% due 04/15/03 NZD 700 350
Nykredit
6.000% due 10/01/29 DKK 1,530 192
Pannon Finance BV
7.750% due 08/03/04 EUR 45 48
Polestar Corp.
10.500% due 05/30/08 GBP 10 15
Rabobank
42.300% due 11/02/00 TRL 138,567 282
42.800% due 12/18/00 (b) TRL 7,970 15
Spintab AB
7.500% due 06/15/04 SEK 800 99
Stadshypotek AB
3.500% due 09/15/04 SEK 1,000 106
Telewest Communication PLC
Step-Up Bond
Zero Coupon due 04/ 15/09 GBP 15 15
TM Group Holdings PLC
12.250% due 05/15/08 GBP 10 16
Unikredit
7.000% due 10/01/29 DKK 3,570 477
---------
2,517
---------
United States Government Agencies - 1.8%
Federal Home Loan Bank Corp. Discount Note
5.811% due 11/03/00 210 200
Federal Home Loan Mortgage Corp.
5.750% due 03/15/09 6,625 6,052
Federal National Mortgage Association
5.625% due 05/14/04 1,950 1,863
Federal National Mortgage Association
Zero Coupon due 06/ 01/17 6,400 1,861
---------
9,976
---------
United States Government Treasuries - 10.3%
United States Treasury Bonds
Principal Strip
9.125% due 05/15/18 1,570 454
8.000% due 11/15/21 2,589 598
161 Multistrategy Bond Fund
<PAGE>
Multistrategy Bond Fund
Statement of Net Assets, continued
December 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
United States Treasury Bonds
8.750% due 08/15/20 1,430 1,733
8.125% due 05/15/21 3,500 4,012
8.000% due 11/15/21 1,600 1,816
6.625% due 02/15/27 4,195 4,158
3.875% due 04/15/29 609 569
6.125% due 08/15/29 2,439 2,325
United States Treasury Interest Only Strips
37.234% due 02/15/ 15 1,250 447
United States Treasury Notes
6.250% due 04/30/01 650 651
5.250% due 05/31/01 1,900 1,876
5.625% due 09/30/01 5,286 5,233
6.000% due 08/15/04 5,635 5,547
7.875% due 11/15/04 850 899
7.500% due 02/15/05 8,950 9,335
3.375% due 01/15/07 2,722 2,565
3.625% due 01/15/08 1,919 1,828
3.875% due 01/15/09 5,282 5,103
5.780% due 05/15/09 1,550 827
6.000% due 08/15/09 8,061 7,808
United States Treasury Principal Strip
Zero Coupon due 02/ 15/07 725 452
---------
58,236
---------
Yankee Bonds - 2.7%
Abbey National PLC
7.950% due 10/26/29 620 618
Amatek Industries Pty, Ltd.
12.000% due 02/15/08 70 64
Amvescap PLC
6.600% due 05/15/05 925 830
App Global Finance, Ltd. (b)
9.961% due 10/04/01 2,650 2,226
Asia Pulp & Paper Finance IX, Ltd.
9.060% due 10/04/01 1,200 996
Colt Telecom Group PLC
Step-Up Bond
Zero Coupon due 12/ 15/06 600 528
Edperbrascan Corp.
7.125% due 12/16/03 925 887
Empresa Nacional de Electricidad SA
7.325% due 02/01/37 350 321
Glencore Nickel Party, Ltd.
9.000% due 12/01/14 305 255
Grupo Iusacell SA de CV
10.000% due 07/15/04 750 713
Grupo Televisa SA Step-Up Bond
13.250% due 05/15/ 08 (b) 1,125 1,027
Hyundai Semiconductor America, Inc.
8.625% due 05/15/07 360 298
Korea Electric Power Corp.
7.000% due 02/01/27 305 283
Mexico (United Mexican States)
6.903% due 12/31/19 (b) 2,700 2,528
National Power Corp.
9.625% due 05/15/28 75 67
National Westminster Bank PLC
7.750% due 04/29/49 (e) 600 577
Peru, Republic of
6.813% due 03/08/27 25 18
Quebec, Province of
7.500% due 09/15/29 800 775
Royal Caribbean Cruises, Ltd.
7.500% due 10/15/27 1,400 1,255
RSL Communications PLC
12.000% due 11/01/08 50 50
RSL Communications PLC Step-Up Bond
Zero Coupon due 03/ 01/08 (b) 450 279
St. George Bank, Ltd.
7.150% due 10/01/05 700 671
Wolters Kluwer
5.500% due 09/22/06 190 188
---------
15,454
---------
Total Long-Term Investments
(cost $611,206) 598,423
---------
Notional
Amount
(000)
$
---------
Options Purchased - 0.0%
United States Treasury Bills (c)
Apr 99.16 Call 550 13
May 100.66 Call 3,700 9
United States Treasury Notes (c)
Feb 99.21 Call 1,939 3
Feb 98.73 Call 2,317 5
---------
Total Options Purchased
(cost $110) 30
---------
Multistrategy Bond Fund 162
<PAGE>
Multistrategy Bond Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ---------
Preferred Stocks - 0.7%
American Restaurant Group, Inc. 8
Australia & New Zealand Banking Group, Ltd. 5 132
California Federal Preferred Capital Corp. 19 422
Equity Office Properties Trust Series B 18 702
Global Crossing Holdings, Ltd. 10 1,004
Granite Broadcasting Corp. 35
Paxson Communications Corp. 408
Pinto Totta International Finance, Ltd. 1 1,182
---------
Total Preferred Stocks
(cost $4,255) 3,893
---------
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Short-Term Investments - 13.3%
American Express Credit Corp. 1&2
5.150% due 01/19/00 2,800 2,792
Bank of Tokyo Mitsubishi, Ltd.
5.937% due 02/18/00 6,000 6,000
Citibank Service Time Deposit
Zero Coupon due 02/22/00 (a) 80 81
Federal Home Loan Bank Corp.
Discount Note
5.480% due 02/04/00 (a) 483 477
Federal Home Loan Mortgage Corp.
Discount Note
5.510% due 01/14/00 (a) 360 356
5.170% due 01/21/00 (a) 1,000 997
5.480-5.600% due 01/25/00 (a) 6,080 6,052
5.700% due 01/31/00 (a) 100 100
5.750% due 03/20/00 100 99
5.760% due 03/27/00 25 25
5.630% due 05/31/00 100 98
Federal National Mortgage Association
Discount Notes
5.750% due 02/03/00 (a) 404 398
5.710% due 02/07/00 (a) 200 197
5.610% due 02/14/00 170 169
5.750% due 04/12/00 135 133
5.710% due 05/03/00 190 186
5.795% due 05/04/00 (a) 400 392
5.470% due 05/11/00 100 98
5.891% due 10/27/00 296 282
Federal National Mortgage Association
Discount Notes
5.632% due 03/02/00 152 151
5.615% due 03/09/00(f) 100 99
Ford Motor Credit Co.
Zero Coupon due 01/19/00 (a) 425 420
Frank Russell Investment Company Money
Market Fund, due on demand (a) 46,839 46,839
General Electric Capital Corp.
Discount Note
5.950% due 01/19/00 (a) 1,922 1,897
Household Finance Corp.
6.000% due 01/19/00 (a) 2,735 2,726
Morgan Stanley Dean Witter
5.980-6.040% due 01/19/00 (a) 2,992 2,982
Salomon, Inc.
1,000% due 03/16/00 45 46
United States Treasury Bills (a)(f)(g)
4.710-4.980% due 02/17/00 290 287
United States Treasury Notes
5.500% due 02/29/00 (a)(f) 1,030 1,030
---------
Total Short-Term Investments
(cost $75,090) 75,409
---------
163 Multistrategy Bond Fund
<PAGE>
Multistrategy Bond Fund
Statement of Net Assets, continued
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- ---------
Warrants - 0.0%
American Mobile Satellite Corp. 1
---------
Total Warrants
(cost $1) 1
---------
Total Investments - 119.6%
(cost $690,662) 677,756
Other Assets and Liabilities,
Net - (19.6%) (111,139)
---------
Net Assets - 100.0% 566,617
=========
* Each contract represents $100,000 notional value.
(a) At amortized 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 from date of acquisition.
Abbreviations:
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:
ARS - Argentine peso
BRL - Brazilian real
CLP - Chilean peso
CNY - Chinese renminbi yuan
COP - Columbian peso
CZK - Czech koruna
DKK - Danish krone
EUR - Euro currency
GBP - British pound sterling
GRD - Greek drachma
HUF - Hungarian forint
IDR - Indonesian rupiah
ILS - Israeli shekel
INR - Indian rupee
JPY - Japanese yen
KES - Kenyan shilling
KRW - South Korean won
PEN - Peruvian nouveau sol
PHP - Philippine peso
PLN - Polish zloty
SEK - Swedish krona
SKK - Slovakian koruna
THB - Thailand baht
TRL - Turkish lira
USD - U.S. dollar
ZAR - South African rand
See accompanying notes which are an integral part of the financial statements.
Multistrategy Bond Fund 164
<PAGE>
Multistrategy Bond Fund
Statement of Net Assets, continued
December 31, 1999
Unrealized
Number Appreciation
of (Depreciation)
Contracts* (000)
---------- --------------
Futures Contracts
Long Positions
Eurodollar
expiration date 09/00 77 $ (138)
expiration date 12/00 60 (71)
United States Treasury Bond
expiration date 03/00 5 (4)
United States Treasury 10 Year Note
expiration date 03/00 338 (567)
Short Positions
United States Treasury Bond
expiration date 03/00 5 11
United States Treasury 5 Year Note
expiration date 03/00 12 16
United States Treasury 10 Year Note
expiration date 03/00 49 105
---------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts $ (648)
=========
Notional Market
Amount Value
(000) (000)
$ $
--------- ---------
Options Written
Eurodollar Mid Curve 1 Year Futures*
Dec 93.50 Put 143 84
Eurodollar Futures*
Dec 93.50 Put 38 22
Government National Mortgage Association*
Feb 97.98 Call 2,810 9
Feb 97.61 Call 3,279 12
United States Treasury Bills*
Apr 103.16 Call 550 --
May 104.66 Call 3,700 1
Apr 95.06 Put 550 1
May 97.28 Put 3,700 64
United States Treasury Bonds*
Feb 93.84 Put 2,700 152
Feb 93.80 Put 2,700 150
United States Treasury Bond Futures*
Feb 98.00 Call 227 14
Jan 91.00 Put 9 3
Feb 90.00 Put 218 221
---------
Total Liability for Options Written
(premium received $411) 733
=========
See accompanying notes which are an integral part of the financial statements.
165 Multistrategy Bond Fund
<PAGE>
Multistrategy Bond Fund
Statement of Net Assets, continued
December 31, 1999
Foreign Forward Currency Exchange Contracts
Unrealized
Contracts to In Exchange Appreciation
Deliver For (Depreciation)
(000) (000) Settlement Date (000)
- ------------- ------------- --------------- -------------
USD 190 ARS 196 05/03/00 $ 3
USD 70 BRL 129 01/24/00 2
USD 65 BRL 129 02/14/00 6
USD 24 BRL 49 06/05/00 2
USD 170 CLP 94,563 02/02/00 8
USD 45 CNY 376 02/22/00 --
USD 45 CNY 377 02/28/00 --
USD 30 CNY 251 03/03/00 --
USD 14 CNY 117 03/03/00 --
USD 25 COP 47,575 01/11/00 --
USD 173 COP 334,236 02/07/00 2
USD 145 CZK 5,063 02/08/00 (3)
USD 14 EUR 13 01/21/00 (1)
USD 14 EUR 13 01/21/00 (1)
USD 18 EUR 18 01/21/00 (1)
USD 21 EUR 20 01/21/00 (1)
USD 21 EUR 20 01/21/00 (1)
USD 17 GRD 5,356 02/24/00 --
USD 296 GRD 95,401 11/06/00 (9)
USD 58 HUF 14,898 03/03/00 --
USD 260 HUF 65,533 05/04/00 (7)
USD 65 IDR 443,950 01/24/00 (2)
USD 15 IDR 101,925 02/15/00 --
USD 45 IDR 318,519 02/15/00 1
USD 10 IDR 72,150 02/28/00 --
USD 20 IDR 142,600 03/20/00 --
USD 35 IDR 248,605 03/20/00 --
USD 80 ILS 346 06/06/00 2
USD 170 INR 7,446 01/13/00 1
USD 10 INR 439 03/03/00 --
USD 14 JPY 1,415 01/21/00 --
USD 22 KES 1,639 03/24/00 --
USD 125 KRW 148,563 01/26/00 6
USD 50 KRW 57,963 03/03/00 1
USD 10 KRW 11,305 03/03/00 --
USD 40 KRW 45,800 03/09/00 --
USD 100 MXN 1,000 05/17/00 1
USD 25 MXN 262 10/03/00 --
USD 210 MXN 2,297 11/08/00 7
USD 34 MXN 365 12/29/00 --
USD 35 MXN 380 12/29/00 --
USD 168 PEN 600 02/08/00 1
USD 300 PHP 12,135 02/07/00 --
USD 15 PHP 621 02/24/00 --
USD 150 PLN 652 02/04/00 6
USD 150 PLN 668 05/04/00 6
USD 253 SKK 10,729 02/04/00 (1)
USD 46 SKK 1,960 02/14/00 --
USD 15 SKK 648 03/16/00 --
USD 35 THB 1,351 02/17/00 1
USD 30 THB 1,159 03/17/00 1
USD 50 THB 1,901 03/21/00 --
ARS 30 USD 30 02/04/00 --
COP 84,465 USD 45 01/11/00 --
COP 42 USD 81,236 02/07/00 --
DKK 4,995 USD 684 01/21/00 7
EUR 93 USD 94 01/21/00 --
EUR 168 USD 177 01/21/00 8
EUR 153 USD 162 01/21/00 7
EUR 189 USD 199 01/21/00 9
EUR 49 USD 51 01/21/00 2
EUR 464 USD 489 01/21/00 20
EUR 24 USD 25 01/21/00 1
EUR 2 USD 2 01/21/00 --
EUR 47 USD 49 01/21/00 2
EUR 34 USD 35 01/21/00 1
EUR 10 USD 10 01/21/00 --
EUR 55 USD 57 01/21/00 2
EUR 13 USD 13 01/21/00 --
EUR 24 USD 25 01/21/00 --
EUR 525 USD 537 01/21/00 7
EUR 105 USD 107 01/21/00 1
EUR 19 USD 19 01/21/00 --
EUR 40 USD 41 01/21/00 --
EUR 5 USD 5 01/21/00 --
EUR 5 USD 5 01/21/00 --
EUR 5 USD 5 01/21/00 --
EUR 2,633 USD 2,699 01/21/00 43
EUR 21 USD 22 01/21/00 --
EUR 5 USD 5 01/21/00 --
EUR 15 USD 15 01/21/00 --
EUR 85 USD 87 01/21/00 1
EUR 28 USD 28 01/21/00 --
EUR 240 USD 254 02/04/00 12
EUR 137 USD 145 02/08/00 6
EUR 44 USD 46 02/14/00 2
EUR 17 USD 16 02/24/00 (1)
EUR 15 USD 15 03/16/00 --
GBP 12 USD 19 01/21/00 --
GBP 83 USD 133 01/21/00 (1)
GBP 113 USD 180 01/21/00 (1)
GBP 37 USD 60 01/21/00 --
GBP 20 USD 32 01/21/00 --
GBP 10 USD 16 01/21/00 --
See accompanying notes which are an integral part of the financial statements.
Multistrategy Bond Fund 166
<PAGE>
Multistrategy Bond Fund
Statement of Net Assets, continued
December 31, 1999
Foreign Forward Currency Exchange Contracts
Unrealized
Contracts to In Exchange Appreciation
Deliver For (Depreciation)
(000) (000) Settlement Date (000)
- ------------- ------------- --------------- -------------
JPY 3,919 USD 38 01/21/00 $ --
JPY 1,552 USD 15 01/21/00 --
JPY 9,235 USD 90 01/21/00 --
JPY 881 USD 9 01/21/00 --
JPY 1,452 USD 14 01/21/00 --
JPY 581 USD 6 01/21/00 --
JPY 1,543 USD 15 01/21/00 --
JPY 1,268 USD 12 01/21/00 --
JPY 2,006 USD 20 01/21/00 --
JPY 1,540 USD 15 01/21/00 --
MXN 440 USD 44 05/17/00 (1)
MXN 560 USD 56 05/17/00 --
MXN 327 USD 31 11/08/00 --
PHP 1,808 USD 44 02/07/00 (1)
PLN 160 USD 37 02/04/00 (1)
PLN 161 USD 37 02/04/00 (1)
SEK 1,788 USD 212 01/21/00 2
-------------
$ 156
=============
See accompanying notes which are an integral part of the financial statements.
167 Multistrategy Bond Fund
<PAGE>
Multistrategy Bond Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amounts)
<TABLE>
<CAPTION>
December 31, 1999
<S> <C> <C>
Assets
Investments at market (identified cost $690,662) .......................................................... $ 677,756
Unrealized appreciation on forward foreign currency exchange contracts .................................... 189
Receivables:
Dividends and interest ................................................................................. 6,158
Investments sold (regular settlement) .................................................................. 3,258
Investments sold (delayed settlement) .................................................................. 9,102
Fund shares sold ....................................................................................... 1,687
Daily variation margin on futures contracts ............................................................ 26
Prepaid expenses .......................................................................................... 3
---------
Total assets ......................................................................................... 698,179
Liabilities
Payables:
Investments purchased (regular settlement) ................................................ $ 8,878
Investments purchased (delayed settlement) ................................................ 120,157
Fund shares redeemed ...................................................................... 1,355
Accrued fees to affiliates ................................................................ 109
Other accrued expenses .................................................................... 141
Daily variation margin on futures contracts ............................................... 156
Unrealized depreciation on forward foreign currency exchange contracts ....................... 33
Options written, at market value (premiums received $411) .................................... 733
---------
Total liabilities .................................................................................... 131,562
---------
Net Assets ................................................................................................ $ 566,617
=========
Net Assets Consist of:
Undistributed net investment income ....................................................................... $ 58
Accumulated net realized gain (loss) ...................................................................... (25,681)
Unrealized appreciation (depreciation) on:
Investments ............................................................................................ (12,906)
Futures contracts ...................................................................................... (648)
Options written ........................................................................................ (322)
Foreign currency-related transactions .................................................................. 160
Shares of beneficial interest ............................................................................. 599
Additional paid-in capital ................................................................................ 605,357
---------
Net Assets ................................................................................................ $ 566,617
=========
Net Asset Value, offering and redemption price per share:
Class C ($6,666,102 divided by 703,860 shares of $.01 par value
shares of beneficial interest outstanding) ........................................................... $ 9.47
=========
Class E ($3,248,139 divided by 342,872 shares of $.01 par value
shares of beneficial interest outstanding) ........................................................... $ 9.47
=========
Class S ($556,702,787 divided by 58,861,208 shares of $.01 par value
shares of beneficial interest outstanding) ........................................................... $ 9.46
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Multistrategy Bond Fund 168
<PAGE>
Multistrategy Bond Fund
Statement of Operations
Amounts in thousands Year Ended December 31, 1999
<TABLE>
<S> <C>
Investment Income
Interest .......................................................... $ 33,288
Dividends from Money Market Fund .................................. 3,945
Dividends ......................................................... 703
--------
Total investment income ........................................ 37,936
Expenses
Advisory fees ....................................... $ 3,380
Administrative fees ................................. 288
Custodian fees ...................................... 387
Distribution fees - Class C ......................... 24
Transfer agent fees ................................. 668
Professional fees ................................... 37
Registration fees ................................... 110
Shareholder servicing fees - Class C ................ 8
Shareholder servicing fees - Class E ................ 8
Trustees' fees ...................................... 7
Miscellaneous ....................................... 57
--------
Expenses before reductions .......................... 4,974
Expense reductions .................................. (327)
--------
Expenses, net .................................................. 4,647
--------
Net investment income ................................................ 33,289
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ......................................... (21,697)
Futures contracts ................................... (2,837)
Options written ..................................... 307
Foreign currency-related transactions ............... 25 (24,202)
--------
Net change in unrealized appreciation (depreciation) on:
Investments ......................................... (13,250)
Futures contracts ................................... (123)
Options written ..................................... (472)
Foreign currency-related transactions ............... 165 (13,680)
-------- --------
Net realized and unrealized gain (loss) .............................. (37,882)
--------
Net increase (decrease) in net assets from operations ................ $ (4,593)
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
169 Multistrategy Bond Fund
<PAGE>
Multistrategy Bond Fund
Statement of Changes in Net Assets
Amounts in thousands Years Ended December 31,
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ....................................... $ 33,289 $ 29,477
Net realized gain (loss) .................................... (24,202) 10,515
Net change in unrealized appreciation (depreciation) ........ (13,680) (6,774)
--------- ---------
Net increase (decrease) in net assets from operations .... (4,593) 33,218
--------- ---------
Distributions
From net investment income
Class C .................................................. (148) --
Class E .................................................. (173) (43)
Class S .................................................. (32,695) (29,983)
From net realized gain
Class E .................................................. (2) (48)
Class S .................................................. (430) (11,829)
--------- ---------
Net decrease in net assets from distributions ......... (33,448) (41,903)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions 54,301 121,730
--------- ---------
Total net increase (decrease) in net assets .................... 16,260 113,045
Net Assets
Beginning of period ......................................... 550,357 437,312
--------- ---------
End of period (including undistributed net investment
income of $58 and accumulated distributions in excess of
net investment income of $350, respectively) ............. $ 566,617 $ 550,357
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Multistrategy Bond Fund 170
<PAGE>
Multistrategy Bond Fund
Financial Highlights - Class C
The following table includes selected data for a share oustanding throughout the
period and other performance information derived from the financial statements.
1999*
---------
Net Asset Value, Beginning of Period ...................... $ 10.14
---------
Income From Operations
Net investment income (a) ............................... .42
Net realized and unrealized gain (loss) ................. (.63)
---------
Total income from operations .......................... (.21)
---------
Distributions
From net investment income .............................. (.45)
From net realized gain .................................. (.01)
---------
Total distributions ................................... (.46)
---------
Net Asset Value, End of Period ............................ $ 9.47
=========
Total Return (%)(b) ....................................... (2.10)
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ................ 6,666
Ratios to average net assets (%)(c):
Operating expenses, net ............................... 1.80
Operating expenses, gross ............................. 1.84
Net investment income ................................. 4.80
Portfolio turnover rate (%) ............................. 134.11
* For the period January 27, 1999 (commencement of sale) to December 31,
1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
171 Multistrategy Bond Fund
<PAGE>
Multistrategy Bond Fund
Financial Highlights - Class E
The following table includes selected data for a share oustanding throughout
each period and other performance information derived from the financial
statements.
Years Ended December 31,
--------------------------
1999 1998*
--------- ---------
Net Asset Value, Beginning of Period .......... $ 10.10 $ 10.30
--------- ---------
Income From Operations
Net investment income (a) .................. .56 .16
Net realized and unrealized gain (loss) .... (.66) .07
--------- ---------
Total income from operations ............ (.10) .23
--------- ---------
Distributions
From net investment income ................. (.52) (.20)
From net realized gain ..................... (.01) (.23)
--------- ---------
Total distributions ..................... (.53) (.43)
--------- ---------
Net Asset Value, End of Period ................ $ 9.47 $ 10.10
========= =========
Total Return (%)(b) ........................... (1.08) 1.89
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ... 3,248 2,610
Ratios to average net assets (%)(c):
Operating expenses, net ................. 1.05 --
Operating expenses, gross ............... 1.11 --
Net investment income ................... 5.54 --
Portfolio turnover rate (%) ................ 134.11 334.86
* For the period September 11, 1998 (commencement of sale) to December 31,
1998.
(a) Average month-end shares outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the period ended December 31, 1998 are not meaningful due
to the Class's short period of operation.
Multistrategy Bond Fund 172
<PAGE>
Multistrategy Bond Fund
Financial Highlights - Class S
The following table includes selected data for a share oustanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 10.11 $ 10.26 $ 10.11 $ 10.25 $ 9.29
-------- -------- -------- -------- --------
Income From Operations
Net investment income (a) .............. .57 .60 .60 .61 .65
Net realized and unrealized gain (loss) (.65) .08 .33 (.12) .97
-------- -------- -------- -------- --------
Total income from operations ........ (.08) .68 .93 .49 1.62
-------- -------- -------- -------- --------
Distributions
From net investment income ............. (.56) (.60) (.61) (.62) (.66)
From net realized gain ................. (.01) (.23) (.17) (.01) --
-------- -------- -------- -------- --------
Total distributions ................. (.57) (.83) (.78) (.63) (.66)
-------- -------- -------- -------- --------
Net Asset Value, End of Period ............ $ 9.46 $ 10.11 $ 10.26 $ 10.11 $ 10.25
======== ======== ======== ======== ========
Total Return (%) .......................... (.81) 6.79 9.50 4.97 17.92
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 556,703 547,747 437,312 305,428 218,765
Ratios to average net assets (%):
Operating expenses, net ............. .80 .80 .80 .81 .85
Operating expenses, gross ........... .86 .81 .83 .88 .89
Net investment income ............... 5.79 5.76 5.93 6.19 6.61
Portfolio turnover rate (%) ............ 134.11 334.86 263.75 145.38 142.26
</TABLE>
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
173 Multistrategy Bond Fund
<PAGE>
Frank Russell Investment Company
Russell Funds
Notes to Financial Statements
December 31, 1999
1. Organization
Frank Russell Investment Company (the "Investment Company") is a series
mutual fund with 29 different investment portfolios, (one of which has not
yet commenced operations) 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 $495,215 of unrealized depreciation, were combined
with those of the Fixed Income II Fund which changed its name to the 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 year ended December
31, 1999:
<TABLE>
<CAPTION>
Undistributed Accumulated Net
Net Investment Realized Gain Additional
Income (Loss) Paid-in Capital
-------------- --------------- ---------------
<S> <C> <C> <C>
Short Term Bond Fund $42,226 $(9,588,387) $9,546,161
</TABLE>
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.
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.
Amortization and accretion: All premiums and discounts, including original
issue discounts, for the Funds are amortized/accreted for both tax and
financial reporting purposes.
Notes to Financial Statements 174
<PAGE>
Frank Russell Investment Company
Russell Funds
Notes to Financial Statements, continued
December 31, 1999
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 and capital gains. Therefore, no
federal income tax provision was required for the Funds. From November 1,
1999 to December 31, 1999, the Funds listed below incurred net realized
capital losses. As permitted by tax regulations, these Funds have elected
to defer these losses and treat them as arising in the year ended December
31, 2000.
Deferred Net
Realized
Capital
Losses
------------
Real Estate Securities $4,344,347
Short Term Bond 283,698
Diversified Bond 2,227,479
Multistrategy Bond 6,282,764
At December 31, 1999, 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>
12/31/01 12/31/02 12/31/03 12/31/04
----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Emerging Markets $ -- $ -- $ (2,887,175) $ (348,806)
Real Estate Securities -- -- -- --
Short Term Bond (4,813,748) (5,161,817) (2,834,049) (1,947,924)
Diversified Bond -- -- -- --
Multistrategy Bond -- -- -- --
<CAPTION>
12/31/05 12/31/06 12/31/07 Totals
----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Emerging Markets $ -- $(56,335,865) $(26,958,651) $(86,530,497)
Real Estate Securities -- (2,695,613) (22,446,311) (25,141,924)
Short Term Bond (574,853) (51,911) (3,470,874) (18,855,176)*
Diversified Bond -- -- (11,070,653) (11,070,653)
Multistrategy Bond -- -- (17,634,520) (17,634,520)
</TABLE>
* A portion of the loss carryforward was acquired from the Volatility
Constrained Bond Fund (see Note 1) and may be limited to offset future
capital gains of the Fund to the extent provided by regulations.
Capital loss carryforward of $2,107,743 for the International Securities Fund at
December 31, 1998 was utilized in the current year.
The aggregate cost of investments and the composition of gross unrealized
appreciation and depreciation of investment securities for federal income tax
purposes as of December 31, 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 $1,153,852,895 $ 489,405,579 $ (49,445,932) $ 439,959,647
Special Growth 559,248,113 183,933,682 (35,504,423) 148,429,259
Equity Income 171,771,242 25,119,402 (8,273,892) 16,845,510
Quantitative Equity 1,090,650,923 528,784,941 (58,045,004) 470,739,937
International Securities 838,716,273 333,935,679 (35,087,731) 298,847,948
Emerging Markets 337,556,870 126,184,485 (25,902,585) 100,281,900
Real Estate Securities 611,206,956 48,343,981 (65,446,544) (17,102,563)
Short Term Bond 460,574,009 129,003 (6,128,457) (5,999,454)
Diversified Bond 862,198,630 3,173,327 (39,047,531) (35,874,204)
Multistrategy Bond 693,666,465 3,296,573 (19,207,422) (15,910,849)
</TABLE>
175 Notes to Financial Statements
<PAGE>
Frank Russell Investment Company
Russell Funds
Notes to Financial Statements, continued
December 31, 1999
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, certain securities sold at a loss
and by recording gains and losses from securities transactions on the
basis of specific identified cost incurred by each money manager for
financial reporting purposes and on the basis of specific identified cost
incurred by each Fund for tax purposes.
The following reclassifications have been made to reflect activity for the
year ended December 31, 1999:
Undistributed Accumulated
Net Investment Net Realized Additional
Income Gain (Loss) Paid-in Capital
-------------- ------------ ---------------
Diversified Equity $ 704,151 $(1,320,311) $ 616,160
Special Growth 757,885 (757,885) --
Equity Income 1,751 (1,751) --
Quantitative Equity 121,795 (121,795) --
International Securities (1,445,810) 1,429,017 16,793
Emerging Markets (1,011,035) 1,032,522 (21,487)
Short Term Bond (18,986) (9,054,390) 9,073,376
Diversified Bond 256,858 (256,858) --
Multistrategy Bond 133,944 (133,944) --
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 to a specific Fund or Class are allocated among all Funds and/
or Classes based on their relative net assets.
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.
Notes to Financial Statements 176
<PAGE>
Frank Russell Investment Company
Russell Funds
Notes to Financial Statements, continued
December 31, 1999
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 Securities Fund may enter into forward foreign currency
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 December 31, 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 (not to
exceed 120 days) (i.e., a "forward commitment", "delayed settlement" or
"when issued" transaction, e.g., to be announced ("TBA")) consistent with
a Fund's ability to manage its investment portfolio and meet redemption
requests. The price of the underlying securities and the date when the
securities will be delivered and paid for are fixed at the time the
transaction is negotiated. The Funds may dispose of a forward commitment
transaction prior to settlement if it is appropriate to do so and realize
short-term gains (or losses) upon such sale. When effecting such
transactions, cash or liquid high-grade debt obligations of the Fund in a
dollar amount sufficient to make payment for the portfolio securities to
be purchased will be segregated on the Fund's records at the trade date
and maintained until the transaction is settled. A forward commitment
transaction involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date or the other party to the
transaction fails to complete the transaction.
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.
177 Notes to Financial Statements
<PAGE>
Frank Russell Investment Company
Russell Funds
Notes to Financial Statements, continued
December 31, 1999
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 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 year ended December 31, 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
--------------- ---------------
Diversified Equity $ 1,521,244,958 $ 1,569,446,810
Special Growth 658,486,286 699,090,245
Equity Income 293,288,562 349,872,503
Quantitative Equity 1,241,536,459 1,331,405,947
International Securities 1,130,214,027 1,204,341,093
Emerging Markets 314,913,984 318,289,477
Real Estate Securities 233,099,531 183,072,057
Short-Term Bond 320,528,572 221,515,031
Diversified Bond 296,438,209 293,837,690
Multistrategy Bond 270,895,190 259,610,245
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 $ 537,710,748 $ 536,585,617
Diversified Bond 1,045,345,020 977,100,173
Multistrategy Bond 671,701,035 655,613,680
Written Options Contracts: Fund transactions in written options contracts
for the year ended December 31, 1999 were as follows:
Diversified Bond
Notional Value (1) Premiums
(000) Received
------------------ ---------
Outstanding December 31, 1998 $ 11,700 $ 167,531
Opened 114,682 902,458
Closed (55,213) (585,406)
Exercised (3,950) (80,719)
Expired (52,137) (262,726)
--------- ---------
Outstanding December 31, 1999 $ 15,082 $ 141,138
========= =========
Multistrategy Bond
Notional Value (1) Premiums
(000) Received
------------------ ---------
Outstanding December 31, 1998 $ 16,700 $ 251,452
Opened 121,084 1,716,897
Closed (86,782) (902,523)
Exercised (7,900) (147,000)
Expired (22,478) (507,392)
--------- ----------
Outstanding December 31, 1999 $ 20,624 $ 411,434
========= ==========
(1) Each $100,000 notional value represents 1 contract.
Notes to Financial Statements 178
<PAGE>
Frank Russell Investment Company
Russell Funds
Notes to Financial Statements, continued
December 31, 1999
4. Related Parties
Advisor and Administrator: FRIMCo advises 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.
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
December 31, 1999, $491,099,000 of the Money Market Fund's net assets
represents investments by these Funds and $458,871,000 represents the
investments of other affiliated Funds not presented herein.
The advisory and administrative fees, which are based upon the average
daily net assets of each Fund and the rates specified in the table below,
are payable monthly and aggregated $54,870,565 and $3,792,408,
respectively, for the year ended December 31, 1999. FRIMCo reduces its
advisory fees for each Fund by advisory fees incurred on assets invested
in the Money Market Fund thereby eliminating any duplication of fees.
Annual Rate
---------------------------
Advisor Administrator
------- -------------
Diversified Equity 0.73% 0.05%
Special Growth 0.90 0.05
Equity Income 0.75 0.05
Quantitative Equity 0.73 0.05
International Securities 0.90 0.05
Emerging Markets 1.15 0.05
Real Estate Securities 0.80 0.05
Short Term Bond 0.45 0.05
Diversified Bond 0.40 0.05
Multistrategy Bond 0.60 0.05
The Advisor has contractually agreed to waive a portion of its combined
0.65% advisory and administrative fees 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 year
ended December 31, 1999 was $327,074.
In accordance with the special servicing agreement entered into in
February 1999 by the Advisor, the LifePoints Funds (a group of five Fund
of Funds which invest in a combination of Class S shares of the Investment
Company's portfolios) 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 the respective
LifePoint Fund.
For the year ended December 31, 1999, the special servicing expense
charged to the Underlying Funds amounted to:
Amount
Underlying Funds Paid
--------------------------------------------------------------------------
Diversified Equity $135,935
Special Growth 54,910
Quantitative Equity 137,369
International Securities 123,933
Emerging Markets 30,586
Real Estate Securities 45,435
Short Term Bond 35,722
Diversified Bond 80,328
Multistrategy Bond 71,281
179 Notes to Financial Statements
<PAGE>
Frank Russell Investment Company
Russell Funds
Notes to Financial Statements, continued
December 31, 1999
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
reported herein for the year ended December 31, 1999 were $9,525,224.
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 is 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 are 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.
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 year ended
December 31, 1999 were as follows:
Diversified Equity $248,110
Special Growth 35,351
Equity Income 90,000
Quantitative Equity 58,576
International Securities 220,903
Emerging Markets 55,954
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 $30,000 per year plus out-of-pocket
expenses. Total Trustee expenses for the year ended December 31, 1999 were
$81,418, and were allocated to each Fund, where appropriate, on a pro rata
basis, including 18 other affiliated Funds not presented herein.
Notes to Financial Statements 180
<PAGE>
Frank Russell Investment Company
Russell Funds
Notes to Financial Statements, continued
December 31, 1999
5. Fund Share Transactions
Share transactions for the year ended December 31, 1999 and the year ended
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Shares Dollars (000)
---------------------------- --------------------------
Diversified Equity 1999 1998 1999 1998
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Class S
Proceeds from shares sold 8,172,792 9,507,360 $ 440,700 $ 448,918
Proceeds from reinvestment of distributions 2,438,734 1,274,778 127,171 59,999
Payments for shares redeemed (8,318,075) (8,070,726) (450,865) (384,259)
----------- ----------- ---------- ----------
Net increase (decrease) 2,293,451 2,711,412 117,006 124,658
----------- ----------- ---------- ----------
Class E (a)
Proceeds from shares sold 184,280 123,298 9,964 5,595
Proceeds from reinvestment of distributions 23,961 5,378 1,251 257
Payments for shares redeemed (145,404) (18,482) (8,037) (892)
----------- ----------- ---------- ----------
Net increase (decrease) 62,837 110,194 3,178 4,960
----------- ----------- ---------- ----------
Class C (b)
Proceeds from shares sold 283,102 -- 15,432 --
Proceeds from reinvestment of distributions 24,102 -- 1,252 --
Payments for shares redeemed (34,012) -- (1,856) --
----------- ----------- ---------- ----------
Net increase (decrease) 273,192 -- 14,828 --
----------- ----------- ---------- ----------
Total increase (decrease) 2,629,480 2,821,606 $ 135,012 $ 129,618
=========== =========== ========== ==========
Special Growth
Class S
Proceeds from shares sold 5,069,523 6,148,876 $ 222,630 $ 275,513
Proceeds from reinvestment of distributions 743,772 617,896 34,121 25,944
Payments for shares redeemed (5,387,701) (5,540,547) (238,216) (242,340)
----------- ----------- ---------- ----------
Net increase (decrease) 425,594 1,226,225 18,535 59,117
----------- ----------- ---------- ----------
Class E (a)
Proceeds from shares sold 96,481 98,025 4,107 4,008
Proceeds from reinvestment of distributions 6,816 5,154 308 203
Payments for shares redeemed (134,930) (29,520) (5,986) (1,255)
----------- ----------- ---------- ----------
Net increase (decrease) (31,633) 73,659 (1,571) 2,956
----------- ----------- ---------- ----------
Class C (b)
Proceeds from shares sold 130,681 -- 5,765 --
Proceeds from reinvestment of distributions 7,607 -- 342 --
Payments for shares redeemed (14,078) -- (629) --
----------- ----------- ---------- ----------
Net increase (decrease) 124,210 -- 5,478 --
----------- ----------- ---------- ----------
Total increase (decrease) 518,171 1,299,884 $ 22,442 $ 62,073
=========== =========== ========== ==========
</TABLE>
(a) Effective May 18, 1998, Class C was renamed Class E.
(b) Share transactions for Class C are for the period January 27, 1999
(commencement of sale of shares) to December 31, 1999.
181 Notes to Financial Statements
<PAGE>
Frank Russell Investment Company
Russell Funds
Notes to Financial Statements, continued
December 31, 1999
<TABLE>
<CAPTION>
Shares Dollars (000)
----------------------------- ---------------------------
Equity Income 1999 1998 1999 1998
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Class S
Proceeds from shares sold 1,558,390 2,229,736 $ 62,668 $ 93,208
Proceeds from reinvestment of distributions 487,753 512,914 18,019 20,629
Payments for shares redeemed (3,052,584) (2,196,713) (121,986) (91,318)
----------- ---------- ----------- -----------
Net increase (decrease) (1,006,441) 545,937 (41,299) 22,519
----------- ---------- ----------- -----------
Class E (a)
Proceeds from shares sold 20,927 22,270 855 940
Proceeds from reinvestment of distributions 2,209 547 81 21
Payments for shares redeemed (12,573) (13,005) (522) (543)
----------- ---------- ----------- -----------
Net increase (decrease) 10,563 9,812 414 418
----------- ---------- ----------- -----------
Class C (b)
Proceeds from shares sold 37,194 -- 1,522 --
Proceeds from reinvestment of distributions 1,899 -- 68 --
Payments for shares redeemed (12,211) -- (479) --
----------- ---------- ----------- -----------
Net increase (decrease) 26,882 -- 1,111 --
----------- ---------- ----------- -----------
Total increase (decrease) (968,996) 555,749 $ (39,774) $ 22,937
=========== ========== =========== ===========
Quantitative Equity
Class S
Proceeds from shares sold 10,418,764 10,401,417 $ 468,516 $ 411,247
Proceeds from reinvestment of distributions 3,368,265 1,801,116 146,301 71,013
Payments for shares redeemed (10,546,550) (8,361,539) (476,897) (332,333)
----------- ---------- ----------- -----------
Net increase (decrease) 3,240,479 3,840,994 137,920 149,927
----------- ---------- ----------- -----------
Class E (a)
Proceeds from shares sold 98,189 135,230 4,483 5,167
Proceeds from reinvestment of distributions 20,011 7,335 868 292
Payments for shares redeemed (117,457) (30,285) (5,392) (1,234)
----------- ---------- ----------- -----------
Net increase (decrease) 743 112,280 (41) 4,225
----------- ---------- ----------- -----------
Class C (b)
Proceeds from shares sold 312,907 -- 14,227 --
Proceeds from reinvestment of distributions 29,988 -- 1,297 --
Payments for shares redeemed (39,969) -- (1,831) --
----------- ---------- ----------- -----------
Net increase (decrease) 302,926 -- 13,693 --
----------- ---------- ----------- -----------
Total increase (decrease) 3,544,148 3,953,274 $ 151,572 $ 154,152
=========== ========== =========== ===========
</TABLE>
(a) Effective May 18, 1998, Class C was renamed Class E.
(b) Share transactions for Class C are for the period January 27, 1999
(commencement of sale of shares) to December 31, 1999.
Notes to Financial Statements 182
<PAGE>
Frank Russell Investment Company
Russell Funds
Notes to Financial Statements, continued
December 31, 1999
<TABLE>
<CAPTION>
Shares Dollars (000)
----------------------------- ---------------------------
International Securities 1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Class S
Proceeds from shares sold 4,491,720 5,496,045 $ 289,151 $ 326,448
Proceeds from reinvestment of distributions 642,480 171,775 45,572 10,072
Payments for shares redeemed (5,502,727) (5,562,388) (357,980) (329,404)
----------- ----------- ----------- -----------
Net increase (decrease) (368,527) 105,432 (23,257) 7,116
----------- ----------- ----------- -----------
Class E (a)
Proceeds from shares sold 45,491 59,331 2,885 3,346
Proceeds from reinvestment of distributions 3,442 588 245 35
Payments for shares redeemed (47,879) (10,159) (3,l02) (591)
----------- ----------- ----------- -----------
Net increase (decrease) 1,054 49,760 28 2,790
----------- ----------- ----------- -----------
Class C (b)
Proceeds from shares sold 107,715 -- 6,967 --
Proceeds from reinvestment of distributions 4,664 -- 329 --
Payments for shares redeemed (11,427) -- (759) --
----------- ----------- ----------- -----------
Net increase (decrease) 100,952 -- 6,537 --
----------- ----------- ----------- -----------
Total increase (decrease) (266,521) 155,192 $ (16,692) $ 9,906
=========== =========== =========== ===========
Emerging Markets
Class S
Proceeds from shares sold 14,900,682 22,508,124 $ 140,982 $ 221,964
Proceeds from reinvestment of distributions 281,096 188,272 2,639 2,070
Payments for shares redeemed (15,483,258) (16,241,312) (152,294) (149,675)
----------- ----------- ----------- -----------
Net increase (decrease) (301,480) 6,455,084 (8,673) 74,359
----------- ----------- ----------- -----------
Class E (a)
Proceeds from shares sold 852,482 4,558 8,575 38
Proceeds from reinvestment of distributions 1,091 -- 13 --
Payments for shares redeemed (353,467) -- (3,674) --
----------- ----------- ----------- -----------
Net increase (decrease) 500,106 4,558 4,914 38
----------- ----------- ----------- -----------
Class C (b)
Proceeds from shares sold 147,290 -- 1,466 --
Proceeds from reinvestment of distributions 45 -- -- --
Payments for shares redeemed (16,617) -- (167) --
----------- ----------- ----------- -----------
Net increase (decrease) 130,718 -- 1,299 --
----------- ----------- ----------- -----------
Total increase (decrease) 329,344 6,459,642 $ (2,460) $ 74,397
=========== =========== =========== ===========
</TABLE>
(a) Effective May 18, 1998, Class C was renamed Class E.
(b) Share transactions for Class C are for the period January 27, 1999
(commencement of sale of shares) to December 31, 1999.
183 Notes to Financial Statements
<PAGE>
Frank Russell Investment Company
Russell Funds
Notes to Financial Statements, continued
December 31, 1999
<TABLE>
<CAPTION>
Shares Dollars (000)
----------------------------- ---------------------------
Real Estate Securities 1999 1998 1999 1998
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Class S
Proceeds from shares sold 10,307,873 9,286,206 $ 247,786 $ 254,637
Proceeds from reinvestment of distributions 1,500,692 1,114,356 34,444 30,226
Payments for shares redeemed (9,610,223) (6,759,461) (227,746) (178,741)
----------- ---------- ----------- -----------
Net increase (decrease) 2,198,342 3,641,101 54,484 106,122
----------- ---------- ----------- -----------
Class E (a)
Proceeds from shares sold 378,070 28,391 9,451 715
Proceeds from reinvestment of distributions 13,837 375 312 9
Payments for shares redeemed (113,177) (6,530) (2,588) (183)
----------- ---------- ----------- -----------
Net increase (decrease) 278,730 22,236 7,175 541
----------- ---------- ----------- -----------
Class C (b)
Proceeds from shares sold 84,921 -- 2,034 --
Proceeds from reinvestment of distributions 2,678 -- 59 --
Payments for shares redeemed (9,550) -- (227) --
----------- ---------- ----------- -----------
Net increase (decrease) 78,049 -- 1,866 --
----------- ---------- ----------- -----------
Total increase (decrease) 2,555,121 3,663,337 $ 63,525 $ 106,663
=========== ========== =========== ===========
Short-Term Bond
Class S
Proceeds from shares sold 12,497,701 6,088,176 $ 229,357 $ 112,707
Shares issued in connection with acquisition
of Volatility Constrained Bond Fund 8,934,738 -- 163,684 --
Proceeds from reinvestment of distributions 1,023,507 604,269 18,557 11,141
Payments for shares redeemed (11,748,485) (5,088,094) (214,600) (94,296)
----------- ---------- ----------- -----------
Net increase (decrease) 10,707,461 1,604,351 196,998 29,552
----------- ---------- ----------- -----------
Class E (c)
Proceeds from shares sold 550,310 -- 10,084 --
Proceeds from reinvestment of distributions 14,963 -- 271 --
Payments for shares redeemed (84,513) -- (1,538) --
----------- ---------- ----------- -----------
Net increase (decrease) 480,760 -- 8,817 --
----------- ---------- ----------- -----------
Class C (d)
Proceeds from shares sold 104,488 -- 1,907 --
Proceeds from reinvestment of distributions 1,225 -- 22 --
Payments for shares redeemed (61,555) -- (1,119) --
----------- ---------- ----------- -----------
Net increase (decrease) 44,158 -- 810 --
----------- ---------- ----------- -----------
Total increase (decrease) 11,232,379 1,604,351 $ 206,625 $ 29,552
=========== ========== =========== ===========
</TABLE>
(a) Effective May 18, 1998, Class C was renamed Class E.
(b) Share transactions for Class C are for the period January 27, 1999
(commencement of sale of shares) to December 31, 1999.
(c) Share transactions for Class E are for the period February 18, 1999
(commencement of sale of shares) to December 31, 1999.
(d) Share transactions for Class C are for the period March 3, 1999
(commencement of sale of shares) to December 31, 1999
Notes to Financial Statements 184
<PAGE>
Frank Russell Investment Company
Russell Funds
Notes to Financial Statements, continued
December 31, 1999
<TABLE>
<CAPTION>
Shares Dollars (000)
----------------------------- ---------------------------
Diversified Bond 1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Class S
Proceeds from shares sold 15,223,893 15,009,859 $ 346,136 $ 355,143
Proceeds from reinvestment of distributions 1,396,770 1,508,462 31,387 35,660
Payments for shares redeemed (15,825,030) (11,474,358) (356,343) (272,067)
----------- ----------- ----------- -----------
Net increase (decrease) 795,633 5,043,963 21,180 118,736
----------- ----------- ----------- -----------
Class E (a)
Proceeds from shares sold 143,481 155,188 3,337 3,757
Proceeds from reinvestment of distributions 9,869 6,059 226 146
Payments for shares redeemed (186,265) (67,274) (4,229) (1,615)
----------- ----------- ----------- -----------
Net increase (decrease) (32,915) 93,973 (666) 2,288
----------- ----------- ----------- -----------
Class C (b)
Proceeds from shares sold 229,269 -- 5,279 --
Proceeds from reinvestment of distributions 4,803 -- 109 --
Payments for shares redeemed (24,874) -- (564) --
----------- ----------- ----------- -----------
Net increase (decrease) 209,198 -- 4,824 --
----------- ----------- ----------- -----------
Total increase (decrease) 971,916 5,137,936 $ 25,338 $ 121,024
=========== =========== =========== ===========
Multistrategy Bond
Class S
Proceeds from shares sold 23,568,739 22,246,273 $ 231,504 $ 228,942
Proceeds from reinvestment of distributions 2,582,271 3,444,172 25,159 35,248
Payments for shares redeemed (21,484,524) (14,104,977) (210,088) (145,116)
----------- ----------- ----------- -----------
Net increase (decrease) 4,666,486 11,585,468 46,575 119,074
----------- ----------- ----------- -----------
Class E (a)
Proceeds from shares sold 198,146 253,909 1,968 2,611
Proceeds from reinvestment of distributions 17,908 8,900 174 90
Payments for shares redeemed (131,598) (4,393) (1,294) (45)
----------- ----------- ----------- -----------
Net increase (decrease) 84,456 258,416 848 2,656
----------- ----------- ----------- -----------
Class C (b)
Proceeds from shares sold 775,114 -- 7,565 --
Proceeds from reinvestment of distributions 14,479 -- 139 --
Payments for shares redeemed (85,733) -- (826) --
----------- ----------- ----------- -----------
Net increase (decrease) 703,860 -- 6,878 --
----------- ----------- ----------- -----------
Total increase (decrease) 5,454,802 11,843,884 $ 54,301 $ 121,730
=========== =========== =========== ===========
</TABLE>
(a) Effective May 18, 1998, Class C was renamed Class E.
(b) Share transactions for Class C are for the period January 27, 1999
(commencement of sale of shares) to December 31, 1999.
6. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $75
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .10% on the average daily unused amount of the
aggregate commitment, which is allocated among each of the Participants.
Interest, at the Federal Fund Rate plus .50% annually (Federal Fund Rate
plus 1.75% prior to and including February 27, 2000), is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up
to a maximum of 10 percent of the value of its net assets under the
agreement. The agreement will expire December 30, 2000. The Fund did not
have any drawdowns during the year.
185 Notes to Financial Statements
<PAGE>
Frank Russell Investment Company
Russell Funds
Notes to Financial Statements, continued
December 31, 1999
7. Dividends
On February 1, 2000, the Board of Trustees declared the following
dividends from net investment income payable on February 4, 2000, to
shareholders of record on February 2, 2000:
Diversified Bond - Class S $0.1138
Diversified Bond - Class E 0.1089
Diversified Bond - Class C 0.0950
Multistrategy Bond - Class S 0.0472
Multistrategy Bond - Class E 0.0452
Multistrategy Bond - Class C 0.0393
8. Beneficial Interest
As of December 31, 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:
% % % %
---- ---- ---- ----
Diversified Equity - Class E 39.7 -- -- --
Special Growth - Class E 13.1 12.6 -- --
Equity Income - Class E 24.4 19.4 17.5 11.6
International Securities - Class E 12.4 11.3 -- --
Emerging Markets - Class E 15.2 14.9 -- --
Real Estate Securities - Class E 19.6 15.7 -- --
Short Term Bond - Class C 39.7 -- -- --
Short Term Bond - Class E 57.7 12.6 11.7 --
Diversified Bond - Class S 14.9 11.4 -- --
Diversified Bond - Class E 23.4 14.0 11.8 --
Multistrategy Bond - Class E 16.2 -- -- --
Notes to Financial Statements 186
<PAGE>
Report of Independent Accountants
To the Board of Trustees and Shareholders
of Frank Russell Investment Company:
In our opinion, the accompanying statements of assets and liabilities, including
the statements of net assets, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the series of Frank Russell
Investment Company (in this report comprised of Diversified Equity, Special
Growth, Equity Income, Quantitative Equity, International Securities, Emerging
Markets, Real Estate Securities, Short Term Bond, Diversified Bond, and
Multistrategy Bond (the "Funds")) at December 31, 1999, and the results of each
of their operations, the changes in each of their net assets and the financial
highlights for the periods indicated therein, in conformity with generally
accepted accounting principles in the United States. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Seattle, Washington
February 17, 2000
187 Report of Independent Accountants
<PAGE>
Frank Russell Investment Company
Russell Funds
Tax Information
December 31, 1999 (Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the
following amounts as long-term capital gain dividends for their taxable year
ended December 31, 1999:
Total Long-Term
Capital Gains
---------------
Diversified Equity $112,786,127
Special Growth 23,768,197
Equity Income 17,340,483
Quantitative Equity 122,095,136
International Securities 50,608,759
Diversified Bond 2,063,284
Tax Information 188
<PAGE>
Frank Russell Investment Company
909 A Street, Tacoma, Washington 98402
(800) 832-6688
In Washington (253) 627-7001
Trustees
Lynn L. Anderson, Chairman
Paul E. Anderson
Paul Anton, PhD
William E. Baxter
Lee C. Gingrich
Eleanor W. Palmer
Trustees Emeritus
George F. Russell, Jr.
Officers
Lynn L. Anderson, Chairman of the Board and President
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
Allan Forbes Building
150 Newport Avenue AFB35
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
Diversified Equity Fund
Alliance Capital Management L.P., Minneapolis, MN
Barclays Global Investors, San Francisco, CA
Equinox Capital Management, LLC, New York, NY
Jacobs Levy Equity Management, Inc., Roseland, NJ
Lincoln Capital Management Company, Chicago, IL
Marsico Capital Management, LLC, Denver, CO
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
Westpeak Investment Advisors, L.P., Boulder, CO
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 Ltd., 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, LLC, 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 Limited, London, England
Genesis Asset Managers Limited, London, England
Nicholas Applegate Capital Management, San Diego, CA
Sanford C. Bernstein & Co., Inc., New York, NY
Schroder Investment Management North America Limited,
New York, NY
This report is prepared from the books and records of the Fund 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.
189 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
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
Lazard Asset Management, New York, NY
Miller Anderson & Sherrerd, West Conshohocken, PA
Pacific Investment Management Company, Newport Beach, CA
Standish, Ayer & Wood, Inc., Boston, MA
This report is prepared from the books and records of the Fund 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 190
<PAGE>
[LOGO] Russell
Frank Russell Investment Company
909 A Street
Tacoma, WA 98402-5120
253-627-7001
800-972-0700
Fax: 253-591-3495
<PAGE>
1999 Annual Report
TAX--MANAGED LARGE CAP FUND - CLASS C AND S SHARES
TAX-MANAGED SMALL CAP FUND - CLASS C AND S SHARES
TAX EXEMPT BOND FUND - CLASS C, E AND S SHARES
TAX FREE MONEY MARKET FUND - CLASS S SHARES
DECEMBER 31, 1999
--------------
[LOGO] Russell
--------------
<PAGE>
Frank Russell Investment
Company
Frank Russell Investment Company
is a "series mutual fund" with 29
different investment portfolios.
These financial statements report
on four 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-Managed Funds
Annual Report
December 31, 1999
Page
Letter to Our Clients .................................................... 2
Tax-Managed Large Cap Fund ............................................... 3
Tax-Managed Small Cap Fund ............................................... 15
Tax Exempt Bond Fund ..................................................... 33
Tax Free Money Market Fund ............................................... 47
Notes to Financial Statements ............................................ 60
Report of Independent Accountants ........................................ 67
Manager, Money Managers and Service Providers ............................ 68
Frank Russell Investment Company - Tax-Managed Funds
Copyright(C) Frank Russell Company 2000. 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 flactuate 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>
To Our Clients
We are pleased to present the Frank Russell Investment Company 1999 Annual
Report. This report covers information on four of the Funds and represents our
eighteenth year in operation.
We remain committed to providing our clients with superior investment solutions
through the benefits of multi-manager, multi-style diversification used in
structuring our Funds. The commitment proved worthwhile in 1999, as our Funds,
in general, provided solid returns as compared to their respective benchmarks
and attracted many new investors, both creating significant growth in assets.
Frank Russell Investment Management Company (FRIMCo) continuously evaluates the
Funds we offer our clients. Each of these Funds is carefully monitored by
Russell investment professionals to ensure that the most appropriate investment
advisors and strategies are utilized within each Fund. The advisors are
monitored by FRIMCo using the expertise and advice of the Investment Policy and
Research group of Frank Russell Company.
Since the close of 1998 we have implemented changes in our Funds' structure
which we believe will benefit current and potential investors. The Russell Funds
and the LifePoints(R) Funds both added Class C shares during 1999, and the
Russell Institutional Funds opened Class E shares for investment in May 1999.
Additionally, the Tax-Managed Small Cap Fund was opened for investment in
November 1999, providing a small cap alternative to the existing tax-managed
Russell Funds.
Thank you for your continued confidence and investment with Frank Russell
Investment Company. We look forward to 2000 and continuing to earn your support.
Sincerely,
/s/ Lynn L. Anderson. /s/ Eric A. Russell
Lynn L. Anderson. Eric A. Russell
Chairman of the Board President
Frank Russell Investment Company Frank Russell Investment Management
Company
<PAGE>
Tax-Managed Large Cap Fund
Portfolio Management Discussion
december 31, 1999 (Unaudited)
Objective: To provide capital growth on an after tax basis by investing
principally in equity securities.
Invests in: US equity securities.
Strategy: The Fund focuses on superior stock selection in a risk-controlled
portfolio while minimizing the impact of taxes by explicitly integrating the tax
implications of portfolio activities on after-tax returns.
- --------------------------------------------------------------------------------
[The following was depicted as a mountain chart in the printed material.]
Dates Managed Large Cap - C S&P 5000**
Inception* $10,000 $10,000
1996 $10,642 $10,551
1997 $14,019 $14,079
1998 $18,516 $16,120
1999 $21,584 $21,950
--------------------------------
Total $74,761 $74,694
Yearly periods ended December 31
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Tax-Managed Large Cap Fund - Class S
- --------------------------------------------------------------------------------
Periods Ended Growth of Total
12/31/99 $10,000 Return
------------- --------- -------
1 Year $11,657 16.57%
Inception $21,584 26.87%ss.
- --------------------------------------------------------------------------------
Tax-Managed Large Cap Fund - Class C
- --------------------------------------------------------------------------------
Periods Ended Growth of Total
12/31/99 $10,000 Return
------------- --------- -------
1 Year $11,651 16.51%
Inception $21,574 26.87%ss.
- --------------------------------------------------------------------------------
Standard & Poors(R) 500 Composite Stock Price Index
- --------------------------------------------------------------------------------
Periods Ended Growth of Total
12/31/99 $10,000 Return
------------- --------- -------
1 Year $12,114 21.14%
Inception $21,950 27.70%ss.
3 Tax-Managed Large Cap Fund
<PAGE>
Tax-Managed Large Cap Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Performance Review
For the year ending December 31, 1999, the Tax-Managed Large Cap Fund Class S
and Class C shares reflected total returns of 16.57% and 16.51%, respectively,
as compared to the S&P 500(R) Index gain of 21.14%. In addition to the Fund's
strong absolute return, taxable capital gains were negligible for the year
relative to other mutual funds.
Portfolio Highlights
The performance of stocks in 1999 was characterized by extreme differences in
returns between the various market sectors. Overall, stocks provided investors
with their fifth consecutive year of returns in excess of 20% - an unprecedented
trend in the US stock market's history. Unlike the previous four years, the
market's advance was much broader across capitalization tiers, with small cap
shares actually finishing the year slightly higher than large caps after an end
of year rally. The market was also narrower, however, by economic sector
performance, which was mostly reflective of the extreme strength of technology
issues. Technology, which gained 77% for the year, dominated other market
sectors, as excitement over the Internet created aggressive buying. Other
sectors lagged by a wide margin, as value stocks in the Russell 1000(R) Index
trailed their growth counterparts by 26 percentage points.
The vast majority of growth and income funds lagged the S&P 500 Index for the
year, and Russell's Tax-Managed Large Cap Fund was no exception. After a strong
first half of the year, the Fund stumbled as a number of market trends
contributed to a weak fourth quarter. Chief among these was the market's strong
bias towards Internet technology companies. The Fund's valuation sensitivity led
to an underweighting of several of the market's strongest performing issues.
These high-priced issues were difficult to rationalize through any fundamental
pricing evaluation. Also contributing to the Fund's fourth quarter weakness was
a significant price decline in a large holding, Tyco International (1.14% of
portfolio at year end), as the stock price tumbled on news of potential
accounting irregularities. However, after evaluating the situation, the holding
was maintained with some recovery already evident by year end.
- --------------------------------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) December 31, 1999
- --------------------------------------------------------------------------------
Microsoft Corp. 5.1%
General Electric Co. 4.2
Cisco Systems, Inc. 3.3
Exxon Mobil Corp. NPV 2.9
Intel Corp. 2.5
Sun Microsystems, Inc. 2.5
MCI WorldCom, Inc. 2.4
Lucent Technologies, Inc. 2.3
Procter & Gamble Co. 2.2
Wal-Mart Stores, Inc. 2.1
- --------------------------------------------------------------------------------
Portfolio Characteristics
December 31, 1999
- --------------------------------------------------------------------------------
Current P/E Ratio 26.8x
Portfolio Price/Book Ratio 4.37x
Market Capitalization - $- Weighted Average 147.49 Bil
Number of Holdings 191
- --------------------------------------------------------------------------------
Money Manager Style
- --------------------------------------------------------------------------------
J.P. Morgan Investment Management, Inc. Market- Oriented
* The Fund commenced operations on October 7, 1996. Index comparison began
November 1, 1996.
** The Standard & Poor's(R) 500 Composite Stock Price Index is composed of
500 common stocks which are chosen by Standard & Poor's Corporation to
best capture the price performance of a large cross-section of the US
publicly traded stock market. The Index is structured to approximate the
general distribution of industries in the US economy.
++ Tax-Managed Large Cap Fund Class S performance has been linked with Class
C to provide historical perspective. For the period December 6, 1999
(commencement of sale) through the current period, Class C paid
shareholder service and Rule 12b-1 distribution fees. Total return would
have been lower had these fees been in effect during prior reporting
periods.
ss. Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Tax-Managed Large Cap Fund 4
<PAGE>
Tax-Managed Large Cap Fund
Statement of Net Assets
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
------ ------
- --------------------------------------------------------------------------------
Common Stocks - 95.0%
Auto and Transportation - 2.4%
CSX Corp. 46,200 1,450
Dana Corp. 89,800 2,688
Delphi Automotive Systems Corp. 1,495 24
Eaton Corp. 25,500 1,852
Ford Motor Co. 49,000 2,618
Goodyear Tire & Rubber Co. 36,900 1,040
Lear Corp. (a) 32,400 1,037
Union Pacific Corp. 64,700 2,822
------
13,531
------
Consumer Discretionary - 10.1%
Abercrombie & Fitch Co. Class A (a) 69,600 1,857
AT&T Corp. - Liberty Media Group Class A (a) 32,232 1,829
Best Buy Co. (a) 5,500 276
Cendant Corp. (a) 115,400 3,065
Circuit City Stores, Inc. 17,500 789
Dayton Hudson Corp. 23,800 1,748
Eastman Kodak Co. 42,500 2,816
Extended Stay America, Inc. (a) 1,700 13
Federated Department Stores, Inc. (a) 53,500 2,705
Gannett Co., Inc. 18,200 1,484
Gap, Inc. 83,700 3,850
Home Depot, Inc. (The) 72,300 4,957
International Game Technology 30,200 613
Jones Apparel Group, Inc. (a) 72,200 1,958
Leggett & Platt, Inc. 68,600 1,471
Lowe's Cos., Inc. 15,700 938
May Department Stores Co. 54,500 1,758
McDonald's Corp. 39,200 1,580
MediaOne Group, Inc. (a) 36,200 2,781
Mirage Resorts, Inc. (a) 9,200 141
Pactiv Corp. (a) 41,000 436
Service Corp. International 135,100 937
Starwood Hotels & Resorts Worldwide, Inc. 63,134 1,484
Time Warner, Inc. 33,250 2,409
TJX Cos., Inc. 156,400 3,197
Wal-Mart Stores, Inc. 172,200 11,903
------
56,995
------
Consumer Staples - 7.5%
Anheuser-Busch Cos., Inc. 2,700 191
Bestfoods 17,000 894
Clorox Co. (The) 10,400 524
Coca-Cola Co. (The) 88,200 5,138
General Mills, Inc. 19,800 708
Gillette Co. 57,600 2,372
Heinz (H.J.) Co. 3,500 139
Kroger Co. (The) (a) 93,400 1,763
PepsiCo, Inc. 37,000 1,304
Philip Morris Cos., Inc. 309,900 7,186
Procter & Gamble Co. 112,300 12,304
Ralston-Purina Group 1,200 33
Safeway, Inc. (a) 9,000 320
Sara Lee Corp. 7,100 157
Seagram Co., Ltd. 192,900 8,668
Unilever NV (a) 12,138 661
------
42,362
------
Financial Services - 13.3%
AEGON NV 5,681 543
Aetna, Inc. 17,000 949
Allstate Corp. 54,400 1,306
Ambac Financial Group, Inc. 31,700 1,654
American International Group, Inc 15,453 1,671
AON Corp. 1,500 60
Astoria Financial Corp. 88,785 2,702
Automatic Data Processing, Inc 21,900 1,180
Bank of America Corp. 107,251 5,383
Bank One Corp. 155,800 4,995
Charter One Financial, Inc. 36,030 689
CIGNA Corp. 10,500 846
CIT Group, Inc. 172,000 3,634
Citigroup, Inc. 135,400 7,523
Commercial Federal Corp. 7,500 134
Dime Bancorp, Inc. 43,300 655
Equifax, Inc. 89,800 2,116
Federal National Mortgage Association 2,600 162
FINOVA Group, Inc. 113,800 4,040
First Data Corp. 10,100 498
First Union Corp. 188,218 6,176
Greenpoint Financial Corp. 31,100 741
Hartford Financial Services Group, Inc. (The) 68,800 3,259
Hibernia Corp. Class A 56,000 595
Huntington Bancshares, Inc. 5,600 133
KeyCorp 176,100 3,896
Marsh & McLennan Cos., Inc. 17,150 1,641
MBIA, Inc. 44,800 2,366
Ocwen Financial Corp. (a) 3,200 20
Peoples Heritage Financial Group 100,900 1,513
Provident Financial Group, Inc 5,900 212
Regions Financial Corp. 21,200 531
Ryder System, Inc. 3,800 93
Sovereign Bancorp, Inc. 12,900 95
Summit Bancorp 95,900 2,937
U.S. Bancorp 160,800 3,829
5 Tax-Managed Large Cap Fund
<PAGE>
Tax-Managed Large Cap Fund
Statement of Net Assets
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
------ ------
- --------------------------------------------------------------------------------
UnumProvident Corp. 76,200 2,443
Washington Mutual, Inc. 156,025 4,057
-------
75,277
-------
Health Care - 7.7%
ALZA Corp. (a) 75,300 2,607
American Home Products Corp. 72,000 2,840
Amgen, Inc. (a) 17,600 1,056
Bausch & Lomb, Inc. 4,600 315
Bristol-Myers Squibb Co. 145,800 9,358
Columbia/HCA Healthcare Corp. 51,400 1,507
Forest Labs, Inc. (a) 32,800 2,015
Genzyme Corp. (a) 7,200 323
Guidant Corp. (a) 2,400 113
Human Genome Sciences, Inc. (a) 13,400 2,044
Johnson & Johnson 11,500 1,071
Lilly (Eli) & Co. 68,800 4,575
MedImmune, Inc. (a) 5,600 928
Medtronic, Inc. 32,800 1,195
Merck & Co., Inc. 44,200 2,964
PE Corp. 11,500 1,384
Pfizer, Inc. 70,200 2,277
Schering-Plough Corp. 44,900 1,894
St. Jude Medical, Inc. (a) 3,900 120
Tenet Healthcare Corp. (a) 53,400 1,255
United Healthcare Corp. 6,900 366
Warner-Lambert Co. 34,800 2,851
Wellpoint Health Networks, Inc. (a) 8,400 554
-------
43,612
-------
Integrated Oils - 4.6%
Chevron Corp. 36,700 3,179
Exxon Mobil Corp. NPV (a) 200,102 16,121
Lyondell Petrochemical Co. 152,900 1,949
Royal Dutch Petroleum Co. 83,900 5,071
-------
26,320
-------
Materials and Processing - 4.9%
Air Products & Chemicals, Inc. 19,700 661
Alcoa, Inc. 3,000 249
Allegheny Technologies, Inc. (a) 53,900 1,209
B.F. Goodrich Co. 46,804 1,287
Dow Chemical Co. 1,000 134
Fort James Corp. 21,400 586
Georgia-Pacific Group 30,400 1,543
Kimberly-Clark Corp. 14,700 959
Monsanto Co. 191,400 6,819
Reynolds Metals Co. 27,700 2,122
Rohm & Haas Co. 114,500 4,659
Smurfit-Stone Container Corp. (a) 13,900 340
Temple-Inland, Inc. 15,100 996
Tyco International, Ltd. 157,306 6,115
USEC, Inc. 61,300 429
-------
28,108
-------
Other Energy - 0.9%
BP Amoco PLC - ADR 31,880 1,891
Global Marine, Inc. (a) 57,500 956
R&B Falcon Corp. (a) 10,000 132
Tosco Corp. 30,500 829
Ultramar Diamond Shamrock Corp 67,600 1,534
-------
5,342
-------
Producer Durables - 6.2%
Applied Materials, Inc. (a) 12,500 1,583
Boston Scientific Corp. (a) 6,500 142
Deere & Co. 41,700 1,809
General Electric Co. 151,700 23,476
Honeywell International, Inc. (a) 87,700 5,059
Lexmark International Group, Inc. Class A (a) 2,700 244
Lockheed Martin Corp. 29,800 652
Xerox Corp. 84,200 1,910
-------
34,875
-------
Technology - 27.2%
Adobe Systems, Inc. 4,000 269
America Online, Inc. (a) 116,600 8,796
BMC Software, Inc. (a) 37,000 2,955
Cisco Systems, Inc. (a) 173,750 18,602
Citrix Systems, Inc. (a) 7,800 959
Cooper Industries, Inc. 47,500 1,921
Dell Computer Corp. (a) 74,200 3,780
DoubleClick, Inc. (a) 2,500 633
Electronic Data Systems Corp. 22,200 1,486
EMC Corp. (a) 76,600 8,369
Exodus Communications, Inc. (a) 22,400 1,989
Hewlett-Packard Co. 12,300 1,402
Intel Corp. 173,900 14,303
International Business Machines Corp. 89,400 9,655
Lucent Technologies, Inc. 173,200 12,958
Microsoft Corp. (a) 247,500 28,880
Motorola, Inc. 27,900 4,108
National Semiconductor Corp. (a) 5,100 218
Nortel Networks Corp. 14,400 1,454
Oracle Systems Corp. (a) 55,150 6,177
QUALCOMM, Inc. (a) 10,400 1,831
Quantum Corp. DLT & Storage Systems (a) 10,700 162
Sun Microsystems, Inc. (a) 182,800 14,144
Texas Instruments, Inc. 52,600 5,096
Tax-Managed Large Cap Fund 6
<PAGE>
Tax-Managed Large Cap Fund
Statement of Net Assets, Continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
------ ------
- --------------------------------------------------------------------------------
Yahoo!, Inc. (a) 8,700 3,764
-------
153,911
-------
Utilities - 10.2%
Allegheny Energy, Inc. 22,400 604
AT&T Corp. 91,606 4,649
Bell Atlantic Corp. 34,764 2,140
Carolina Power & Light Co. 110,600 3,366
Columbia Energy Group 72,350 4,576
Comcast Corp. Special Class A 55,000 2,778
DTE Energy Co. 16,200 508
Global Crossing, Ltd. (a) 93,835 4,686
GTE Corp. 103,800 7,324
Level 3 Communications, Inc.(a) 8,100 662
MCI WorldCom, Inc. (a) 254,235 13,475
PG&E Corp. 65,400 1,341
Pinnacle West Capital Corp. 10,200 312
SBC Communications, Inc. 170,566 8,315
Sprint Corp. 11,100 747
Sprint Corp. (PCS Group) (a) 8,150 835
Wisconsin Energy Corp. 68,100 1,311
-------
57,629
-------
Total Common Stocks
(cost $400,332) 537,962
-------
Principal
Amount
(000)
$
---------
Short-Term Investments - 4.2%
Frank Russell Investment
Company Money Market Fund,
due on demand (b) 22,788 22,788
United States Treasury Bills
(b)(c)(d)
4.660% due 01/20/00 900 898
4.960% due 03/30/00 400 395
-------
Total Short-Term Investments
(cost $24,081) 24,081
-------
Total Investments - 99.2%
(identified cost $424,413) 562,043
Other Assets and Liabilities,
Net - 0.8% 4,266
-------
Net Assets - 100.0% 566,309
=======
* Each contract represents $100,000 notional value.
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
(c) Held as collateral in connection with futures contracts purchased by the
Fund.
(d) Rate noted is yield-to-maturity from date of acquisition.
(e) Real Estate Investment Trust (REIT).
Abbreviations:
ADR - American Depositary Receipt
NPV - No Par Value
NV - Nonvoting
See accompanying notes which are an integral part of the financial statements.
7 Tax-Managed Large Cap Fund
<PAGE>
Tax-Managed Large Cap Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Unrealized
Number Appreciation
of (Depreciation)
Contracts* (000)
- --------------------------------------------------------------------------------
Futures Contracts
S&P 500 Index
expiration date 03/00 62 $ 270
---------
Total Unrealized Appreciation
(Depreciation) on Open
Futures Contracts Purchased $ 270
=========
See accompanying notes which are an integral part of the financial statements.
Tax-Managed Large Cap Fund 8
<PAGE>
Tax-Managed Large Cap Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amounts) December 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $424,413) ...................... $ 562,043
Receivables:
Dividends and interest ............................................. 687
Fund shares sold ................................................... 3,843
Daily variation margin on futures contracts ........................ 54
Deferred organization expenses ........................................ 7
Prepaid expenses ...................................................... 2
---------
Total assets .................................................... 566,636
Liabilities
Payables:
Fund shares redeemed ............................................... $ 166
Accrued fees to affiliates ......................................... 35
Other accrued expenses ............................................. 126
---------
Total liabilities ............................................... 327
---------
Net Assets ............................................................ $ 566,309
=========
Net Assets Consist of:
Undistributed net investment income ................................... $ 140
Accumulated net realized gain (loss) ................................. (3,329)
Unrealized appreciation (depreciation) on:
Investments ........................................................ 137,630
Futures contracts .................................................. 270
Shares of beneficial interest ......................................... 268
Additional paid-in capital ............................................ 431,330
---------
Net Assets ............................................................ $ 566,309
=========
Net Asset Value, offering and redemption price per share:
Class C ($308,039 divided by 14,553 shares of $.01 par value
shares of beneficial interest outstanding) ...................... $ 21.17
=========
Class S ($566,000,564 divided by 26,737,891 shares of $.01 par value
shares of beneficial interest outstanding) ...................... $ 21.17
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
9 Tax-Managed Large Cap Fund
<PAGE>
Tax-Managed Large Cap Fund
Statement of Operations
Amounts in thousands Year Ended December 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Dividends ........................................... $ 6,220
Dividends from Money Market Fund .................... 371
Interest ............................................ 53
-------
Total investment income .......................... 6,644
Expenses
Advisory fees ....................................... $ 2,968
Administrative fees ................................. 212
Custodian fees ...................................... 120
Transfer agent fees ................................. 122
Professional fees ................................... 28
Registration fees ................................... 119
Trustees' fees ...................................... 5
Amortization of deferred organization expenses ...... 7
Miscellaneous ....................................... 34
--------
Total expenses ................................... 3,615
-------
Net investment income .................................. 3,029
-------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ......................................... (2,785)
Futures contracts ................................... 224 (2,561)
--------
Net change in unrealized appreciation (depreciation) on:
Investments ......................................... 65,388
Futures contracts ................................... 167 65,555
-------- -------
Net realized and unrealized gain (loss) ................ 62,994
-------
Net increase (decrease) in net assets from operations .. $66,023
=======
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Tax-Managed Large Cap Fund 10
<PAGE>
Tax-Managed Large Cap Fund
Statement of Change in Net Assets
Amounts in thousands Years Ended December 31,
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ........................................... $ 3,029 $ 1,202
Net realized gain (loss) ........................................ (2,561) (729)
Net change in unrealized appreciation (depreciation) ............ 65,555 58,053
--------- ---------
Net increase (decrease) in net assets from operations ........ 66,023 58,526
--------- ---------
Distributions
From net investment income
Class C ...................................................... (2) --
Class S ...................................................... (2,888) (1,334)
From net realized gain
Class S ...................................................... -- (78)
--------- ---------
Net decrease in net assets from distributions ............. (2,890) (1,412)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions ... 197,724 138,603
--------- ---------
Total net increase (decrease) in net assets ........................ 260,857 195,717
Net Assets
Beginning of period ............................................. 305,452 109,735
--------- ---------
End of period (including undistributed net investment income of
$140 and accumulated distributions in excess of net investment
income of $110, respectively) ................................ $ 566,309 $ 305,452
========= =========
</TABLE>
See accompanying notes which are not integral part of the financial statements.
11 Tax-Managed Large Cap Fund
<PAGE>
Tax-Managed Large Cap 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 ........................ $ 20.92
----------
Income From Operations
Net investment income (loss)(a)** ........................ --
Net realized and unrealized gain (loss) .................. .35
----------
Total income from operations .......................... .35
----------
Distributions
From net investment income ............................... (.10)
----------
Net Asset Value, End of Period .............................. $ 21.17
==========
Total Return (%)(b) ......................................... 2.24
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ................. 308
Ratios to average net assets (%)(c):
Operating expenses .................................... 1.57
Net investment income (loss) .......................... (.28)
Portfolio turnover rate (%) .............................. 48.35
* For the period December 1, 1999 (commencement of sale) to December 31,
1999.
** Less than .01(cent)per share.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
Tax-Managed Large Cap Fund 12
<PAGE>
Tax-Managed Large Cap 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*
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 18.26 $ 13.90 $ 10.61 $ 10.00
----------- ----------- ----------- -----------
Income From Operations
Net investment income (a) .............. .14 .10 .08 .03
Net realized and unrealized gain (loss) 2.88 4.35 3.28 .61
----------- ----------- ----------- -----------
Total income from operations ........ 3.02 4.45 3.36 .64
----------- ----------- ----------- -----------
Distributions
From net investment income ............. (.11) (.08) (.07) (.03)
From net realized gain ................. -- (.01) -- --
----------- ----------- ----------- -----------
Total distributions ................. (.11) (.09) (.07) (.03)
----------- ----------- ----------- -----------
Net Asset Value, End of Period ............ $ 21.17 $ 18.26 $ 13.90 $ 10.61
=========== =========== =========== ===========
Total Return (%)(b) ....................... 16.57 32.08 31.73 6.10
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 566,001 305,452 109,735 19,931
Ratios to average net assets (%)(c):
Operating expenses, net ............. .85 .99 1.00 1.00
Operating expenses, gross ........... .85 .99 1.08 2.83
Net investment income ............... .71 .61 .92 1.62
Portfolio turnover rate (%) ............ 48.35 50.59 39.23 8.86
</TABLE>
* For the period October 7, 1996 (commencement of operations) to December
31, 1996.
(a) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
13 Tax-Managed Large Cap Fund
<PAGE>
Tax Small Cap Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: To provide capital growth on an after tax basis by investing
principally in equity securities of small capitalization companies.
Invests in: US equity securities.
Strategy: The Fund focuses on superior stock selection in a risk-controlled
portfolio while minimizing the impact of taxes by explicitly integrating the tax
implications of portfolio activities on after-tax returns.
- --------------------------------------------------------------------------------
[The following was depicted as a moutain chart in the printed material.]
Dates Tax Managed Small Cap Russell Special Small Company Index**
Inceptions* $10,000 $10,000
1999 $10,730 $11,342
------------------------------
Total $20,730 $21,342
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Tax-Managed Small Cap Fund - Class S
- --------------------------------------------------------------------------------
Period Ended Growth of Total
12/31/99 $10,000 Return
------------ --------- ------
Inception $10,730 7.30%
- --------------------------------------------------------------------------------
Tax-Managed Small Cap Fund - Class C
- --------------------------------------------------------------------------------
Period Ended Growth of Total
12/31/99 $10,000 Return
------------ --------- ------
Inception $10,710 7.10%
- --------------------------------------------------------------------------------
Russell Special Small Company Index
- --------------------------------------------------------------------------------
Period Ended Growth of Total
12/31/99 $10,000 Return
------------ --------- ------
Inception $11,342 13.42%
15 Tax-Managed Small Cap Fund
<PAGE>
Tax-Managed Small Cap Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Performance Review
From its November 30, 1999 inception through the year ended December 31, 1999,
the Tax-Managed Small Cap Fund Class S and Class C shares returned 7.30% and
7.10%, respectively, as compared to the Russell Special Small Company Index,
which gained 13.42%. The Fund's performance reflects its lower exposure to
aggressively-valued technology stocks.
Portfolio Highlights
Small capitalization stocks caught up with large cap issues at year end 1999.
The Russell 2000(R) Index gained 18.45% in the fourth quarter to bring its
annual gain to 21.26%, versus the Russell 1000(R) Index gain of 20.91%. Similar
to its large cap counterparts, the performance of small cap stocks was dominated
by technology shares, with small cap technology issues up more than 100% for the
year. Disappointing security selection results accounted for the Fund's margin
of underperformance. However, its underlying cause was tied much more to the
disparities in returns being driven by valuation. As managers grew increasingly
concerned about overvaluation, their decisions to rotate to more attractively
valued alternatives led to significant underexposure to the strongest performing
issues, generally the stocks of Internet companies. A consequent tactical value
bias in the portfolio had a severe impact on performance results, as price
momentum dominated the market.
- --------------------------------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) December 31, 1999
- --------------------------------------------------------------------------------
VeriSign, Inc. 1.1%
Biogen, Inc. 0.9
Siebel Systems, Inc. 0.8
Linear Technology Corp. 0.8
PMC - Sierra, Inc. 0.7
Harley Davidson, Inc. 0.7
BroadVision, Inc. 0.7
Altera Corp. 0.6
DoubleClick, Inc. 0.6
MicroStrategy, Inc. 0.6
- --------------------------------------------------------------------------------
Portfolio Characteristics
December 31, 1999
- --------------------------------------------------------------------------------
Current P/E Ratio 19.8x
Portfolio Price/Book Ratio 2.87x
Market Capitalization - $- Weighted Average 3.45 Bil
Number of Holdings 953
- --------------------------------------------------------------------------------
Money Manager Style
- --------------------------------------------------------------------------------
Geewax, Terker & Co. Growth
Geewax, Terker & Co. Value
* The Fund commenced operations on November 30, 1999. Index comparison began
December 1, 1999.
** The Russell Special Small Company Index (the RSMALL Index) is defined as
the Russell 3000(R) Index minus the S&P 500(R) Index. Approximately 40% of
the RSMALL Index is comprised of the small cap stocks, while the remaining
60% are mid-cap stocks.
++ Tax-Managed Small Cap Fund Class S performance has been linked with Class
C to provide historical perspective. For the period December 2, 1999
(commencement of sale) through the current period, Class C paid
shareholder service fees. Total return would have been lower had these
fees been in effect during prior reporting periods.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Tax-Managed Small Cap Fund 16
<PAGE>
Tax-Managed Small Cap Fund
Statement of Net Assets
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
------ ------
- --------------------------------------------------------------------------------
Common Stocks - 80.0%
Auto and Transportation - 4.1%
A.S.V., Inc. (a) 200 3
AAR Corp. 900 16
ABC Rail Products Corp. (a) 700 6
AHL Services, Inc. (a) 200 4
Airborne Freight Corp. 1,800 40
Alaska Air Group, Inc. (a) 900 32
Alexander & Baldwin, Inc. 1,600 36
American Freightways Corp. (a) 600 10
Amtran, Inc. (a) 100 2
Arnold Industries, Inc. 700 10
Arvin Industries, Inc. 900 26
Atlas Air, Inc. (a) 400 11
AutoNation, Inc. (a) 7,000 65
Avis Rent A Car, Inc. (a) 800 20
Bandag, Inc. 600 15
BE Aerospace, Inc. (a) 400 3
Borg-Warner Automotive, Inc. 800 32
Budget Group, Inc. Class A (a) 1,000 9
C.H. Robinson Worldwide, Inc. 1,000 40
Carlisle Cos., Inc. 1,000 36
Circle International Group, Inc. 600 13
Comair Holdings, Inc. 1,000 23
Delco Remy International, Inc. (a) 400 3
Eagle USA Airfreight, Inc. (a) 400 17
Florida East Coast Industries, Inc. 1,000 42
Fritz Companies, Inc. (a) 700 7
Frontier Airlines, Inc. NPV (a) 200 2
Gentex Corp. (a) 1,500 42
Group 1 Automotive, Inc. (a) 300 4
Harley-Davidson, Inc. 3,200 205
Hayes Lemmerz International, Inc. (a) 400 7
Heartland Express, Inc. (a) 300 5
Lancaster Colony Corp. 1,300 43
Landstar Systems, Inc. (a) 200 8
M.S. Carriers, Inc. (a) 300 7
Mascotech, Inc. 200 3
Meritor Automotive, Inc. 200 4
Mesaba Holdings, Inc. (a) 300 3
Midwest Express Holdings, Inc. (a) 400 13
Monaco Coach Corp. (a) 500 13
Myers Industries, Inc. 500 8
National R.V. Holdings, Inc. (a) 200 4
Newport News Shipbuilding, Inc. 700 19
Northwest Airlines Corp. Class A (a) 900 20
O'Reilly Automotive, Inc. (a) 700 15
Overseas Shipholding Group, Inc. 1,000 15
Polaris Industries, Inc. 500 18
Roadway Express, Inc. 400 9
Simpson Industries, Inc. 600 7
Superior Industries International, Inc 700 19
Swift Transportation Co., Inc. (a) 800 14
Tower Automotive, Inc. (a) 1,300 20
Trinity Industries, Inc. 1,500 43
USFreightways Corp. 1,000 46
Wabash National Corp. 900 14
Werner Enterprises, Inc. 1,000 14
Winnebago Industries, Inc. 300 6
Wisconsin Central Transportation Corp. (a) 1,500 20
XTRA Corp. (a) 500 21
--------
1,212
--------
Consumer Discretionary - 11.4%
99 Cents Only Stores NPV (a) 200 8
Aaron Rents, Inc. 500 9
ABM Industries, Inc. 400 8
Acclaim Entertainment, Inc. (a) 800 4
Activision, Inc. (a) 800 12
Advo Systems, Inc. (a) 500 12
AMC Entertainment, Inc. (a) 400 3
American Eagle Outfitters, Inc. (a) 400 18
Anchor Gaming (a) 200 9
AnnTaylor Stores Corp. (a) 500 17
Applebee's International, Inc. 600 18
Authentic Fitness Corp. 100 2
Aztar Corp. (a) 1,500 16
Bacou USA, Inc. (a) 200 3
Bassett Furniture Industries, Inc. 400 6
Bebe Stores, Inc. (a) 100 3
Belo (A.H.) Corp. Class A 3,200 61
BJ's Wholesale Club, Inc. (a) 300 11
Blyth Industries, Inc. (a) 700 17
Bob Evans Farms, Inc. 1,400 22
Borders Group, Inc. (a) 2,400 39
Bowne & Co., Inc. 1,400 19
Boyd Gaming Corp. (a) 1,300 8
Buckle, Inc. (The) (a) 200 3
Burlington Coat Factory Warehouse Corp. 600 8
Burns International Services Corp. (a) 200 2
Callaway Golf Co. 2,500 44
Carriage Services, Inc. Class A (a) 300 2
Catalina Marketing Corp. (a) 300 35
Cato Corp. Class A 500 6
CDI Corp. (a) 300 7
CEC Entertainment, Inc. (a) 600 17
CellStar Corp. (a) 700 7
Central Newspapers, Inc. Class A 500 20
Charles River Associates, Inc. (a) 200 7
Cheesecake Factory, Inc. (The) (a) 400 14
17 Tax-Managed Small Cap Fund
<PAGE>
Tax-Managed Small Cap Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
------ ------
- --------------------------------------------------------------------------------
Cintas Corp. 1,600 85
Claire's Stores, Inc. 900 20
Consolidated Graphics, Inc. (a) 300 4
Consolidated Products, Inc. (a) 330 3
Copart, Inc. (a) 400 17
Cox Radio, Inc. Class A (a) 200 20
CSX Auto Corp. (a) 400 7
Daisytek International Corp. (a) 500 12
Dave & Buster's, Inc. (a) 200 2
Dendrite International, Inc. (a) 600 20
DeVry, Inc. (a) 1,300 24
Dollar Tree Stores, Inc. (a) 1,300 63
Dover Downs Entertainment, Inc. 300 6
Electronic Arts, Inc. (a) 1,400 118
Entercom Communications Corp. (a) 100 7
Estee Lauder Cos., Class A 1,800 91
Ethan Allen Interiors, Inc. 900 29
Extended Stay America, Inc. (a) 2,000 15
Fairfield Communities, Inc. (a) 1,000 11
Fastenal Co. 600 27
Footstar, Inc. (a) 600 18
Fossil, Inc. (a) 300 7
Furniture Brands International, Inc. (a) 1,000 22
Gaylord Entertainment Co. 600 18
Genesco, Inc. (a) 500 7
Goody's Family Clothing, Inc. (a) 600 3
GTECH Holdings Corp. (a) 1,100 24
Guitar Center, Inc. (a) 500 5
Gymboree Corp. (a) 800 5
HA-LO Industries, Inc. (a) 900 7
Harland (John H.) Co. 1,000 18
Harman International Industries, Inc. 500 28
Harte Hanks Communications 300 7
Haverty Furniture Co., Inc. 100 1
Hines Horticulture, Inc. (a) 500 4
Hollywood Entertainment Corp. (a) 700 10
Hollywood Park, Inc. (a) 800 18
Houghton Mifflin Co. 900 38
IHOP Corp. (a) 500 8
Innkeepers USA Trust 1,300 11
Insight Enterprises, Inc. (a) 400 16
Interim Services, Inc. (a) 1,800 45
International Game Technology 3,300 67
ITT Educational Services, Inc. (a) 300 5
JAKKS Pacific, Inc. (a) 300 6
Journal Register Co. (a) 600 9
K-Swiss, Inc. Class A 100 2
Kellwood Co. 1,000 19
Kelly Services, Inc. Class A 600 15
La-Z-Boy Inc. 1,800 30
Lamar Advertising Co. Class A (a) 1,000 60
Land's End, Inc. (a) 100 3
Landry's Seafood Restaurants, Inc. (a) 900 8
Lason, Inc. (a) 400 4
Lee Enterprises, Inc. 900 29
Legato Systems, Inc. (a) 1,700 117
Libbey, Inc. 500 14
Linens 'N Things, Inc. (a) 800 24
Lone Star Steakhouse & Saloon (a) 1,300 12
Luby's Cafeterias, Inc. 800 9
Mandalay Resort Group (a) 2,500 50
McClatchy Co. Class A 700 30
Media General, Inc. Class A 700 36
MemberWorks, Inc. (a) 300 10
Men's Wearhouse, Inc., The (a) 500 15
MeriStar Hospitality Corp. 1,700 27
MGM Grand, Inc. (a) 100 5
Michaels Stores, Inc. (a) 400 11
Micro Warehouse, Inc. (a) 1,400 26
Modis Professional Services, Inc. (a) 2,800 40
Morrison Management Specialists, Inc. 300 6
Movado Group, Inc. 100 2
Musicland Stores Corp. (a) 600 5
Nautica Enterprises, Inc. (a) 1,200 14
NFO Worldwide, Inc. (a) 400 9
NPC International, Inc. (a) 200 2
O'Charleys, Inc. (a) 200 3
Oakley, Inc. (a) 700 4
OfficeMax, Inc. (a) 3,700 20
Ogden Corp. 300 4
On Assignment, Inc. (a) 200 6
Oshkosh B' Gosh, Inc. Class A 300 6
Outback Steakhouse, Inc. (a) 1,300 34
Pacific Sunwear of California (a) 600 19
Papa Johns International, Inc. (a) 500 13
Paxson Communications Corp. (a) 600 7
Payless ShoeSource, Inc. (a) 1,100 52
Personnel Group of America, Inc. (a) 800 8
Petco Animal Supplies, Inc. (a) 1,000 15
PETsMART, Inc. (a) 2,500 14
Phillips-Van Heusen Corp. 800 7
Pierce Leahy Corp. (a) 200 9
Pittston Brink's Group 1,400 31
Plantronics, Inc. (a) 400 29
Playtex Products, Inc. (a) 800 12
Polo Ralph Lauren Corp. Class A (a) 1,900 32
Pre-Paid Legal Services, Inc. (a) 500 12
PRIMEDIA, Inc. (a) 1,200 20
Provant, Inc. (a) 200 5
Quicksilver, Inc. (a) 400 6
Tax-Managed Small Cap Fund 18
<PAGE>
Tax--Managed Small Cap Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
------ ------
- --------------------------------------------------------------------------------
RARE Hospitality International, Inc. NPV (a) 200 4
Rayovac Corp. (a) 600 11
Regis Corp. 600 11
Rent-A-Center, Inc. (a) 400 8
Rent-Way, Inc. (a) 400 7
Revlon, Inc. Class A (a) 400 3
Ruby Tuesday, Inc. 800 15
Ryan's Family Steak Houses, Inc. (a) 1,500 13
Salton, Inc. (a) 200 7
Scholastic Corp. (a) 500 31
School Specialty, Inc. (a) 400 6
Scientific Games Holdings Corp. (a) 400 7
SCP Pool Corp. (a) 200 5
Scripps (E.W.) Co. Class A 900 40
ShopKo Stores, Inc. (a) 1,000 23
Snyder Communications, Inc. (a) 1,100 21
Sonic Corp. (a) 400 11
Specialty Equipment Cos., Inc. (a) 200 5
Speedway Motorsports, Inc. (a) 400 11
Starbucks Corp. (a) 3,800 92
Starwood Hotels & Resorts Worldwide, Inc. 700 16
Station Casinos, Inc. (a) 500 11
Steinway Musical Instruments, Inc. (a) 100 2
Stewart Enterprises, Inc. Class A 3,500 17
Stride Rite Corp. (a) 1,100 7
Sturm, Ruger & Co., Inc. 700 6
Sunglass Hut International, Inc. (a) 900 10
Sunterra Corp. (a) 800 9
Sylvan Learning Systems, Inc. (a) 1,200 16
Talbots, Inc. 400 18
TETRA Technologies, Inc. (a) 700 11
Tiffany & Co. 1,100 98
Timberland Co. Class A (a) 300 16
Toro Co. 400 15
Trans World Entertainment Corp. (a) 800 8
Trendwest Resorts, Inc. NPV (a) 100 2
True North Communications, Inc. 1,100 49
Unifirst Corp. 400 5
United Natural Foods, Inc. (a) 200 2
Urban Outfitters, Inc. (a) 200 6
USA Networks, Inc. (a) 100 6
Venator Group, Inc. (a) 4,900 34
Wackenhut Corp. 300 4
Wackenhut Corrections Corp. (a) 200 2
Wallace Computer Services, Inc. 1,400 23
WestPoint Stevens, Inc. 800 14
Westwood One, Inc. (a) 700 53
Whitehall Jewellers, Inc. (a) 200 7
Wiley (John) & Son Inc. Class A 1,000 17
Windmere Corp. (a) 800 14
WMS Industries, Inc. (a) 400 5
Zale Corp. (a) 100 4
--------
3,325
--------
Consumer Staples - 1.9%
Aurora Foods, Inc. (a) 500 5
Bush Boake Allen, Inc. (a) 200 5
Canandaigua Brands Inc. Class A (a) 500 26
Casey's General Stores, Inc. 1,200 13
Church and Dwight Co., Inc. 800 21
Corn Products International, Inc. 1,400 46
Dean Foods Co. 1,400 56
IBP, Inc. 2,600 47
International Home Foods, Inc. (a) 600 10
Jack in the Box, Inc. (a) 900 19
Keebler Foods Co. (a) 400 11
McCormick & Co., Inc. 2,500 74
Michael Foods, Inc. 500 12
Performance Food Group Co. (a) 300 7
Pilgrim's Pride Corp. 300 2
Ralcorp Holdings, Inc. (a) 1,000 20
Riviana Foods, Inc. 100 2
Robert Mondavi Corp. Class A (a) 400 14
Ruddick Corp. 1,000 16
Schweitzer-Mauduit International, Inc. 500 7
Smucker (J.M.) Co. 900 18
Suiza Foods Corp. (a) 1,200 48
Universal Corp. 1,100 25
Universal Foods Corp. 1,600 32
Whitman Corp. NPV 900 11
--------
547
--------
Financial Services - 13.0% ACE, Ltd. 1,000 17
Advanta Corp. Class A 800 15
Affiliated Managers Group, Inc. (a) 400 16
Alexandria Real Estate Equities, Inc. (e) 500 16
Alleghany Corp. (a) 200 37
Alliance Bancorp 400 7
Allied Capital Corp. (a) 1,700 31
Amcore Financial, Inc. 1,000 24
American Annuity Group, Inc. 300 5
AmeriCredit Corp. (a) 1,500 28
Andover Bancorp, Inc. 200 6
Avalonbay Communities, Inc. (e) 2,300 79
BancorpSouth, Inc. 2,000 33
BancWest Corp. 1,800 35
Bay View Capital Corp. 900 13
Tax-Managed Small Cap Fund
19 Tax--Managed Small Cap Fund
<PAGE>
Tax-Managed Small Cap Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
------ ------
- --------------------------------------------------------------------------------
Bedford Property Investors, Inc. (e) 800 14
BISYS Group, Inc. (a) 600 39
BOK Financial Corp. (a) 400 8
BRE Properties, Inc. 1,600 36
Brown & Brown, Inc. 300 11
Camden Property Trust (e) 1,500 41
Cathay Bancorp, Inc. 400 16
Chelsea GCA Realty, Inc. 500 15
Chicago Title Corp. 500 23
Chittenden Corp. 800 24
Citizens Banking Corp. 1,100 24
Colonial BancGroup, Inc. 3,400 35
Commerce Bancorp, Inc. 800 32
Commerce Bancshares, Inc. 2,200 75
Commonwealth Bancorp, Inc. 500 8
Community Trust Bancorp, Inc. 400 8
Concord EFS, Inc. (a) 4,300 110
Conning Corp. 300 3
CORT Business Services Corp. (a) 400 7
CORUS Bankshares, Inc. 300 7
Cullen Frost Bankers, Inc. 1,900 49
CVB Financial Corp. 200 5
Developers Diversified Realty Corp. 2,100 27
Dime Community Bancorp, Inc. 400 7
Doral Financial Corp. 800 10
Downey Financial Corp. 700 14
DST Systems, Inc. (a) 300 23
Duff & Phelps Credit Rating Co. 100 9
E.W. Blanch Holdings, Inc. 300 18
Enhance Financial Services Group, Inc. 900 15
Everest Reinsurance Holdings, Inc. 1,500 33
F&M National Corp. 500 14
F.N.B. Corp. 700 15
Federated Investors, Inc. Class B NPV 1,200 24
Financial Federal Corp. (a) 200 5
Financial Security Assurance Holdings, Ltd. 700 36
FINOVA Group, Inc. 2,100 75
First American Financial Corp. 2,000 25
First Charter Corp. NPV 500 7
First Citizens BancShares, Inc. 200 14
First Commonwealth Financial Corp. 2,100 25
First Federal Capital Corp. 500 7
First Financial Bancorp 700 15
First Financial Holdings, Inc. 400 6
First Indiana Corp. 300 7
First Merchants Corp. NPV 500 13
First Midwest Bancorp, Inc. 1,200 32
First Sentinel Bancorp, Inc. 1,800 14
First Tennessee National Corp. 200 6
First United Bancshares, Inc. 900 12
First Virginia Banks, Inc. 1,800 77
First Washington Bancorp, Inc. 400 6
Foremost Corp. of America 500 14
Foundation Health Systems, Inc. (a) 3,500 35
Frontier Financial Corp. NPV 300 6
Fulton Financial Corp. 2,500 45
Gallagher (Arthur J.) & Co. 400 26
GBC Bancorp 400 8
Greater Bay Bancorp NPV 200 9
Hamilton Bancorp, Inc. (a) 300 5
Hancock Holding Co. 400 15
Harbor Florida Bancshares, Inc. 500 6
Health Care REIT, Inc. (e) 1,000 15
Healthcare Realty Trust, Inc. (e) 1,500 23
Hilb, Rogal & Hamilton Co. 300 8
HRPT Properties Trust 4,700 42
HSB Group, Inc. 600 20
Hudson United Bancorp NPV 800 20
Independence Community Bank Corp. 2,600 32
Independent Bank Corp. 300 4
Interpool, Inc. 500 4
Investors Financial Services Corp. 300 14
Irwin Financial Corp. 200 4
Jack Henry & Assocociates, Inc. 300 16
John Nuveen & Co., Inc. Class A 100 4
JSB Financial, Inc. 300 16
Knight/Trimark Group, Inc. Class A (a) 1,400 64
Leucadia National Corp. 1,500 35
Liberty Financial Cos., Inc. 600 14
MAF Bancorp, Inc. 900 19
McGrath RentCorp 300 5
Metris Companies, Inc. 800 29
MGI Properties 500 3
MidAmerica Bancorp NPV 300 9
Mississippi Valley Bancshares, Inc. 100 3
MONY Group, Inc. (The) 1,700 50
Morgan Keegan, Inc. 800 13
National City Bancshares, Inc. 600 15
National Commerce Bancorp 1,600 36
National Data Corp. 800 27
National Penn Bancshares, Inc. NPV 500 12
Nationwide Health Properties, Inc. (e) 1,700 23
New Plan Excel Realty Trust (e) 3,100 49
OceanFirst Financial Corp. 500 9
Old National Bancorp 1,700 55
Omega Financial Corp. 300 9
One Valley Bancorp of West Virginia, Inc. 1,200 37
Oriental Financial Group, Inc. 200 4
Tax-Managed Small Cap Fund 20
<PAGE>
Tax-Managed Small Cap Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
------ ------
- --------------------------------------------------------------------------------
Pacific Century Financial Corp. 2,800 52
Pacific Gulf Properties, Inc. (e) 700 14
Parkway Properties, Inc. (e) 500 14
PFF Bancorp, Inc. (a) 600 12
Pioneer Group, Inc. (a) 800 12
PMI Group, Inc. (The) 1,100 54
Policy Management Systems Corp. (a) 700 18
Prentiss Properties Trust (e) 1,400 29
Profit Recovery Group International, Inc. (The)(a) 600 16
Protective Life Corp. 1,900 60
Provident Bankshares Corp. 800 14
Provident Financial Group, Inc. 700 25
Queens County Bancorp 200 5
Radian Group, Inc. (a) 1,200 57
Raymond James Financial, Inc. 200 4
Regency Realty Corp. (e) 1,300 26
Reinsurance Group Of America 600 17
Reliance Bancorp, Inc. 400 14
Republic Bancorp, Inc. 1,600 20
RFS Hotel Investors, Inc. (e) 900 9
Richmond County Financial Corp. 1,100 20
Riggs National Corp. 700 9
Rollins Truck Leasing Corp. 1,700 20
S&T Bancorp, Inc. 600 14
SEI Corp. 300 36
Selective Insurance Group, Inc. 1,000 17
Silicon Valley Bancshares (a) 700 35
Simmons First National Corp. Class A 200 5
Simon Property Group, Inc. (e) 4,400 101
Sky Financial Group, Inc. 1,400 28
SL Green Realty Corp. (e) 700 15
Southwest Bancorporation of Texas,
Inc. (a) 600 12
Sovereign Bancorp, Inc. 300 2
St. Francis Capital Corp. 300 6
State Auto Financial Corp. 500 5
Staten Island Bancorp, Inc. 1,500 27
Sterling Bancshares, Inc. 500 6
Student Loan Corp., The 100 5
Summit Properties, Inc. (e) 800 14
Susquehanna Bancshares, Inc. 1,400 22
TCF Financial Corp. 2,900 72
Texas Regional Bancshares, Inc.
Class A 500 14
Triad Guaranty, Inc. (a) 400 9
Triangle Bancorp, Inc. 600 12
TrustCo Bank Corp. NY 1,100 15
U.S. Trust Corp. 400 32
UICI (a) 100 1
UMB Financial Corp. 640 24
United Bankshares, Inc. 900 21
United National Bancorp 600 13
USBANCORP, Inc. 500 6
Valley National Bancorp 2,200 62
Waddell & Reed Financial, Inc. Class
A 1,400 38
Washington Federal, Inc. 2,000 39
Webster Financial Corp. 1,400 33
WesBanco, Inc. 100 2
West Coast Bancorp NPV 100 1
Westamerica Bancorporation 100 3
Whitney Holding Corp. 800 30
Zenith National Insurance Corp. 300 6
Zions Bancorp 800 47
-------
3,805
-------
Health Care - 6.8%
Advance Paradigm, Inc. (a) 400 9
Alpharma, Inc. Class A 400 12
American Retirement Corp. (a) 300 2
AmeriPath, Inc. (a) 100 1
AmeriSource Health Corp. Class A (a) 1,000 15
Andrx Corp. (a) 400 17
Apria Healthcare Group, Inc. (a) 1,900 34
Arrow International, Inc. NPV 500 14
Biogen, Inc. (a) 3,200 270
Biomatrix, Inc. (a) 300 6
Celera Genomics (a) 900 134
Chiron Corp. (a) 1,000 42
Columbia Laboratories, Inc. (a) 400 3
Conmed Corp. (a) 300 8
Cooper Companies, Inc. (a) 300 9
Covance, Inc. (a) 1,200 13
Coventry Health Care, Inc. (a) 2,100 14
Cytyc Corp. (a) 400 24
Datascope Corp. (a) 400 16
DENTSPLY International, Inc. 100 2
Diagnostic Products Corp. 400 10
Dura Pharmaceuticals, Inc. (a) 1,200 17
EntreMed, Inc. (a) 300 8
Enzon, Inc. (a) 800 35
Express Scripts, Inc. Class A (a) 400 26
Forest Labs, Inc. (a) 1,800 111
GelTex Pharmaceuticals, Inc. (a) 200 3
Gilead Sciences, Inc. (a) 900 49
Gliatech, Inc. (a) 200 3
Hanger Orthopedic Group, Inc. (a) 300 3
Henry Schein, Inc. (a) 500 7
Human Genome Sciences, Inc. (a) 500 76
ICOS Corp. (a) 800 23
IDEC Pharmaceuticals Corp. (a) 800 78
21 Tax-Managed Small Cap Fund
<PAGE>
Tax-Managed Small Cap Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
------ ------
- --------------------------------------------------------------------------------
IDEXX Laboratories, Inc. (a) 800 13
Jones Pharma, Inc. 800 35
King Pharmaceuticals, Inc. NPV (a) 400 22
Laser Vision Centers, Inc. (a) 800 8
Lincare Holdings, Inc. (a) 1,100 38
Liposome Co., Inc. (a) 900 11
Magellan Health Services, Inc. (a) 1,100 7
Medco Research, Inc. (a) 200 6
Medical Manager Corp. (a) 700 59
Medicis Pharmaceutical Corp. Class A. (a) 600 26
MedImmune, Inc. (a) 1,000 166
Mentor Corp. 600 16
Mid Atlantic Medical Services, Inc. (a) 900 7
Millennium Pharmaceuticals, Inc. (a) 800 98
Mylan Laboratories, Inc. 3,000 76
NBTY, Inc. (a) 2,000 22
Owens & Minor, Inc., Holding Co. 900 8
Parexel International Corp. (a) 500 6
Patterson Dental Co. (a) 500 21
Pharmaceutical Product Development, Inc. (a) 400 5
Professional Detailing, Inc. (a) 100 3
Protein Design Labs, Inc. (a) 400 28
Province Healthcare Co. (a) 200 4
PSS World Medical, Inc. (a) 1,500 14
Quorum Health Group, Inc. (a) 2,600 24
Renal Care Group, Inc. (a) 900 21
Res-Care, Inc. (a) 400 5
ResMed, Inc. (a) 300 13
Respironics, Inc. (a) 100 1
Sunrise Assisted Living, Inc. (a) 400 6
Sybron International Corp. (a) 2,200 54
Techne Corp. (a) 400 22
Theragenics Corp. (a) 600 5
United Payors & United Providers, Inc. (a) 300 5
Universal Health Services, Inc. Class B (a) 100 4
US Oncology, Inc. (a) 700 3
Veterinary Centers of America, Inc. (a) 600 8
Vical, Inc. (a) 300 9
Vital Signs, Inc. 200 4
Wesley Jessen VisionCare, Inc. (a) 400 14
West Pharmaceutical Services, Inc. 400 11
--------
2,002
--------
Integrated Oils - 0.4%
Cabot Oil & Gas Corp. 1,000 16
Cross Timbers Oil Co. 1,300 12
Equitable Resources, Inc. 1,100 37
Pennzoil-Quaker State Co. (a) 2,700 28
Tesoro Petroleum Corp. (a) 1,200 13
--------
106
--------
Materials and Processing - 5.4%
Airgas, Inc. (a) 2,000 19
AK Steel Holding Corp. 1,800 34
AMCOL International Corp. 1,000 16
Apogee Enterprises, Inc. 600 3
AptarGroup, Inc. 1,000 25
Banta Corp. 900 20
BMC Industries, Inc. (a) 800 4
Brady Corp. Class A 600 20
Cabot Corp. 2,300 47
Cambrex Corp. 800 28
Caraustar Industries, Inc. 700 17
Carpenter Technology Corp. 600 16
Catellus Development Corp. (a) 2,900 37
Centex Construction Products, Inc. 200 8
ChemFirst, Inc. 600 13
Clarcor, Inc. 800 14
Comfort Systems USA, Inc. (a) 400 3
Commercial Metals Co. 400 14
CUNO, Inc. (a) 200 4
Cytec Industries, Inc. (a) 1,600 37
Dal-Tile International, Inc. (a) 1,200 12
Deltic Timber Corp. 400 9
Dexter Corp. 600 24
EastGroup Properties, Inc. 500 9
Ferro Corp. 1,100 24
Florida Rock Industries, Inc. 400 14
Forest City Enterprises, Inc. Class A 400 11
Geon Co. 700 23
Georgia Gulf Corp. 500 15
Gibraltar Steel Corp. (a) 200 5
Glenborough Realty Trust, Inc. 1,100 15
Granite Construction, Inc. 800 15
Hanna (M.A.) Co. 1,800 20
Hughes Supply, Inc. 800 17
Hussmann International, Inc. 1,800 27
IMCO Recycling, Inc. 500 6
Internet Corp. 800 9
Ionics, Inc. (a) 500 14
Jacob's Engineering Group, Inc. (a) 700 23
Johns Manville Corp. 1,200 17
Justin Industries, Inc. 600 9
Kaiser Aluminum Corp. (a) 1,000 8
Kaydon Corp. 600 16
Lafarge Corp. 1,100 30
Tax-Managed Small Cap Fund 22
<PAGE>
Tax-Managed Small Cap Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
------ ------
- --------------------------------------------------------------------------------
Lilly Industrial Coatings, Inc. Class A 800 11
Longview Fibre Co. 1,900 27
LSI Industries, Inc. 200 4
Lubrizol Corp. 2,000 62
Lydall, Inc. (a) 600 4
MasTec, Inc. (a) 400 18
Metals USA, Inc. (a) 900 8
Minerals Technologies, Inc. 600 24
Morrison Knudsen Corp. (a) 1,100 9
Mueller Industries, Inc. (a) 1,200 44
NCI Building Systems, Inc. (a) 500 9
Nortek, Inc. (a) 300 8
OM Group 800 28
Omnova Solutions, Inc. 900 7
P.H. Glatfelter Co. 1,100 16
Paxar Corp. (a) 1,800 15
Polymer Group, Inc. 800 15
Quanex Corp. 500 13
Rayonier, Inc. 900 43
Reliance Steel & Aluminum Co. 600 14
Rock-Tenn Co. Class A 400 6
RPM, Inc. (Ohio) 3,900 40
Ryerson Tull, Inc. 500 10
Schulman (A.), Inc. 1,100 18
Scotts Co. (The) Class A (a) 300 12
Shorewood Packaging Corp. (a) 500 9
Simpson Manufacturing Co., Inc. (a) 200 9
Spartech Corp. 200 6
SPS Technologies, Inc. (a) 400 13
St. Joe Co. (The) 200 5
Standard Register Co. 500 10
Standex International Corp. 200 4
Steel Dynamics, Inc. (a) 1,000 16
Stericycle, Inc. (a) 300 6
Stillwater Mining Co. (a) 800 26
Stone & Webster, Inc. 300 5
Teleflex, Inc. 1,200 38
Texas Industries, Inc. 400 17
TJ International, Inc. 400 17
Tractor Supply Co. (a) 200 3
U.S. Can Corp. (a) 200 4
UCAR International, Inc. (a) 1,600 29
Universal Forest Products, Inc. 500 7
Valspar Corp. 1,300 54
Waters Corp. (a) 1,300 68
WD-40 Co. 300 7
Webb (Del E.) Corp. (a) 500 11
Wolverine Tube, Inc. (a) 500 6
------
1,586
------
Miscellaneous - 0.9%
Agribrands International, Inc. (a) 400 18
Cabot Industrial Trust 1,500 28
CB Richard Ellis Services (a) 300 4
Convergys Corp. NPV (a) 200 6
Education Management Corp. (a) 400 6
F.Y.I., Inc. (a) 400 14
Group Maintenance America Corp. (a) 900 10
IndyMac Mortgage Holdings, Inc. 2,500 32
Insignia Financial Group, Inc. (a) 500 4
Labor Ready, Inc. (a) 900 11
LNR Property Corp. 800 16
MAXIMUS, Inc. (a) 200 7
Methode Electronics, Inc. Class A 1,000 32
Navigant Consulting, Inc (a) 1,100 12
PS Business Parks, Inc. 800 18
Staff Leasing, Inc. (a) 400 4
Stone Energy Corp. (a) 300 11
TeleTech Holdings, Inc. (a) 500 17
Trammell Crow Co. (a) 500 6
U.S. Restaurant Properties, Inc. 600 9
Valmont Industries, Inc. 500 7
Walden Residential Properties, Inc. 900 18
------
290
------
Other Energy - 2.1%
Barrett Resources Corp. (a) 600 18
Brown (Tom), Inc. (a) 500 7
Cal Dive International, Inc. NPV (a) 100 3
Cleco Corp. 800 26
Devon Energy Corp. 700 23
Dril-Quip, Inc. (a) 200 6
Dynegy, Inc. 200 5
Evergreen Resources, Inc. (a) 200 4
Forest Oil Corp. (a) 600 8
Global Industries, Inc. (a) 600 5
Global Marine, Inc. (a) 4,900 81
Hanover Compressor Co. (a) 500 19
Louis Dreyfus Natural Gas Corp. (a) 800 15
McMoRan Exploration Co. (a) 600 13
MidAmerican Energy Holdings Co. (a) 1,500 51
Newfield Exploration Co. (a) 900 24
Northwestern Corp. 800 18
Nuevo Energy Co. (a) 600 11
Ocean Energy, Inc. (a) 5,900 46
Oceaneering International, Inc. (a) 600 9
Pioneer Natural Resources Co. (a) 3,500 31
Seacor Holdings, Inc. (a) 400 21
Seitel, Inc. (a) 900 6
SEMCO Energy, Inc. 600 7
Ultramar Diamond Shamrock Corp. 3,000 68
Valero Energy Corp. 1,800 36
23 Tax-Managed Small Cap Fund
<PAGE>
Tax-Managed Small Cap Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
------ ------
- --------------------------------------------------------------------------------
Varco International, Inc. (a) 2,200 21
Vastar Resources, Inc. 400 23
Vintage Petroleum, Inc. (a) 100 1
-------
606
-------
Producer Durables - 4.8%
American Power Conversion Corp. (a) 4,900 129
AMETEK, Inc. 700 13
Applied Industrial Technology, Inc. 800 13
Applied Power, Inc., Class A 900 33
Asyst Technologies, Inc. (a) 400 26
Baldor Electric Co. 1,000 18
Belden, Inc. 800 17
C&D Technologies, Inc. 300 13
Champion Enterprises, Inc. (a) 900 8
Clayton Homes, Inc. 200 2
Cohu, Inc. 100 3
Columbus McKinnon Corp. 400 4
CommScope, Inc. (a) 1,200 48
CTS Corp. 600 45
D.R. Horton, Inc. 1,700 23
Detroit Diesel Corp. 300 6
Diebold, Inc. 2,500 59
Donaldson Co., Inc. 1,200 29
Dura Automotive Systems, Inc. (a) 500 9
Fisher Scientific International, Inc. (a) 600 22
Franklin Electric Co., Inc. 100 7
GenCorp, Inc. 1,400 14
General Semiconductor, Inc. (a) 600 9
GenRad, Inc. (a) 600 10
HON Industries, Inc. 2,100 46
Howmet International, Inc. (a) 700 13
IDEX Corp. 900 27
JLG Industries, Inc. 1,500 24
Kennametal, Inc. 1,000 34
Kent Electronics Corp. (a) 1,000 23
Kimball International, Inc. Class B 1,100 18
Lennar Corp. 1,700 28
Lincoln Electric Holdings, Inc. NPV 900 19
Manitowoc Co., Inc. 600 20
Mark IV Industries, Inc. 1,800 32
Mathews International Corp. Class A 300 8
Mettler-Toledo International, Inc. (a) 800 31
Micrel, Inc. NPV (a) 600 34
Miller (Herman), Inc. 1,700 39
NationsRent, Inc. (a) 300 2
Nordson Corp. 200 10
NVR, Inc. (a) 300 14
Oak Industries, Inc. (a) 400 42
Optical Coating Laboratory, Inc. 300 88
Pittway Corp. Class A 900 40
Regal-Beloit Corp. 700 14
Roper Industries, Inc. 600 23
Ryland Group, Inc. (The) 600 14
Sawtek, Inc. (a) 500 33
Sensormatic Electronics Corp. (a) 2,100 37
Silicon Valley Group, Inc. (a) 100 2
Smith (A.O.) Corp. 700 15
Standard Pacific Corp. 300 3
Stewart & Stevenson Services, Inc. 1,000 12
Technitrol, Inc. 300 13
Terex Corp. (a) 400 11
Thermo Instrument Systems, Inc. (a) 400 4
Toll Brothers, Inc. (a) 800 15
Triumph Group, Inc. (a) 400 10
Ultratech Stepper, Inc. (a) 200 3
Vicor Corp. (a) 400 16
Watsco, Inc. 400 5
Watts Industries, Inc. Class A 600 9
Wausau-Mosinee Paper Corp. 700 8
Woodward Governor Co. 300 7
-------
1,406
-------
Technology - 23.4%
Actel Corp. (a) 100 2
Actuate Corp. (a) 500 21
Adtran, Inc. (a) 400 21
Advanced Digital Information (a) 400 19
Advanced Fibre Communications (a) 1,500 67
Advent Software, Inc. (a) 300 19
Affiliated Computer Services, Inc. Class A (a) 600 28
Allaire Corp. (a) 200 29
Alliant Techsystems, Inc. (a) 200 12
Altera Corp. (a) 3,700 183
American Management Systems, Inc. (a) 900 28
Amkor Technology, Inc. (a) 1,900 53
Amphenol Corp. Class A (a) 300 20
Analysts International Corp. 400 5
Ancor Communications, Inc. (a) 100 7
AnswerThink Consulting Group, Inc. (a) 600 21
Apex, Inc. NPV (a) 500 16
Applied Micro Circuits Corp. (a) 200 25
Arrow Electronics, Inc. (a) 3,400 86
Artesyn Technologies, Inc. (a) 700 15
Aspect Development, Inc. (a) 100 7
At Home Corp. Series A (a) 2,900 125
Atmel Corp. (a) 2,100 62
AVT Corp. (a) 300 14
BEA Systems, Inc. (a) 700 49
Tax-Managed Small Cap Fund 24
<PAGE>
Tax-Managed Small Cap Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
------ ------
- --------------------------------------------------------------------------------
BindView Development Corp. (a) 400 20
Black Box Corp. (a) 100 7
Broadcom Corp. Class A (a) 200 54
BroadVision, Inc. (a) 1,200 204
Burr-Brown Corp. (a) 100 4
C-Cube Microsystems, Inc. (a) 800 50
Cable Design Technologies Corp. (a) 1,000 23
CACI International, Inc. Class A (a) 200 5
CDW Computer Centers, Inc. (a) 500 39
Checkpoint Systems, Inc. (a) 1,000 10
Clarify, Inc. (a) 100 13
CNET, Inc. (a) 1,000 57
Coherent, Inc. (a) 800 21
Concord Communications, Inc. (a) 300 13
Cree, Inc. (a) 100 8
CSG Systems International, Inc. (a) 1,000 39
CyberCash, Inc. (a) 300 3
Cybex Computer Products Corp. (a) 300 12
Cypress Semiconductor Corp. (a) 2,900 94
Dallas Semiconductor Corp. 600 39
Datastream Systems, Inc. (a) 300 7
DII Group, Inc. (The) (a) 600 43
DoubleClick, Inc. (a) 700 177
E-Tek Dynamics, Inc. (a) 600 81
Electro Scientific Industries, Inc. (a) 300 22
Electronics For Imaging, Inc. (a) 1,000 59
Emulex Corp. (a) 700 79
Entrust Technologies, Inc. (a) 100 6
Exchange Applications, Inc. (a) 100 6
Extreme Networks, Inc. (a) 100 8
FileNet Corp. (a) 200 5
Galileo International, Inc. 1,000 30
Genesys Telecommunications Laboratories, Inc. (a) 200 11
Gerber Scientific, Inc. 500 11
Go2Net, Inc. (a) 1,100 96
Great Plains Software, Inc. (a) 200 15
Hadco Corp. (a) 400 20
Haemonetics Corp. (a) 300 7
Harbinger Corp. (a) 800 25
Harmonic Lightwaves, Inc. (a) 100 9
Hutchinson Technology, Inc. (a) 200 4
Hyperion Solutions Corp. (a) 100 4
Identix, Inc. (a) 500 5
Imation Corp. (a) 1,300 44
Impath, Inc. (a) 200 5
In Focus Systems, Inc. (a) 100 2
Informix Corp. (a) 400 5
InfoSpace.com, Inc. (a) 500 107
Ingram Micro, Inc. Class A (a) 2,000 26
Inktomi Corp. (a) 200 18
Innovex, Inc. 200 2
Integrated Device Technology, Inc. (a) 2,900 84
Intermedia Communications, Inc. (a) 1,000 39
International Rectifier Corp. (a) 1,500 39
InterVoice, Inc. (a) 800 19
Intuit, Inc. (a) 2,600 156
ISS Group, Inc. (a) 500 36
ITI Technologies, Inc. (a) 300 9
Jabil Circuit, Inc. (a) 200 15
Kemet Corp. (a) 1,200 54
Kronos, Inc. (a) 300 18
L-3 Communications Holdings, Inc. (a) 700 29
Lam Research Corp. (a) 600 67
Lattice Semiconductor Corp. (a) 900 42
Linear Technology Corp. 3,200 229
Littlefuse, Inc. (a) 200 5
LTX Corp. (a) 100 2
Lycos, Inc. (a) 1,400 111
Macromedia, Inc. (a) 800 59
Macrovision Corp. (a) 100 7
Manugistics Group, Inc. (a) 500 16
Mastech Corp. (a) 700 17
Maxim Integrated Products, Inc. (a) 1,100 52
Maxwell Technologies, Inc. (a) 200 2
Mentor Graphics Corp. (a) 500 7
Mercury Interactive Corp. (a) 800 86
Metromedia Fiber Network, Inc. Class A (a) 2,200 105
Miami Computer Supply Corp. NPV (a) 200 7
Microchip Technology, Inc. (a) 1,100 75
Micromuse, Inc. (a) 200 34
Micron Electronics, Inc. (a) 100 1
MICROS Systems, Inc. (a) 300 22
MicroStrategy, Inc. (a) 800 168
National Computer Systems, Inc. 700 26
National Instruments Corp. (a) 500 19
NeoMagic Corp. (a) 100 1
Network Solutions, Inc. Class A (a) 300 65
Open Market, Inc. (a) 600 27
Park Electrochemical Corp. 400 11
Peregrine Systems, Inc. (a) 500 42
Perot Systems Corp. Class A (a) 1,000 19
Pinnacle Systems, Inc. NPV (a) 400 16
Pioneer-Standard Electronics, Inc. 1,000 14
PMC - Sierra, Inc. (a) 1,300 208
Power Integrations, Inc. (a) 500 24
Progress Software Corp. (a) 300 17
QLogic Corp. (a) 100 16
QRS Corp. (a) 200 21
25 Tax-Managed Small Cap Fund
<PAGE>
Tax-Managed Small Cap Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
------ ------
- --------------------------------------------------------------------------------
RadiSys Corp. (a) 300 15
Rational Software Corp. (a) 1,800 88
RealNetworks, Inc. (a) 700 84
Remedy Corp. (a) 500 24
Renaissance Worldwide, Inc. NPV (a) 800 6
Rogers Corp. (a) 400 15
RSA Security, Inc. (a) 800 62
S3, Inc. (a) 200 2
Sandisk Corp. (a) 100 10
Sanmina Corp. (a) 200 20
Sapient Corp. (a) 600 85
SCI Systems, Inc. (a) 800 66
Scott Technologies, Inc. (a) 100 2
SDL, Inc. (a) 100 22
Semtech Corp. (a) 600 31
Siebel Systems, Inc. (a) 2,800 236
SIPEX Corp. (a) 400 10
SPSS, Inc. (a) 200 5
Sterling Commerce, Inc. (a) 1,700 58
Sterling Software, Inc. (a) 200 6
Structural Dynamics Research Corp. (a) 100 1
Sybase, Inc. (a) 2,700 46
Sykes Enterprises, Inc. (a) 500 22
Symantec Corp. (a) 200 12
Symbol Technologies, Inc. 1,800 114
Synopsys, Inc. (a) 1,200 80
Systemax, Inc. (a) 1,500 13
theglobe.com (a) 200 2
THQ, Inc. (a) 400 9
Total Systems Services, Inc. 800 13
TranSwitch Corp. (a) 500 36
Trimble Navigation, Ltd. NPV (a) 500 11
Triquint Semiconductor, Inc. (a) 300 33
US LEC Corp. (a) 200 6
Verio, Inc. (a) 1,400 65
VeriSign, Inc. (a) 1,600 306
VerticalNet, Inc. (a) 700 114
Vishay Intertechnology, Inc. (a) 2,600 82
Visio Corp. (a) 600 29
Visual Networks, Inc. (a) 400 32
Vitesse Semiconductor Corp. (a) 3,200 168
Volt Information Sciences, Inc. (a) 300 7
Wind River Systems, Inc. (a) 100 4
Xircom, Inc. (a) 500 38
Zebra Technologies Corp. Class A (a) 500 29
--------
6,845
--------
Utilities - 5.8%
American States Water Co. NPV 400 14
Black Hills Corp. 200 4
California Water Service Group 400 12
Com21, Inc. (a) 500 11
Commonwealth Telephone Enterprises, Inc. (a) 200 11
Comsat Corp. Series 1 500 10
Conectiv, Inc. 2,900 49
DPL, Inc. 5,600 97
Dycom Industries, Inc. (a) 500 22
E'town Corp. 300 19
Energen Corp. 900 16
Hawaiian Electric Industries, Inc. 1,100 32
Idacorp, Inc. 1,400 38
Illinova Corp. 2,500 87
IMRglobal Corp. (a) 400 5
Laclede Gas Co. 600 13
MDU Resources Group, Inc. 1,800 36
Minnesota Power, Inc. 2,600 44
National Fuel Gas Co. 1,400 65
New Jersey Resources Corp. 600 23
NiSource, Inc. NPV 4,500 80
Northwest Natural Gas Co. 800 17
NUI Corp. 500 13
Omnipoint Corp. (a) 700 84
Otter Tail Power Co. 400 15
Pacific Gateway Exchange, Inc. (a) 300 5
Philadelphia Suburban Corp. 1,100 23
Piedmont Natural Gas Co., Inc. 1,100 33
Powertel, Inc. (a) 500 50
Powerwave Technologies, Inc. (a) 300 17
Price Communications Corp. (a) 900 25
Public Service Co. of New Mexico 1,300 21
Razorfish, Inc. (a) 100 10
SCANA Corp. 3,700 99
Sierra Pacific Resources 2,800 48
SJW Corp. 100 12
South Jersey Industries, Inc. 300 9
Southwest Gas Corp. 1,100 25
TALK.com, Inc. (a) 800 14
TECO Energy, Inc. 4,700 87
UGI Corp. 1,100 22
United Illuminating Co. 500 26
United States Cellular Corp. (a) 200 20
UtiliCorp United, Inc. 3,300 64
Washington Gas & Light Co. 1,700 47
Western Resources, Inc. 2,400 41
Tax-Managed Small Cap Fund 26
<PAGE>
Tax-Managed Small Cap Fund
Statement of Net Assets, continued
December 31, 1999
- --------------------------------------------------------------------------------
Market
Number Value
of (000)
Shares $
------ ------
- --------------------------------------------------------------------------------
Western Wireless Corp. NPV Class A
(a) 1,000 67
Wisconsin Energy Corp. 4,200 82
WPS Resources Corp. 900 23
--------
1,687
--------
Total Common Stocks
(cost $21,700) 23,417
--------
Principal
Amount
(000)
$
---------
Short-Term Investments - 17.9%
Frank Russell Investment Company
Money Market Fund, due on demand (b) 4,907 4,907
United States Treasury Bills (b)(c)(d)
4.670% due 01/20/00 350 349
--------
Total Short-Term Investments
(cost $5,256) 5,256
--------
Total Investments - 97.9%
(identified cost $26,956) 28,673
Other Assets and Liabilities,
Net - 2.1% 602
--------
Net Assets - 100.0% 29,275
========
* Each contract represents $100,000 notional value.
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
(c) Held as collateral in connection with futures contracts purchased by the
Fund.
(d) Rate noted is yield-to-maturity from date of acquisition.
(e) Real Estate Investment Trust (REIT).
Abbreviations:
ADR - American Depositary Receipt
NPV - No Par Value
- --------------------------------------------------------------------------------
Unrealized
Number Appreciation
of (Depreciation)
Contracts* (000)
- --------------------------------------------------------------------------------
Futures Contracts
S&P 500 Index
expiration date 03/ 00 5 $ 35
S&P 400 Midcap
expiration date 03/ 00 10 94
-------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ 129
=======
See accompanying notes which are an integral part of the financial statements.
27 Tax-Managed Small Cap Fund
<PAGE>
Tax-Managed Small Cap Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amounts) December 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $26,956) ..................... $ 28,673
Receivables:
Dividends ........................................................ 65
Investments sold ................................................. 347
Fund shares sold ................................................. 510
From Advisor ..................................................... 112
Daily variation margin on futures contracts ...................... 18
--------
Total assets .................................................. 29,725
Liabilities
Payables:
Investments purchased ............................................ $369
Accrued fees to affiliates ....................................... 21
Other accrued expenses ........................................... 60
----
Total liabilities ............................................. 450
--------
Net Assets .......................................................... $ 29,275
========
Net Assets Consist of:
Undistributed net investment income ................................. $ 35
Accumulated net realized gain (loss) ................................ (181)
Unrealized appreciation (depreciation) on:
Investments ...................................................... 1,717
Futures contracts ................................................ 129
Shares of beneficial interest ....................................... 27
Additional paid-in capital .......................................... 27,548
--------
Net Assets .......................................................... $ 29,275
========
Net Asset Value, offering and redemption price per share:
Class C ($221,837 divided by 20,704 shares of $.01 par value
shares of beneficial interest outstanding) .................... $ 10.71
========
Class S ($29,053,019 divided by 2,707,857 shares of $.01 par value
shares of beneficial interest outstanding) .................... $ 10.73
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Tax-Managed Small Cap Fund 28
<PAGE>
Tax-Managed Small Cap Fund
Statement of Operations
Amounts in thousands For the Period December 1, 1999
(Commencement of Operations) to December 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Dividends from Money Market Fund .................... $ 31
Dividends ........................................... 25
Interest ............................................ 1
-------
Total investment income .......................... 57
Expenses
Advisory fees ....................................... $ 18
Administrative fees ................................. 1
Custodian fees ...................................... 40
Transfer agent fees ................................. 21
Professional fees ................................... 14
Registration fees ................................... 44
Amortization of deferred organization expenses ...... 2
Miscellaneous ....................................... 2
-------
Expenses before reductions .......................... 142
Expense reductions .................................. (120)
-------
Expenses, net .................................... 22
-------
Net investment income .................................. 35
-------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ......................................... (155)
Futures contracts ................................... (26) (181)
-------
Net change in unrealized appreciation (depreciation) on:
Investments ......................................... 1,717
Futures contracts ................................... 129 1,846
------- -------
Net realized and unrealized gain (loss) ................ 1,665
-------
Net increase (decrease) in net assets from operations .. $ 1,700
=======
</TABLE>
See accompanying notes which are an integral part of the financial statements.
29 Tax-Managed Small Cap Fund
<PAGE>
Tax-Managed Small Cap Fund
Statement of Changes in Net Assets
Amounts in thousands For the Period December 1, 1999
(Commencement of Operations) to December 31, 1999
Increase (Decrease) in Net Assets
Operations
Net investment income ........................................ $ 35
Net realized gain (loss) ..................................... (181)
Net change in unrealized appreciation (depreciation) ......... 1,846
--------
Net increase (decrease) in net assets from operations ..... 1,700
--------
Share Transactions
Net increase (decrease) in net assets from share transactions 27,575
--------
Total net increase (decrease) in net assets ..................... 29,275
Net Assets
Beginning of period .......................................... --
--------
End of period (including undistributed net investment
income of $35) ............................................ $ 29,275
========
See accompanying notes which are an integral part of the financial statements.
Tax-Managed Small Cap Fund 30
<PAGE>
Tax-Managed Small Cap 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 ........................ $ 10.00
-------
Income From Operations
Net investment income (a)** .............................. --
Net realized and unrealized gain (loss) .................. .71
-------
Total income from operations .......................... .71
-------
Net Asset Value, End of Period .............................. $ 10.71
=======
Total Return (%)(b) ......................................... 7.10
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ................. 222
Ratios to average net assets (%)(c):
Operating expenses, net ............................... 2.18
Operating expenses, gross ............................. 8.78
Net investment income ................................. .73
Portfolio turnover rate (%) .............................. 3.33
* For the period December 1, 1999 (commencement of sale) to December 31,
1999.
** Less than .01(cent)per share.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
31 Tax-Managed Small Cap Fund
<PAGE>
Tax-Managed Small Cap 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.
1999*
----------
Net Asset Value, Beginning of Period ...................... $ 10.00
----------
Income From Operations
Net investment income (a) .............................. .01
Net realized and unrealized gain (loss) ................ .72
----------
Total income from operations ........................ .73
----------
Net Asset Value, End of Period ............................ $ 10.73
==========
Total Return (%)(b) ....................................... 7.30
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ............... 29,053
Ratios to average net assets (%)(c):
Operating expenses, net ............................. 1.25
Operating expenses, gross ........................... 7.95
Net investment income ............................... 1.92
Portfolio turnover rate (%) ............................ 3.33
* For the period December 1, 1999 (commencement of sale) to December 31,
1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
Tax-Managed Small Cap Fund 32
<PAGE>
Tax Exempt Bond Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: To provide a high level of federal tax-exempt current income by
investing principally in a diversified portfolio of investment grade municipal
securities.
Invests in: Municipal obligations maturing in seven years or less from the date
of acquisition.
Strategy: The Fund concentrates on investment opportunities in the tax- free,
investment grade municipal debt securities market.
- --------------------------------------------------------------------------------
[The following was depicted as a moutain chart in the printed material.]
<TABLE>
<CAPTION>
Dates Tax Exempt Bond - Class BSB 3-Month T-Bill** Lipper(R) Short Muni Debt++
<S> <C> <C> <C>
$10,000 $10,000 $10,000
1990 $10,611 $10,790 $10,639
1991 $11,423 $11,410 $11,499
1992 $12,090 $11,622 $12,235
1993 $12,896 $12,185 $12,994
1994 $12,817 $12,699 $12,967
1995 $13,818 $13,426 $13,920
1996 $14,241 $14,133 $14,439
1997 $14,942 $14,874 $15,107
1998 $15,662 $15,625 $15,776
1999 $15,581 $16,365 $15,517
------------------------------------------------------------------------------------------
Total $144,071 $143,332 $145,095
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Tax Exempt Bond Fund - Class S
- --------------------------------------------------------------------------------
Periods Ended Growth of Total
12/31/99 $10,000 Return
------------- --------- -------
1 Year $9,948 (0.52)%
5 Years $12,157 3.98%ss.
10 Years $15,581 4.53%ss.
- --------------------------------------------------------------------------------
Tax Exempt Bond Fund - Class E
- --------------------------------------------------------------------------------
Periods Ended Growth of Total
12/31/99 $10,000 Return
------------- --------- -------
1 Year $9,934 (0.66)%
5 Years $12,140 3.95%ss.
10 Years $15,559 4.52%ss.
- --------------------------------------------------------------------------------
Tax Exempt Bond Fund - Class C
- --------------------------------------------------------------------------------
Periods Ended Growth of Total
12/31/99 $10,000 Return
------------- --------- -------
1 Year $9,876 (1.24)%
5 Years $12,069 3.83%ss.
10 Years $15,469 4.46%ss.
- --------------------------------------------------------------------------------
Salomon Smith Barney 3-Month Treasury Bill Index
- --------------------------------------------------------------------------------
Periods Ended Growth of Total
12/31/99 $10,000 Return
------------- --------- -------
1 Year $10,474 4.74%
5 Years $12,887 5.20%ss.
10 Years $16,365 5.05%ss.
- --------------------------------------------------------------------------------
Lipper(R) Short Municipal Debt Funds Benchmark
- --------------------------------------------------------------------------------
Periods Ended Growth of Total
12/31/99 $10,000 Return
------------- --------- -------
1 Year $10,038 0.38%
5 Years $12,392 4.38%ss.
10 Years $16,414 5.08%ss.
33 Tax Exempt Bond Fund
<PAGE>
Tax Exempt Bond Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Performance Review
For the year ended December 31, 1999, the Tax-Exempt Bond Fund Class S, Class E
and Class C shares reflected losses of 0.52%, 0.66%, and 1.24%, respectively, as
compared to the Lipper(R) Short Municipal Debt Funds Average, which posted a
gain of 0.38%. The year proved challenging for the Fund's managers as a trend of
rising interest rates made duration and yield curve strategies critical.
Portfolio Highlights
Bonds suffered their worst setback since 1994, and their second worst year in
over two decades. Strong US economic growth led to significantly higher interest
rates and aggressive Fed intervention via actual policy tightening. US
treasuries were the most severely impacted during the year, relative to other
sectors of the US bond market, with the 30-year US treasury bond losing nearly
15% for the year. Spread sectors, including corporate bonds and mortgage- and
asset-backed securities fared better, as post- emerging markets crisis spread
widening reversed.
The Fund trailed its benchmark for the year as its longer-than- benchmark
duration proved counter to market trends.
- --------------------------------------------------------------------------------
Top Ten Issuing States
(as a percent of Total Investments) December 31, 1999
- --------------------------------------------------------------------------------
New York 11.9%
Illinois 10.4
Texas 6.4
Washington 4.5
Michigan 4.4
Indiana 4.4
Georgia 3.8
Hawaii 3.5
District of Columbia 3.4
Louisiana 3.0
- --------------------------------------------------------------------------------
Portfolio Characteristics
December 31, 1999
- --------------------------------------------------------------------------------
Weighted Average Quality Diversification AAA
Weighted Average Years-to- Maturity 5.9 Years
Weighted Average Duration 4.6 Years
Current Yield (SEC 30-day standardized)
Class S 4.3%
Class E 4.7%
Class C 3.3%
Number of Issues 145
Number of Issuers 116
- --------------------------------------------------------------------------------
Money Managers
- --------------------------------------------------------------------------------
MFS Institutional Advisors, Inc.
Standish, Ayer & Wood, Inc.
* Tax Exempt Bond Fund Class S assumes initial investment on January 1,
1990.
** Salomon Smith Barney 3-Month Treasury Bill Index consists of equal
dollar amounts of three-month Treasury bills purchased at the beginning
of each of three consecutive months. As each bill matures, all proceeds
are rolled over or reinvested in a new three-month bill. The income
used to calculate the monthly return is derived by subtracting the
original amount invested from the maturity value.
++ Lipper(R) Short Municipal Debt Funds Benchmark is the average total
return for the universe of funds within the Short Municipal Debt Funds
investment objective. The total return for the funds reflects
adjustments for income dividends and capital gains distributions
reinvested as of the ex-dividend dates.
++++ Tax Exempt Bond Fund Class S performance has been linked with Class E
to provide historical perspective. From February 18, 1999 (commencement
of sale) through the current period, Class E paid shareholder service
fees. Total return would have been lower had these fees been in effect
during prior reporting periods.
++++++ Tax Exempt Bond Fund Class S and Class E performance has been linked
with Class C to provide historical perspective. From March 29, 1999
(commencement of sale) through the current period, Class C paid
shareholder service and Rule 12b-1 distribution fees. Total return
would have been lower had these fees been in effect during prior
reporting periods.
ss. Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Tax-Exempt Bond Fund 34
<PAGE>
Tax Exempt Bond Fund
Statement of Net Assets
December 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Principal Market
Amounts Date Value
(000) Rate of (000)
$ $ Maturity $
--------- ----- -------- ------
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Bonds - 88.0%
Alaska - 1.2%
Alaska State Housing Finance Corp. Revenue, Series A-1 (a) 650 4.550 12/01/02 645
Anchorage, Alaska General Obligation (a) 1,000 5.125 12/01/13 943
-----
1,588
-----
Arizona - 0.8%
Arizona State Transportation Board Special Obligations Revenue, Series A
(pre-refunded 07/01/01)(e) 1,000 6.450 07/01/06 1,043
-----
Arkansas - 1.5%
Ashdown, Arkansas Pollution Control Revenue 500 4.750 04/01/08 465
Baxter County, Arkansas Hospital Revenue, Series A 1,515 5.000 09/01/08 1,394
-----
1,859
-----
California - 2.7%
ABAG Finance Authority For Nonprofit Corporations Insured Revenue
Certificate Participation 600 5.700 08/15/14 594
California Statewide Communities Development Authority Multi-family Revenue 1,000 5.200 12/01/29 951
Sacramento, California Municipal Utility District Revenue, Series Z (a) 1,000 6.000 07/01/01 1,025
Stanislaus, California Waste-to-Energy Financing Agency Solid Waste
Facility Revenue 900 7.625 01/01/10 919
-----
3,489
-----
Colorado - 1.1%
Colorado Housing Finance Authority Revenue, Series C-2 440 4.500 11/01/05 430
Denver, Colorado Health & Hospital Revenue, Series A 1,000 5.000 12/01/04 974
-----
1,404
-----
Connecticut - 0.8%
Connecticut State Special Tax Obligation Revenue (a)(b) 1,000 5.250 10/01/09 1,007
-----
District of Columbia - 3.4%
District of Columbia General Obligation, Series A (pre-refunded 06/01/06)(e) 800 6.375 06/01/16 873
District of Columbia General Obligation, Series B 1,000 5.500 06/01/09 1,012
District of Columbia Revenue (a) 1,000 5.250 10/01/02 1,013
District of Columbia Revenue General Obligation, Series A (a)(d) 500 5.500 04/01/01 506
District of Columbia Revenue, Series A (a) 1,000 5.000 01/01/12 946
-----
4,350
-----
Florida - 1.8%
Florida State Board of Education Capital Outlay General Obligation, Series A 765 7.250 06/01/23 788
Hillsborough County, Florida Educational Facilities Authority Revenue 1,500 5.750 04/01/18 1,477
-----
2,265
-----
Georgia - 3.8%
Atlanta, Georgia Airport Facilities Revenue (a) 500 5.500 01/01/01 507
Georgia, State of, General Obligation, Series B 1,000 5.750 08/01/08 1,052
Georgia, State of, General Obligation, Series C 750 6.500 07/01/07 822
Georgia, State of, General Obligation, Series F 600 6.500 12/01/09 665
Georgia State Municipal Electric Authority General Resolution Revenue,
Series A (a) 850 5.000 01/01/02 856
Georgia State Municipal Electric Authority Revenue, Series B (a) 850 6.250 01/01/17 890
-----
4,792
-----
</TABLE>
35 Tax Exempt Bond Fund
<PAGE>
Tax Exempt Bond Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Principal Market
Amounts Date Value
(000) Rate of (000)
$ $ Maturity $
--------- ----- -------- ------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hawaii - 3.5%
Hawaii State Housing Financial & Development Corporation, Single Family
Mortgage Purchasing Revenue, Series B 1,000 4.450 07/01/03 982
Hawaii, State of, General Obligation, Series CA (a) 1,000 5.750 01/01/10 1,034
Hawaii, State of, General Obligation, Series CP (a) 600 5.000 10/01/02 605
Honolulu, Hawaii City & County General Obligation, Series A (a) 650 5.000 11/01/02 656
Honolulu, Hawaii City & County General Obligation, Series B 1,150 5.000 10/01/02 1,159
------
4,436
------
Illinois - 10.4%
Bolingbrook, Illinois Parks District General Obligation Zero Coupon (a) 1,230 0.000 01/01/05 950
Chicago, Illinois General Obligation (a) 750 6.000 01/01/11 784
Chicago, Illinois General Obligation, Series C (a) 1,500 6.250 10/31/01 1,544
Chicago, Illinois Public Building Commercial Building Revenue, Series B (a) 500 5.250 12/01/18 457
Chicago, Illinois Public Building Commercial Building Revenue, Series C (a) 500 5.500 02/01/06 511
Chicago, Illinois Sales Tax Revenue (a) 1,000 5.250 01/01/05 1,014
Chicago, Illinois Sales Tax Revenue (a) 1,000 5.000 01/01/13 931
Illinois Development Finance Authority Revenue, Series A (a) 1,145 5.500 05/15/05 1,167
Illinois Health Facilities Authority Revenue 1,000 5.250 09/01/04 989
Illinois Health Facilities Authority Revenue (a) 500 5.000 08/01/03 503
Illinois Health Facilities Authority Revenue (a) 270 5.250 08/15/03 274
Illinois Health Facilities Authority Revenue, Series A (a) 175 5.000 10/01/00 176
Illinois Health Facilities Authority Revenue, Series A (a) 230 4.550 07/01/01 230
Illinois Health Facilities Authority Revenue, Series A (a) 1,420 5.500 08/15/05 1,450
Illinois Housing Development Authority, Elderly Housing Development Revenue 265 4.350 01/01/04 258
Illinois Housing Development Authority, Elderly Housing Development Revenue 500 4.450 01/01/05 485
Illinois, State of, Dedicated Tax Revenue, Series A (a) 1,000 7.000 12/15/13 1,041
Illinois, State of, General Obligation (a) 500 5.375 05/01/01 506
------
13,270
------
Indiana - 4.4%
Indiana Bond Bank Revenue, Series A 1,000 4.100 02/01/05 951
Indiana Health Facilities Financing Authority Hospital Revenue 465 4.500 02/15/05 453
Indiana Health Facilities Financing Authority Hospital Revenue, Series A 1,250 5.000 12/01/03 1,256
Indiana Health Facilities Financing Authority Hospital Revenue, Series A (a) 500 5.000 11/01/02 503
Indiana Health Facilities Financing Authority Hospital Revenue, Series D (b) 1,410 5.000 11/01/26 1,401
Indiana University Revenue, Series M 500 5.750 08/01/10 515
Monroe County, Indiana Hospital Authority Revenue (a) 500 4.500 05/01/03 493
------
5,572
------
Kansas - 0.8%
Butler & Sedgwick Counties, Kansas University School District Number 385
Andover General Obligation 1,000 5.000 09/01/09 989
------
Kentucky - 0.8%
McCracken County, Kentucky Hospital Revenue, Series A (a) 1,000 5.700 11/01/00 1,012
------
Louisiana - 3.0%
De Soto Parish, Louisiana Pollution Control Revenue, Series A 650 5.050 12/01/02 648
Jefferson Parish, Louisiana Hospital Service District Number 2 Hospital
Revenue (a) 1,000 5.250 12/01/15 1,017
Louisiana Public Facilities Authority Hospital Revenue, Series A 1,600 5.500 08/15/19 1,358
Shreveport, Louisiana General Obligation Zero Coupon (a) 1,000 0.000 01/01/05 775
------
3,798
------
</TABLE>
Tax Exempt Bond Fund 36
<PAGE>
Tax Exempt Bond Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Principal Market
Amounts Date Value
(000) Rate of (000)
$ $ Maturity $
--------- ----- -------- ------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maine - 0.8%
Maine Health & Higher Education Facilities Authority Revenue, Series A 1,000 4.300 07/01/04 973
------
Massachusetts - 1.8%
Massachusetts State Development Finance Agency Revenue, Series B 215 5.200 07/01/01 215
Massachusetts State Development Finance Agency Revenue, Series B 125 5.400 07/01/02 125
Massachusetts State Health & Educational Facilities Authority Revenue,
Series B (b) 485 4.550 01/01/21 481
Massachusetts State Industrial Finance Agency Resource Recovery Revenue,
Series A 500 4.850 12/01/05 483
Massachusetts, State of, Special Obligation Revenue, Series A 1,000 5.500 06/01/13 1,005
------
2,309
------
Michigan - 4.4%
Bishop International Airport Authority, Michigan Airport Revenue, Series B 1,000 5.000 12/01/10 932
Bishop International Airport Authority, Michigan Airport Revenue, Series B 1,030 5.250 12/01/11 972
Jackson County, Michigan Hospital Financial Authority Revenue (a) 300 4.375 06/01/02 297
Manistee, Michigan Area Public Schools General Obligation (a) 235 6.000 05/01/08 249
Michigan State Building Authority Revenue, Series I 375 5.400 10/01/03 389
Michigan State Hospital Finance Authority Revenue, Series A 500 5.000 07/01/02 503
Michigan State Hospital Finance Authority Revenue, Series A 1,000 5.500 10/01/04 1,026
Michigan State Hospital Finance Authority Revenue, Series A (a) 250 5.000 05/15/07 247
Michigan State Hospital Finance Authority Revenue, Series B 1,000 5.200 11/15/33 996
------
5,611
------
Nevada - 0.8%
Clark County, Nevada School District General Obligation 1,000 5.250 06/15/10 993
------
New Hampshire - 0.7%
New Hampshire Higher Educational & Health Facilities Authority Revenue
(pre-refunded 03/01/2003)(e) 750 9.000 03/01/23 850
------
New Jersey - 1.3%
New Jersey State Housing & Mortgage Finance Agency Revenue, Series 1 1,000 6.000 11/01/02 1,019
New Jersey State Transportation Corporation Capital Grant Anticipation
Notes, Series A 670 4.900 09/01/01 673
------
1,692
------
New Mexico - 0.3%
New Mexico Mortgage Finance Authority Revenue, Series A-1 385 6.200 01/01/01 388
-----
New York - 11.9%
Metropolitan Transportation Authority, New York Service Contract Commuter
Facilities, Series 7 1,000 5.300 07/01/05 1,005
Metropolitan Transportation Authority, New York Transit Facilities Revenue,
Series R (d) 650 5.000 07/01/03 656
Municipal Assistance Corporation, New York, New York Revenue, Series E 1,000 4.700 07/01/02 1,002
Nassau County, New York Tobacco Settlement Corporation Revenue 595 5.400 07/15/12 581
New York, New York General Obligation, Series E 500 5.300 08/01/03 506
New York, New York General Obligation, Series F 500 5.300 08/01/03 506
New York, New York General Obligation, Series H 750 5.250 08/01/03 758
New York State Certificate of Participation 1,000 5.000 09/01/02 1,003
New York State Dormitory Authority Revenue 450 5.000 04/01/03 449
New York State Dormitory Authority Revenue (a) 1,900 7.000 07/01/09 2,094
New York State Dormitory Authority Revenue, Series 1 500 5.000 07/01/03 499
</TABLE>
37 Tax Exempt Bond Fund
<PAGE>
Tax Exempt Bond Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Principal Market
Amounts Date Value
(000) Rate of (000)
$ $ Maturity $
--------- ----- -------- ------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York State Dormitory Authority Revenue, Series A 375 6.000 02/15/03 385
New York State Dormitory Authority Revenue, Series A 375 6.000 08/15/04 388
New York State Dormitory Authority Revenue, Series A (a) 1,000 4.300 08/15/04 971
New York State Dormitory Authority Revenue, Series B 745 4.500 02/15/03 732
New York State Dormitory Authority Revenue, Series E 1,000 5.500 02/15/03 1,012
New York State Urban Development Corporation Revenue 1,000 5.300 01/01/04 1,007
New York State Urban Development Corporation Revenue, Series 7 125 5.500 01/01/01 126
Suffolk County, New York Judicial Facilities Agency Service Agreement
Revenue (a) 500 5.500 04/15/09 511
TSASC Inc., New York Revenue, Series 1 1,000 5.500 07/15/13 971
-------
15,162
-------
North Carolina - 0.8%
North Carolina Medical Care Community Hospital Revenue (a) 1,000 4.250 06/01/04 963
-------
Ohio - 2.1%
Cleveland, Ohio General Obligation (a) 1,000 5.000 11/15/08 994
Medina, Ohio City School District (a) 750 4.850 12/01/10 711
Ohio, State of, Revenue 1,000 5.000 12/15/06 1,002
-------
2,707
-------
Oklahoma - 0.2%
Stillwater, Oklahoma Medical Center Authority Revenue, Series A 300 5.550 05/15/01 301
-------
Oregon - 0.4%
Oregon State Department Administration Services Lottery Revenue, Series B 500 5.250 04/01/06 508
-------
Pennsylvania - 2.5%
Philadelphia, Pennsylvania Gas Works Revenue, Series A 1,000 5.500 07/01/07 1,025
Philadelphia, Pennsylvania Hospitals & Higher Educational Facilities
Authority Revenue, Series A 500 5.000 05/15/02 503
Philadelphia, Pennsylvania Water & Wastewater Revenue (a) 1,000 5.250 12/15/11 991
Scranton-Lackawanna, Pennsylvania Health & Welfare Authority Revenue,
Series A 700 7.375 07/15/08 734
-------
3,253
-------
Rhode Island - 1.4%
Rhode Island Housing & Mortgage Finance Authority Housing Revenue, Series A (a) 1,000 5.150 07/01/01 1,006
Rhode Island State Health & Educational Building Corporation Revenue (a) 785 5.500 04/01/17 753
-------
1,759
-------
South Carolina - 2.1%
Columbia, South Carolina Waterworks & Sewer System Revenue, Zero Coupon 1,000 0.000 02/01/04 816
Medical University South Carolina Hospital Facilities Revenue 1,355 5.500 07/01/03 1,367
Winnsboro, South Carolina Utility Revenue (a) 550 5.250 08/15/14 531
-------
2,714
-------
South Dakota - 0.8%
South Dakota Housing Development Authority Revenue, Series A 1,000 5.200 05/01/02 1,007
-----
</TABLE>
Tax Exempt Bond Fund 38
<PAGE>
Tax Exempt Bond Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Principal Market
Amounts Date Value
(000) Rate of (000)
$ $ Maturity $
--------- ----- -------- ------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tennessee - 1.6%
Metropolitan Government, Nashville & Davidson Counties, Tennessee Health &
Educational Facilities Board Revenue, Series A 920 5.000 11/01/06 920
Metropolitan Government, Nashville & Davidson Counties, Tennessee Health &
Educational Facilities Board Revenue, Series A (d) 615 5.250 05/01/01 621
White House Utility District, Tennessee, Robertson & Sumner Counties
Waterworks Revenue, Zero Coupon, Series B (a) 650 0.000 01/01/05 503
-------
2,044
-------
Texas - 6.4%
Arlington, Texas Independent School District General Obligation 1,000 4.750 02/15/09 952
Brazos River Authority, Texas Revenue (b) 1,500 5.200 12/01/18 1,494
Houston, Texas General Obligation, Series C 1,000 5.900 03/01/03 1,024
Matagorda County, Texas Navigation District Number 1 Pollution Control
Revenue, Series A (b) 1,000 4.900 05/01/30 998
San Antonio, Texas Electric & Gas Revenue 500 4.700 02/01/05 494
San Antonio, Texas Electric & Gas Revenue (pre-refunded 02/01/04) (e) 70 4.700 02/01/05 71
San Antonio, Texas Electric & Gas Revenue, Zero Coupon, Series B (a) 1,000 0.000 02/01/04 814
Texas A&M University Permanent University Funding Revenue (b) 1,000 5.000 07/01/08 995
Texas State Public Finance Authority Building Revenue, Series B 1,000 5.000 02/01/05 1,004
Waco, Texas Health Facilities Development Corp. Revenue, Series A 250 5.200 11/15/06 248
-------
8,094
-------
Utah - 1.8%
Intermountain Power Agency, Utah Power Supply Revenue, Series C 1,000 4.700 07/01/02 999
Intermountain Power Agency, Utah Power Supply Revenue, Series E (d) 500 5.250 07/01/01 505
Utah State Board of Regents Revenue (a) 300 5.000 08/01/02 302
Utah Water Finance Agency Revenue, Series A (a) 500 4.800 10/01/08 481
-------
2,287
-------
Virginia - 0.8%
Arlington County, Virginia Industrial Development Authority Resource
Recovery Revenue, Series A 1,000 5.250 01/01/04 1,014
-------
Washington - 4.5%
CDP King County III, Washington Lease Revenue (a) 1,000 4.600 06/01/03 995
Washington State Public Power Supply System Nuclear Project Number 1
Revenue, Series A 1,000 7.000 07/01/08 1,114
Washington State Public Power Supply System Nuclear Project Number 3
Revenue, Series A 1,000 5.000 07/01/04 1,002
Washington, State of, General Obligation, Series A 1,060 6.500 07/01/04 1,130
Washington, State of, General Obligation, Series R 1,500 6.400 09/01/03 1,554
-------
5,795
-------
West Virginia - 0.6%
South Charleston, West Virginia Pollution Control Revenue 700 7.625 08/01/05 760
-------
Total Municipal Bonds (cost $114,570) 112,058
-------
</TABLE>
39 Tax Exempt Bond Fund
<PAGE>
Tax Exempt Bond Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Principal Market
Amounts Value
(000) (000)
$ $
--------- ------
- ----------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Investments - 10.9%
Frank Russell Investment Company Tax Free Money Market Fund
due on demand (c) 13,824 13,824
-------
Total Short-Term Investments
(cost $13,824) 13,824
-------
Total Investments - 98.9%
(identified cost $128,394) 125,882
Other Assets & Liabilities, Net - 1.1% 1,406
-------
Net Assets - 100.0% 127,288
=======
</TABLE>
(a) Bond is insured by AMBAC, FGIC or MBIA.
(b) Adjustable or floating rate security.
(c) At amortized cost, which approximates market value.
(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 (Unaudited)
AAA 65%
AA 22
A 7
BBB 6
---
100%
===
Economic Sector Emphasis as a % of Market Value (Unaudited)
General Obligation 20%
Health Care Revenue 20
Utility Revenue 9
State & Community Lease 8
Housing Revenue 6
University Revenue 7
Pollution Control Revenue 2
Refunded & Special Obligation 1
Other 16
Cash Equivalents 11
---
100%
===
See accompanying notes which are an integral part of the financial statements.
Tax Exempt Bond Fund 40
<PAGE>
Tax Exempt Bond Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amounts) December 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $128,394) ..................... $ 125,882
Receivables:
Dividends and interest ............................................ 1,751
Fund shares sold .................................................. 350
Prepaid expenses ..................................................... 1
---------
Total assets ................................................... 127,984
Liabilities
Payables:
Investments purchased ............................................. $342
Fund shares redeemed .............................................. 306
Accrued fees to affiliates ........................................ 6
Other accrued expenses ............................................ 42
----
Total liabilities .............................................. 696
---------
Net Assets ........................................................... $ 127,288
=========
Net Assets Consist of:
Accumulated distributions in excess of net investment income ......... $ (144)
Accumulated distributions net realized gain (loss) ................... (2,110)
Unrealized appreciation (depreciation) on investments ................ (2,512)
Shares of beneficial interest ........................................ 62
Additional paid-in capital ........................................... 131,992
---------
Net Assets ........................................................... $ 127,288
=========
Net Asset Value, offering and redemption price per share:
Class C ($474,201 divided by 23,183 shares of $.01 par value
shares of beneficial interest outstanding) ..................... $ 20.45
=========
Class E ($2,853,497 divided by 139,408 shares of $.01 par value
shares of beneficial interest outstanding) ..................... $ 20.47
=========
Class S ($123,960,342 divided by 6,071,047 shares of $.01 par value
shares of beneficial interest outstanding) ..................... $ 20.42
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
41 Tax Exempt Bond Fund
<PAGE>
Tax Exempt Bond Fund
Statement of Operations
Amounts in thousands Year End December 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Interest ....................................................... $6,457
Dividends ...................................................... 61
------
Total investment income ..................................... 6,518
Expenses
Advisory fees .................................................. $427
Administrative fees ............................................ 71
Custodian fees ................................................. 81
Distribution fees - Class C .................................... 1
Transfer agent fees ............................................ 86
Professional fees .............................................. 35
Registration fees .............................................. 95
Shareholder servicing fees - Class C ........................... 1
Shareholder servicing fees - Class E ........................... 5
Trustees' fees ................................................. 6
Miscellaneous .................................................. 17
----
Total expenses .............................................. 825
------
Net investment income ............................................. 5,693
------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on investments ........................... (1,498)
Net change in unrealized appreciation (depreciation) on investments (5,063)
------
Net realized and unrealized gain (loss) ........................... (6,561)
------
Net increase (decrease) in net assets from operations ............. $ (868)
======
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Tax Exempt Bond Fund 42
<PAGE>
Tax Exempt Bond Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Amounts in thousands
Years Ended December 31,
-------------------------
1999 1998
--------- ---------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ............................................. $ 5,693 $ 4,119
Net realized gain (loss) .......................................... (1,498) (141)
Net change in unrealized appreciation (depreciation) .............. (5,063) 1,153
--------- ---------
Net increase (decrease) in net assets from operations .......... (868) 5,131
--------- ---------
Distributions
From net investment income
Class C ........................................................ (7) --
Class E ........................................................ (77) --
Class S ........................................................ (5,753) (4,154)
--------- ---------
Net decrease in net assets from distributions ............... (5,837) (4,154)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions ..... 5,034 44,906
--------- ---------
Total net increase (decrease) in net assets .......................... (1,671) 45,883
Net Assets
Beginning of period ............................................... 128,959 83,076
--------- ---------
End of period (including accumulated distributions in excess of net
investment income of $144 at December 31, 1999) ................ $ 127,288 $ 128,959
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
43 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 Operations
Net investment income (a) ................................ .45
Net realized and unrealized gain (loss) .................. (.84)
-------
Total income from operations .......................... (.39)
-------
Distributions
From net investment income ............................... (.54)
-------
Net Asset Value, End of Period .............................. $ 20.45
=======
Total Return (%)(b) ......................................... (1.82)
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ................. 474
Ratios to average net assets (%)(c):
Operating expenses .................................... 1.57
Net investment income ................................. 3.12
Portfolio turnover rate (%) .............................. 119.34
* For the period March 29, 1999 (commencement of sale) to December 31, 1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
Tax Exempt Bond Fund 44
<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 Operations
Net investment income (a) .............................. .50
Net realized and unrealized gain (loss) ................ (.71)
---------
Total income from operations ........................ (.21)
---------
Distributions
From net investment income ............................. (.51)
---------
Net Asset Value, End of Period ............................ $ 20.47
=========
Total Return (%)(b) ....................................... (.99)
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ............... 2,854
Ratios to average net assets (%)(c):
Operating expenses .................................. .82
Net investment income ............................... 3.76
Portfolio turnover rate (%) ............................ 119.34
* For the period May 14, 1999 (commencement of sale) to December 31, 1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
45 Tax Exempt Bond Fund
<PAGE>
Tax Exempt Bond 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
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 21.39 $ 21.19 $ 21.02 $ 21.24 $ 20.48
----------- ----------- ----------- ----------- -----------
Income From Operations
Net investment income (a) .............. .84 .81 .84 .85 .81
Net realized and unrealized gain (loss) (.95) .19 .18 (.21) .77
----------- ----------- ----------- ----------- -----------
Total income from operations ........ (.11) 1.00 1.02 .64 1.58
----------- ----------- ----------- ----------- -----------
Distributions
From net investment income ............. (.86) (.80) (.85) (.86) (.82)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ............ $ 20.42 $ 21.39 $ 21.19 $ 21.02 $ 21.24
=========== =========== =========== =========== ===========
Total Return (%)(b) ....................... (.52) 4.82 4.92 3.07 7.81
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 123,960 128,959 83,076 66,344 63,838
Ratios to average net assets (%)(b):
Operating expenses .................. .57 .72 .71 .75 .74
Net investment income ............... 3.99 3.80 3.99 4.02 3.91
Portfolio turnover rate (%) ............ 119.34 74.42 40.79 74.34 73.91
</TABLE>
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) 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.
Tax Exempt Bond Fund 46
<PAGE>
Tax Free Money Market Fund
Statement of Net Assets
December 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Principal
Amounts Date Value
(000) Rate of (000)
$ $ Maturity* $
--------- ----- --------- ------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Bonds - 106.1%
Alabama - 1.2%
Mobile, Alabama Industrial Development Board Pollution Control Revenue,
weekly demand 3,000 5.125 06/01/04 3,000
------
Arizona - 0.8%
Maricopa County, Arizona Industrial Development Authority Revenue, weekly
demand 500 5.250 10/01/04 500
Maricopa County, Arizona Industrial Development Authority Revenue, Series
A, daily demand 880 4.550 02/01/29 880
Yuma County, Arizona Jail District Revenue (a) 500 4.500 07/01/00 501
------
1,881
------
Arkansas - 0.2%
Fayetteville, Arkansas Public Facilities Board Revenue, daily demand 300 4.700 09/01/27 300
Greystone Tax-Exempt Certificate Trust Revenue, Series 1998-1, weekly
demand (e) 186 5.630 05/01/28 186
------
486
------
Colorado - 4.3%
Castle Pines North Metropolitan District, Colorado General Obligation,
weekly demand 7,000 5.550 12/01/28 7,000
Colorado Housing Financial Authority Multi- family Housing Revenue, annual
demand 1,150 5.400 06/01/05 1,150
Denver, Colorado City and County Multi-family Housing Revenue, daily demand 700 4.950 12/01/09 700
SBC Metropolitan District, Colorado General Obligation, annual demand 1,670 4.000 12/01/17 1,670
------
10,520
------
Delaware - 1.5%
Delaware State Economic Development Authority Multi-family Housing Revenue,
weekly demand 650 5.550 12/01/15 650
Delaware State Economic Development Authority Revenue, Series B, weekly
demand 3,100 5.550 05/01/15 3,100
------
3,750
------
District of Columbia - 0.1%
District of Columbia Revenue, weekly demand 375 5.650 12/01/23 375
------
Florida - 3.8%
Alachua County, Florida Industrial Development Revenue, Series A, monthly
demand 375 3.750 01/01/12 375
Capital Trust Agency, Florida Multi-family Housing Revenue, Series A,
weekly demand 3,000 5.800 12/01/32 3,000
Fort Pierce, Florida Health Facility Revenue, weekly demand 1,615 5.550 10/01/17 1,615
Greystone Tax-Exempt Certificate Trust Revenue, Series 1998-1, weekly
demand (e) 282 5.630 05/01/28 282
Orange County, Florida Industrial Development Authority Revenue, monthly
demand 1,100 3.750 01/01/11 1,100
Orange County, Florida Industrial Development Authority Revenue, Series A,
semiannual demand 2,960 3.750 10/01/15 2,960
------
9,332
------
</TABLE>
47 Tax Free Money Market Fund
<PAGE>
Tax Free Money Market Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Principal
Amounts Date Value
(000) Rate of (000)
$ $ Maturity* $
--------- ----- --------- ------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Georgia - 8.2%
Cobb County, Georgia Housing Authority Multi- family Housing Revenue,
weekly demand 1,000 5.500 06/01/25 1,000
Cobb County, Georgia Residential Care Facilities Authority Revenue, weekly
demand 1,000 5.550 04/01/16 1,000
De Kalb County, Georgia Development Authority Revenue, weekly demand 1,500 5.550 03/01/24 1,500
De Kalb County, Georgia Housing Authority Multi-family Housing Revenue,
weekly demand 3,700 5.500 06/01/25 3,700
Fulton County, Georgia Development Authority Revenue, weekly demand 300 5.550 12/01/16 300
Greystone Tax-Exempt Certificate Trust Revenue, Series 1998-1, weekly
demand (e) 942 5.630 05/01/28 942
Gwinnett County, Georgia Development Authority Revenue, weekly demand 115 5.550 03/01/17 115
Gwinnett County, Georgia Development Authority Revenue, weekly demand 4,600 5.550 04/01/18 4,600
La Grange, Georgia Water & Sewage Revenue (pre-refunded 01/01/00)(b) 1,000 7.375 01/01/12 1,020
Macon-Bibb County, Georgia Hospital Authority Revenue Anticipation
Certificates, weekly demand 900 5.550 12/01/18 900
Marietta, Georgia Housing Authority Multi- family Housing Revenue
Anticipation Certificates, weekly demand 2,500 4.850 01/01/08 2,500
Savannah, Georgia Housing Authority Multi- family Housing Revenue, Series
B, weekly demand 650 5.500 06/15/26 650
Thomasville, Georgia Hospital Authority Revenue, weekly demand 1,200 5.550 11/01/17 1,200
Walton County, Georgia Development Authority Industrial Development
Revenue, Series B, weekly demand 800 5.550 06/01/04 800
------
20,227
------
Illinois - 12.6%
Belleville, Illinois Industrial Development Revenue, weekly demand 1,750 5.650 12/01/08 1,750
Chicago, Illinois General Obligation Building Acquisition Certificates 425 4.400 01/01/00 425
Cook County, Illinois Community Unit School District Number 401, Tax
Anticipation Warrants 2,500 4.980 10/25/00 2,509
De Kalb, Illinois Industrial Development Revenue, Series C, weekly demand 500 5.500 02/01/01 500
East Peoria, Illinois Multi-family Housing Authority, weekly demand 1,690 5.250 06/01/08 1,690
Illinois Development Finance Authority Pollution Control Revenue, Series B,
weekly demand 7,000 5.300 10/15/14 7,000
Illinois Development Finance Authority Revenue, quarterly demand 700 3.950 08/01/25 700
Illinois Development Finance Authority Revenue, weekly demand 2,038 5.650 09/01/26 2,038
Illinois Development Finance Authority Revenue, weekly demand 7,000 5.550 08/01/29 7,000
Illinois Health Facilities Authority Revenue, daily demand 400 4.750 11/01/20 400
Illinois Health Facilities Authority Revenue, Series B, weekly demand 4,900 5.350 08/15/22 4,900
Illinois State Certificate of Participation (a) 1,005 4.500 07/01/00 1,009
McHenry County, Illinois Community Construction School District Number 047,
Certificate of Participation (a) 400 6.700 01/01/00 400
Troy Grove, Illinois Revenue, weekly demand 750 5.015 05/01/10 750
------
31,071
------
Indiana - 4.7%
Bartholomew, Indiana Construction School Corporation, General Obligation 1,100 4.300 07/01/00 1,100
Fort Wayne, Indiana Economic Development Revenue, Series 83, weekly demand 1,000 5.125 12/01/03 1,000
Hamilton County, Indiana County Optional Income Tax Revenue, Series A 635 4.250 01/10/00 635
Hamilton County, Indiana County Optional Income Tax Revenue, Series A 205 4.250 07/10/00 205
Indiana State Development Finance Authority Revenue, weekly demand 3,500 5.500 07/01/26 3,500
Indiana State Educational Facilities Authority Revenue, weekly demand 775 5.500 10/01/19 775
Mishawaka, Indiana Waterworks Revenue Bond Anticipation Notes 1,800 4.250 08/11/00 1,800
</TABLE>
Tax Free Money Market Fund 48
<PAGE>
Tax Free Money Market Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Principal
Amounts Date Value
(000) Rate of (000)
$ $ Maturity* $
--------- ----- --------- ------
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
South Bend, Indiana Community School Corporation General Obligation, Series A 815 4.500 01/01/01 815
Whitco, Indiana Community School Corporation Tax Anticipation Warrants 1,900 4.500 12/29/00 1,904
------
11,734
------
Iowa - 1.5%
Chillicothe, Iowa Pollution Control Revenue, Series A, weekly demand 900 5.450 05/01/23 900
Storm Lake, Iowa Private College Revenue, weekly demand 2,900 5.650 12/01/03 2,900
------
3,800
------
Kansas - 0.1%
Greystone Tax-Exempt Certificate Trust Revenue, Series 1998-1, weekly
demand (e) 140 5.630 05/01/28 140
------
Kentucky - 2.2%
Jefferson County, Kentucky Industrial Building Revenue, weekly demand 1,050 5.500 01/01/19 1,050
Jefferson County, Kentucky Retirement Home Revenue, weekly demand 2,000 5.500 10/01/19 2,000
Kentucky Area Development Districts Financing Lease Program Revenue, Series
E2, weekly demand 490 5.750 12/01/31 490
Louisville, Kentucky Industrial Development Revenue, weekly demand 750 5.550 09/01/01 750
McCreary, Kentucky Industrial Building Revenue, Series B, weekly demand 1,150 5.350 04/01/13 1,150
------
5,440
------
Maryland - 3.8%
Anne Arundel County, Maryland Industrial Development Revenue, Series C,
weekly demand 2,260 5.500 02/01/01 2,260
Maryland State Economic Development Corporation Revenue, weekly demand 3,300 5.550 09/01/24 3,300
Maryland State Health & Higher Educational Facilities Authority Revenue,
weekly demand 2,790 5.550 09/01/24 2,790
Montgomery County, Maryland Industrial Development Revenue, monthly demand 930 3.850 04/01/14 930
------
9,280
------
Massachusetts - 0.2%
New England Educational Loan Marketing Corporation, Massachusetts Student
Loan Revenue, Series G 465 5.000 08/01/00 467
------
Michigan - 2.5%
Lansing, Michigan Economic Development Corporation, semiannual demand 1,885 3.850 05/01/15 1,885
Livonia, Michigan Economic Development Corporation, semiannual demand 320 4.100 11/15/04 320
McDonald Tax-Exempt Mortgage Bond Trust, thirteen month demand (d) 101 3.450 01/15/09 101
Meridian, Michigan Economic Development, monthly demand 455 3.900 11/15/14 455
Michigan State Housing Development Authority Limited Obligation Revenue,
weekly demand 1,000 5.125 06/01/04 1,000
Michigan State Job Development Authority Revenue, monthly demand 1,300 3.800 11/01/14 1,300
Northville Township, Michigan Economic Development Corporation, Limited
Obligation Revenue, Series P, weekly demand 500 5.125 05/01/14 500
Oakland County, Michigan Economic Development Corporation, Limited
Obligation Revenue, semiannual demand 625 3.800 08/01/15 625
------
6,186
------
</TABLE>
49 Tax Free Money Market Fund
<PAGE>
Tax Free Money Market Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Principal
Amounts Date Value
(000) Rate of (000)
$ $ Maturity* $
--------- ----- --------- ------
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Minnesota - 5.4%
Burnsville, Minnesota Industrial Development Revenue, Series C, weekly
demand 350 5.500 02/01/01 350
Capital Realty Investment Tax-Exempt Fund, Series 96-1, weekly demand 8,535 5.750 12/01/04 8,535
Mendota Heights, Minnesota Commercial Development, weekly demand 1,515 5.600 12/01/15 1,515
Minnesota State Revenue, Series A (a) 980 5.000 06/30/00 987
St. Paul, Minnesota Port Authority Industrial Development Revenue, Series
1, weekly demand 2,000 5.610 06/01/19 2,000
------
13,387
------
Mississippi - 0.2%
DeSoto County, Mississippi Industrial Development Revenue, weekly demand 400 5.015 12/01/08 400
------
Missouri - 6.3%
Clayton, Missouri Industrial Development Authority Revenue, weekly demand 1,000 5.200 01/01/09 1,000
Kansas City, Missouri Industrial Development Authority Multi-family Housing
Revenue, weekly demand 3,900 5.450 10/01/15 3,900
Missouri State Health & Educational Facilities Authority Revenue, daily
demand 2,200 4.850 12/01/24 2,200
Missouri State Health & Educational Facilities Authority Revenue, daily
demand 800 4.850 11/01/29 800
Missouri State Health & Educational Facilities Authority Revenue, Series A,
weekly demand 1,000 5.600 08/01/29 1,000
Missouri State Health & Educational Facilities Authority Revenue, Series B,
daily demand 1,400 4.750 10/01/24 1,400
Missouri State Health & Educational Facilities Authority School District
Advanced Funding Program Revenue, Series D 2,000 4.250 09/19/00 2,007
St. Charles County, Missouri Industrial Development Authority Revenue,
weekly demand 2,300 5.560 12/01/27 2,300
St. Louis, Missouri Industrial Development Authority Revenue, Series C,
weekly demand 965 5.500 02/01/01 965
------
15,572
------
Nevada - 1.5%
Clark County, Nevada Economic Development Revenue, weekly demand 1,545 5.600 08/01/19 1,545
Reno, Nevada Hospital Revenue, Series B (pre- refunded 01/01/00)(b) 1,065 7.750 07/01/15 1,086
Reno, Nevada Hospital Revenue, Series C (pre- refunded 01/01/00)(b) 960 7.750 07/01/15 981
Washoe County, Nevada General Obligation (a) 100 8.250 06/01/00 102
------
3,714
------
New Jersey - 0.4%
North Hudson Sewer Authority, New Jersey Tax-Exempt Notes 900 4.250 03/31/00 900
------
New York - 0.8%
Jamestown, New York Community College Regional Board of Trustees Revenue
Anticipation Notes 2,000 4.375 09/08/00 2,005
------
North Carolina - 0.6%
Beaufort County, North Carolina Industrial Facility & Pollution Control
Revenue, Series 85, weekly demand 300 5.100 12/01/00 300
North Carolina Medical Care Community Hospital Revenue, weekly demand 1,100 5.500 08/15/18 1,100
------
1,400
------
</TABLE>
Tax Free Money Market Fund 50
<PAGE>
Tax Free Money Market Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Principal
Amounts Date Value
(000) Rate of (000)
$ $ Maturity* $
--------- ----- --------- ------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ohio - 4.3%
Bellevue, Ohio Hospital Facilities Revenue, semiannual demand 330 3.700 03/01/17 330
Buckeye, Ohio Tax-Exempt Mortgage Bond Trust, semiannual demand 240 3.900 02/01/05 240
Clermont County, Ohio Economic Development Revenue, semiannual demand 400 4.000 12/01/09 400
Clermont County, Ohio Economic Development Revenue, semiannual demand 550 4.000 05/01/12 550
Clinton County, Ohio Hospital Revenue, weekly demand 1,000 5.600 06/01/28 1,000
Columbus, Ohio Electric System Revenue, monthly demand 1,300 3.600 09/01/09 1,300
East Muskingum, Ohio Water Revenue Anticipation Notes 1,000 4.320 06/22/00 1,001
Franklin County, Ohio Industrial Development Revenue, semiannual demand 130 3.850 11/01/15 130
Mahoning County, Ohio Industrial Development Revenue, Series A, weekly
demand 5 5.600 10/01/00 5
Mahoning County, Ohio Industrial Development Revenue, Series B, weekly
demand 15 5.600 10/01/00 15
McDonald Tax-Exempt Mortgage Bond Trust, thirteen month demand (d) 473 3.450 01/15/09 473
North Olmsted, Ohio Bond Anticipation Notes, Series 2 1,900 4.200 09/21/00 1,903
Ohio State Higher Educational Facilities Community College Revenue, weekly
demand 585 5.500 09/01/20 585
Scioto County, Ohio Health Care Facilities Revenue, semiannual demand 645 4.000 12/01/15 645
Stark County, Ohio Health Care Facilities, semiannual demand 1,550 3.800 09/15/16 1,550
Trumbull County, Ohio Industrial Development Revenue, Series A, weekly
demand 390 5.600 04/01/04 390
------
10,517
------
Oklahoma - 1.3%
Muskogee, Oklahoma Industrial Trust Revenue, weekly demand 1,890 5.300 12/01/15 1,890
Tulsa County, Oklahoma Industrial Authority Health Care Revenue, semiannual
demand 1,250 4.100 12/15/08 1,250
------
3,140
------
Oregon - 1.7%
Clackamas County, Oregon Hospital Facilities Authority Revenue, Series C,
weekly demand 2,000 5.600 05/15/29 2,000
Hillsboro, Oregon Revenue, weekly demand 1,750 5.500 08/01/11 1,750
Medford, Oregon Hospital Facilities Authority Revenue, weekly demand 400 5.600 05/15/27 400
------
4,150
------
Pennsylvania - 8.1%
Berks County, Pennsylvania Industrial Development Authority, weekly demand 2,450 5.125 12/01/04 2,450
Butler County, Pennsylvania Industrial Development Authority, Series B,
weekly demand 2,950 5.550 11/01/16 2,950
Chartiers Valley, Pennsylvania Industrial and Commercial Development
Revenue, Series A, weekly demand 1,000 5.550 12/01/01 1,000
Geisinger, Pennsylvania Health System Authority Revenue, Series B, daily
demand 600 4.800 08/15/28 600
Lebanon County, Pennsylvania Health Facilities Revenue, weekly demand 1,000 5.750 04/01/24 1,000
McDonald Tax-Exempt Mortgage Bond Trust, thirteen month demand (d) 101 3.450 01/15/09 101
Pennsylvania State Higher Educational Facilities Authority Revenue, Series
E3, weekly demand 5,000 5.550 11/01/14 5,000
Philadelphia, Pennsylvania Hospitals & Higher Educational Facilities
Authority Revenue, Series A-3, weekly demand 1,500 5.700 03/01/19 1,500
</TABLE>
51 Tax Free Money Market Fund
<PAGE>
Tax Free Money Market Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Principal
Amounts Date Value
(000) Rate of (000)
$ $ Maturity* $
--------- ----- --------- ------
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Philadelphia, Pennsylvania Hospitals & Higher Educational Facilities
Authority Revenue, Series B, weekly demand 3,500 5.700 06/01/14 3,500
South Fork, Pennsylvania Municipal Hospital Authority Revenue, Series B,
weekly demand 2,000 5.550 07/01/23 2,000
------
20,101
------
Puerto Rico - 0.8%
Puerto Rico Municipal Finance Agency General Obligation, Series B 2,000 5.000 08/01/00 2,012
------
South Carolina - 0.2%
Edgefield County, South Carolina School District General Obligation 565 5.750 02/01/00 566
------
Tennessee - 6.3%
Franklin County, Tennessee Health & Educational Facilities Revenue, monthly
demand 1,565 4.200 09/01/10 1,565
Greystone Tax-Exempt Certificate Trust Revenue, Series 1998-1, weekly
demand (e) 1,054 5.630 05/01/28 1,054
Jackson County, Tennessee Industrial Development Board Revenue, Series B,
daily demand 1,800 4.850 08/01/15 1,800
Knox County, Tennessee Health, Educational & Housing Facilities Board
revenue, weekly demand 7,400 5.600 05/01/29 7,400
Knox County, Tennessee Industrial Development Revenue, monthly demand 2,700 4.550 12/01/14 2,700
Tusculum, Tennessee Health, Educational & Housing Facilities Revenue,
weekly demand 1,000 5.550 07/01/15 1,000
------
15,519
------
Texas - 5.4%
Austin County, Texas Industrial Development Corporation Revenue, weekly
demand 1,980 5.650 11/01/02 1,980
Austin, Texas Utility Systems Revenue (pre-refunded 05/15/00)(b) 350 10.750 05/15/15 361
Brazos Harbor, Texas Industrial Development Corporation Revenue, monthly
demand 1,400 3.800 12/01/13 1,400
Harris County, Texas Health Facilities Development Corporation Hospital
Revenue, daily demand 2,460 4.800 12/01/25 2,460
Tarrant County, Texas Housing Finance Corporation Revenue, weekly demand 4,000 5.750 12/01/07 4,000
Texas Association of School Boards, Tax Anticipation Notes, Series A 3,062 4.500 08/31/00 3,063
------
13,264
------
Virginia - 3.1%
Chesterfield County, Virginia General Obligation, Series A (pre-refunded
01/15/00)(b) 1,000 6.7500 01/15/10 1,022
Greystone Tax-Exempt Certificate Trust Revenue, Series 1998-1, weekly
demand (e) 496 5.630 05/01/28 496
Harrisonburg, Virginia Redevelopment & Housing Authority Multi-family
Housing Revenue, annual demand 1,000 3.200 02/01/26 1,000
Harrisonburg, Virginia Redevelopment & Housing Authority Multi-family
Housing Revenue, Series A, annual demand 3,495 3.200 02/01/26 3,495
Henrico County, Virginia Industrial Development Authority Revenue, Series C
(pre-refunded 08/01/00)(b) 645 7.500 09/01/07 671
Norfolk, Virginia Industrial Development Authority Revenue, weekly demand 1,075 5.125 03/01/16 1,075
------
7,759
------
</TABLE>
Tax Free Money Market Fund 52
<PAGE>
Tax Free Money Market Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Principal
Amounts Date Value
(000) Rate of (000)
$ $ Maturity* $
--------- ----- --------- ------
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Washington - 4.6%
Seattle, Washington Municipality Metropolitan Seattle Sewer Revenue, Series
U (pre-refunded 01/01/01)(a)(b) 2,600 6.600 01/01/32 2,717
Washington State Economic Development Finance Authority Revenue, Series H,
daily demand 2,235 4.800 09/01/18 2,235
Washington State Housing Finance Commission Nonprofit Revenue, daily demand 685 4.850 07/01/11 685
Washington State Housing Finance Commission Nonprofit Revenue, daily demand 190 5.900 08/01/19 190
Washington State Housing Finance Commission Nonprofit Revenue, daily demand 1,400 4.850 01/01/21 1,400
Washington State Housing Finance Commission Nonprofit Revenue, daily demand 400 5.100 01/01/27 400
Washington State Housing Finance Commission Nonprofit Revenue, daily demand 200 5.100 05/01/27 200
Washington State Housing Finance Commission Nonprofit Revenue, weekly demand 1,200 5.600 08/01/24 1,200
Washington State Public Power Supply System Nuclear Project Number 1
Revenue, Series A (pre-refunded 07/01/00)(a)(b) 1,300 7.000 07/01/11 1,347
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 1,020
------
11,394
------
West Virginia - 0.4%
Marshall County, West Virginia Pollution Control Revenue, weekly demand 1,000 5.500 03/01/26 1,000
------
Wisconsin - 6.8%
Altoona, Wisconsin School District Tax & Revenue Anticipation Notes 1,000 4.125 10/27/00 1,000
Green Bay, Wisconsin Industrial Development Revenue, weekly demand 1,345 5.500 07/01/13 1,345
Jefferson, Wisconsin School District Tax & Revenue Anticipation Promisory
Notes 1,100 4.020 09/08/00 1,101
Lac du Flambeau, Wisconsin School District Number 1 Tax & Revenue
Anticipation Promisory Notes 700 4.170 07/28/00 701
Northern Ozaukee School District, Wisconsin Bond Anticipation Notes 1,500 3.400 02/01/00 1,500
Slinger, Wisconsin School District Tax & Revenue Anticipation Promisory
Notes 1,400 4.040 09/27/00 1,400
Sturgeon Bay, Wisconsin School District Tax & Revenue Anticipation
Promisory Notes 1,100 4.230 10/27/00 1,101
Weyauwega-Freemont, Wisconsin School District Tax & Revenue Anticipation
Notes 1,800 4.170 08/25/00 1,801
Wisconsin State Health & Educational Facilities Authority Revenue, Series
A, weekly demand 5,000 5.450 10/01/29 5,000
Wisconsin State Health & Educational Facilities Authority Revenue, Series B
(pre-refunded 06/01/00)(a)(b) 1,800 7.000 06/01/20 1,861
------
16,810
------
</TABLE>
53 Tax Free Money Market Fund
<PAGE>
Tax Free Money Market Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Principal
Amounts Date Value
(000) Rate of (000)
$ $ Maturity* $
--------- ----- --------- ------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Wyoming - 0.2%
Sweetwater County, Wyoming School District Number 2, General Obligation 450 4.000 06/01/00 450
-------
Total Investments - 106.1% (amortized cost $261,749)(c) 261,749
-------
Other Assets and Liabilities, Net - (6.1%) (15,054)
Net Assets - 100.0% 246,695
=======
</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 Arkansas, Florida, Georgia, Kansas,
Tennessee, and Virginia.
See accompanying notes which are an integral part of the financial statements.
Tax Free Money Market Fund 54
<PAGE>
Tax Free Money Market Fund
Statement of Net Assets, continued
December 31, 1999
Quality Ratings as a % of Market Value++ (Unaudited)
VMIG1 or SP-1 63%
P1 37
---
100%
===
Economic Sector Emphasis as a % of Market Value (Unaudited)
Education Revenue 21%
General Obligation 21
Housing Revenue 20
Industrial Revenue Bonds 17
Healthcare Revenue 13
Pollution Control Revenue 6
Utility Revenue 2
---
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.
55 Tax Free Money Market Fund
<PAGE>
Tax Free Money Market Fund
Statement of Assets and Liabilited
Amounts in thousands (except per share amounts) December 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at amortized cost which approximates market ........ $261,749
Cash ........................................................... 119
Interest receivable ............................................ 1,767
Prepaid expenses ............................................... 56
--------
Total assets ............................................. 263,691
Liabilities
Payables:
Dividends ................................................... $ 224
Investments purchased ....................................... 16,722
Accrued fees to affiliates .................................. 16
Other accrued expenses ...................................... 34
--------
Total liabilities ........................................ 16,996
--------
Net Assets ..................................................... $246,695
========
Net Assets Consist of:
Accumulated net realized gain (loss) ........................... $ 7
Shares of beneficial interest .................................. 2,467
Additional paid-in capital ..................................... 244,221
--------
Net Assets ..................................................... $246,695
========
Net Asset Value, offering and redemption price per share:
($246,695,365 divided by 246,688,208 shares of $.01 par value
shares of beneficial interest outstanding) ............... $ 1.00
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Tax Free Money Market Fund 56
<PAGE>
Tax Free Money Market Fund
Statement of Operations
Amounts in thousands Year Ended December 31, 1999
Investment Income
Interest ........................................ $6,855
Expenses
Advisory fees ................................... $ 393
Administration Fees ............................. 98
Custodian fees .................................. 18
Transfer agent fees ............................. 26
Professional fees ............................... 15
Registration fees ............................... 47
Trustees' fees .................................. 5
Miscellaneous ................................... 14
-----
Expenses before reductions ...................... 616
Expense reductions .............................. (197)
-----
Expenses, net ................................ 419
------
Net investment income .............................. 6,436
------
Net Realized Gain (Loss)
Net realized gain (loss) on investments ............ 12
------
Net increase in net assets from operations ......... $6,448
======
See accompanying notes which are an integral part of the financial statements.
57 Tax Free Money Market Fund
<PAGE>
Tax Free Money Market Fund
Amounts in thousands Year Ended December 31,
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ....................................... $ 6,436 $ 5,654
Net realized gain (loss) .................................... 12 (5)
--------- ---------
Net increase in net assets from operations ............... 6,448 5,649
--------- ---------
Distributions
From net investment income .................................. (6,436) (5,654)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions 52,020 63,943
--------- ---------
Total net increase (decrease) in net assets .................... 52,032 63,938
Net Assets
Beginning of period ......................................... 194,663 130,725
--------- ---------
End of period ............................................... $ 246,695 $ 194,663
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Tax Free Money Market Fund 58
<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
---------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ----------- ---------- ---------
Income From Operations
Net investment income .................. .0326 .0331 .0355 .0329 .0370
---------- ---------- ----------- ---------- ---------
Distributions
From net investment income ............. (.0326) (.0331) (.0355) (.0329) (.0370)
---------- ---------- ----------- ---------- ---------
Net Asset Value, End of Period ............ $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========== ========== =========== ========== =========
Total Return (%)(a) ....................... 3.31 3.36 3.61 3.35 3.76
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 246,695 194,663 130,725 102,207 78,000
Ratios to average net assets (%)(a):
Operating expenses, net (b) ......... .21 .34 .28 .42 .48
Operating expenses, gross (b) ....... .31 .44 .38 .42 .48
Net investment income ............... 3.28 3.29 3.55 3.28 3.69
</TABLE>
(a) 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.
(b) See Note 4 for current period amounts.
59 Tax Free Money Market Fund
<PAGE>
Frank Russell Investment Company
Tax-Managed Funds
Notes to Financial Statements
December 31, 1999
1. Organization
Frank Russell Investment Company (the "Investment Company") is a series
mutual fund with 29 different investment portfolios, (one of which has not
yet commenced operations) referred to as "Funds." These financial
statements report on four 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 August 9, 1999, the Investment Company's Board of
Trustees approved a plan to rename the "Equity T Fund" the "Tax-Managed
Large Cap Fund." The change was approved by the shareholders at a meeting
on August 9, 1999 and became effective November 1, 1999.
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.
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 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.
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.
Notes to Financial Statements 60
<PAGE>
Frank Russell Investment Company
Tax-Managed Funds
Notes to Financial Statements, continued
December 31, 1999
It is each Fund's intention to qualify as a regulated investment company
and distribute all of its taxable income and capital gains. Therefore, no
federal income tax provision was required for the Funds. From November 1,
1999 to December 31, 1999, the Funds listed below incurred net realized
capital losses. As permitted by tax regulations, these Funds have elected
to defer these losses and treat them as arising in the year ended December
31, 2000.
Deferred Net
Realized Capital
Losses
----------------
Tax-Managed Large Cap $1,464,158
Tax-Managed Small Cap 45,987
Tax Exempt Bond 1,099,124
At December 31, 1999, 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 12/31/07 Totals
-------- -------- -------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Tax-Managed Large Cap $ -- $ -- $ -- $ -- $ (655,350) $ (716,802) $ (1,372,152)
Tax Exempt Bond (345,504) (110,634) (15,075) -- (141,152) (399,027) (1,011,392)
</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 December 31, 1999 were as follows:
<TABLE>
<CAPTION>
Gross Gross Net Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
----------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
Tax-Managed Large Cap $ 424,635,497 $ 163,531,193 $ (26,123,815) $ 137,407,378
Tax-Managed Small Cap 26,961,556 2,176,190 (464,989) 1,711,201
Tax Exempt Bond 128,393,844 195,236 (2,707,064) (2,511,828)
</TABLE>
Redemption fees: In general, shares of the Tax-Managed Large Cap Fund may
be redeemed at net asset value. Prior to May 1, 1999 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 was 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. As of May 1, 1999, the
redemption fee no longer exists. 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 Tax-Managed Large Cap Fund and the Tax-Managed Small Cap
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, forward
contracts, passive foreign investment companies, foreign-denominated
investments, mortgage-backed securities, certain securities sold at a loss
and by recording gains and losses from securities transactions on the
basis of specific identified cost incurred by each money manager for
financial reporting purposes and on the basis of specific identified cost
incurred by each Fund for tax purposes.
61 Notes to Financial Statements
<PAGE>
Frank Russell Investment Company
Tax-Managed Funds
Notes to Financial Statements, continued
December 31, 1999
The following reclassifications have been made to reflect activity for the
year ended December 31, 1999:
<TABLE>
<CAPTION>
Undistributed Accumulated
Net Investment Net Realized Additional
Income Gain (Loss) Paid-in Capital
------------- ------------ ---------------
<S> <C> <C> <C>
Tax-Managed Large Cap $ 110,226 $ -- $(110,226)
Tax Exempt Bond -- 383,404 (383,404)
</TABLE>
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.
Deferred organization expenses: Organization costs of the Tax-Managed
Large Cap Fund have been deferred and are being amortized over 60 months
on a straight-line basis.
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 Tax-Managed Large Cap Fund and the Tax-Managed
Small Cap Fund utilize 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 year ended December 31, 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
------------ ------------
Tax-Managed Large Cap $375,918,148 $200,558,704
Tax-Managed Small Cap 22,635,473 780,856
Tax Exempt Bond 168,206,682 176,539,632
Tax Free Money Market purchases, sales and maturities of short-term tax-
exempt obligations were $624,494,237, $509,272,559 and $54,925,000,
respectively.
Notes to Financial Statements 62
<PAGE>
Frank Russell Investment Company
Tax-Managed Funds
Notes to Financial Statements
December 31, 1999
4. Related Parties
Advisor and Administrator: FRIMCo advises and administers all of the Funds
which comprise the Investment Company. FRIMCo is 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.
The Tax-Managed Large Cap Fund and the Tax-Managed Small Cap Fund 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 December 31, 1999,
$27,695,000 of the Money Market Fund's net assets represents investments
by these Funds and $922,275,000 represents the investments of other
affiliated Funds not presented herein.
The advisory and administrative fees, which are based upon the average
daily net assets of each Fund and the rates specified in the table below,
are payable monthly and aggregated $3,805,690 and $383,118, respectively,
for the year ended December 31, 1999. FRIMCo reduces its advisory fees for
each Fund by advisory fees incurred on assets invested in the Money Market
Fund or the Tax Free Money Market Fund thereby eliminating any duplication
of fees.
Annual Rate
-----------------------------
Advisor Administrator
------- -------------
Tax-Managed Large Cap 0.70% 0.05%
Tax-Managed Small Cap 0.98 0.05
Tax Exempt Bond 0.30 0.05
Tax Free Money Market 0.20 0.05
The Advisor has contractually agreed to waive up to the full amount of its
1.03% combined advisory and administrative fees for the Tax-Managed Small
Cap Fund, and to reimburse the Fund to the extent that Fund level expenses
exceed 1.25% of the Fund's average daily net assets on an annual basis.
The total amount of the waiver for the year ended December 31, 1999 was
$18,535. The total amount of the reimbursement for the year ended December
31, 1999 was $101,811.
The Advisor has contractually agreed to waive 0.10% of its 0.25% of its
combined advisory and administrative fees for the Tax Free Money Market
Fund. The amount of such waiver for the year ended December 31, 1999 was
$196,504.
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 thereby eliminating any duplication of fees.
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 reported
herein for the year ended December 31, 1999 were $253,920.
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.
63 Notes to Financial Statements
<PAGE>
Frank Russell Investment Company
Tax-Managed Funds
Notes to Financial Statements
December 31, 1999
Board of Trustees: The Investment Company pays each of its Trustees not
affiliated with FRIMCo a retainer of $30,000 per year plus out-of-pocket
expenses. Total Trustee expenses for the Funds reported herein for the
year ended December 31, 1999 were $16,804, and were allocated to each
Fund, where appropriate, on a pro rata basis, including 24 other
affiliated Funds not presented herein.
5. Fund Share Transactions
Share transactions for the year ended December 31, 1999 and year ended
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Shares Dollars (000)
--------------------------- ----------------------------
Tax-Managed Large Cap Fund 1999 1998 1999 1998
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Class S
Proceeds from shares sold 12,066,862 10,018,318 $ 237,975 $ 157,138
Proceeds from reinvestment
of distributions 121,536 66,849 2,510 1,142
Payments for shares redeemed (2,179,216) (1,253,400) (43,064) (19,677)
---------- ---------- ----------- -----------
Net increase (decrease) 10,009,182 8,831,767 $ 197,421 $ 138,603
---------- ---------- ----------- -----------
Class C (a)
Proceeds from shares sold 16,790 -- $ 350 $ --
Proceeds from reinvestment
of distributions 54 -- 1 --
Payments for shares redeemed (2,291) -- (48) --
---------- ---------- ----------- -----------
Net increase (decrease) 14,553 -- $ 303 $ --
---------- ---------- ----------- -----------
Total net increase (decrease) 10,023,735 8,831,767 $ 197,724 $ 138,603
========== ========== =========== ===========
Tax-Managed Small Cap Fund
Class S (a)
Proceeds from shares sold 2,756,585 -- $ 27,852 $ --
Proceeds from reinvestment
of distributions -- -- -- --
Payments for shares redeemed (48,728) -- (488) --
---------- ---------- ----------- -----------
Net increase (decrease) 2,707,857 -- $ 27,364 $ --
---------- ---------- ----------- -----------
Class C (a)
Proceeds from shares sold 23,465 -- $ 240 $ --
Proceeds from reinvestment
of distributions -- -- -- --
Payments for shares redeemed (2,761) -- (29) --
---------- ---------- ----------- -----------
Net increase (decrease) 20,704 -- $ 211 $ --
---------- ---------- ----------- -----------
Total net increase (decrease) 2,728,561 -- $ 27,575 $ --
========== ========== =========== ===========
</TABLE>
Notes to Financial Statements 64
<PAGE>
Frank Russell Investment Company
Tax-Managed Funds
Notes to Financial Statements
December 31, 1999
<TABLE>
<CAPTION>
Shares Dollars (000)
---------------------------------------------------------
Tax Exempt Bond Fund 1999 1998 1999 1998
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Class S
Proceeds from shares sold 4,520,673 3,941,290 $ 95,714 $ 83,966
Proceeds from reinvestment
of distributions 211,531 140,598 4,417 2,994
Payments for shares redeemed (4,689,527) (1,973,744) (98,546) (42,054)
--------- --------- ---------- ----------
Net increase (decrease) 42,677 2,108,144 $ 1,585 $ 44,906
--------- --------- ---------- ----------
Class E (a)
Proceeds from shares sold 292,005 -- $ 6,103 $ --
Proceeds from reinvestment
of distributions 626 -- 13 --
Payments for shares redeemed (153,223) -- (3,153) --
--------- --------- ---------- ----------
Net increase (decrease) 139,408 -- $ 2,963 $ --
--------- --------- ---------- ----------
Class C (b)
Proceeds from shares sold 34,719 -- $ 722 $ --
Proceeds from reinvestment
of distributions 320 -- 7 --
Payments for shares redeemed (11,856) -- (243) --
--------- --------- ---------- ----------
Net increase (decrease) 23,183 -- $ 486 $ --
--------- --------- ---------- ----------
Total net increase (decrease) 205,268 2,108,144 $ 5,034 $ 44,906
========= ========= ========== ==========
</TABLE>
On a Constant Dollar Basis (000)
--------------------------------
Tax Free Money Market Fund 1999 1998
------- -------
Proceeds from shares sold 486,976 367,890
Proceeds from reinvestment
of distributions 4,433 3,258
Payments for shares redeemed (439,389) (307,205)
-------- --------
Total net increase (decrease) 52,020 63,943
======== ========
(a) Share transactions for Class E are for the period May 14, 1999
(commencement of sale of shares) to December 31, 1999.
(b) Share transactions for Class C are for the period March 29, 1999
(commencement of sale of shares) to December 31, 1999.
6. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $75
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .10% on the average daily unused amount of the
aggregate commitment, which is allocated among each of the Participants.
Interest, at the Federal Fund Rate plus .50% annually (Federal Fund Rate
plus 1.75% prior to and including February 27, 2000), is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up
to a maximum of 10 percent of the value of its net assets under the
agreement. The agreement will expire December 30, 2000. The Fund did not
have any drawdowns during the year.
65 Notes to Financial Statements
<PAGE>
Frank Russell Investment Company
Tax-Managed Funds
Notes to Financial Statements
December 31, 1999
7. Dividends
On February 1, 2000, the Board of Trustees declared the following dividend
from net investment income payable on February 4, 2000 to shareholders of
record on February 2, 2000:
Class S Class E Class C
-----------------------------------
Tax Exempt Bond Fund $0.0663 $0.0627 $0.0504
8. Beneficial Interest
As of December 31, 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:
% % %
---- ---- ----
Tax-Managed Large Cap - Class S 23.3 -- --
Tax-Managed Small Cap - Class S 29.8 10.2 --
Tax-Managed Small Cap - Class C 10.4 -- --
Tax Exempt Bond - Class E 17.9 11.8 --
Tax Exempt Bond - Class C 31.7 25.4 21.1
Tax Free Money Market 22.1 -- --
Notes to Financial Statements 66
<PAGE>
Report of Independent Accountants
To the Board of Trustees and Shareholders
of Frank Russell Investment Company:
In our opinion, the accompanying statements of assets and liabilities, including
the statements of net assets, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the series of Frank Russell
Investment Company (in this report comprised of Tax-Managed Large Cap,
Tax-Managed Small Cap, Tax Exempt Bond, and Tax Free Money Market (the "Funds"))
at December 31, 1999, and the results of each of their operations, the changes
in each of their net assets and the financial highlights for the periods
indicated therein, in conformity with generally accepted accounting principles
in the United States. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Funds' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards in
the United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Seattle, Washington
February 16, 2000
67 Report of Independent Accountants
<PAGE>
Frank Russell Investment Company
909 A Street, Tacoma, Washington 98402
(800) 932-6688
In Washington (253) 627-7001
Trustees
Lynn L. Anderson, Chairman
Paul E. Anderson
Paul Anton, PhD
William E. Baxter
Lee C. Gingrich
Eleanor W. Palmer
Trustees Emeritus
George F. Russell, Jr.
Officers
Lynn L. Anderson, Chairman of the Board and President
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
Allan Forbes Building
150 Newport Avenue AFB35
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 Fourth Avenue Plaza
Suite 4200
Seattle, WA 98154
Distributor
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
Money Managers Tax-Managed Large Cap Fund
J.P. Morgan Investment Management, Inc., New York, NY
Tax-Managed Small Cap Fund
Geewax, Terber & Company, Phoenixville, PA
Tax Exempt Bond Fund
MFS 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.
Manager, Money Managers and Service Providers 68
<PAGE>
- --------------
[LOGO] Russell
- --------------
Frank Russell Investment Company
909 A Street
Tacoma, WA 98402-5120
253-627-7001
800-972-0700
Fax: 253-591-3495
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
1999 Annual Report
CLASS S SHARES
MONEY MARKET FUND
US GOVERNMENT MONEY MARKET FUND
TAX FREE MONEY MARKET FUND
DECEMBER 31, 1999
--------------
[LOGO] Russell
--------------
<PAGE>
Frank Russell Investment
Company
Frank Russell Investment Company is a "series mutual
fund" with 29 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
Annual Report
December 31, 1999
Table of Contents
Page
Letter to Our Clients.................................................... 2
Money Market Fund........................................................ 3
U.S. Government Money Market Fund........................................ 11
Tax Free Money Market Fund............................................... 17
Notes to Financial Statements............................................ 30
Report of Independent Accountants........................................ 33
Manager, Money Managers and Service Providers............................ 34
Frank Russell Investment Company - Money Market Funds
Copyright (c) Frank Russell Company 2000. 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 U.S. government. There can be no assurances 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>
To Our Clients
We are pleased to present the Frank Russell Investment Company 1999 Annual
Report. This report covers information on three of the Funds and represents our
eighteenth year in operation.
We remain committed to providing our clients with superior investment solutions
through the benefits of multi-manager, multi-style diversification used in
structuring our Funds. The commitment proved worthwhile in 1999, as our Funds,
in general, provided solid returns as compared to their respective benchmarks
and attracted many new investors, both creating significant growth in assets.
Frank Russell Investment Management Company (FRIMCo) continuously evaluates the
Funds we offer our clients. Each of these Funds is carefully monitored by
Russell investment professionals to ensure that the most appropriate investment
advisors and strategies are utilized within each Fund. The advisors are
monitored by FRIMCo using the expertise and advice of the Investment Policy and
Research group of Frank Russell Company.
Since the close of 1998 we have implemented changes in our Funds' structure
which we believe will benefit current and potential investors. The Russell Funds
and the LifePoints(R) Funds both added Class C shares during 1999, and the
Russell Institutional Funds opened Class E shares for investment in May 1999.
Additionally, the Tax-Managed Small Cap Fund was opened for investment in
November 1999, providing a small cap alternative to the existing tax-managed
Russell Funds.
Thank you for your continued confidence and investment with Frank Russell
Investment Company. We look forward to 2000 and continuing to earn your support.
Sincerely,
/s/ Lynn L. Anderson /s/ Eric A. Russell
Lynn L. Anderson. Eric A. Russell
Chairman of the Board President
Frank Russell Investment Company Frank Russell Investment Management Company
<PAGE>
Money Market Fund
Statement of Net Assets
December 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------- ---------- -----------
<S> <C> <C> <C> <C>
Corporate Bonds and Notes - 32.8%
American Express Centurion Bank (a) 20,000 5.720 06/08/00 20,000
American Express Centurion Bank (a) 25,000 5.750 07/12/00 25,000
American Express Centurion Bank (a) 10,000 5.750 07/13/00 10,000
Bank of America (a) 50,000 5.750 02/09/00 50,000
Barclays Bank PLC (a) 40,000 5.750 01/18/00 40,000
Chase Manhattan Corp. (a) 5,000 6.465 11/02/00 5,010
FCC National Bank 30,000 5.550 01/18/00 30,000
First National Bank of Chicago 20,000 5.485 06/05/00 19,997
First Union Corp. (a) 25,000 5.730 06/26/00 24,999
General Electric Capital Corp. (a) 30,000 6.126 04/12/00 30,000
Gien Raven MLS, Inc. (a) 40,000 6.490 05/01/14 40,000
Grantor Trust Series 1996-2 (a) 7,119 6.570 12/23/06 7,119
Grantor Trust Series 1997-11 (a) 34,174 6.115 12/01/04 34,174
Grantor Trust Series 1998 - T67 (a) 20,093 6.115 07/01/04 20,093
Gulf States Paper Corp. Series 1998 (a) 40,000 6.490 11/01/18 40,000
Illinois Educational Facilities Authority Revenues (a) 45,300 6.900 07/01/24 45,300
Morgan (J.P.) & Co., Inc. 25,000 5.030 02/07/00 25,000
Morganite Industries Series 1998-A (a) 50,000 6.490 07/01/18 50,000
Presbyterian Homes & Services Series B2 (a) 21,955 6.850 12/01/28 21,955
Strategic Money Market Trust Series 1999-B 35,000 5.449 03/15/00 35,000
Toyota Motor Credit Corp. 15,000 5.770 07/06/00 15,000
Weyerhaeuser Notes 75,000 6.335 02/01/00 75,000
---------
Total Corporate Bonds and Notes (cost $663,647) 663,647
---------
Yankee Certificates of Deposit - 22.2%
Bank of Nova Scotia 25,000 5.120 02/16/00 24,999
Bank of Nova Scotia 20,000 5.400 06/01/00 19,997
Bayerische Hypo-Und Vereinsbank AG 25,000 5.270 05/22/00 24,994
Bayerische Hypo-Und Vereinsbank AG 25,000 5.350 05/22/00 24,994
Commerzbank AG 25,000 5.090 02/16/00 24,999
Commerzbank AG 25,000 5.160 02/25/00 24,999
Commerzbank AG 20,000 5.295 05/19/00 19,996
Commerzbank AG 20,000 5.640 06/15/00 19,997
Credit Suisse First Boston, Inc. 20,000 5.600 01/25/00 20,000
Credit Suisse First Boston, Inc. (a) 30,000 5.720 06/07/00 30,000
Credit Suisse First Boston, Inc. (a) 25,000 5.740 06/09/00 25,000
Deutsche Bank AG 10,000 5.000 01/06/00 10,000
Deutsche Bank AG 10,000 5.060 02/08/00 10,000
Deutsche Bank AG 25,000 5.250 05/18/00 24,995
Deutsche Bank AG 15,000 5.570 06/12/00 14,997
Toronto Dominion 25,000 6.200 01/21/00 25,000
UBS AG 20,000 5.410 06/01/00 19,997
UBS AG 10,000 5.600 06/26/00 9,994
UBS AG 25,000 5.660 06/26/00 24,995
Westdeutcshe Landesbank Girozentrale 30,000 5.180 01/19/00 29,981
Westpac Banking Corp. 20,000 5.200 03/01/00 19,999
---------
Total Yankee Certificates of Deposit (cost $449,933) 449,933
---------
</TABLE>
3 Money Market Fund
<PAGE>
Money Market Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------- ---------- -----------
<S> <C> <C> <C> <C>
Domestic Commercial Paper - 40.9%
Associates Corp. of North America 25,000 6.375 06/15/00 25,100
Bavaria TRR Corp. 11,150 5.800 02/11/00 11,076
Bavaria TRR Corp. 20,000 5.920 03/17/00 19,750
Blue Square Funding Ltd. 25,000 5.980 02/28/00 25,000
Centric Capital Corp. 25,000 5.000 01/05/00 24,986
Citibank Capital Markets 25,000 5.780 02/15/00 24,819
CSN Overseas Barclays Bank 10,775 5.970 03/01/00 10,668
Dresdner U.S. Finance 25,000 6.000 02/08/00 24,843
General Electric Capital Corp. 25,000 5.980 02/11/00 24,830
General Electric Capital Services, Inc. 25,000 5.410 01/24/00 24,914
General Electric Capital Services, Inc. 25,000 5.430 01/24/00 24,913
General Motors Acceptance Corp. (a) 25,000 5.770 03/13/00 25,000
General Motors Acceptance Corp. (a) 25,000 5.770 03/14/00 25,001
General Motors Acceptance Corp. (a) 25,000 5.770 03/17/00 25,000
General Motors Acceptance Corp. (a) 15,000 5.770 03/30/00 15,000
ING America Insurance Holdings 25,000 5.840 05/03/00 24,502
Intrepid Funding Master Trust 25,000 5.820 03/13/00 24,709
Intrepid Funding Treasury 20,000 5.700 02/10/00 19,873
Intrepid Funding Treasury 21,736 5.800 02/24/00 21,547
Irish Permanent Treasury 25,000 5.930 02/09/00 24,839
Irish Permanent Treasury 15,000 5.990 02/10/00 14,900
Irish Permanent Treasury 20,000 5.930 02/14/00 19,855
Irish Permanent Treasury 17,775 5.980 02/14/00 17,645
Irish Permanent Treasury 25,000 5.900 03/08/00 24,725
Jefferson-Pilot Corp. 10,000 5.460 02/07/00 9,944
Jefferson-Pilot Corp. 20,000 5.775 02/16/00 19,852
KMS Corporation 15,000 6.050 01/24/00 14,942
KMS Corporation 30,000 5.930 04/06/00 29,526
Merrill Lynch & Co., Inc. 25,000 6.000 02/04/00 24,858
Morgan (J.P.) & Co., Inc. 20,000 5.440 02/03/00 19,900
Norwest Financial, Inc. (a) 50,000 5.675 07/07/00 49,966
Parthenon Receivables 15,564 7.000 01/20/00 15,506
Parthenon Receivables 25,517 5.910 01/25/00 25,416
Parthenon Receivables 25,000 5.780 02/10/00 24,839
Parthenon Receivables 20,000 5.710 02/14/00 19,860
Stellar Funding Group 14,311 7.250 01/19/00 14,259
Westways Funding III Ltd. 20,494 6.350 01/13/00 20,451
Westways Funding III Ltd. 15,787 6.350 01/19/00 15,737
---------
Total Domestic Commercial Paper (cost $828,551) 828,551
---------
Eurodollar Time Deposits - 2.2%
Canadian Imperial Bank 19,674 4.750 01/03/00 19,674
Erste Bank 25,000 5.500 01/03/00 25,000
---------
Eurodollar Time Deposits (cost $44,674) 44,674
---------
</TABLE>
Money Market Fund 4
<PAGE>
Money Market Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------- ---------- -----------
<S> <C> <C> <C> <C>
United States Government Agencies - 1.0%
Aid To Chile Guaranteed Note (LIBOR Floater)(a) 9,729 6.366 06/01/05 9,735
Aid To INH Portugal Guaranteed Note (LIBOR Floater)(a) 11,250 6.366 12/01/17 11,422
---------
Total United States Government Agencies (cost $21,157) 21,157
---------
Total Investments - 99.1% (amortized cost $2,007,962)(b) 2,007,962
Other Assets and Liabilities, Net - 0.9% 18,755
---------
Net Assets - 100.0% 2,026,717
=========
</TABLE>
* The interest rate for all securities with a maturity date 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 indentified cost for federal income tax purposes is the same as shown
above.
Abbreviations:
LIBOR - London Interbank Offered Rate
See accompanying notes which are an integral part of the financial statements.
5 Money Market Fund
<PAGE>
Money Market Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amounts) December 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at amortized cost which approximates market .................... $ 2,007,962
Interest receivable: ....................................................... 24,717
Prepaid expenses ........................................................... 4
-----------
Total assets ........................................................ 2,032,683
Liabilities
Payables:
Dividends .................................................. $ 5,592
Accrued fees to affiliates ................................. 264
Other accrued expenses ..................................... 110
--------
Total liabilities ................................................... 5,966
-----------
Net Assets ................................................................. $ 2,026,717
===========
Net Assets Consist of:
Accumulated net realized gain (loss) ....................................... $ (21)
Shares of beneficial interest .............................................. 20,267
Additional paid-in capital ................................................. 2,006,471
-----------
Net Assets ................................................................. $ 2,026,717
===========
Net Asset Value, offering and redemption price per share:
($2,026,717,347 divided by 2,026,738,726 shares of
$.01 par value shares of beneficial interest outstanding) .............. $ 1.00
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Money Market Fund 6
<PAGE>
Money Market Fund
Statement of Operations
Amounts in thousands Year ended December 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Interest ............................................................... $ 108,659
Expenses
Advisory fees .............................................. $ 4,087
Administrative fees ........................................ 1,022
Custodian fees ............................................. 588
Transfer agent fees ........................................ 612
Professional fees .......................................... 20
Registration fees .......................................... 123
Trustees' fees ............................................. 5
Miscellaneous .............................................. 49
--------
Expenses before reductions ................................. 6,506
Expense reductions ......................................... (3,065)
--------
Expenses, net ....................................................... 3,441
-----------
Net investment income ...................................................... 105,218
-----------
Net Realized Gain (Loss)
Net realized gain (loss) on investments .................................... (18)
-----------
Net increase in net assets from operations ................................. $ 105,200
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
7 Money Market Fund
<PAGE>
Money Market Fund
Statement of Changes in Net Assets
Amounts in thousands
<TABLE>
<CAPTION>
Years ended December 31,
1999 1998
------------ ------------
Increase (Decrease) in Net Assets
<S> <C> <C>
Operations
Net investment income .............................. $ 105,218 $ 60,214
Net realized gain (loss) ........................... (18) (3)
------------ ------------
Net increase in net assets from operations ...... 105,200 60,211
------------ ------------
Distributions
From net investment income ......................... (105,218) (60,214)
------------ ------------
Share Transactions
Net increase (decrease) in net assets from share
transactions .................................... 421,709 678,746
------------ ------------
Total net increase (decrease) in net assets ............ 421,691 678,743
Net Assets
Beginning of period ................................ 1,605,026 926,283
------------ ------------
End of period ...................................... $ 2,026,717 $ 1,605,026
============ ============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Money Market Fund 8
<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
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ....... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ----------
Income From Operations
Net investment income .................. .0515 .0553 .0563 .0549 .0601
---------- ---------- ---------- ---------- ----------
Distributions
From net investment income ............. (.0515) (.0553) (.0563) (.0549) (.0601)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ............. $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========== ========== ========== ========== ==========
Total Return (%)(a) ........................ 5.27 5.69 5.79 5.63 6.19
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 2,026,717 1,605,026 926,283 496,932 533,643
Ratios to average net assets (%)(a):
Operating expenses, net (b) ......... .17 .16 .08 .05 .06
Operating expenses, gross (b) ....... .32 .31 .30 .30 .26
Net investment income ............... 5.15 5.54 5.65 5.49 6.01
</TABLE>
(a) 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.
(b) See Note 4 for current period amounts.
9 Money Market Fund
<PAGE>
U.S. Government Money Market Fund
Statement of Net Assets
December 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------- ---------- -----------
<S> <C> <C> <C> <C>
United States Government Agencies - 88.5%
Aid to Chile Guaranteed Note (LIBOR Floater)(a) 4,571 6.366 06/01/05 4,574
Aid to Sri Lanka Guaranteed Note (LIBOR Floater)(a) 3,125 6.366 06/15/12 3,152
Federal Farm Credit Bank (a) 10,000 5.560 06/22/00 9,998
Federal Home Loan Bank Bonds 3,000 5.975 01/06/00 3,000
Federal Home Loan Bank Bonds 10,000 4.950 02/17/00 9,999
Federal Home Loan Bank Bonds 8,000 4.950 02/24/00 7,989
Federal Home Loan Bank Bonds 5,000 5.050 03/03/00 4,996
Federal Home Loan Bank Bonds 2,060 5.080 03/03/00 2,056
Federal Home Loan Bank Bonds 3,420 5.160 03/08/00 3,415
Federal Home Loan Bank Bonds 1,000 5.140 03/17/00 998
Federal Home Loan Bank Bonds 1,000 6.495 04/03/00 1,001
Federal Home Loan Bank Bonds 1,000 5.000 04/14/00 997
Federal Home Loan Bank Bonds 2,000 5.100 05/11/00 1,993
Federal Home Loan Bank Bonds 3,000 5.150 05/19/00 2,999
Federal Home Loan Bank Bonds 2,250 5.550 08/17/00 2,245
Federal National Mortgage Association 5,000 4.830 01/11/00 5,000
Federal National Mortgage Association 5,000 6.100 02/10/00 5,001
Federal National Mortgage Association 2,000 6.250 03/20/00 2,002
Federal National Mortgage Association 11,052 4.970 04/12/00 11,027
Federal National Mortgage Association 1,655 5.650 04/28/00 1,654
Federal National Mortgage Association 7,000 5.770 05/19/00 6,848
Federal National Mortgage Association 11,090 5.100 05/19/00 11,062
Federal National Mortgage Association 10,035 5.900 07/06/00 10,025
Federal National Mortgage Association (a) 10,000 5.620 08/09/00 9,997
Federal National Mortgage Association 4,500 5.490 08/18/00 4,489
Federal National Mortgage Association 5,500 5.140 11/16/00 5,456
Federal National Mortgage Association Debenture Strip 5,005 4.627 02/07/00 4,981
Federal National Mortgage Association Discount Notes 10,000 5.650 03/30/00 9,860
Federal National Mortgage Association Discount Notes 12,414 5.770 06/29/00 12,056
Nebraska Higher Education Loan Program, Inc. (b) 6,682 6.100 01/21/00 6,659
Student Loan Marketing Association 2,750 7.500 03/08/00 2,759
---------
Total United States Government Agencies 168,288
---------
Total Investments - 88.5% (amortized cost $168,288) 168,288
---------
</TABLE>
See accompanying notes which are an integral part of the financial statements.
11 U.S. Government Money Market Fund
<PAGE>
U.S. Government Money Market Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
Value
(000)
$
-----------
<S> <C>
Repurchase Agreement - 10.5%
Agreement with HSBC Securities and Chase Bank (Tri-Party) of $19,986
acquired December 31, 1999 at 3.600% to be repurchased at $19,992
on January 3, 2000, collateralized by:
$20,721 United States Treasury Obligations, valued at $20,387 19,986
---------
Total Repurchase Agreement (identified cost $19,986) 19,986
---------
Total Investments and Repurchase Agreement - 99.0% (cost $188,274)(c) 188,274
Other Assets and Liabilities, Net - 1.0% 1,876
---------
Net Assets - 100.0% 190,150
=========
</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 Student Loan Marketing Association.
(c) The identified cost for federal income tax purposes is the same as shown
above.
Abbreviations:
LIBOR - London Interbank Offered Rate
See accompanying notes which are an integral part of the financial statements.
U.S. Government Money Market Fund 12
<PAGE>
U.S. Government Money Market Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amounts) December 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at amortized cost which approximates market .................... $ 168,288
Repurchase agreements (identified cost $19,986) ............................ 19,986
Receivables:
Interest ............................................................... 1,905
From Advisor ........................................................... 36
Prepaid expenses ........................................................... 2
-----------
Total assets ........................................................ 190,217
Liabilities
Payables:
Dividends .................................................. $ 28
Accrued fees to affiliates ................................. 19
Other accrued expenses ..................................... 20
--------
Total liabilities ................................................... 67
-----------
Net Assets ................................................................. $ 190,150
===========
Net Assets Consist of:
Accumulated net realized gain (loss) ....................................... $ (5)
Shares of beneficial interest .............................................. 1,902
Additional paid-in capital ................................................. 188,253
-----------
Net Assets ................................................................. $ 190,150
===========
Net Asset Value, offering and redemption price per share:
($190,150,030 divided by 190,155,460 shares of $.01 par
value shares of beneficial interest outstanding) ....................... $ 1.00
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
13 U.S. Government Money Market Fund
<PAGE>
U.S. Government Money Market Fund
Statement of Operations
Amounts in thousands Year Ended December 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Interest ............................................................... $ 8,069
Expenses
Advisory fees .............................................. $ 314
Administrative fees ........................................ 79
Custodian fees ............................................. 61
Transfer agent fees ........................................ 279
Professional fees .......................................... 10
Registration fees .......................................... 81
Trustees' fees ............................................. 5
Miscellaneous .............................................. 22
--------
Expenses before reductions ................................. 851
Expense reductions ......................................... (380)
--------
Expenses, net ....................................................... 471
-----------
Net investment income ...................................................... 7,598
-----------
Net Realized Gain (Loss)
Net realized gain (loss) on investments .................................... (5)
-----------
Net increase in net assets from operations ................................. $ 7,593
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
U.S. Government Money Market Fund 14
<PAGE>
U.S. Government Money Market Fund
Statement of Changes in Net Assets
Amounts in thousands
<TABLE>
<CAPTION>
Years ended December 31,
1999 1998
------------ ------------
Increase (Decrease) in Net Assets
<S> <C> <C>
Operations
Net investment income .............................. $ 7,598 $ 7,756
Net realized gain (loss) ........................... (5) --
------------ ------------
Net increase in net assets from operations ...... 7,593 7,756
------------ ------------
Distributions
From net investment income ......................... (7,598) (7,756)
------------ ------------
Share Transactions
Net increase (decrease) in net assets from share
transactions ...................................... 23,931 (21,188)
------------ ------------
Total net increase (decrease) in net assets ............ 23,926 (21,188)
Net Assets
Beginning of period ................................ 166,224 187,412
------------ ------------
End of period ...................................... $ 190,150 $ 166,224
============ ============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
15 U.S. Government Money Market Fund
<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 other financial
statements.
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ....... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ----------
Income From Operations
Net investment income .................. .0483 .0520 .0545 .0526 .0580
---------- ---------- ---------- ---------- ----------
Distributions
From net investment income ............. (.0483) (.0520) (.0545) (.0526) (.0580)
Net Asset Value, End of Period ............. $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========== ========== ========== ========== ==========
Total Return (%) ........................... 4.93 5.34 5.59 5.40 5.98
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 190,150 166,224 187,412 239,725 149,941
Ratios to average net assets (%):
Operating expenses, net (a) ......... .30 .32 .20 .25 .32
Operating expenses, gross (a) ....... .54 .55 .41 .50 .51
Net investment income ............... 4.83 5.20 5.44 5.27 5.82
</TABLE>
(a) See Note 4 for current period amounts.
U.S. Government Money Market Fund 16
<PAGE>
Tax Free Money Market Fund
Statement of Net Assets
December 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------- ---------- -----------
<S> <C> <C> <C> <C>
Municipal Bonds - 106.1%
Alabama - 1.2%
Mobile, Alabama Industrial Development Board Pollution Control Revenue,
weekly demand 3,000 5.125 06/01/04 3,000
----------
Arizona - 0.8%
Maricopa County, Arizona Industrial Development Authority Revenue, weekly
demand 500 5.250 10/01/04 500
Maricopa County, Arizona Industrial Development Authority Revenue, Series A,
daily demand 880 4.550 02/01/29 880
Yuma County, Arizona Jail District Revenue (a) 500 4.500 07/01/00 501
----------
1,881
----------
Arkansas - 0.2%
Fayetteville, Arkansas Public Facilities Board Revenue, daily demand 300 4.700 09/01/27 300
Greystone Tax-Exempt Certificate Trust Revenue, Series 1998-1, weekly
demand (e) 186 5.630 05/01/28 186
----------
486
----------
Colorado - 4.3%
Castle Pines North Metropolitan District, Colorado General Obligation, weekly
demand 7,000 5.550 12/01/28 7,000
Colorado Housing Financial Authority Multi-family Housing Revenue, annual
demand 1,150 5.400 06/01/05 1,150
Denver, Colorado City and County Multi-family Housing Revenue, daily demand 700 4.950 12/01/09 700
SBC Metropolitan District, Colorado General Obligation, annual demand 1,670 4.000 12/01/17 1,670
----------
10,520
----------
Delaware - 1.5%
Delaware State Economic Development Authority Multi-family Housing Revenue,
weekly demand 650 5.550 12/01/15 650
Delaware State Economic Development Authority Revenue, Series B, weekly
demand 3,100 5.550 05/01/15 3,100
----------
3,750
----------
District of Columbia - 0.1%
District of Columbia Revenue, weekly demand 375 5.650 12/01/23 375
----------
Florida - 3.8%
Alachua County, Florida Industrial Development Revenue, Series A, monthly
demand 375 3.750 01/01/12 375
Capital Trust Agency, Florida Multi-family Housing Revenue, Series A, weekly
demand 3,000 5.800 12/01/32 3,000
Fort Pierce, Florida Health Facility Revenue, weekly demand 1,615 5.550 10/01/17 1,615
Greystone Tax-Exempt Certificate Trust Revenue, Series 1998-1, weekly
demand (e) 282 5.630 05/01/28 282
Orange County, Florida Industrial Development Authority Revenue, monthly
demand 1,100 3.750 01/01/11 1,100
Orange County, Florida Industrial Development Authority Revenue, Series A,
semiannual demand 2,960 3.750 10/01/15 2,960
----------
9,332
----------
</TABLE>
17 Tax Free Money Market Fund
<PAGE>
Tax Free Money Market Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------- ---------- -----------
<S> <C> <C> <C> <C>
Georgia - 8.2%
Cobb County, Georgia Housing Authority Multi-family Housing Revenue, weekly
demand 1,000 5.500 06/01/25 1,000
Cobb County, Georgia Residential Care Facilities Authority Revenue, weekly
demand 1,000 5.550 04/01/16 1,000
De Kalb County, Georgia Development Authority Revenue, weekly demand 1,500 5.550 03/01/24 1,500
De Kalb County, Georgia Housing Authority Multi-family Housing Revenue,
weekly demand 3,700 5.500 06/01/25 3,700
Fulton County, Georgia Development Authority Revenue, weekly demand 300 5.550 12/01/16 300
Greystone Tax-Exempt Certificate Trust Revenue, Series 1998-1, weekly
demand (e) 942 5.630 05/01/28 942
Gwinnett County, Georgia Development Authority Revenue, weekly demand 115 5.550 03/01/17 115
Gwinnett County, Georgia Development Authority Revenue, weekly demand 4,600 5.550 04/01/18 4,600
La Grange, Georgia Water & Sewage Revenue (pre-refunded 01/01/00) (b) 1,000 7.375 01/01/12 1,020
Macon-Bibb County, Georgia Hospital Authority Revenue Anticipation
Certificates, weekly demand 900 5.550 12/01/18 900
Marietta, Georgia Housing Authority Multi-family Housing Revenue Anticipation 2,500 4.850 01/01/08 2,500
Certificates, weekly demand
Savannah, Georgia Housing Authority Multi-family Housing Revenue, Series B,
weekly demand 650 5.500 06/15/26 650
Thomasville, Georgia Hospital Authority Revenue, weekly demand 1,200 5.550 11/01/17 1,200
Walton County, Georgia Development Authority Industrial Development
Revenue, Series B, weekly demand 800 5.550 06/01/04 800
----------
20,227
----------
Illinois - 12.6%
Belleville, Illinois Industrial Development Revenue, weekly demand 1,750 5.650 12/01/08 1,750
Chicago, Illinois General Obligation Building Acquisition Certificates 425 4.400 01/01/00 425
Cook County, Illinois Community Unit School District Number 401, Tax
Anticipation Warrants 2,500 4.980 10/25/00 2,509
De Kalb, Illinois Industrial Development Revenue, Series C, weekly demand 500 5.500 02/01/01 500
East Peoria, Illinois Multi-family Housing Authority, weekly demand 1,690 5.250 06/01/08 1,690
Illinois Development Finance Authority Pollution Control Revenue, Series B,
weekly demand 7,000 5.300 10/15/14 7,000
Illinois Development Finance Authority Revenue, quarterly demand 700 3.950 08/01/25 700
Illinois Development Finance Authority Revenue, weekly demand 2,038 5.650 09/01/26 2,038
Illinois Development Finance Authority Revenue, weekly demand 7,000 5.550 08/01/29 7,000
Illinois Health Facilities Authority Revenue, daily demand 400 4.750 11/01/20 400
Illinois Health Facilities Authority Revenue, Series B, weekly demand 4,900 5.350 08/15/22 4,900
Illinois State Certificate of Participation (a) 1,005 4.500 07/01/00 1,009
McHenry County, Illinois Community Construction School District Number 047,
Certificate of Participation (a) 400 6.700 01/01/00 400
Troy Grove, Illinois Revenue, weekly demand 750 5.015 05/01/10 750
----------
31,071
----------
Indiana - 4.7%
Bartholomew, Indiana Construction School Corporation, General Obligation 1,100 4.300 07/01/00 1,100
Fort Wayne, Indiana Economic Development Revenue, Series 83, weekly demand 1,000 5.125 12/01/03 1,000
Hamilton County, Indiana County Optional Income Tax Revenue, Series A 635 4.250 01/10/00 635
Hamilton County, Indiana County Optional Income Tax Revenue, Series A 205 4.250 07/10/00 205
Indiana State Development Finance Authority Revenue, weekly demand 3,500 5.500 07/01/26 3,500
Indiana State Educational Facilities Authority Revenue, weekly demand 775 5.500 10/01/19 775
Mishawaka, Indiana Waterworks Revenue Bond Anticipation Notes 1,800 4.250 08/11/00 1,800
</TABLE>
Tax Free Money Market Fund 18
<PAGE>
Tax Free Money Market Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------- ---------- -----------
<S> <C> <C> <C> <C>
South Bend, Indiana Community School Corporation General Obligation,
Series A 815 4.500 01/01/01 815
Whitco, Indiana Community School Corporation Tax Anticipation Warrants 1,900 4.500 12/29/00 1,904
----------
11,734
----------
Iowa - 1.5%
Chillicothe, Iowa Pollution Control Revenue, Series A, weekly demand 900 5.450 05/01/23 900
Storm Lake, Iowa Private College Revenue, weekly demand 2,900 5.650 12/01/03 2,900
----------
3,800
----------
Kansas - 0.1%
Greystone Tax-Exempt Certificate Trust Revenue, Series 1998-1, weekly
demand (e) 140 5.630 05/01/28 140
----------
Kentucky - 2.2%
Jefferson County, Kentucky Industrial Building Revenue, weekly demand 1,050 5.500 01/01/19 1,050
Jefferson County, Kentucky Retirement Home Revenue, weekly demand 2,000 5.500 10/01/19 2,000
Kentucky Area Development Districts Financing Lease Program Revenue,
Series E2, weekly demand 490 5.750 12/01/31 490
Louisville, Kentucky Industrial Development Revenue, weekly demand 750 5.550 09/01/01 750
McCreary, Kentucky Industrial Building Revenue, Series B, weekly demand 1,150 5.350 04/01/13 1,150
----------
5,440
----------
Maryland - 3.8%
Anne Arundel County, Maryland Industrial Development Revenue, Series C,
weekly demand 2,260 5.500 02/01/01 2,260
Maryland State Economic Development Corporation Revenue, weekly demand 3,300 5.550 09/01/24 3,300
Maryland State Health & Higher Educational Facilities Authority Revenue,
weekly demand 2,790 5.550 09/01/24 2,790
Montgomery County, Maryland Industrial Development Revenue, monthly demand 930 3.850 04/01/14 930
----------
9,280
----------
Massachusetts - 0.2%
New England Educational Loan Marketing Corporation, Massachusetts Student
Loan Revenue, Series G 465 5.000 08/01/00 467
----------
Michigan - 2.5%
Lansing, Michigan Economic Development Corporation, semiannual demand 1,885 3.850 05/01/15 1,885
Livonia, Michigan Economic Development Corporation, semiannual demand 320 4.100 11/15/04 320
McDonald Tax-Exempt Mortgage Bond Trust, thirteen month demand (d) 101 3.450 01/15/09 101
Meridian, Michigan Economic Development, monthly demand 455 3.900 11/15/14 455
Michigan State Housing Development Authority Limited Obligation Revenue,
weekly demand 1,000 5.125 06/01/04 1,000
Michigan State Job Development Authority Revenue, monthly demand 1,300 3.800 11/01/14 1,300
Northville Township, Michigan Economic Development Corporation, Limited
Obligation Revenue, Series P, weekly demand 500 5.125 05/01/14 500
Oakland County, Michigan Economic Development Corporation, Limited
Obligation Revenue, semiannual demand 625 3.800 08/01/15 625
----------
6,186
----------
</TABLE>
19 Tax Free Money Market Fund
<PAGE>
Tax Free Money Market Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------- ---------- -----------
<S> <C> <C> <C> <C>
Minnesota - 5.4%
Burnsville, Minnesota Industrial Development Revenue, Series C, weekly demand 350 5.500 02/01/01 350
Capital Realty Investment Tax-Exempt Fund, Series 96-1, weekly demand 8,535 5.750 12/01/04 8,535
Mendota Heights, Minnesota Commercial Development, weekly demand 1,515 5.600 12/01/15 1,515
Minnesota State Revenue, Series A (a) 980 5.000 06/30/00 987
St. Paul, Minnesota Port Authority Industrial Development Revenue, Series 1,
weekly demand 2,000 5.610 06/01/19 2,000
----------
13,387
----------
Mississippi - 0.2%
DeSoto County, Mississippi Industrial Development Revenue, weekly demand 400 5.015 12/01/08 400
----------
Missouri - 6.3%
Clayton, Missouri Industrial Development Authority Revenue, weekly demand 1,000 5.200 01/01/09 1,000
Kansas City, Missouri Industrial Development Authority Multi-family Housing
Revenue, weekly demand 3,900 5.450 10/01/15 3,900
Missouri State Health & Educational Facilities Authority Revenue, daily demand 2,200 4.850 12/01/24 2,200
Missouri State Health & Educational Facilities Authority Revenue, daily demand 800 4.850 11/01/29 800
Missouri State Health & Educational Facilities Authority Revenue, Series A,
weekly demand 1,000 5.600 08/01/29 1,000
Missouri State Health & Educational Facilities Authority Revenue, Series B,
daily demand 1,400 4.750 10/01/24 1,400
Missouri State Health & Educational Facilities Authority School District
Advanced Funding Program Revenue, Series D 2,000 4.250 09/19/00 2,007
St. Charles County, Missouri Industrial Development Authority Revenue, weekly
demand 2,300 5.560 12/01/27 2,300
St. Louis, Missouri Industrial Development Authority Revenue, Series C, weekly
demand 965 5.500 02/01/01 965
----------
15,572
----------
Nevada - 1.5%
Clark County, Nevada Economic Development Revenue, weekly demand 1,545 5.600 08/01/19 1,545
Reno, Nevada Hospital Revenue, Series B (pre-refunded 01/01/00) (b) 1,065 7.750 07/01/15 1,086
Reno, Nevada Hospital Revenue, Series C (pre-refunded 01/01/00) (b) 960 7.750 07/01/15 981
Washoe County, Nevada General Obligation (a) 100 8.250 06/01/00 102
----------
3,714
----------
New Jersey - 0.4%
North Hudson Sewer Authority, New Jersey Tax-Exempt Notes 900 4.250 03/31/00 900
----------
New York - 0.8%
Jamestown, New York Community College Regional Board of Trustees Revenue
Anticipation Notes 2,000 4.375 09/08/00 2,005
----------
North Carolina - 0.6%
Beaufort County, North Carolina Industrial Facility & Pollution Control Revenue,
Series 85, weekly demand 300 5.100 12/01/00 300
North Carolina Medical Care Community Hospital Revenue, weekly demand 1,100 5.500 08/15/18 1,100
----------
1,400
----------
</TABLE>
Tax Free Money Market Fund 20
<PAGE>
Tax Free Money Market Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------- ---------- -----------
<S> <C> <C> <C> <C>
Ohio - 4.3%
Bellevue, Ohio Hospital Facilities Revenue, semiannual demand 330 3.700 03/01/17 330
Buckeye, Ohio Tax-Exempt Mortgage Bond Trust, semiannual demand 240 3.900 02/01/05 240
Clermont County, Ohio Economic Development Revenue, semiannual demand 400 4.000 12/01/09 400
Clermont County, Ohio Economic Development Revenue, semiannual demand 550 4.000 05/01/12 550
Clinton County, Ohio Hospital Revenue, weekly demand 1,000 5.600 06/01/28 1,000
Columbus, Ohio Electric System Revenue, monthly demand 1,300 3.600 09/01/09 1,300
East Muskingum, Ohio Water Revenue Anticipation Notes 1,000 4.320 06/22/00 1,001
Franklin County, Ohio Industrial Development Revenue, semiannual demand 130 3.850 11/01/15 130
Mahoning County, Ohio Industrial Development Revenue, Series A, weekly demand 5 5.600 10/01/00 5
Mahoning County, Ohio Industrial Development Revenue, Series B, weekly demand 15 5.600 10/01/00 15
McDonald Tax-Exempt Mortgage Bond Trust, thirteen month demand (d) 473 3.450 01/15/09 473
North Olmsted, Ohio Bond Anticipation Notes, Series 2 1,900 4.200 09/21/00 1,903
Ohio State Higher Educational Facilities Community College Revenue, weekly
demand 585 5.500 09/01/20 585
Scioto County, Ohio Health Care Facilities Revenue, semiannual demand 645 4.000 12/01/15 645
Stark County, Ohio Health Care Facilities, semiannual demand 1,550 3.800 09/15/16 1,550
Trumbull County, Ohio Industrial Development Revenue, Series A, weekly
demand 390 5.600 04/01/04 390
----------
10,517
----------
Oklahoma - 1.3%
Muskogee, Oklahoma Industrial Trust Revenue, weekly demand 1,890 5.300 12/01/15 1,890
Tulsa County, Oklahoma Industrial Authority Health Care Revenue, semiannual
demand 1,250 4.100 12/15/08 1,250
----------
3,140
----------
Oregon - 1.7%
Clackamas County, Oregon Hospital Facilities Authority Revenue, Series C,
weekly demand 2,000 5.600 05/15/29 2,000
Hillsboro, Oregon Revenue, weekly demand 1,750 5.500 08/01/11 1,750
Medford, Oregon Hospital Facilities Authority Revenue, weekly demand 400 5.600 05/15/27 400
----------
4,150
----------
Pennsylvania - 8.1%
Berks County, Pennsylvania Industrial Development Authority, weekly demand 2,450 5.125 12/01/04 2,450
Butler County, Pennsylvania Industrial Development Authority, Series B, weekly
demand 2,950 5.550 11/01/16 2,950
Chartiers Valley, Pennsylvania Industrial and Commercial Development Revenue,
Series A, weekly demand 1,000 5.550 12/01/01 1,000
Geisinger, Pennsylvania Health System Authority Revenue, Series B, daily
demand 600 4.800 08/15/28 600
Lebanon County, Pennsylvania Health Facilities Revenue, weekly demand 1,000 5.750 04/01/24 1,000
McDonald Tax-Exempt Mortgage Bond Trust, thirteen month demand (d) 101 3.450 01/15/09 101
Pennsylvania State Higher Educational Facilities Authority Revenue, Series E3,
weekly demand 5,000 5.550 11/01/14 5,000
Philadelphia, Pennsylvania Hospitals & Higher Educational Facilities Authority
Revenue, Series A-3, weekly demand 1,500 5.700 03/01/19 1,500
</TABLE>
21 Tax Free Money Market Fund
<PAGE>
Tax Free Money Market Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------- ---------- -----------
<S> <C> <C> <C> <C>
Philadelphia, Pennsylvania Hospitals & Higher Educational Facilities Authority
Revenue, Series B, weekly demand 3,500 5.700 06/01/14 3,500
South Fork, Pennsylvania Municipal Hospital Authority Revenue, Series B,
weekly demand 2,000 5.550 07/01/23 2,000
----------
20,101
----------
Puerto Rico - 0.8%
Puerto Rico Municipal Finance Agency General Obligation, Series B 2,000 5.000 08/01/00 2,012
----------
South Carolina - 0.2%
Edgefield County, South Carolina School District General Obligation 565 5.750 02/01/00 566
----------
Tennessee - 6.3%
Franklin County, Tennessee Health & Educational Facilities Revenue, monthly
demand 1,565 4.200 09/01/10 1,565
Greystone Tax-Exempt Certificate Trust Revenue, Series 1998-1, weekly demand (e) 1,054 5.630 05/01/28 1,054
Jackson County, Tennessee Industrial Development Board Revenue, Series B,
daily demand 1,800 4.850 08/01/15 1,800
Knox County, Tennessee Health, Educational & Housing Facilities Board revenue,
weekly demand 7,400 5.600 05/01/29 7,400
Knox County, Tennessee Industrial Development Revenue, monthly demand 2,700 4.550 12/01/14 2,700
Tusculum, Tennessee Health, Educational & Housing Facilities Revenue, weekly
demand 1,000 5.550 07/01/15 1,000
----------
15,519
----------
Texas - 5.4%
Austin County, Texas Industrial Development Corporation Revenue, weekly
demand 1,980 5.650 11/01/02 1,980
Austin, Texas Utility Systems Revenue (pre-refunded 05/15/00)(b) 350 10.750 05/15/15 361
Brazos Harbor, Texas Industrial Development Corporation Revenue, monthly demand 1,400 3.800 12/01/13 1,400
Harris County, Texas Health Facilities Development Corporation Hospital
Revenue, daily demand 2,460 4.800 12/01/25 2,460
Tarrant County, Texas Housing Finance Corporation Revenue, weekly demand 4,000 5.750 12/01/07 4,000
Texas Association of School Boards, Tax Anticipation Notes, Series A 3,062 4.500 08/31/00 3,063
----------
13,264
----------
Virginia - 3.1%
Chesterfield County, Virginia General Obligation, Series A
(pre-refunded 01/15/00)(b) 1,000 6.7500 01/15/10 1,022
Greystone Tax-Exempt Certificate Trust Revenue, Series 1998-1, weekly
demand (e) 496 5.630 05/01/28 496
Harrisonburg, Virginia Redevelopment & Housing Authority Multi-family
Housing Revenue, annual demand 1,000 3.200 02/01/26 1,000
Harrisonburg, Virginia Redevelopment & Housing Authority Multi-family
Housing Revenue, Series A, annual demand 3,495 3.200 02/01/26 3,495
Henrico County, Virginia Industrial Development Authority Revenue, Series C 645 7.500 09/01/07 671
(pre-refunded 08/01/00)(b)
Norfolk, Virginia Industrial Development Authority Revenue, weekly demand 1,075 5.125 03/01/16 1,075
----------
7,759
----------
</TABLE>
Tax Free Money Market Fund 22
<PAGE>
Tax Free Money Market Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------- ---------- -----------
<S> <C> <C> <C> <C>
Washington - 4.6%
Seattle, Washington Municipality Metropolitan Seattle Sewer Revenue, Series U
(pre-refunded 01/01/01) (a)(b) 2,600 6.600 01/01/32 2,717
Washington State Economic Development Finance Authority Revenue, Series H,
daily demand 2,235 4.800 09/01/18 2,235
Washington State Housing Finance Commission Nonprofit Revenue, daily
demand 685 4.850 07/01/11 685
Washington State Housing Finance Commission Nonprofit Revenue, daily
demand 190 5.900 08/01/19 190
Washington State Housing Finance Commission Nonprofit Revenue, daily
demand 1,400 4.850 01/01/21 1,400
Washington State Housing Finance Commission Nonprofit Revenue, daily
demand 400 5.100 01/01/27 400
Washington State Housing Finance Commission Nonprofit Revenue, daily
demand 200 5.100 05/01/27 200
Washington State Housing Finance Commission Nonprofit Revenue, weekly
demand 1,200 5.600 08/01/24 1,200
Washington State Public Power Supply System Nuclear Project Number 1
Revenue, Series A (pre-refunded 07/01/00) (a)(b) 1,300 7.000 07/01/11 1,347
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 1,020
----------
11,394
----------
West Virginia - 0.4%
Marshall County, West Virginia Pollution Control Revenue, weekly demand 1,000 5.500 03/01/26 1,000
----------
Wisconsin - 6.8%
Altoona, Wisconsin School District Tax & Revenue Anticipation Notes 1,000 4.125 10/27/00 1,000
Green Bay, Wisconsin Industrial Development Revenue, weekly demand 1,345 5.500 07/01/13 1,345
Jefferson, Wisconsin School District Tax & Revenue Anticipation Promisory
Notes 1,100 4.020 09/08/00 1,101
Lac du Flambeau, Wisconsin School District Number 1 Tax & Revenue
Anticipation Promisory Notes 700 4.170 07/28/00 701
Northern Ozaukee School District, Wisconsin Bond Anticipation Notes 1,500 3.400 02/01/00 1,500
Slinger, Wisconsin School District Tax & Revenue Anticipation Promisory Notes 1,400 4.040 09/27/00 1,400
Sturgeon Bay, Wisconsin School District Tax & Revenue Anticipation Promisory
Notes 1,100 4.230 10/27/00 1,101
Weyauwega-Freemont, Wisconsin School District Tax & Revenue Anticipation
Notes 1,800 4.170 08/25/00 1,801
Wisconsin State Health & Educational Facilities Authority Revenue, Series A,
weekly demand 5,000 5.450 10/01/29 5,000
Wisconsin State Health & Educational Facilities Authority Revenue, Series B
(pre-refunded 06/01/00) (a)(b) 1,800 7.000 06/01/20 1,861
----------
16,810
----------
</TABLE>
23 Tax Free Money Market Fund
<PAGE>
Tax Free Money Market Fund
Statement of Net Assets, continued
December 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------- ---------- -----------
<S> <C> <C> <C> <C>
Wyoming - 0.2%
Sweetwater County, Wyoming School District Number 2, General Obligation 450 4.000 06/01/00 450
----------
Total Investments - 106.1% (amortized cost $261,749)(c) 261,749
Other Assets and Liabilities, Net - (6.1%) (15,054)
----------
Net Assets - 100.0% 246,695
==========
</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 Arkansas, Florida, Georgia, Kansas,
Tennessee, and Virginia.
See accompanying notes which are an integral part of the financial statements.
Tax Free Money Market Fund 24
<PAGE>
Tax Free Money Market Fund
Statement of Net Assets, continued
December 31, 1999
Quality Ratings as a % of Market Value++ (Unaudited)
VMIG1 or SP-1 63%
P1 37
-----
100%
=====
Economic Sector Emphasis as a % of Market Value (Unaudited)
Education Revenue 21%
General Obligation 21
Housing Revenue 20
Industrial Revenue Bonds 17
Healthcare Revenue 13
Pollution Control Revenue 6
Utility Revenue 2
-----
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.
25 Tax Free Money Market Fund
<PAGE>
Tax Free Money Market Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amounts) December 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at amortized cost which approximates market .................... $ 261,749
Cash ....................................................................... 119
Interest receivable ........................................................ 1,767
Prepaid expenses ........................................................... 56
-----------
Total assets ........................................................ 263,691
Liabilities
Payables:
Dividends .................................................. $ 224
Investments purchased ...................................... 16,722
Accrued fees to affiliates ................................. 16
Other accrued expenses ..................................... 34
--------
Total liabilities ................................................... 16,996
-----------
Net Assets ................................................................. $ 246,695
===========
Net Assets Consist of:
Accumulated net realized gain (loss) ....................................... $ 7
Shares of beneficial interest .............................................. 2,467
Additional paid-in capital ................................................. 244,221
-----------
Net Assets ................................................................. $ 246,695
===========
Net Asset Value, offering and redemption price per share:
($246,695,365 divided by 246,688,208 shares of $.01 par value
shares of beneficial interest outstanding) ............................ $ 1.00
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Tax Free Money Market Fund 26
<PAGE>
Tax Free Money Market Fund
Statement of Operations
Amounts in thousands Year Ended December 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Interest ............................................................... $ 6,855
Expenses
Advisory fees .............................................. $ 393
Administrative fees ........................................ 98
Custodian fees ............................................. 18
Transfer agent fees ........................................ 26
Professional fees .......................................... 15
Registration fees .......................................... 47
Trustees' fees ............................................. 5
Miscellaneous .............................................. 14
--------
Expenses before reductions ................................. 616
Expense reductions ......................................... (197)
--------
Expenses, net ....................................................... 419
-----------
Net investment income ...................................................... 6,436
-----------
Net Realized Gain (Loss)
Net realized gain (loss) on investments .................................... 12
-----------
Net increase in net assets from operations ................................. $ 6,448
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
27 Tax Free Money Market Fund
<PAGE>
Tax Free Money Market Fund
Statement of Changes in Net Assets
Amounts in thousands
<TABLE>
<CAPTION>
Years ended December 31,
1999 1998
------------ ------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income .............................. $ 6,436 $ 5,654
Net realized gain (loss) ........................... 12 (5)
------------ ------------
Net increase in net assets from operations ...... 6,448 5,649
------------ ------------
Distributions
From net investment income ......................... (6,436) (5,654)
------------ ------------
Share Transactions
Net increase (decrease) in net assets from share
transactions ...................................... 52,020 63,943
------------ ------------
Total net increase (decrease) in net assets ............ 52,032 63,938
Net Assets
Beginning of period ................................ 194,663 130,725
------------ ------------
End of period ...................................... $ 246,695 $ 194,663
============ ============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Tax Free Money Market Fund 28
<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
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ....... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ----------
Income From Operations
Net investment income .................. .0326 .0331 .0355 .0329 .0370
---------- ---------- ---------- ---------- ----------
Distributions
From net investment income ............. (.0326) (.0331) (.0355) (.0329) (.0370)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ............. $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========== ========== ========== ========== ==========
Total Return (%)(a) ........................ 3.31 3.36 3.61 3.35 3.76
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 246,695 194,663 130,725 102,207 78,000
Ratios to average net assets (%)(a):
Operating expenses, net (b) ......... .21 .34 .28 .42 .48
Operating expenses, gross (b) ....... .31 .44 .38 .42 .48
Net investment income ............... 3.28 3.29 3.55 3.28 3.69
</TABLE>
(a) 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.
(b) See Note 4 for current period amounts.
29 Tax Free Money Market Fund
<PAGE>
Frank Russell Investment Company
Money Market Funds
Notes to Financial Statements
December 31, 1999
1. Organization
Frank Russell Investment Company (the "Investment Company") is a series
mutual fund with 29 different investment portfolios, (one of which has not
yet commenced operations) 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 and capital gains. Therefore, no
federal income tax provision was required for the Funds. From November 1,
1999 to December 31, 1999, the Funds listed below incurred net realized
capital losses. As permitted by tax regulations, these Funds have elected
to defer these losses and treat them as arising in the year ending
December 31, 2000.
Deferred Net
Realized Capital
Losses
----------------
Money Market $11,686
U.S. Government Money Market 4,442
At December 31, 1999, 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 12/31/07 Totals
-------- -------- -------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Money Market $ -- $ (41,009) $ (814) $ -- $(3,245) $(12,600) $ (57,668)
U.S. Government Money Market (1,309) (4,913) (3,331) (1,570) (762) (1,783) (13,668)
</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.
Notes to Financial Statements 30
<PAGE>
Frank Russell Investment Company
Money Market Funds
Notes to Financial Statements
December 31, 1999
Expenses: The Funds 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.
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. Related Parties
Advisor and Administrator: FRIMCo advises and administers all of the Funds
which comprise the Investment Company. FRIMCo is 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.
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 Money Market Fund. As of December 31, 1999,
$949,970,000 represents the investments of other affiliated Funds not
presented herein.
The advisory and administrative fees, which are based upon the average
daily net assets of each Fund and the rates specified in the table below,
are payable monthly and aggregated $4,794,218 and $1,198,555,
respectively, for the year ended December 31, 1999. FRIMCo reduces its
advisory fees for each Fund by advisory fees incurred on assets invested
in the Money Market Fund or the Tax Free Money Market Fund thereby
eliminating any duplication of fees.
Annual Rate
-------------------------------
Advisor Administrator
----------- ----------------
Money Market 0.20% 0.05%
U.S. Government Money Market 0.20 0.05
Tax Free Money Market 0.20 0.05
The Advisor has contractually agreed to waive 0.15% of its 0.25% combined
advisory and administrative fees for the Money Market Fund. The amount of
such waiver for the year ended December 31, 1999 was $3,065,144.
The Advisor has contractually agreed to waive a portion of its combined
advisory and administrative fees for the U.S. Government Money Market
Fund, its combined advisory and administrative fees, 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 year ended December 31, 1999 was
$379,754.
The Advisor has contractually agreed to waive 0.10% of its 0.25% combined
advisory and administrative fees for the Tax Free Money Market Fund. The
amount of such waiver for the year ended December 31, 1999 was $196,504.
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 year ended December 31, 1999 were $915,998.
Board of Trustees: The Investment Company pays each of its Trustees not
affiliated with FRIMCo a retainer of $30,000 per year plus out-of-pocket
expenses. Total Trustee expenses for the Funds listed for the year ended
December 31, 1999 were $16,373 and were allocated to each Fund, where
appropriate, on a pro rata basis, including 25 other affiliated Funds not
presented herein.
31 Notes to Financial Statements
<PAGE>
Frank Russell Investment Company
Money Market Funds
Notes to Financial Statements
December 31, 1999
4. Fund Share Transactions
Share transactions for the year ended December 31, 1999 and year ended
December 31, 1998 were as follows:
On a Constant Dollar Basis (000)
--------------------------------
1999 1998
Money Market ----------- ----------
Proceeds from shares sold 21,077,851 12,024,641
Proceeds from reinvestment
of distributions 50,168 17,841
Payments for shares redeemed (20,706,310) (11,363,736)
---------- ----------
Total net increase (decrease) 421,709 678,746
========== ==========
U.S. Government Money Market
Proceeds from shares sold 539,954 431,194
Proceeds from reinvestment
of distributions 7,536 6,807
Payments for shares redeemed (523,559) (459,189)
---------- ----------
Total net increase (decrease) 23,931 (21,188)
========== ==========
Tax Free Money Market
Proceeds from shares sold 486,976 367,890
Proceeds from reinvestment
of distributions 4,433 3,258
Payments for shares redeemed (439,389) (307,205)
---------- ----------
Total net increase (decrease) 52,020 63,943
========== ==========
5. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $75
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .10% on the average daily unused amount of the
aggregate commitment, which is allocated among each of the Participants.
Interest, at the Federal Fund Rate plus .50% annually (Federal Fund Rate
plus 1.75% prior to and including February 27, 2000), is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up
to a maximum of 10 percent of the value of its net assets under the
agreement. The agreement will expire December 30, 2000. The Fund did not
have any drawdowns during the year.
6. Beneficial Interest
As of December 31, 1999, the following Fund has one or more shareholders
with shares of beneficial interest of greater than 10% of the total
outstanding shares of the Fund: Tax Free Money Market 22.1%.
Notes to Financial Statements 32
<PAGE>
Report of Independent Accountants
To the Board of Trustees and Shareholders
of Frank Russell Investment Company:
In our opinion, the accompanying statements of assets and liabilities, including
the statements of net assets, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the series of Frank Russell
Investment Company (in this report comprised of Money Market, U.S. Government
Money Market, and Tax Free Money Market (the "Funds")) at December 31, 1999, and
the results of each of their operations, the changes in each of their net assets
and the financial highlights for the periods indicated therein, in conformity
with generally accepted accounting principles in the United States. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards in the United States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at December 31, 1999 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
Seattle, Washington /s/ PricewaterhouseCoopers LLP
February 16, 2000
33 Report of Independent Accountants
<PAGE>
Frank Russell Investment Company
909 A Street, Tacoma, Washington 98402
(800) 832-6688
In Washington (253) 627-7001
Trustees
Lynn L. Anderson, Chairman
Paul E. Anderson
Paul Anton, PhD
William E. Baxter
Lee C. Gingrich
Eleanor W. Palmer
Trustees Emeritus
George F. Russell, Jr.
Officers
Lynn L. Anderson, Chairman of the Board and President
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
Allan Forbes Building
150 Newport Avenue AFB35
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 Fourth Avenue Plaza
Suite 4200
Seattle, WA 98154
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 34
<PAGE>
- --------------
[LOGO] Russell
- --------------
Frank Russell Investment Company
909 A Street
Tacoma, WA 98402-5120
253-627-7001
800-972-0700
Fax: 253-591-3495
<PAGE>
1999 Annual Report
[Illegible]
<PAGE>
Frank Russell Investment Company
Frank Russell Investment Company is a "series mutual fund" with 29 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
Annual Report
December 31, 1999
Table of Contents
Page
Letter to Our Clients..................................................... 2
Portfolio Management Discussion........................................... 3
Equity Aggressive Strategy Fund........................................... 10
Aggressive Strategy Fund.................................................. 16
Balanced Strategy Fund.................................................... 22
Moderate Strategy Fund.................................................... 28
Conservative Strategy Fund................................................ 34
Notes to Financial Statements............................................. 40
Report of Independent Accountants......................................... 47
Tax Information........................................................... 48
Manager, Money Managers and Service Providers............................. 49
Frank Russell Investment Company - LifePoints(R) Funds
Copyright (C) Frank Russell Company 2000. All rights reserved. This material is
proprietary and may not be reproduced, transferred, or distributed in any form
without prior written permission form 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 performances quoted represents past performance and
the investment recent and principal value of an investment will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Investment is 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>
To Our Clients
We are pleased to present the Frank Russell Investment Company 1999 Annual
Report. This report covers information on five of the Funds and represents our
eighteenth year in operation.
We remain committed to providing our clients with superior investment solutions
through the benefits of multi-manager, multi-style diversification used in
structuring our Funds. The commitment proved worthwhile in 1999, as our Funds,
in general, provided solid returns as compared to their respective benchmarks
and attracted many new investors, both creating significant growth in assets.
Frank Russell Investment Management Company (FRIMCo) continuously evaluates the
Funds we offer our clients. Each of these Funds is carefully monitored by
Russell investment professionals to ensure that the most appropriate investment
advisors and strategies are utilized within each Fund. The advisors are
monitored by FRIMCo using the expertise and advice of the Investment Policy and
Research group of Frank Russell Company.
Since the close of 1998 we have implemented changes in our Funds' structure
which we believe will benefit current and potential investors. The Russell Funds
and the LifePoints(R) Funds both added Class C shares during 1999, and the
Russell Institutional Funds opened Class E shares for investment in May 1999.
Additionally, the Tax-Managed Small Cap Fund was opened for investment in
November 1999, providing a small cap alternative to the existing tax-managed
Russell Funds.
Thank you for your continued confidence and investment with Frank Russell
Investment Company. We look forward to 2000 and continuing to earn your support.
Sincerely,
/s/ Lynn L. Anderson Eric A. Russell
Lynn L. Anderson. Eric A. Russell
Chairman of the Board President
Frank Russell Investment Company Frank Russell Investment Management Company
<PAGE>
LifePoints(R) Funds
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Performance Review
For the year ended December 31, 1999, the LifePoints Funds provided investors
with respectable returns, although each lagged their respective Fund composite
benchmark. Stocks provided remarkable gains for the year, while bonds suffered
their second worst year in more than two decades, as rising interest rates
eroded bond values. US stocks experienced an unprecedented fifth consecutive
year of returns in excess of 20%. Developed foreign markets joined the party,
led by the 67% gain for Japanese shares. Emerging markets recovered globally and
ended the year more than 70% higher.
Enthusiasm towards the Internet proved a dominant theme through most of 1999,
particularly in the fourth quarter, as the technology sector of the Russell
3000(R) Index increased 78% for the year. The next best performing sector was
consumer discretionary, with a gain of 28%. While the strength of these two
sectors boosted returns of growth-oriented portfolios, a 16% decline in consumer
staples and 7% decline in health care issues exemplified the narrowness of the
market. This market proved difficult for value-oriented investors, with the
Russell 1000(R) Value Index gaining only 7.35% for the year versus a 33.16% gain
of the Russell 1000(R) Growth Index.
Bond investors also faced a challenging market environment, as strong economic
growth provoked concerns over mounting inflationary pressures. The Fed's
vigilant stance towards inflation weighed heavily on the market psyche, which
led to several rate hikes during the year. The Lehman Brothers Aggregate Bond
Index posted a 0.82% decline for 1999, which was modest compared to the 14.92%
loss for the 30-year US treasury bond. Favorable economic trends did have the
benefit of narrowing credit spreads, which helped spread sectors - including US
corporates, mortgage-backed securities, and emerging markets debt securities -
blunt the impact of rising rates.
With bonds suffering through a difficult year and the stock markets' gains
focused on technology issues, conservative investors struggled. Value funds
dramatically underperformed their growth counterparts, and even among
growth-oriented funds, the more price-sensitive investors lagged their more
aggressive counterparts by wide margins.
These were the market trends that underlied the performance of the LifePoints
Funds during 1999. While the US large cap stock funds (Diversified Equity and
Quantitative Equity), the bond funds, and the Real Estate Securities Fund all
exceeded their individual benchmarks by impressive margins, the Special Growth,
International Securities, and Emerging Markets Funds, each trailed their
respective benchmarks. The lack of significant emerging markets exposure in the
International Securities Fund was a decided disadvantage relative to peers,
given the strong performance of emerging markets in 1999. The balanced blend of
growth and value styles in Special Growth was also disadvantageous relative to
its growth-biased benchmark. The relative under-performance of the Emerging
Markets Fund was largely attributable to the impact of manager changes, as the
termination of two managers and hire of four new managers was challenging given
the relative illiquidity of the asset class.
The 1999 annual returns of the Underlying Funds (Class S shares) are as follows:
Diversified Equity Fund had a total return of 18.21%, Special Growth Fund
returned 21.45%, Quantitative Equity Fund gained 21.37%, International
Securities Fund returned 30.52%, Emerging Markets Fund gained 49.03%, Real
Estate Securities Fund returned 0.55%, Multistrategy Bond Fund lost 0.81%, Short
Term Bond Fund gained 3.03%, and Diversified Bond Fund lost 1.26%.
3 LifePoints(R) Funds
<PAGE>
Equity Aggressive Strategy Fund++
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: Equity Aggressive Strategy Fund seeks to achieve high, long-term
capital appreciation, while recognizing the possibility of high fluctuations in
year to year market values.
Strategy: Each LifePoints(R) Fund allocates its assets by investing in a
diversified group of Underlying Funds. By investing in the multi-managed
Underlying Funds, the LifePoints Funds seek to maintain different allocations
between classes of domestic equity, international equity, and fixed income,
depending on the LifePoints Fund's investment objective and risk profile.
[GRAPHIC OMITTED]
[The following table was depicted in a line chart]
LifePoints(R) Equity Equity Aggressive
Aggressive Strategy Strategy Composite Russell 1000 Salomon SB
Fund - Class E Benchmark++++ Index BMI Ex-US
-------------------- ------------------ ------------ ----------
Inception* $10,000 $10,000 $10,000 $10,000
1997 $9,758 $9,918 $10,301 $9,235
1998 $11,099 $11,700 $13,084 $10,827
1999 $13,536 $14,337 $15,820 $13,938
Total $44,393 $45,955 $49,205 $44,001
- -------------------------------------- --------------------------------------
Equity Aggressive Equity Aggressive Strategy
Strategy Fund - Class E Composite Benchmark
- -------------------------------------- --------------------------------------
Periods Ended Growth of Total Periods Ended Growth of Total
12/31/99 $10,000 Return 12/31/99 $10,000 Return
- ------------- --------- --------- ------------- --------- ---------
1 Year $12,196 21.96% 1 Year $12,358 23.58%
Inception $13,536 14.39%ss. Inception $14,337 17.36%ss.
- -------------------------------------- --------------------------------------
Equity Aggressive Strategy Russell 1000(R)Index
Fund - Class D+
- -------------------------------------- --------------------------------------
Periods Ended Growth of Total Periods Ended Growth of Total
12/31/99 $10,000 Return 12/31/99 $10,000 Return
- ------------- --------- --------- ------------- --------- ---------
1 Year $12,158 21.58% 1 Year $12,091 20.91%
Inception $13,488 14.21%ss. Inception $15,820 22.61%ss.
- -------------------------------------- --------------------------------------
Equity Aggressive Strategy Salomon Smith Barney Broad
Fund - Class C+ Market Index (BMI) Ex-US
- -------------------------------------- --------------------------------------
Periods Ended Growth of Total Periods Ended Growth of Total
12/31/99 $10,000 Return 12/31/99 $10,000 Return
- ------------- --------- --------- ------------- --------- ---------
1 Year $12,114 21.14% 1 Year $12,873 28.73%
Inception $13,439 14.02%ss. Inception $13,938 15.90%ss.
++ Prior to May 1, 1999, this Fund was named LifePoints Equity Balanced
Strategy Fund.
* Equity Aggressive Strategy Fund Class E commenced operations on September
30, 1997. Index comparison began October 1, 1997.
+ Equity Aggressive Strategy Fund Class E performance has been linked with
Class D to provide historical perspective. From March 24, 1998
(commencement of sale) through the current period, Class D paid
shareholder servicing and Rule 12b-1 distribution fees. Total return would
have been lower had these fees been in effect during prior reporting
periods.
+++ Equity Aggressive Strategy Fund Class E and Class D performance has been
linked with Class C to provide historical perspective. From February 11,
1999 (commencement of sale) through the current period, Class C paid
shareholder service and Rule 12b-1 distribution fees. Total return would
have been lower had these fees been in effect during prior reporting
periods.
ss. Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Equity Aggressive Strategy Fund 4
<PAGE>
Aggressive Strategy Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: Aggressive Strategy Fund seeks to achieve high, long-term capital
appreciation, with low current income while recognizing the possibility of
substantial fluctuations in year to year market values.
Strategy: Each LifePoints(R) Fund allocates its assets by investing in a
diversified group of Underlying Funds. By investing in the multi-managed
Underlying Funds, the LifePoints Funds seek to maintain different allocations
between classes of domestic equity, international equity, and fixed income,
depending on the LifePoints Fund's investment objective and risk profile.
[GRAPHIC OMITTED]
[The following table was depicted in a line chart]
LifePoints(R) Aggressive
Aggressive Strategy Strategy Composite Russell 1000 Salomon SB
Fund - Class E Benchmark++++ Index BMI Ex-US
------------------- ------------------ ------------ ----------
Inception* $10,000 $10,000 $10,000 $10,000
1997 $9,981 $9,926 $10,301 $9,235
1998 $11,148 $11,407 $13,084 $10,827
1999 $13,149 $13,501 $15,820 $13,938
Total $44,278 $44,834 $49,205 $44,001
- -------------------------------------- --------------------------------------
Aggressive Strategy Fund - Class E Aggressive Strategy Composite Benchmark
- -------------------------------------- --------------------------------------
Periods Ended Growth of Total Periods Ended Growth of Total
12/31/99 $10,000 Return 12/31/99 $10,000 Return
- ------------- --------- --------- ------------- --------- ---------
1 Year $11,795 17.95% 1 Year $11,934 19.34%
Inception $13,149 12.70%ss. Inception $13,501 14.27%ss.
- -------------------------------------- --------------------------------------
Aggressive Strategy Fund - Class D+ Russell 1000(R)Index
- -------------------------------------- --------------------------------------
Periods Ended Growth of Total Periods Ended Growth of Total
12/31/99 $10,000 Return 12/31/99 $10,000 Return
- ------------- --------- --------- ------------- --------- ---------
1 Year $11,769 17.69% 1 Year $12,091 20.91%
Inception $13,099 12.51%ss. Inception $15,820 22.61%ss.
- -------------------------------------- --------------------------------------
Aggressive Strategy Fund - Class C++ Salomon Smith Barney Broad Market
Index (BMI) Ex-US
- -------------------------------------- --------------------------------------
Periods Ended Growth of Total Periods Ended Growth of Total
12/31/99 $10,000 Return 12/31/99 $10,000 Return
- ------------- --------- --------- ------------- --------- ---------
1 Year $11,706 17.06% 1 Year $12,873 28.73%
Inception $13,029 12.25%ss. Inception $13,938 15.90%ss.
* Aggressive Strategy Fund Class E commenced operations on September 16,
1997. Index comparison began October 1, 1997.
+ Aggressive Strategy Fund Class E performance has been linked with Class D
to provide historical perspective. From March 24, 1998 (commencement of
sale) through the current period, Class D paid shareholder servicing and
Rule 12b-1 distribution fees. Total return would have been lower had these
fees been in effect during prior reporting periods.
++ Aggressive Strategy Fund Class E and Class D performance has been linked
with Class C to provide historical perspective. From January 29, 1999
(commencement of sale) through the current period, Class C paid
shareholder service and Rule 12b-1 distribution fees. Total return would
have been lower had these fees been in effect during prior reporting
periods.
ss. Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
5 Aggressive Strategy Fund
<PAGE>
Balanced Strategy Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: Balanced Strategy Fund seeks a moderate level of current income and,
over time, above-average capital appreciation with moderate risk.
Strategy: Each LifePoints(R) Fund allocates its assets by investing in a
diversified group of Underlying Funds. By investing in the multi-managed
Underlying Funds, the LifePoints Funds seek to maintain different allocations
between classes of domestic equity, international equity, and fixed income,
depending on the LifePoints Fund's investment objective and risk profile.
[GRAPHIC OMITTED]
[The following table was depicted in a line chart]
LifePoints(R) Balanced
Balanced Strategy Strategy Composite LB Russell
Fund - Class E Benchmark+++ Aggregate 1000 Index
-------------------- ------------------ ------------ ----------
Inception* $10,000 $10,000 $10,000 $10,000
1997 $10,104 $10,053 $10,294 $10,301
1998 $11,282 $11,447 $11,189 $13,084
1999 $12,613 $12,834 $11,097 $15,820
Total $43,999 $44,334 $42,580 $49,250
- -------------------------------------- --------------------------------------
Balanced Strategy Fund - Class E Balanced Strategy Composite Benchmark
- -------------------------------------- --------------------------------------
Periods Ended Growth of Total Periods Ended Growth of Total
12/31/99 $10,000 Return 12/31/99 $10,000 Return
- ------------- --------- --------- ------------- --------- ---------
1 Year $11,180 11.80% 1 Year $11,275 12.75%
Inception $12,613 10.67%ss. Inception $12,834 11.73%ss.
- -------------------------------------- --------------------------------------
Balanced Strategy Fund - Class D Lehman Brothers Aggregate Bond Index
- -------------------------------------- --------------------------------------
Periods Ended Growth of Total Periods Ended Growth of Total
12/31/99 $10,000 Return 12/31/99 $10,000 Return
- ------------- --------- --------- ------------- --------- ---------
1 Year $11,164 11.64% 1 Year $ 9,918 (0.82)%
Inception $12,581 10.55%ss. Inception $11,097 4.73%ss.
- -------------------------------------- --------------------------------------
Balanced Strategy Fund - Class C Russell 1000(R)Index
- -------------------------------------- --------------------------------------
Periods Ended Growth of Total Periods Ended Growth of Total
12/31/99 $10,000 Return 12/31/99 $10,000 Return
- ------------- --------- --------- ------------- --------- ---------
1 Year $11,094 10.94% 1 Year $12,091 20.91%
Inception $12,503 10.24%ss. Inception $15,820 22.61%ss.
* Balanced Strategy Fund Class E commenced operations on September 16, 1997.
Index comparison began October 1, 1997.
+ Balanced Strategy Fund Class E performance has been linked with Class D to
provide historical perspective. From March 24, 1998 (commencement of sale)
through the current period, Class D paid shareholder servicing and Rule
12b-1 distribution fees. Total return would have been lower had these fees
been in effect during prior reporting periods.
++ Balanced Strategy Fund Class E and Class D performance has been linked with
Class C to provide historical perspective. From January 29, 1999
(commencement of sale) through the current period, Class C paid shareholder
service and Rule 12b-1 distribution fees. Total return would have been
lower had these fees been in effect during prior reporting periods.
ss. Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Balanced Strategy Fund 6
<PAGE>
Moderate Strategy Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: Moderate Strategy Fund seeks to achieve moderate long-term capital
appreciation with high current income while recognizing the possibility of
moderate fluctuations in year to year market values.
Strategy: Each LifePoints(R) Fund allocates its assets by investing in a
diversified group of Underlying Funds. By investing in the multi-managed
Underlying Funds, the LifePoints Funds seek to maintain different allocations
between classes of domestic equity, international equity, and fixed income,
depending on the LifePoints Fund's investment objective and risk profile.
[GRAPHIC OMITTED]
[The following table was depicted in a line chart]
LifePoints(R) Moderate Merrill Lynch
Moderate Strategy Strategy Composite 1-2-99 Yr LP
Fund - Class E Benchmark++ Treasury Aggregate
-------------------- ------------------ ---------- ----------
Inception* $10,000 $10,000 $10,000 $10,000
1997 $9,994 $10,102 $10,168 $10,294
1998 $11,012 $11,252 $10,879 $11,189
1999 $11,964 $12,234 $11,213 $11,097
Total $42,970 $43,588 $42,259 $42,580
- -------------------------------------- --------------------------------------
Moderate Strategy Fund - Class E Moderate Strategy Composite Benchmark
- -------------------------------------- --------------------------------------
Periods Ended Growth of Total Periods Ended Growth of Total
12/31/99 $10,000 Return 12/31/99 $10,000 Return
- ------------- --------- --------- ------------- --------- ---------
1 Year $10,865 8.65% 1 Year $10,913 9.13%
Inception $11,964 8.31%ss. Inception $12,234 9.38%ss.
- -------------------------------------- --------------------------------------
Moderate Strategy Fund - Class D Merrill Lynch 1-2.99 Years Treasury Index
- -------------------------------------- --------------------------------------
Periods Ended Growth of Total Periods Ended Growth of Total
12/31/99 $10,000 Return 12/31/99 $10,000 Return
- ------------- --------- --------- ------------- --------- ---------
1 Year $10,840 8.40% 1 Year $10,306 3.06%
Inception $11,907 8.08%ss. Inception $11,213 5.22%ss.
- -------------------------------------- --------------------------------------
Moderate Strategy Fund - Class C Lehman Brothers Aggregate Bond Index
- -------------------------------------- --------------------------------------
Periods Ended Growth of Total Periods Ended Growth of Total
12/31/99 $10,000 Return 12/31/99 $10,000 Return
- ------------- --------- --------- ------------- --------- ---------
1 Year $10,803 8.03% 1 Year $9,918 (0.82)%
Inception $11,865 7.91%ss. Inception $11,097 4.73%ss.
* Moderate Strategy Fund Class E commenced operations on October 2, 1997.
Index comparison began October 1, 1997.
+ Moderate Strategy Fund Class E performance has been linked with Class D to
provide historical perspective. From March 24, 1998 (commencement of sale)
through the current period, Class D paid shareholder servicing and Rule
12b-1 distribution fees. Total return would have been lower had these fees
been in effect during prior reporting periods.
++ Moderate Strategy Fund Class E and Class D performance has been linked
with Class C to provide historical perspective. From February 11, 1999
(commencement of sale) through the current period, Class C paid
shareholder service and Rule 12b-1 distribution fees. Total return would
have been lower had these fees been in effect during prior reporting
periods.
ss. Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance in not indicative of future results.
7 Moderate Strategy Fund
<PAGE>
Conservative Strategy Fund
Portfolio Management Discussion
December 31, 1999 (Unaudited)
Objective: Conservative Strategy Fund seeks to achieve a moderate rate of return
through low capital appreciation and reinvestment of a high level of current
income.
Strategy: Each LifePoints(R) Fund allocates its assets by investing in a
diversified group of Underlying Funds. By investing in the multi-managed
Underlying Funds, the LifePoints Funds seek to maintain different allocations
between classes of domestic equity, international equity, and fixed income,
depending on the LifePoints Fund's investment objective and risk profile.
[GRAPHIC OMITTED]
[The following table was depicted in a line chart]
LifePoints(R) Conservative Merrill Lynch
Conservative Strategy Strategy Composite 1-2-99 Yr LP
Fund - Class E Benchmark++ Treasury Aggregate
-------------------- ------------------ ---------- ---------
Inception* $10,000 $10,000 $10,000 $10,000
1997 $10,136 $10,140 $10,168 $10,294
1998 $10,917 $11,029 $10,879 $11,189
1999 $11,521 $11,658 $11,213 $11,097
Total $42,574 $42,627 $42,260 $42,580
- -------------------------------------- --------------------------------------
Conservative Strategy Fund - Class E Conservative Strategy
Composite Benchmark
- -------------------------------------- --------------------------------------
Periods Ended Growth of Total Periods Ended Growth of Total
12/31/99 $10,000 Return 12/31/99 $10,000 Return
- ------------- --------- --------- ------------- --------- ---------
1 Year $10,554 5.54% 1 Year $10,562 5.62%
Inception $11,521 6.82%ss. Inception $11,658 7.34%ss.
- -------------------------------------- --------------------------------------
Conservative Strategy Fund - Class D Merrill Lynch 1-2.99
Years Treasury Index
- -------------------------------------- --------------------------------------
Periods Ended Growth of Total Periods Ended Growth of Total
12/31/99 $10,000 Return 12/31/99 $10,000 Return
- ------------- --------- --------- ------------- --------- ---------
1 Year $10,518 5.18% 1 Year $10,306 3.06%
Inception $11,457 6.54%ss. Inception $11,213 5.07%ss.
- -------------------------------------- --------------------------------------
Conservative Strategy Fund - Class C++ Lehman Brothers Aggregate Bond Index
- -------------------------------------- --------------------------------------
Periods Ended Growth of Total Periods Ended Growth of Total
12/31/99 $10,000 Return 12/31/99 $10,000 Return
- ------------- --------- --------- ------------- --------- ---------
1 Year $10,477 4.77% 1 Year $9,918 (0.82)%
Inception $11,413 6.35%ss. Inception $11,097 4.23%ss.
* Conservative Strategy Fund Class E commenced operations on November 7,
1997. Index comparison began October 1, 1997.
+ Conservative Strategy Fund Class E performance has been linked with Class
D to provide historical perspective. From March 24, 1998 (commencement of
sale) through the current period, Class D paid shareholder servicing and
Rule 12b-1 distribution fees. Total return would have been lower had these
fees been in effect during prior reporting periods.
++ Conservative Strategy Fund Class E and Class D performance has been linked
with Class C to provide historical perspective. From February 11, 1999
(commencement of sale) through the current period, Class C paid
shareholder service and Rule 12b-1 distribution fees. Total return would
have been lower had these fees been in effect during prior reporting
periods.
ss. Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance in not indicative of future results.
Conservative Strategy Fund 8
<PAGE>
LifePoints(R) Funds
Benchmark Composition
December 31, 1999 (Unaudited)
The Equity Aggressive Strategy Composite Benchmark is comprised of the following
indices: 60% Russell 1000(R) Index, 20% Salomon Smith Barney BMI Ex-US, 10%
Russell 2500(TM) Index, 5% IFC Investable Composite Index and 5% NAREIT Equity
REIT Index.
The Aggressive Strategy Composite Benchmark is comprised of the following
indices: 42% Russell 1000 Index, 19% Salomon Smith Barney BMI Ex-US, 18% Lehman
Brothers Aggregate Bond Index, 11% Russell 2500 Index, 5% IFC Investable
Composite Index and 5% NAREIT Equity REIT Index.
The Balanced Strategy Composite Benchmark is comprised of the following indices:
41% Lehman Brothers Aggregate Bond Index, 32% Russell 1000 Index, 14% Salomon
Smith Barney BMI Ex-US, 5% Russell 2500 Index, 5% NAREIT Equity REIT Index and
3% IFC Investable Composite Index.
The Moderate Strategy Composite Benchmark is comprised of the following indices:
33% Merrill Lynch 1-2.99 Years Treasury Index, 27% Lehman Brothers Aggregate
Bond Index, 22% Russell 1000 Index, 9% Salomon Smith Barney BMI Ex-US, 5% NAREIT
Equity REIT Index, 2% Russell 2500 Index and 2% IFC Investable Composite Index.
The Conservative Strategy Composite Benchmark is comprised of the following
indices: 60% Merrill Lynch 1-2.99 Years Treasury Index, 18% Lehman Brothers
Aggregate Bond Index, 11% Russell 1000 Index, 5% Salomon Smith Barney BMI Ex-US,
5% NAREIT Equity REIT Index and 1% IFC Investable Composite Index.
The Russell 1000(R) Index includes the 1,000 largest companies in the Russell
3000(R) Index, the smallest of which is valued at about $1,124.8 million. The
Russell 1000 Index represents the universe of stocks from which most active
money managers typically select. The Russell 1000 Index return reflects
adjustments for income dividends and capital gains distributions reinvested as
of the ex-dividend dates.
The Salomon Smith Barney Braod Market Index (BMI) ex-US is a comprehensive
float-weighted equity index consisting of every company with an investable
market capitalization of over $100 million in 22 countries. This Index has
broader representation than the MSCI EAFE Index.
The Lehman Brothers Aggregate Bond Index is composed of securities from Lehman
Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index, and
the Asset-Backed Securities Index. Total return comprises price
appreciation/depreciation and income as a percentage of the original investment.
Indexes are rebalanced monthly by market capitalization.
The Merrill Lynch 1-2.99 Years Treasury Index is an index composed of
approximately 160 issues in the form of publicly placed, coupon-bearing US
Treasury debt. Issues must carry a term to maturity of at least one year, and
par amounts outstanding must be no less than $10 million at the start and at the
close of the performance measurement periods.
9 LifePoints(R) Funds
<PAGE>
Equity Aggressive Strategy Fund
Statement of Net Assets
December 31, 1999
Number Market
of Value
Shares $
-------- --------
Investments
Portfolios of the Frank Russell Investment Company
Series Mutual Fund - Class S Shares
Domestic Equities - 73.5%
Diversified Equity Fund 1,198,015 65,088,130
Quantitative Equity Fund 1,445,497 65,322,005
Real Estate Securities Fund 463,664 10,599,353
Special Growth Fund 446,587 21,963,137
------------
162,972,625
------------
International Equities - 24.8%
Emerging Markets Fund 908,407 11,373,250
International Securities Fund 581,010 43,639,666
------------
55,012,916
------------
Short-Term Investments - 1.5%
Money Market Fund
due on demand (a) 3,161,000 3,161,000
------------
Total Investments - 99.8%
(identified cost $197,124,481) 221,146,541
------------
Other Assets and Liabilities
Other assets 2,062,595
Liabilities (1,551,857)
------------
Total Other Assets and Liabilities,
Net - 0.2% 510,738
------------
Net Assets - 100.0% 221,657,279
============
Net Assets consist of:
Undistributed net investment income 7,345
Accumulated net realized gain (loss) 10,380,390
Unrealized appreciation
(depreciation) on investments 24,022,060
Shares of beneficial interest 194,553
Additional paid-in capital 187,052,931
------------
Net Assets 221,657,279
============
Net Asset Value, offering and redemption price
per share:
Class C ($15,859,964 divided by 1,393,778
shares of $.01 par value shares of
beneficial interest outstanding) $ 11.38
============
Class D ($3,731,507 divided by 326,497 shares
of $.01 par value shares of beneficial
interest outstanding) $ 11.43
============
Class E ($202,065,808 divided by 17,735,032
shares of $.01 par value shares of beneficial
interest outstanding) $ 11.39
============
(a) At amortized cost, which approximates market.
See accompanying notes which are an integral part of the financial statements.
Equity Aggressive Strategy Fund 10
<PAGE>
Equity Aggressive Strategy Fund
Statement of Operations
Year Ended December 31, 1999
Investment Income
Income distributions from Underlying Funds .................... $ 2,012,544
Expenses
Advisory fees .................................... $ 322,810
Administrative fees .............................. 80,703
Distribution fees - Class C ...................... 28,827
Distribution fees - Class D ...................... 10,594
Shareholder servicing fees - Class C ............. 9,609
Shareholder servicing fees - Class D ............. 10,594
Shareholder servicing fees - Class E ............. 383,309
------------
Expenses before reductions ....................... 846,446
Expense reductions ............................... (403,513)
------------
Expenses, net .............................................. 442,933
------------
Net investment income ............................................ 1,569,611
------------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ...................................... (350,263)
Capital gain distributions from Underlying Funds . 16,391,721 16,041,458
------------
Net change in unrealized appreciation (depreciation)
on investments ................................................. 18,490,512
------------
Net realized and unrealized gain (loss) .......................... 34,531,970
------------
Net increase (decrease) in net assets from operations ............ $ 36,101,581
============
See accompanying notes which are an integral part of the financial statements.
11 Equity Aggressive Strategy Fund
<PAGE>
Equity Aggressive Strategy Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
------------- ------------
Increase (Decrease) in Net Assets
<S> <C> <C>
Operations
Net investment income .................................. $ 1,569,611 $ 161,484
Net realized gain (loss) ............................... 16,041,458 2,538,657
Net change in unrealized appreciation (depreciation) ... 18,490,512 5,748,823
------------- ------------
Net increase (decrease) in net assets from operations 36,101,581 8,448,964
------------- ------------
Distributions
From net investment income
Class C ............................................. (291,440) --
Class D ............................................. (92,884) (13,627)
Class E ............................................. (5,761,692) (1,028,400)
From net realized gain
Class C ............................................. (37,600) --
Class D ............................................. (76,597) (23,598)
Class E ............................................. (2,126,189) (430,626)
------------- ------------
Net decrease in net assets from distributions .... (8,386,402) (1,496,251)
------------- ------------
Share Transactions
Net increase (decrease) in net assets from share
transactions ........................................ 97,559,762 86,444,463
------------- ------------
Total net increase (decrease) in net assets ............... 125,274,941 93,397,176
Net Assets
Beginning of period .................................... 96,382,338 2,985,162
------------- ------------
End of period (including undistributed net investment
income of $7,345 and accumulated distributions in
excess of net investment income of $800,
respectively) ....................................... $ 221,657,279 $ 96,382,338
============= ============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Equity Aggressive Strategy Fund 12
<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 Operations
Net investment income (a)(e) ............................. .06
Net realized and unrealized gain (loss) .................. 1.98
----------
Total income from operations .......................... 2.04
----------
Distributions
From net investment income ............................... (.30)
From net realized gain ................................... (.16)
----------
Total distributions ................................... (.46)
----------
Net Asset Value, End of Period .............................. $ 11.38
==========
Total Return (%)(b) ......................................... 21.26
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ................. 15,860
Ratios to average net assets (%):
Operating expenses, net (c)(d) ........................ 1.00
Operating expenses, gross (c)(d) ...................... 1.25
Net investment income (b) ............................. .59
Portfolio turnover rate (%) .............................. 76.20
* For the period February 11, 1999 (commencement of sale) to December 31,
1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
(d) See Note 4 for current period amounts.
(e) Recognition of net investment income by the Fund is affected by the timing
of the declaration of dividends by the underlying companies in which the
Fund invests.
13 Equity Aggressive Strategy Fund
<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.
Year Ended December 31,
------------------------
1999 1998*
---------- ---------
Net Asset Value, Beginning of Period ............... $ 9.81 $ 9.92
--------- --------
Income From Operations
Net investment income (a)(e) .................... .06 .01
Net realized and unrealized gain (loss) ......... 2.01 .10
--------- --------
Total income from operations ................. 2.07 .11
--------- --------
Distributions
From net investment income ...................... (.29) (.17)
From net realized gain .......................... (.16) (.05)
--------- --------
Total distributions .......................... (.45) (.22)
--------- --------
Net Asset Value, End of Period ..................... $ 11.43 $ 9.81
========= ========
Total Return (%)(b) ................................ 21.58 1.17
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ........ 3,732 4,923
Ratios to average net assets (%):
Operating expenses, net (c)(d) ............... .50 .50
Operating expenses, gross (c)(d) ............. .75 .89
Net investment income (b) .................... .64 .01
Portfolio turnover rate (%) ..................... 76.20 73.95
* For the period March 24, 1998 (commencement of sale) to December 31, 1998.
(a) Average month-end shares outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
(d) See Note 4 for current period amounts.
(e) Recognition of net investment income by the Fund is affected by the timing
of the declaration of dividends by the underlying companies in which the
Fund invests.
Equity Aggressive Strategy Fund 14
<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.
Year Ended December 31,
---------------------------------
1999 1998 1997*
------- ------- --------
Net Asset Value, Beginning of Period ........ $ 9.80 $ 8.83 $ 10.00
------- ------- -------
Income From Operations
Net investment income (a)(f) ............. .10 .03 .09
Net realized and unrealized gain (loss) .. 2.00 1.18 (.33)
------- ------- -------
Total income from operations .......... 2.10 1.21 (.24)
------- ------- -------
Distributions
From net investment income ............... (.35) (.19) (.33)
From net realized gain ................... (.16) (.05) (.60)
------- ------- -------
Total distributions ................... (.51) (.24) (.93)
------- ------- -------
Net Asset Value, End of Period .............. $ 11.39 $ 9.80 $ 8.83
======= ======= =======
Total Return (%)(b) ......................... 21.96 13.75 (2.42)
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) . 202,066 91,459 2,985
Ratios to average net assets (%):
Operating expenses, net (c)(d) ........ .25 .25 .25
Operating expenses, gross (d)(e) ...... .50 .62 --
Net investment income (b) ............. .99 .28 .45
Portfolio turnover rate (%) .............. 76.20 73.95 48.30
* For the period September 30, 1997 (commencement of operations) to December
31, 1997.
(a) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
(d) See Note 4 for current period amounts.
(e) The ratio for the period ended December 31, 1997 is not meaningful due to
the Class's short period of operation.
(f) Recognition of net investment income by the Fund is affected by the timing
of the declaration of dividends by the underlying companies in which the
Fund invests.
15 Equity Aggressive Strategy Fund
<PAGE>
Equity Aggressive Strategy Fund
Statement of Net Assets
December 31, 1999
Number Market
of Value
Shares $
-------- --------
Investments
Portfolios of the Frank Russell Investment Company
Series Mutual Fund - Class S Shares
Domestic Equities - 57.1%
Diversified Equity Fund 772,380 41,963,400
Quantitative Equity Fund 925,942 41,843,334
Real Estate Securities Fund 440,595 10,071,992
Special Growth Fund 449,622 22,112,400
------------
115,991,126
------------
International Equities - 23.9%
Emerging Markets Fund 818,377 10,246,076
International Securities Fund 508,467 38,190,978
------------
48,437,054
------------
Bonds - 17.6%
Multistrategy Bond Fund 3,788,908 35,843,071
------------
Short-Term Investments - 1.1%
Money Market Fund
due on demand (a) 2,199,000 2,199,000
------------
Total Investments - 99.7%
(identified cost $189,762,102) 202,470,251
------------
Other Assets and Liabilities
Other assets 2,010,577
Liabilities (1,342,400)
------------
Total Other Assets and Liabilities,
Net - 0.3% 668,177
------------
Net Assets - 100.0% 203,138,428
============
Net Assets consist of:
Accumulated distributions in excess of net (188)
investment income
Accumulated net realized gain (loss) 7,306,333
Unrealized appreciation
(depreciation) on investments 12,708,149
Shares of beneficial interest 181,916
Additional paid-in capital 182,942,218
------------
Net Assets 203,138,428
============
Net Asset Value, offering and redemption price
per share:
Class C ($29,365,075 divided by 2,634,538
shares of $.01 par value shares of
beneficial interest outstanding) $ 11.15
============
Class D ($6,096,283 divided by 544,461 shares
of $.01 par value shares of beneficial
interest outstanding) $ 11.20
============
Class E ($167,677,070 divided by 15,012,609
shares of $.01 par value shares of beneficial
interest outstanding) $ 11.17
============
(a) At amortized cost, which approximates market.
See accompanying notes which are an integral part of the financial statements
Aggressive Strategy Fund 16
<PAGE>
Aggressive Strategy Fund
Statement of Operations
Year Ended December 31, 1999
Investment Income
Income distributions from Underlying Funds ..................... $ 2,523,244
Expenses
Advisory fees .................................... $ 250,172
Administrative fees .............................. 62,543
Distribution fees - Class C ...................... 50,849
Distribution fees - Class D ...................... 9,961
Shareholder servicing fees - Class C ............. 16,950
Shareholder servicing fees - Class D ............. 9,961
Shareholder servicing fees - Class E ............. 285,806
-----------
Expenses before reductions ....................... 686,242
Expense reductions ............................... (312,715)
-----------
Expenses, net .............................................. 373,527
-----------
Net investment income ............................................ 2,149,717
-----------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ...................................... (216,004)
Capital gain distributions from Underlying Funds . 11,243,918 11,027,914
-----------
Net change in unrealized appreciation (depreciation)
on investments................................................... 11,617,537
-----------
Net realized and unrealized gain (loss) ........................... 22,645,451
-----------
Net increase (decrease) in net assets from operations ............. $24,795,168
===========
See accompanying notes which are an integral part of the financial statements.
17 Aggressive Strategy Fund
<PAGE>
Aggressive Strategy Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
------------- ------------
Increase (Decrease) in Net Assets
<S> <C> <C>
Operations
Net investment income ....................................... $ 2,149,717 $ 720,772
Net realized gain (loss) .................................... 11,027,914 1,160,217
Net change in unrealized appreciation (depreciation) ........ 11,617,537 1,402,719
------------- ------------
Net increase (decrease) in net assets from operations .... 24,795,168 3,283,708
------------- ------------
Distributions
From net investment income
Class C .................................................. (503,183) --
Class D .................................................. (142,839) (54,267)
Class E .................................................. (4,607,854) (968,744)
From net realized gain
Class C .................................................. (22,286) --
Class D .................................................. (66,968) (4,399)
Class E .................................................. (1,242,909) (73,262)
------------- ------------
Net decrease in net assets from distributions ......... (6,586,039) (1,100,672)
------------- ------------
Share Transactions
Net increase (decrease) in net assets from share transactions 119,092,587 58,346,402
------------- ------------
Total net increase (decrease) in net assets .................... 137,301,716 60,529,438
Net Assets
Beginning of period ......................................... 65,836,712 5,307,274
------------- ------------
End of period (including accumulated distributions
in excess of net investment income of $188 and
undistributed net investment income of $3,828,
respectively) ............................................ $ 203,138,428 $ 65,836,712
============= ============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Aggressive Strategy Fund 18
<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 Operations
Net investment income (a)(e) .................................. .13
Net realized and unrealized gain (loss) ....................... 1.36
-------
Total income from operations ............................... 1.49
-------
Distributions
From net investment income .................................... (.29)
From net realized gain ........................................ (.16)
-------
Total distributions ........................................ (.45)
-------
Net Asset Value, End of Period ................................... $ 11.15
=======
Total Return (%)(b) .............................................. 15.21
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ...................... 29,365
Ratios to average net assets (%):
Operating expenses, net (c)(d) ............................. 1.00
Operating expenses, gross (c)(d) ........................... 1.25
Net investment income (b) .................................. 1.50
Portfolio turnover rate (%) ................................... 71.44
* For the period January 29, 1999 (commencement of sale) to December 31,
1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
(d) See Note 4 for current period amounts.
(e) Recognition of net investment income by the Fund is affected by the timing
of the declaration of dividends by the underlying companies in which the
Fund invests.
19 Aggressive Strategy Fund
<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.
Year Ended December 31,
------------------------
1999 1998*
---------- ---------
Net Asset Value, Beginning of Period ................ $ 9.95 $ 10.09
------- -------
Income From Operations
Net investment income (a)(e) ..................... .15 .13
Net realized and unrealized gain (loss) .......... 1.57 (.05)
------- -------
Total income from operations .................. 1.72 .08
------- -------
Distributions
From net investment income ....................... (.31) (.21)
From net realized gain ........................... (.16) (.01)
------- -------
Total distributions ........................... (.47) (.22)
------- -------
Net Asset Value, End of Period ...................... $ 11.20 $ 9.95
======= =======
Total Return (%)(b) ................................. 17.69 .96
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ......... 6,096 3,649
Ratios to average net assets (%):
Operating expenses, net (c)(d) ................ .50 .50
Operating expenses, gross (c)(d) .............. .75 .93
Net investment income (b) ..................... 1.48 1.35
Portfolio turnover rate (%) ...................... 71.44 93.08
* For the period March 24, 1998 (commencement of sale) to December 31, 1998.
(a) Average month-end shares outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the periods less than one year are annualized.
(d) See Note 4 for current period amounts.
(e) Recognition of net investment income by the Fund is affected by the timing
of the declaration of dividends by the underlying companies in which the
Fund invests.
Aggressive Strategy Fund 20
<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.
Year Ended December 31,
---------------------------------
1999 1998 1997*
------- ------- --------
Net Asset Value, Beginning of Period ........ $ 9.94 $ 9.14 $ 10.00
------- ------- -------
Income From Operations
Net investment income (a)(f) ............. .18 .19 .10
Net realized and unrealized gain (loss) .. 1.56 .87 (.11)
------- ------- -------
Total income from operations .......... 1.74 1.06 (.01)
------- ------- -------
Distributions
From net investment income ............... (.35) (.25) (.31)
From net realized gain ................... (.16) (.01) (.54)
------- ------- -------
Total distributions ................... (.51) (.26) (.85)
------- ------- -------
Net Asset Value, End of Period .............. $ 11.17 $ 9.94 $ 9.14
======= ======= =======
Total Return (%)(b) ......................... 17.95 11.69 (.19)
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) . 167,677 62,188 5,307
Ratios to average net assets (%):
Operating expenses, net (c)(d) ........ .25 .25 .25
Operating expenses, gross (d)(e) ...... .50 .66 --
Net investment income (b) ............. 1.73 1.88 .97
Portfolio turnover rate (%) .............. 71.44 93.08 56.88
* For the period September 16, 1997 (commencement of operations) to December
31, 1997.
(a) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the periods less than one year are annualized.
(d) See Note 4 for current period amounts.
(e) The ratio for the period ended December 31, 1997 is not meaningful due to
the Class's short period of operation.
(f) Recognition of net investment income by the Fund is affected by the timing
of the declaration of dividends by the underlying companies in which the
Fund invests.
21 Aggressive Strategy Fund
<PAGE>
Balanced Strategy Fund
Statement of Net Assets
December 31, 1999
Number Market
of Value
Shares $
-------- --------
Investments
Portfolios of the Frank Russell Investment Company
Series Mutual Fund - Class S Shares
Domestic Equities - 41.9%
Diversified Equity Fund 1,009,846 54,864,908
Quantitative Equity Fund 1,211,675 54,755,575
Real Estate Securities Fund 750,275 17,151,284
Special Growth Fund 350,550 17,240,048
------------
144,011,815
------------
International Equities - 17.0%
Emerging Markets Fund 831,943 10,415,923
International Securities Fund 643,356 48,322,496
------------
58,738,419
------------
Bonds - 40.4%
Diversified Bond Fund 3,892,896 84,748,347
Multistrategy Bond Fund 5,738,456 54,285,795
------------
139,034,142
------------
Short-Term Investments - 0.6%
Money Market Fund
due on demand (a) 1,907,000 1,907,000
------------
Total Investments - 99.9%
(identified cost $329,513,152) 343,691,376
------------
Other Assets and Liabilities
Other assets 1,955,822
Liabilities (1,705,121)
------------
Total Other Assets and Liabilities,
Net - 0.1% 250,701
------------
Net Assets - 100.0% 343,942,077
============
Net Assets consist of:
Accumulated net realized gain (loss) 9,768,399
Unrealized appreciation 14,178,224
(depreciation) on investments
Shares of beneficial interest 320,201
Additional paid-in capital 319,675,253
Net Assets 343,942,077
============
Net Asset Value, offering and redemption price
per share:
Class C ($39,325,402 divided by 3,667,730
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.72
============
Class D ($9,074,753 divided by 842,976 shares
of $.01 par value shares of beneficial
interest outstanding) $ 10.77
============
Class E ($295,541,922 divided by 27,509,389
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.74
============
(a) At amortized cost, which approximates market
See accompanying notes which are an integral part of the financial statements.
Balanced Strategy Fund 22
<PAGE>
Balanced Strategy Fund
Statement of Operations
Year Ended December 31, 1999
Investment Income
Income distributions from Underlying Funds ..................... $ 8,286,435
Expenses
Advisory fees ................................... $ 520,172
Administrative fees 130,043
Distribution fees - Class C ..................... 85,150
Distribution fees - Class D ..................... 10,153
Shareholder servicing fees - Class C ............ 28,383
Shareholder servicing fees - Class D ............ 10,153
Shareholder servicing fees - Class E ............ 611,692
----------
Expenses before reductions ...................... 1,395,746
Expense reductions .............................. (650,215)
----------
Expenses, net ............................................... 745,531
------------
Net investment income ............................................. 7,540,904
------------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ..................................... (425,576)
Capital gain distributions from Underlying Funds 15,051,994 14,626,418
----------
Net change in unrealized appreciation (depreciation)
on investments .................................................. 10,879,646
------------
Net realized and unrealized gain (loss) ........................... 25,506,064
------------
Net increase (decrease) in net assets from operations ............. $ 33,046,968
============
See accompanying notes which are an integral part of the financial statements.
23 Balanced Strategy Fund
<PAGE>
Balanced Strategy Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
------------- ------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ........................................ $ 7,540,904 $ 3,382,872
Net realized gain (loss) ..................................... 14,626,418 3,765,388
Net change in unrealized appreciation (depreciation) ......... 10,879,646 3,463,095
------------- -------------
Net increase (decrease) in net assets from operations ..... 33,046,968 10,611,355
------------- -------------
Distributions
From net investment income
Class C ................................................... (788,029) --
Class D ................................................... (229,844) (78,906)
Class E ................................................... (10,742,115) (4,773,743)
From net realized gain
Class C ................................................... (14,195) --
Class D ................................................... (55,102) (15,716)
Class E ................................................... (2,338,789) (493,631)
------------- -------------
Net decrease in net assets from distributions .......... (14,168,074) (5,361,996)
------------- -------------
Share Transactions
Net increase (decrease) in net assets from share transactions 159,001,580 157,257,748
------------- -------------
Total net increase (decrease) in net assets ..................... 177,880,474 162,507,107
Net Assets
Beginning of period .......................................... 166,061,603 3,554,496
------------- -------------
End of period (including undistributed net investment
income of $5,633 at December 31, 1998) .................... $ 343,942,077 $ 166,061,603
============= =============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Balanced Strategy Fund 24
<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 Operations
Net investment income (a)(e) .................................. .25
Net realized and unrealized gain (loss) ....................... .70
--------
Total income from operations ............................... .95
--------
Distributions
From net investment income .................................... (.37)
From net realized gain ........................................ (.12)
--------
Total distributions ........................................ (.49)
--------
Net Asset Value, End of Period ................................... $ 10.72
========
Total Return (%)(b) .............................................. 9.53
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ...................... 39,325
Ratios to average net assets (%):
Operating expenses, net (c)(d) ............................. 1.00
Operating expenses, gross (c)(d) ........................... 1.25
Net investment income (b) .................................. 2.96
Portfolio turnover rate (%) ................................... 64.63
* For the period January 29, 1999 (commencement of sale) to December 31,
1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
(d) See Note 4 for current period amounts.
(e) Recognition of net investment income by the Fund is affected by the timing
of the declaration of dividends by the underlying companies in which the
Fund invests.
25 Balanced Strategy Fund
<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.
Year Ended December 31,
------------------------
1999 1998*
---------- ---------
Net Asset Value, Beginning of Period .................. $ 10.13 $ 10.22
------- -------
Income From Operations
Net investment income (a)(e) ....................... .30 .24
Net realized and unrealized gain (loss) ............ .84 .07
------- -------
Total income from operations .................... 1.14 .31
------- -------
Distributions
From net investment income ......................... (.38) (.37)
From net realized gain ............................. (.12) (.03)
------- -------
Total distributions ............................. (.50) (.40)
------- -------
Net Asset Value, End of Period ........................ $ 10.77 $ 10.13
======= =======
Total Return (%)(b) ................................... 11.64 3.23
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ........... 9,075 4,953
Ratios to average net assets (%):
Operating expenses, net (c)(d) .................. .50 .50
Operating expenses, gross (c)(d) ................ .75 .86
Net investment income (b) ....................... 3.07 2.46
Portfolio turnover rate (%) ........................ 64.63 78.85
* For the period March 24, 1998 (commencement of sale) to December 31, 1998.
(a) Average month-end shares outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
(d) See Note 4 for current period amounts.
(e) Recognition of net investment income by the Fund is affected by the timing
of the declaration of dividends by the underlying companies in which the
Fund invests.
Balanced Strategy Fund 26
<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.
Year Ended December 31,
---------------------------------
1999 1998 1997*
------- ------- --------
Net Asset Value, Beginning of Period ....... $ 10.12 $ 9.46 $ 10.00
-------- -------- --------
Income From Operations
Net investment income (a)(f) ............ .30 .31 .09
Net realized and unrealized gain (loss) . .86 .78 .02
-------- -------- --------
Total income from operations ......... 1.16 1.09 .11
-------- -------- --------
Distributions
From net investment income .............. (.42) (.40) (.24)
From net realized gain .................. (.12) (.03) (.41)
-------- -------- --------
Total distributions .................. (.54) (.43) (.65)
-------- -------- --------
Net Asset Value, End of Period ............. $ 10.74 $ 10.12 $ 9.46
======== ======== ========
Total Return (%)(b) ........................ 11.80 11.66 1.04
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 295,542 161,108 3,554
Ratios to average net assets (%):
Operating expenses, net (c)(d) ....... .25 .25 .25
Operating expenses, gross (d)(e) ..... .50 .61
Net investment income (b) ............ 2.89 3.05 1.30
Portfolio turnover rate (%) ............. 64.63 78.85 29.58
* For the period September 16, 1997 (commencement of operations) to December
31, 1997.
(a) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the period less than one year are annualized.
(d) See Note 4 for current period amounts.
(e) The ratio for the period ended December 31, 1997 is not meaningful due to
the Class's short period of operation.
(f) Recognition of net investment income by the Fund is affected by the timing
of the declaration of dividends by the underlying companies in which the
Fund invests.
27 Balanced Strategy Fund
<PAGE>
Moderate Strategy Fund
Statement of Net Assets
December 31, 1999
Market
Number Value
of (000)
Shares $
--------- -----------
Investments
Portfolios of the Frank Russell Investment
Company Series Mutual
Fund - Class S Shares
Domestic Equities - 29.5%
Diversified Equity Fund 104,386 5,671,277
Quantitative Equity Fund 125,046 5,650,847
Real Estate Securities Fund 113,928 2,604,386
Special Growth Fund 21,476 1,056,196
-----------
14,982,706
-----------
International Equities - 11.2%
Emerging Markets Fund 82,842 1,037,179
International Securities Fund 61,634 4,629,353
-----------
5,666,532
-----------
Bonds - 59.2%
Diversified Bond Fund 624,707 13,599,878
Short Term Bond Fund 916,246 16,519,919
-----------
30,119,797
-----------
Short-Term Investments - 0.8%
Money Market Fund
due on demand (a) 419,000 419,000
-----------
Total Investments - 100.7%
(identified cost $49,974,847) 51,188,035
-----------
Other Assets and Liabilities
Other assets 377,541
Liabilities (710,303)
-----------
Total Other Assets and Liabilities,
Net - (0.7%) (332,762)
-----------
Net Assets - 100.0% 50,855,273
===========
Net Assets consist of:
Accumulated distributions in excess of
net investment income (6)
Accumulated net realized gain (loss) 628,638
Unrealized appreciation (depreciation)
on investments 1,213,188
Shares of beneficial interest 48,632
Additional paid-in capital 48,964,821
-----------
Net Assets 50,855,273
===========
Net Asset Value, offering and redemption price
per share:
Class C ($4,138,671 divided by 395,717
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.46
===========
Class D ($1,366,897 divided by 130,262
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.49
===========
Class E ($45,349,705 divided by 4,337,231
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.46
===========
(a) At amortized cost, which approximates market.
See accompanying notes which are an integral part of the financial statements.
Moderate Strategy Fund 28
<PAGE>
Moderate Strategy Fund
Statement of Operations
Year Ended December 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Income distributions from Underlying Funds ........................................ $ 1,562,323
Expenses
Advisory fees .................................................. $ 75,628
Administrative fees ............................................ 18,907
Distribution fees - Class C .................................... 10,299
Distribution fees - Class D .................................... 3,983
Shareholder servicing fees - Class C ........................... 3,433
Shareholder servicing fees - Class D ........................... 3,983
Shareholder servicing fees - Class E ........................... 87,119
-----------
Expenses before reductions ..................................... 203,352
Expense reductions ............................................. (94,535)
-----------
Expenses, net .................................................................. 108,817
-----------
Net investment income ................................................................ 1,453,506
-----------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments .................................................... (111,987)
Capital gain distributions from Underlying Funds ............... 1,482,825 1,370,838
-----------
Net change in unrealized appreciation (depreciation) on investments................... 655,773
-----------
Net realized and unrealized gain (loss) .............................................. 2,026,611
-----------
Net increase (decrease) in net assets from operations ................................ $ 3,480,117
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
29 Moderate Strategy Fund
<PAGE>
Moderate Strategy Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended December 31, 1999
1999 1998
------------- -------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ....................................... $ 1,453,506 $ 448,325
Net realized gain (loss) .................................... 1,370,838 64,608
Net change in unrealized appreciation (depreciation) ........ 655,773 570,808
------------ ------------
Net increase (decrease) in net assets from operations .... 3,480,117 1,083,741
------------ ------------
Distributions
From net investment income
Class C .................................................. (85,669) --
Class D .................................................. (61,084) (44,710)
Class E .................................................. (1,721,421) (478,737)
From net realized gain
Class C .................................................. (11,629) --
Class D .................................................. (13,921) (1,557)
Class E .................................................. (274,607) (16,063)
------------ ------------
Net decrease in net assets from distributions ......... (2,168,331) (541,067)
------------ ------------
Share Transactions
Net increase (decrease) in net assets from share transactions 29,190,454 19,425,232
------------ ------------
Total net increase (decrease) in net assets .................... 30,502,240 19,967,906
Net Assets
Beginning of period ......................................... 20,353,033 385,127
------------ ------------
End of period (including accumulated distributions in
excess of net investment income of $6 and undistributed
net investment income of $745, respectively) ............. $ 50,855,273 $ 20,353,033
============ ============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Moderate Strategy Fund 30
<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.
1999*
---------
Net Asset Value, Beginning of Period ........................ $ 10.15
---------
Income From Operations
Net investment income (a)(e) ............................. .32
Net realized and unrealized gain (loss) .................. .48
---------
Total income from operations .......................... .80
---------
Distributions
From net investment income ............................... (.40)
From net realized gain ................................... (.09)
---------
Total distributions ................................... (.49)
---------
Net Asset Value, End of Period .............................. $ 10.46
=========
Total Return (%)(b) ......................................... 8.03
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ................. 4,139
Ratios to average net assets (%):
Operating expenses, net (c)(d) ........................ 1.00
Operating expenses, gross (c)(d) ...................... 1.25
Net investment income (b) ............................. 3.35
Portfolio turnover rate (%) .............................. 120.04
* For the period February 11, 1999 (commencement of sale) to December 31,
1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
(d) See Note 4 for current period amounts.
(e) Recognition of net investment income by the Fund is affected by the timing
of the declaration of dividends by the underlying companies in which the
Fund invests.
31 Moderate Strategy Fund
<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.
Years Ended December 31,
------------------------
1999 1998*
--------- ---------
Net Asset Value, Beginning of Period ............ $ 10.15 $ 10.18
--------- ---------
Income From Operations
Net investment income (a)(e) ................. .33 .26
Net realized and unrealized gain (loss) ...... .50 .09
--------- ---------
Total income from operations .............. .83 .35
--------- ---------
Distributions
From net investment income ................... (.40) (.37)
From net realized gain ....................... (.09) (.01)
--------- ---------
Total distributions ....................... (.49) (.38)
--------- ---------
Net Asset Value, End of Period .................. $ 10.49 $ 10.15
========= =========
Total Return (%)(b) ............................. 8.40 3.57
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ..... 1,367 1,780
Ratios to average net assets (%):
Operating expenses, net (c)(d) ............ .50 .50
Operating expenses, gross (c)(d) .......... .75 1.01
Net investment income (b) ................. 3.28 2.65
Portfolio turnover rate (%) .................. 120.04 175.58
* For the period March 24, 1998 (commencement of sale) to December 31, 1998.
(a) Average month-end shares outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
(d) See Note 4 for current period amounts.
(e) Recognition of net investment income by the Fund is affected by the timing
of the declaration of dividends by the underlying companies in which the
Fund invests.
Moderate Strategy Fund 32
<PAGE>
Moderate 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 ...... $ 10.15 $ 9.61 $ 10.00
---------- ---------- ----------
Income From Operations
Net investment income (a)(f) ........... .40 .39 .07
Net realized and unrealized gain (loss) .46 .57 (.08)
---------- ---------- ----------
Total income from operations ........ .86 .96 (.01)
---------- ---------- ----------
Distributions
From net investment income ............. (.46) (.41) (.14)
From net realized gain ................. (.09) (.01) (.24)
---------- ---------- ----------
Total distributions ................. (.55) (.42) (.38)
---------- ---------- ----------
Net Asset Value, End of Period ............ $ 10.46 $ 10.15 $ 9.61
========== ========== ==========
Total Return (%)(b) ....................... 8.65 10.19 (.06)
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 45,350 18,573 385
Ratios to average net assets (%):
Operating expenses, net (c)(d) ...... .25 .25 .25
Operating expenses, gross (d)(e) .... .50 .94 --
Net investment income (b) ........... 3.87 3.71 1.01
Portfolio turnover rate (%) ............ 120.04 175.58 9.66
</TABLE>
* For the period October 2, 1997 (commencement of operations) to December
31, 1997.
(a) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
(d) See Note 4 for current period amounts.
(e) The ratio for the period ended December 31, 1997 is not meaningful due to
the Class's short period of operation.
(f) Recognition of net investment income by the Fund is affected by the timing
of the declaration of dividends by the underlying companies in which the
Fund invests.
33 Moderate Strategy Fund
<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 18,668 1,014,222
Quantitative Equity Fund 26,672 1,205,327
Real Estate Securities Fund 44,456 1,016,259
-----------
3,235,808
-----------
International Equities - 6.3%
Emerging Markets Fund 17,414 218,026
International Securities Fund 13,587 1,020,523
-----------
1,238,549
-----------
Bonds - 78.5%
Diversified Bond Fund 160,878 3,502,318
Short Term Bond Fund 658,280 11,868,793
-----------
15,371,111
-----------
Total Investments - 101.4%
(identified cost $19,860,711) 19,845,468
-----------
Other Assets and Liabilities
Other assets 136,205
Liabilities (408,635)
-----------
Total Other Assets and Liabilities,
Net - (1.4%) (272,430)
-----------
Net Assets - 100.0% 19,573,038
===========
Net Assets consist of:
Accumulated net realized gain (loss) (117,609)
Unrealized appreciation (depreciation)
on investments (15,243)
Shares of beneficial interest 19,306
Additional paid-in capital 19,686,584
-----------
Net Assets 19,573,038
===========
Net Asset Value, offering and redemption price
per share:
Class C ($1,697,162 divided by 167,697
shares of $10.12 $.01 par value shares of
beneficial interest outstanding) $ 10.12
===========
Class D ($1,000,894 divided by 98,504
shares of $10.16 $.01 par value shares of
beneficial interest outstanding) $ 10.16
===========
Class E ($16,874,982 divided by 1,664,387
shares $10.14 of $.01 par value shares of
beneficial interest outstanding) $ 10.14
===========
See accompanying notes which are an integral part of the financial statements.
Conservative Strategy Fund 34
<PAGE>
Conservative Strategy Fund
Statement of Operations
<TABLE>
<CAPTION>
Year Ended December 31, 1999
<S> <C> <C>
Investment Income
Income distributions from Underlying Funds ..................................... $ 723,875
Expenses
Advisory fees .................................................. $ 28,767
Administrative fees ............................................ 7,192
Distribution fees - Class C .................................... 3,270
Distribution fees - Class D .................................... 2,429
Shareholder servicing fees - Class C ........................... 1,090
Shareholder servicing fees - Class D ........................... 2,429
Shareholder servicing fees - Class E ........................... 32,430
---------
Expenses before reductions ..................................... 77,607
Expense reductions ............................................. (35,959)
---------
Expenses, net ............................................................... 41,648
---------
Net investment income ............................................................. 682,227
---------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments .................................................... (49,672)
Capital gain distributions from Underlying Funds ............... 285,443 235,771
---------
Net change in unrealized appreciation (depreciation) on investments................ (76,746)
---------
Net realized and unrealized gain (loss) ........................................... 159,025
---------
Net increase (decrease) in net assets from operations ............................. $ 841,252
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
35 Conservative Strategy Fund
<PAGE>
Conservative Strategy Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
------------ ------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ....................................... $ 682,227 $ 112,183
Net realized gain (loss) .................................... 235,771 10,145
Net change in unrealized appreciation (depreciation) ........ (76,746) 61,843
------------ ------------
Net increase (decrease) in net assets from operations .... 841,252 184,171
------------ ------------
Distributions
From net investment income
Class C .................................................. (48,743) --
Class D .................................................. (53,626) (18,645)
Class E .................................................. (864,296) (103,876)
From net realized gain
Class C .................................................. (4,447) --
Class D .................................................. (4,059) (70)
Class E .................................................. (62,267) (504)
------------ ------------
Net decrease in net assets from distributions ......... (1,037,438) (123,095)
------------ ------------
Share Transactions
Net increase (decrease) in net assets from share transactions 14,740,226 4,945,302
------------ ------------
Total net increase (decrease) in net assets .................... 14,544,040 5,006,378
Net Assets
Beginning of period ......................................... 5,028,998 22,620
------------ ------------
End of period (including undistributed net investment
income of $74 at December 31, 1998) ...................... $ 19,573,038 $ 5,028,998
============ ============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Conservative Strategy Fund 36
<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 Operations
Net investment income (a)(e) ............................. .43
Net realized and unrealized gain (loss) .................. .04
---------
Total income from operations .......................... .47
---------
Distributions
From net investment income ............................... (.56)
From net realized gain ................................... (.05)
---------
Total distributions ................................... (.61)
---------
Net Asset Value, End of Period .............................. $ 10.12
=========
Total Return (%)(b) ......................................... 4.67
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ................. 1,697
Ratios to average net assets (%):
Operating expenses, net (c)(d) ........................ 1.00
Operating expenses, gross (c)(d) ...................... 1.25
Net investment income (b) ............................. 4.77
Portfolio turnover rate (%) .............................. 125.01
* For the period February 11, 1999 (commencement of sale) to December 31,
1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
(d) See Note 4 for current period amounts.
(e) Recognition of net investment income by the Fund is affected by the timing
of the declaration of dividends by the underlying companies in which the
Fund invests.
37 Conservative Strategy Fund
<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.
Years Ended December 31,
------------------------
1999 1998*
--------- ---------
Net Asset Value, Beginning of Period ............... $ 10.25 $ 10.20
--------- ---------
Income From Operations
Net investment income (a)(e) .................... .44 .32
Net realized and unrealized gain (loss) ......... .08 .06
--------- ---------
Total income from operations ................. .52 .38
--------- ---------
Distributions
From net investment income ...................... (.56) (.33)
From net realized gain .......................... (.05) --
--------- ---------
Total distributions .......................... (.61) (.33)
--------- ---------
Net Asset Value, End of Period ..................... $ 10.16 $ 10.25
========= =========
Total Return (%)(b) ................................ 5.18 3.77
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) ........ 1,001 618
Ratios to average net assets (%):
Operating expenses, net (c)(d) ............... .50 .50
Operating expenses, gross (c)(d) ............. .75 1.73
Net investment income (b) .................... 4.24 3.09
Portfolio turnover rate (%) ..................... 125.01 169.79
* For the period March 24, 1998 (commencement of sale) to December 31, 1998.
(a) Average month-end shares outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
(d) See Note 4 for current period amounts.
(e) Recognition of net investment income by the Fund is affected by the timing
of the declaration of dividends by the underlying companies in which the
Fund invests.
Conservative Strategy Fund 38
<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 Operations
Net investment income (a)(f) ........... .49 .46 .07
Net realized and unrealized gain (loss) .06 .29 .07
---------- --------- ---------
Total income from operations ........ .55 .75 .14
---------- --------- ---------
Distributions
From net investment income ............. (.60) (.39) (.10)
From net realized gain ................. (.05) -- (.16)
---------- --------- ---------
Total distributions ................. (.65) (.39) (.26)
---------- --------- ---------
Net Asset Value, End of Period ............ $ 10.14 $ 10.24 $ 9.88
========== ========= =========
Total Return (%)(b) ....................... 5.54 7.70 1.36
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) 16,875 4,411 23
Ratios to average net assets (%):
Operating expenses, net (c)(d) ...... .25 .25 .25
Operating expenses, gross (d)(e) .... .50 2.50 --
Net investment income (b) ........... 4.76 4.41 .67
Portfolio turnover rate (%) ............ 125.01 169.79 0.00
</TABLE>
* For the period November 7, 1997 (commencement of operations) to December
31, 1997.
(a) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
(d) See Note 4 for current period amounts.
(e) The ratio for the period ended December 31, 1997 is not meaningful due to
the Class's short period of operation.
(f) Recognition of net investment income by the Fund is affected by the timing
of the declaration of dividends by the underlying companies in which the
Fund invests.
39 Conservative Strategy Fund
<PAGE>
Frank Russell Investment Company
LifePoints(R) Funds
Notes to Financial Statements
December 31, 1999
1. Organization
Frank Russell Investment Company (the "Investment Company") is a series
mutual fund with 29 different investment portfolios, (one of which has not
yet commenced operations) 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.
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
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 assuming a higher level of volatility than the Diversified
Equity Fund.
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.
Real Estate Securities Fund: To generate a high level of total return 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 securities of
non-US companies.
Notes to Financial Statements 40
<PAGE>
Frank Russell Investment Company
LifePoints(R) Funds
Notes to Financial Statements, continued
December 31, 1999
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 by
investing primarily in equity securities.
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 4:00 p.m. or the close
of regular trading on the New York Stock Exchange, if earlier. Short-term
investments having a maturity of sixty days or less are valued at
amortized cost.
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: Distributions of income and capital gains from the
Underlying Funds are recorded on the ex-dividend date.
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 and capital gains. 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 December 31, 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 $198,081,611 $ 24,230,121 $ (1,165,191) $ 23,064,930
Aggressive Strategy 190,464,118 14,557,245 (2,551,111) 12,006,134
Balanced Strategy 330,703,112 23,002,146 (10,013,882) 12,988,264
Moderate Strategy 50,378,764 1,923,993 (1,114,722) 809,271
Conservative Strategy 19,978,320 546,563 (679,415) (132,852)
</TABLE>
41 Notes to Financial Statements
<PAGE>
Frank Russell Investment Company
LifePoints(R) Funds
Notes to Financial Statements, continued
December 31, 1999
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 and
capital gains.
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.
The following reclassifications have been made to reflect activity for the
year ended December 31, 1999:
Undistributed Accumulated Additional
Net Investment Net Realized Paid-in
Income Gain (Loss) Capital
-------------- ------------ ----------
Equity Aggressive Strategy $ 4,584,550 $(4,584,550) $ --
Aggressive Strategy 3,100,143 (3,100,143) --
Balanced Strategy 4,213,451 (4,219,281) 5,830
Moderate Strategy 413,916 (413,916) --
Conservative Strategy 284,364 (281,844) (2,520)
Expenses: Expenses, other than Class specific expenses, are allocated to
each Class of shares based upon their relative net assets. Expenses
included in the accompanying financial statements reflect the expenses of
each Fund and do not include any expenses associated with the Underlying
Funds.
3. Investment Transactions
Securities: During the year ended December 31, 1999, purchases and sales
of the Underlying Funds (excluding Money Market Fund investments) were as
follows:
Purchases Sales
------------ ------------
Equity Aggressive Strategy $229,597,401 $123,058,841
Aggressive Strategy 216,509,670 89,465,822
Balanced Strategy 338,927,326 166,926,974
Moderate Strategy 75,665,677 45,245,259
Conservative Strategy 32,802,993 17,819,252
4. Related Parties
Advisor and Administrator: FRIMCo advises and administers all of the Funds
which compromise the Investment Company. FRIMCo is a wholly owned
subsidiary of Frank Russell Company, a wholly owned subsidiary of The
Northwestern Mutual Life Insurance Company.
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. As
of December 31, 1999, $7,686,000 of the Money Market Fund's net assets
represents investments by these Funds and $942,284,000 represents the
investments of other affiliated Funds not presented herein.
The Funds are 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
assets. For the year ended December 31, 1999, the Advisor contractually
agreed to waive both the advisory fee and the administrative fee.
Notes to Financial Statements 42
<PAGE>
Frank Russell Investment Company
LifePoints(R) Funds
Notes to Financial Statements, continued
December 31, 1999
No LifePoints Fund will bear any operating expenses. Operating expenses
include those expenses arising from accounting, custody, auditing, legal
and transfer agent services. They do not include expenses attributable to
advisory and administrative fees (which are currently waived by FRIMCo),
any Rule 12b-1 distribution fee, any shareholder service fees, or any
nonrecurring extraordinary expenses, which will be borne by the LifePoints
Funds or their appropriate classes of shares.
A LifePoints Fund's operating expenses are borne either by the Underlying
Funds in which the LifePoints Fund invests or by FRIMCo. This arrangement
is governed by Special Servicing Agreements among each of the affected
Funds and FRIMCo. Those agreements are entered into on a yearly basis and
must be re-approved annually by the Investment Company's Board of
Trustees.
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 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 distribution 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.
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, Class D, 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, Class D, and Class C shares
on an annual basis.
Accrued Shareholder Servicing and Distribution fees payable to affiliates
as of December 31, 1999 were as follows:
Equity Aggressive Strategy $ 54,080
Aggressive Strategy 58,275
Balanced Strategy 96,483
Moderate Strategy 13,113
Conservative Strategy 5,386
--------
$227,337
========
Board of Trustees: The Investment Company pays each of its Trustees not
affiliated with FRIMCo a retainer of $30,000 per year plus out-of-pocket
expenses. Total Trustee expenses for the year ended December 31, 1999 were
$23,864. The LifePoints Funds' share of these fees and expenses have been
paid for by the Underlying Funds or FRIMCo under the aforementioned
Special Servicing Agreements.
43 Notes to Financial Statements
<PAGE>
Frank Russell Investment Company
LifePoints(R) Funds
Notes to Financial Statements, continued
December 31, 1999
5. Fund Share Transactions
Share transactions for the year ended December 31, 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 10,976,153 9,545,046 $ 111,250,338 $ 86,677,483
Proceeds from reinvestment of distributions 735,158 150,876 7,739,848 1,443,025
Payments for shares redeemed (3,307,666) (702,666) (34,267,608) (6,451,225)
---------- --------- ------------- -------------
Net increase (decrease) 8,403,645 8,993,256 84,722,578 81,669,283
---------- --------- ------------- -------------
Class D (a)
Proceeds from shares sold 340,578 502,893 3,495,409 4,784,572
Proceeds from reinvestment of distributions 15,864 3,888 162,828 36,704
Payments for shares redeemed (531,958) (4,767) (5,425,508) (46,096)
---------- --------- ------------- -------------
Net increase (decrease) (175,516) 502,014 (1,767,271) 4,775,180
---------- --------- ------------- -------------
Class C (b)
Proceeds from shares sold 1,544,511 -- 16,146,443 --
Proceeds from reinvestment of distributions 29,855 -- 325,930 --
Payments for shares redeemed (180,588) -- (1,867,918) --
---------- --------- ------------- -------------
Net increase (decrease) 1,393,778 -- 14,604,455 --
---------- --------- ------------- -------------
Total increase (decrease) 9,621,907 9,495,270 $ 97,559,762 $ 86,444,463
========== ========= ============= =============
Aggressive Strategy
Class E
Proceeds from shares sold 10,507,851 6,093,738 $ 107,829,314 $ 58,657,811
Proceeds from reinvestment of distributions 546,129 99,583 5,705,859 955,622
Payments for shares redeemed (2,297,816) (517,340) (23,658,744) (4,851,956)
---------- --------- ------------- -------------
Net increase (decrease) 8,756,164 5,675,981 89,876,429 54,761,477
---------- --------- ------------- -------------
Class D (a)
Proceeds from shares sold 506,069 450,907 5,173,737 4,313,477
Proceeds from reinvestment of distributions 18,899 5,923 196,766 57,363
Payments for shares redeemed (347,272) (90,064) (3,547,495) (785,915)
---------- --------- ------------- -------------
Net increase (decrease) 177,696 366,766 1,823,008 3,584,925
---------- --------- ------------- -------------
Class C (c)
Proceeds from shares sold 2,762,515 -- 28,710,464 --
Proceeds from reinvestment of distributions 47,843 -- 513,771 --
Payments for shares redeemed (175,820) -- (1,831,085) --
---------- --------- ------------- -------------
Net increase (decrease) 2,634,538 -- 27,393,150 --
---------- --------- ------------- -------------
Total increase (decrease) 11,568,398 6,042,747 $ 119,092,587 $ 58,346,402
========== ========= ============= =============
</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 are for the period February 11, 1999 (commencement
of sale of shares) to December 31, 1999.
(c) Fund share transactions are for the period January 29, 1999 (commencement
of sale of shares) to December 31, 1999.
Notes to Financial Statements 44
<PAGE>
Frank Russell Investment Company
LifePoints(R) Funds
Notes to Financial Statements, continued
December 31, 1999
<TABLE>
<CAPTION>
Shares Dollars
---------------------------- ---------------------------------
Balanced Strategy 1999 1998 1999 1998
---------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
Class E
Proceeds from shares sold 15,883,305 17,549,534 $ 162,202,404 $ 172,155,709
Proceeds from reinvestment of distributions 1,237,575 523,953 12,726,961 5,173,243
Payments for shares redeemed (5,535,963) (2,524,583) (57,343,595) (24,860,635)
---------- ---------- ------------- -------------
Net increase (decrease) 11,584,917 15,548,904 117,585,770 152,468,317
---------- ---------- ------------- -------------
Class D (a)
Proceeds from shares sold 744,198 504,049 7,761,359 4,926,188
Proceeds from reinvestment of distributions 27,083 8,519 279,748 84,433
Payments for shares redeemed (417,501) (23,373) (4,289,415) (221,190)
---------- ---------- ------------- -------------
Net increase (decrease) 353,780 489,195 3,751,692 4,789,431
---------- ---------- ------------- -------------
Class C (b)
Proceeds from shares sold 3,746,798 -- 38,468,393 --
Proceeds from reinvestment of distributions 74,392 -- 774,941 --
Payments for shares redeemed (153,460) -- (1,579,216) --
---------- ---------- ------------- -------------
Net increase (decrease) 3,667,730 -- 37,664,118 --
---------- ---------- ------------- -------------
Total increase (decrease) 15,606,427 16,038,099 $ 159,001,580 $ 157,257,748
========== ========== ============= =============
Moderate Strategy
Class E
Proceeds from shares sold 3,290,795 2,231,041 $ 33,625,382 $ 22,075,376
Proceeds from reinvestment of distributions 189,865 44,242 1,938,598 438,860
Payments for shares redeemed (973,411) (485,375) (9,947,211) (4,821,156)
---------- ---------- ------------- -------------
Net increase (decrease) 2,507,249 1,789,908 25,616,769 17,693,080
---------- ---------- ------------- -------------
Class D (a)
Proceeds from shares sold 208,042 195,126 2,110,425 1,928,847
Proceeds from reinvestment of distributions 7,349 4,649 75,005 46,186
Payments for shares redeemed (260,416) (24,489) (2,646,866) (242,881)
---------- ---------- ------------- -------------
Net increase (decrease) (45,025) 175,286 (461,436) 1,732,152
---------- ---------- ------------- -------------
Class C (c)
Proceeds from shares sold 442,297 -- 4,515,653 --
Proceeds from reinvestment of distributions 9,292 -- 95,232 --
Payments for shares redeemed (55,873) -- (575,764) --
---------- ---------- ------------- -------------
Net increase (decrease) 395,716 -- 4,035,121 --
---------- ---------- ------------- -------------
Total increase (decrease) 2,857,940 1,965,194 $ 29,190,454 $ 19,425,232
========== ========== ============= =============
</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 are for the period January 29, 1999 (commencement
of sale of shares) to December 31, 1999.
(c) Fund share transactions are for the period February 11, 1999 (commencement
of sale of shares) to December 31, 1999.
45 Notes to Financial Statements
<PAGE>
Frank Russell Investment Company
LifePoints(R) Funds
Notes to Financial Statements, continued
December 31, 1999
<TABLE>
<CAPTION>
Shares Dollars
-------------------------- -------------------------------
Conservative Strategy 1999 1998 1999 1998
--------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Class E
Proceeds from shares sold 1,647,322 511,083 $ 16,886,081 $ 5,168,551
Proceeds from reinvestment of distributions 90,532 9,863 915,578 99,711
Payments for shares redeemed (504,166) (92,535) (5,163,670) (935,823)
--------- ------- ------------ ------------
Net increase (decrease) 1,233,688 428,411 12,637,989 4,332,439
--------- ------- ------------ ------------
Class D (a)
Proceeds from shares sold 114,508 71,083 1,171,630 722,509
Proceeds from reinvestment of distributions 5,689 1,849 57,686 18,714
Payments for shares redeemed (81,941) (12,685) (833,393) (128,360)
--------- ------- ------------ ------------
Net increase (decrease) 38,256 60,247 395,923 612,863
--------- ------- ------------ ------------
Class C (b)
Proceeds from shares sold 169,843 -- 1,729,013 --
Proceeds from reinvestment of distributions 4,421 -- 44,406 --
Payments for shares redeemed (6,567) -- (67,105) --
--------- ------- ------------ ------------
Net increase (decrease) 167,697 -- 1,706,314 --
--------- ------- ------------ ------------
Total increase (decrease) 1,439,641 488,658 $ 14,740,226 $ 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.
(b) Fund share transactions are for the period February 11, 1999
(commencement of sale of shares) to December 31, 1999.
6. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $75
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .10% on the average daily unused amount of the
aggregate commitment, which is allocated among each of the Participants.
Interest, at the Federal Fund Rate plus .50% annually (Federal Fund Rate
plus 1.75% prior to and including February 27, 2000), is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up
to a maximum of 10 percent of the value of its net assets under the
agreement. The agreement will expire December 30, 2000. The Fund did not
have any drawdowns during the year.
7. Beneficial Interest
As of December 31, 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 Aggressive Strategy - Class E 23.7 10.9 10.1 --
Equity Aggressive Strategy - Class D 52.8 17.5 13.5 --
Aggressive Strategy - Class E 10.8 -- -- --
Aggressive Strategy - Class D 38.0 33.4 -- --
Balanced Strategy - Class E 20.5 -- -- --
Balanced Strategy - Class D 45.4 36.7 -- --
Moderate Strategy - Class E 20.0 11.5 -- --
Moderate Strategy - Class D 45.3 21.2 11.7 11.6
Conservative Strategy - Class E 15.1 -- -- --
Conservative Strategy - Class D 62.4 21.2 -- --
Conservative Strategy - Class C 15.2 14.8 12.0 --
Notes to Financial Statements 46
<PAGE>
Report of Independent Accountants
To the Board of Trustees and Shareholders
of Frank Russell Investment Company:
In our opinion, the accompanying statements of net assets, and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
each of the series of Frank Russell Investment Company (in this report comprised
of LifePoints Funds: Equity Aggressive Strategy, Aggressive Strategy, Balanced
Strategy, Moderate Strategy, and Conservative Strategy (the "Funds")) at
December 31, 1999, and the results of each of their operations, the changes in
each of their net assets and the financial highlights for the periods indicated
therein, in conformity with generally accepted accounting principles in the
United States. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Funds'
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
/s/ PricewaterhouseCoopers LLP
Seattle, Washington
February 16, 2000
47 Report of Independent Accountants
<PAGE>
Frank Russell Investment Company
LifePoints(R) Funds
Tax Information
December 31, 1999 (Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the
following amounts as long-term capital gain dividends for their taxable year
ended December 31, 1999:
Total Long-Term
Capital Gains
---------------
Equity Aggressive Strategy $2,240,386
Aggressive Strategy 1,255,057
Balanced Strategy 2,408,086
Moderate Strategy 230,205
Conservative Strategy 225,492
Tax Information 48
<PAGE>
Frank Russell Investment Company
909 A Street, Tacoma, Washington 98402
(800) 832-6688
In Washington (253) 627-7001
Trustees
Lynn L. Anderson, Chairman
Paul E. Anderson
Paul Anton, PhD
William E. Baxter
Lee C. Gingrich
Eleanor W. Palmer
Trustees Emeritus
George F. Russell, Jr.
Officers
Lynn L. Anderson, Chairman of the Board and President
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
Allan Forbes Building
150 Newport Avenue AFB35
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 Fourth Avenue Plaza
Suite 4200
Seattle, WA 98154
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
Jacobs Levy Equity Management, Inc., Roseland, NJ
Lincoln Capital Management Company, Chicago, IL
Marsico Capital Management, LLC, Denver, CO
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
Westpeak Investment Advisors, L.P., Boulder, CO
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 Ltd., 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, LLC, 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 Limited, London, England
Genesis Asset Managers Limited, London, England
Nicholas Applegate Capital Management, San Diego, CA
Sanford C. Bernstein & Co., Inc., New York, NY
Schroder Investment Management North America 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.
49 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
Lazard Asset Management, New York, NY
Miller Anderson & Sherrerd, West Conshohocken, PA
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.
Manager, Money Managers and Service Providers 50
<PAGE>
- --------------
[LOGO] Russell
- --------------
Frank Russell Investment Company
909 A Street
Tacoma, WA 98402-5120
253-627-7001
800-972-0700
Fax: 253-591-3495 36-08-022(200[ILLEGIBLE]
