<PAGE>
-------------
RUSSELL FUNDS
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FRANK RUSSELL INVESTMENT COMPANY
2000 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
TAX EXEMPT BOND FUND
CLASS C AND S SHARES
TAX-MANAGED LARGE CAP FUND
(FORMERLY EQUITY T FUND)
TAX-MANAGED SMALL CAP FUND
OCTOBER 31, 2000
[LOGO OF FRANK RUSSELL INVESTMENT COMPANY]
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
Frank Russell Investment Company
is a "series mutual fund" with 29
different investment portfolios.
These financial statements report
on thirteen 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
OCTOBER 31, 2000
TABLE OF CONTENTS
Page
Letter to Our Client................................................... 2
Diversified Equity Fund................................................ 3
Special Growth Fund.................................................... 21
Equity Income Fund..................................................... 41
Quantitative Equity Fund............................................... 57
International Securities Fund.......................................... 73
Emerging Markets Fund.................................................. 95
Real Estate Securities Fund............................................ 113
Short Term Bond Fund................................................... 123
Diversified Bond Fund.................................................. 137
Multistrategy Bond Fund................................................ 159
Tax Exempt Bond Fund................................................... 187
Tax-Managed Large Cap Fund............................................. 203
Tax-Managed Small Cap Fund............................................. 213
Notes to Financial Statements.......................................... 232
Report of Independent Accounts......................................... 248
Tax Information........................................................ 249
Manager, Money Managers and Service Providers.......................... 250
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 Company. Frank Russell Company and Standard & Poor's
Corporation are the owners of the trademarks, service marks, and copyrights
related to their respective indexes. This material must be accompanied or
preceded by a current Frank Russell Investment Company Prospectus containing
complete information concerning the investment objectives and operations of the
company, charges, and expenses. The Prospectus should be read carefully, before
an investment is made. The performance quoted represents past performance and
the investment return and principal value of an investment will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Investments in securities of non-US issuers and foreign currencies involve
investment risks different than those of US issuers; the Prospectus contains
further information and details regarding these risks. Russell Fund
Distributors, Inc., is the distributor of Frank Russell Investment Company.
<PAGE>
TO OUR CLIENTS
We are pleased to present the Frank Russell Investment Company 2000 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 2000, 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 1999 we have implemented changes in our Funds' structure
which we believe will benefit current and potential investors. Class Y shares of
the Institutional Funds were opened for investment, and the LifePoints(R) Funds
added Class S shares during 2000. Additionally, the Tax-Managed Global Equity
Fund was opened for investment in January 2000, providing a diversified
asset-allocated product to compliment the existing tax-managed Russell funds.
Thank you for your continued confidence and investment with Frank Russell
Investment Company. We look forward to 2001 and continuing to earn your support.
Sincerely,
/s/ Lynn L. Anderson
Lynn L. Anderson.
Chairman of the Board
Frank Russell Investment Company
<PAGE>
DIVERSIFIED EQUITY FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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 three separate and distinct
investment styles.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
DATES DIVERSIFIED EQUITY - CLASS S RUSSELL 1000(R)**
Inception* $10,000 $10,000
1991 $13,441 $13,659
1992 $14,652 $15,127
1993 $17,073 $17,515
1994 $17,665 $18,058
1995 $21,943 $22,935
1996 $26,953 $28,192
1997 $35,931 $37,168
1998 $41,651 $44,495
1999 $51,294 $55,878
2000 $53,093 $60,939
YEARLY PERIODS ENDED OCTOBER 31
<TABLE>
<CAPTION>
DIVERSIFIED EQUITY FUND - CLASS S DIVERSIFIED EQUITY FUND - CLASS C++++
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
-------------------------------------------------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $10,351 3.51% 1 Year $10,250 2.50%
5 Years $24,196 19.31%(S) 5 Years $23,593 18.71%(S)
10 Years $53,093 18.16%(S) 10 Years $51,768 17.86%(S)
DIVERSIFIED EQUITY FUND - CLASS E++ RUSSELL 1000(R) INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
-------------------------------------------------------- -------------------------------------------------------
1 Year $10,323 3.23% 1 Year $10,906 9.06%
5 Years $23,881 19.00%(S) 5 Years $26,571 21.59%(S)
10 Years $52,402 18.00%(S) 10 Years $60,939 19.81%(S)
</TABLE>
3 Diversified Equity Fund
<PAGE>
DIVERSIFIED EQUITY FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the ten months ended October 31, 2000, the Diversified Equity Fund Class S,
Class E and Class C shares lost 4.28%, 4.49% and 5.07%, respectively. This
compared to a gain of 0.28% for the Russell 1000(R) Index.
The Fund's performance reflected the impact of both general stock market
transitions and Fund-specific manager changes implemented during the period.
During the first quarter of the year, active managers faced challenges from a
narrowly focused stock market that emphasized technology stocks at the expense
of most other sectors. During the last six months of the period, the market
trends reversed, ending with a value bias and a decidedly unfavorable climate
for technology. This reversal coupled with the Fund's new manager lineup, helped
produce solid late-period results.
PORTFOLIO HIGHLIGHTS
In a period that was highlighted by significant market volatility and sharp
switches in style and sector leadership, the Fund's structure was enhanced in
keeping with a changing market and index environment. After careful analysis, in
March 2000 the Fund's manager lineup was modified. Strong Capital Management, a
growth-stock manager with a mid-cap bias, and Turner Investment Partners, a
concentrated, large-cap growth manager were added to the Fund. Lincoln Capital
Management Company, a growth manager, and Trinity Investment Management Corp., a
value manager were terminated. At the same time, Barclays' assignment was
modified to focus more narrowly on value and eliminate midcap exposure, which
had become redundant under the new manager lineup. The Fund's manager structure
now includes a broader cap exposure on the growth side and a more diversified
value strategy.
The Fund trailed its benchmark during the first quarter as it felt the impact of
transition costs related to hiring the new managers. This effect on Fund results
also drove down performance through much of the remaining period. The last
several months of the period, however, provided a positive validation of the
changes implemented earlier in the year. Within the volatile Technology sector,
the Fund successfully de-emphasized personal computer and semiconductor stocks
such as Dell, Intel and Microsoft, while emphasizing rapidly growing Internet
infrastructure and fiber optics companies, such as Juniper, I2, and Integrated
Device Technology.
During the last three months of the period, the Fund's new manager lineup also
captured significant opportunity in both growth and value styles during the
stock market's unexpected switch from growth to value stocks. The Fund's
late-period positive performance reflected the potential benefits of broader cap
exposure in growth and a more diversified value strategy.
TOP TEN EQUITY HOLDINGS
(as a percent of Total Investments) October 31, 2000
General Electric Co. 3.8%
Cisco Systems, Inc. 2.6
Citigroup, Inc. 2.5
Exxon Mobil Corp. 1.9
Pfizer, Inc. 1.8
EMC Corp. 1.6
Sun Microsystems, Inc. 1.5
Merck & Co., Inc. 1.5
American International Group, Inc. 1.4
SBC Communications, Inc. 1.3
PORTFOLIO CHARACTERISTICS
October 31, 2000
Current P/E Ratio 23.7x
Portfolio Price/Book Ratio 4.7x
Market Capitalization - $-Weighted Average 109.33 Bil
Number of Holdings 718
MONEY MANAGERS STYLE
Alliance Capital Management L.P. Growth
Barclays Global Fund Advisors Market-Oriented
Equinox Capital Management, Inc. Value
Jacobs Levy Equity Management, Inc. Market-Oriented
Marsico Capital Management, LLC Growth
Peachtree Asset Management Market-Oriented
Sanford C. Bernstein & Co., Inc. Value
Strong Capital Management, Inc. Growth
Suffolk Capital Management, Inc. Market-Oriented
Turner Investment Partners, Inc. Growth
Westpeak Investment Advisors, LP Market-Oriented
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* Diversified Equity Fund Class S assumes initial investment on November 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 $1.6 billion. The
Russell 1000(R) Index represents the universe of stocks from which most
active money managers typically select. The Russell 1000(R) Index return
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.
(S) 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
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
COMMON STOCKS - 95.4%
AUTO AND TRANSPORTATION - 1.8%
Airborne Freight Corp. 1,100 11
AMR Corp. (a) 35,200 1,153
ArvinMeritor, Inc. 8,925 149
AutoNation, Inc. (a) 53,900 364
AutoZone, Inc. (a) 14,600 391
Bandag, Inc. 1,600 57
Burlington Northern, Inc. 47,420 1,260
CNF Transportation, Inc. 600 16
Continental Airlines, Inc. Class B (a) 43,600 2,289
Cooper Tire & Rubber Co. 9,700 106
Delphi Automotive Systems Corp. 21,587 339
Delta Air Lines, Inc. 74,500 3,520
Eaton Corp. 6,100 415
Expeditors International of Washington, Inc. 1,000 52
FedEx Corp. (a) 18,200 853
Ford Motor Co. 169,705 4,434
GATX Corp. 2,200 93
General Motors Corp. 64,232 3,990
Genuine Parts Co. 4,910 105
Harley-Davidson, Inc. 17,300 834
Hertz Corp. Class A 2,400 79
Hunt (JB) Transportation Services, Inc. 7,200 94
Kansas City Southern Industries, Inc. (a) 1,850 16
KLM Royal Dutch Airlines (a) 66,800 1,211
Lear Corp. (a) 44,700 1,218
Norfolk Southern Corp. 10,500 148
Northwest Airlines Corp. Class A (a) 53,600 1,521
PACCAR, Inc. 1,560 66
Ryder System, Inc. 200 4
Southwest Airlines Co. 2,300 66
Swift Transportation Co., Inc. (a) 1,300 18
Trinity Industries, Inc. 900 22
UAL Corp. 63,390 2,404
Union Pacific Corp. 26,940 1,262
Visteon Corp. 6,085 107
-------
28,667
-------
CONSUMER DISCRETIONARY - 8.9%
Abercrombie & Fitch Co. Class A (a) 100 2
AC Nielsen Corp. (a) 7,900 189
Advo Systems, Inc. (a) 3,300 121
Alberto Culver Co. Class B 3,800 128
AT&T Corp. - Liberty Media Group Class A (a) 484,974 8,730
Avon Products, Inc. 5,100 247
Banta Corp. 5,100 118
Bed Bath & Beyond, Inc. (a) 47,500 1,223
Best Buy Co. (a) 7,000 351
BJ's Wholesale Club, Inc. (a) 1,900 63
Black & Decker Corp. 27,900 1,050
Brinker International, Inc. (a) 8,700 341
Brunswick Corp. 18,700 363
Callaway Golf Co. 3,200 51
Carnival Corp. 25,800 640
Catalina Marketing Corp. (a) 2,700 106
CBRL Group, Inc. 4,200 75
Cendant Corp. (a) 59,500 714
Circuit City Stores - Circuit City Group 4,800 64
Clear Channel Communications, Inc. (a) 75,232 4,519
Convergys Corp. (a) 9,400 409
Costco Wholesale Corp. (a) 105,886 3,878
Darden Restaurants, Inc. 26,300 592
Diamond Technology Partners, Inc. (a) 700 31
Disney (Walt) Co. 275,640 9,871
Dollar Tree Stores, Inc. (a) 25,300 988
Donnelley (R.R.) & Sons Co. 24,400 525
Eastman Kodak Co. 16,700 749
EchoStar Communications Corp. Class A (a) 1,400 63
Energizer Holdings, Inc. (a) 10,099 199
Federated Department Stores, Inc. (a) 23,100 752
Fluor Corp. 6,200 217
Fortune Brands, Inc. 7,600 224
Four Seasons Hotels, Inc. 36,768 2,684
Gannett Co., Inc. 29,900 1,734
Gap, Inc. 7,300 188
Harcourt General, Inc. 4,000 224
Harrah's Entertainment, Inc. (a) 13,700 392
Hasbro, Inc. 5,100 55
Home Depot, Inc. (The) 308,606 13,270
Houghton Mifflin Co. 200 7
Infinity Broadcasting Corp. Class A (a) 14,200 472
Interpublic Group Cos., Inc. 13,400 575
JC Penney & Co., Inc. 2,400 28
Kelly Services, Inc. Class A 900 20
Kimberly-Clark Corp. 69,900 4,613
Kmart Corp. (a) 46,500 276
Knight-Ridder, Inc. 9,950 500
Kohl's Corp. (a) 219,810 11,911
Lancaster Colony Corp. 1,300 31
Land's End, Inc. (a) 200 5
Learning Tree International, Inc. (a) 2,800 126
Limited, Inc. (The) 36,000 909
Linens 'N Things, Inc. (a) 78,800 2,423
Liz Claiborne, Inc. 8,100 344
Lowe's Cos., Inc. 45,400 2,074
5 Diversified Equity Fund
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
May Department Stores Co. 34,660 910
Maytag Corp. 1,400 40
McDonald's Corp. 44,800 1,389
McGraw-Hill, Inc. 8,800 565
MGM Grand, Inc. 6,300 218
Neiman Marcus Group, Inc. (The) Class A (a) 2,100 78
New York Times Co. Class A 27,600 1,014
Newell Rubbermaid, Inc. 5,100 98
NIKE, Inc. Class B 3,700 148
NTL, Inc. (a) 2,900 127
Office Depot, Inc. (a) 24,600 204
Omnicom Group, Inc. 28,101 2,592
PanAmSat Corp. (a) 1,300 43
Park Place Entertainment Corp. (a) 32,900 419
Payless ShoeSource, Inc. (a) 3,700 214
Penton Media, Inc. 2,300 70
Pier 1 Imports, Inc. 13,500 179
Pittston Brink's Group 5,600 89
Pixar, Inc. (a) 100 3
Plantronics, Inc. (a) 5,900 269
Reebok International, Ltd. (a) 1,300 28
Robert Half International, Inc. (a) 53,400 1,629
Ross Stores, Inc. 600 8
Russell Corp. 800 13
Sabre Holdings, Corp. 7,500 251
Safeguard Scientifics, Inc. (a) 4,200 65
Saks, Inc. (a) 6,200 63
Scholastic Corp. (a) 1,400 112
Sears Roebuck & Co. 40,600 1,207
Shaw Industries, Inc. 6,900 128
Sirius Satellite Radio, Inc. (a) 1,100 55
Stanley Works (The) 8,600 229
Starbucks Corp. (a) 600 27
Starwood Hotels & Resorts Worldwide, Inc. 4,400 130
Target Corp. 38,600 1,066
Tiffany & Co. 73,703 3,146
Time Warner, Inc. 87,400 6,635
TJX Cos., Inc. 900 25
Toys "R" Us, Inc. (a) 17,500 301
Tribune Co. 48,300 1,790
Tricon Global Restaurants, Inc. (a) 2,100 63
Tupperware Corp. 11,300 194
United Stationers, Inc. (a) 3,600 108
UnitedGlobalCom, Inc. Class A (a) 1,600 51
Univision Communications, Inc. Class A (a) 400 15
USA Networks, Inc. (a) 199,900 4,035
V.F. Corp. 5,600 153
Valassis Communications, Inc. (a) 500 14
Venator Group, Inc. (a) 4,500 64
Viacom, Inc. Class B (a) 200,114 11,381
Viad Corp. 1,800 39
Wal-Mart Stores, Inc. 290,789 13,196
Wallace Computer Services, Inc. 8,300 121
Wendy's International, Inc. 16,200 353
Westwood One, Inc. (a) 12,900 245
Whirlpool Corp. 16,310 710
Zale Corp. (a) 50,160 1,700
-------
138,473
-------
Consumer Staples - 4.7%
Albertson's, Inc. 13,000 308
Anheuser-Busch Cos., Inc. 186,380 8,527
Campbell Soup Co. 7,100 208
Clorox Co. (The) 50,000 2,231
Coca-Cola Co. (The) 52,700 3,182
Coca-Cola Enterprises, Inc. 500 9
Colgate-Palmolive Co. 68,300 4,013
ConAgra, Inc. 39,070 835
Coors (Adolph) Co. Class B 6,100 388
Delhaize America, Inc. 7,912 135
Dreyers Grand Ice Cream, Inc. 800 20
General Mills, Inc. 4,500 188
Gillette Co. (The) 7,700 269
Heinz (H.J.) Co. 76,570 3,211
IBP, Inc. 18,700 385
Interstate Bakeries Corp. 8,600 120
Keebler Foods Co. 5,700 231
Kroger Co. (The) (a) 114,800 2,590
McCormick & Co., Inc. 11,200 355
Nabisco Group Holdings Corp. 11,500 332
Nabisco Holdings Corp. Class A 2,000 108
Pepsi Bottling Group, Inc. (The) 65,113 2,255
PepsiCo, Inc. 216,770 10,500
Philip Morris Cos., Inc. 216,530 7,930
Procter & Gamble Co. 118,200 8,444
Quaker Oats Co. (The) 18,000 1,468
R.J. Reynolds Tobacco Holdings, Inc. 24,100 862
Ralston-Purina Group 50,700 1,229
Safeway, Inc. (a) 65,200 3,566
Sara Lee Corp. 23,200 500
Smithfield Foods, Inc. (a) 3,400 98
SuperValu, Inc. 13,300 204
SYSCO Corp. 44,380 2,316
Tyson Foods, Inc. Class A 11,300 126
UST Corp. 5,900 149
Walgreen Co. 104,000 4,745
Winn-Dixie Stores, Inc. 14,700 283
Wrigley (Wm.), Jr. Co. 5,000 396
-------
72,716
-------
Diversified Equity Fund 6
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
FINANCIAL SERVICES - 18.3%
Aetna, Inc. 12,900 746
Affiliated Managers Group, Inc. (a) 3,900 234
AFLAC, Inc. 27,600 2,017
Allmerica Financial Corp. 1,600 101
Allstate Corp. 76,200 3,067
Ambac Financial Group, Inc. 5,800 463
American Express Co. 143,915 8,635
American General Corp. 41,400 3,333
American International Group, Inc. 230,027 22,543
AmeriCredit Corp. (a) 8,000 215
AmSouth Bancorp 19,100 266
AON Corp. 34,700 1,438
Apartment Investment & Management Co. Class A (e) 9,600 439
Associates First Capital Corp. Class A 88,000 3,267
Astoria Financial Corp. 7,940 298
AXA Financial, Inc. 19,700 1,065
BancWest Corp. 1,200 25
Bank of America Corp. 226,928 10,907
Bank of New York Co., Inc. 58,700 3,379
Bank One Corp. 122,900 4,486
BB&T Corp. 20,800 663
Bear Stearns Companies Inc. (The) 18,339 1,112
Block (H&R), Inc. 2,800 100
Catellus Development Corp. (a) 3,200 58
Charter One Financial, Inc. 39,565 908
Chase Manhattan Corp. 126,825 5,771
Chubb Corp. (The) 24,950 2,107
CIGNA Corp. 35,100 4,280
Cincinnati Financial Corp. 8,600 316
CIT Group, Inc. 110,500 1,927
Citigroup, Inc. 737,417 38,807
CNA Financial Corp. (a) 4,320 158
Colonial BancGroup, Inc. 4,200 37
Comerica, Inc. 9,300 561
Commerce Bancshares, Inc. 700 25
Compass Bancshares, Inc. 4,000 73
Concord EFS, Inc. (a) 23,600 974
Conseco, Inc. 53,500 371
Countrywide Credit Industries, Inc. 9,060 339
Crescent Real Estate Equities, Inc. (e) 12,300 248
Dime Bancorp, Inc. 1,900 46
Donaldson, Lufkin & Jenrette, Inc. 4,800 431
Dow Jones & Co., Inc. 44,800 2,638
Duke-Weeks Realty Corp. (e) 13,900 329
Edwards (A.G.), Inc. 5,500 279
Equity Office Properties Trust (e) 14,264 430
Equity Residential Properties Trust (e) 1,400 66
Erie Indemnity Co. Class A 500 14
Everest Re Group, Ltd. 900 53
Federal Home Loan Mortgage Corp. 90,800 5,448
Federal National Mortgage Association 175,600 13,521
Federated Investors, Inc. Class B 5,400 157
FelCor Lodging Trust, Inc. (e) 10,800 237
FINOVA Group, Inc. 3,700 9
First Data Corp. 47,400 2,376
First Tennessee National Corp. 1,300 30
First Union Corp. 49,300 1,494
Firstar Corp. 32,100 632
FleetBoston Financial Corp. 267,190 10,153
Franchise Finance Corp. of America 6,400 130
Franklin Resources, Inc. 67,000 2,870
Fulton Financial Corp. 2,535 55
Gallagher (Arthur J.) & Co. 2,000 126
General Growth Properties, Inc. (e) 800 24
Golden State Bancorp, Inc. 5,610 147
Golden West Financial Corp. 43,970 2,465
Goldman Sachs Group, Inc. 59,927 5,981
Greater Bay Bancorp 2,400 78
Greenpoint Financial Corp. 8,370 249
Hartford Financial Services Group, Inc. (The) 52,000 3,871
Heller Financial, Inc. Class A 2,610 76
Hibernia Corp. Class A (a) 9,300 111
Household International, Inc. 64,500 3,245
Jefferson-Pilot Corp. 13,300 914
John Hancock Financial Services, Inc. (a) 900 28
KeyCorp 46,520 1,148
Lehman Brothers Holdings, Inc. 122,402 7,895
Liberty Property Trust (e) 400 11
Lincoln National Corp. 56,500 2,733
Loews Corp. 15,520 1,411
Marsh & McLennan Cos., Inc. 37,700 4,929
Marshall & Ilsley Corp. 3,000 136
MBIA, Inc. 4,470 325
MBNA Corp. 268,900 10,101
Mellon Financial Corp. 56,600 2,731
Merrill Lynch & Co., Inc. 185,743 13,002
MGIC Investment Corp. 20,300 1,383
MONY Group, Inc. (The) 5,900 243
Moody's Corp. (a) 14,860 391
Morgan (J.P.) & Co., Inc. 26,500 4,386
Morgan Stanley Dean Witter & Co. 134,220 10,780
National City Corp. 49,240 1,053
National Commerce Bancorp 2,700 57
Nationwide Financial Services, Inc. Class A 300 15
New Dun & Bradstreet Corp. (The) (a) 7,430 161
North Fork Bancorp, Inc. 4,000 81
Northern Trust Corp. 31,500 2,685
7 Diversified Equity Fund
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
Old Kent Financial Corp. 3,165 88
Old Republic International Corp. 25,700 668
Paine Webber Group, Inc. 7,900 563
Paychex, Inc. 61,600 3,492
PMI Group, Inc. (The) 1,800 133
PNC Bank Corp. 52,900 3,538
Popular, Inc. 1,900 53
Price (T. Rowe) & Associates, Inc. 20,000 935
Providian Financial Corp. 21,600 2,246
Radian Group, Inc. 4,400 312
Regions Financial Corp. 8,900 209
Reinsurance Group Of America 800 30
SAFECO Corp. 7,660 185
SEI Corp. 3,200 290
Silicon Valley Bancshares (a) 9,800 452
Simon Property Group, Inc. (e) 8,700 194
SouthTrust Corp. 15,910 515
Sovereign Bancorp, Inc. 22,900 190
Spieker Properties, Inc. (e) 300 17
St. Paul Cos., Inc. 66,880 3,428
State Street Corp. 12,600 1,572
Stilwell Financial, Inc. 27,300 1,223
Summit Bancorp 6,210 233
SunTrust Banks, Inc. 12,800 625
TCF Financial Corp. 17,800 720
Torchmark Corp. 3,300 110
Transatlantic Holdings, Inc. 950 88
U.S. Bancorp 50,700 1,226
Union Planters Corp. 3,400 115
UnionBanCal Corp. 13,300 279
UnumProvident Corp. 26,600 751
USA Education, Inc. 11,800 659
Wachovia Corp. 5,400 292
Waddell & Reed Financial, Inc. Class A 7,150 227
Washington Mutual, Inc. 85,420 3,757
Wells Fargo Co. 98,172 4,546
Wilmington Trust Corp. 100 5
XL Capital, Ltd. Class A 7,100 545
-------
284,640
-------
HEALTH CARE - 12.4%
Abbott Laboratories 215,070 11,358
Allergan, Inc. 2,800 235
ALZA Corp. (a) 32,000 2,590
American Home Products Corp. 106,690 6,775
Amgen, Inc. (a) 73,600 4,260
Bard (C.R.), Inc. 3,500 147
Bausch & Lomb, Inc. 3,400 131
Baxter International, Inc. 109,665 9,013
Becton, Dickinson & Co. 68,900 2,308
Bergen Brunswig Corp. Class A 9,900 90
Boston Scientific Corp. (a) 18,100 288
Bristol-Myers Squibb Co. 185,410 11,298
Cardinal Health, Inc. 62,400 5,912
Chiron Corp. (a) 300 13
Covance, Inc. (a) 2,500 22
DENTSPLY International, Inc. 8,300 288
Elan Corp. PLC - ADR (a) 79,600 4,134
First Health Group Corp. (a) 2,300 90
Forest Labs, Inc. (a) 32,560 4,314
Foundation Health Systems, Inc. (a) 14,100 285
Genentech, Inc. (a) 128,452 10,597
Genzyme Corp. (a) 1,900 135
Gilead Sciences, Inc. (a) 1,300 112
Guidant Corp. (a) 49,064 2,597
HCA-The Healthcare Co. 130,540 5,213
HEALTHSOUTH Corp. (a) 10,300 124
Human Genome Sciences, Inc. (a) 15,200 1,343
Humana, Inc. (a) 14,170 172
ICOS Corp. (a) 600 31
IVAX Corp. (a) 48,350 2,103
Johnson & Johnson 184,650 17,011
Lilly (Eli) & Co. 16,600 1,484
MedImmune, Inc. (a) 231 15
Medtronic, Inc. 32,800 1,781
Merck & Co., Inc. 258,056 23,209
Millennium Pharmaceuticals, Inc. (a) 24,000 1,742
MiniMed, Inc. (a) 7,700 562
PacifiCare Health Systems, Inc. (a) 8,500 88
PE Corp. - PE Biosystems Group 33,700 3,943
Perrigo Co. (a) 5,100 33
Pfizer, Inc. 646,837 27,935
Pharmacia Corp. 114,481 6,296
Priority Healthcare Corp. Class B (a) 37,862 2,030
Quest Diagnostics, Inc. (a) 2,700 260
Schering-Plough Corp. 97,100 5,019
St. Jude Medical, Inc. (a) 17,800 979
Steris Corp. (a) 5,600 84
Stryker Corp. 5,300 250
SYNAVANT, Inc. (a) 630 3
Techne Corp. (a) 2,600 290
Tenet Healthcare Corp. 46,380 1,823
Trigon Healthcare, Inc. (a) 7,400 530
United Health Corp (a) 53,200 5,819
Universal Health Services, Inc. Class B (a) 13,800 1,157
Varian Medical Systems, Inc. (a) 3,600 176
Watson Pharmaceuticals, Inc. (a) 15,200 952
Wellpoint Health Networks, Inc. (a) 26,000 3,041
-------
192,490
-------
Diversified Equity Fund 8
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- ------
INTEGRATED OILS - 3.7%
Amerada Hess Corp. 43,890 2,721
Ashland, Inc. 6,960 228
Burlington Resources, Inc. 7,900 284
Chevron Corp. 58,680 4,819
Coastal Corp. 27,200 2,052
Conoco, Inc. Class B 128,825 3,502
Exxon Mobil Corp. 334,671 29,848
Helmerich & Payne, Inc. 3,700 116
Murphy Oil Corp. 4,100 238
Occidental Petroleum Corp. 79,600 1,582
Phillips Petroleum Co. 70,130 4,331
Texaco, Inc. 41,450 2,448
Unocal Corp. 78,100 2,666
USX-Marathon Group 109,000 2,964
------
57,799
------
MATERIALS AND PROCESSING - 3.2%
Air Products & Chemicals, Inc. 73,900 2,757
AK Steel Holding Corp. 3,100 29
Albemarle Corp. 8,000 186
Alcoa, Inc. 102,352 2,936
American Standard Cos., Inc. (a) 14,600 670
Archer-Daniels-Midland Co. 43,089 474
Avery Dennison Corp. 200 10
Barrick Gold Corp. 7,300 98
Bemis Co., Inc. 5,600 145
Boise Cascade Corp. 100 3
Bowater, Inc. 7,300 395
Centex Corp. 19,500 722
Dow Chemical Co. 125,801 3,853
du Pont (E.I.) de Nemours & Co. 85,785 3,892
Eastman Chemical Co. 10,400 446
Ecolab, Inc. 1,300 51
Engelhard Corp. 11,400 238
FMC Corp. (a) 2,000 152
Fort James Corp. 4,900 161
Freeport-McMoRan Copper & Gold, Inc.
Class A (a) 400 3
Class B (a) 2,600 21
Georgia-Pacific Group 17,510 471
Granite Construction, Inc. 200 5
Harsco Corp. 2,700 55
Illinois Tool Works, Inc. 4,600 256
IMC Global, Inc. 10,200 132
International Paper Co. 21,851 800
Johns Manville Corp. 8,500 78
Kaufman & Broad Home Corp. 7,740 230
Lafarge Corp. 2,300 43
Longview Fibre Co. 2,900 40
Louisiana Pacific Corp. 5,200 44
Lyondell Petrochemical Co. 8,300 119
Masco Corp. 4,300 80
Minnesota Mining & Manufacturing Co. 79,700 7,701
Nucor Corp. 5,400 187
Phelps Dodge Corp. 2,800 131
PPG Industries, Inc. 6,100 272
Praxair, Inc. 64,930 2,419
Precision Castparts Corp. 200 8
Rayonier, Inc. 300 11
Rohm & Haas Co. 4,800 144
Sherwin-Williams Co. 34,300 744
Sigma Aldrich Corp. 8,300 297
Smurfit-Stone Container Corp. (a) 2,400 32
Southdown, Inc. 100 7
Standard Register Co. 1,500 18
Timken Co. 7,900 111
Tyco International, Ltd. 261,905 14,847
Union Carbide Corp. 10,000 430
US Industries, Inc. 1,600 14
USX-U.S. Steel Group 300 5
Waters Corp. (a) 17,200 1,248
Westvaco Corp. 22,000 627
Weyerhaeuser Co. 27,050 1,269
Willamette Industries, Inc. 7,500 271
------
50,388
------
OTHER ENERGY - 2.1%
AES Corp. (a) 50,680 2,863
Anadarko Petroleum Corp. 54,850 3,513
Apache Corp. 15,400 852
Baker Hughes, Inc. 16,100 553
BP Amoco PLC - ADR 67,312 3,429
Constellation Energy Group 13,000 542
Devon Energy Corp. 1,188 60
El Paso Energy Corp. 70,410 4,414
ENSCO International, Inc. 39,600 1,317
EOG Resources, Inc. 14,800 583
Flowserve Corp. 3,400 68
Halliburton Co. 3,900 145
Kerr-McGee Corp. 16,900 1,104
Mitchell Energy & Development Corp. Class A 3,100 143
Nabors Industries, Inc. (a) 25,800 1,313
Noble Drilling Corp. (a) 6,200 258
Ocean Energy, Inc. (a) 8,300 115
Pioneer Natural Resources Co. (a) 3,100 40
R&B Falcon Corp. (a) 21,200 530
Rowan Cos., Inc. (a) 3,800 96
Schlumberger, Ltd. 5,600 426
Sempra Energy 44,200 914
9 Diversified Equity Fund
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- -------
Smith International, Inc. (a) 1,100 78
Sunoco, Inc. 19,150 573
Tidewater, Inc. 100 5
Tosco Corp. 25,000 716
Transocean Sedco Forex, Inc. 46,600 2,470
TXU Corp. 88,610 3,284
Ultramar Diamond Shamrock Corp. 48,860 1,283
Valero Energy Corp. 17,600 582
Vintage Petroleum, Inc. 5,500 116
Weatherford International, Inc. (a) 800 28
-------
32,413
-------
PRODUCER DURABLES - 8.0%
AMETEK, Inc. 100 2
Applied Materials, Inc. (a) 109,400 5,812
B.F. Goodrich Co. 19,020 779
Beckman Coulter, Inc. 3,700 259
Boeing Co. (The) 139,313 9,447
Caterpillar, Inc. 13,700 480
Celestica, Inc. (a) 46,410 3,336
Clayton Homes, Inc. 800 7
Cooper Industries, Inc. 3,300 126
Crane Co. 4,900 128
D.R. Horton, Inc. 9,701 179
Danaher Corp. 3,900 246
Deere & Co. 26,800 987
Dover Corp. 33,900 1,439
Emerson Electric Co. 90,400 6,639
General Dynamics Corp. 54,884 3,928
General Electric Co. 1,090,001 59,746
Honeywell International, Inc. 92,012 4,951
Ingersoll-Rand Co. 65,250 2,463
ITT Industries, Inc. 17,760 578
Johnson Controls, Inc. 12,200 727
Kennametal, Inc. 7,500 220
KLA Tencor Corporation (a) 3,200 108
Koninklijke (Royal) Philips Electronics (a) 74,651 2,981
Lennar Corp. 6,500 209
Littlefuse, Inc. (a) 2,100 61
Litton Industries, Inc. (a) 3,900 203
Lockheed Martin Corp. 76,000 2,725
Mettler-Toledo International, Inc. (a) 4,200 196
Molex, Inc. 1,424 77
Northrop Grumman Corp. 9,500 798
Pall Corp. 9,700 209
Parker-Hannifin Corp. 14,980 620
Pitney Bowes, Inc. 6,800 202
Plexus Corp. (a) 3,500 221
Pulte Corp. 6,430 214
Raytheon Co. Class B 22,900 783
Republic Services, Inc. (a) 4,400 59
Rockwell International Corp. 12,800 503
Sawtek, Inc. (a) 100 5
Solectron Corp. (a) 44,130 1,942
SPX Corp. (a) 500 62
Stewart & Stevenson Services, Inc. 4,800 115
Technitrol, Inc. 4,000 444
Tektronix, Inc. 3,000 214
Teradyne, Inc. (a) 1,800 56
Textron, Inc. 49,070 2,475
Thermo Electron Corp. (a) 750 22
United Technologies Corp. 95,700 6,681
Waste Management, Inc. 19,400 388
Xerox Corp. 11,200 94
-------
125,146
-------
TECHNOLOGY - 24.0%
3Com Corp. (a) 36,300 642
Adobe Systems, Inc. 36,632 2,784
Advanced Micro Devices, Inc. (a) 18,500 419
Agilent Technologies, Inc. (a) 1,100 51
Alliance Semiconductor Corp. (a) 3,700 74
Altera Corp. (a) 12,600 515
America Online, Inc. (a) 148,820 7,505
Analog Devices, Inc. (a) 81,118 5,273
Andrew Corp. (a) 7,600 200
Apple Computer, Inc. (a) 12,600 246
Applied Micro Circuits Corp. (a) 58,980 4,512
Arrow Electronics, Inc. (a) 72,300 2,314
At Home Corp. Series A (a) 3,600 37
Atmel Corp. (a) 125,400 1,865
Automatic Data Processing, Inc. 62,205 4,063
Avnet, Inc. 9,600 258
AVX Corp. 15,200 435
BEA Systems, Inc. (a) 68,150 4,886
Broadcom Corp. Class A (a) 10,690 2,377
Brocade Communications Systems, Inc. (a) 34,410 7,824
Cabletron Systems, Inc. (a) 13,900 377
Cadence Design Systems, Inc. (a) 3,400 87
Check Point Software Technologies, Ltd. (a) 21,370 3,384
CIENA Corp. (a) 59,900 6,293
Cirrus Logic, Inc. (a) 2,100 90
Cisco Systems, Inc. (a) 753,522 40,596
CMGI, Inc. (a) 14,700 248
CNET Networks, Inc. (a) 66,500 2,091
Comdisco, Inc. 3,800 47
Commerce One, Inc. New (a) 2,900 186
COMPAQ Computer Corp. 159,300 4,844
Diversified Equity Fund 10
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
Computer Associates International, Inc. 113,100 3,605
Computer Sciences Corp. (a) 31,300 1,972
Comverse Technology, Inc. (a) 28,380 3,170
Corning, Inc. 175,523 13,428
Critical Path, Inc. (a) 30,700 1,489
Dell Computer Corp. (a) 21,500 633
DST Systems, Inc. (a) 7,200 444
EarthLink, Inc. (a) 73,131 478
Electronic Data Systems Corp. 68,600 3,220
EMC Corp. (a) 291,481 25,960
Exar Corp. (a) 3,000 134
Exodus Communications, Inc. (a) 5,900 198
Extreme Networks, Inc. (a) 300 25
Fairchild Semiconductor Corp.
Class A (a) 24,200 510
Flextronics International, Ltd. (a) 153,982 5,842
Galileo International, Inc. 2,400 47
General Motors Corp. Class H (a) 29,701 962
GTECH Holdings Corp. (a) 7,300 126
Hewlett-Packard Co. 112,000 5,201
i2 Technologies, Inc. (a) 38,130 6,480
Ikon Office Solutions, Inc. 5,400 18
IMS Health, Inc. 11,000 260
Integrated Device Technology, Inc. (a) 23,200 1,306
Intel Corp. 187,732 8,436
International Business Machines Corp. 115,060 11,333
International Game Technology (a) 12,000 440
Internet Capital Group, Inc. New (a) 6,000 79
Intuit, Inc. (a) 2,800 172
JDS Uniphase Corp. (a) 114,600 9,333
Juniper Networks, Inc. (a) 68,500 13,405
Keane, Inc. (a) 3,800 49
Kemet Corp. (a) 25,000 697
Lam Research Corp. (a) 55,000 1,059
Lattice Semiconductor Corp. (a) 71,100 2,080
Linear Technology Corp. 27,000 1,742
LSI Logic Corp. (a) 66,100 2,173
Lucent Technologies, Inc. 35,500 828
MarchFirst, Inc. (a) 10,900 63
Maxim Integrated Products, Inc. (a) 7,300 484
Mercury Interactive Corp. (a) 1,900 211
Metromedia Fiber Network, Inc. Class A (a) 13,900 264
Microchip Technology, Inc. (a) 48,750 1,542
Micron Technology, Inc. (a) 47,100 1,637
Microsoft Corp. (a) 186,670 12,857
Motorola, Inc. 116,900 2,915
National Semiconductor Corp. (a) 5,500 143
NCR Corp. (a) 2,500 108
Network Appliance, Inc. (a) 35,290 4,200
New Focus, Inc. New (a) 200 13
Nortel Networks Corp. 307,235 13,979
Novell, Inc. (a) 2,900 26
ONI Systems Corp. New (a) 22,850 1,852
Oracle Systems Corp. (a) 478,419 15,788
Palm, Inc. New (a) 74,393 3,985
PeopleSoft, Inc. (a) 400 17
PerkinElmer, Inc. 500 60
PMC - Sierra, Inc. (a) 22,550 3,832
Quantum Corp. - DLT & Storage Systems (a) 10,400 156
Qwest Communications International, Inc. (a) 116,450 5,662
RadioShack, Corp. 4,800 286
Rational Software Corp. (a) 5,400 322
Sandisk Corp. (a) 28,000 1,503
Sanmina Corp. (a) 32,713 3,740
SCI Systems, Inc. (a) 3,000 129
Seagate Technology (a) 9,200 643
Siebel Systems, Inc. (a) 72,970 7,657
Silicon Storage Technology, Inc. (a) 3,900 89
Sony Corp. - ADR 18,845 1,564
Storage Technology Corp. (a) 4,600 45
Structural Dynamics Research Corp. (a) 4,000 41
Sun Microsystems, Inc. (a) 211,716 23,461
SunGard Data Systems (a) 4,800 245
Sybase, Inc. (a) 3,500 73
Symantec Corp. (a) 44,300 1,728
Tech Data Corp. (a) 5,600 233
Texas Instruments, Inc. 22,800 1,119
Total Systems Services, Inc. 4,700 78
Unisys Corp. (a) 14,400 183
VeriSign, Inc. (a) 2,900 382
Veritas Software Corp. (a) 46,560 6,561
Verizon Communications 292,812 16,927
Vishay Intertechnology, Inc. (a) 20,200 605
Vitesse Semiconductor Corp. (a) 27,000 1,886
Xilinx, Inc. (a) 8,300 600
Yahoo!, Inc. (a) 38,100 2,230
-------
373,981
-------
UTILITIES - 8.3%
ADC Telecommunications, Inc. (a) 300 6
Adelphia Communications Corp. (a) 10,600 352
Allegheny Energy, Inc. 10,680 437
Alliant Energy Corp. 5,900 179
Alltel Corp. 11,600 747
Amdocs, Ltd. (a) 21,300 1,381
Ameren Corp. 15,570 619
11 Diversified Equity Fund
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- ---------
American Electric Power Co., Inc. 19,400 805
AT&T Corp. 310,672 7,204
AT&T Wireless Group New (a) 159,400 3,975
BellSouth Corp. 168,400 8,136
BroadWing, Inc. (a) 62,000 1,752
C&D Technologies, Inc. 10,800 639
Cable Design Technologies Corp. (a) 5,300 122
Cablevision Systems Corp. Class A (a) 3,000 224
Calpine Corp. (a) 53,340 4,211
Centennial Cellular Corp. Class A (a) 1,600 31
CenturyTel, Inc. 76,000 2,926
Cinergy Corp. 16,020 491
Citizens Communications Co. (a) 14,400 209
Columbia Energy Group 2,800 201
Comcast Corp. Special Class A (a) 181,000 7,364
Consolidated Edison Inc. 13,400 472
Cox Communications, Inc. Class A (a) 6,100 269
Dominion Resources, Inc. 21,500 1,281
DPL, Inc. 16,600 471
DTE Energy Co. 6,300 228
Duke Energy Corp. 5,900 510
Dynegy, Inc. Class A 66,100 3,061
Edison International 12,000 287
Energy East Corp. 300 6
Enron Corp. 117,890 9,674
Entergy Corp. 26,040 998
Exelon Corp. (a) 22,150 1,332
FirstEnergy Corp. 64,100 1,659
Florida Progress Corp. 17,700 941
FPL Group, Inc. 34,600 2,284
GPU, Inc. 14,510 480
KeySpan Corp. 19,400 683
Level 3 Communications, Inc. (a) 1,900 90
MCN Energy Group, Inc. 3,100 76
Nokia Corp. - ADR 139,891 5,980
Northeast Utilities 21,400 436
OGE Energy Corp. 600 12
PG&E Corp. 134,460 3,622
Pinnacle West Capital Corp. 11,900 517
Powerwave Technologies, Inc. (a) 600 29
PPL Corp. 85,300 3,513
Public Service Enterprise Group, Inc. 32,800 1,361
Questar Corp. 4,000 108
Redback Networks, Inc. (a) 21,360 2,263
Reliant Energy, Inc. 41,920 1,732
SBC Communications, Inc. 363,926 20,994
SCANA Corp. 700 19
SDL, Inc. (a) 16,770 4,347
Southern Co. 33,200 975
Southern Energy, Inc. New (a) 22,188 605
Sprint Corp. (Fon Group) 59,700 1,522
Sprint Corp. (PCS Group) (a) 31,500 1,201
Telephone & Data Systems, Inc. 4,100 433
TyCom, Ltd. New (a) 5,700 191
UtiliCorp United, Inc. 6,630 176
Viacom, Inc. Class A (a) 1,300 74
Vodafone Group PLC - ADR 130,300 5,546
West TeleServices Corp. (a) 900 22
Western Resources, Inc. 3,900 83
Williams Cos. (The) 43,600 1,822
Wisconsin Energy Corp. 18,600 349
WorldCom, Inc. (a) 122,500 2,901
Xcel Energy, Inc. 33,555 857
---------
128,503
---------
TOTAL COMMON STOCKS
(cost $1,251,069) 1,485,216
---------
PRINCIPAL
AMOUNT
(000)
$
---------
SHORT-TERM INVESTMENTS - 5.7%
Frank Russell Investment Company Money Market 80,034 80,034
Fund, due on demand (b)
United States Treasury Bills (b)(c)(d)
5.925% due 12/21/00 4,200 4,165
5.940% due 12/21/00 5,000 4,959
---------
TOTAL SHORT-TERM INVESTMENTS
(cost $89,158) 89,158
---------
TOTAL INVESTMENTS - 101.1%
(identified cost $1,340,227) 1,574,374
OTHER ASSETS AND LIABILITIES,
NET - (1.1%) (16,734)
---------
NET ASSETS - 100.0% 1,557,640
=========
(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 Depository Receipt
See accompanying notes which are an integral part of the financial statements.
Diversified Equity Fund 12
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
--------- -------------
S&P 500 Index 204 $ (2,220)
expiration date 12/00
S&P Midcap 400 Index
expiration date 12/00 67 215
------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ (2,005)
============
See accompanying notes which are an integral part of the financial statements.
13 Diversified Equity Fund
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) October 31, 2000
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $1,340,227) ...................... $ 1,574,374
Cash .................................................................... 1,448
Receivables:
Dividends ............................................................ 1,291
Investments sold ..................................................... 33,978
Fund shares sold ..................................................... 3,150
From Advisor ......................................................... 34
Daily variation margin on futures contracts .......................... 1,855
Prepaid expenses ........................................................ 10
-----------
Total assets ...................................................... 1,616,140
LIABILITIES
Payables:
Investments purchased .................................. $ 54,532
Fund shares redeemed ................................... 2,595
Accrued fees to affiliates ............................. 1,201
Other accrued expenses ................................. 172
-----------
Total liabilities ................................................. 58,500
-----------
NET ASSETS .............................................................. $ 1,557,640
===========
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) $ 116,642
Unrealized appreciation (depreciation) on:
Investments .......................................................... 234,147
Futures contracts .................................................... (2,005)
Shares of beneficial interest ........................................... 308
Additional paid-in capital .............................................. 1,208,548
-----------
NET ASSETS .............................................................. $ 1,557,640
===========
NET ASSET VALUE, offering and redemption price per share:
Class C ($21,525,935 divided by 429,457 shares of $.01 par value
shares of beneficial interest outstanding) ........................ $ 50.12
===========
Class E ($19,666,185 divided by 389,034 shares of $.01 par value
shares of beneficial interest outstanding) ........................ $ 50.55
===========
Class S ($1,516,447,540 divided by 29,996,007 shares of $.01 par
shares of beneficial interest outstanding) ........................ $ 50.55
===========
</TABLE>
See Accompanying notes which are an integral part of the financial statements.
Diversified Equity Fund 14
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS YEAR
ENDED ENDED
OCTOBER 31, 2000 DECEMBER 31, 2000
---------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Dividends ........................................... $ 12,972 $ 16,888
Dividends from Money Market Fund .................... 4,857 3,899
Interest ............................................ 313 446
---------------- -----------------
Total investment income .......................... 18,142 21,233
---------------- -----------------
EXPENSES
Advisory fees ....................................... 9,446 10,643
Administrative fees ................................. 652 734
Custodian fees ...................................... 643 711
Distribution fees - Class C ......................... 115 49
Transfer agent fees ................................. 1,094 1,263
Professional fees ................................... 103 52
Registration fees ................................... 147 182
Shareholder servicing fees - Class C ................ 38 16
Shareholder servicing fees - Class E ................ 32 31
Trustees' fees ...................................... 19 10
Miscellaneous ....................................... 133 123
---------------- -----------------
Expenses before reductions .......................... 12,422 13,814
Expense reductions .................................. (15) --
---------------- -----------------
Expenses, net .................................... 12,407 13,814
---------------- -----------------
Net investment income .................................. 5,735 7,419
---------------- -----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ......................................... 27,177 246,363
Futures contracts ................................... (1,131) 11,461
Foreign currency-related transactions ............... 1 --
---------------- -----------------
26,047 257,824
---------------- -----------------
Net change in unrealized appreciation (depreciation) on:
Investments ......................................... (92,253) (16,913)
Futures contracts ................................... (7,253) 1,995
Foreign currency-related transactions ............... (1) --
---------------- -----------------
(99,507) (14,918)
---------------- -----------------
Net realized and unrealized gain (loss) ................ (73,460) 242,906
---------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS .. $ (67,725) $ 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>
TEN MONTHS
ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income .......................................... $ 5,735 $ 7,419 $ 7,673
Net realized gain (loss) ....................................... 26,047 257,824 92,820
Net change in unrealized appreciation (depreciation) ........... (99,507) (14,918) 174,452
----------- ----------- -----------
Net increase (decrease) in net assets from operations ....... (67,725) 250,325 274,945
----------- ----------- -----------
DISTRIBUTIONS
From net investment income
Class C ..................................................... -- (1) --
Class E ..................................................... (47) (23) (9)
Class S ..................................................... (5,444) (8,208) (7,563)
From net realized gain
Class C ..................................................... (375) (1,313) --
Class E ..................................................... (303) (1,234) (334)
Class S ..................................................... (35,620) (152,916) (66,093)
----------- ----------- -----------
Net decrease in net assets from distributions ............ (41,789) (163,695) (73,999)
----------- ----------- -----------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions .. 69,489 135,012 129,618
----------- ----------- -----------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ....................... (40,025) 221,642 330,564
NET ASSETS
Beginning of period ............................................ 1,597,665 1,376,023 1,045,459
----------- ----------- -----------
End of period (including undistributed net investment income of
$109 at December 31, 1998) .................................. $ 1,557,640 $ 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
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
2000* 1999*
------------- -------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............................................. $ 54.13 $ 52.04
------------- -------------
INCOME FROM OPERATIONS
Net investment income (loss)(a) ............................................... (.24) (.20)
Net realized and unrealized gain (loss) ....................................... (2.55) 8.14
------------- -------------
Total income from operations ............................................... (2.79) 7.94
------------- -------------
DISTRIBUTIONS
From net investment income .................................................... -- (.03)
From net realized gain ........................................................ (1.22) (5.82)
------------- -------------
Total distributions ........................................................ (1.22) (5.85)
------------- -------------
NET ASSET VALUE, END OF PERIOD ................................................... $ 50.12 $ 54.13
============= =============
TOTAL RETURN (%)(B) .............................................................. (5.07) 15.83
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) 21,526 14,787
Ratios to average net assets (%)(c):
Operating expenses ......................................................... 1.94 1.94
Net investment income ...................................................... (.56) (.41)
Portfolio turnover rate (%) ................................................... 141.75 110.36
</TABLE>
* For the ten months ended October 31, 2000.
** 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) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
17 Diversified Equity Fund
<PAGE>
DIVERSIFIED EQUITY FUND
FINANCIAL HIGHLIGHTS - CLASS E
<TABLE>
<CAPTION>
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,
---------------------------------------
2000* 1999 1998 1997**
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ...... $ 54.43 $ 51.40 $ 43.64 $ 45.55
------------- ------------- ------------ ------------
INCOME FROM OPERATIONS
Net investment income (a) .............. .08 .13 .10 .06
Net realized and unrealized gain (loss) (2.57) 8.81 10.34 7.97
------------- ------------- ------------ ------------
Total income from operations ........ (2.49) 8.94 10.44 8.03
------------- ------------- ------------ ------------
DISTRIBUTIONS
From net investment income ............. (.17) (.09) (.08) (.07)
From net realized gain ................. (1.22) (5.82) (2.60) (9.87)
------------- ------------- ------------ ------------
Total distributions ................. (1.39) (5.91) (2.68) (9.94)
------------- ------------- ------------ ------------
NET ASSET VALUE, END OF PERIOD ............ $ 50.55 $ 54.43 $ 51.40 $ 43.64
============= ============= ============ ============
TOTAL RETURN (%)(b) ....................... (4.49) 17.95 24.59 15.99
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) 19,666 12,958 9,007 2,839
Ratios to average net assets (%)(c):
Operating expenses .................. 1.19 1.19 1.33 1.63
Net investment income ............... .19 .23 .21 .10
Portfolio turnover rate (%) ............ 141.75 110.36 100.31 114.11
</TABLE>
* For the ten months ended October 31, 2000.
** 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 performance information derived from the financial statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------
2000* 1999 1998 1997 1996 1995
------------ ------------ ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ...... $ 54.33 $ 51.39 $ 43.64 $ 41.45 $ 38.62 $ 32.26
------------ ------------ ------------ ----------- ---------- ----------
INCOME FROM OPERATIONS
Net investment income (a) .............. .19 .28 .30 .37 .48 .60
Net realized and unrealized gain (loss) (2.57) 8.79 10.34 12.06 8.15 10.63
------------ ------------ ------------ ----------- ---------- ----------
Total income from operations ........ (2.38) 9.07 10.64 12.43 8.63 11.23
------------ ------------ ------------ ----------- ---------- ----------
DISTRIBUTIONS
From net investment income ............. (.18) (.31) (.29) (.37) (.48) (.60)
From net realized gain ................. (1.22) (5.82) (2.60) (9.87) (5.32) (4.27)
------------ ------------ ------------ ----------- ---------- ----------
Total distributions ................. (1.40) (6.13) (2.89) (10.24) (5.80) (4.87)
------------ ------------ ------------ ----------- ---------- ----------
NET ASSET VALUE, END OF PERIOD ............ $ 50.55 $ 54.33 $ 51.39 $ 43.64 $ 41.45 $ 38.62
============ ============ ============ =========== ========== ==========
TOTAL RETURN (%)(b) ....................... (4.28) 18.21 25.11 31.32 23.29 35.17
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) 1,516,448 1,569,920 1,367,016 1,042,620 699,691 530,645
Ratios to average net assets (%)(c):
Operating expenses .................. .94 .93 .91 .92 .94 .95
Net investment income ............... .45 .51 .62 .80 1.18 1.56
Portfolio turnover rate (%) ............ 141.75 110.36 100.31 114.11 99.90 92.53
</TABLE>
* For the ten months ended October 31, 2000.
(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.
19 Diversified Equity Fund
<PAGE>
SPECIAL GROWTH FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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 eight small capitalization stock fund managers with three
separate and distinct investment styles.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
DATES SPECIAL GROWTH - CLASS S RUSSELL 2500(TM)**
Inception* $ 10,000 $ 10,000
1991 $ 15,328 $ 15,765
1992 $ 16,375 $ 17,516
1993 $ 20,919 $ 22,388
1994 $ 21,000 $ 22,797
1995 $ 24,706 $ 27,668
1996 $ 29,877 $ 32,867
1997 $ 39,266 $ 42,438
1998 $ 35,796 $ 39,171
1999 $ 42,297 $ 46,222
2000 $ 53,463 $ 56,979
Total $309,027 $333,811
YEARLY PERIODS ENDED OCTOBER 31
<TABLE>
<CAPTION>
SPECIAL GROWTH FUND - CLASS S SPECIAL GROWTH FUND - CLASS C ++++
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
----------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $12,640 26.40% 1 Year $12,515 25.15%
5 Years $21,639 16.68%(S) 5 Years $21,034 16.01%(S)
10 Years $53,463 18.23%(S) 10 Years $51,968 17.90%(S)
SPECIAL GROWTH FUND - CLASS E ++ RUSSELL 2500(TM) INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
----------------------------------------- -----------------------------------------
1 Year $12,611 26.11% 1 Year $12,327 23.27%
5 Years $21,305 16.31%(S) 5 Years $20,593 15.54%(S)
10 Years $52,636 18.05%(S) 10 Years $56,979 19.01%(S)
</TABLE>
21 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the ten months ended October 31, 2000, the total returns for the Special
Growth Fund Class S, Class E and Class C shares were 9.76%, 9.53%, and 8.83%,
respectively. This compares favorably with the Russell 2500(TM) Index, which
gained 5.26% for the same period.
PORTFOLIO HIGHLIGHTS
An extremely narrow market characterized the first quarter of the year, with
much of the performance generated by a small universe of stocks across several
sectors. Due to the Fund's broadly diversified investment strategy, this
environment proved to be particularly challenging. However, the Fund's approach
was rewarded during the last six months of the fiscal period, as the markets
finally broadened, although frequently changing favor between value and growth
styles. The volatility associated with this style leadership rotation was, in
part, mitigated by the Fund's strategic diversification.
A 50 basis point interest rate increase from the Federal Reserve Board (the Fed)
in May increased investor concerns, and dealt a particularly harsh blow to
technology and telecommunications stocks. While the interest rate hike was the
Fed's final increase for the period, technology and telecommunications issues
maintained their high volatility and generally performed poorly through the end
of October. The Fund's diversification, which included an overweight allocation
to the Energy sector during that period, helped offset some of the disappointing
Technology stock returns.
The Fund's managers, particularly those with a growth-style mandate, showed a
strong mid-cap bias during the last three months of the period. This made a
positive contribution to returns, as most of this period's earnings strength
occurred within mid-cap equities. The mid-cap bias was based on stock
fundamentals rather than a long-term, tactical bias toward mid cap issues, and
the Fund's managers ended the fiscal period with what appeared to be a shift
toward smaller cap issues.
During the ten months of the period, the Fund's investment managers were
realigned. In March, CapitalWorks, a manager with a focus on higher growth and
higher valuations was retained. This move helped eliminate any inadvertent bets
against the higher growth segment of the market. Subsequently, during the second
quarter, the Fund's returns were boosted as CapitalWorks outperformed. At the
same time, the Fund terminated Wellington, as their portfolio fell below the
market cap of the Russell 2500(TM) Index.
During the final two months of the period, David J. Greene and Co., a small-cap
value manager, was added to the Fund's lineup.
Greene's concentrated stock picking strategy is complimentary to the other two
value managers, Jacobs Levy Equity Management, Inc. and Delphi Management, Inc.
Within the growth segment of the Fund, Fiduciary Trust International was
replaced with TimesSquare Capital Management, Inc. subsequent to Fiduciary's
investment team transitioning to TimesSquare.
TOP TEN EQUITY HOLDINGS
(as a percent of Total Investments) October 31, 2000
Pepsi Bottling Group, Inc. (The) 0.7%
Radian Group, Inc. 0.7
DST Systems, Inc. 0.6
HEALTHSOUTH Corp. 0.5
Charter Communications Holdings, Inc. 0.5
Investors Financial Services Corp. 0.5
Arrow Electronics, Inc. 0.4
Vintage Petroleum, Inc. 0.4
EOG Resources, Inc. 0.4
International Game Technology 0.4
PORTFOLIO CHARACTERISTICS
October 31, 2000
Current P/E Ratio 16.5x
Portfolio Price/Book Ratio 2.61x
Market Capitalization - $-Weighted Average 3.45 Bil
Number of Holdings 982
MONEY MANAGERS STYLES
CapitalWorks Investment Partners, LLC Growth
David J. Greene & Co., LLC Value
Delphi Management, Inc. Value
GlobeFlex Capital, L.P. Market-Oriented
Jacobs Levy Equity Management, Inc. Value
Sirach Capital Management, Inc. Growth
TimesSquare Capital Management, Inc. Growth
Westpeak Investment Advisors, L.P. Market-Oriented
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* Special Growth Fund Class S assumes initial investment on November 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 $4.0 billion.
The Russell 2500(TM) Index return reflects adjustments for income dividends
and capital gains distributions reinvested as of the ex-dividend dates.
++ Special Growth 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.
++++ 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.
(S) 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
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- ------
COMMON STOCKS - 93.4%
AUTO AND TRANSPORTATION - 3.1%
American Axle & Manufacturing Holdings,
Inc. (a) 800 10
American Freightways Corp. (a) 24,300 390
Arkansas Best Corp. (a) 7,000 112
AutoNation, Inc. (a) 111,100 750
AutoZone, Inc. (a) 62,700 1,681
Avis Rent A Car, Inc. (a) 6,300 188
Bandag, Inc. 2,700 96
C.H. Robinson Worldwide, Inc. 14,300 782
Continental Airlines, Inc. Class B (a) 3,200 168
Cooper Tire & Rubber Co. 14,500 159
Dana Corp. 6,800 151
Dollar Thrifty Automotive
Group, Inc. (a) 40,500 623
Dura Automotive Systems, Inc. (a) 6,000 51
EGL, Inc. New (a) 3,700 105
Expeditors International of
Washington, Inc. 37,200 1,923
FedEx Corp. (a) 31,500 1,476
Fleetwood Enterprises, Inc. 6,200 82
GATX Corp. 24,800 1,043
Goodyear Tire & Rubber Co. 6,800 126
Lear Corp. (a) 6,000 164
Mesa Airlines, Inc. (a) 89,400 520
Monaco Coach Corp. (a) 8,450 144
Navistar International Corp. (a) 35,000 1,157
Newport News Shipbuilding, Inc. 18,900 930
Northwest Airlines Corp. Class A (a) 3,500 99
Offshore Logistics, Inc. (a) 102,500 1,761
Polaris Industries, Inc. 4,300 149
Roadway Express, Inc. 8,200 167
Ryder System, Inc. 130,300 2,573
Skywest, Inc. 9,550 482
Sonic Automotive, Inc. (a) 25,400 227
Superior Industries International, Inc. 40,500 1,380
Thor Industries, Inc. 14,000 280
Tower Automotive, Inc. (a) 22,000 242
UAL Corp. 30,400 1,153
USFreightways Corp. 51,600 1,322
Visteon Corp. 4,700 83
Wabash National Corp. 13,600 109
Wabtec Corp. 37,000 375
Wisconsin Central Transportation Corp. (a) 14,000 179
XTRA Corp. (a) 1,800 82
Yellow Corp. (a) 20,300 364
------
23,858
------
CONSUMER DISCRETIONARY - 13.9%
Aaron Rents, Inc. 9,100 152
Abercrombie & Fitch Co. Class A (a) 65,900 1,553
AC Nielsen Corp. (a) 4,300 103
Advo Systems, Inc. (a) 32,800 1,207
Agribrands International, Inc. (a) 2,000 87
Alberto Culver Co. Class B 9,100 305
American Greetings Corp. Class A 112,400 2,044
Anchor Gaming (a) 1,700 144
AnnTaylor Stores Corp. (a) 52,400 1,572
Apollo Group, Inc. Class A (a) 23,300 910
Applebee's International, Inc. 2,700 82
Argosy Gaming Co. (a) 50,500 821
Aztar Corp. (a) 49,300 746
Bacou USA, Inc. (a) 3,000 75
Banta Corp. 73,800 1,702
Barnes & Noble, Inc. (a) 5,800 109
Belo (A.H.) Corp. Class A 10,800 207
BJ's Wholesale Club, Inc. (a) 5,400 178
Black & Decker Corp. 2,800 105
Borders Group, Inc. (a) 5,700 79
Bowne & Co., Inc. 26,900 225
Brown Shoe Co., Inc. 5,600 55
Brunswick Corp. 89,400 1,738
Buckeye Technologies, Inc. (a) 20,300 348
Callaway Golf Co. 5,800 93
Career Education Corp. (a) 18,600 722
Catalina Marketing Corp. (a) 2,700 106
Cato Corp. Class A 8,800 105
CBRL Group, Inc. 34,600 616
CEC Entertainment, Inc. (a) 25,025 798
Claire's Stores, Inc. 75,100 1,511
Coldwater Creek, Inc. (a) 3,500 104
Columbia Sportswear Co. (a) 4,500 190
Copart, Inc. (a) 9,000 135
Corporate Executive Board
Company, (The) (a) 44,800 2,066
Cox Radio, Inc. Class A (a) 12,600 287
Crestline Capital Corp. (a) 5,700 119
Darden Restaurants, Inc. 19,500 439
DeVry, Inc. (a) 59,800 2,209
Diamond Technology
Partners, Inc. (a) 30,200 1,350
Dollar Tree Stores, Inc. (a) 31,650 1,236
Dress Barn, Inc. (a) 11,200 280
Emmis Broadcasting Corp.
Class A (a) 30,000 801
Energizer Holdings, Inc. (a) 6,400 126
Entercom Communications Corp. (a) 9,800 384
23 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
Ethan Allen Interiors, Inc. 2,400 70
Extended Stay America, Inc. (a) 41,800 515
F.Y.I., Inc. (a) 13,900 557
Fairfield Communities, Inc. (a) 10,900 138
Federated Department Stores, Inc. (a) 45,000 1,465
Footstar, Inc. (a) 52,100 1,869
Furniture Brands International, Inc. (a) 50,000 844
Gemstar-TV Guide
International, Inc. (a) 8,800 603
Genesco, Inc. (a) 8,900 158
Genlyte Group, Inc. (The) (a) 4,100 104
Grey Global Group, Inc. 4,025 2,233
Guess?, Inc. (a) 4,800 36
Guitar Center, Inc. (a) 5,700 75
Handleman Co. (a) 10,800 107
Harman International Industries, Inc. 2,200 106
Harrah's Entertainment, Inc. (a) 7,200 206
Harte Hanks Communications 50,800 1,124
Haverty Furniture Co., Inc. 16,000 180
Hearst-Argyle Television, Inc. (a) 49,900 895
Hilton Hotels Corp. 15,900 151
Hispanic Broadcasting Corp. (a) 3,400 106
IHOP Corp. (a) 1,900 40
Interpublic Group Cos., Inc. 45,600 1,958
Jones Apparel Group, Inc. (a) 5,700 159
K-Swiss, Inc. Class A 3,800 104
Kelly Services, Inc. Class A 5,500 122
Kenneth Cole Productions, Inc.
Class A (a) 2,100 95
Knight-Ridder, Inc. 30,800 1,548
Lamar Advertising Co. Class A (a) 31,900 1,519
Landry's Seafood Restaurants, Inc. 22,500 181
Learning Tree International, Inc. (a) 17,100 771
Lee Enterprises, Inc. 50,000 1,381
Lexar Media, Inc. New (a) 151,000 1,114
Libbey, Inc. 3,000 82
Liz Claiborne, Inc. 2,300 98
Lone Star Steakhouse & Saloon 7,600 64
Mandalay Resort Group (a) 14,300 298
Manpower, Inc. 27,800 968
MAXIMUS, Inc. (a) 19,800 486
McClatchy Co. (The) Class A 47,775 1,815
McGraw-Hill, Inc. 31,400 2,015
Men's Wearhouse (The), Inc. (a) 31,600 924
Meredith Corp. 61,400 1,949
MGM Grand, Inc. 26,700 923
Michaels Stores, Inc. (a) 19,200 466
Modis Professional Services, Inc. (a) 64,500 266
MSC Industrial Direct Co., Inc.
Class A (a) 7,500 112
Musicland Stores Corp. (a) 16,300 132
Nautica Enterprises, Inc. (a) 6,400 80
Neiman Marcus Group, Inc. (The) Class A (a) 18,600 691
Nu Skin Enterprises, Inc. Class A (a) 12,000 65
Oakley, Inc. (a) 33,500 704
On Assignment, Inc. (a) 82,800 2,086
Outback Steakhouse, Inc. (a) 28,700 818
Park Place Entertainment Corp. (a) 108,500 1,382
PC Connection, Inc. (a) 9,000 245
Penn National Gaming, Inc. (a) 5,500 95
Penton Media, Inc. 108,117 3,304
Phillips-Van Heusen Corp. 16,300 194
Pier 1 Imports, Inc. 146,700 1,944
Pinnacle Entertainment, Inc. (a) 26,700 609
Pittston Brink's Group 68,200 1,083
Playtex Products, Inc. (a) 75,900 768
Polo Ralph Lauren Corp. Class A (a) 4,400 86
Pomeroy Computer Resources, Inc. (a) 3,800 67
Pre-paid Legal Services, Inc. (a) 72,400 3,176
Prime Hospitality Corp. (a) 23,900 227
R.R. Donnelley Corp. (a) 34,600 783
Radio One, Inc. New (a) 23,100 180
RARE Hospitality International, Inc. (a) 17,400 402
Reader's Digest Association, Inc. Class A 3,400 125
Reebok International, Ltd. (a) 6,800 147
Regis Corp. 8,500 128
Rent-A-Center, Inc. (a) 13,500 394
Robert Half International, Inc. (a) 23,000 702
Ross Stores, Inc. 92,100 1,215
Ruby Tuesday, Inc. 45,000 610
Russell Corp. 11,300 181
Ryan's Family Steak Houses, Inc. (a) 132,600 1,102
Sabre Holdings, Corp. 30,700 1,027
Saks, Inc. (a) 7,000 71
Salton, Inc. (a) 26,150 598
Scholastic Corp. (a) 10,600 845
School Specialty, Inc. (a) 3,300 50
Schultz Sav-o Stores, Inc. 90,500 996
SCP Pool Corp. (a) 3,600 93
Scripps (E.W.) Co. Class A 33,700 1,968
Skechers U.S.A., Inc. Class A New (a) 9,000 137
Spiegel, Inc. Class A 28,700 199
Stanley Works (The) 3,800 101
Starwood Hotels & Resorts Worldwide, Inc. 18,200 539
Station Casinos, Inc. (a) 5,800 94
Stein Mart, Inc. (a) 6,200 96
Sylvan Learning Systems, Inc. (a) 13,000 201
Talbots, Inc. 24,100 1,905
TETRA Technologies, Inc. (a) 53,400 1,851
Special Growth Fund 24
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
Tiffany & Co. 54,200 2,314
Timberland Co. Class A (a) 17,700 914
TMP Worldwide, Inc. (a) 1,800 125
Topps Co., Inc. (a) 75,000 677
Toro Co. 11,000 385
Toys "R" Us, Inc. (a) 9,700 167
True North Communications, Inc. 21,400 807
Tupperware Corp. 3,600 62
Tweeter Home Entertainment
Group, Inc. New 13,800 331
United Natural Foods, Inc. (a) 7,100 88
United Stationers, Inc. (a) 47,300 1,416
United Television, Inc. 10,450 1,400
URS Corp. (a) 11,400 146
Valassis Communications, Inc. (a) 3,700 103
Valuevision International, Inc.
Class A (a) 3,000 61
Venator Group, Inc. (a) 39,400 557
Viad Corp. 37,000 791
Wackenhut Corp. (a) 2,000 25
Wallace Computer Services, Inc. 6,700 97
Warnaco Group, Inc. Class A 12,400 33
Washington Post Co (The), Class B 4,200 2,243
Zale Corp. (a) 49,600 1,680
-------
108,142
-------
CONSUMER STAPLES - 3.2%
Block Drug Co., Inc. Class A 36,012 1,884
Coca-Cola Bottling Co. Consolidated 30,700 1,090
Constellation Brands, Inc. Class A (a) 25,400 1,238
Coors (Adolph) Co. Class B 23,000 1,465
Dean Foods Co. 37,000 1,184
Dole Food Co., Inc. 34,200 413
Fleming Cos., Inc. 20,500 291
Hormel Foods Corp. 68,700 1,155
International Multifoods Corp. 14,900 252
Interstate Bakeries Corp. 56,500 791
Keebler Foods Co. 2,800 113
McCormick & Co., Inc. 2,500 79
Michael Foods, Inc. 5,200 140
Pathmark Stores, Inc. New (a) 2,900 46
Pepsi Bottling Group, Inc. (The) 167,700 5,806
Performance Food Group Co. (a) 8,100 324
R.J. Reynolds Tobacco Holdings, Inc. 92,300 3,300
Ralcorp Holdings, Inc. (a) 15,000 211
Robert Mondavi Corp. Class A (a) 1,500 67
Smithfield Foods, Inc. (a) 28,100 806
Suiza Foods Corp. (a) 50,000 2,316
SuperValu, Inc. 4,800 74
Tootsie Roll Industries, Inc. 39,840 1,529
Universal Corp. 14,400 403
Whitman Corp. 16,800 218
Whole Foods Market, Inc. (a) 3,600 166
-------
25,361
-------
FINANCIAL SERVICES - 17.3%
ACE, Ltd. 28,700 1,126
Advanta Corp. Class A 107,000 1,083
Affiliated Managers Group, Inc. (a) 39,400 2,369
Alexandria Real Estate Equities, Inc. (e) 6,700 227
Allmerica Financial Corp. 38,100 2,403
Ambac Financial Group, Inc. 7,600 607
American Financial Group, Inc. 10,500 225
American National Insurance Co. 1,200 80
AmeriCredit Corp. (a) 80,900 2,174
AmerUs Group Co. (a) 7,200 190
Amli Residential Properties Trust (e) 8,600 199
Andover Bancorp, Inc. 2,000 60
Archstone Communities Trust (e) 3,200 75
Associated Banc-Corp. 5,280 127
Astoria Financial Corp. 34,000 1,275
Avalonbay Communities, Inc. (e) 3,117 143
BancWest Corp. 15,500 317
Bank of Granite Corp. 4,000 92
Banknorth Group, Inc. 97,480 1,767
Bay View Capital Corp. 16,600 135
Bear Stearns Companies Inc. (The) 37,734 2,288
Bedford Property Investors, Inc. (e) 17,000 335
BlackRock, Inc. New (a) 4,200 179
Boston Properties, Inc. (e) 1,321 54
Boykin Lodging Co. (e) 5,829 53
BRE Properties, Inc. (e) 6,659 211
Brookline Bancorp, Inc. 9,700 104
Burnham Pacific Properties, Inc. (e) 27,100 147
Capital Automotive 20,200 260
Capitol Federal Financial 18,700 270
Catellus Development Corp. (a)(e) 40,400 735
Cathay Bancorp, Inc. 12,500 607
CBL & Associates Properties, Inc. (e) 12,300 284
Charter One Financial, Inc. 40,950 939
Chelsea GCA Realty, Inc. (e) 18,900 610
City National Corp. 35,000 1,203
Colonial BancGroup, Inc. 121,300 1,069
Comerica, Inc. 36,200 2,183
Commerce Bancorp, Inc. 2,535 154
Commerce Bancshares, Inc. 6,000 215
Commerce Group, Inc. 10,400 266
Commonwealth Bancorp, Inc. 6,600 98
Compass Bancshares, Inc. 3,500 64
CompuCredit Corp. (a) 1,600 49
Concord EFS, Inc. (a) 76,200 3,143
Conseco, Inc. 197,600 1,371
25 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- ------
Cousins Properties, Inc. (e) 13,000 338
Crescent Real Estate Equities, Inc. (e) 12,688 255
Cullen Frost Bankers, Inc. 20,500 683
Delphi Financial Group, Inc. (a) 3,400 126
Dime Bancorp, Inc. 21,200 518
Dime Community Bancorp, Inc. 11,300 250
Doral Financial Corp. 10,300 184
Downey Financial Corp. 19,455 929
Duke-Weeks Realty Corp. (e) 25,799 611
DVI, Inc. (a) 8,100 136
East West Bancorp, Inc. 18,800 354
EastGroup Properties, Inc. (e) 13,500 275
Eaton Vance Corp. 22,300 1,111
Edwards (A.G.), Inc. 18,200 924
Enhance Financial Services
Group, Inc. 4,800 56
Entertainment Properties Trust (e) 10,500 116
Equity Office Properties Trust (e) 44,700 1,347
Everest Re Group, Ltd. 26,500 1,554
F&M National Corp. 4,800 124
Federated Investors, Inc. Class B 32,500 947
FelCor Lodging Trust, Inc. (e) 45,625 1,001
Fidelity National Financial, Inc. 4,990 123
FINOVA Group, Inc. 113,400 291
First Bancorp. 5,100 117
First Commonwealth Financial Corp. 5,200 52
First Federal Capital Corp. 5,800 67
First Industrial Realty Trust, Inc. (e) 26,100 806
FirstFed Financial Corp. (a) 21,500 548
Frontier Financial Corp. 3,300 61
Gabelli Asset Management, Inc. New (a) 3,200 115
Gables Residential Trust (e) 52,000 1,326
Gallagher (Arthur J.) & Co. 13,000 821
GBC Bancorp 26,700 848
Golden State Bancorp, Inc. 49,700 1,298
Great Lakes, Inc. 2,900 49
Greater Bay Bancorp 29,600 964
Greenpoint Financial Corp. 58,900 1,752
Hamilton Bancorp, Inc. (a) 8,200 121
Harbor Florida Bancshares, Inc. 8,200 100
Health Care REIT, Inc. (e) 12,000 212
Heller Financial, Inc. Class A 36,100 1,056
Hibernia Corp. Class A (a) 28,000 334
Hospitality Properties Trust (e) 26,500 571
Host Marriott Corp. (e) 73,957 786
HRPT Properties Trust (e) 75,500 486
iStar Financial Inc. (e) 25,300 506
Imperial Bancorp (a) 91,768 2,230
Independence Community Bank Corp. 19,900 291
IndyMac Mortgage Holdings, Inc. 5,900 123
Innkeepers USA Trust (e) 28,911 295
Investment Technology Group (a) 20,200 727
Investors Financial Services Corp. 50,600 3,626
IPC Holdings, Ltd. 70,500 1,436
IRT Property Co. (e) 12,200 100
Jack Henry & Associates, Inc. 31,000 1,703
Jefferies Group, Inc. 46,800 1,275
LaBranche & Co., Inc. New (a) 8,000 317
LandAmerica Financial Group, Inc. 7,000 207
LaSalle Hotel Properties (e) 12,200 175
Legg Mason, Inc. 49,500 2,570
Leucadia National Corp. 19,900 495
Liberty Corp. 5,600 194
LNR Property Corp. 69,400 1,501
MAF Bancorp, Inc. 54,300 1,303
Markel Corp. (a) 8,800 1,275
Medical Assurance, Inc. (a) 2,200 31
Mercantile Bankshares Corp. 16,000 602
MeriStar Hospitality Corp. 32,560 623
Metris Companies, Inc. 39,300 1,272
Mid-America Apartment Communities, Inc. (e) 6,100 134
MONY Group, Inc. (The) 27,700 1,139
Moody's Corp. (a) 25,700 676
Morgan Keegan, Inc. 6,700 134
Nationwide Financial Services, Inc.
Class A 23,700 1,152
NCO Group, Inc. (a) 2,900 63
Neuberger Berman, Inc. 3,000 197
New Century Financial Corp. (a) 10,700 124
New Plan Excel Realty Trust (e) 46,300 570
North Fork Bancorp, Inc. 84,700 1,710
OceanFirst Financial Corp. 9,800 205
Ohio Casualty Corp. 26,800 225
Old Republic International Corp. 57,000 1,482
Pacific Century Financial Corp. 59,800 759
Pacific Gulf Properties, Inc. (e) 13,700 364
Pan Pacific Retail Properties, Inc. (e) 3,200 65
Parkway Properties, Inc. (e) 800 23
Paychex, Inc. 60,000 3,401
Penn Treaty American Corp. (a) 5,000 96
Pennsylvania Real Estate
Investment Trust (e) 4,700 81
People's Bank 3,000 60
PFF Bancorp, Inc. 13,100 239
PMI Group, Inc. (The) 16,900 1,248
Prentiss Properties Trust (e) 9,900 251
Presidential Life Corp. 2,600 38
Price (T. Rowe) & Associates, Inc. 36,100 1,688
Protective Life Corp. 35,500 821
Provident Bankshares Corp. 6,930 131
PS Business Parks, Inc. (e) 3,200 84
Special Growth Fund 26
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
Queens County Bancorp 1,000 28
Radian Group, Inc. 79,400 5,627
Raymond James Financial, Inc. 37,500 1,268
Reckson Associates Realty Corp. (e) 32,900 744
Regency Realty Corp. (e) 9,700 218
RenaissanceRe Holdings, Ltd. 30,000 2,177
Republic Bancorp, Inc. 5,610 53
RFS Hotel Investors, Inc. (e) 23,700 305
Richmond County Financial Corp. 60,200 1,411
RightCHOICE Managed Care, Inc. Class A
(a) 10,300 285
RLI Corp. 2,100 82
Rollins Truck Leasing Corp. 11,600 61
SAFECO Corp. 69,800 1,688
SEI Corp. 3,600 326
Senior Housing Properties Trust (e) 10,000 93
Silicon Valley Bancshares (a) 67,900 3,132
SL Green Realty Corp. (e) 16,841 452
Smith (Charles E.) Residential
Realty, Inc. (e) 40,000 1,760
Southwest Bancorporation of
Texas, Inc. (a) 16,700 609
Southwest Securities Group, Inc. 26,520 749
Sovereign Bancorp, Inc. 241,100 2,004
Sovran Self Storage, Inc. (e) 43,600 823
Spieker Properties, Inc. (e) 6,185 342
Stancorp Financial Group, Inc. 22,700 925
State Street Corp. 15,600 1,945
Staten Island Bancorp, Inc. 17,600 340
Sterling Bancshares, Inc. 13,000 223
Stewart Information Services Corp. 5,900 93
TCF Financial Corp. 8,200 332
Texas Regional Bancshares, Inc.
Class A 23,400 696
Torchmark Corp. 10,000 333
Trammell Crow Co. (a) 4,600 62
Transatlantic Holdings, Inc. 4,900 455
Triad Guaranty, Inc. (a) 4,700 136
Tucker Anthony Sutro Corp. 13,300 308
UMB Financial Corp. 1,760 60
Union Planters Corp. 31,475 1,064
Unitrin, Inc. 5,500 171
Vornado Realty Trust (e) 34,719 1,209
Waddell & Reed Financial, Inc.
Class A 10,200 325
Watson Wyatt & Co.
Holdings New (a) 21,400 370
Webster Financial Corp. 54,800 1,336
Weingarten Realty Investors (e) 7,400 310
Wesco Financial Corp. 389 104
Westamerica Bancorporation 43,400 1,560
Whitney Holding Corp. 4,300 159
XL Capital, Ltd. Class A 22,000 1,691
-------
134,789
-------
HEALTH CARE - 10.6%
Abgenix, Inc. (a) 10,500 830
Affymetrix, Inc. (a) 16,000 883
Alkermes, Inc. (a) 49,700 1,840
Alliance Pharmaceutical Corp. (a) 44,000 622
AmeriPath, Inc. (a) 8,700 156
Andrx Group (a) 11,800 847
Arrow International, Inc. 1,900 76
Aurora Biosciences Corp. (a) 1,200 73
Bard (C.R.), Inc. 66,100 2,769
Bausch & Lomb, Inc. 15,700 605
Bergen Brunswig Corp. Class A 94,000 852
Bindley Western Industries, Inc. 47,200 1,697
Biomet, Inc. 7,600 278
Caremark Rx, Inc. (a) 142,500 1,781
Celgene Corp. (a) 7,000 450
Cell Therapeutics, Inc. (a) 7,900 528
Cephalon, Inc. (a) 14,500 775
Chiron Corp. (a) 9,700 420
Ciphergen Biosystems, Inc. New (a) 2,200 69
Cooper Companies, Inc. 27,200 972
Cor Therapeutics, Inc. (a) 21,200 1,196
Corixa Corp. (a) 48,300 2,147
Covance, Inc. (a) 40,200 347
Cubist Pharmaceuticals, Inc. (a) 9,000 388
CuraGen Corp. (a) 1,600 103
Cytyc Corp. (a) 3,100 184
Datascope Corp. 9,900 340
DaVita, Inc. (a) 64,000 720
DENTSPLY International, Inc. 2,200 76
Diagnostic Products Corp. 6,700 306
Drugstore.com, Inc. (a) 17,600 44
Dyax Corp. New (a) 12,600 466
Edwards Lifesciences Corp. (a) 17,200 231
Express Scripts, Inc. Class A (a) 9,300 624
First Health Group Corp. (a) 49,100 1,912
Foundation Health Systems, Inc. (a) 166,200 3,355
Health Management Associates
Class A (a) 70,500 1,397
HEALTHSOUTH Corp. (a) 344,200 4,130
Henry Schein, Inc. (a) 22,300 544
Human Genome Sciences, Inc. (a) 16,500 1,458
ICN Pharmaceuticals, Inc. 21,500 818
IDEC Pharmaceuticals Corp. (a) 13,700 2,687
IDEXX Laboratories, Inc. (a) 28,300 679
Incyte Pharmaceuticals, Inc. (a) 15,000 549
Informax, Inc. New (a) 31,500 874
27 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- ------
Inhale Therapeutic Systems, Inc. (a) 11,900 591
Invacare Corp. 3,700 105
Invitrogen Corp. (a) 20,000 1,521
IVAX Corp. (a) 19,900 866
King Pharmaceuticals, Inc. (a) 38,587 1,729
Large Scale Biology Corp. New (a) 29,700 549
LifePoint Hospitals, Inc. (a) 20,400 791
Lincare Holdings, Inc. (a) 55,000 2,313
Maxim Pharmaceuticals, Inc. (a) 16,200 720
Medarex, Inc. (a) 24,600 1,502
Medicines Co. (The) New (a) 19,500 583
MedImmune, Inc. (a) 12,200 797
Medquist, Inc. (a) 18,200 201
Mentor Corp. 11,300 198
Mid Atlantic Medical Services, Inc. (a) 32,600 554
MiniMed, Inc. (a) 17,800 1,298
Mylan Laboratories, Inc. 7,200 202
National Data Corp. 8,000 305
NBTY, Inc. (a) 15,200 98
Neurocrine Biosciences, Inc. (a) 18,200 698
Noven Pharmaceuticals, Inc. (a) 8,800 391
Ocular Sciences, Inc. (a) 8,000 99
Omnicare, Inc. 35,400 620
Orthodontic Centers of America, Inc. (a) 26,100 871
OSI Pharmaceuticals, Inc. (a) 17,900 1,280
Owens & Minor, Inc., Holding Co. 32,800 496
Oxford Health Plans, Inc. (a) 77,800 2,621
PacifiCare Health Systems, Inc. (a) 28,200 293
Parexel International Corp. (a) 19,300 168
Patterson Dental Co. (a) 2,600 81
Perrigo Co. (a) 34,400 226
POZEN, Inc. New (a) 27,300 437
PRAECIS Pharmaceuticals,
Inc. New (a) 22,700 573
Professional Detailing, Inc. (a) 3,100 275
Province Healthcare Co. (a) 48,000 2,016
QLT PhotoTherapeutics, Inc. (a) 6,500 323
Quest Diagnostics, Inc. (a) 26,900 2,589
Quintiles Transnational Corp. New (a) 19,700 273
RehabCare Group, Inc. (a) 3,900 168
Renal Care Group, Inc. (a) 30,100 705
Respironics, Inc. (a) 14,400 282
SpaceLabs, Inc. (a) 34,600 365
St. Jude Medical, Inc. (a) 5,500 303
Syncor International Corp. (a) 18,800 472
Techne Corp. (a) 1,000 112
Tenet Healthcare Corp. 52,100 2,048
Teva Pharmaceutical Industries,
Ltd. - ADR 19,400 1,147
Thermo Cardiosystems, Inc. (a) 11,600 95
Trigon Healthcare, Inc. (a) 23,400 1,677
United Therapeutics Corp. New (a) 10,000 534
Universal Health Services, Inc.
Class B (a) 21,800 1,828
Varian Medical Systems, Inc. (a) 36,900 1,803
Vital Signs, Inc. 4,500 140
------
83,030
------
INTEGRATED OILS - 1.0%
Ashland, Inc. 1,600 52
Cross Timbers Oil Co. 155,400 2,923
Helmerich & Payne, Inc. 73,400 2,308
Murphy Oil Corp. 14,600 846
Tesoro Petroleum Corp. (a) 18,500 192
Unocal Corp. 41,000 1,399
------
7,720
------
MATERIALS AND PROCESSING - 4.5%
Advanced Energy Industries, Inc. (a) 6,300 108
AK Steel Holding Corp. 171,500 1,585
Albany International Corp. Class A (a) 11,300 121
Albemarle Corp. (a) 13,200 306
Allegheny Technologies, Inc. 23,000 466
AMCOL International Corp. 5,000 37
American Standard Cos., Inc. (a) 3,400 156
AptarGroup, Inc. 60,600 1,254
Arch Chemicals, Inc. 5,300 103
Ball Corp. 14,700 516
Boise Cascade Corp. 58,000 1,664
Bowater, Inc. 5,100 276
Cabot Corp. 5,100 112
Calgon Carbon Corp. 65,200 383
Carlisle Cos., Inc. 11,600 483
Carpenter Technology Corp. 12,000 372
Centex Corp. 55,700 2,061
Century Aluminum Co. 8,000 69
Chemed Corp. 10,000 329
Commercial Metals Co. 7,300 199
CUNO, Inc. (a) 2,600 66
Cytec Industries, Inc. (a) 2,600 90
Delta and Pine Land Co. 5,400 132
Eastman Chemical Co. 5,000 214
Elcor Chemical Corp. 6,400 100
Engelhard Corp. 5,400 113
FMC Corp. (a) 800 61
Freeport-McMoRan Copper & Gold, Inc.
Class B (a) 11,600 92
Georgia Gulf Corp. 9,100 122
Georgia-Pacific Corp. (Timber Group) 2,400 68
Harland (John H.) Co. 18,700 259
Hughes Supply, Inc. 12,000 225
IMC Global, Inc. 20,000 259
Special Growth Fund 28
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- ------
Insituform Technologies, Inc.
Class A (a) 3,900 139
Kaufman & Broad Home Corp. 43,400 1,291
Kaydon Corp. 34,700 761
Lafarge Corp. 28,000 529
Lennox International, Inc. New 7,300 58
Lyondell Petrochemical Co. 14,700 211
MacDermid, Inc. 16,400 353
Martin Marietta Materials, Inc. 19,300 741
Maverick Tube Corp. (a) 19,600 305
Mead Corp. 4,100 119
Minerals Technologies, Inc. 33,500 1,049
Mueller Industries, Inc. (a) 3,000 70
NCI Building Systems, Inc. (a) 4,400 68
Newmont Mining Corp. 8,900 121
NL Industries, Inc. 19,500 461
Nucor Corp. 38,400 1,332
Olin Corp. 79,200 1,406
OM Group 14,600 675
P.H. Glatfelter Co. 10,100 105
Paxar Corp. (a) 15,600 128
Phelps Dodge Corp. 7,300 341
Plum Creek Timber Co., Inc. 47,200 1,224
Pope & Talbot, Inc. 6,700 104
Precision Castparts Corp. 48,200 1,820
Sealed Air Corp. New (a) 12,000 578
Sherwin-Williams Co. 6,900 150
SIFCO Industries 145,400 745
Sigma Aldrich Corp. 4,400 157
Solutia, Inc. 5,800 74
Southdown, Inc. 5,900 418
Spartech Corp. 10,100 156
SPS Technologies, Inc. (a) 36,000 1,859
St. Joe Co. (The) 62,100 1,254
Standex International Corp. 3,500 64
Temple-Inland, Inc. 2,200 98
Texas Industries, Inc. 40,650 948
Timken Co. 4,800 68
USG Corp. 19,800 338
USX-U.S. Steel Group 52,600 838
W.R. Grace & Co. (a) 39,900 152
Washington Group International, Inc. (a) 10,800 113
Waters Corp. (a) 8,300 602
Webb (Del E.) Corp. (a) 3,200 86
Westvaco Corp. 6,300 180
Worthington Industries, Inc. 33,600 321
------
35,011
------
MISCELLANEOUS - 0.5%
Bright Horizons Family
Solutions, Inc. (a) 5,100 126
Corinthian Colleges, Inc. New (a) 13,400 920
Descartes Systems Group,
Inc. (The) (a) 70,300 2,847
Education Management Corp. New 4,700 145
------
4,038
------
OTHER ENERGY - 6.1%
Barrett Resources Corp. (a) 24,400 888
Berry Petroleum Co. Class A 18,400 316
BJ Services Co. (a) 28,700 1,505
Brown (Tom), Inc. (a) 11,800 270
Cleco Corp. 5,600 266
CONSOL Energy, Inc. 3,700 63
Cooper Cameron Corp. (a) 14,100 768
Devon Energy Corp. 20,400 1,028
Diamond Offshore Drilling, Inc. 12,000 415
EEX Corp. (a) 24,500 115
ENSCO International, Inc. 13,400 446
EOG Resources, Inc. 87,900 3,460
Global Industries, Inc. (a) 35,400 372
Global Marine, Inc. (a) 65,000 1,723
Hanover Compressor Co. (a) 10,000 326
HS Resources, Inc. (a) 16,900 526
Key Production, Inc. (a) 5,000 110
Kinder Morgan, Inc. 45,700 1,762
Marine Drilling Co, Inc. (a) 2,600 62
Nabors Industries, Inc. (a) 62,400 3,176
Newfield Exploration Co. (a) 1,500 57
Noble Drilling Corp. (a) 37,900 1,575
Northwestern Corp. 6,800 150
Ocean Energy, Inc. (a) 9,300 129
ONEOK, Inc. 15,100 598
Patterson Energy, Inc. (a) 4,000 112
Pioneer Natural Resources Co. (a) 63,400 828
Pogo Producing Co. 24,800 620
Pride International, Inc. (a) 50,400 1,276
Rowan Cos., Inc. (a) 69,700 1,756
Santa Fe International Corp. 72,800 2,657
Seacor Holdings, Inc. (a) 3,000 126
Seitel, Inc. (a) 26,100 392
Sempra Energy 14,200 294
Smith International, Inc. (a) 45,200 3,187
Sunoco, Inc. 67,700 2,027
Talisman Energy, Inc. (a) 42,585 1,323
Tidewater, Inc. 64,400 2,974
29 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- ------
Transocean Sedco Forex, Inc. 13,000 689
Ultramar Diamond Shamrock Corp. 73,600 1,932
UTI Energy Corp. (a) 5,400 108
Valero Energy Corp. 55,300 1,828
Varco International, Inc. (a) 81,700 1,409
Vectren Corp. 5,400 125
Vintage Petroleum, Inc. 165,650 3,499
------
47,268
------
PRODUCER DURABLES - 6.9%
Actuant Corp. Class A (a) 57,700 209
AGCO Corp. 44,000 501
American Superconductor Corp. (a) 15,400 735
Applied Industrial Technology, Inc. 13,500 229
APW, Ltd. (a) 26,200 1,210
Armor Holdings, Inc. (a) 6,900 107
B.F. Goodrich Co. 7,700 315
Beckman Coulter, Inc. 4,000 280
Belden, Inc. 4,400 114
Briggs & Stratton Corp. 2,200 79
Brooks Automation, Inc. (a) 30,100 798
C-COR Electronics, Inc. (a) 3,600 56
Celestica, Inc. (a) 17,300 1,243
Cognex Corp. (a) 2,400 80
Cohu, Inc. 58,600 923
CoorsTek, Inc. (a) 41,900 1,228
Credence Systems Corp. (a) 26,600 499
Crossmann Communities, Inc. (a) 5,800 104
CTS Corp. 2,100 90
Cummins Engine Co., Inc. 4,500 153
D.R. Horton, Inc. 125,752 2,326
Diebold, Inc. 43,200 1,123
Donaldson Co., Inc. 10,900 247
Efficient Networks, Inc. (a) 68,000 2,852
EMCOR Group, Inc. (a) 12,800 331
ESCO Technologies, Inc. (a) 5,200 95
GenCorp, Inc. 30,500 255
General Cable Corp. 48,100 289
General Dynamics Corp. 25,000 1,789
General Semiconductor, Inc. (a) 7,800 89
Grant Prideco, Inc. (a) 4,300 80
Hubbell, Inc. Class B 35,700 855
ITT Industries, Inc. 54,600 1,777
JLG Industries, Inc. 35,700 498
Johnson Controls, Inc. 24,000 1,431
Kaman Corp. Class A 17,300 248
Kennametal, Inc. 2,600 76
Kent Electronics Corp. (a) 21,200 395
KLA Tencor Corporation (a) 35,200 1,188
Kulicke & Soffa Industries, Inc. (a) 72,800 1,069
Lennar Corp. 103,100 3,312
Littlefuse, Inc. (a) 4,800 139
Litton Industries, Inc. (a) 32,900 1,709
M.D.C. Holdings, Inc. 15,000 411
Mettler-Toledo International, Inc. (a) 3,800 177
Micrel, Inc. (a) 3,000 136
Miller (Herman), Inc. 16,500 431
Millipore Corp. 22,400 1,176
Moog, Inc. (a) 2,900 84
National-Oilwell, Inc. (a) 48,500 1,419
Northrop Grumman Corp. 7,400 622
Novellus Systems, Inc. (a) 9,100 372
NVR, Inc. (a) 21,100 2,182
Orbital Sciences Corp. Class A (a) 48,400 384
Pall Corp. 50,200 1,082
Penn Engineering &
Manufacturing Corp. 16,200 613
Plexus Corp. (a) 15,300 965
Power-One, Inc. (a) 11,700 830
Primex Technologies, Inc. 10,000 293
Pulte Corp. 46,100 1,536
Republic Services, Inc. (a) 5,800 78
Ryland Group, Inc. (The) 6,900 223
Sawtek, Inc. (a) 2,100 107
Sensormatic Electronics Corp. (a) 6,500 117
SPX Corp. (a) 4,700 581
Standard Pacific Corp. 30,100 564
Starrett (L.S.) Co. Class A 30,100 502
Steelcase, Inc. Class A 54,900 968
Technitrol, Inc. 1,500 166
Tektronix, Inc. 2,100 150
Teleflex, Inc. 17,000 588
Teradyne, Inc. (a) 19,264 602
Terex Corp. (a) 4,900 60
Textron, Inc. 28,300 1,427
Thermo Electron Corp. (a) 6,700 194
Thomas & Betts Corp. 10,300 156
Toll Brothers, Inc. (a) 77,500 2,518
Triquint Semiconductor, Inc. (a) 8,200 314
UNOVA, Inc. (a) 53,300 257
Varian, Inc. New (a) 2,100 65
Veeco Instruments, Inc. (a) 5,500 364
Watsco, Inc. 6,200 58
Woodhead Industries 5,700 124
York International Corp. 2,800 76
------
54,098
------
TECHNOLOGY - 20.2%
Acacia Research Corp. (a) 27,500 870
Actel Corp. (a) 2,400 88
Acterna Corp. (a) 12,700 202
Activision, Inc. (a) 33,500 459
Special Growth Fund 30
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- ------
Actuate Corp. (a) 57,600 1,620
Adtran, Inc. (a) 2,100 80
Advanced Fibre Communications (a) 3,600 117
Aeroflex, Inc. (a) 23,875 1,397
Affiliated Computer Services, Inc. Class
A (a) 1,800 100
AGENCY.COM, Inc. New (a) 30,100 316
Allen Telecom, Inc. (a) 61,000 1,140
Alliance Semiconductor Corp. (a) 66,300 1,322
Alpha Industries, Inc. (a) 2,000 80
American Management
Systems, Inc. (a) 40,000 858
Amkor Technology, Inc. (a) 3,300 74
Amphenol Corp. Class A (a) 3,200 206
Anaren Microwave, Inc. (a) 13,500 1,404
Andrew Corp. (a) 4,500 118
Anixter International, Inc. (a) 117,900 2,859
Applied Micro Circuits Corp. (a) 4,211 322
Arrow Electronics, Inc. (a) 110,800 3,545
Art Technology Group, Inc. (a) 31,850 1,999
Aspen Technology, Inc. (a) 31,600 1,302
AudioCodes, Ltd. (a) 8,000 317
Audiovox Corp. Class A (a) 22,500 307
Autodesk, Inc. 21,800 480
Avnet, Inc. 105,800 2,842
Avocent Corp. New (a) 12,200 865
AVX Corp. 30,000 859
AXENT Technologies, Inc. (a) 7,800 150
Barra, Inc. (a) 20,700 1,264
BindView Development Corp. (a) 38,000 295
BISYS Group, Inc. (a) 70,300 3,308
Black Box Corp. (a) 4,300 283
Bookham Technology PLC - ADR (a) 9,500 319
Business Objects SA - ADR (a) 21,900 1,725
CACI International, Inc. Class A (a) 13,200 271
Cadence Design Systems, Inc. (a) 33,600 863
Caliper Technologies Corp. New (a) 20,000 1,126
Ceridian Corp. (a) 6,700 168
Check Point Software
Technologies, Ltd. (a) 4,800 760
ChoicePoint, Inc. New (a) 43,400 2,221
CIENA Corp. (a) 24,400 2,564
Cirrus Logic, Inc. (a) 43,500 1,873
Clarent Corp. (a) 16,700 518
Cognos, Inc. (a) 71,100 2,964
Comdisco, Inc. 73,300 903
Comverse Technology, Inc. (a) 10,000 1,117
Covad Communications Group, Inc. (a) 80,400 425
Cree, Inc. (a) 1,100 109
Critical Path, Inc. (a) 7,500 364
Cubic Corp. 5,200 142
Cymer, Inc. (a) 14,900 371
Cypress Semiconductor Corp. (a) 35,900 1,344
Dallas Semiconductor Corp. 4,000 159
Dendrite International, Inc. (a) 32,800 711
Digex, Inc. (a) 6,000 235
DMC Stratex Networks, Inc. (a) 37,600 867
Documentum, Inc. (a) 5,900 500
DSP Group, Inc. (a) 1,600 45
DST Systems, Inc. (a) 73,100 4,505
eFunds Corp. New (a) 26,000 205
Esterline Corp. (a) 9,600 214
Exar Corp. (a) 2,000 89
Extreme Networks, Inc. (a) 34,900 2,895
FactSet Research Systems, Inc. 5,900 223
Fair, Isaac and Co., Inc. 2,400 98
FileNet Corp. (a) 41,800 1,113
Floware Wireless Systems Ltd. New (a) 26,300 358
Forrester Research, Inc. (a) 1,300 53
Freemarkets Inc. (a) 26,400 1,305
Galileo International, Inc. 125,700 2,483
Galileo Technology, Ltd. (a) 72,100 1,956
Genuity, Inc. New (a) 69,700 383
GTECH Holdings Corp. (a) 8,600 149
Harris Corp. 84,600 2,680
i2 Technologies, Inc. (a) 6,000 1,020
Ikon Office Solutions, Inc. 14,600 47
InFocus Corp. (a) 18,500 817
Informatica Corp. (a) 14,900 1,408
InfoSpace.com, Inc. (a) 40,313 811
Ingram Micro, Inc. Class A (a) 56,400 962
Insight Enterprises, Inc. (a) 24,000 780
Integrated Device Technology, Inc. (a) 31,700 1,785
Integrated Silicon Solution, Inc. (a) 51,000 682
Internap Network Services Corp. (a) 23,300 370
International Game Technology (a) 92,900 3,402
International Rectifier Corp. (a) 11,400 509
Internet Security Systems, Inc. (a) 10,900 961
Intersil Holding Corp. New (a) 21,800 1,044
Interwoven, Inc. (a) 26,200 2,640
IntraNet Solutions, Inc. (a) 24,400 1,133
JDA Software Group, Inc. (a) 4,300 64
Jupiter Media Metrix, Inc. New (a) 25,000 336
Kana Communications, Inc. (a) 17,000 398
Kemet Corp. (a) 86,500 2,411
L-3 Communications Holdings, Inc. (a) 11,700 771
Lam Research Corp. (a) 70,000 1,348
Lattice Semiconductor Corp. (a) 6,200 181
Loral Space & Communications, Ltd. (a) 184,900 1,052
LSI Logic Corp. (a) 33,000 1,085
Macromedia, Inc. (a) 7,650 590
Macrovision Corp. (a) 6,400 466
31 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
Manugistics Group, Inc. (a) 15,900 1,811
MarchFirst, Inc. (a) 53,400 310
MatrixOne, Inc. New (a) 61,000 1,815
Mercury Interactive Corp. (a) 24,700 2,740
Microchip Technology, Inc. (a) 21,600 683
Micromuse, Inc. (a) 10,800 1,833
Microsemi Corp. (a) 18,700 749
N2H2, Inc. (a) 2,500 1
National Instruments Corp. (a) 16,925 789
National Semiconductor Corp. (a) 15,500 403
Natural Microsystems Corp. (a) 26,500 1,194
NCR Corp. (a) 54,700 2,359
Netegrity, Inc. (a) 22,150 1,726
Netro Corp. (a) 15,200 331
Network Appliance, Inc. (a) 21,900 2,606
Network Associates, Inc. (a) 8,200 158
Newport Corp. 13,100 1,489
NVIDIA Corp. (a) 3,000 186
Oak Technology, Inc. (a) 32,200 904
Oplink Communications, Inc. New (a) 7,000 171
Orbotech, Ltd. NPV (a) 9,750 516
Park Electrochemical Corp. 9,200 608
Pegasus Systems, Inc. (a) 25,800 439
PeopleSoft, Inc. (a) 10,000 436
PerkinElmer, Inc. 1,900 227
Perot Systems Corp. Class A (a) 15,900 158
Photronics, Inc. (a) 48,200 1,085
Pioneer-Standard Electronics, Inc. 33,300 462
Pivotal Corp. New (a) 39,600 2,418
Pixelworks, Inc. New (a) 11,200 372
PMC - Sierra, Inc. (a) 12,600 2,141
Polycom, Inc. (a) 16,800 1,090
QLogic Corp. (a) 6,700 648
Quantum Corp. - DLT & Storage Systems (a) 79,700 1,196
Quantum Corp. - Hard Disk Drive (a) 77,800 890
Quest Software, Inc. (a) 11,100 485
Rational Software Corp. (a) 7,300 436
Redback Networks, Inc. (a) 3,200 339
REMEC, Inc. (a) 84,450 2,491
RSA Security, Inc. (a) 8,000 463
Sandisk Corp. (a) 22,300 1,197
SCI Systems, Inc. (a) 5,700 245
Scott Technologies, Inc. (a) 3,500 80
Semtech Corp. (a) 3,800 122
SERENA Software, Inc. (a) 3,600 183
Silicon Storage Technology, Inc. (a) 25,600 582
Stamps.com, Inc. New (a) 10,000 39
StarTek, Inc. (a) 2,100 53
Stoneridge, Inc. (a) 9,300 91
SunGard Data Systems (a) 26,000 1,329
Sybase, Inc. (a) 5,400 113
Sycamore Networks, Inc. (a) 12,100 767
Symantec Corp. (a) 22,800 889
Tekelec, Inc. (a) 14,000 515
Teledyne Technologies, Inc. (a) 44,800 1,123
THQ, Inc. (a) 21,800 446
Turnstone Systems, Inc. (a) 48,500 1,031
Tut Systems, Inc. (a) 1,500 49
Unisys Corp. (a) 130,000 1,658
VA Linux Systems, Inc. New (a) 39,000 1,124
Varian Semiconductor Equipment
Associates, Inc. (a) 30,700 706
VelocityHSI, Inc. New (a) 1,199 1
VeriSign, Inc. (a) 8,427 1,112
Veritas Software Corp. (a) 4,500 634
Virata Corp. (a) 20,200 390
Vishay Intertechnology, Inc. (a) 17,750 533
Volt Information Sciences, Inc. (a) 2,800 61
WatchGuard Technologies, Inc. (a) 5,800 289
Wireless Facilities, Inc. (a) 32,100 1,601
Zoran Corp. (a) 36,400 1,806
-------
157,821
-------
UTILITIES - 6.1%
AGL Resources, Inc. 34,500 702
ALLETE (a) 27,400 590
Alliant Energy Corp. 23,000 697
Amdocs, Ltd. (a) 8,700 564
American States Water Co. 1,600 50
American Tower Corp. Class A (a) 12,900 528
American Water Works, Inc. 800 20
Avista Corp. 200 4
Black Hills Corp. 6,000 188
BroadWing, Inc. (a) 104,400 2,948
C&D Technologies, Inc. 4,700 278
Cable Design Technologies Corp. (a) 62,300 1,437
Cascade Natural Gas Corp. 9,500 175
CenturyTel, Inc. 7,000 270
CH Energy Group, Inc. 6,600 260
Charter Communications
Holdings, Inc. (a) 204,800 3,980
Citizens Communications Co. (a) 22,800 331
Comcast Corp. Special Class A (a) 53,900 2,192
Conectiv, Inc. 26,800 481
CT Communications, Inc. 3,400 68
Dobson Communications Corp. New (a) 32,600 414
DQE, Inc. 30,500 1,066
Dycom Industries, Inc. (a) 62,400 2,348
El Paso Electric Co. (a) 42,500 510
Energen Corp. 15,100 432
Energy East Corp. 10,500 212
Special Growth Fund 32
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------ -------
Finisar Corp. (a) 44,200 1,274
Hawaiian Electric Industries, Inc. 25,100 827
Hickory Tech Corp. 7,900 175
Idacorp, Inc. 32,600 1,607
MDU Resources Group, Inc. 11,400 333
Montana Power Co. 9,100 257
New Jersey Resources Corp. 2,300 92
NICOR, Inc. 32,500 1,148
NiSource, Inc. 6,100 152
NRG Energy, Inc. (a) 29,100 757
NSTAR 3,100 120
OGE Energy Corp. 19,900 409
Peoples Energy Corp. 11,200 385
Piedmont Natural Gas Co., Inc. 5,100 156
Pinnacle West Capital Corp. 19,300 838
Powerwave Technologies, Inc. (a) 17,000 818
PPL Corp. 6,100 251
Primus Telecommunications
Group, Inc. (a) 33,100 167
Public Service Co. of New Mexico 70,100 1,932
Puget Sound Energy, Inc. 14,000 344
Quanta Services, Inc. (a) 19,350 601
Questar Corp. 18,300 495
RCN Corp. (a) 48,000 849
RGS Energy Group, Inc. 30,300 894
SBA Communications Corp. (a) 1,700 85
SCANA Corp. 6,400 170
South Jersey Industries, Inc. 2,600 76
Stratos Lightwave, Inc. New (a) 44,500 1,176
TECO Energy, Inc. 5,400 151
Telephone & Data Systems, Inc. 12,800 1,350
Time Warner Telecom, Inc. Class A (a) 12,100 724
TNPC, Inc. New (a) 1,700 28
Tollgrade Communications, Inc. (a) 800 76
TranSwitch Corp. (a) 3,600 208
UGI Corp. 20,400 473
UIL Holdings Corp. 8,900 417
UniSource Energy Corp. 14,100 211
United States Cellular Corp. (a) 22,500 1,440
UtiliCorp United, Inc. 48,000 1,275
Vyyo, Inc. New (a) 36,400 803
West TeleServices Corp. (a) 5,700 142
Western Resources, Inc. 78,200 1,672
Wisconsin Energy Corp. 27,300 514
WPS Resources Corp. 10,900 351
Xcel Energy, Inc. 9,800 251
-------
47,219
-------
TOTAL COMMON STOCKS
(cost $610,374) 728,355
-------
PREFERRED STOCKS - 0.0%
Sovereign Bancorp, Inc. (conv.) 2,500 126
-------
TOTAL PREFERRED STOCKS
(cost $125) 126
-------
PRINCIPAL
AMOUNT
(000)
$
---------
SHORT-TERM INVESTMENTS - 7.7%
Frank Russell Investment Company Money
Market Fund,
due on demand (b) 54,860 54,860
United States Treasury Bills (b)(c)(d)
5.925% due 12/21/00 1,750 1,736
5.940% due 12/21/00 3,500 3,471
-------
TOTAL SHORT-TERM INVESTMENTS
(cost $60,067) 60,067
-------
TOTAL INVESTMENTS - 101.1%
(identified cost $670,566) 788,548
OTHER ASSETS AND LIABILITIES,
NET - (1.1%) (8,673)
-------
779,875
NET ASSETS - 100.0% =======
(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.
(e) Real Estate investment Trust (REIT).
Abbreviations:
ADR - American Depositary Receipt
See accompanying notes which are an integral part of the financial statements.
33 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
FUTURES CONTRACTS CONTRACTS (000)
--------- --------------
Nasdaq 100 Index
expiration date 12/00 17 $ 241
Russell 2000 Index
expiration date 12/00 39 298
S&P Midcap 400 Index
expiration date 12/00 131 (1,766)
S&P 500 Index
expiration date 12/00 24 (380)
--------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ (1,607)
========
See accompanying notes which are an integral part of the financial statements.
Special Growth Fund 34
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) October 31, 2000
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $670,566)............................................... $ 788,548
Cash........................................................................................... 507
Receivables:
Dividends and interest...................................................................... 760
Investments sold............................................................................ 5,234
Fund shares sold............................................................................ 1,632
Daily variation margin on futures contracts................................................. 1,499
Prepaid expenses............................................................................... 5
-----------
Total assets............................................................................. 798,185
LIABILITIES
Payables:
Investments purchased............................................................ $ 16,584
Fund shares redeemed............................................................. 841
Accrued fees to affiliates....................................................... 780
Other accrued expenses........................................................... 105
----------
Total liabilities........................................................................ 18,310
-----------
NET ASSETS..................................................................................... $ 779,875
===========
NET ASSETS CONSIST OF:
Undistributed net investment income............................................................ $ 180
Accumulated net realized gain (loss)........................................................... 99,211
Unrealized appreciation (depreciation) on:
Investments................................................................................. 117,982
Futures contracts........................................................................... (1,607)
Shares of beneficial interest.................................................................. 149
Additional paid-in capital..................................................................... 563,960
-----------
NET ASSETS..................................................................................... $779,875
===========
NET ASSET VALUE, offering and redemption price per share:
Class C ($10,761,944 divided by 210,810 shares of $.01 par value
shares of beneficial interest outstanding)............................................... $ 51.05
===========
Class E ($9,678,306 divided by 187,070 shares of $.01 par value
shares of beneficial interest outstanding)............................................... $ 51.74
===========
Class S ($759,434,970 divided by 14,460,452 shares of $.01 par value
shares of beneficial interest outstanding)............................................... $ 52.52
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
35 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Dividends......................................................... $ 5,058 $ 5,190
Dividends from Money Market Fund.................................. 2,991 1,597
Interest.......................................................... 181 250
---------------- -----------------
Total investment income........................................ 8,230 7,037
---------------- -----------------
EXPENSES
Advisory fees..................................................... 5,667 5,557
Administrative fees............................................... 317 310
Custodian fees.................................................... 449 469
Distribution fees - Class C....................................... 53 18
Transfer agent fees............................................... 1,043 1,139
Professional fees................................................. 61 31
Registration fees................................................. 78 96
Shareholder servicing fees - Class C.............................. 18 6
Shareholder servicing fees - Class E.............................. 16 14
Trustees' fees.................................................... 14 7
Miscellaneous..................................................... 87 70
---------------- -----------------
Expenses before reductions........................................ 7,803 7,717
Expense reductions................................................ (20) --
---------------- -----------------
Expenses, net.................................................. 7,783 7,717
---------------- -----------------
Net investment income (loss)......................................... 447 (680)
---------------- -----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments....................................................... 92,466 63,510
Futures contracts................................................. 4,471 5,156
---------------- -----------------
96,937 68,666
---------------- -----------------
Net change in unrealized appreciation (depreciation) on:
Investments....................................................... (24,086) 59,584
Futures contracts................................................. (3,843) 333
---------------- -----------------
(27,929) 59,917
---------------- -----------------
Net realized and unrealized gain (loss).............................. 69,008 128,583
---------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS................ $69,455 $127,903
================ =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Special Growth Fund 36
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss).............................. $ 447 $ (680) $ 189
Net realized gain (loss).................................. 96,937 68,666 25,694
Net change in unrealized appreciation (depreciation)...... (27,929) 59,917 (28,689)
---------------- ----------------- -----------------
Net increase (decrease) in net assets from operations.. 69,455 127,903 (2,806)
---------------- ----------------- -----------------
DISTRIBUTIONS
From net investment income
Class S................................................ (267) (78) (536)
From net realized gain
Class C................................................ (189) (357) --
Class E................................................ (165) (323) (281)
Class S................................................ (19,077) (42,975) (32,238)
---------------- ----------------- -----------------
Net decrease in net assets from distributions....... (19,698) (43,733) (33,055)
---------------- ----------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share
transactions.............................................. 21,506 22,442 62,073
---------------- ----------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS.................. 71,263 106,612 26,212
NET ASSETS
Beginning of period....................................... 708,612 602,000 575,788
---------------- ----------------- -----------------
End of period (including undistributed net investment
income of $180 at October 31, 2000).................... $ 779,875 $ 708,612 $ 602,000
================ ================= =================
</TABLE>
See acompanying notes which are an integral part of the financial statements.
37 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
2000* 1999**
------ ------
NET ASSET VALUE, BEGINNING OF PERIOD...................... $48.22 $42.17
------ ------
INCOME FROM OPERATIONS
Net investment income (loss)(a)........................ (.38) (.45)
Net realized and unrealized gain (loss)................ 4.56 9.72
------ ------
Total income from operations........................ 4.18 9.27
------ ------
DISTRIBUTIONS
From net realized gain................................. (1.35) (3.22)
------ ------
NET ASSET VALUE, END OF PERIOD............................ $51.05 $48.22
====== ======
TOTAL RETURN (%)(b)....................................... 8.83 22.53
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)............... 10,762 5,990
Ratios to average net assets (%)(c):
Operating expenses, net............................. 2.21 2.23
Operating expenses, gross........................... 2.22 2.23
Net investment income (loss)........................ (.91) (1.10)
Portfolio turnover rate (%)............................ 136.00 111.98
* For the ten months ended October 31, 2000.
** 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) 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 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,
--------------------------------------------
2000* 1999 1998 1997 1996**
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................ $48.55 $42.91 $45.42 $40.75 $43.48
------ ------ ------ ------ ------
INCOME FROM OPERATIONS
Net investment income (loss)(a).................. (.07) (.16) (.17) (.13) (.02)
Net realized and unrealized gain (loss).......... 4.61 9.02 .09 11.05 1.63
------ ------ ------ ------ ------
Total income from operations.................. 4.54 8.86 (.08) 10.92 1.61
------ ------ ------ ------ ------
DISTRIBUTIONS
From net realized gain........................... (1.35) (3.22) (2.43) (6.25) (4.34)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD...................... $51.74 $48.55 $42.91 $45.42 $40.75
====== ====== ====== ====== ======
TOTAL RETURN (%)(b)................................. 9.53 21.19 .04 27.90 4.04
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)......... 9,678 5,411 6,139 3,153 910
Ratios to average net assets (%)(c):
Operating expenses, net....................... 1.46 1.49 1.58 1.83 1.89
Operating expenses, gross..................... 1.47 1.49 1.58 1.83 1.89
Net investment income (loss).................. (.16) (.36) (.39) (.51) (.38)
Portfolio turnover rate (%)...................... 136.00 111.98 129.19 97.19 118.13
</TABLE>
* For the ten months ended October 31, 2000.
** 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.
39 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------
2000* 1999 1998 1997 1996 1995
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............. $49.18 $43.34 $45.72 $40.79 $39.17 $33.47
------ ------ ------ ------ ------ ------
INCOME FROM OPERATIONS
Net investment income (loss)(a)............... .04 (.05) .01 .08 .12 .18
Net realized and unrealized gain (loss)....... 4.67 9.12 .08 11.18 6.87 9.25
------ ------ ------ ------ ------ ------
Total income from operations............... 4.71 9.07 .09 11.26 6.99 9.43
------ ------ ------ ------ ------ ------
DISTRIBUTIONS
From net investment income.................... (.02) (.01) (.04) (.08) (.12) (.21)
From net realized gain........................ (1.35) (3.22) (2.43) (6.25) (5.25) (3.52)
------ ------ ------ ------ ------ ------
Total distributions........................ (1.37) (3.23) (2.47) (6.33) (5.37) (3.73)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD................... $52.52 $49.18 $43.34 $45.72 $40.79 $39.17
====== ====== ====== ====== ====== ======
TOTAL RETURN (%)(b).............................. 9.76 21.45 .42 28.77 18.65 28.52
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)...... 759,435 697,211 595,862 572,635 393,048 313,678
Ratios to average net assets (%)(c):
Operating expenses, net.................... 1.21 1.24 1.15 1.15 1.19 1.22
Operating expenses, gross.................. 1.22 1.24 1.15 1.15 1.19 1.22
Net investment income (loss)............... .08 (.10) .03 .18 .28 .49
Portfolio turnover rate (%)................... 136.00 111.98 129.19 97.19 118.13 87.56
</TABLE>
* For the ten months ended October 31, 2000.
(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 40
<PAGE>
EQUITY INCOME FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
DATES EQUITY INCOME - CLASS S RUSSELL 1000(R) VALUE **
Inception* $ 10,000 $ 10,000
1991 $ 13,718 $ 13,289
1992 $ 15,039 $ 14,706
1993 $ 17,912 $ 18,406
1994 $ 18,676 $ 18,548
1995 $ 22,865 $ 23,126
1996 $ 27,872 $ 28,614
1997 $ 37,359 $ 38,110
1998 $ 41,759 $ 43,760
1999 $ 45,115 $ 50,992
2000 $ 45,144 $ 53,805
Total $295,459 $313,356
YEARLY PERIODS ENDED OCTOBER 31
<TABLE>
<CAPTION>
EQUITY INCOME FUND - CLASS S EQUITY INCOME FUND - CLASS C++++
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
-------------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $10,006 0.06% 1 Year $ 9,908 (0.92)%
5 Years $19,743 14.56%(S) 5 Years $19,159 13.87%(S)
10 Years $45,144 16.25%(S) 10 Years $43,807 15.90%(S)
EQUITY INCOME FUND - CLASS E++ RUSSELL 1000(R) VALUE INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
-------------------------------------------------------- --------------------------------------------------------
1 Year $ 9,986 (0.14)% 1 Year $10,552 5.52%
5 Years $19,403 14.16%(S) 5 Years $23,266 18.40%(S)
10 Years $44,365 16.05%(S) 10 Years $53,805 18.33%(S)
</TABLE>
41 Equity Income Fund
<PAGE>
EQUITY INCOME FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the ten months ended October 31, 2000, the Equity Income Fund Class S, Class
E and Class C shares returned 0.66%, 0.46%, and (0.17)% respectively, as
compared to the Russell 1000(R) Value Index, which gained 5.84%.
The Fund faced a difficult first quarter, as growth issues, particularly
technology stocks, vastly outperformed value stocks. However, the climate
abruptly changed in March 2000 and the Fund's value managers began to enjoy a
much more favorable, although highly volatile, climate.
PORTFOLIO HIGHLIGHTS
A high level of confidence and a more speculative investment philosophy marked
the beginning of the fiscal period. This provided significant challenges for
value investors, as valuation models performed poorly in a world driven almost
exclusively by price momentum. Further complicating matters for diversified
investors, sector concentration, notably in the Technology arena, provided an
exceptionally narrow window for investment opportunities.
However, by the end of the first quarter, value managers began to feel
vindicated. Beginning in March, investors experienced an abrupt turnaround from
growth to value investing and the long-favored Technology sector fell
dramatically, as market opportunities broadened. During the remainder of the
period, market breadth increased substantially, and the Fund's diversification
was again a benefit. Strong stock selection in the Utilities, Consumer
Discretionary, and Health Care sectors contributed to the Fund's late-period
rally. During this time, overweight positions in JP Morgan and St. Paul (both
issues within the Financials sector), Reliant Energy (Utilities), and Boeing
(Producer Durables), as well as an underweight position in Worldcom (Utilities),
added to the Fund's overall returns.
The Fund's performance was also affected by a second quarter modification to the
investment manager lineup. After careful consideration, the Fund terminated
Trinity Investment Management Corp. and retained Barclays Global Fund Advisors
in April 2000. This provided an additional level of diversification for the
Fund, and helped align the portfolio with the changing nature of the value
indexes. Barclays utilizes a process that incorporates earnings momentum into
its portfolio building approach. This helps give the Fund broader coverage of
the former growth-oriented stocks that have become part of the value segment of
the Russell 1000(R) Index since the June reconstitution of the Index. That
annual evaluation revealed that some slower-growth companies had become value
stocks as extremely high-growth issues, such as technology stocks, crowded them
out of the growth segment of the Russell 1000(R) Index.
TOP TEN EQUITY HOLDINGS
(as a percent of Total Investments) October 31, 2000
Exxon Mobil Corp. 4.0%
Citigroup, Inc. 3.7
SBC Communications, Inc. 2.5
Merck & Co., Inc. 2.3
Fleetboston Financial Corp. 1.9
Morgan Stanley Dean Witter & Co. 1.9
Johnson & Johnson 1.8
American International Group, Inc. 1.7
Morgan (J.P.) & Co., Inc. 1.6
Verizon Communications 1.6
PORTFOLIO CHARACTERISTICS
October 31, 2000
Current P/E Ratio 16.2x
Portfolio Price/Book Ratio 3.06x
Market Capitalization - $-Weighted Average 79.36 Bil
Number of Holdings 513
MONEY MANAGERS STYLE
Barclays Global Fund Advisors Value
Equinox Capital Management, Inc. Value
Westpeak Investment Advisors, L.P. Value
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* Equity Income Fund Class S assumes initial investment on November 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.
++ 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.
(S) 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
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------ ------
COMMON STOCKS - 94.5%
AUTO AND TRANSPORTATION - 3.8%
Airborne Freight Corp. 200 2
AMR Corp. (a) 1,400 46
ArvinMeritor, Inc. 1,825 31
AutoZone, Inc. (a) 3,100 83
Bandag, Inc. 400 14
Burlington Northern, Inc. 9,000 239
CNF Transportation, Inc. 100 3
Delphi Automotive Systems Corp. 2,800 44
Delta Air Lines, Inc. 33,800 1,597
Eaton Corp.
Expeditors International of 600 41
Washington, Inc. 200 10
FedEx Corp. (a) 2,700 127
Ford Motor Co. 43,003 1,123
GATX Corp. 400 17
General Motors Corp. 30,988 1,925
Hertz Corp. Class A
Hunt (JB) Transportation 500 16
Services, Inc 1,400 18
Lear Corp. (a) 900 25
Ryder System, Inc. 100 2
Southwest Airlines Co. 500 14
Swift Transportation Co., Inc. (a) 200 3
Trinity Industries, Inc. 200 5
UAL Corp. 200 8
Union Pacific Corp. 6,800 319
Visteon Corp. 1,266 21
------
5,733
------
CONSUMER DISCRETIONARY - 6.8%
AC Nielsen Corp. (a) 1,600 38
AT&T Corp. - Liberty Media Group Class A (a) 69,568 1,252
Avon Products, Inc. 200 10
Banta Corp. 1,100 25
Best Buy Co. (a) 1,500 75
BJ's Wholesale Club, Inc. (a) 3,500 115
Brinker International, Inc. (a) 1,800 71
Brunswick Corp. 2,300 45
Callaway Golf Co. 700 11
Carnival Corp. 100 2
Catalina Marketing Corp. (a) 500 20
Cendant Corp. (a) 3,000 36
Circuit City Stores - Circuit City Group 500 7
Clear Channel Communications, Inc. (a) 1,616 97
Costco Wholesale Corp. (a) 800 29
Darden Restaurants, Inc. 5,300 119
Disney (Walt) Co. 51,300 1,837
Donnelley (R.R.) & Sons Co. 5,100 110
Eastman Kodak Co. 2,100 94
EchoStar Communications Corp. Class A (a) 300 14
Energizer Holdings, Inc. (a) 6,933 137
Federated Department Stores, Inc. (a) 2,500 81
Fluor Corp. 1,400 49
Gannett Co., Inc. 2,200 128
Harrah's Entertainment, Inc. (a) 1,800 52
Hasbro, Inc. 900 10
Home Depot, Inc. (The) 200 9
Infinity Broadcasting Corp. Class A (a) 1,500 50
JC Penney & Co., Inc. 500 6
Kelly Services, Inc. Class A 200 4
Kimberly-Clark Corp. 4,700 310
Kmart Corp. (a) 4,600 27
Lancaster Colony Corp. 300 7
Land's End, Inc. (a) 100 3
Limited, Inc. (The) 11,300 285
Liz Claiborne, Inc. 3,700 157
Lowe's Cos., Inc. 1,900 87
Manpower, Inc. 4,500 157
Marriott International, Inc. Class A 5,000 203
May Department Stores Co. 4,900 129
Maytag Corp. 300 9
McDonald's Corp. 5,000 155
McGraw-Hill, Inc. 1,700 109
MGM Grand, Inc. 7,100 245
Neiman Marcus Group, Inc. (The) Class A (a) 4,200 156
New York Times Co. Class A 1,900 70
Newell Rubbermaid, Inc. 1,100 21
NTL, Inc. (a) 1,100 48
Office Depot, Inc. (a) 1,400 12
PanAmSat Corp. (a) 300 10
Park Place Entertainment Corp. (a) 1,500 19
Payless ShoeSource, Inc. (a) 800 46
Pittston Brink's Group 1,100 17
Reebok International, Ltd. (a) 300 6
Robert Half International, Inc. (a) 300 9
Ross Stores, Inc. 200 3
Russell Corp. 200 3
Sabre Holdings, Corp. 1,600 54
Safeguard Scientifics, Inc. (a) 900 14
Saks, Inc. (a) 1,200 12
Sears Roebuck & Co. 30,600 910
Shaw Industries, Inc. 1,300 24
Starbucks Corp. (a) 100 4
Starwood Hotels & Resorts
Worldwide, Inc 1,000 30
43 Equity Income Fund
<PAGE>
EQUITY INCOME FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
Target Corp. 4,700 130
Tiffany & Co. 300 13
Time Warner, Inc. 1,500 114
TJX Cos., Inc. 200 5
Toys "R" Us, Inc. (a) 3,700 64
Tribune Co. 19,100 708
Tricon Global Restaurants, Inc. (a) 500 15
Tupperware Corp. 200 3
UnitedGlobalCom, Inc. Class A (a) 400 13
USA Networks, Inc. (a) 800 16
V.F. Corp. 200 5
Valassis Communications, Inc. (a) 100 3
Venator Group, Inc. (a) 1,000 14
Viacom, Inc. Class B (a) 21,206 1,206
Viad Corp. 400 9
Wal-Mart Stores, Inc. 1,300 59
Wallace Computer Services, Inc. 1,700 25
Wendy's International, Inc. 1,600 35
Westwood One, Inc. (a) 800 15
Whirlpool Corp. 1,900 82
-------
10,418
-------
CONSUMER STAPLES - 6.9%
Albertson's, Inc. 2,700 64
Anheuser-Busch Cos., Inc. 27,200 1,244
Campbell Soup Co. 500 15
Clorox Co. (The) 4,200 187
Coca-Cola Co. (The) 1,700 103
Coca-Cola Enterprises, Inc. 100 2
Colgate-Palmolive Co. 17,200 1,011
ConAgra, Inc. 1,200 26
Coors (Adolph) Co. Class B 700 45
Delhaize America, Inc. 1,769 30
Dreyers Grand Ice Cream, Inc. 200 5
Gillette Co. (The) 600 21
Heinz (H.J.) Co. 21,500 902
IBP, Inc. 2,300 47
Interstate Bakeries Corp. 1,700 24
Keebler Foods Co. 1,200 49
Kroger Co. (The)(a) 2,700 61
McCormick & Co., Inc. 2,300 73
Nabisco Group Holdings Corp. 2,400 69
Nabisco Holdings Corp. Class A 400 22
Pepsi Bottling Group, Inc. (The) 6,300 218
PepsiCo, Inc. 28,700 1,390
Philip Morris Cos., Inc. 43,200 1,582
Procter & Gamble Co. 27,950 1,997
Quaker Oats Co. (The) 2,900 237
R.J. Reynolds Tobacco Holdings, Inc. 9,200 329
Ralston-Purina Group 3,500 85
Safeway, Inc. (a) 2,100 115
Sara Lee Corp. 2,300 50
SuperValu, Inc. 1,000 14
SYSCO Corp. 6,700 350
Tyson Foods, Inc. Class A 2,300 25
UST Corp. 100 2
Winn-Dixie Stores, Inc. 3,100 60
Wrigley (Wm.), Jr. Co. 1,100 86
-------
10,540
-------
FINANCIAL SERVICES - 30.5%
AFLAC, Inc. 1,500 110
Allmerica Financial Corp. 300 19
Allstate Corp. 6,300 254
Ambac Financial Group, Inc. 700 56
American Express Co. 7,700 462
American General Corp. 13,900 1,119
American International Group, Inc. 26,300 2,577
AmSouth Bancorp 3,900 54
AON Corp. 13,000 539
Apartment Investment & Management 2,000 91
Co. Class A (b)
Associates First Capital Corp. Class A 7,200 267
AXA Financial, Inc. 1,300 70
BancWest Corp. 19,600 401
Bank of America Corp. 34,384 1,653
Bank of New York Co., Inc. 19,700 1,134
Bank One Corp. 30,600 1,117
BB&T Corp. 4,300 137
Bear Stearns Companies Inc. (The) 100 6
Block (H&R) Co., Inc. 600 21
Catellus Development Corp. (a)(b) 700 13
Chase Manhattan Corp. 16,900 769
Chubb Corp. (The) 9,100 768
CIGNA Corp. 16,800 2,049
Cincinnati Financial Corp. 1,800 66
CIT Group, Inc. 1,000 17
Citigroup, Inc. 107,133 5,638
City National Corp. 13,600 468
Colonial BancGroup, Inc. 800 7
Comerica, Inc. 1,900 115
Commerce Bancshares, Inc. 7,700 276
Compass Bancshares, Inc. 900 16
Conseco, Inc. 1,900 13
Crescent Real Estate Equities, Inc. (b) 2,600 52
Dime Bancorp, Inc. 400 10
Donaldson, Lufkin & Jenrette, Inc. 1,000 90
Dow Jones & Co., Inc. 3,700 218
Duke-Weeks Realty Corp. (b) 3,000 71
Dun & Bradstreet Corp. (a) 100 2
Edwards (A.G.), Inc. 5,100 259
Equity Income Fund 44
<PAGE>
EQUITY INCOME FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------ ------
Equity Office Properties Trust (b) 3,055 92
Equity Residential Properties Trust (b) 300 14
Erie Indemnity Co. Class A 10,600 295
Everest Re Group, Ltd. 200 12
Federal Home Loan Mortgage Corp. 4,000 240
Federal National Mortgage Association 26,600 2,048
FelCor Lodging Trust, Inc. (b) 1,400 31
FINOVA Group, Inc. 700 2
First Data Corp. 5,500 276
First Tennessee National Corp. 300 7
First Union Corp. 7,700 233
Firstar Corp. 6,700 132
FleetBoston Financial Corp. 77,100 2,930
Franchise Finance Corp. of America 1,200 24
Franklin Resources, Inc. 700 30
Fulton Financial Corp. 530 12
General Growth Properties, Inc. (b) 200 6
Golden State Bancorp, Inc. 9,000 235
Golden West Financial Corp. 17,500 981
Goldman Sachs Group, Inc. (The) 3,800 379
Greenpoint Financial Corp. 800 24
Hartford Financial Services Group, Inc. (The) 14,600 1,087
Hibernia Corp. Class A 1,900 23
Hospitality Properties Trust 5,450 118
Household International, Inc. 5,500 277
Jefferson-Pilot Corp. 5,600 385
John Hancock Financial Services, Inc. (a) 200 6
KeyCorp 5,900 146
Lehman Brothers Holdings, Inc. 11,800 761
Lincoln National Corp. 1,900 92
Loews Corp. 11,900 1,082
Marsh & McLennan Cos., Inc. 2,600 340
Marshall & Ilsley Corp. 200 9
MBNA Corp. 2,300 86
Mellon Financial Corp. 2,900 140
Mercantile Bankshares Corp. 2,500 94
Merrill Lynch & Co., Inc. 15,400 1,078
MGIC Investment Corp. 7,900 538
MONY Group, Inc. (The) 6,300 259
Moody's Corp. (a) 200 5
Morgan (J.P.) & Co., Inc. 14,900 2,466
Morgan Stanley Dean Witter & Co. 35,500 2,851
National City Corp. 7,000 150
National Commerce Bancorp 600 13
North Fork Bancorp, Inc. 900 18
Northern Trust Corp. 3,100 264
Old Kent Financial Corp. 740 20
Old Republic International Corp. 600 16
Paine Webber Group, Inc. 500 36
PMI Group, Inc. (The) 1,800 133
PNC Bank Corp. 15,400 1,030
Popular, Inc. 500 14
Radian Group, Inc. 5,300 376
Regions Financial Corp. 1,800 42
Reinsurance Group of America 200 7
Simon Property Group, Inc. (b) 1,800 40
SouthTrust Corp. 2,100 68
Spieker Properties, Inc. (b) 2,093 116
St. Paul Cos., Inc. 22,400 1,148
State Street Corp. 600 75
Stilwell Financial, Inc. 600 27
SunTrust Banks, Inc. 1,700 83
Synovus Financial Corp. 12,000 259
TCF Financial Corp. 900 36
Torchmark Corp. 700 23
U.S. Bancorp 8,500 206
UnionBanCal Corp. 8,100 170
UnumProvident Corp. 2,500 71
USA Education, Inc. 1,700 95
Wachovia Corp. 1,100 59
Washington Mutual, Inc. 9,100 400
Wells Fargo Co. 12,462 577
------
46,422
------
HEALTH CARE - 8.4%
Abbott Laboratories 8,600 454
Allergan, Inc. 600 50
Bausch & Lomb, Inc. 700 27
Baxter International, Inc. 4,600 378
Becton, Dickinson & Co. 1,000 34
Boston Scientific Corp. (a) 3,800 61
Bristol-Myers Squibb Co. 25,300 1,542
Cardinal Health, Inc. 4,200 398
Covance, Inc. (a) 400 3
DENTSPLY International, Inc. 7,000 243
First Health Group Corp. (a) 400 16
Forest Labs, Inc. (a) 400 53
Foundation Health Systems, Inc. (a) 900 18
Genzyme Corp. (a) 400 28
Gilead Sciences, Inc. (a) 300 26
HCA-The Healthcare Co. 30,600 1,222
HEALTHSOUTH Corp. (a) 2,200 26
Humana, Inc. (a) 1,100 13
ICOS Corp. (a) 100 5
Johnson & Johnson 29,800 2,745
Lilly (Eli) & Co. 300 27
Merck & Co., Inc. 39,400 3,544
PacifiCare Health Systems, Inc. (a) 300 3
Perrigo Co. (a) 1,000 7
45 Equity Income Fund
<PAGE>
EQUITY INCOME FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------ ------
Pfizer, Inc. 400 17
Pharmacia Corp. 2,907 160
St. Jude Medical, Inc. (a) 200 11
Steris Corp. (a) 1,000 15
Stryker Corp. 1,100 52
Tenet Healthcare Corp. 12,300 484
Trigon Healthcare, Inc. (a) 200 14
United Health Corp (a) 4,800 525
Universal Health Services, Inc. Class B (a) 400 34
Watson Pharmaceuticals, Inc. (a) 6,100 382
Wellpoint Health Networks, Inc. (a) 1,900 221
------
12,838
------
INTEGRATED OILS - 8.2%
Amerada Hess Corp. 19,800 1,228
Burlington Resources, Inc. 1,700 61
Chevron Corp. 22,100 1,815
Coastal Corp. 1,300 98
Conoco, Inc. Class B 5,600 152
Exxon Mobil Corp. 69,173 6,169
Helmerich & Payne, Inc. 800 25
Murphy Oil Corp. 900 52
Occidental Petroleum Corp. 20,700 411
Phillips Petroleum Co. 20,300 1,254
Texaco, Inc. 3,300 195
Unocal Corp. 27,600 942
USX-Marathon Group 5,600 153
------
12,555
------
MATERIALS AND PROCESSING - 3.8%
Air Products & Chemicals, Inc. 2,100 78
AK Steel Holding Corp. 600 6
Albemarle Corp. (a) 1,600 37
Alcoa, Inc. 6,460 185
American Standard Cos., Inc. (a) 1,700 78
Archer-Daniels-Midland Co. 21,600 238
Barrick Gold Corp. 1,400 19
Bowater, Inc. 1,100 60
Centex Corp. 7,200 266
Dow Chemical Co. 39,508 1,210
du Pont (E.I.) de Nemours 20,700 939
Eastman Chemical Co. 2,200 94
Ecolab, Inc. 300 12
FMC Corp. (a) 400 30
Freeport-McMoRan Copper & Gold, Inc.
Class A (a) 100 1
Freeport-McMoRan Copper & Gold, Inc.
Class B (a) 400 3
Georgia-Pacific Group 1,600 43
Granite Construction, Inc. 100 2
Harsco Corp. 600 12
Illinois Tool Works, Inc. 300 17
IMC Global, Inc. 2,100 27
International Paper Co. 2,107 77
Johns Manville Corp. 1,700 16
Lafarge Corp. 500 9
Longview Fibre Co. 600 8
Louisiana Pacific Corp. 1,100 9
Lyondell Petrochemical Co. 1,600 23
Masco Corp. 800 15
Minnesota Mining & Manufacturing Co. 14,100 1,362
Nucor Corp. 1,200 42
PPG Industries, Inc. 900 40
Praxair, Inc. 1,200 45
Sigma Aldrich Corp. 1,700 61
Smurfit-Stone Container Corp. (a) 500 7
Standard Register Co. 300 4
Timken Co. 1,600 23
Tyco International, Ltd. 2,628 149
Union Carbide Corp. 900 39
US Industries, Inc. 400 4
USX-U.S. Steel Group 100 2
Washington Group International, Inc.
2003 warrants (a) 292 1
Westvaco Corp. 11,000 314
Weyerhaeuser Co. 1,600 74
Willamette Industries, Inc. 1,500 53
------
5,734
------
OTHER ENERGY - 1.9%
Anadarko Petroleum Corp. 837 54
Apache Corp. 3,900 216
Baker Hughes, Inc. 3,400 117
Devon Energy Corp. 264 13
El Paso Energy Corp. 400 25
ENSCO International, Inc. 1,300 43
EOG Resources, Inc. 700 28
Flowserve Corp. 700 14
Halliburton Co. 900 33
Kerr-McGee Corp. 2,000 131
Noble Drilling Corp. (a) 5,800 241
Ocean Energy, Inc. (a) 1,700 24
Pioneer Natural Resources Co. (a) 700 9
Sempra Energy 25,700 532
Smith International, Inc. (a) 200 14
Tosco Corp. 1,200 34
TXU Corp. 20,500 760
Ultramar Diamond Shamrock Corp. 21,400 562
Weatherford International, Inc. (a) 200 6
------
2,856
------
Equity Income Fund 46
<PAGE>
EQUITY INCOME FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------ ------
PRODUCER DURABLES - 6.6%
AMETEK, Inc. 100 2
B.F. Goodrich Co. 1,400 57
Beckman Coulter, Inc. 6,800 476
Boeing Co. (The) 26,500 1,797
Caterpillar, Inc. 5,900 207
Clayton Homes, Inc. 200 2
Crane Co. 1,100 29
Danaher Corp. 800 51
Deere & Co. 16,400 604
Dover Corp. 8,400 356
Emerson Electric Co. 3,300 242
General Dynamics Corp. 200 14
General Electric Co. 30,400 1,666
Honeywell International, Inc. 5,200 280
Ingersoll-Rand Co. 400 15
ITT Industries, Inc. 2,000 65
Johnson Controls, Inc. 1,800 107
Kennametal, Inc. 1,600 47
Lennar Corp. 11,700 376
Litton Industries, Inc. (a) 800 42
Lockheed Martin Corp. 27,700 993
Molex, Inc. 325 18
Northrop Grumman Corp. 1,200 101
Pall Corp. 100 2
Parker-Hannifin Corp. 4,100 170
Pitney Bowes, Inc. 1,600 48
Republic Services, Inc. (a) 1,000 13
Rockwell International Corp. 2,700 106
SPX Corp. (a) 100 12
Steelcase, Inc. Class A 6,500 115
Stewart & Stevenson Services, Inc. 1,100 26
Teradyne, Inc. (a) 400 13
Textron, Inc. 18,600 938
United Technologies Corp. 12,400 866
Waste Management, Inc. 4,000 80
Xerox Corp. 2,300 19
-----
9,955
-----
TECHNOLOGY - 6.9%
3Com Corp. (a) 1,300 23
Advanced Micro Devices, Inc. (a) 1,700 38
Agilent Technologies, Inc. (a) 200 9
Altera Corp. (a) 400 16
America Online, Inc. (a) 100 5
Analog Devices, Inc. (a) 300 20
Apple Computer, Inc. (a) 2,700 53
Arrow Electronics, Inc. (a) 3,300 106
At Home Corp. Series A (a) 700 7
Avnet, Inc. 6,400 172
AVX Corp. 5,500 157
Cabletron Systems, Inc. (a) 1,900 52
Cadence Design Systems, Inc. (a) 700 18
Cisco Systems, Inc. (a) 600 32
Comdisco, Inc. 7,200 89
COMPAQ Computer Corp. 37,300 1,134
Computer Associates International, Inc. 24,300 775
Computer Sciences Corp. (a) 500 32
Corning, Inc. 500 38
Critical Path, Inc. (a) 100 5
Dell Computer Corp. (a) 2,400 71
DST Systems, Inc. (a) 1,500 92
Electronic Data Systems Corp. 4,600 216
Galileo International, Inc. 500 10
General Motors Corp. Class H (a) 1,230 40
GTECH Holdings Corp. (a) 1,500 26
Hewlett-Packard Co. 17,200 799
Ikon Office Solutions, Inc. 1,100 4
IMS Health, Inc. 2,300 54
Integrated Device Technology, Inc. (a) 100 6
Intel Corp. 16,664 749
International Business Machines Corp. 10,800 1,064
Internet Capital Group, Inc. (a) 1,200 16
Intuit, Inc. (a) 600 37
Keane, Inc. (a) 800 10
Kemet Corp. (a) 1,200 33
MarchFirst, Inc. (a) 600 3
Metromedia Fiber Network, Inc. Class A (a) 900 17
Microchip Technology, Inc. (a) 600 19
Motorola, Inc. 18,800 469
NCR Corp. (a) 500 22
Nortel Networks Corp. 1,500 68
Novell, Inc. (a) 600 5
Oracle Systems Corp. (a) 400 13
Palm, Inc. (a) 276 15
PeopleSoft, Inc. (a) 100 4
PerkinElmer, Inc. 100 12
QUALCOMM, Inc. (a) 100 7
Quantum Corp. - DLT & Storage Systems (a) 2,100 32
Qwest Communications International, Inc. (a) 21,363 1,039
RadioShack, Corp. 100 6
Seagate Technology (a) 1,000 70
Storage Technology Corp. (a) 1,000 10
Structural Dynamics Research Corp. (a) 800 8
Sun Microsystems, Inc. (a) 600 66
SunGard Data Systems (a) 1,000 51
47 Equity Income Fund
<PAGE>
EQUITY INCOME FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------ -------
Sybase, Inc. (a) 800 17
Symantec Corp. (a) 200 8
Total Systems Services, Inc. 1,100 18
Veritas Software Corp. (a) 400 56
Verizon Communications 42,046 2,431
Vishay Intertechnology, Inc. (a) 1,200 35
-------
10,509
-------
UTILITIES - 10.7%
ADC Telecommunications, Inc. (a) 100 2
Allegheny Energy, Inc. 100 4
Alltel Corp. 1,700 110
Ameren Corp. 700 28
American Electric Power Co., Inc. 9,720 403
AT&T Corp. 59,326 1,376
AT&T Wireless Group (a) 700 17
BellSouth Corp. 46,100 2,227
BroadWing, Inc. (a) 4,300 121
Cablevision Systems Corp. Class A (a) 600 45
Centennial Cellular Corp. Class A (a) 400 8
CenturyTel, Inc. 900 35
Columbia Energy Group 600 43
Comcast Corp. Special Class A (a) 7,600 309
Consolidated Edison, Inc. 2,100 74
Cox Communications, Inc. Class A (a) 1,300 57
Dominion Resources, Inc. 1,500 89
DTE Energy Co. 1,300 47
Dycom Industries, Inc. (a) 2,000 75
Edison International 2,600 62
Enron Corp. 8,400 689
Entergy Corp. 1,000 38
Exelon Corp. (a) 1,138 68
FirstEnergy Corp. 10,000 259
Florida Progress Corp. 700 37
FPL Group, Inc. 12,500 825
Idacorp, Inc. 19,300 952
KeySpan Corp. 3,000 106
Level 3 Communications, Inc. (a) 400 19
MCN Energy Group, Inc. 600 15
National Fuel Gas Co. 5,900 316
Northeast Utilities 700 14
PG&E Corp. 43,900 1,183
Pinnacle West Capital Corp. 2,500 109
Powerwave Technologies, Inc. (a) 100 5
PPL Corp. 7,200 297
Public Service Enterprise Group, Inc. 4,400 183
Questar Corp. 900 24
Reliant Energy, Inc. 21,100 872
SBC Communications, Inc. 67,000 3,865
SCANA Corp. 200 5
Southern Co. 2,900 85
Sprint Corp. (Fon Group) 6,000 153
Telephone & Data Systems, Inc. 900 95
Viacom, Inc. Class A (a) 300 17
West TeleServices Corp. (a) 200 5
Western Resources, Inc. 800 17
Williams Cos. (The) 1,200 50
WorldCom, Inc. (a) 30,800 730
Xcel Energy, Inc. 1,295 33
-------
16,198
-------
TOTAL COMMON STOCKS
(cost $121,370) 143,758
-------
PRINCIPAL
AMOUNT
(000)
$
---------
SHORT-TERM INVESTMENTS - 6.6%
Frank Russell Investment Company 9,090 9,090
Money Market Fund, due on demand
(c)
United States Treasury Bills
(c)(d)(e) 5.940% due 12/21/00 1,000 992
-------
TOTAL SHORT-TERM INVESTMENTS
(cost $10,082) 10,082
-------
TOTAL INVESTMENTS - 101.1%
(identified cost $131,452) 153,840
OTHER ASSETS AND LIABILITIES,
NET - (1.1%) (1,653)
-------
NET ASSETS - 100.0% 152,187
=======
(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.
See accompanying notes which are an integral part of the financial statements.
Equity Income Fund 48
<PAGE>
EQUITY INCOME FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
FUTURES CONTRACTS CONTRACTS (000)
--------- --------------
S&P Barra Value Index
expiration date 12/00 18 $ (14)
S&P 500 Index
expiration date 12/00 20 121
--------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ 107
==============
See accompanying notes which are an integral part of the financial statements.
49 Equity Income Fund
<PAGE>
EQUITY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) October 31, 2000
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $131,452) ............................................... $ 153,840
Receivables:
Dividends and interest ...................................................................... 186
Investments sold ............................................................................ 34
Fund shares sold ............................................................................ 383
Daily variation margin on futures contracts ................................................. 176
Prepaid expenses ............................................................................... 4
---------
Total assets ............................................................................. 154,623
LIABILITIES
Payables:
Investments purchased ......................................................... $ 1,489
Fund shares redeemed .......................................................... 732
Accrued fees to affiliates .................................................... 153
Other accrued expenses ........................................................ 62
---------
Total liabilities ........................................................................ 2,436
---------
NET ASSETS ..................................................................................... $ 152,187
=========
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) ........................................................... $ (6,405)
Unrealized appreciation (depreciation) on:
Investments ................................................................................. 22,388
Futures contracts ........................................................................... 107
Shares of beneficial interest .................................................................. 41
Additional paid-in capital ..................................................................... 136,056
---------
NET ASSETS ..................................................................................... $ 152,187
=========
NET ASSET VALUE, offering and redemption price per share:
Class C ($1,034,866 divided by 28,181 shares of $.01 par value
shares of beneficial interest outstanding) ............................................... $ 36.72
=========
Class E ($1,095,138 divided by 29,688 shares of $.01 par value
shares of beneficial interest outstanding) ............................................... $ 36.89
=========
Class S ($150,057,210 divided by 4,090,467 shares of $.01 par value
shares of beneficial interest outstanding) ............................................... $ 36.68
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Equity Income Fund 50
<PAGE>
EQUITY INCOME FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- ------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends ............................................................... $ 2,417 $ 4,243
Dividends from Money Market Fund ........................................ 303 460
Interest ................................................................ 31 107
---------------- ------------------
Total investment income .............................................. 2,751 4,810
---------------- ------------------
EXPENSES
Advisory fees ........................................................... 981 1,681
Administrative fees ..................................................... 66 113
Custodian fees .......................................................... 204 180
Distribution fees - Class C ............................................. 6 4
Transfer agent fees ..................................................... 329 377
Professional fees ....................................................... 45 23
Registration fees ....................................................... 35 76
Shareholder servicing fees - Class C .................................... 2 1
Shareholder servicing fees - Class E .................................... 2 3
Trustees' fees .......................................................... 11 5
Miscellaneous ........................................................... 47 35
---------------- ------------------
Expenses before reductions .............................................. 1,728 2,498
Expense reductions ...................................................... (1) --
---------------- ------------------
Expenses, net ........................................................ 1,727 2,498
---------------- ------------------
Net investment income ...................................................... 1,024 2,312
---------------- ------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ............................................................. (8,945) 16,273
Futures contracts ....................................................... (584) 1,725
Foreign currency-related transactions ................................... (6) 2
---------------- ------------------
(9,535) 18,000
---------------- ------------------
Net change in unrealized appreciation (depreciation) on:
Investments ............................................................. 7,175 (20,112)
Futures contracts ....................................................... (144) (39)
Foreign currency-related transactions ................................... 1 (1)
---------------- ------------------
7,032 (20,152)
---------------- ------------------
Net Realized And Unrealized Gain (Loss) .................................... (2,503) (2,152)
---------------- ------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ...................... $ (1,479) $ 160
================ ==================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
51 Equity Income Fund
<PAGE>
EQUITY INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income ............................................ $ 1,024 $ 2,312 $ 3,335
Net realized gain (loss) ......................................... (9,535) 18,000 27,006
Net change in unrealized appreciation (depreciation) ............. 7,032 (20,152) (538)
---------------- ----------------- -----------------
Net increase (decrease) in net assets from operations ......... (1,479) 160 29,803
---------------- ----------------- -----------------
DISTRIBUTIONS
From net investment income
Class C ....................................................... -- (2) --
Class E ....................................................... (6) (7) (7)
Class S ....................................................... (1,029) (2,290) (3,291)
From net realized gain
Class C ....................................................... (5) (68) --
Class E ....................................................... (5) (101) (56)
Class S ....................................................... (896) (20,115) (25,440)
Tax return of capital
Class C ....................................................... (1) -- --
Class E ....................................................... (1) -- --
Class S ....................................................... (94) -- --
---------------- ----------------- -----------------
Net decrease in net assets from distributions .............. (2,037) (22,583) (28,794)
---------------- ----------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions .... (33,336) (39,774) 22,937
---------------- ----------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ......................... (36,852) (62,197) 23,946
NET ASSETS
Beginning of period .............................................. 189,039 251,236 227,290
---------------- ----------------- -----------------
End of period (including undistributed net investment income of
$51 at December 31, 1999 and $37 at December 31, 1998) ........ $ 152,187 $ 189,039 $ 251,236
================ ================= =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Equity Income Fund 52
<PAGE>
EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
2000* 1999*
-------- --------
NET ASSET VALUE, BEGINNING OF PERIOD .................... $ 37.02 $ 40.38
-------- --------
INCOME FROM OPERATIONS
Net investment income (loss)(a) ...................... (.06) .04
Net realized and unrealized gain (loss) .............. (.03) .66
-------- --------
Total income from operations ...................... (.09) .70
-------- --------
DISTRIBUTIONS
From net investment income ........................... -- (.17)
From net realized gain ............................... (.19) (3.89)
Tax return of capital ................................ (.02) --
-------- --------
Total distributions ............................... (.21) (4.06)
-------- --------
NET ASSET VALUE, END OF PERIOD .......................... $ 36.72 $ 37.02
======== ========
TOTAL RETURN (%)(b) ..................................... (.17) 2.03
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ............. 1,035 995
Ratios to average net assets (%)(c):
Operating expenses ................................ 2.31 2.10
Net investment income (loss) ...................... (.22) .10
Portfolio turnover rate (%) .......................... 99.20 137.94
* For the ten months ended October 31, 2000.
** 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) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
53 Equity Income Fund
<PAGE>
EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
2000* 1999 1998 1997 1996**
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ................ $ 37.20 $ 41.45 $ 41.43 $ 40.22 $ 41.86
--------- --------- --------- --------- ---------
INCOME FROM OPERATIONS
Net investment income (a) ........................ .15 .33 .37 .32 .10
Net realized and unrealized gain (loss) .......... (.02) (.44) 4.49 12.20 2.39
--------- --------- --------- --------- ---------
Total income from operations .................. .13 (.11) 4.86 12.52 2.49
--------- --------- --------- --------- ---------
DISTRIBUTIONS
From net investment income ....................... (.23) (.25) (.51) (.07) (.18)
From net realized gain ........................... (.19) (3.89) (4.33) (11.24) (3.95)
Tax return of capital ............................ (.02) -- -- -- --
--------- --------- --------- --------- ---------
Total distributions ........................... (.44) (4.14) (4.84) (11.31) (4.13)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD ...................... $ 36.89 $ 37.20 $ 41.45 $ 41.43 $ 40.22
========= ========= ========= ========= =========
TOTAL RETURN (%)(b) ................................. .46 .04 12.41 32.68 6.23
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ......... 1,095 1,061 745 338 122
Ratios to average net assets (%)(c):
Operating expenses ............................ 1.56 1.35 1.42 1.74 1.77
Net investment income ......................... .53 .80 .90 .77 1.50
Portfolio turnover rate (%) ...................... 99.20 137.94 149.63 139.33 106.40
</TABLE>
* For the ten months ended October 31, 2000.
** 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.
Equity Income Fund 54
<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,
------------------------------------------------------------------
2000* 1999 1998 1997 1996 1995
--------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ...... $ 36.92 $ 41.26 $ 41.08 $ 40.22 $ 38.43 $ 32.21
--------- --------- ---------- ---------- ---------- ----------
INCOME FROM OPERATIONS
Net investment income (a) .............. .23 .41 .55 .69 .82 .94
Net realized and unrealized gain
(loss) ................................. (.03) (.44) 4.49 12.11 7.03 10.08
--------- --------- ---------- ---------- ---------- ----------
Total income from operations ........ .20 (.03) 5.04 12.80 7.85 11.02
--------- --------- ---------- ---------- ---------- ----------
DISTRIBUTIONS
From net investment income ............. (.23) (.42) (.53) (.70) (.83) (.97)
From net realized gain ................. (.19) (3.89) (4.33) (11.24) (5.23) (3.83)
Tax return of capital .................. (.02) -- -- -- -- --
--------- --------- ---------- ---------- ---------- ----------
Total distributions ................. (.44) (4.31) (4.86) (11.94) (6.06) (4.80)
--------- --------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD ............ $ 36.68 $ 36.92 $ 41.26 $ 41.08 $ 40.22 $ 38.43
========= ========= ========== ========== ========== ==========
TOTAL RETURN (%)(b) ....................... .66 .25 12.99 33.59 21.45 34.76
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) 150,057 186,983 250,491 226,952 195,132 180,116
Ratios to average net assets (%)(c):
Operating expenses .................. 1.31 1.11 1.01 1.04 1.07 1.06
Net investment income ............... .79 1.03 1.30 1.51 2.03 2.51
Portfolio turnover rate (%) ............ 99.20 137.94 149.63 139.33 106.40 92.40
</TABLE>
* For the ten months ended October 31, 2000.
(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.
55 Equity Income Fund
<PAGE>
QUANTITATIVE EQUITY FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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(R) Index. The Fund employed the investment management services of
four managers using four distinctive quantitative approaches to investment.
[GRAPH]
GROWTH OF $10,000 INVESTMENT
DATES QUANTITATIVE EQUITY - CLASS S RUSSELL 1000(R)**
Inception* $ 10,000 $ 10,000
1991 $ 13,640 $ 13,659
1992 $ 14,820 $ 15,127
1993 $ 17,676 $ 17,515
1994 $ 18,203 $ 18,058
1995 $ 23,121 $ 22,935
1996 $ 28,382 $ 28,192
1997 $ 37,631 $ 37,168
1998 $ 44,039 $ 44,495
1999 $ 55,665 $ 55,878
2000 $ 60,710 $ 60,939
Total $323,887 $323,966
YEARLY PERIODS ENDED OCTOBER 31
<TABLE>
<CAPTION>
QUANTITATIVE EQUITY FUND - CLASS S QUANTITATIVE EQUITY FUND - CLASS C++++
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
--------------------------------------------------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $10,907 9.07% 1 Year $10,822 8.22%
5 Years $26,257 21.27%(S) 5 Years $25,550 20.61%(S)
10 Years $60,710 19.75%(S) 10 Years $59,074 19.42%(S)
QUANTITATIVE EQUITY FUND - CLASS E++ RUSSELL 1000(R) INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
--------------------------------------------------- ---------------------------------------------------
1 Year $10,863 8.63% 1 Year $10,906 9.06%
5 Years $25,784 20.83%(S) 5 Years $26,571 21.59%(S)
10 Years $59,615 19.53%(S) 10 Years $60,939 19.81%(S)
</TABLE>
57 Quantitative Equity Fund
<PAGE>
QUANTITATIVE EQUITY FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the ten months ended October 31, 2000, the Quantitative Equity Fund Class S,
Class E and Class C shares returned 0.47%, 0.11% and (0.16)%, respectively, as
compared to the Russell 1000(R) Index, which gained 0.28%.
The Fund's performance was influenced by the market's first quarter shift from
an emphasis on growth stocks to an environment that favored value issues. This
factor, coupled with the market's extreme volatility, provided continual
challenges for both diversified investors and active managers. However, through
maintaining full exposure to all economic sectors, the Fund's managers were able
to mitigate some of the market's unpredictability.
PORTFOLIO HIGHLIGHTS
Investor enthusiasm and speculation dominated the market during the first
quarter, with growth stocks, particularly the technology and Internet-related
shares, posting extraordinary returns. Further complicating matters for
diversified investors, sector concentration, notably in the Technology arena,
provided an exceptionally narrow window for investment opportunities.
The Fund's market-oriented managers faced this challenging environment by
capitalizing on their risk-controlled sector constraints. Early in the period,
the managers' benchmark-mandated sector exposures in Producer Durables (e.g.
Nokia), Technology (Cisco, Oracle, Texas Instruments), and Financial Services
(Morgan Stanley) boosted returns.
During the final months of the period, the managers generally maintained caution
by assuming a more conservative investment discipline with regard to valuation.
Given concerns over earnings estimates and the uncertainty surrounding the
presidential election, the Fund's managers retained more positions in order to
control risk levels versus their strategy during more stable market conditions.
Some solid late-period stock decisions included benchmark-relative underweight
positions in Lucent (Technology) and Sprint (Utilities), and overweights in Sun
Microsystems (Technology), Alza (Health Care), Citigroup (Financials), and
Lehman (Financials).
TOP TEN EQUITY HOLDINGS
(as a percent of Total Investments) October 31, 2000
General Electric Co. 4.3%
Cisco Systems, Inc. 3.2
Exxon Mobil Corp. 2.4
Citigroup, Inc. 2.4
Microsoft Corp. 2.2
Intel Corp. 2.1
Sun Microsystems, Inc. 2.1
Merck & Co., Inc. 2.1
American International Group, Inc. 1.6
Oracle Systems Corp. 1.6
PORTFOLIO CHARACTERISTICS
October 31, 2000
Current P/E Ratio 21.3x
Portfolio Price/Book Ratio 4.45x
Market Capitalization - $-Weighted Average 123.4 Bil
Number of Holdings 568
MONEY MANAGERS STYLE
Barclays Global Fund Advisors Market-Oriented
Franklin Portfolio Associates, LLC Market-Oriented
J.P. Morgan Investment Management, Inc. Market-Oriented
Jacobs Levy Equity Management, Inc. Market-Oriented
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* Quantitative Equity Fund Class S assumes initial investment on November
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(R) Index represents the universe of stocks from which
most active money managers typically select. The Russell 1000(R) Index
return 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.
(S) 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 58
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF NET ASSETS
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
COMMON STOCKS - 97.1%
AUTO AND TRANSPORTATION - 2.2%
AMR Corp. (a) 37,200 1,218
ArvinMeritor, Inc. New 34,425 577
AutoNation, Inc. (a) 10,000 68
AutoZone, Inc. (a) 26,600 713
Burlington Northern, Inc. 104,300 2,770
C.H. Robinson Worldwide, Inc. 5,700 312
Dana Corp. 30,800 683
Delphi Automotive Systems Corp. 89,527 1,404
Delta Air Lines, Inc. 78,400 3,704
Eaton Corp. 23,100 1,572
Expeditors International of
Washington, Inc. 4,100 212
FedEx Corp. (a) 200 9
Ford Motor Co. 353,211 9,228
General Motors Corp. 101,102 6,281
Harley-Davidson, Inc. 41,200 1,985
Kansas City Southern Industries,
Inc. (a) 168,550 1,464
Lear Corp. (a) 18,600 507
PACCAR, Inc. 4,800 202
UAL Corp. 13,900 527
Union Pacific Corp. 33,300 1,562
Visteon Corp. 21,948 389
-------
35,387
-------
CONSUMER DISCRETIONARY - 8.6%
Abercrombie & Fitch Co. Class A (a) 13,300 313
Advo Systems, Inc. (a) 7,900 291
Amazon.com, Inc. (a) 7,400 271
AT&T Corp. - Liberty Media Group
Class A (a) 293,300 5,279
Banta Corp. 9,500 219
Best Buy Co. (a) 91,500 4,592
BJ's Wholesale Club, Inc. (a) 11,600 382
Brunswick Corp. 86,500 1,681
Callaway Golf Co. 60,700 971
CBRL Group, Inc. 10,300 183
Cendant Corp. (a) 213,600 2,563
Clear Channel Communications, Inc. (a) 29,500 1,772
Convergys Corp. (a) 19,100 832
Darden Restaurants, Inc. 118,900 2,675
Diamond Technology Partners, Inc. (a) 1,800 80
Disney (Walt) Co. 305,600 10,944
Donnelley (R.R.) & Sons Co. 47,100 1,013
Eastman Kodak Co. 300 13
Energizer Holdings, Inc. (a) 32,399 640
Estee Lauder Cos., Class A 12,200 567
Federated Department Stores, Inc. (a) 81,300 2,647
Fortune Brands, Inc. 21,220 625
Fox Entertainment Group, Inc. Class
A (a) 5,100 110
Gannett Co., Inc. 57,200 3,318
Gap, Inc. 89,800 2,318
Gemstar-TV Guide International, Inc. (a) 8,800 603
Hasbro, Inc. 23,500 253
Home Depot, Inc. (The) 197,871 8,508
Infinity Broadcasting Corp. Class A (a) 21,300 708
Interpublic Group Cos., Inc. 30,000 1,288
Jones Apparel Group, Inc. (a) 19,700 548
Kimberly-Clark Corp. 35,943 2,372
Kmart Corp. (a) 72,700 432
Knight-Ridder, Inc. 12,300 618
Kohl's Corp. (a) 33,700 1,826
Learning Tree International, Inc. (a) 6,700 302
Limited, Inc. (The) 45,200 1,141
Lowe's Cos., Inc. 62,349 2,849
Marriott International, Inc. Class A 15,500 628
Mattel, Inc. 9,400 122
May Department Stores Co. 50,100 1,315
McDonald's Corp. 10,700 332
New York Times Co. Class A 9,800 360
NIKE, Inc. Class B 20,400 815
Office Depot, Inc. (a) 21,700 180
Omnicom Group, Inc. 25,800 2,380
Payless ShoeSource, Inc. (a) 17,800 1,031
Penton Media, Inc. 5,600 171
Pier 1 Imports, Inc. 29,000 384
Plantronics, Inc. (a) 13,200 602
Priceline.com, Inc. (a) 1,200 7
Sabre Holdings, Corp. 41,600 1,391
Safeguard Scientifics, Inc. (a) 3,900 60
Sears Roebuck & Co. 269,900 8,024
Shaw Industries, Inc. 32,500 603
Starwood Hotels & Resorts Worldwide, Inc 39,200 1,161
Target Corp. 107,600 2,972
TeleTech Holdings, Inc. (a) 26,300 730
The Men's Wearhouse, Inc. (a) 11,600 339
Tiffany & Co. 38,800 1,656
Time Warner, Inc. 227,500 17,270
TJX Cos., Inc. 59,400 1,619
TMP Worldwide, Inc. (a) 16,000 1,113
Toys "R" Us, Inc. (a) 117,824 2,025
Tribune Co. 22,370 829
Tupperware Corp. 28,200 483
United Stationers, Inc. (a) 6,500 195
59 Quantitative Equity Fund
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
Venator Group, Inc. (a) 24,300 343
Viacom, Inc. Class B (a) 73,286 4,168
Wal-Mart Stores, Inc. 318,816 14,467
Westwood One, Inc. (a) 10,900 207
Whirlpool Corp. 38,100 1,658
Zale Corp. (a) 24,700 838
-------
136,225
-------
CONSUMER STAPLES - 4.7%
Anheuser-Busch Cos., Inc. 76,292 3,490
Clorox Co. (The) 30,100 1,343
Coca-Cola Co. (The) 16,000 966
Colgate-Palmolive Co. 32,900 1,933
ConAgra, Inc. 104,393 2,231
Constellation Brands, Inc. Class A (a) 4,700 229
Delhaize America, Inc. 11,100 189
Gillette Co. (The) 142,400 4,966
Heinz (H.J.) Co. 32,400 1,359
Hormel Foods Corp. 94,400 1,587
IBP, Inc. 168,300 3,461
International Flavors & Fragrances, Inc 31,500 528
Interstate Bakeries Corp. 25,200 353
Keebler Foods Co. 13,000 527
Kellogg Co. 27,200 690
Kroger Co. (a) 99,200 2,238
Nabisco Group Holdings Corp. 11,500 332
Nabisco Holdings Corp. Class A 1,900 103
Pepsi Bottling Group, Inc. (The) 69,000 2,389
PepsiCo, Inc. 190,200 9,213
Philip Morris Cos., Inc. 414,220 15,171
Procter & Gamble Co. 153,300 10,951
R.J. Reynolds Tobacco Holdings, Inc. 34,000 1,216
Ralston-Purina Group 5,300 129
Safeway, Inc. (a) 27,628 1,511
Smithfield Foods, Inc. (a) 8,400 241
SYSCO Corp. 50,200 2,620
Tyson Foods, Inc. Class A 38,200 427
Unilever 40,100 2,038
Universal Corp. 32,200 901
Walgreen Co. 26,400 1,204
-------
74,536
-------
FINANCIAL SERVICES - 15.5%
Aetna, Inc. 33,900 1,960
Affiliated Managers Group, Inc. (a) 8,200 493
AFLAC, Inc. 6,800 497
Allstate Corp. 128,700 5,180
Ambac Financial Group, Inc. 13,100 1,046
American General Corp. 200 16
American International Group, Inc. 258,053 25,289
AmeriCredit Corp. (a) 9,200 247
AmSouth Bancorp 88,675 1,236
AON Corp. 17,800 738
Associates First Capital Corp. Class A 98,800 3,668
Astoria Financial Corp. 17,700 664
AXA Financial, Inc. 31,500 1,703
Bank of America Corp. 286,793 13,784
Bank One Corp. 35,200 1,285
Banknorth Group, Inc. 12,400 225
BB&T Corp. 16,800 536
Bear Stearns Companies Inc. (The) 31,385 1,903
Charter One Financial, Inc. 31 1
Chase Manhattan Corp. 105,089 4,782
CIGNA Corp. 16,600 2,024
Cincinnati Financial Corp. 2,100 77
CIT Group, Inc. 81,700 1,425
Citigroup, Inc. 711,999 37,469
CNA Financial Corp. (a) 9,800 358
Comerica, Inc. 55,850 3,368
Conseco, Inc. 98,300 682
Countrywide Credit Industries, Inc. 34,600 1,295
Dime Bancorp, Inc. 21,700 530
Dow Jones & Co., Inc. 26,700 1,572
E*TRADE Group, Inc. (a) 42,900 625
Edwards (A.G.), Inc. 21,200 1,076
Federal Home Loan Mortgage Corp. 160,312 9,619
Federal National Mortgage Association 133,300 10,264
Federated Investors, Inc. Class B 17,700 516
FelCor Lodging Trust, Inc. 9,500 208
FINOVA Group, Inc. 20,400 52
First Data Corp. 65,300 3,273
First Tennessee National Corp. 15,600 359
First Union Corp. 109,900 3,331
Firstar Corp. 43,600 858
FleetBoston Financial Corp. 111,905 4,252
Franklin Resources, Inc. 25,200 1,080
Golden State Bancorp, Inc. 34,800 909
Golden West Financial Corp. 12,000 673
Goldman Sachs Group, Inc. 71,000 7,087
Greater Bay Bancorp 3,800 124
Greenpoint Financial Corp. 22,900 681
Hartford Financial Services Group, Inc. (The) 30,800 2,293
Heller Financial, Inc. Class A 6,100 178
Hibernia Corp. Class A (a) 16,400 196
Household International, Inc. 28,200 1,419
Huntington Bancshares, Inc. 25,400 364
John Hancock Financial Services, Inc. (a) 61,600 1,948
KeyCorp 79,800 1,970
Quantitative Equity Fund 60
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
Lehman Brothers Holdings, Inc. 108,200 6,979
Lincoln National Corp. 14,600 706
Loews Corp. 11,200 1,019
MBIA, Inc. 11,100 807
MBNA Corp. 75,008 2,817
Merrill Lynch & Co., Inc. 174,200 12,194
MetLife, Inc. New 111,000 3,066
MGIC Investment Corp. 8,000 545
MONY Group, Inc. (The) 6,200 255
Morgan (J.P.) & Co., Inc. 15,483 2,562
Morgan Stanley Dean Witter & Co. 205,116 16,473
National City Corp. 9,120 195
National Commerce Bancorp 19,400 412
North Fork Bancorp, Inc. 2,150 43
Paychex, Inc. 44,500 2,523
PMI Group, Inc. (The) 31,950 2,360
PNC Bank Corp. 46,705 3,123
Providian Financial Corp. 13,200 1,373
Radian Group, Inc. 4,100 291
Regions Financial Corp. 21,500 505
Schwab (Charles) Corp. 6,900 242
SEI Corp. 7,500 680
Silicon Valley Bancshares (a) 15,700 724
SouthTrust Corp. 97,200 3,147
Sovereign Bancorp, Inc. 49,800 414
St. Paul Cos., Inc. 21,320 1,093
Summit Bancorp 17,000 638
TCF Financial Corp. 8,400 340
TD Waterhouse Group, Inc. (a) 57,000 944
Torchmark Corp. 24,700 823
Transatlantic Holdings, Inc. 1,000 93
U.S. Bancorp 136,700 3,306
UnionBanCal Corp. 62,498 1,312
UnumProvident Corp. 23,200 655
Waddell & Reed Financial, Inc. Class A 16,900 539
Washington Mutual, Inc. 84,600 3,722
Wells Fargo Co. 61,100 2,829
-------
247,157
-------
HEALTH CARE - 12.4%
Abbott Laboratories 127,800 6,749
Allergan, Inc. 63,200 5,313
ALZA Corp. (a) 44,600 3,610
American Home Products Corp. 11,900 756
Amgen, Inc. (a) 58,000 3,357
Andrx Group (a) 13,900 998
Bard (C.R.), Inc. 12,900 540
Becton, Dickinson & Co. 52,000 1,742
Bergen Brunswig Corp. Class A 27,700 251
Boston Scientific Corp. (a) 96,100 1,532
Bristol-Myers Squibb Co. 342,700 20,883
Cardinal Health, Inc. 27,243 2,581
Celgene Corp. (a) 13,700 881
Chiron Corp. (a) 15,479 669
Cytyc Corp. (a) 15,600 925
First Health Group Corp. (a) 3,300 128
Forest Labs, Inc. (a) 49,900 6,612
Foundation Health Systems, Inc. (a) 21,400 432
Genentech, Inc. (a) 4,100 338
Genzyme Corp. (a) 15,900 1,128
HCA-The Healthcare Co. 104,390 4,169
HEALTHSOUTH Corp. (a) 3,700 44
Human Genome Sciences, Inc. (a) 10,000 884
Humana, Inc. (a) 20,100 244
ICOS Corp. (a) 7,700 394
IDEC Pharmaceuticals Corp. (a) 1,500 294
Immunex Corp. (a) 11,600 493
Incyte Pharmaceuticals, Inc. (a) 4,000 147
IVAX Corp. (a) 39,500 1,718
Johnson & Johnson 214,400 19,752
King Pharmaceuticals, Inc. (a) 13,700 614
Lilly (Eli) & Co. 163,100 14,577
McKesson HBOC, Inc. 11,600 326
Medtronic, Inc. 35,900 1,950
Merck & Co., Inc. 362,740 32,624
Millennium Pharmaceuticals, Inc. (a) 3,100 225
PacifiCare Health Systems, Inc. (a) 72,700 754
PE Corp. - PE Biosystems Group 1,200 140
Perrigo Co. (a) 6,900 45
Pfizer, Inc. 507,275 21,908
Pharmacia Corp. 217,105 11,941
Province Healthcare Co. (a) 6,100 256
Quest Diagnostics, Inc. (a) 14,800 1,425
Schering-Plough Corp. 140,800 7,278
St. Jude Medical, Inc. (a) 20,800 1,144
Techne Corp. (a) 4,900 546
Tenet Healthcare Corp. 127,300 5,004
Trigon Healthcare, Inc. (a) 2,200 158
United Health Corp (a) 37,654 4,118
Universal Health Services, Inc. 10,500 881
Class B (a)
Varian Medical Systems, Inc. (a) 8,600 420
Vertex Pharmaceuticals, Inc. (a) 200 19
Wellpoint Health Networks, Inc. (a) 24,735 2,893
-------
196,810
-------
INTEGRATED OILS - 4.4%
Amerada Hess Corp. 24,400 1,513
Ashland, Inc. 14,600 478
Chevron Corp. 95,400 7,835
Coastal Corp. 6,900 521
61 Quantitative Equity Fund
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- -------
Conoco, Inc. Class B 39,519 1,074
Exxon Mobil Corp. 436,080 38,893
Noble Affiliates, Inc. 1,800 66
Occidental Petroleum Corp. 192,500 3,826
Phillips Petroleum Co. 11,800 729
Royal Dutch Petroleum Co. 131,400 7,802
Texaco, Inc. 73,600 4,347
USX-Marathon Group 117,568 3,195
-------
70,279
-------
MATERIALS AND PROCESSING - 3.3%
Air Products & Chemicals, Inc. 50,700 1,892
AK Steel Holding Corp. 20,400 189
Alcoa, Inc. 68,700 1,971
Allegheny Technologies, Inc. 9,400 190
Archer-Daniels-Midland Co. 231,297 2,544
Boise Cascade Corp. 6,000 172
Bowater, Inc. 7,100 384
Centex Corp. 25,200 932
Dow Chemical Co. 203,001 6,217
Eastman Chemical Co. 24,300 1,042
Georgia-Pacific Group 64,900 1,744
Illinois Tool Works, Inc. 16,635 924
IMC Global, Inc. 14,300 185
International Paper Co. 18,400 674
Kaufman & Broad Home Corp. 16,700 497
Lafarge Corp. 1,100 21
Lubrizol Corp. 17,900 388
Lyondell Petrochemical Co. 98,900 1,422
Minnesota Mining & Manufacturing Co. 92,464 8,934
Nucor Corp. 17,800 617
PPG Industries, Inc. 22,100 986
Praxair, Inc. 22,100 823
Precision Castparts Corp. 16,600 627
Rohm & Haas Co. 62,000 1,864
Sherwin-Williams Co. 42,176 915
Sigma Aldrich Corp. 14,500 518
Smurfit-Stone Container Corp. (a) 43,100 579
Temple-Inland, Inc. 8,500 380
Tyco International, Ltd. 211,941 12,014
Union Carbide Corp. 12,100 520
USG Corp. 98,500 1,682
Weyerhaeuser Co. 30,215 1,419
-------
53,266
-------
OTHER ENERGY - 2.0%
Anadarko Petroleum Corp. 44,653 2,860
Apache Corp. 66,100 3,656
Baker Hughes, Inc. 11,400 392
BJ Services Co. (a) 1,400 73
Cooper Cameron Corp. (a) 17,200 937
Devon Energy Corp. 6,800 343
El Paso Energy Corp. 5,300 332
ENSCO International, Inc. 8,000 266
EOG Resources, Inc. 3,400 134
Global Marine, Inc. (a) 40,200 1,065
Kerr-McGee Corp. 50,400 3,292
Marine Drilling Co, Inc. (a) 27,400 654
Mitchell Energy & Development Corp. Class A 7,900 363
Nabors Industries, Inc. (a) 3,800 193
Noble Drilling Corp. (a) 62,100 2,581
Ocean Energy, Inc. (a) 37,000 513
Pioneer Natural Resources Co. (a) 4,400 57
Sunoco, Inc. 29,000 868
Tidewater, Inc. 8,300 383
Tosco Corp. 67,200 1,924
TXU Corp. 120,800 4,477
Ultramar Diamond Shamrock Corp. 176,300 4,628
Valero Energy Corp. 37,200 1,231
Vintage Petroleum, Inc. 12,900 274
-------
31,496
-------
PRODUCER DURABLES - 7.3%
Applied Materials, Inc. (a) 103,400 5,493
B.F. Goodrich Co. 33,100 1,355
Boeing Co. (The) 146,000 9,901
Caterpillar, Inc. 56,700 1,988
Cooper Industries, Inc. 18,600 711
Credence Systems Corp. (a) 21,700 407
D.R. Horton, Inc. 27,250 504
Dover Corp. 76,200 3,234
Efficient Networks, Inc. (a) 1,000 42
Emerson Electric Co. 14,500 1,065
General Dynamics Corp. 21,793 1,560
General Electric Co. 1,260,600 69,097
Grainger (W.W.), Inc. 13,800 441
Honeywell International, Inc. 49,100 2,642
Ingersoll-Rand Co. 40,978 1,547
ITT Industries, Inc. 29,700 967
Johnson Controls, Inc. 11,200 668
KLA Tencor Corporation (a) 16,500 557
Lennar Corp. 17,900 575
Littlefuse, Inc. (a) 5,000 145
Mettler-Toledo International, Inc. (a) 9,600 448
Molex, Inc. 13,300 717
Northrop Grumman Corp. 39,900 3,352
Parker-Hannifin Corp. 30,900 1,278
Plexus Corp. (a) 5,100 322
Pulte Corp. 14,100 470
Raytheon Co. Class B 34,400 1,176
Quantitative Equity Fund 62
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
Rockwell International Corp. 18,079 711
Solectron Corp. (a) 23,920 1,052
Technitrol, Inc. 9,400 1,042
Teradyne, Inc. (a) 34,100 1,066
United Technologies Corp. 29,600 2,065
-------
116,598
-------
TECHNOLOGY - 29.5%
3Com Corp. (a) 76,300 1,350
Adobe Systems, Inc. 6,600 502
Adtran, Inc. (a) 23,400 889
Advanced Fibre Communications (a) 6,000 195
Advanced Micro Devices, Inc. (a) 106,300 2,405
Agilent Technologies, Inc. (a) 39,400 1,825
Akamai Technologies, Inc. (a) 1,500 76
Alliance Semiconductor Corp. (a) 1,900 38
Altera Corp. (a) 111,482 4,557
America Online, Inc. (a) 218,964 11,042
Amkor Technology, Inc. (a) 2,300 52
Amphenol Corp. Class A (a) 15,200 977
Analog Devices, Inc. (a) 58,500 3,803
Apple Computer, Inc. (a) 28,100 548
Applied Micro Circuits Corp. (a) 22,200 1,698
Ariba, Inc. New (a) 11,200 1,415
Arrow Electronics, Inc. (a) 52,200 1,670
Art Technology Group, Inc. (a) 2,000 126
At Home Corp. Series A (a) 5,500 57
Atmel Corp. (a) 43,200 643
Automatic Data Processing, Inc. 43,600 2,848
Avaya, Inc. (a) 5,981 80
Avnet, Inc. 79,300 2,131
AVX Corp. 100,500 2,877
BEA Systems, Inc. (a) 51,600 3,699
Broadcom Corp. Class A (a) 10,800 2,401
BroadVision, Inc. (a) 30,800 916
Brocade Communications Systems, Inc. (a) 5,400 1,228
Cabletron Systems, Inc. (a) 67,500 1,831
CacheFlow, Inc. New (a) 600 65
CIENA Corp. (a) 21,300 2,238
Cisco Systems, Inc. (a) 945,409 50,934
CMGI, Inc. (a) 8,900 150
CNET Networks, Inc. (a) 1,600 50
Commerce One, Inc. New (a) 12,900 827
COMPAQ Computer Corp. 178,000 5,413
Computer Sciences Corp. (a) 3,400 214
Corning, Inc. 139,300 10,656
Critical Path, Inc. (a) 1,500 73
CSG Systems International, Inc. (a) 14,200 659
Cybear Group (a) 2,069 1
Cypress Semiconductor Corp. (a) 60,000 2,246
Dell Computer Corp. (a) 471,700 13,886
DoubleClick, Inc. (a) 3,400 55
DST Systems, Inc. (a) 58,000 3,574
E.piphany, Inc. New (a) 1,200 108
eBay, Inc. (a) 4,700 242
Electro Scientific Industries, Inc. (a) 7,700 269
Electronic Data Systems Corp. 80,351 3,771
EMC Corp. (a) 181,076 16,127
Emulex Corp. (a) 500 73
Exar Corp. (a) 7,000 313
Exodus Communications, Inc. (a) 37,600 1,262
Extreme Networks, Inc. (a) 3,400 282
Fairchild Semiconductor Corp. Class A (a) 11,800 249
Galileo International, Inc. 120,900 2,388
General Motors Corp. Class H (a) 1,782 58
GlobeSpan, Inc. (a) 7,500 575
GTECH Holdings Corp. (a) 24,900 431
Hewlett-Packard Co. 130,600 6,065
i2 Technologies, Inc. (a) 11,600 1,971
Infonet Services Corp. Class B (a) 6,000 39
InfoSpace.com, Inc. (a) 22,730 457
Ingram Micro, Inc. Class A (a) 17,900 305
Inktomi Corp. (a) 2,800 178
Insight Enterprises, Inc. (a) 850 28
Integrated Device Technology, Inc. (a) 22,500 1,267
Intel Corp. 752,100 33,797
International Business Machines Corp 152,603 15,031
International Game Technology (a) 4,600 168
Internet Capital Group, Inc. New (a) 6,600 87
Internet Security Systems, Inc. (a) 1,000 88
Intuit, Inc. (a) 34,600 2,126
JDS Uniphase Corp. (a) 85,500 6,963
Juniper Networks, Inc. (a) 28,400 5,558
Kana Communications, Inc. (a) 2,900 68
Kemet Corp. (a) 144,100 4,017
Lattice Semiconductor Corp. (a) 9,400 275
Liberate Technologies, Inc. New (a) 1,600 30
Linear Technology Corp. 30,700 1,980
LSI Logic Corp. (a) 21,500 707
Lucent Technologies, Inc. 26,177 610
Macromedia, Inc. (a) 1,700 131
MarchFirst, Inc. (a) 12,900 75
Maxim Integrated Products, Inc. (a) 60,400 4,002
Mentor Graphics Corp. (a) 3,500 82
Mercury Interactive Corp. (a) 9,300 1,032
Metromedia Fiber Network, Inc. Class A (a) 58,800 1,117
Microchip Technology, Inc. (a) 57,600 1,822
Micromuse, Inc. (a) 6,100 1,035
63 Quantitative Equity Fund
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
Micron Technology, Inc. (a) 80,200 2,787
Microsoft Corp. (a) 502,451 34,606
Motorola, Inc. 151,845 3,787
National Semiconductor Corp. (a) 45,303 1,178
NCR Corp. (a) 3,800 164
Network Appliance, Inc. (a) 36,600 4,355
Network Associates, Inc. (a) 7,500 144
Nortel Networks Corp. 297,757 13,548
NVIDIA Corp. (a) 9,400 583
Oracle Systems Corp. (a) 747,420 24,665
Palm, Inc. New (a) 40,810 2,186
Parametric Technology Corp. (a) 2,100 26
Phone.com, Inc. (a) 1,600 148
PMC - Sierra, Inc. (a) 19,200 3,263
Portal Software, Inc. (a) 17,600 622
PSINet, Inc. (a) 4,300 29
QUALCOMM, Inc. (a) 62,688 4,083
Quantum Corp. - DLT & Storage Systems (a) 100 2
Qwest Communications International, Inc. (a) 151,201 7,352
RadioShack, Corp. 12,600 751
Rational Software Corp. (a) 12,400 740
RealNetworks, Inc. (a) 2,400 49
Redback Networks, Inc. (a) 9,600 1,017
RSA Security, Inc. (a) 1,500 87
Sandisk Corp. (a) 8,100 435
Scient Corp. New (a) 1,200 22
Seagate Technology (a) 73,968 5,169
Siebel Systems, Inc. (a) 61,900 6,496
Silicon Storage Technology, Inc. (a) 9,400 214
Software.com, Inc. New (a) 4,400 654
Storage Technology Corp. (a) 5,100 50
Sun Microsystems, Inc. (a) 297,600 32,978
SunGard Data Systems (a) 71,600 3,661
Sybase, Inc. (a) 42,300 883
Symantec Corp. (a) 47,800 1,864
Tellabs, Inc. (a) 42,000 2,097
Terra Networks SA - ADR 6,665 161
Texas Instruments, Inc. 174,100 8,542
TIBCO Software, Inc. (a) 11,500 724
Unisys Corp. (a) 33,000 421
VeriSign, Inc. (a) 21,585 2,848
Veritas Software Corp. (a) 69,152 9,746
Verizon Communications 323,291 18,690
VerticalNet, Inc. (a) 1,400 39
Vignette Corp. (a) 2,700 80
Vishay Intertechnology, Inc. (a) 60,537 1,816
Vitria Technology, Inc. (a) 2,600 70
webMethods, Inc. New (a) 600 52
Williams Communications Group, Inc. New (a) 22,300 407
Xilinx, Inc. (a) 45,480 3,291
Yahoo!, Inc. (a) 28,400 1,662
-------
469,423
-------
UTILITIES - 7.2%
ADC Telecommunications, Inc. (a) 68,500 1,460
Allegiance Telecom, Inc. (a) 1,400 44
Ameren Corp. 14,800 588
American Electric Power Co., Inc. 22,640 940
AT&T Corp. 289,617 6,715
AT&T Wireless Group New (a) 45,200 1,127
BellSouth Corp. 413,658 19,985
BroadWing, Inc. (a) 35,100 992
C&D Technologies, Inc. 25,800 1,525
Cable Design Technologies Corp. (a) 12,700 293
Calpine Corp. (a) 33,000 2,605
Cinergy Corp. 16,900 518
CMS Energy Corp. 25,600 691
Columbia Energy Group 2,600 187
Comcast Corp. Special Class A (a) 96,146 3,912
Consolidated Edison, Inc. 29,500 1,038
Copper Mountain Networks, Inc. (a) 1,200 14
CP&L, Inc. 32,900 1,326
Dominion Resources, Inc. 17,300 1,030
DTE Energy Co. 101,800 3,678
Duke Energy Corp. 24,100 2,083
Dycom Industries, Inc. (a) 14,000 527
Dynegy, Inc. Class A 46,800 2,167
Edison International 16,800 401
Energy East Corp. 9,200 186
Entergy Corp. 89,500 3,429
FirstEnergy Corp. 50,300 1,302
FPL Group, Inc. 25,900 1,709
Global Crossing, Ltd. (a) 59,800 1,409
GPU, Inc. 13,200 436
KeySpan Corp. 46,700 1,643
Level 3 Communications, Inc. (a) 31,800 1,514
MasTec, Inc. (a) 21,600 625
MCN Energy Group, Inc. 3,500 86
Nextel Communications, Inc. Class A (a) 36,500 1,403
NiSource, Inc. 14,300 357
PG&E Corp. 114,900 3,095
Pinnacle West Capital Corp. 29,400 1,277
Powerwave Technologies, Inc. (a) 12,100 582
PPL Corp. 12,200 502
Public Service Enterprise Group, Inc 74,800 3,104
Quanta Services, Inc. (a) 7,050 219
Reliant Energy, Inc. 82,600 3,412
Quantitative Equity Fund 64
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- ---------
SBC Communications, Inc. 262,641 15,151
SDL, Inc. (a) 2,800 726
Southern Co. 72,300 2,124
Sprint Corp. (Fon Group) 38,100 972
Sprint Corp. (PCS Group) (a) 103,500 3,946
Telephone & Data Systems, Inc. 6,800 717
Terayon Communication Systems, Inc. (a) 6,800 151
Time Warner Telecom, Inc. Class A (a) 2,300 138
United States Cellular Corp. (a) 18,200 1,165
UtiliCorp United, Inc. 14,400 383
Williams Cos. (The) 13,000 544
Wisconsin Energy Corp. 16,400 309
WorldCom, Inc. (a) 334,652 7,927
Xcel Energy, Inc. 900 24
---------
114,413
---------
TOTAL COMMON STOCKS
(cost $1,226,015) 1,545,590
---------
PRINCIPAL
AMOUNT
(000)
$
---------
SHORT-TERM INVESTMENTS - 2.8%
Frank Russell Investment Company 39,111 39,111
Money Market Fund, due on demand (b)
United States Treasury Bills (b)(c)(d)
5.925% due 12/21/00 2,700 2,678
5.940% due 12/21/00 3,100 3,074
---------
TOTAL SHORT-TERM INVESTMENTS
(COST $44,863) 44,863
---------
TOTAL INVESTMENTS - 99.9%
(identified cost $1,270,878) 1,590,453
OTHER ASSETS AND LIABILITIES,
NET - 0.1% 2,330
---------
NET ASSETS - 100.0% 1,592,783
=========
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
FUTURES CONTRACTS CONTRACTS (000)
--------- --------------
S&P 400 Midcap Index
expiration date 12/00 57 $ (383)
S&P 500 Index
expiration date 12/00 88 (1,314)
--------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ (1,697)
==============
(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.
Abbreviation:
ADR - American Depositary Receipt
See accompanying notes which are an integral part of the financial statements.
65 Quantitative Equity Fund
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) October 31, 2000
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $1,270,878) ........................................ $ 1,590,453
Cash ...................................................................................... 223
Receivables:
Dividends .............................................................................. 1,279
Investments sold ....................................................................... 6,261
Fund shares sold ....................................................................... 2,903
From Advisor ........................................................................... 57
Daily variation margin on futures contracts ............................................ 956
Prepaid expenses .......................................................................... 6
-----------
Total assets ........................................................................ 1,602,138
LIABILITIES
Payables:
Investments purchased ............................................. $ 5,548
Fund shares redeemed .............................................. 2,439
Accrued fees to affiliates ........................................ 1,216
Other accrued expenses ............................................ 152
-----------
Total liabilities ................................................................... 9,355
-----------
NET ASSETS ................................................................................ $ 1,592,783
===========
NET ASSETS CONSIST OF:
Undistributed net investment income ....................................................... $ 1,369
Accumulated net realized gain (loss) ...................................................... 144,598
Unrealized appreciation (depreciation) on:
Investments ............................................................................ 319,575
Futures contracts ...................................................................... (1,697)
Shares of beneficial interest ............................................................. 360
Additional paid-in capital ................................................................ 1,128,578
-----------
NET ASSETS ................................................................................ $ 1,592,783
===========
NET ASSET VALUE, offering and redemption price per share:
Class C ($20,935,042 divided by 477,126 shares of $.01 par value
shares of beneficial interest outstanding) .......................................... $ 43.88
===========
Class E ($15,313,869 divided by 346,707 shares of $.01 par value
shares of beneficial interest outstanding) .......................................... $ 44.17
===========
Class S ($1,556,534,071 divided by 35,156,412 shares of $.01 par value
shares of beneficial interest outstanding) .......................................... $ 44.27
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Quantitative Equity Fund 66
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Dividends ................................................................ $ 14,793 $ 18,946
Dividends from Money Market Fund ......................................... 2,617 1,650
Interest ................................................................. 200 243
---------------- -----------------
Total investment income ............................................... 17,610 20,839
---------------- -----------------
EXPENSES
Advisory fees ............................................................ 9,557 10,414
Administrative fees ...................................................... 658 715
Custodian fees ........................................................... 479 580
Distribution fees - Class C .............................................. 109 44
Transfer agent fees ...................................................... 1,086 1,248
Professional fees ........................................................ 92 53
Registration fees ........................................................ 152 177
Shareholder servicing fees - Class C ..................................... 36 15
Shareholder servicing fees - Class E ..................................... 22 20
Trustees' fees ........................................................... 19 10
Miscellaneous ............................................................ 117 114
---------------- -----------------
Expenses before reductions ............................................... 12,327 13,390
Expense reductions ....................................................... (10) --
---------------- -----------------
Expenses, net ......................................................... 12,317 13.390
---------------- -----------------
Net investment income ....................................................... 5,293 7,449
---------------- -----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments .............................................................. 76,627 249,787
Futures contracts ........................................................ 989 5,707
---------------- -----------------
77,616 255,494
---------------- -----------------
Net change in unrealized appreciation (depreciation) on:
Investments .............................................................. (70,231) 17,217
Futures contracts ........................................................ (4,111) 533
---------------- -----------------
(74,342) 17,750
---------------- -----------------
Net realized and unrealized gain (loss) ..................................... 3,274 273,244
---------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ....................... $ 8,567 $ 280,693
================ =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
67 Quantitative Equity Fund
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income .............................................. $ 5,293 $ 7,449 $ 7,998
Net realized gain (loss) ........................................... 77,616 255,494 102,532
Net change in unrealized appreciation (depreciation) ............... (74,342) 17,750 149,884
------------- ----------- -----------
Net increase (decrease) in net assets from operations ........... 8,567 280,693 260,414
------------- ----------- -----------
DISTRIBUTIONS
From net investment income
Class C ......................................................... -- (5) --
Class E ......................................................... (21) (19) (13)
Class S ......................................................... (5,016) (7,550) (7,962)
From net realized gain
Class C ......................................................... (307) (1,371) --
Class E ......................................................... (170) (927) (384)
Class S ......................................................... (31,384) (179,302) (81,901)
------------- ----------- -----------
Net decrease in net assets from distributions ................ (36,898) (189,174) (90,260)
------------- ----------- -----------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ...... 54,493 151,572 154,152
------------- ----------- -----------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ........................... 26,162 243,091 324,306
NET ASSETS
Beginning of period ................................................ 1,566,621 1,323,530 999,224
------------- ----------- -----------
End of period (including undistributed net investment income of
$1,369 at October 31, 2000 and $3 at December 31, 1998) ......... $ 1,592,783 $ 1,566,621 $ 1,323,530
============= =========== ===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Quantitative Equity Fund 68
<PAGE>
QUANTITATIVE EQUITY FUND
FINANCIAL HIGHLIGHTS - CLASS C
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,
--------------------------
2000* 1999*
--------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD .............. $ 44.94 $ 43.02
--------- ---------
INCOME FROM OPERATIONS
Net investment income (loss)(a) ................ (.22) (.20)
Net realized and unrealized gain (loss) ........ .07 8.00
--------- ---------
Total income from operations ................ (.15) 7.80
--------- ---------
DISTRIBUTIONS
From net investment income ..................... -- (.04)
From net realized gain ......................... (.91) (5.84)
--------- ---------
Total distributions ......................... (.91) (5.88)
--------- ---------
NET ASSET VALUE, END OF PERIOD .................... $ 43.88 $ 44.94
========= =========
TOTAL RETURN (%)(b) ............................... (.16) 18.89
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ....... 20,935 13,613
Ratios to average net assets (%)(c):
Operating expenses .......................... 1.92 1.93
Net investment income (loss) ................ (.60) (.47)
Portfolio turnover rate (%) .................... 59.25 89.52
* For the ten months ended October 31, 2000.
** 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) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
69 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,
----------------------------------------------------
2000* 1999 1998 1997 1996**
-------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ................ $ 45.19 $ 42.50 $ 36.80 $ 33.05 $ 33.81
-------- -------- -------- --------- ---------
INCOME FROM OPERATIONS
Net investment income (a) ........................ .06 .13 .12 .14 .05
Net realized and unrealized gain (loss) .......... (.08) 8.50 8.54 9.95 1.87
-------- -------- -------- --------- ---------
Total income from operations .................. (.02) 8.63 8.66 10.09 1.92
-------- -------- -------- --------- ---------
DISTRIBUTIONS
From net investment income ....................... (.09) (.10) (.16) (.07) (.08)
From net realized gain ........................... (.91) (5.84) (2.80) (6.27) (2.60)
-------- -------- -------- --------- ---------
Total distributions ........................... (1.00) (5.94) (2.96) (6.34) (2.68)
-------- -------- -------- --------- ---------
NET ASSET VALUE, END OF PERIOD ...................... $ 44.17 $ 45.19 $ 42.50 $ 36.80 $ 33.05
======== ======== ======== ========= =========
TOTAL RETURN (%)(B) ................................. .11 21.11 24.34 31.70 5.91
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ......... 15,314 7,987 7,479 2,344 322
Ratios to average net assets (%)(c):
Operating expenses ............................ 1.17 1.18 1.31 1.59 1.65
Net investment income ......................... .15 .28 .30 .33 .81
Portfolio turnover rate (%) ...................... 59.25 89.52 77.23 87.67 74.33
</TABLE>
* For the ten months ended October 31, 2000.
** 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 70
<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,
-----------------------------------------------------------------
2000* 1999 1998 1997 1996 1995
---------- ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ...... $ 45.19 $ 42.53 $ 36.78 $ 33.05 $ 30.76 $ 24.84
---------- ---------- ---------- --------- --------- ---------
INCOME FROM OPERATIONS
Net investment income (a) .............. .15 .24 .27 .38 .51 .50
Net realized and unrealized gain (loss) (.02) 8.50 8.55 10.00 6.24 8.72
---------- ---------- ---------- --------- --------- ---------
Total income from operations ........ .13 8.74 8.82 10.38 6.75 9.22
---------- ---------- ---------- --------- --------- ---------
DISTRIBUTIONS
From net investment income ............. (.14) (.24) (.27) (.38) (.51) (.51)
From net realized gain ................. (.91) (5.84) (2.80) (6.27) (3.95) (2.79)
---------- ---------- ---------- --------- --------- ---------
Total distributions ................. (1.05) (6.08) (3.07) (6.65) (4.46) (3.30)
---------- ---------- ---------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD ............ $ 44.27 $ 45.19 $ 42.53 $ 36.78 $ 33.05 $ 30.76
========== ========== ========== ========= ========= =========
TOTAL RETURN (%)(b) ....................... .47 21.37 24.82 32.70 23.08 37.69
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) 1,556,534 1,545,021 1,316,051 996,880 663,925 488,948
Ratios to average net assets (%)(c):
Operating expenses .................. .92 .93 .91 .91 .93 .93
Net investment income ............... .42 .53 .69 1.04 1.59 1.71
Portfolio turnover rate (%) ............ 59.25 89.52 77.23 87.67 74.33 78.83
</TABLE>
* For the ten months ended October 31, 2000.
(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.
71 Quantitative Equity Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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 ten 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.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
DATES INTERNATIONAL SECURITIES - CLASS S MSCI EAFE **
Inception* $ 10,000 $ 10,000
1991 $ 10,569 $ 10,732
1992 $ 9,738 $ 9,347
1993 $ 12,927 $ 12,887
1994 $ 14,622 $ 14,225
1995 $ 14,465 $ 14,216
1996 $ 15,981 $ 15,751
1997 $ 16,728 $ 16,526
1998 $ 17,327 $ 18,171
1999 $ 21,054 $ 22,417
2000 $ 21,346 $ 21,819
Total $164,756 $166,091
YEARLY PERIODS ENDED OCTOBER 31
<TABLE>
<CAPTION>
INTERNATIONAL SECURITIES FUND - CLASS S MSCI EAFE INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
------------------------------------------------------ ------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $10,138 1.38% 1 Year $ 9,734 (2.66)%
5 Years $14,757 8.09%(S) 5 Years $15,349 8.95%(S)
10 Years $21,346 7.88%(S) 10 Years $21,819 8.12%(S)
INTERNATIONAL SECURITIES FUND - CLASS E++ SALOMON SMITH BARNEY BROAD MARKET INDEX (BMI) EX-US+
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
------------------------------------------------------ ------------------------------------------------------
1 Year $10,113 1.13% 1 Year $ 9,917 (0.83)%
5 Years $14,529 7.75%(S) 5 Years $15,835 9.63%(S)
10 Years $21,016 7.71%(S) 10 Years $21,949 8.18%(S)
INTERNATIONAL SECURITIES FUND - CLASS C++++
PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN
------------------------------------------------------
1 Year $10,037 0.37%
5 Years $14,344 7.47%(S)
10 Years $20,748 7.57%(S)
</TABLE>
73 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the ten months ended October 31, 2000, the International Securities Fund
Class S, Class E and Class C shares lost 12.40%, 12.58%, and 13.13%,
respectively. This compared to the Salomon Smith Barney BMI World ex-US, which
lost 11.57%, and the MSCI EAFE Index which lost 13.71% during the same period.
The Fund's performance was mixed, and was a result of the international markets'
sector rotations. This was similar to the US markets' behavior during the year,
as both growth managers and value managers enjoyed periods during which their
style was favored.
PORTFOLIO HIGHLIGHTS
Similar to the US markets, the performance of international Technology and
Telecommunications sectors exceeded all others during the first quarter. This
benefited the Fund's growth managers, but penalized those managers trying to
adhere to strict valuation disciplines.
During the first quarter, currency movements had a significant impact on
returns. The decline in the Euro muted European gains, while the gain in the Yen
boosted returns from Japan. However, while Japan's outlook remained strong
during the first half of the year, investors became impatient with the pace of
the country's restructuring effort later in the period and returns suffered as a
result.
Second quarter was a difficult time internationally, just as it was in the US.
During this period, growth managers faced a steep decline in technology and
telecommunications issues, while value managers gained some ground in this
environment. The Fund managers' stock selection, particularly in Germany where
holdings of Jenoptik (Technology), Systematics (Information Technology), Consors
Discount (Banking) contributed positive results to performance.
By mid-year, international markets lost ground amidst extreme sector rotation,
heightened volatility and the "tech wreck", which dramatically cut valuations
for technology issues.
The Fund's manager lineup was broadened during the second quarter with the
addition of Driehaus Capital Management, Inc. and Marvin & Palmer Associates,
Inc. Driehaus and Marvin & Palmer were both retained to expand the Fund's
aggressive growth exposure, and as a result, existing growth managers' asset
allocation was rebalanced.
TOP TEN EQUITY HOLDINGS
(as a percent of Total Investments) October 31, 2000
Vodafone Group PLC (United Kingdom) 1.8%
Rhone-Poulenc SA Class A - ADR (France) 1.4
Total Co. SA Class B (France) 1.3
ING Groep (Netherlands) 1.1
Novartis AG (Regd) (Switzerland) 1.1
Canon, Inc. (Japan) 1.0
Telefonica SA (Spain) 0.9
Glaxo Wellcome PLC (United Kingdom) 0.9
Royal Dutch Petroleum Co. (Netherlands) 0.8
Nippon Telegraph & Telephone Corp. (Japan) 0.8
PORTFOLIO CHARACTERISTICS
October 31, 2000
Current P/E Ratio 20.07x
Portfolio Price/Book Ratio 2.66x
Market Capitalization - $-Weighted Average 39.4 Bil
Number of Holdings 783
MONEY MANAGERS STYLES
Delaware International Advisors, Ltd. Value
Driehaus Capital Management, Inc. Growth
Fidelity Management Trust Company Growth
J.P. Morgan Investment Management, Inc. Value
Marvin & Palmer Associates, Inc. Growth
Mastholm Asset Management, LLC Growth
Montgomery Asset Management, LLC Growth
Oechsle International Advisors, LLC Growth
Sanford C. Bernstein & Co., Inc. Value
The Boston Company Asset Management, Inc. Value
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* International Securities Fund Class S assumes initial investment on
November 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.
++ International Securities 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.
++++ 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.
(S) 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 74
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- -------
COMMON STOCKS - 90.1%
AUSTRALIA - 1.9%
Amcor, Ltd. 540,695 1,499
AMP, Ltd. 35,446 320
Australia & New Zealand Bank Group, Ltd 429,537 3,173
Australian Gas & Light Co. 5,145 31
Australian Stock Exchange, Ltd. 2,600 16
BHP, Ltd. - ADR 2,548 50
Billabong International, Ltd. (a) 9,000 19
Brambles Industries, Ltd. 2,300 60
Broken Hill Proprietary Co. 113,668 1,102
Cable & Wireless Optus, Ltd. (a) 12,700 27
Coles Myer, Ltd. 5,421 20
Commonwealth Bank of Australia 18,829 280
CSL, Ltd. 15,852 282
CSR, Ltd. 925,103 1,895
F.H. Faulding & Co., Ltd. 3,000 16
Fairfax (John) Holdings, Ltd. 4,900 11
Foster's Brewing Group, Ltd. 1,254,100 2,841
Goodman Fielder Wattie 815,196 528
Harvey Norman Holdings, Ltd. 17,100 38
Leighton Holdings, Ltd. Class A 6,900 24
Lend Lease Corp. 17,728 208
Macquarie Bank, Ltd. 1,400 20
National Australia Bank, Ltd. 294,523 4,091
National Foods, Ltd. 9,100 12
News Corp., Ltd. 50,332 526
News Corp., Ltd. - ADR 9,578 412
Oil Search, Ltd. (Australia Regd) (a) 8,900 7
OneSteel, Ltd. (a) 24,735 12
Orica, Ltd. 166,000 499
Paperlinx, Ltd. 142,198 243
Rio Tinto, Ltd. 2,700 37
Southcorp Holdings, Ltd. 61,100 158
Tabcorp. Holdings, Ltd. 6,500 35
Telstra Corp., Ltd. 102,700 335
Telstra Corp., Ltd. Installment Receipts 27,503 90
Wesfarmers, Ltd. 3,829 29
Westfield Holdings, Ltd. 6,700 43
Westfield Trust (a) 457 1
Westpac Banking Corp. 171,425 1,171
WMC, Ltd. 29,984 115
Woodside Petroleum, Ltd. 3,900 29
Woolworths, Ltd. 88,195 350
--------
20,655
--------
AUSTRIA - 0.2%
Bank Austria AG 34,269 1,854
OMV AG 1,500 102
Voest-Alpine Stahl AG 11,000 258
Wienerberger Baustoffindustrie AG 10,400 195
--------
2,409
--------
BELGIUM - 0.6%
Agfa Gevaert 84,901 1,758
Dexia 25,507 3,879
Electrabel 5,400 1,173
Real Software 722 12
Ubizen 4,678 100
--------
6,922
--------
CANADA - 4.0%
Abitibi-Consolidated, Inc. 5,600 49
Agrium, Inc. 3,930 40
Alberta Energy Co., Ltd. 49,290 1,815
Alcan Aluminum, Ltd. 8,680 273
Anderson Exploration, Ltd. (a) 87,740 1,608
Ballard Power Systems, Inc. (a) 17,950 1,922
Bank of Montreal 26,288 1,213
Bank of Nova Scotia 10,710 305
Barrick Gold Corp. 10,700 142
BCE, Inc. 7,690 206
Biovail Corp. (a) 30,232 1,269
Bombardier, Inc. Class B 99,492 1,560
C.I. Fund Management, Inc. 2,660 55
Canadian Hunter Exploration, Ltd. (a) 2,480 52
Canadian Imperial Bank of Commerce 23,305 738
Canadian National Railway Co. 27,000 848
Canadian Natural Resources, Ltd. (a) 34,177 1,007
Canadian Occidental Petroleum, Ltd. 23,420 562
Canadian Pacific, Ltd. 18,600 539
Celestica, Inc. (a) 15,270 1,094
Cognos, Inc. (a) 1,050 42
Descartes Systems Group, Inc. (The) 19,868 805
Dofasco, Inc. 27,601 382
Enbridge, Inc. 7,950 213
Finning International, Inc. 17,000 130
Gulf Canada Resources, Ltd. (a) 9,220 40
Hudson's Bay Co. 18,600 164
Imperial Oil, Ltd. 10,867 274
Inco, Ltd. (a) 1,310 20
Leitch Technology Corp. (a) 49,500 621
Loblaw Cos., Ltd. 11,350 388
Mackenzie Financial Corp. 1,380 18
Magna International, Inc. Class A 4,710 211
Manitoba Telecom Services, Inc. 12,000 247
Manulife Financial Corp. 6,100 158
Mitel Corp. (a) 144,300 2,362
Molson Cos., Ltd. Class A 730 18
National Bank of Canada 52,740 861
75 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- -------
Nortel Networks Corp. 138,191 6,251
Petro-Canada 140,000 2,933
Potash Corp. of Saskatchewan, Inc. 3,040 181
Precision Drilling Corp. (a) 600 17
QLT PhotoTherapeutics, Inc. 3,865 192
Quebecor World, Inc. 7,800 171
Research in Motion, Ltd. 10,550 1,055
Rogers Communications, Inc. Class B 30,190 585
Royal Bank of Canada 33,410 1,056
Seagram Co., Ltd. 10,156 581
Shell Canada, Ltd. Class A 19,000 435
Sun Life Financial Services, Inc. New 6,920 143
Suncor, Inc. 15,676 305
Talisman Energy, Inc. (a) 91,620 2,876
TD Waterhouse Group, Inc. (a) 17,980 296
Tembec, Inc. Class A (a) 91,000 801
Thomson Corp. (The) 17,180 692
Toronto Dominion Bank (The) New 10,000 275
Torstar Corp. Class B 30,500 449
TransAlta Corp. 22,000 286
Westcoast Energy, Inc. 62,226 1,386
-------
43,217
-------
CHINA - 0.1%
China Unicom Ltd. - ADR (a) 20,255 415
Cosco Pacific, Ltd. 1,030,000 759
PetroChina Co., Ltd. Class H 1,754,000 369
-------
1,543
-------
DENMARK - 0.8%
ISS A/S (a) 17,211 1,060
Jyske Bank A/S (Regd) 29,939 570
Novo Nordisk A/S Series B 16,612 3,523
Vestas Wind Systems A/S (a) 72,731 3,940
-------
9,093
-------
FINLAND - 1.1%
Elisa Communications Oyj 80,846 2,243
Kesko Oyj 95,352 797
Metsa-Serla Oyj Series B 13,000 82
Nokia Oyj 113,668 4,677
Sampo Insurance Co., Ltd. Series A 17,314 705
Sonera Group Oyj 52,300 1,152
Stora Enso Oyj Series R 32,900 338
Tietoenator Oyj 7,433 143
UPM-Kymmene Oyj 39,577 1,120
Valmet - Rauma Oyj 22,729 174
-------
11,431
-------
FRANCE - 9.7%
Air Liquide 20,390 2,410
Alcatel 125,502 7,657
Alcatel Alsthom Compagnie Generale
d'Electricite - ADR 43,615 2,720
Alstom 90,781 1,995
Assurances Generales de France 41,554 2,274
Avcntis SA Class A - ADR 210,417 15,178
AXA 19,993 2,647
Banque Nationale Paris 44,470 3,834
Bongrain SA 18,488 502
Bouygues SA 6,378 325
Bull SA 7,400 42
Business Objects SA - ADR 7,734 609
Carrefour SA 35,567 2,387
Castorama Dubois 12,435 2,528
Chargeurs International SA 2,550 143
Christian Dior SA 6,266 319
Cie de St. Gobain 24,850 3,288
Credit Lyonnais 8,020 274
Eridania Beghin-Say SA 1,605 123
European Aeronautic Defense and Space Co. 71,000 1,446
Fimatex 9,021 97
France Telecom SA 7,000 732
Genset 3,255 162
Groupe Air France 43,846 781
Groupe Danone 10,407 1,455
Havas Advertising SA 26,000 419
L'Oreal SA 3,900 298
Lafarge SA 12,810 945
Lagardere S.C.A 4,181 237
Legris Industries SA 3,900 127
Michelin (Cie Gen) Class B 55,309 1,600
Pernod-Ricard 6,100 280
Peugeot SA 2,315 426
Publicis 700 23
Publicis Groupe SA 16,000 523
Renault (Regie Nationale) 23,489 1,168
Rhodia SA 63,437 793
Sanofi-Synthelabo SA 78,027 4,105
Schneider Electric SA 6,161 401
Scor SA 9,000 414
SEB SA 6,600 336
Simco (Regd) 3,300 204
Societe Generale Class A 101,056 5,737
Societe Generale d'Entreprises SA 5,549 279
STMicroelectronics N.V 11,500 580
Suez Lyonnaise des Eaux SA 37,006 5,646
Technip 1,679 216
Thomson-CSF 23,200 1,042
Total Co. SA Class B 96,549 13,815
Total Fina SA - ADR 33,036 2,367
International Securities Fund 76
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- -------
Usinor Sacilor 144,409 1,576
Vivendi 79,921 5,745
Vivendi Environnement 37,934 1,417
-------
104,647
-------
GERMANY - 7.0%
Allianz AG (Regd) 18,088 6,133
Altana AG 21,500 2,589
BASF AG 51,432 2,016
Bayer AG 179,976 7,812
Bayerische Hypo Vereinsbank AG 61,400 3,374
Bayerische Motoren Werke AG 38,247 1,266
Commerzbank AG 38,327 1,081
Consors Discount Broker AG 23,775 1,892
Continental AG 83,800 1,280
Deutsche Bank AG 58,122 4,759
Deutsche Lufthansa AG 67,314 1,314
Deutsche Pfandbrief & Hypothekenbank AG 7,000 517
Deutsche Telekom AG 37,882 1,422
Dresdner Bank AG 79,765 3,324
E.On AG 137,364 6,980
Fresenius Medical Care AG 2,200 175
Hannover Rueckversicherungs AG 6,100 513
IKB Deutsche Industriebank AG 25,750 353
Intershop Communications AG 3,068 133
Jenoptik AG 134,460 3,684
Mannheimer Aktiengesellschaft 5,300 297
Marschollek, Lautenschlaeger and Partner AG 980 134
Merck KGAA 55,156 2,097
Metallgesellschaft AG 70,093 753
Muenchener 19,705 6,195
Rueckversicherungs-Gesellschaft AG
PrimaCom AG 1,468 29
RWE AG 78,150 3,134
SAP AG 165 27
Schering AG 93,097 5,214
SGL Carbon AG 3,867 236
Siemens AG 36,606 4,661
Software AG 8,460 606
United Internet AG 12,371 79
Volkswagen AG 44,907 2,244
-------
76,323
-------
GREECE - 0.2%
Cosmote SA - GDR (a) 17,000 255
Hellenic Telecommunication
Organization SA - ADR 178,178 1,559
-------
1,814
-------
HONG KONG - 1.6%
ASAT Holdings, Ltd. - ADR (a) 23,100 144
Asia Satellite Telecommunications 8,000 16
Holdings, Ltd.
Bank of East Asia, Ltd. 89,200 201
Cathay Pacific Airways 39,000 71
Cheung Kong Holdings, Ltd. 22,800 252
China Petroleum and Chemical Corp. 96,000 19
Series H New (a)
China Telecom (Hong Kong), Ltd. (a) 374,500 2,401
China Unicom, Ltd. (a) 70,000 140
CLP Holdings, Ltd. 59,400 277
Dairy Farm International Holdings, Ltd. (a) 37,800 16
Dao Heng Bank Group, Ltd. 6,500 33
Great Eagle Holdings 12,193 18
Hang Lung Development Co. 192,000 172
Hang Seng Bank 8,200 97
Henderson Land Development Co., Ltd. 17,000 73
Hong Kong & China Gas Co., Ltd. 66,396 84
Hong Kong Electric Holding, Ltd. 1,383,448 4,568
Hong Kong Land Holdings, Ltd. - ADR (a) 9,000 17
Hutchison Whampoa, Ltd. 97,330 1,211
Jardine Matheson Holdings, Ltd. - ADR (a) 214,100 1,188
JCG Holdings, Ltd. 50,400 27
Johnson Electric Holdings, Ltd. (a) 46,800 94
Kerry Properties, Ltd. 350,000 402
Li & Fung, Ltd. (a) 55,600 103
MTR Corporation, Ltd. (a) 593,000 878
New World Infrastructure, Ltd. (a) 11,000 10
Pacific Century CyberWorks, Ltd. (a) 141,042 109
SmarTone Telecommunications Holdings, Ltd. 69,000 103
Sun Hung Kai Properties, Ltd. 328,600 2,697
Sunevision Holdings, Ltd. (a) 157,500 77
Swire Pacific, Ltd. Class A 15,300 94
77 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- -------
Television Broadcast 6,000 33
Wharf Holdings 646,862 1,319
Wing Hang Bank, Ltd. 10,200 30
-------
16,974
-------
IRELAND - 0.4%
Allied Irish Banks 17,500 178
Bank of Ireland 479,320 3,648
CRH PLC 34,052 523
Independent Newspapers PLC 54,100 168
Trintech Group PLC 8,225 88
-------
4,605
-------
ISRAEL - 0.3%
Check Point Software Technologies, Ltd. 7,852 1,244
Nice Systems, Ltd. - ADR 16,100 749
Teva Pharmaceutical Industries, Ltd.- ADR 23,302 1,377
-------
3,370
-------
ITALY - 4.5%
Alleanza Assicurazioni 60,000 796
Assicurazioni Generali SPA 14,300 470
Autostrade SPA 33,527 195
Banca Commerciale Italiana 221,000 1,300
Banca Nazionale del Lavoro 727,759 2,359
Banca Pop di Milano 49,000 308
Banca Popolare di Bergamo CV 90,921 1,559
Banca Popolare di Novara 51,000 301
Banca Popolare di Verona 56,600 625
Benetton Group SPA 174,000 316
Bipop Carire SPA 65,750 520
Bulgari SPA 33,806 398
Credito Emiliano SPA 46,567 179
Ente Nazionale Idrocarburi SPA 1,310,518 7,095
Fiat SPA 17,930 235
Finmeccanica SPA 1,332,840 1,528
Ifil (Finanziaria di Partecipazioni) SPA 30,000 135
Luxottica Group SPA - ADR 31,500 455
Mediaset SPA 275,491 3,986
Mediolanum SPA 64,604 947
Montefibre di Risp 37,000 17
Montefibre SPA 240,000 131
Parmalat Finanziaria SPA 1,038,000 1,497
Pirelli SPA 388,500 1,128
Riunione Adriatica de Sicurta 257,285 3,378
Saipem SPA 64,727 337
San Paolo - IMI SPA 507,617 8,228
Tecnost SPA 84,000 283
Telecom Italia Mobile SPA 330,004 2,805
Telecom Italia Mobile SPA di Risp 17,000 90
Telecom Italia SPA di Risp 676,473 3,680
Telecom Italia SPA 266,557 3,087
Unicredito Italiano SPA 132,607 674
-------
49,042
-------
JAPAN - 17.9%
77th Bank, Ltd. (The) 184,000 1,363
Advantest Corp. 3,100 404
AIFUL Corp. 13,550 1,068
Aisin Seiki Co., Ltd. 10,000 143
Ajinomoto Co., Inc. 30,000 335
Aoki International 32,000 92
Aoyama Trading Co. 29,900 244
Asahi Bank, Ltd. 246,000 969
Asahi Breweries 7,000 69
Asahi Chemical Industrial 62,000 384
Bank of Fukuoka, Ltd. (The) 32,000 157
Bank of Tokyo - Mitsubishi, Ltd. 69,000 828
Bridgestone Tire Corp. 171,000 1,696
Canon, Inc. 279,000 11,072
Capcom Co. 3,200 124
Central Glass Co., Ltd. 29,000 133
Chugai Pharmaceutical Co., Ltd. 17,000 289
Credit Saison Co. 135,650 2,872
Dai Ichi Pharmaceutical Co. 20,000 568
Dai-Tokyo Fire & Marine 376,000 1,099
Daido Steel Co. 134,000 370
Dainippon Pharmaceutical Co., Ltd. 10,000 128
Daito Trust Construction 7,350 124
Daiwa Kosho Lease Co., Ltd. 87,000 243
Daiwa Securities Group, Inc. 95,000 1,053
DDI Corp. 44 208
Deodeo Corp. 15,000 98
Dowa Mining Co. 32,000 123
Ebara Corp. 40,000 621
Eisai Co., Ltd. 121,000 3,726
Fast Retailing Co., Ltd. 9,600 2,362
Fuji Heavy Industries, Ltd. 78,000 543
Fuji Machine Manufacturing Co. 41,200 1,125
Fuji Photo Film Co. 7,000 260
Fujikura 43,000 379
Fujisawa Pharmaceutical 2,000 63
Fujitsu, Ltd. 164,000 2,922
Funai Electric Co., Ltd. 1,500 113
Furukawa Electric Co. 133,000 3,498
Futaba Corp. 27,400 977
Gunze, Ltd. 24,000 80
Hitachi Chemical Co., Ltd. 15,000 377
Hitachi, Ltd. 507,000 5,436
Hitachi Maxell 24,000 449
International Securities Fund 78
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- ------
Hitachi Software Engineering Co., Ltd 900 97
Honda Motor Co., Ltd. 48,000 1,658
Hosiden Electronics 4,000 128
House Foods Corporation 25,000 328
Hoya Corp. 4,000 331
Ines Corp. 5,600 70
Isetan Co. 69,000 586
Ito-Yokado Co., Ltd. 5,000 226
Itochu Corp. (a) 162,000 690
Itochu Techno Science Corp. 6,600 1,569
Japan Tobacco, Inc. 102 701
JGC Corp. 35,000 218
Kagoshima Bank 35,000 140
Kaken Pharmaceutical Co., Ltd. 6,000 36
Kao Corp. 70,000 2,098
Katokichi Co. 31,000 895
Kawasaki Steel Corp. 259,000 254
Keyence Corp. 1,000 311
Kinki Coca-Cola Bottling 27,000 285
Kissei Pharmaceutical Co. 34,000 623
Koa Fire & Marine 82,000 304
Konami Co., Ltd. 41,800 3,524
Konica Corp. 25,000 193
Kubota Corp. 50,000 168
Kurimoto Iron Works 90,000 193
Kyocera Corp. 23,700 3,084
Kyorin Pharmaceutical Co., Ltd. 7,000 230
Kyushu Electric Power 34,900 512
Lawson, Inc. 5,500 190
Mabuchi Motor Co., Ltd. 20,100 2,148
MACNICA, Inc. 1,600 181
Makita Corp. 91,000 663
Marubeni Corp. (a) 939,000 2,194
Marui Co., Ltd. 12,000 177
Maruichi Steel Tube 38,000 539
Matsumotokiyoshi 30,900 2,447
Matsushita Communication 8,200 1,075
Matsushita Electric Industrial Co., Ltd 267,000 7,757
Minebea Co., Ltd. 234,000 2,338
Mitsubishi Chemical 181,000 572
Mitsubishi Corp. 77,000 635
Mitsubishi Electric Corp. 97,000 697
Mitsubishi Estate Co., Ltd. 44,000 468
Mitsubishi Heavy Industries 289,000 1,123
Mitsubishi Trust & Banking 25,000 203
Mitsui Fudosan Co., Ltd. 73,000 884
Mitsui Mining & Smelting 35,000 295
Mitsui O.S.K. Lines 200,000 440
Mitsumi Electric Co. 3,000 99
Mizuho Holdings, Inc. (a) 709 5,452
Murata Manufacturing Co., Ltd. 2,800 335
Mycal Corp. 94,000 217
Namco 48,900 1,264
Nanto Bank 57,000 222
NEC Corp. 77,000 1,468
NGK Insulators, Ltd. 17,000 225
NGK Spark Plug Co. 2,000 31
Nichicon Corp. 26,000 464
Nichido Fire & Marine 172,000 889
NIDEC COPAL Corp. 5,000 75
NIDEC Corp. 2,200 135
Nikko Securities Co., Ltd. 16,000 138
Nintendo Co., Ltd. 5,700 943
Nippon Comsys Corp. 5,000 96
Nippon Electric Glass 6,000 140
Nippon Express Co., Ltd. 434,000 2,605
Nippon Fire & Marine 80,000 298
Nippon Meat Packers, Inc. 15,000 190
Nippon Oil Co. 50,000 269
Nippon Sheet Glass 28,000 426
Nippon System Development 600 65
Nippon Telegraph & Telephone Corp. 927 8,436
Nippon Yusen 226,000 1,060
Nippon Zeon Co., Ltd. 16,000 69
Nishimatsu Construction 259,000 819
Nissan Chemical Industries, Ltd. 20,000 148
Nissan Motor Co., Ltd. (a) 881,000 6,047
Nisshin Steel Co. 76,000 59
Nitto Denko Corp. 7,000 237
NOK Corp. 9,000 86
Nomura Securities Co., Ltd. 255,000 5,410
NTT Mobile Communication Network, Inc 159 3,920
Oki Electric Industries (a) 31,000 184
Omron Corp. 51,000 1,257
Oriental Land Co., Ltd. 2,400 145
Orix Corp. 3,900 409
Osaka Gas Co. 78,000 192
Paris Miki, Inc. 2,300 95
Pioneer Corp. 71,000 2,199
Promise Co., Ltd. 2,900 218
Ricoh Co., Ltd. 19,000 293
Rinnai Corp. 82,000 1,680
Rohm Co. 16,000 4,034
Ryohin Keikaku Co., Ltd. 1,200 61
Sakura Bank, Ltd. 479,000 3,490
Sankyo Co., Ltd. 83,000 1,829
Sanseido Co., Ltd. 34,000 296
Sanyo Electric Co., Ltd. 24,000 183
Sekisui Chemical Co., Ltd. 180,000 520
79 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
Sekisui House, Ltd. 60,000 635
Shimachu Co., Ltd. 6,700 101
Shin-Etsu Chemical Co., Ltd. 49,050 2,014
Shohkoh Fund & Co., Ltd. 9,270 761
SMC Corp. 1,000 142
Snow Brand Milk Products Co., Ltd. 22,000 80
Softbank Corp. 5,400 324
Sony Corp. 48,000 3,836
Stanley Electric 9,000 93
Sumitomo Bank 41,000 498
Sumitomo Electric Industries, Ltd. 61,000 1,126
Sumitomo Osaka Cement Co., Ltd. 30,000 128
Sumitomo Realty & Development 180,000 1,033
Sumitomo Rubber Industries 95,000 453
Sumitomo Trust & Banking 97,000 747
Suruga Bank, Ltd. 14,000 192
Suzuki Motor Corp. 13,000 139
Taiheiyo Cement Corp. 27,000 42
Taisho Pharmaceutical Co., Ltd. 54,000 1,554
Takeda Chemical Industries, Ltd. 82,000 5,403
Takefuji Corp. 9,400 930
TDK Corp. 17,400 1,754
Terumo Corp. 2,900 82
THK Co., Ltd. 5,800 144
Toc Co. 42,000 281
Toho Bank 83,000 307
Tohoku Electric Power 16,500 222
Tokio Marine & Fire Insurance Co. 16,000 177
Tokuyama Corp. 29,000 120
Tokyo Electric Power 13,500 328
Tokyo Gas Co. 68,000 178
Tokyo Seimitsu Co., Ltd. 1,100 78
Tokyo Steel Manufacturing 17,900 73
Tokyo Tomin Bank, Ltd. 2,100 59
Tokyu Corp. 286,000 1,478
Toppan Printing Co., Ltd. 14,000 124
Toshiba Corp. 28,000 200
Toshiba Machine Co. (a) 11,000 46
Tostem Corp. 22,000 321
Toto, Ltd. 6,000 46
Toyo Information Systems 12,000 814
Toyoda Gosei Co., Ltd. 10,000 612
Toyota Motor Corp. 66,100 2,641
Trend Micro, Inc. (a) 500 47
UNY Co., Ltd. 20,000 245
West Japan Railway Co. 877 3,601
Yakult Honsha Co., Ltd. 17,000 194
Yamaha Corp. 50,000 431
Yamanouchi Pharmaceutical 116,000 5,252
Yamato Kogyo Co. 34,000 111
Yamato Transport 4,000 81
Yasuda Fire & Marine Insurance Co., Ltd. (The) 27,000 139
Yodogawa Steel Works, Ltd. 122,000 274
Yokohama Rubber Co., Ltd. 225,000 525
York-Benimaru Co., Ltd. 3,000 72
Yoshitomi Pharmaceutical Ind., Ltd. 2,000 13
-------
194,388
-------
LUXEMBOURG - 0.1%
Carrier 1 International SA 5,140 124
Thiel Logistik AG New 3,510 542
-------
666
-------
MEXICO - 0.1%
Grupo Television SA de CV - GDR 11,806 639
-------
NETHERLANDS - 7.2%
ABN Amro Holding 183,722 4,256
Aegon 5,900 234
Akzo Nobel 76,885 3,500
ASM Lithography Holding 86,630 2,368
Bols Wessanen CVA 22,300 260
Buhrmann 56,376 1,540
DSM 9,000 260
Elsevier 219,300 2,801
Equant 4,015 134
Fortis (NL) 80,752 2,467
Fox Kids Europe 32,547 373
Getronics 14,174 159
Heineken 45,586 2,476
Heineken Holding Class A 32,001 1,141
Hunter Douglas 65,514 1,879
ING Groep 171,854 11,801
Koninklijke Ahold 275,466 8,002
Koninklijke (Royal) Philips Electronics 88,654 3,484
Koninklijke KPN 157,807 3,197
Koninklijke Numico 130,691 6,111
Koninklijke Vopak 5,052 96
Lycos Europe 2,726 23
Nutreco Holding 22,539 972
QIAGEN 4,200 181
Royal Dutch Petroleum Co. 144,391 8,564
Stork 79,821 894
TNT Post Group 27 1
Unilever 67,616 3,391
Unique International 2,300 47
United Pan-Europe Communications 33,782 592
Vedior 59,282 883
Verenigde Nederlandse Uitgeversbedrijven 40,136 1,890
International Securities Fund 80
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- ------
Wereldhave 8,966 395
Wolters Kluwer 166,778 3,752
------
78,124
------
NEW ZEALAND - 0.4%
Air New Zealand Class B 12,800 11
Air New Zealand, Ltd. (a) 4,266 4
Carter Holt Harvey 710,381 471
Lion Nathan, Ltd. 112,019 215
Telecom Corp. of New Zealand, Ltd. 1,515,887 3,355
Warehouse Group (The), Ltd. 6,600 16
------
4,072
------
NORWAY - 0.3%
Christiania Bank OG Kreditkasse 44,000 230
Den Norske Creditbank A/S 105,029 456
Kvaerner Industries ASA (a) 2,000 20
Norsk Hydro A/S 30,292 1,205
Norske Skogindustrier AS Class A 4,000 144
Orkla ASA Class A 4,285 77
Petroleum Geo-Services ASA - ADR (a) 29,800 408
Sparebanken NOR 8,000 202
------
2,742
------
PORTUGAL - 0.4%
Banco Comercial Portugues, SA 263,800 1,319
Banco Espirito Santo e Comercial de 9,780 149
Lisboa SA (Regd)
Electricidade de Portugal SA 380,900 1,034
Portucel Industrial SA 17,000 96
Portugal Telecom SA 164,929 1,470
Telecel - Comunicacoes Pessoais SA 22,716 248
------
4,316
------
RUSSIA - 0.1%
Lukoil Oil Co. - ADR 18,325 979
------
SINGAPORE - 1.3%
Chartered Semiconductor Manufacturing, Ltd (a) 13,000 56
City Developments 91,400 422
Creative Technology, Ltd. (a) 12,000 202
Datacraft Asia, Ltd. (a) 5,576 38
DBS Group Holdings, Ltd. 162,330 1,913
DBS Land 13,000 20
Flextronics International, Ltd. (a) 91,600 3,475
Jardine Strategic Holdings Ltd. (a) 12,000 34
Natsteel Electronics, Ltd. 214,000 556
Oversea-Chinese Banking Corp., Ltd. 564,420 3,599
Overseas Union Bank 361,664 1,750
Parkway Holdings 4,000 8
Singapore Airlines, Ltd. (Alien Market) 29,800 299
Singapore Land 40,000 83
Singapore Land, Ltd. 2005 Warrants (a) 8,000 7
Singapore Press Holdings, Ltd. 16,100 230
Singapore Technologies Engineering, Ltd 36,800 59
Singapore Telecommunications, Ltd. 60,000 99
Straits Steamship Land, Ltd. 95,000 142
United Overseas Bank, Ltd. 213,117 1,577
Venture Manufacturing (Singapore), Ltd 4,000 39
------
14,608
------
SPAIN - 2.7%
Acerinox SA 6,166 172
Altadis 211,278 3,164
Amadeus Global Travel Distribution SA Class A 15,751 129
Banco Bilbao Vizcaya SA 201,489 2,684
Banco Popular Espanol SA 43,817 1,311
Banco Santander Central Hispano SA 258,700 2,507
Centros Commerciales Pryca 18,700 237
Endesa SA 179,872 2,931
Grupo Dragados SA 15,900 154
Iberdrola SA 249,394 3,050
Prosegur CIA de Seguridad SA (Regd) 26,708 263
Repsol SA - ADR 97,366 1,552
Respol - YPF SA 49,760 790
Telefonica SA 506,545 9,659
Union Electrica Fenosa SA 17,940 331
------
28,934
------
SWEDEN - 1.9%
Assa Abloy AB Series B 63,269 1,165
Autoliv, Inc. 79,646 1,746
Electrolux AB Series B 13,000 164
Investor AB Class B 92,540 1,222
Mo och Domsjo AB Series B 15,400 393
Nordic Baltic Holding AB 617,500 4,635
Securitas AB Series B 40,857 871
Skandia Forsakrings AB 80,271 1,362
Skandinaviska Enskilda Banken Class A 78,489 927
Stora Enso Oyj Class R 42,999 441
Svenska Handelsbanken AB Class A 32,230 506
Tele1 Europe Holding AB (a) 12,968 100
Telefonaktiebolaget LM Ericsson AB Series B (a) 424,877 5,655
81 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- ------
Telefonaktiebolaget LM Ericsson Class B - ADR 21,200 294
Tornet Fastighets AB 25,600 341
Volvo AB Series B 16,200 250
------
20,072
------
SWITZERLAND - 5.0%
ABB, Ltd. 20,233 1,798
Baloise Holding, Ltd. 1,300 1,287
Barry Callebaut AG (Regd) 10,850 1,503
Bobst AG 450 568
Clariant AG (Regd) 11,352 3,461
Credit Suisse Group (Regd) 12,582 2,359
Forbo Holding AG 1,400 544
Holderbank Financiere Glarus AG (BR) 200 210
Julius Baer Holding, Ltd. Class B 862 4,268
Kuoni Reisen AG Series B 730 313
Nestle SA (Regd) 2,308 4,783
Novartis AG (Regd) 7,688 11,663
Richemont Series A 337 937
Roche Holdings Genusscheine AG 120 1,096
Schweiz Ruckversicher (Regd) 963 1,899
Serono SA Series B 950 855
SGS Holding (BR) 120 147
Sulzer AG (Regd) 1,640 1,059
Sulzer Medica AG (Regd) 3,271 828
Swatch Group (The) AG 745 986
Swisscom AG 3,376 857
UBS AG 40,602 5,624
Valora Holding AG (Regd) 800 163
Zurich Financial Services AG (a) 14,572 7,052
------
54,260
------
UNITED KINGDOM - 20.3%
3i Group PLC 57,288 1,301
Alliance & Leicester PLC 45,000 385
Alliance UniChem PLC 139,000 1,178
ARM Holdings PLC (a) 33,800 333
Associated British Foods PLC 236,720 1,340
AstraZeneca Group PLC 24,126 1,140
Avis Europe PLC 52,600 137
AWG PLC (a) 218,227 1,887
Bank of Scotland Governor & Co. PLC 61,033 569
Barclays PLC 129,686 3,711
Barratt Developments PLC 150,000 621
Bass PLC 283,107 2,771
BBA Group PLC 110,711 608
BG Group PLC 558,252 2,236
Billiton PLC 87,092 332
Blue Circle Industries PLC 440,700 2,692
BOC Group PLC 101,720 1,417
Bookham Technology PLC (a) 3,213 106
Boots Co. PLC 393,001 3,136
BP Amoco PLC 803,232 6,812
British Aerospace PLC (a) 989,056 5,618
British Airways PLC 707,000 3,160
British American Tobacco PLC 298,527 2,092
British Energy PLC 64,900 169
British Sky Broadcasting Group PLC (a) 43,468 628
British Telecom PLC 218,300 2,559
Brixton Estate PLC 100,000 353
Bunzl PLC 451,914 2,587
Cable & Wireless PLC 331,338 4,687
Cadbury Schweppes PLC 27,115 168
Canary Wharf Finance Group PLC 111,395 870
Capita Group PLC 119,460 910
Caradon PLC 140,000 385
Carphone Warehouse (The) PLC (a) 24,000 62
Celltech Group PLC (a) 21,837 434
Centrica PLC 333,500 1,147
CGNU PLC 274,387 3,671
CMG PLC 47,225 780
COLT Telecom Group PLC (a) 73,112 2,334
COLT Telecom Group PLC - ADR (a) 9,567 1,250
Computacenter PLC 37,483 218
Corus Group PLC 367,600 331
Debenhams PLC 175,000 543
Diageo PLC 771,628 7,283
Dimension Data Holdings PLC (a) 69,094 606
Dixons Group PLC 57,112 170
Elan Corp. PLC - ADR 37,860 1,966
Elementis PLC 200,000 212
Energis PLC (a) 106,500 911
Enterprise Oil PLC 416,632 3,295
Freeserve PLC (a) 126,600 302
Gallaher Group PLC 24,596 144
GKN PLC 229,600 2,632
Glaxo Wellcome PLC 320,510 9,226
Glynwed International PLC 38,800 102
Granada Compass PLC (a) 269,510 2,323
Great University Stores PLC 516,100 3,564
Halifax PLC 303,800 2,389
Hanson PLC 62,414 329
Hays PLC 58,202 318
HSBC Holdings PLC 581,913 8,243
Invesco PLC 165,187 3,691
Jazztel PLC 7,754 140
Johnson Matthey PLC 12,615 197
Ladbroke Group, Ltd. PLC 45,300 126
International Securities Fund 82
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- -------
LASMO PLC 495,000 1,052
Lattice Group PLC (a) 558,252 1,191
Legal & General Group PLC 166,316 414
Lloyds TSB Group PLC 372,881 3,798
Logica PLC 119,030 3,521
Marconi PLC 33,304 420
MFI Furniture Group PLC 70,117 56
Misys PLC 120,383 1,254
Morgan Crucible PLC 478,185 1,880
National Grid Group PLC 92,731 804
Next PLC 260,300 2,589
Northern Foods PLC 48,760 79
Nycomed Amersham PLC 65,210 584
Ocean Group PLC 7,760 133
Pearson PLC 113,681 3,050
Powell Duffryn PLC 55,000 475
PowerGen PLC 588,239 4,558
QXL.com PLC (a) 79,300 31
Railtrack Group PLC 203,704 3,151
Rank Group PLC 300,000 744
Reckitt Benckiser PLC 176,744 2,323
Reed International PLC 529,876 4,897
Reuters Group PLC 56,281 1,096
Rexam PLC 638,769 2,159
Rio Tinto Corp. PLC (Regd) 203,738 3,296
Royal & Sun Alliance Insurance Group PLC 935,121 6,655
Royal Bank of Scotland Group PLC 107,806 2,420
Safeway PLC 345,242 1,435
Scottish & Newcastle PLC 118,600 812
Scottish & Southern Energy PLC 133,858 1,113
ScottishPower PLC 325,532 2,444
SEMA Group PLC 9,100 115
Severn Trent PLC 17,167 183
Shell Transport & Trading Co. PLC 509,303 4,098
Shire Pharmaceuticals Group PLC (a) 12,500 254
Shire Pharmaceuticals Group PLC - ADR 8,603 541
Smith & Nephew PLC 413,181 1,697
Smith (David S.) Holdings PLC 85,000 187
SmithKline Beecham PLC 242,331 3,129
Somerfield PLC 470,912 526
SSL International PLC 72,700 841
Standard Chartered Bank Group PLC 22,189 320
Taylor Woodrow PLC 170,000 449
TeleWest Communications PLC (a) 339,581 562
Tesco Store Holdings PLC 321,100 1,224
Thistle Hotels PLC 286,666 482
TI Group PLC 44,875 242
Tomkins PLC 759,014 1,806
Trinity PLC 117,000 766
Unilever PLC 418,222 2,829
United Newspaper, Ltd. PLC 52,975 663
Vodafone Group PLC 4,553,123 18,944
Williams PLC 39,053 187
Wimpey (George), Ltd. PLC 160,000 348
Wolseley PLC 292,234 1,616
WPP Group PLC 41,395 556
Zeneca Group PLC 70,016 3,279
-------
220,115
-------
TOTAL COMMON STOCKS
(cost $930,134) 975,960
-------
PREFERRED STOCKS - 1.1%
AUSTRALIA - 0.0%
News Corp., Ltd. 74,050 664
-------
GERMANY - 1.1%
Dyckerhoff AG 22,228 353
Fresenius AG 4,100 1,012
Henkel KGAA 4,500 272
Hugo Boss AG 3,692 941
Krones AG 12,000 295
MAN AG 2,000 41
Marschollek, Lautenschlaeger und 4,165 564
Partner AG
Porsche AG 712 2,399
ProSieben Sat.1 Media AG 21,251 669
Systeme, Anwendungen, Produkte in 18,596 3,748
der Datenverarbeitung AG
Volkswagen AG 16,026 460
Wella AG 23,294 934
-------
11,688
-------
ITALY - 0.0%
Fiat SPA 3,530 53
-------
TOTAL PREFERRED STOCKS
(cost $10,334) 12,405
83 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ---------
SHORT-TERM INVESTMENTS - 7.6%
United States - 7.6%
Frank Russell Investment Company
Money Market Fund,
due on demand (b) 70,860 70,860
United States Treasury Bills (b)(c)(d)
5.925% due 12/21/00 5,000 4,959
5.960% due 12/21/00 6,000 5,950
---------
TOTAL SHORT-TERM INVESTMENTS
(cost $81,769) 81,769
---------
TOTAL INVESTMENTS - 98.8%
(identified cost $1,022,237) 1,070,134
OTHER ASSETS AND LIABILITIES,
NET - 1.2% 12,850
---------
NET ASSETS - 100.0% 1,082,984
=========
(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.
Abbreviations:
ADR - American Depositary Receipt
BR - Bearer
GDR - Global Depositary Receipt
Foreign Currency Abbreviations:
AUD - Australian dollar
CAD - Canadian dollar
CHF - Swiss franc
DKK - Danish krone
EUR - Euro dollar
GBP - British pound
HKD - Hong Kong dollar
JPY - Japanese yen
NOK - Norwegian krona
NZD - New Zealand dollar
SEK - Swedish dollar
SGD - Singapore dollar
USD - United States dollar
See accompanying notes which are an integral part of the financial statements.
International Securities Fund 84
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
FUTURES CONTRACTS CONTRACTS (000)
----------- --------------
CAC-40 Index (France)
expiration date 12/00 179 $ 67
DAX Index (Germany)
expiration date 12/00 50 11
EUR STOXX 50 Index (EMU)
expiration date 12/00 385 (395)
FTSE-100 Index (UK)
expiration date 12/00 259 (236)
TOPIX Index (Japan)
expiration date 12/00 185 (1,530)
-------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $(2,083)
=======
MARKET
% OF VALUE
INDUSTRY DIVERSIFICATION NET (000)
(UNAUDITED) ASSETS $
------ ---------
Auto & Transportation 5.0% 54,366
Basic Industries 0.4 4,376
Consumer Discretionary 9.1 98,862
Consumer Staples 6.6 71,796
Energy 7.1 76,650
Financial Services 19.4 209,896
Health Care 7.7 83,346
Materials & Processing 8.9 96,143
Miscellaneous 2.6 28,141
Producer Durables 6.6 71,442
Technology 6.1 66,211
Utilities 11.7 127,136
Short-Term Investments 7.6 81,769
----- ---------
Total Investments 98.8 1,070,134
Other Assets and Liabilities, net 1.2 12,850
----- ---------
Net Assets 100.0% 1,082,984
===== =========
MARKET
% OF VALUE
GEOGRAPHIC DIVERSIFICATION NET (000)
(UNAUDITED) ASSETS $
------ ---------
Europe 43.1% 467,141
Japan 17.9 194,388
Latin America 0.1 639
Middle East 0.3 3,370
Pacific Basin 5.4 58,516
United Kingdom 20.3 220,115
Other 4.1 44,196
Short-Term Investments 7.6 81,769
----- ---------
Total Investments 98.8 1,070,134
Other Assets and Liabilities, net 1.2 12,850
----- ---------
NET ASSETS 100.0% 1,082,984
===== =========
See accompanying notes which are an integral part of the financial statements.
85 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION
DELIVER FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
------------------- ---------------- -------------- -------------
USD 29,349 EUR 34,000 12/07/00 $ (446)
USD 866 EUR 1,000 12/07/00 (16)
USD 861 EUR 1,000 12/07/00 (11)
USD 5,961 EUR 7,000 12/07/00 (11)
USD 878 EUR 1,000 12/07/00 (28)
USD 1,687 EUR 2,000 12/07/00 13
USD 4,750 EUR 5,500 12/07/00 (75)
USD 21,235 GBP 15,100 12/07/00 690
USD 2,822 GBP 2,000 12/07/00 81
USD 724 GBP 500 12/07/00 2
USD 4,245 GBP 3,000 12/07/00 111
USD 2,172 GBP 1,500 12/07/00 6
USD 879 JPY 94,900 11/10/00 (10)
USD 805 JPY 87,308 11/10/00 (5)
USD 12,580 JPY 1,325,000 12/07/00 (354)
USD 944 JPY 100,000 12/07/00 (22)
USD 2,837 JPY 300,000 12/07/00 (69)
USD 924 JPY 100,000 12/07/00 (1)
USD 9,013 JPY 950,000 12/07/00 (248)
USD 1,243 JPY 132,710 12/07/00 (19)
EUR 47 USD 68 11/07/00 28
EUR 362 USD 307 11/07/00 --
EUR 7,000 USD 6,190 12/07/00 240
EUR 1,000 USD 872 12/07/00 22
EUR 1,000 USD 864 12/07/00 14
EUR 2,000 USD 1,703 12/07/00 3
EUR 2,600 USD 2,187 12/07/00 (23)
GBP 172 USD 250 11/06/00 --
GBP 21 USD 31 11/06/00 --
GBP 34 USD 49 11/06/00 --
GBP 434 USD 628 11/06/00 (1)
GBP 334 USD 484 11/06/00 (1)
GBP 2,000 USD 2,924 12/07/00 21
GBP 1,000 USD 1,454 12/07/00 2
GBP 2,000 USD 2,943 12/07/00 39
JPY 150,000 USD 1,413 12/07/00 29
JPY 100,000 USD 935 12/07/00 13
JPY 100,000 USD 937 12/07/00 14
JPY 132,710 USD 1,237 12/07/00
12
-------------
$ 0
=============
FOREIGN CURRENCY EXCHANGE SPOT CONTRACTS
USD 31 AUD 59 11/01/00 $ --
USD 160 AUD 304 11/01/00 (3)
USD 31 CAD 47 11/02/00 --
USD 310 CAD 472 11/02/00 (1)
USD 157 CHF 281 11/01/00 --
USD 16 DKK 140 11/01/00 --
USD 524 EUR 624 11/01/00 5
USD 169 EUR 200 11/01/00 1
USD 455 EUR 540 11/01/00 4
USD 594 EUR 699 11/01/00 (1)
USD 71 EUR 83 11/01/00 --
USD 65 EUR 76 11/01/00 --
USD 210 EUR 249 11/02/00 1
USD 218 EUR 256 11/02/00 1
USD 212 EUR 250 11/02/00 1
USD 19 EUR 23 11/03/00 --
USD 347 GBP 241 11/01/00 3
USD 104 GBP 72 11/01/00 1
USD 68 GBP 48 11/01/00 2
USD 213 GBP 150 11/01/00 5
USD 67 GBP 46 11/02/00 --
USD 321 GBP 221 11/02/00 (1)
USD 325 GBP 223 11/03/00 (2)
USD 81 HKD 634 11/01/00 --
USD 266 JPY 28,968 11/01/00 (1)
USD 401 JPY 43,445 11/01/00 (3)
USD 479 JPY 51,912 11/01/00 (3)
USD 519 JPY 56,338 11/01/00 (3)
USD 66 JPY 7,195 11/01/00 --
USD 395 JPY 43,034 11/01/00 (1)
USD 67 JPY 7,298 11/01/00 (1)
USD 350 JPY 38,138 11/02/00 (1)
USD 144 JPY 15,679 11/02/00 --
USD 93 JPY 10,181 11/02/00 --
USD 319 JPY 34,708 11/02/00 (1)
USD 65 JPY 7,093 11/02/00 --
USD 97 JPY 10,538 11/02/00 --
USD 10 NOK 94 11/01/00 --
USD 3 NZD 6 11/03/00 --
USD 110 SEK 1,105 11/01/00 --
USD 131 SEK 1,304 11/02/00 --
USD 72 SEK 723 11/02/00 --
AUD 5 USD 3 11/10/00 --
EUR 620 USD 521 11/01/00 (5)
EUR 1,662 USD 1,399 11/02/00 (11)
EUR 283 USD 241 11/02/00 --
See accompanying notes which are an integral part of the financial statements.
International Securities Fund 86
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
FOREIGN CURRENCY EXCHANGE SPOT CONTRACTS
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION
DELIVER FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
------------------- ---------------- -------------- -------------
EUR 5 USD 4 11/02/00 --
EUR 1,098 USD 923 11/02/00 (9)
EUR 1 USD 1 11/03/00 --
EUR 1,275 USD 1,072 11/03/00 (11)
GBP 146 USD 213 11/01/00 1
GBP 5 USD 8 11/01/00 --
GBP 320 USD 454 11/01/00 (10)
GBP 26 USD 37 11/02/00 --
GBP 326 USD 474 11/02/00 1
GBP 278 USD 399 11/02/00 (5)
GBP 219 USD 317 11/03/00 --
GBP 392 USD 568 11/03/00 --
JPY 348 SGD 6 11/01/00 --
JPY 4,895 USD 45 11/01/00 --
JPY 18,757 USD 172 11/01/00 --
JPY 36,543 USD 335 11/01/00 --
JPY 7,645 USD 70 11/02/00 --
JPY 20,235 USD 186 11/02/00 --
JPY 8,813 USD 81 11/02/00 --
-------------
$ (47)
=============
See accompanying notes which are an integral part of the financial statements.
87 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) October 31, 2000
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $1,022,237) ............................................ $ 1,070,134
Foreign currency holdings (identified cost $11,831) ........................................... 11,773
Unrealized appreciation on forward foreign currency exchange contracts ........................ 1,340
Unrealized appreciation on foreign currency exchange spot contracts ........................... 26
Receivables:
Dividends and interest ..................................................................... 1,714
Investments sold ........................................................................... 17,455
Fund shares sold ........................................................................... 1,960
Foreign taxes recoverable .................................................................. 1,116
From Advisor ............................................................................... 64
Daily variation margin on futures contracts ................................................ 730
Prepaid expenses .............................................................................. 6
-----------
Total assets ............................................................................ 1,106,318
LIABILITIES
Payables:
Investments purchased ................................................... $ 18,334
Fund shares redeemed .................................................... 2,178
Accrued fees to affiliates .............................................. 1,044
Other accrued expenses .................................................. 365
Unrealized depreciation on forward foreign currency exchange contracts ..... 1,340
Unrealized depreciation on foreign currency exchange spot contracts ........ 73
-----------
Total liabilities ....................................................................... 23,334
-----------
NET ASSETS .................................................................................... $ 1,082,984
===========
NET ASSETS CONSIST OF:
Accumulated distributions in excess of net investment income .................................. $ (2,959)
Accumulated net realized gain (loss) .......................................................... 105,891
Unrealized appreciation (depreciation) on:
Investments ................................................................................ 47,897
Futures contracts .......................................................................... (2,083)
Foreign currency-related transactions ...................................................... (248)
Shares of beneficial interest ................................................................. 171
Additional paid-in capital .................................................................... 934,315
-----------
NET ASSETS .................................................................................... $ 1,082,984
===========
Net Asset Value, offering and redemption price per share:
Class C ($11,848,475 divided by 189,691 shares of $.01 par value
shares of beneficial interest outstanding) .............................................. $ 62.46
===========
Class E ($9,964,109 divided by 157,568 shares of $.01 par value
shares of beneficial interest outstanding) .............................................. $ 63.24
===========
Class S ($1,061,171,199 divided by 16,709,333 shares of $.01 par value
shares of beneficial interest outstanding) .............................................. $ 63.51
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
International Securities Fund 88
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Dividends ........................................... $ 22,413 $ 20,257
Dividends from Money Market Fund .................... 4,184 2,478
Interest ............................................ 303 489
Less foreign taxes withheld ......................... (2,284) (2,303)
--------- ---------
Total investment income .......................... 24,616 20,921
--------- ---------
EXPENSES
Advisory fees ....................................... 8,440 8,947
Administrative fees ................................. 474 500
Custodian fees ...................................... 1,896 2,093
Distribution fees - Class C ......................... 64 23
Transfer agent fees ................................. 1,018 1,126
Professional fees ................................... 131 70
Registration fees ................................... 115 140
Shareholder servicing fees - Class C ................ 21 8
Shareholder servicing fees - Class E ................ 14 13
Trustees' fees ...................................... 18 9
Miscellaneous ....................................... 148 129
--------- ---------
Expenses before reductions .......................... 12,339 13,058
Expense reductions .................................. (10) --
--------- ---------
Expenses, net .................................... 12,329 13,058
--------- ---------
Net investment income .................................. 12,287 7,863
--------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
Investments ......................................... 67,549 122,855
Futures contracts ................................... (535) 15,568
Foreign currency-related transactions ............... (16,156) (9,722)
--------- ---------
50,858 128,701
--------- ---------
Net change in unrealized appreciation (depreciation) on:
Investments ......................................... (204,506) 134,124
Futures contracts ................................... (7,525) 4,278
Foreign currency-related transactions ............... (253) 2,297
--------- ---------
(212,284) 140,699
--------- ---------
Net realized and unrealized gain (loss) ................ (161,426) 269,400
--------- ---------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS .. $(149,139) $ 277,263
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
89 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income .................................................. $ 12,287 $ 7,863 $ 10,770
Net realized gain (loss) ............................................... 50,858 128,701 22,759
Net change in unrealized appreciation (depreciation) ................... (212,284) 140,699 73,736
---------------- ----------------- -----------------
Net increase (decrease) in net assets from operations ............... (149,139) 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 ............................................................. (299) (335) --
Class E ............................................................. (200) (248) (5)
Class S ............................................................. (38,617) (51,360) (3,176)
---------------- ----------------- -----------------
Net decrease in net assets from distributions .................... (39,116) (59,212) (12,998)
---------------- ----------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions .......... 124,670 (16,692) 9,906
---------------- ----------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ............................... (63,585) 201,359 104,173
NET ASSETS
Beginning of period .................................................... 1,146,569 945,210 841,037
---------------- ----------------- -----------------
End of period (including accumulated distributions in excess of
net investment income of $2,959, $3,812 and $2,960, respectively) ... $ 1,082,984 $ 1,146,569 $ 945,210
================ ================ =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
International Securities Fund 90
<PAGE>
INTERNATIONAL SECURITIES FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
2000* 1999**
---------- ----------
NET ASSET VALUE, BEGINNING OF PERIOD .................. $ 74.51 $ 60.66
---------- ----------
INCOME FROM OPERATIONS
Net investment income (loss)(a) .................... .17 (.32)
Net realized and unrealized gain (loss) ............ (9.68) 17.92
---------- ----------
Total income from operations .................... (9.51) 17.60
---------- ----------
DISTRIBUTIONS
From net investment income ......................... -- (.17)
From net realized gain ............................. (2.54) (3.58)
---------- ----------
Total distributions ............................. (2.54) (3.75)
---------- ----------
NET ASSET VALUE, END OF PERIOD ........................ $ 62.46 $ 74.51
========== ==========
TOTAL RETURN (%)(b) ................................... (13.13) 29.39
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ........... 11,849 7,522
Ratios to average net assets (%)(c):
Operating expenses, net ......................... 2.29 2.30
Operating expenses, gross ....................... 2.30 2.30
Net investment income (loss) .................... .30 (.51)
Portfolio turnover rate (%) ........................ 101.84 120.52
* For the ten months ended October 31, 2000.
** 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) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
91 International Securities Fund
<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,
----------------------------------------------------
2000* 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ................. $ 74.95 $ 60.68 $ 54.64 $ 58.47 $ 58.56
---------- ---------- ---------- ---------- ----------
INCOME FROM OPERATIONS
Net investment income (loss)(a) ................... .57 .40 .28 .35 (.03)
Net realized and unrealized gain (loss) ........... (9.74) 17.72 6.53 (.64) 1.68
---------- ---------- ---------- ---------- ----------
Total income from operations ................... (9.17) 18.12 6.81 (.29) 1.65
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS
From net investment income ........................ -- (.27) (.57) (.29) (.43)
From net realized gain ............................ (2.54) (3.58) (.20) (3.25) (1.31)
---------- ---------- ---------- ---------- ----------
Total distributions ............................ (2.54) (3.85) (.77) (3.54) (1.74)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD ....................... $ 63.24 $ 74.95 $ 60.68 $ 54.64 $ 58.47
========== ========== ========== ========== ==========
TOTAL RETURN (%)(b) .................................. (12.58) 30.21 12.53 (.41) 2.86
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) .......... 9,964 5,552 4,431 1,271 623
Ratios to average net assets (%)(c):
Operating expenses, net ........................ 1.54 1.55 1.64 1.96 2.00
Operating expenses, gross ...................... 1.55 1.55 1.64 1.96 2.00
Net investment income (loss) ................... 1.00 .61 .49 .19 (.61)
Portfolio turnover rate (%) ....................... 101.84 120.52 68.46 73.54 42.43
</TABLE>
* For the ten months ended October 31, 2000.
** 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.
International Securities Fund 92
<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,
-----------------------------------------------------------------
2000* 1999 1998 1997 1996 1995
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........ $ 75.11 $ 60.86 $ 54.69 $ 58.48 $ 56.61 $ 53.96
----------- ---------- ---------- ---------- ---------- ----------
INCOME FROM OPERATIONS
Net investment income (a) ................ .76 .51 .69 .56 .53 .56
Net realized and unrealized gain (loss) (9.82) 17.82 6.32 (.46) 3.72 4.89
----------- ---------- ---------- ---------- ---------- ----------
Total income from operations .......... (9.06) 18.33 7.01 .10 4.25 5.45
----------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS
From net investment income ............... -- (.50) (.64) (.64) (.48) (1.11)
From net realized gain ................... (2.54) (3.58) (.20) (3.25) (1.90) (1.69)
----------- ---------- ---------- ---------- ---------- ----------
Total distributions ................... (2.54) (4.08) (.84) (3.89) (2.38) (2.80)
----------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD .............. $ 63.51 $ 75.11 $ 60.86 $ 54.69 $ 58.48 $ 56.61
=========== ========== ========== ========== ========== ==========
TOTAL RETURN (%)(b) ......................... (12.40) 30.52 12.90 .26 7.63 10.20
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands).. 1,061,171 1,133,495 940,779 839,767 743,615 623,389
Ratios to average net assets (%)(c):
Operating expenses, net ............... 1.29 1.30 1.22 1.26 1.30 1.30
Operating expenses, gross ............. 1.30 1.30 1.22 1.26 1.31 1.31
Net investment income ................. 1.31 .79 1.15 .91 .91 .97
Portfolio turnover rate (%) .............. 101.84 120.52 68.46 73.54 42.43 42.96
</TABLE>
* For the ten months ended October 31, 2000.
(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.
93 International Securities Fund
<PAGE>
EMERGING MARKETS FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
DATES EMERGING MARKETS - EXTENDED BARINGS IFC INVESTABLE
CLASS S++ EM++++ COMPOSITE **
Inception* $10,000 $10,000 $10,000
1993 $12,150 $13,821 $14,489
1994 $14,884 $19,196 $18,464
1995 $12,176 $15,357 $14,120
1996 $13,492 $16,905 $15,602
1997 $13,448 $15,776 $14,035
1998 $9,450 $11,844 $9,984
1999 $11,371 $16,894 $14,297
2000 $10,645 $15,107 $12,851
Total $107,615 $134,901 $123,842
YEARLY PERIODS ENDED OCTOBER 31
<TABLE>
<CAPTION>
EMERGING MARKETS FUND - CLASS S IFC INVESTABLE COMPOSITE INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
--------------------------------------------------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $ 9,362 (6.38)% 1 Year $ 8,988 (10.12)%
5 Years $ 8,743 (2.65)%(S) 5 Years $ 9,101 (1.87)%(S)
Inception $10,645 0.81%(S) Inception $12,851 3.29%(S)
EMERGING MARKETS FUND - CLASS E(S)(S) EXTENDED BARINGS EMERGING MARKETS INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
--------------------------------------------------- ---------------------------------------------------
1 Year $ 9,338 (6.62)% 1 Year $ 8,942 (10.58)%
5 Years $ 8,707 (2.73)%(S) 5 Years $ 9,838 (0.33)%(S)
Inception $10,601 0.76%(S) Inception $15,107 5.47%(S)
EMERGING MARKETS FUND - CLASS C (S)(S)(S)
PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN
--------------- --------------- ---------------
1 Year $ 9,257 (7.43)%
5 Years $ 8,589 (2.99)%(S)
Inception $10,457 0.58%(S)
</TABLE>
95 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the ten months ended October 31, 2000, the Emerging Markets Fund Class S,
Class E, and Class C shares lost 25.79%, 25.90%, and 26.51%, respectively, as
compared to a 27.28% loss for the IFC Investable Composite Index.
Global weakness in the Technology sector plagued both the markets and the Fund
for most of the ten months, resulting in lower absolute returns. However,
benchmark-relative performance was favorable for the period.
PORTFOLIO HIGHLIGHTS
Like their counterparts in developed countries, emerging markets technology and
telecommunications issues made a strong showing during the first part of the
year, but were also responsible for a sizable portion of the downturn that
followed. Weakness in the Technology sector began to appear as early as March,
and the difficulties continued through the remainder of the year. By the final
three months of the period, overall market weaknesses were attributed to fears
of a global economic slowdown, high oil prices and a downturn in both sentiment
and prospects for technology companies. Investors also registered their
impatience with the progress of economic reforms and political instability in
some countries, including Indonesia, Turkey, Korea, and Taiwan. This resulted in
a bias towards 'safe' markets that didn't experience these inherent problems.
During a difficult environment for emerging markets, the Fund generally paced,
and sometimes outperformed, its benchmark. This economic climate also helped
illustrate the benefits of diversification. As the investing climate changed
during the year, so did manager successes. The Fund's growth managers held their
edge during the first part of the year, but their performance declined with the
overall downturn in the technology and telecommunications sectors. Late-period
strong performance from the Fund's managers employing valuation as part of their
investment selection process, notably Sanford Bernstein, helped offset the
technology bets made previously by the more aggressive market-oriented managers.
TOP TEN EQUITY HOLDINGS
(as a percent of Total Investments) October 31, 2000
Telefonos de Mexico SA Series L - ADR (Mexico) 4.1%
Samsung Electronics (South Korea) 1.6
China Telecom (Hong Kong), Ltd. (Hong Kong) 1.6
United Microelectronics Corp. - ADR (Taiwan) 1.4
Yapi ve Kredi Bankasi AS (Turkey) 1.2
SK Telecom Co., Ltd. (South Korea) 1.2
Taiwan Semiconductor Manufacturing Co., Ltd. -
ADR (Taiwan) 1.1
Genesis India Investment Co. (India) 1.1
Petroleo Brasileiro SA - ADR (Brazil) 1.1
Credit Bank (Regd) (Greece) 1.1
PORTFOLIO CHARACTERISTICS
October 31, 2000
Current P/E Ratio 14.59x
Portfolio Price/Book Ratio 1.31x
Market Capitalization - $-Weighted Average 8.3 Bil
Number of Holdings 411
MONEY MANAGERS STYLES
Foreign & Colonial Emerging Markets Limited Market-Oriented
Genesis Asset Managers Limited Market-Oriented
Nicholas Applegate Capital Management Growth
Sanford C. Bernstein & Co., Inc. Value
Schroders Investment Management North
America, Ltd. Market-Oriented
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* 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.
(S) Annualized.
(S)(S) 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.
(S)(S)(S) 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.
Investments in emerging market countries involve exposure to economic structures
that are generally less diverse and mature, and to political systems which can
be expected to have less stability than those of more developed countries.
Securities may be less liquid and more volatile than US or longer established
international markets. Please see the Prospectus for further details.
Emerging Markets Fund 96
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ------
COMMON STOCKS - 86.7%
Argentina - 1.4%
Banco Frances del Rio la Plata - ADR 21,600 473
Central Costanera SA Class B 437,100 656
Central Puerto SA Class B 38,210 41
Inversiones y Representaciones SA Class B 209,137 439
PC Holdings SA Class B 1,008,581 1,452
Perez Companc SA - ADR (a) 9,292 134
Quilmes Industrial (Regd) (a) 63,500 508
Siderca SAIC Class A 350,000 760
Telecom Argentina SA Class B - ADR 43,300 744
--------
5,207
--------
AUSTRALIA - 0.1%
Orogen Minerals, Ltd. 545,000 421
--------
BRAZIL - 2.8%
Brasil Telecom Participacoes SA - ADR 24,200 1,311
Centrais Eletricas Brasileiras SA 23,508,997 417
Companhia Siderurgica Nacional 8,215,000 228
Companhia Vale do Rio Doce 37,500 864
Copel Parana Energ 20,000,000 140
Embraer Aircraft Corp. - ADR 4,300 124
Embratel Participacoes SA 27,962,000 356
Globo Cabo SA - ADR 34,700 373
Petroleo Brasileiro SA - Petrobras 7,500 218
Petroleo Brasileiro SA - Petrobras - ADR (a) 142,110 4,132
Petroleo Brasileiro SA - Petrobras - ADR 12,400 329
Tele Centro Sul Participacoes SA 39,439,000 310
Tele Norte Leste Participacoes SA 61,448,264 1,011
Ultrapar Participacoes SA - ADR 18,400 185
Votorantim Celulose e Papel SA - ADR 8,025 138
--------
10,136
--------
CHILE - 2.7%
Antofagasta Holdings PLC 239,636 1,419
Banco de A. Edwards Series A - ADR (a) 9,944 119
Banco Santander Chile Series A - ADR 2,800 38
BBV Banco BHIF - ADR 33,600 477
Compania de Telecomunicaciones de Chile SA - ADR 71,469 1,090
Distribucion y Servicio D&S SA - ADR 94,400 1,687
Embotelladora Andina SA Series A - ADR 51,100 613
Embotelladora Andina SA Series B - ADR 58,000 555
Embotelladora Arica SA - ADR (a) 79,300 286
Enersis SA - ADR 31,533 560
Gener SA - ADR 139,100 1,685
Laboratorio Chile SA - ADR 30,000 486
Quinenco SA 116,200 973
--------
9,988
--------
CHINA - 4.9%
Beijing Yanhua Petrochemical Co., Ltd. Class H 4,450,000 439
China Eastern Airlines Corp., Ltd. (a) 950,000 138
China Merchants Holdings International Co., Ltd. 298,000 206
China Petroleum and Chemical Corp. - ADR (a) 28,700 565
China Petroleum and Chemical Corp. Series H New (a) 5,264,000 1,033
China Resources Enterprise, Ltd. 183,000 208
China Shipping Development Co., Ltd. Class H (a) 560,000 85
China Southern Airlines (a) 1,402,000 345
China Telecom (Hong Kong), Ltd. (a) 895,500 5,742
Cosco Pacific, Ltd. 520,000 383
Guangdong Kelon Electrical Holdings Co., Ltd. Class H 1,360,000 255
Huaneng Power International, Inc. Class H 874,000 342
Huaneng Power International, Inc. Series N - ADR 4,000 61
Jiangsu Expressway Co., Ltd. Class H 7,530,000 1,284
Jilin Chemical Industrial Company, Ltd. Class H 1,800,000 99
New World China Land, Ltd. (a) 1,036,500 332
PetroChina Co., Ltd. Class H 14,016,000 2,947
Shanghai Petrochemical Co., Ltd. Class H 7,030,000 712
Shenzhen Expressway Co., Ltd. Class H 4,800,000 554
Yanzhou Coal Mining Co., Ltd. Series H 6,970,000 1,877
Yizheng Chemical Fibre Class H 480,000 88
Zhejiang Expressway Co., Ltd. Series H 1,700,000 275
--------
17,970
--------
CROATIA - 0.3%
Pliva d.d. - GDR 94,300 981
--------
97 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- ------
CZECH REPUBLIC - 0.5%
Ceske Energeticke Zavody AS (a) 109,200 266
Ceske Radiokomunikace - GDR 18,400 690
Cesky Telecom AS (a) 8,280 109
Czechoslovakian Value Fund (a)(c) 1,800 0
Komercni Banka AS (a) 7,100 150
Tabak AS 3,500 487
------
1,702
------
ECUADOR - 0.1%
La Cemento Nacional - GDR 700 25
(144A)(a)
La Cemento National - GDR (a) 4,800 168
------
193
------
EGYPT - 0.8%
Al-Ahram Beverages Co. S.A.E. - GDR (144A)(a) 3,280 41
Al-Ahram Beverages Co. S.A.E. - GDR (a) 42,900 543
Commercial International Bank 18,900 167
Commercial International Bank (Regd.) - GDR 18,700 154
Eastern Co. Tobacco & Cigarettes 5,900 88
Egypt International Pharmaceutical Industries Co. 1,000 38
Egyptian Mobile Phone Network (a) 48,118 952
Misr International Bank 4,000 41
Orascom Construction (a) 42,125 405
Orascom Telecom (a) 30,250 377
Oriental Weavers Co. 5,500 47
Suez Cement Co. (Regd) - GDR 8,198 73
------
2,926
------
GREECE - 3.6%
Alpha Bank A.E. (Regd) 111,355 4,114
Aluminum Co. of Greece SA 29,300 1,064
Bank of Piraues 16,680 256
Commercial Bank of Greece 12,460 557
Cosmote SA (a) 22,000 165
EFG Eurobank 8,100 220
Hellenic Bottling Co. SA 17,100 234
Hellenic Telecommunication Organization SA - ADR 49,800 436
Hellenic Telecommunication Organization SA - GDR 130,774 2,284
Intracom SA 39,200 1,021
National Bank of Greece SA 61,812 2,349
Panafon Hellenic Telecom SA 55,800 464
STET Hellas Telecommunications SA - ADR (a) 6,500 92
------
13,256
------
HONG KONG - 1.6%
Chen Hsong Holdings, Ltd. 1,296,000 160
China Mobile, Ltd. - ADR (a) 5,200 159
China Unicom, Ltd. (a) 1,251,000 2,510
China Unicom, Ltd. - ADR (a) 45,600 935
Legend Holdings, Ltd. 626,000 530
New World Infrastructure, Ltd. (a) 845,100 769
Shanghai Industrial Holdings, Ltd. 366,000 690
TCL International Holdings, Ltd. (a) 1,062,000 174
------
5,927
------
HUNGARY - 1.6%
BorsodChem - GDR 17,700 487
Egis Gyogyszergyar 12,700 536
Gedeon Richter, Ltd. - GDR 22,946 1,101
Magyar Tavkozlesi Rt (Regd) 195,476 869
Magyar Tavkozlesi Rt - ADR 62,032 1,459
Mol Magyar Olaj-Es Gazipari Rt - GDR 69,266 1,049
OTP Bank Rt 7,534 349
------
5,850
------
INDIA - 3.2%
Bajaj Auto, Ltd. - GDR 71,000 419
BSES, Ltd. (a) 22,800 253
BSES, Ltd. - GDR 27,000 300
Foreign & Colonial Emerging Markets Indian 321,089 1,728
Investment Co. (a)
Genesis India Investment Co. (a) 511,800 4,130
Hindalco Industries, Ltd. - GDR 40,000 594
ICICI Bank, Ltd. - ADR 32,000 302
ICICI Bank, Ltd. - ADR (a) 22,000 105
Indo Gulf Fertilisers & Chemicals - GDR 70,000 60
Indo Gulf Fertilizers & Chemicals - GDR (a) 349,000 297
Infosys Technologies, Ltd. - ADR 4,220 580
ITC, Ltd. - GDR 14,900 264
Larsen & Toubro, Ltd. - GDR 11,750 72
Mahanagar Telephone Nigam, Ltd. - GDR 19,900 115
Perusahaan Persero Telekom - ADR 32,616 171
Ranbaxy Laboratories, Ltd. - GDR 6,000 102
Reliance Industries, Ltd. - GDR 103,200 1,342
SSI, Ltd. Series S - GDR (a) 28,700 136
State Bank of India - GDR 14,100 93
Videsh Sanchar Nigam, Ltd. - ADR 79,257 585
------
11,648
------
Emerging Markets Fund 98
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ------
INDONESIA - 1.5%
Gulf Indonesia Resources, Ltd. (a) 68,900 749
Indah Kiat Pulp & Paper (Alien Market) (a) 1,162,000 127
PT Bank Central Asia (a) 3,700,000 652
PT Bank Pan Indonesia (a) 2,014,000 53
PT Gudang Garam 369,000 396
PT Hanjaya Mandala Sampoerna Tbk 415,500 488
PT Indofood Sukses Makmur Tbk (a) 3,407,500 282
PT Indosat (Persero) Tbk 475,000 340
PT Indosat (Persero) Tbk - ADR 15,800 112
PT Matahari Putra Prima Tbk 11,000,000 676
PT Ramayana Lestari Sentosa 1,564,000 753
PT Telekomunikasi Indonesia Series B 2,039,000 523
Semen Gresik 642,000 442
------
5,593
------
ISRAEL - 4.4%
AudioCodes, Ltd. (a) 13,400 530
Bank Hapoalim, Ltd. 410,900 1,039
Bank Leumi Le-Israel 686,736 1,349
Bezeq Israeli Telecommunication Corp., Ltd. 137,523 688
Blue Square Israel, Ltd. - ADR 13,720 127
Check Point Software Technologies, Ltd. (a) 23,000 3,643
Clal Industries, Ltd. 18,400 178
ECI Telecom, Ltd. 7,823 184
IDB Holding Corp., Ltd. 5,464 176
Israel Chemicals, Ltd. 881,724 860
Israel Discount Bank Series A 300,000 302
Leumi Insurance Holdings 182,550 147
M-Systems Flash Disk Pioneers, Ltd. (a) 21,400 530
Makhteshim-Agan Industries, Ltd. 210,000 417
Nice Systems, Ltd. - ADR (a) 7,230 336
Orbotech, Ltd. (a) 32,188 1,701
Partner Communications Co., Ltd. - ADR (a) 7,800 47
Property & Building Corp., Ltd. 1,066 79
Scitex Corp., Ltd. (a) 19,000 195
Supersol, Ltd. 110,000 363
Tecnomatix Technologies, Ltd. (a) 41,500 246
Teva Pharmaceutical Industries, Ltd. - ADR 48,695 2,879
------
16,016
------
JORDAN - 0.2%
Arab Bank Group 3,010 672
------
LUXEMBOURG - 0.2%
Millicom International Cellular SA (a) 28,300 858
------
858
------
MALAYSIA - 4.4%
AMMB Holdings Berhad 137,000 154
Berjaya Sports 124,000 163
Commerce Asset-Holding Berhad 538,000 1,366
Genting Berhad 248,000 633
Golden Hope Plantation 519,000 497
IJM Corp. Berhad 570,000 537
Malakoff Berhad 251,000 618
Malayan Banking Berhad 542,000 2,168
Malaysian Pacific 109,000 617
Oriental Holdings Berhad 651,200 788
Perusahaan Otomobil Nasional Berhad 124,000 136
Petronas Gas Berhad 168,000 305
Public Bank Berhad 878,000 758
Public Bank Berhad (Alien Market) 494,000 424
Resorts World Berhad 249,000 436
RHB Capital Berhad 202,000 163
Road Builder (M) Holdings Berhad 440,000 463
Rothmans of Pall Mall (Malaysia) Berhad 106,200 971
Sime Darby Berhad 340,000 426
Tan Chong Motor Holdings 600,000 194
Technical Resource Industries Berhad 164,000 133
Telekom Malaysia Berhad 320,000 985
Tenaga Nasional Berhad 809,000 2,619
UMW Holdings Berhad 115,000 145
United Engineers (Malaysia) Berhad 295,000 419
YTL Corp. Berhad 182,000 191
------
16,309
------
MEXICO - 14.2%
Alfa SA de CV Class A 59,000 118
Carso Global Telecom Series A1 (a) 798,100 1,782
Cemex SA de CV 354,678 1,491
Cemex SA de CV - ADR 61,101 1,291
Cemex SA de CV 2000 Warrants (a) 1,737 3
Cemex SA de CV 2002 Warrants (a) 20,000 9
Cifra SA de CV Class C (a) 418,400 954
Cifra SA de CV Series V (a) 833,500 2,005
Coca-Cola Femsa SA - ADR 88,600 1,700
Compania Cervecerias Unidas SA - ADR 62,100 1,199
Controladora Comercial Mexicana SA de CV Units 1,102,000 1,222
Corporacion Interamericana de Entretenimiento SA 565,400 2,554
Series B (a)
Cydsa SA Series A 277,000 146
Empresa Nacional de Electricidad SA - ADR 5,993 63
99 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- ------
Fomento Economico Mexicano SA de CV 151,500 577
Fomento Economico Mexicano SA de CV Series B - ADR 55,350 2,114
Grupo Aeroportuario del Sureste SA de CV - ADR (a) 5,300 79
Grupo Elektra, SA de CV 210,000 217
Grupo Financiero Banamex Accival SA de CV (Banacci) 1,561,449 2,426
Class O (a)
Grupo Financiero Banamex Accival Series O (a) 298,000 464
Grupo Financiero Bancomer SA de CV Series O (a) 1,520,800 942
Grupo Financiero Banorte SA de CV (a) 345,000 515
Grupo Financiero Inbursa SA de CV Class O (a) 172,000 656
Grupo Industrial Durango SA - ADR (a) 17,250 119
Grupo Iusacell SA de CV - ADR New (a) 107,500 1,398
Grupo Modelo SA de CV Series C 336,500 897
Grupo Television SA de CV - GDR (a) 65,595 3,550
Hylsamex SA de CV Series B (a) 230,000 225
Kimberly-Clark, Mexico Class A 598,500 1,530
Nuevo Grupo Mexico SA Series B (a) 151,100 502
Organizacion Soriana SA de CV Series B 103,000 323
Panamerican Beverages, Inc. Class A 126,100 2,081
Seguros Comercial America Series B (a) 87,000 223
Telefonos de Mexico SA Series L - ADR 276,774 14,928
Tubos de Acero de Mexico SA 28,300 430
TV Azteca SA de CV 222,000 171
TV Azteca SA de CV - ADR 275,000 3,438
------
52,342
------
PANAMA - 0.2%
Banco Latinoamericano de Exportaciones SA Class E 27,300 684
------
PERU - 0.4%
Compania de Minas Buenaventura SA Series B 21,800 141
Compania de Minas Buenaventura SA Series B - ADR 52,400 674
Credicorp, Ltd. 41,650 305
Enrique Ferreyros (a) 236,970 40
Minsur SA 87,794 95
Southern Peru Copper Corp. 7,300 102
------
1,357
------
PHILIPPINES - 1.1%
Ayala Corp. 160,800 19
Equitable PCI Bank 620,200 697
First Philippine Holdings Corp. 270,000 111
Manila Electric Co. Class B 1,787,240 1,468
Metropolitan Bank & Trust Co. 205,970 672
Philippine Long Distance Telephone Co. 16,100 244
Philippine Long Distance Telephone Co. - ADR 14,027 217
San Miguel Corp. Class B 67,500 65
Security Bank Corp. 350,000 152
SM Prime Holdings 3,960,000 310
Universal Robina 3,213,000 229
------
4,184
------
POLAND - 0.6%
Agora SA - GDR (a) 1,957 36
Bank Polska Kasa Opieki Grupa Pekao SA (a) 5,970 60
BRE Bank SA 1,843 42
Elektrim Spolka Akcyjna SA (a) 50,053 397
KGHM Polska Miedz SA - GDR 31,300 336
Polski Koncern Naftowy SA - GDR 82,831 638
Powszechny Bank Kredytowy - GDR 6,900 121
Prokom Software SA 9,700 382
Telekomunikacja Polska SA Class S - GDR 54,598 270
Telekomunikacja Polska SA Series A - GDR 6,140 30
WBK 8,246 37
------
2,349
------
Emerging Markets Fund 100
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- ------
RUSSIA - 2.4%
Lukoil Oil Co. - ADR 64,516 3,445
Mobile Telesystems - ADR (a) 28,989 801
OAO Gazprom - ADR (a) 14,000 113
Rostelecom - ADR 7,200 63
Surgutneftegaz SP - ADR (a) 266,545 3,425
Unified Energy Systems - ADR 12,287 155
Unified Energy Systems - GDR 25,138 318
Vimpel-Communications - ADR (a) 22,100 431
------
8,751
------
SINGAPORE - 0.9%
Asia Pulp & Paper Co, - ADR Ltd. (a) 79,000 138
Datacraft Asia, Ltd. (a) 288,600 1,977
Golden Agri-Resources, Ltd. (a) 814,300 146
Total Access Communication, Ltd. (a) 381,000 1,212
------
3,473
------
SOUTH AFRICA - 6.7%
AECI, Ltd. 474,000 699
African Bank Investments, Ltd. (a) 204,900 162
Amalgamated Banks of South Africa 356,567 1,212
Amalgamated Beverage Industries, Ltd. 30,971 160
Anglo American Platinum Corp., Ltd. 56,200 2,192
Anglo American PLC 9,800 533
AngloGold, Ltd. 27,910 794
Ashanti Goldfields, Ltd. - ADR (a) 147,178 414
Barlow, Ltd. 53,137 278
Billiton PLC 91,600 354
De Beers Centenary Linked Units 69,654 1,916
Fedsure Holdings, Ltd. 43,400 126
FirstRand, Ltd. 968,100 871
Forbes Group, Ltd. 489,368 1,039
Impala Platinum Holdings, Ltd. 45,500 1,950
Imperial Holdings, Ltd. (a) 67,188 470
Iscor, Ltd. (a) 74,960 119
Ixchange Technology Holdings, Ltd. (a) 67,000 58
JD Group, Ltd. 66,800 336
Johnnies Industrial Corp., Ltd. 9,600 109
Liberty Life Association of Africa 51,121 390
Lonmin PLC 33,376 412
Metro Cash and Carry, Ltd. 423,659 178
Nampak, Ltd. 162,000 236
Nasionale Pers Beperk Class N 18,000 134
Nedcor, Ltd. 39,927 750
PepsiCo International, Inc. (a) 1,190 5
Primedia, Ltd. 494,700 364
Profurn, Ltd. 367,290 180
Rembrandt Group, Ltd. 124,000 344
Remgro, Ltd. (a) 124,000 758
Sanlam, Ltd. 1,215,000 1,261
Sappi, Ltd. 180,900 1,237
Sasol 315,163 2,411
South African Breweries PLC 199,000 1,198
Standard Bank Investment Corporation, Ltd. 136,260 477
Tongaat-Hulett Group, Ltd. 103,000 432
Truworths International, Ltd. 552 1
------
24,560
------
SOUTH KOREA - 10.5%
Daelim Industrial Co. 150,000 525
Doosan Corp. (a) 27,372 455
H&CB - GDR (a) 8,000 190
Hanil Cement Manufacturing Co., Ltd. 54,500 652
Hankuk Glass Industries, Inc. 63,000 803
Hite Brewery Co., Ltd. 9,600 430
Housing & Commercial Bank, Korea 42,360 1,019
Hyundai Electronics Industries Co. (a) 66,540 409
Hyundai Motor Co., Ltd. 37,428 428
Kookmin Bank 281,388 3,216
Kookmin Bank - GDR (a) 4,500 52
Korea Electric Power Corp. 174,638 3,900
Korea Electric Power Corp. - ADR 22,648 276
Korea Telecom Corp. 63,930 3,764
Korea Telecom Corp. - ADR 43,679 1,611
Korea Telecom Freetel (a) 18,100 638
Korea Tobacco & Ginseng Corp. 49,900 792
Korean Telecom Corp. 2001 Warrants (a) 48,980 680
LG Chemical, Ltd. 69,780 687
Locus Corp. (a) 429 10
Lotte Confectionery Co. 5,200 425
Pohang Iron & Steel Co., Ltd. 8,271 481
S1 Corp. 69,881 725
Samsung Display Devices Co. 13,062 509
Samsung Electronics (a) 46,310 5,801
Samsung Electronics - GDR (144A) 23,019 748
Samsung Electronics - GDR 4,700 345
Samsung Securities Co., Ltd. 37,528 680
Seoul City Gas Co., Ltd. 17,000 260
Shin Han Bank 118,530 1,188
SK Telecom Co., Ltd. (a) 20,280 4,321
Ssangyong Oil Refining Co. 84,640 2,106
Tae Young Corp. 12,139 266
------
38,392
------
101 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ------
SRI LANKA - 0.1%
Development Finance Corp. of Ceylon 97,221 123
John Keells Holdings, Ltd. 195,906 107
------
230
------
TAIWAN - 7.1%
Acer Communications & Multimedia, Inc. - GDR (a) 26,400 165
Acer, Inc. - GDR 408,978 1,677
Advanced Semiconductor Engineering, Inc. - ADR (a) 40,765 247
ASE Test, Ltd. (a) 18,000 277
Asia Cement Corp. - GDR 220,860 1,126
Asustek Computer, Inc. - GDR (Regd) 157,432 850
China Steel Corp. - GDR (a) 120,376 1,360
Compal Electronics, Inc. - GDR 140,084 1,093
Evergreen Marine Corp. - GDR (a) 66,573 416
Far Eastern Textile, Ltd. - GDR 147,864 1,168
Foreign & Colonial Emerging Markets Taiwan
Investment Co. (a) 165,200 1,703
Fubon Insurance Co., Ltd. - GDR 98,918 579
Hon Hai Precision Industry Co., Ltd. - GDR 63,852 730
Macronix International Co., Ltd. - ADR 31,499 445
Phoenixtec Power Co., Ltd. 155,100 130
Powerchip Semiconductor Corp. - GDR (a) 71,422 464
Siliconware Precision Industries Co. - ADR (a) 123,283 485
Synnex Technology International Corp. (Regd) - GDR 26,228 214
Taiwan Semiconductor Manufacturing Co., Ltd. 411,500 1,249
Taiwan Semiconductor Manufacturing Co., Ltd. 2001
Warrants (a) 457,000 1,451
Taiwan Semiconductor Manufacturing Co., Ltd. - ADR
(a) 184,574 4,186
United Microelectronics Corp. - ADR (a) 440,500 5,011
Winbond Electronics Corp. - GDR 69 1
Winbond Electronics Corp. - GDR (a) 103,013 984
Winbond Electronics Corp. 2001 Warrants (a) 36,000 35
------
26,046
------
THAILAND - 0.9%
Advanced Information Services (Alien Market) (a) 25,000 205
Bangkok Bank PLC (Alien Market) (a) 95,000 81
Bangkok Expressway PLC (a) 57,000 7
Bangkok Expressway PLC (Alien Market) (a) 58,000 8
BEC World PLC (Alien Market) 8,000 37
Delta Electronics (Thailand) PLC 27,300 125
Electricity Generating PLC (Alien Market) 5,000 5
Jasmine International PLC (Alien Market) (a) 700,000 137
National Petrochemical PLC (Alien Market) 880,000 590
PTT Exploration and Production PLC (a) 406,600 970
Siam Cement Co. (Alien Market) (a) 4,000 38
Siam City Cement PLC (Alien Market) (a) 145,000 343
Siam Makro PLC (Alien Market) 3,000 4
TelecomAsia (Alien Market) (a) 223,000 134
Thai Farmers Bank (Alien Market) (a) 1,200,900 621
------
3,305
------
TURKEY - 5.7%
Akbank TAS 58,138,900 375
Anadolu Efes Biracilik ve Malt Sanayii AS (a) 35,010,261 2,052
Arcelik AS 20,235,230 652
Brisa Bridgestone Sabanci Lastik San. Ve Tic AS 12,650,000 667
Dogan Sirketler Grubu Holding AS (a) 20,041,000 345
Dogan Yayin Holding AS (a) 16,201,663 211
Eregli Demir ve Celik Fabrikalari TAS (a) 2,000,000 63
Haci Omer Sabanci Holding AS 30,641,952 310
Haci Omer Sabanci Holding AS - ADR 252,472 619
Hurriyet Gazetecilik ve Matbaacilik AS (a) 35,739,900 429
Koc Holding AS 25,681,580 1,637
Migros 16,240,800 2,237
Sasa Suni ve Sentetik Elyaf Sanayii Anonim Sirketi (a) 5,000,000 145
Tupras 17,100,000 777
Turkcell Iletisim Hizmetleri AS (a) 25,153,500 1,106
Emerging Markets Fund 102
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
----------- --------
Turkcell Iletisim Hizmetleri AS - ADR (a) 58,900 644
Turkiye Garanti Bankasi AS (a) 197,106,380 2,022
Turkiye Is Bankasi 106,938,328 2,036
Vestel Elektronik Sanayi ve Ticaret AS (a) 1,627,720 334
Yapi ve Kredi Bankasi AS 510,117,560 4,410
--------
21,071
--------
UNITED KINGDOM - 1.4%
Dimension Data Holdings PLC (a) 407,857 3,514
Genesis Smaller Companies Fund (a) 131,135 1,677
--------
5,191
--------
UNITED STATES - 0.0%
Tricom SA - ADR (a) 7,800 105
--------
105
--------
VENEZUELA - 0.1%
Mavesa SA - ADR 127,875 535
--------
535
--------
ZIMBABWE - 0.1%
Delta Corp. 1,010,343 220
--------
TOTAL COMMON STOCKS
(cost $358,563) 318,448
--------
PREFERRED STOCKS - 8.2%
Argentina - 0.2%
Quilmes Industrial Quinsa Societe - ADR 74,800 617
--------
BRAZIL - 7.1%
Aracruz Celulose SA - ADR 29,000 435
Banco Bradesco SA 232,949,984 1,483
Banco Itau SA 29,389,880 2,286
Companhia Brasileira de Distribuicao Grupo Pao de
Acucar - ADR 77,900 2,775
Companhia de Bebidas das Americas - ADR 26,700 602
Companhia de Bebidas das Americas 5,375,000 1,199
Companhia Paranaense de Energia - Copel Class B 107,147,000 973
Companhia Paranaense de Energia - Copel Class B -
ADR 31,800 288
Companhia Vale Do Rio Doce Series A 78,200 1,802
Coteminas (Cia Tec) 5,160,171 381
Duratex SA (BR) 3,500,000 105
Eletropaulo Metropolitana - Electricidade de
Sao Paulo SA 4,210,000 236
Embratel Participacoes SA 14,941,500 240
Embratel Participacoes SA - ADR 94,534 1,530
Gerdau SA 2,000,000 21
Itausa Investimentos Itau SA 849,700 721
Marcopolo SA 471,400 568
Petroleo Brasileiro SA 66,220 1,756
Tele Celular Sul Participacoes SA 82,013,296 204
Tele Centro Sul Participacoes SA 33,594,600 364
Tele Nordeste Celular Participacoes SA - ADR 4,900 202
Tele Norte Leste Participacoes SA 36,111,753 788
Tele Norte Leste Participacoes SA - ADR 78,862 1,745
Telecomunicacoes do Parana SA 33,150,000 255
Telemig Celular Participacoes SA 85,821,000 224
Telemig Celular SA Class C 35,333 1
Telesp Celular Participacoes SA 154,274,690 1,825
Telesp Celular Participacoes SA - ADR 10,600 335
Uniao de Bancos Brasileiros SA (Units) 6,109,000 309
Uniao de Bancos Brasileiros SA - GDR 27,400 692
Usinas Siderurgicas de Minas Gerais SA 194,140 997
Votorantim Celulose e Papel SA 29,200,000 976
--------
26,318
--------
RUSSIA - 0.4%
Lukoil Holding Oil Co. - ADR 66,750 1,468
--------
SOUTH KOREA - 0.1%
Samsung Electronic, Ltd. 5,700 292
--------
THAILAND - 0.4%
Siam Commercial Bank 3,669,500 1,522
--------
TOTAL PREFERRED STOCKS
(cost $28,126) 30,217
--------
103 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- -------
LONG-TERM INVESTMENTS - 0.0%
BRAZIL - 0.0%
Companhia Vale do Rio Doce (a)(c)
Variable Rate due 12/12/09 47,267 0
TAIWAN - 0.0%
Far Eastern Textile, Ltd. (conv.)(a)
Zero Coupon due 01/26/05 65,000 64
-------
TOTAL LONG-TERM INVESTMENTS
(cost $65) 64
-------
SHORT-TERM INVESTMENTS - 5.1%
UNITED STATES - 5.1%
Frank Russell Investment Company Money Market Fund,
due on demand (b) 18,919 18,919
-------
TOTAL SHORT-TERM INVESTMENTS
(cost $18,919) 18,919
-------
TOTAL INVESTMENTS - 100.0%
(identified cost $405,673) 367,648
OTHER ASSETS AND LIABILITIES,
NET - 0.0% 169
-------
NET ASSETS - 100.0% 367,817
=======
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
(c) This security has been valued by the Security Valuation Committee,
delegated by 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
BR - Bearer
GDR - Global Depositary Receipt
144A - Represents private placement security for qualified buyers according to
rule 144A of the Securities Act of 1933.
Foreign Currency Abbreviations:
BRL - Brazilian real
CZK - Czech koruna
GRD - Greek drachma
THB - Thailand baht
TRL - Turkish lira
USD - United States dollar
ZAR - South African rand
FOREIGN CURRENCY EXCHANGE SPOT CONTRACTS
SOLD CONTRACTS BOUGHT IN UNREALIZED
TO DELIVER EXCHANGE APPRECIATION
OUT FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
-------------- -------------- ---------- --------------
USD 54 CZK 2,252 11/02/00 $ 1
USD 266 GRD 107,668 11/02/00 3
USD 3 THB 126 11/02/00 --
USD 20 TRL 13,724,981 11/01/00 --
USD 83 ZAR 629 11/01/00 --
BRL 95 USD 49 11/01/00 (1)
--------------
$ 3
==============
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 104
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
% OF VALUE
INDUSTRY DIVERSIFICATION NET (000)
(Unaudited) ASSETS $
------ -------
Auro & Transportation 1.4% 5,231
Basic Industries 0.8 2,880
Consumer Discretionary 7.6 27,941
Consumer Staples 7.3 26,721
Energy 8.6 31,702
Financial Services 19.7 72,523
Health Care 1.7 6,123
Materials & Processing 9.3 34,301
Miscellaneous 2.8 10,076
Producer Durables 3.7 13,475
Technology 10.1 37,067
Utilities 21.9 80,625
Long-Term Investments 64
Short-Term Investments 5.1 18,919
------ -------
Total Investments 100.0 367,648
Other Assets and Liabilities, net 169
------ -------
Net Assets 100.0% 367,817
====== =======
GEOGRAPHIC DIVERSIFICATION
(Unaudited)
Europe 8.2% 30,187
Latin America 29.2 107,377
Pacific Basin 33.7 123,434
Middle East 14.3 52,562
Africa 6.7 24,781
Other 2.8 10,324
Long-Term Investments 64
Short-Term Investments 5.1 18,919
------ -------
Total Investments 100.0 367,648
Other Assets and Liabilities, net 169
------ -------
Net Assets 100.0% 367,817
====== =======
See accompanying notes which are an integral part of the financial statements.
105 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) October 31, 2000
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments at market (identified cost $405,673) .......................................... $ 367,648
Foreign currency holdings (identified cost $2,503) ........................................ 2,465
Unrealized appreciation on foreign currency exchange spot contracts ........................ 4
Receivables:
Dividends and interest .................................................................... 596
Investments sold .......................................................................... 1,027
Fund shares sold .......................................................................... 1,759
From Advisor .............................................................................. 7
Prepaid expenses ........................................................................... 3
---------
Total assets ............................................................................ 373,509
LIABILITIES
Payables:
Investments purchased ......................................................... $ 4,448
Fund shares redeemed .......................................................... 420
Accrued fees to affiliates .................................................... 602
Other accrued expenses ........................................................ 221
Unrealized depreciation on foreign currency exchange spot contracts ............ 1
---------
Total liabilities ....................................................................... 5,692
---------
NET ASSETS ................................................................................. $ 367,817
=========
NET ASSETS CONSIST OF:
Accumulated distributions in excess of net investment income ............................... $ (1,218)
Accumulated net realized gain (loss) ...................................................... (67,155)
Unrealized appreciation (depreciation) on:
Investments ............................................................................... (38,025)
Foreign currency-related transactions ..................................................... (64)
Shares of beneficial interest .............................................................. 398
Additional paid-in capital ................................................................. 473,881
---------
NET ASSETS ................................................................................. $ 367,817
=========
NET ASSET VALUE, offering and redemption price per share:
Class C ($2,228,248 divided by 243,603 shares of $.01 par
value shares of beneficial interest outstanding) ......................................... $ 9.15
=========
Class E ($6,387,933 divided by 691,003 shares of $.01 par
value shares of beneficial interest outstanding) ......................................... $ 9.24
=========
Class S ($359,201,208 divided by 38,831,175 shares of $.01 par
value shares of beneficial interest outstanding) ......................................... $ 9.25
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 106
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Dividends ............................................. $ 6,456 $ 7,347
Dividends from Money Market Fund ...................... 1,113 894
Less foreign taxes withheld ........................... (622) (607)
---------------- -----------------
Total investment income ............................. 6,947 7,634
EXPENSES
Advisory fees ......................................... 4,095 4,046
Administrative fees ................................... 179 177
Custodian fees ........................................ 1,164 1,137
Distribution fees - Class C ........................... 13 4
Transfer agent fees ................................... 1,133 1,161
Professional fees ..................................... 94 48
Registration fees ..................................... 72 95
Shareholder servicing fees - Class C .................. 5 1
Shareholder servicing fees - Class E .................. 13 8
Trustees' fees ........................................ 13 6
Miscellaneous ......................................... 106 72
---------------- -----------------
Expenses before reductions ............................ 6,887 6,755
Expense reductions .................................... (31) --
---------------- -----------------
Expenses, net ....................................... 6,856 6,755
---------------- -----------------
Net investment income .................................. 91 879
---------------- -----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ........................................... 7,586 (2,140)
Foreign currency-related transactions ................. (698) (2,085)
---------------- -----------------
6,888 (4,225)
---------------- -----------------
Net change in unrealized appreciation
(depreciation) on:
Investments ........................................... (130,365) 153,342
Foreign currency-related transactions ................. (53) (7)
---------------- -----------------
(130,418) 153,335
---------------- -----------------
Net realized and unrealized gain (loss) ................ (123,530) 149,110
---------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS .. $ (123,439) $ 149,989
================ =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
107 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income ........................................... $ 91 $ 879 $ 4,050
Net realized gain (loss) ....................................... 6,888 (4,225) (57,573)
Net change in unrealized appreciation (depreciation) ........... (130,418) 153,335 (57,066)
---------------- ----------------- -----------------
Net increase (decrease) in net assets from operations ......... (123,439) 149,989 (110,589)
---------------- ----------------- -----------------
DISTRIBUTIONS
From net investment income
Class C ....................................................... (3) -- --
Class E ....................................................... (22) (16) --
Class S ....................................................... (2,029) (3,161) (2,472)
---------------- ----------------- -----------------
Net decrease in net assets from distributions ............... (2,054) (3,177) (2,472)
---------------- ----------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ... 54,571 (2,461) 74,397
---------------- ----------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ...................... (70,922) 144,351 (38,664)
NET ASSETS
Beginning of period ............................................. 438,739 294,388 333,052
---------------- ----------------- -----------------
End of period (including accumulated distributions in excess of
net investment income of $1,218 and $2,814 and undistributed
net investment income of $495, respectively) ................. $ 367,817 $ 438,739 $ 294,388
================ ================= =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 108
<PAGE>
EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
2000* 1999**
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ................... $ 12.47 $ 8.07
------------ ------------
INCOME FROM OPERATIONS
Net investment income (loss)(a) ...................... (.10) (.12)
Net realized and unrealized gain (loss) .............. (3.20) 4.57
------------ ------------
Total income from operations ........................ (3.30) 4.45
------------ ------------
DISTRIBUTIONS
From net investment income ............................ (.02) (.05)
------------ ------------
NET ASSET VALUE, END OF PERIOD ......................... $ 9.15 $ 12.47
============ ============
TOTAL RETURN (%)(b) ................................... (26.51) 55.43
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ............. 2,228 1,631
Ratios to average net assets (%)(c):
Operating expenses, net ............................. 2.91 2.91
Operating expenses, gross ........................... 2.92 2.91
Net investment income (loss) ....................... (1.02) (1.23)
Portfolio turnover rate (%) .......................... 73.11 94.85
</TABLE>
* For the ten months ended October 31, 2000.
** 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.
109 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
2000* 1999 1998**
----------- ----------- ---------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ......... $ 12.51 $ 8.48 $ 7.37
----------- ----------- ---------
INCOME FROM OPERATIONS
Net investment income (loss)(a) ............ (.03) (.04) (.02)
Net realized and unrealized gain (loss) .... (3.20) 4.14 1.13
----------- ----------- ---------
Total income from operations .............. (3.23) 4.10 1.11
----------- ----------- ---------
DISTRIBUTIONS
From net investment income .................. (.04) (.07) --
----------- ----------- ---------
NET ASSET VALUE, END OF PERIOD ............... $ 9.24 $ 12.51 $ 8.48
============ ============ =========
TOTAL RETURN (%)(b) ......................... (25.90) 48.71 15.06
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ... 6,388 6,314 39
Ratios to average net assets (%)(c)(d):
Operating expenses, net ................... 2.16 2.17 --
Operating expenses, gross ................. 2.17 2.17 --
Net investment income (loss) ............. (.30) (.40) --
Portfolio turnover rate (%) ................ 73.11 94.85 59.35
</TABLE>
* For the ten months ended October 31, 2000.
** 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 the 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 110
<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,
-----------------------------------------------------
2000* 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD .............. $ 12.52 $ 8.48 $ 11.79 $ 12.35 $ 11.16 $ 12.25
-------- -------- -------- -------- -------- ---------
INCOME FROM OPERATIONS
Net investment income (loss)(a)** ............... -- .03 .12 .14 .10 .11
Net realized and unrealized gain (loss) ......... (3.21) 4.10 (3.35) (.56) 1.26 (1.12)
-------- -------- -------- -------- -------- ---------
Total income from operations ................... (3.21) 4.13 (3.23) (.42) 1.36 (1.01)
-------- -------- -------- -------- -------- ---------
DISTRIBUTIONS
From net investment income ....................... (.06) (.09) (.08) (.14) (.17) (.05)
From net realized gain .......................... -- -- -- -- -- (.03)
-------- -------- -------- -------- -------- ---------
Total distributions ............................ (.06) (.09) (.08) (.14) (.17) (.08)
-------- -------- -------- -------- -------- ---------
NET ASSET VALUE, END OF PERIOD .................... $ 9.25 $ 12.52 $ 8.48 $ 11.79 $ 12.35 $ 11.16
======== ======== ======== ======== ======== =========
TOTAL RETURN (%)(b)(c) ............................ (25.79) 49.03 (27.57) (3.45) 12.26 (8.21)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ........ 359,201 430,794 294,349 333,052 271,490 172,673
Ratios to average net assets (%)(c)(d):
Operating expenses, net ........................ 1.91 1.91 1.75 1.64 1.71 1.75
Operating expenses, gross ...................... 1.92 1.91 1.75 1.64 1.72 1.80
Net investment income (loss) .................. (.02) .26 1.20 .87 .77 .88
Portfolio turnover rate (%) ..................... 73.11 94.85 59.35 50.60 34.62 71.16
</TABLE>
* For the ten months ended October 31, 2000.
** Less than $.01 per share for the period ended October 31, 2000.
(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) For periods prior to April 1, 1995, Fund performance, operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net of
investment management fees but gross of any investment services fees. See
Note 4.
(d) The ratios for the periods less than one year are annualized.
111 Emerging Markets Fund
<PAGE>
REAL ESTATE SECURITIES FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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 three managers with distinct approaches to investing in real estate equity
securities.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
REAL ESTATE SECURITIES
DATES - CLASS S NAREIT EQUITY REIT **
Inception* $ 10,000 $ 10,000
1991 $ 13,520 $ 13,583
1992 $ 16,281 $ 15,943
1993 $ 21,302 $ 21,007
1994 $ 20,115 $ 19,751
1995 $ 22,412 $ 22,162
1996 $ 28,049 $ 27,638
1997 $ 36,931 $ 36,696
1998 $ 32,604 $ 32,002
1999 $ 31,167 $ 29,749
2000 $ 38,960 $ 35,188
Total $271,342 $263,718
YEARLY PERIODS ENDED OCTOBER 31
<TABLE>
<CAPTION>
REAL ESTATE SECURITIES FUND - CLASS S REAL ESTATE SECURITIES FUND - CLASS C++++
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
-------------------------------------------------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $ 12,500 25.00% 1 Year $ 12,373 23.73%
5 Years $ 17,384 11.68%(S) 5 Years $ 16,879 11.02%(S)
10 Years $ 38,960 14.56%(S) 10 Years $ 37,828 14.22%(S)
REAL ESTATE SECURITIES FUND - CLASS E++ NAREIT EQUITY REIT INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
-------------------------------------------------------- -------------------------------------------------------
1 Year $ 12,462 24.62% 1 Year $ 11,828 18.28%
5 Years $ 17,094 11.30%(S) 5 Years $ 15,878 9.69%(S)
10 Years $ 38,309 14.36%(S) 10 Years $ 35,188 13.41%(S)
</TABLE>
113 Real Estate Securities Fund
<PAGE>
REAL ESTATE SECURITIES FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the ten months ended October 31, 2000, the Real Estate Securities Fund's
Class S, Class E and Class C shares gained 18.53%, 18.24%, and 17.54%,
respectively. This compared favorably to the 16.55% return for the NAREIT Equity
REIT Index. The stock selection strategies employed by the Fund's managers
proved highly effective in capturing opportunities over the period.
The Fund's performance for the ten month period reinforced the reasons for
including real estate in a diversified portfolio. As the equities market faced
increasing challenges, particularly from the Technology sector, real estate
showed improving strength as investors looked for an asset class to hedge
against the volatility in the stock market.
PORTFOLIO HIGHLIGHTS
During the period, fundamentals improved and REIT prices generally rose,
however, sector leadership roles changed from quarter to quarter. The Fund and
the Index enjoyed a particularly strong first quarter, with Lodging/Resorts
posting the strongest sector gains. Lagging the group during that period was
Health Care, Manufactured Housing, and free-standing Retail. However, during the
second quarter the Office and Multi-Family sectors took the lead, while Health
Care, along with the Office and Residential sectors turned in strong results in
the final months of the period.
Notably, cash flows into REITS have reversed course this year. Although still
tepid, approximately $400 million in new capital flowed into REITS during 2000,
after approximately $900 million exited REITS during 1999, a particularly poor
performing year for real estate investors.
The Real Estate Securities Fund's manager lineup was expanded in March with the
addition of Security Capital Global Capital Management Group. This manager
focuses on companies with the ability to generate strong net cash flows, with
effective underlying management strategies, financial flexibility, and sources
of growth. The addition of Security Capital resulted in a change in the
allocation of the Fund's assets. Security Capital's target allocation is 25%
while Cohen and Steers Capital Management's new target allocation is 45%, down
from 70%. AEW Capital Management's 30% allocation remained unchanged.
TOP TEN EQUITY HOLDINGS
(as a percent of Total Investments) October 31, 2000
Equity Office Properties Trust 7.4%
Avalonbay Communities, Inc. 5.0
Starwood Hotels & Resorts Worldwide, Inc. 4.8
Apartment Investment & Management Co. Class A 4.4
Equity Residential Properties Trust 4.4
Boston Properties, Inc. 4.4
Spieker Properties, Inc. 4.3
Vornado Realty Trust 4.2
Arden Realty Group, Inc. 3.3
Mack-Cali Realty Corp. 3.1
PORTFOLIO CHARACTERISTICS
October 31, 2000
Current P/E Ratio 15.6x
Portfolio Price/Book Ratio 1.48x
Market Capitalization - $ - Weighted Average 3.02 Bil
Number of Holdings 59
MONEY MANAGERS
AEW Capital Management, L.P.
Cohen & Steers Capital Management, Inc.
Security Capital Global
Capital Management Group Incorporated
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* Real Estate Securities Fund Class S assumes initial investment on November
1, 1990.
** 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.
++ 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.
(S) 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 114
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF NET ASSETS
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- -------
COMMON STOCKS (B) - 96.5%
Apartment - 26.3%
Amli Residential Properties Trust 203,600 4,708
Apartment Investment & Management Co. Class A 670,215 30,620
Archstone Communities Trust 440,724 10,385
Avalonbay Communities, Inc. 753,130 34,597
Brookfield Properties Corp. 970,200 14,856
Camden Property Trust 185,429 5,308
Equity Residential Properties Trust 646,688 30,435
Essex Property Trust, Inc. 237,500 12,350
Post Properties, Inc. 316,146 11,045
Smith (Charles E.) Residential Realty, Inc. 434,750 19,129
Summit Properties, Inc. 133,600 3,206
Sun Communities, Inc. 73,600 2,236
United Dominion Realty Trust, Inc. 40,800 428
-------
179,303
-------
HEALTH CARE - 4.4%
Health Care Property Investors, Inc. 493,300 14,491
Manor Care, Inc. (a) 301,300 5,028
Nationwide Health Properties, Inc. 718,200 10,728
-------
30,247
-------
HOTELS/LEISURE - 6.8%
Hospitality Properties Trust 212,600 4,584
Host Marriott Corp. 510,400 5,423
MeriStar Hospitality Corp. 182,900 3,498
Starwood Hotels & Resorts Worldwide, Inc. 1,115,600 33,050
-------
46,555
-------
LEASING - 0.3%
Franchise Finance Corp. of America 93,000 1,889
-------
OFFICE/INDUSTRIAL - 40.5%
AMB Property Corp. 585,900 13,769
Arden Realty Group, Inc. 947,850 22,748
Boston Properties, Inc. 750,150 30,381
Cabot Industrial Trust 89,400 1,687
CarrAmerica Realty Corp. 145,200 4,292
Cousins Properties, Inc. 119,600 3,110
Crescent Operating, Inc. (a) 26,300 24
Crescent Real Estate Equities, Inc. 419,900 8,450
Duke-Weeks Realty Corp. 336,819 7,978
Equity Office Properties Trust 1,707,387 51,435
First Industrial Realty Trust, Inc. 99,500 3,072
Frontline Capital Group (a) 269,100 3,835
Highwoods Properties, Inc. 253,400 5,480
Kilroy Realty Corp. 182,100 4,746
Liberty Property Trust 457,400 12,093
Mack-Cali Realty Corp. 795,100 21,567
Pacific Gulf Properties, Inc. 117,000 3,108
Prentiss Properties Trust 544,000 13,804
ProLogis Trust 862,118 18,104
Reckson Associates Realty Corp. 440,600 9,969
SL Green Realty Corp. 222,400 5,963
Spieker Properties, Inc. 531,000 29,404
Trizec Hahn Corp. 92,600 1,384
-------
276,403
-------
OUTLET CENTERS - 0.5%
Chelsea GCA Realty, Inc. 104,900 3,383
-------
REGIONAL MALLS - 6.9%
General Growth Properties, Inc. 673,500 19,868
Macerich Co. (The) 265,200 5,205
Rouse Co. (The) 239,100 5,903
Simon Property Group, Inc. 540,450 12,059
Taubman Centers, Inc. 37,100 406
Urban Shopping Centers, Inc. 81,600 3,912
-------
47,353
-------
SELF STORAGE - 2.5%
Public Storage, Inc. 676,056 15,211
Shurgard Storage Centers, Inc. Class A 79,800 1,810
-------
17,021
-------
SHOPPING CENTER - 8.3%
Federal Realty Investment Trust 443,800 8,543
Kimco Realty Corp. 323,900 13,037
Pan Pacific Retail Properties, Inc. 61,400 1,255
Philips International Realty Corp. 79,600 1,323
Regency Realty Corp. 144,400 3,249
Vornado Realty Trust 831,100 28,933
-------
56,340
-------
TOTAL COMMON STOCKS
(cost $586,028) 658,494
-------
115 Real Estate Securities Fund
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- --------
SHORT-TERM INVESTMENTS - 4.9%
Frank Russell Investment Company Money Market
Fund, due on demand (c) 33,152 33,152
--------
TOTAL SHORT-TERM INVESTMENTS
(cost $33,152) 33,152
--------
TOTAL INVESTMENTS - 101.4%
(identified cost $619,180) 691,646
OTHER ASSETS AND LIABILITIES,
NET - (1.4%) (9,630)
--------
NET ASSETS - 100.0% 682,016
========
(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.
Host Marriott Corp.
Manor Care, Inc.
Rouse Co. (The)
Starwood Hotels & Resorts Worldwide, Inc.
Trizek 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 116
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) October 31, 2000
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments at market (identified cost $619,180) ................. $ 691,646
Receivables:
Dividends ........................................................ 599
Investments sold ................................................. 2,146
Fund shares sold ................................................. 783
Prepaid expenses .................................................. 6
---------
Total assets ................................................... 695,180
LIABILITIES
Payables:
Investments purchased ........................... $ 11,681
Fund shares redeemed ............................ 672
Accrued fees to affiliates ...................... 728
Other accrued expenses .......................... 83
---------
Total liabilities .............................................. 13,164
---------
NET ASSETS ........................................................ $ 682,016
=========
NET ASSETS CONSIST OF:
Accumulated distributions in excess of net investment income ...... $ (570)
Accumulated net realized gain (loss) ............................. (32,902)
Unrealized appreciation (depreciation) on investments ............. 72,466
Shares of beneficial interest ..................................... 260
Additional paid-in capital ........................................ 642,762
---------
NET ASSETS ........................................................ $ 682,016
=========
NET ASSET VALUE, offering and redemption price per share:
Class C ($3,393,235 divided by 130,878 shares of $.01 par
value shares of beneficial interest outstanding) ................ $ 25.93
=========
Class E ($9,093,863 divided by 348,879 shares of $.01 par
value shares of beneficial interest outstanding) ................ $ 26.07
=========
Class S ($669,528,433 divided by 25,532,481 shares of $.01 par
value shares of beneficial interest outstanding) ................ $ 26.22
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
117 Real Estate Securities Fund
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
------------------ -------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends ............................................................. $ 32,522 $ 38,576
Dividends from Money Market Fund ...................................... 1,479 1,751
Interest .............................................................. -- 2
--------- ---------
Total investment income ............................................. 34,001 40,329
--------- ---------
EXPENSES
Advisory fees ......................................................... 4,399 4,886
Administrative fees ................................................... 276 308
Custodian fees ........................................................ 224 250
Distribution fees - Class C ........................................... 16 6
Transfer agent fees ................................................... 1,252 1,339
Professional fees ..................................................... 62 28
Registration fees ..................................................... 56 123
Shareholder servicing fees - Class C .................................. 5 2
Shareholder servicing fees - Class E .................................. 17 11
Trustees' fees ........................................................ 14 7
Miscellaneous ......................................................... 103 71
--------- ---------
Expense before reductions .............................................. 6,424 7,031
Expense reductions ..................................................... (4) --
--------- ---------
Expenses, net ....................................................... 6,420 7,031
--------- ---------
Net investment income .................................................. 27,581 33,298
--------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investments ................................ (9,932) (22,242)
Net change in unrealized appreciation (depreciation) on investments .... 94,886 (10,653)
--------- ---------
Net realized and unrealized gain (loss) ............................... 84,954 (32,895)
--------- ---------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS .................. $ 112,535 $ 403
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Real Estate Securities Fund 118
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income ........................................... $ 27,581 $ 33,298 $ 30,253
Net realized gain (loss) ....................................... (9,932) (22,242) (1,281)
Net change in unrealized appreciation (depreciation) ........... 94,886 (10,653) (137,901)
--------- --------- ---------
Net increase (decrease) in net assets from operations ......... 112,535 403 (108,929)
--------- --------- ---------
DISTRIBUTIONS
From net investment income
Class C ....................................................... (78) (67) --
Class E ....................................................... (266) (358) (26)
Class S ....................................................... (21,539) (42,467) (26,915)
From net realized gain
Class E ....................................................... -- -- (7)
Class S ....................................................... -- -- (9,488)
--------- --------- ---------
Net decrease in net assets from distributions ............... (21,883) (42,892) (36,436)
--------- --------- ---------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ... (6,841) 63,525 106,663
--------- --------- ---------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ...................... 83,811 21,036 (38,702)
NET ASSETS
Beginning of period ............................................. 598,205 577,169 615,871
--------- --------- ---------
End of period (including accumulated distributions in excess of
net investment income of $570 and $6,282, and undistributed
net investment income of $3,312, respectively) ............... $ 682,016 $ 598,205 $ 577,169
========= ========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
119 Real Estate Securities Fund
<PAGE>
REAL ESTATE SECURITIES FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
2000* 1999**
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ................... $ 22.69 $ 24.13
------------ ------------
INCOME FROM OPERATIONS
Net investment income (a) ............................ .84 1.08
Net realized and unrealized gain (loss) .............. 3.11 (1.06)
------------ ------------
Total income from operations ........................ 3.95 .02
------------ ------------
DISTRIBUTIONS
From net investment income ............................ (.71) (1.46)
------------ ------------
NET ASSET VALUE, END OF PERIOD ......................... $ 25.93 $ 22.69
============ ============
TOTAL RETURN (%)(b) ................................... 17.54 .19
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ............. 3,393 1,771
Ratios to average net assets (%)(c):
Operating expenses .................................. 2.16 2.14
Net investment income ............................... 4.06 5.12
Portfolio turnover rate (%) .......................... 53.30 42.69
</TABLE>
* For the ten months ended October 31, 2000.
** 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) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
Real Estate Securities Fund 120
<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,
------------------------------------------
2000* 1999 1998 1997 1996**
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........... $ 22.76 $ 24.27 $ 31.02 $ 29.18 $ 26.67
------- ------- ------- ------- -------
INCOME FROM OPERATIONS
Net investment income (a) ..................... .98 1.28 1.26 1.14 .24
Net realized and unrealized gain (loss) ...... 3.14 (1.24) (6.12) 3.95 3.85
------- ------- ------- ------- -------
Total income from operations ................ 4.12 .04 (4.86) 5.09 4.09
------- ------- ------- ------- -------
DISTRIBUTIONS
From net investment income .................... (.81) (1.55) (1.43) (1.04) (.32)
From net realized gain ........................ -- -- (.46) (2.21) (1.26)
------- ------- ------- ------- -------
Total distributions ......................... (.81) (1.55) (1.89) (3.25) (1.58)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD ................. $ 26.07 $ 22.76 $ 24.27 $ 31.02 $ 29.18
======= ======= ======= ======= =======
TOTAL RETURN (%)(b) ........................... 18.24 .30 (16.25) 18.20 15.75
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ..... 9,094 7,134 843 388 101
Ratios to average net assets (%)(c):
Operating expenses .......................... 1.41 1.39 1.47 1.71 1.77
Net investment income ....................... 4.78 5.42 4.90 3.94 5.31
Portfolio turnover rate (%) .................. 53.30 42.69 42.58 49.40 51.75
</TABLE>
* For the ten months ended October 31, 2000.
** 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.
121 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,
------------------------------------------------------
2000* 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD .............. $ 22.86 $ 24.44 $ 30.86 $ 29.19 $ 23.51 $ 22.53
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM OPERATIONS
Net investment income (a) ....................... 1.04 1.30 1.34 1.36 1.39 1.32
Net realized and unrealized gain (loss) ......... 3.15 (1.20) (6.13) 3.93 6.89 1.03
---------- ---------- ---------- ---------- ---------- ----------
Total income from operations ................... 4.19 .10 (4.79) 5.29 8.28 2.35
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS
From net investment income ....................... (.83) (1.68) (1.17) (1.41) (1.34) (1.35)
From net realized gain .......................... -- -- (.46) (2.21) (1.26) (0.02)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions ............................ (.83) (1.68) (1.63) (3.62) (2.60) (1.37)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD .................... $ 26.22 $ 22.86 $ 24.44 $ 30.86 $ 29.19 $ 23.51
========== ========== ========== ========== ========== ==========
TOTAL RETURN (%)(b) .............................. 18.53 .55 (15.94) 18.99 36.81 10.87
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ........ 669,529 589,300 576,326 615,483 445,619 290,990
Ratios to average net assets (%)(c):
Operating expenses ............................. 1.16 1.14 1.05 1.02 1.04 1.04
Net investment income .......................... 5.00 5.41 4.93 4.57 5.64 6.10
Portfolio turnover rate (%) ..................... 53.30 42.69 42.58 49.40 51.75 23.49
</TABLE>
* For the ten months ended October 31, 2000.
(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.
Real Estate Securities Fund 122
<PAGE>
SHORT-TERM BOND FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
DATES SHORT TERM BOND - CLASS S++ ML 1-2.99 **
Inception* $10,000 $10,000
1991 $11,176 $11,128
1992 $11,836 $12,039
1993 $12,572 $12,740
1994 $12,704 $12,892
1995 $13,776 $14,045
1996 $14,549 $14,875
1997 $15,434 $15,840
1998 $16,449 $17,060
1999 $16,918 $17,571
2000 $17,946 $18,638
Total $153,360 $156,827
YEARLY PERIODS ENDED OCTOBER 31
<TABLE>
<CAPTION>
SHORT TERM BOND FUND - CLASS S SHORT TERM BOND FUND - CLASS C ++++++
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
---------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $10,608 6.08% 1 Year $10,498 4.98%
5 Years $13,027 5.43%(S) 5 Years $12,805 5.06%(S)
10 Years $17,946 6.02%(S) 10 Years $17,639 5.84%(S)
SHORT TERM BOND FUND - CLASS E ++++ MERRILL LYNCH 1-2.99 YEARS TREASURY INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
---------------------------------------- ---------------------------------------------
1 Year $10,580 5.80% 1 Year $10,607 6.07%
5 Years $12,967 5.33%(S) 5 Years $13,270 5.82%(S)
10 Years $17,863 5.97%(S) 10 Years $18,638 6.42%(S)
</TABLE>
123 Short-Term Bond Fund
<PAGE>
SHORT-TERM BOND FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the ten months ended October 31, 2000, the Short-Term Bond Fund Class S,
Class E, and Class C shares gained 5.64%, 5.36%, and 4.67%, respectively. This
compared to a 5.72% return for the Merrill Lynch 1-2.99 Years Treasury Index.
The Fund's performance reflected the advantage that US Treasuries held over
corporate securities for most of the fiscal period.
PORTFOLIO HIGHLIGHTS
During the first quarter, bond markets were focused on the Federal Reserve Board
(the Fed), as they waited for a definitive response regarding interest rates.
After the Fed imposed a 50 basis point interest rate hike on May 16, however,
bond investors generally reached a consensus that the Fed would hold rates
steady, and bonds enjoyed a rally. Subsequently, in June economic data provided
bond investors with the first major indications that the US economy could be
slowing, which continued to fuel the rally.
The big story was the inversion of the US Treasury yield curve which occurred
during first quarter 2000. While the 3-month and 2-year rates rose 57 and 25
basis points, respectively, the 10-year and 30-year rates declined 42 and 64
basis points, respectively. This inversion was driven by the US Treasury's debt
buyback program and a declining supply of longer-term Treasury bonds.
Corporate debt generally underperformed during the period, with high-yield
issues being the worst performers during the first quarter, and the
investment-grade corporate sector closely following their pattern. While
corporate issues lagged for most of the year, they did stage a late-period rally
that helped drive further debate regarding the direction of the equities markets
and future growth outlooks.
The Fund's fiscal period performance results generally benefited from the
portfolio's yield advantage. However, Fund returns did experience some setbacks
due to its exposure in the poor performing corporate sector.
TOP TEN ISSUERS
(as a percent of Total Investments) October 31, 2000
Federal National Mortgage Association 5.7%
DaimlerChrysler 4.5
Ford Credit Auto Owner Trust 3.8
Ford Motor Credit Co. 3.4
General Motors Acceptance Corp. 3.3
General Electric Capital Corp. 2.9
CIT Group, Inc. 2.8
United States Treasury 2.8
Federal Home Loan Mortgage Corp. 2.7
Manitoba, Province of 2.5
PORTFOLIO CHARACTERISTICS
October 31, 2000
Weighted Average Quality Diversification AAA
Weighted Average Years-to-Maturity 2.2 Years
Weighted Average Duration 1.5 Years
Current Yield (SEC 30-day standardized)
Class S 6.4%
Class E 6.1%
Class C 5.4%
Number of Issues 232
Number of Issuers 172
MONEY MANAGERS STYLES
BlackRock Financial Management Mortgage/Asset-
Backed Specialist
Standish, Ayer & Wood, Inc. Corporate Specialist
STW Fixed Income Management, Ltd. Sector Rotation
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* Short-Term Bond Fund Class S assumes initial investment on November 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.
++++ 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.
++++++ 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.
(S) 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.
Short-Term Bond Fund 124
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF NET ASSETS
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ------
LONG-TERM INVESTMENTS - 94.6%
ASSET-BACKED SECURITIES - 31.5%
AFC Home Equity Loan Trust
Series 1993-2 Class A
6.000% due 01/20/13 11 11
American Express Credit Account Master
Trust
Series 1997-1 Class A
6.400% due 04/15/05 7,500 7,460
Banc One Automobile Grantor Trust
Series 1997-A Class A
6.270% due 11/20/03 955 952
Boston Edison Co.
Series 1999-1 Class A2
6.450% due 09/15/05 8,000 7,895
California Infrastructure SCE-1
Series 1997-1 Class A4
6.220% due 03/25/04 5,160 5,123
Captec Franchise Trust
Series 1999-1 Class A1
6.504% due 05/25/05 1,155 1,142
Case Equipment Loan Trust
Series 1997-B Class C
6.410% due 09/15/04 45 44
Chase Manhattan Automobile Owner Trust
Series 1998-B Class A4
5.800% due 02/17/03 2,000 1,982
Chase Manhattan Credit Card
Master Trust
Series 1996-3 Class A
7.040% due 02/15/05 6,000 6,006
Chevy Chase Automobile Receivables
Trust
Series 1997-1 Class A
6.500% due 10/15/03 374 373
Series 1997-2 Class A
6.350% due 01/15/04 128 127
Series 1997-3 Class A
6.200% due 03/20/04 (a) 281 279
Citibank Credit Card Master Trust I
Series 1997-2 Class A
6.550% due 02/15/04 9,500 9,461
Conseco Finance
Securitizations Corp.
Series 2000-2 Class A3
8.070% due 12/01/30 1,150 1,171
Copelco Capital Funding Corp.
Series 1999-A Class A2
5.500% due 03/15/01 29 29
Series 1999-A Class A3
5.665% due 03/15/02 750 746
Series 1999-A Class A5
5.950% due 06/15/04 1,250 1,218
Series 1999-B Class A3
6.610% due 12/18/02 850 849
DaimlerChrysler Automobile Trust
Series 2000-A Class A3
7.090% due 12/06/03 4,300 4,323
Series 2000-B Class A4
7.630% due 06/08/05 5,000 5,113
Delta Funding Home Equity
Loan Trust
Series 1998-1 Class A2A
6.830% due 05/25/30 (a) 132 132
Discover Card Master Trust I
Series 1998-7 Class A
5.600% due 05/16/06 3,500 3,387
Series 1999-1 Class B
5.550% due 08/15/04 650 638
First Security Automobile
Owner Trust
Series 1999-1 Class A3
5.580% due 06/15/03 1,067 1,063
FMAC Loan Receivables Trust
Series 1998-CA Class A1
5.990% due 11/15/04 583 568
Ford Credit Automobile Owner Trust
Series 1997-B Class B
6.400% due 05/15/02 825 821
Series 1999-B Class A4
5.800% due 06/15/02 1,225 1,219
Series 1999-D Class A4
6.400% due 10/15/02 1,100 1,096
Series 2000-A Class A3
6.820% due 06/17/02 3,195 3,195
Series 2000-E Class A3
6.740% due 12/15/02 4,000 3,996
Series 2000-E Class A5
6.770% due 10/15/04 6,000 6,015
Green Tree Financial Corp.
Series 1995-9 Class A5
6.800% due 12/15/25 1,300 1,293
Series 1998-1 Class A3
5.950% due 11/01/29 1,250 1,246
Honda Automobile Receivables Owner
Trust
Series 2000-1 Class A3
6.620% due 07/15/04 1,500 1,499
Honda Automobile Lease Trust
Series 1999-A Class A3
125 Short Term Bond Fund
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ------
6.100% due 01/15/02 3,461 3,452
Series 1999-A Class A4
6.450% due 09/16/02 1,000 996
IMC Home Equity Loan Trust
Series 1998-1 Class A3
6.410% due 04/20/18 760 752
MBNA Master Credit Card Trust
Series F Class A
6.600% due 11/15/04 10,000 9,994
Mellon Automobile Grantor Trust
Series 2000-1 Class A
7.180% due 10/15/06 1,374 1,382
Navistar Financial Corp. Owner Trust
Series 1999-A Class A3
5.950% due 04/15/03 1,675 1,661
Newcourt Equipment Trust Securities
Series 1998-1 Class A3
5.240% due 12/20/02 571 566
Series 1998-2 Class A3
5.450% due 10/15/02 298 296
Nissan Automobile Lease Trust
Series 2000-A Class A3
7.800% due 05/20/03 1,125 1,141
Nissan Automobile Receivables Owner
Trust
Series 1999-A Class A3
6.470% due 09/15/03 1,025 1,021
Olympic Automobile
Receivables Trust
Series 1996-D Class CTFS
6.125% due 04/15/02 1,450 1,445
PBG Equipment Trust
Series 1A Class A
6.270% due 01/20/12 749 729
Peoplefirst.com Automobile Receivables
Owner Trust
Series 2000-1 Class A4
7.405% due 12/15/06 9,500 9,666
Premier Automobile Trust
Series 1999-1 Class A3
5.690% due 11/08/02 8,257 8,213
Series 1999-3 Class A4
6.430% due 03/08/04 (a) 1,600 1,593
Ryder Vehicle Lease Trust
Series 1998-A Class A
6.100% due 09/15/08 (a) 424 420
Series 1999-A Class A4
6.890% due 04/15/05 1,100 1,102
The Money Store Home Equity Trust
Series 1995-B Class A6
7.500% due 01/15/26 1,000 1,006
The Money Store Small Business
Administration Loan Trust
Series 1996-2 Class A
7.181% due 04/15/24 (a) 616 619
Series 1997-1 Class A
7.126% due 01/15/25 (a) 891 785
Series 1997-1 Class B
7.598% due 01/15/25 (a) 594 527
Toyota Automobile Receivables
Owners Trust
Series 2000-A Class A3
7.180% due 08/15/04 825 832
UCFC Home Equity Loan
Series 1993-B1 Class A-1
6.075% due 07/25/14 31 30
USAA Automobile Loan
Grantor Trust
Series 1999-1 Class A
6.100% due 02/15/06 (a) 1,348 1,338
WFS Financial Owner Trust
Series 2000-A Class A4
7.410% due 09/20/07 3,500 3,554
Series 2000-C Class A4
7.170% due 02/20/08 1,000 1,008
Wilshire Funding Corp.
Series 1998-WFC2 Class A3
7.000% due 12/28/37 635 614
World Omni Automobile
Lease Securitization Trust
Series 1999-A Class A1
6.871% due 02/15/02 (a) 1,472 1,471
-------
136,685
-------
CORPORATE BONDS AND NOTES - 40.1%
Aerofreighter Finance Trust
7.850% due 10/30/09 563 548
Associates Corp. of North America
6.500% due 07/15/02 2,700 2,678
5.750% due 11/01/03 1,825 1,761
AT&T Capital Corp.
6.250% due 05/15/01 1,550 1,536
AT&T Corp.
5.625% due 03/15/04 600 566
Avon Energy Partners Holdings
6.730% due 12/11/02 310 303
Banco Latinoamerica
de Exportaciones, S.A.
6.500% due 04/02/01 2,200 2,195
Short Term Bond Fund 126
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ------
Bank of America Corp.
Series H
7.350% due 04/03/02 9,300 9,371
Bank One Corp.
6.400% due 08/01/02 2,725 2,693
Business Loan Center, Inc.
Series 1998-1A
6.750% due 04/02/05 (a) 1,028 1,028
CIT Group, Inc.
6.500% due 06/14/02 3,800 3,741
7.375% due 03/15/03 8,400 8,413
Comdisco, Inc.
6.000% due 01/30/02 2,000 1,877
Compaq Computer Corp.
7.450% due 08/01/02 1,100 1,098
Conseco, Inc.
6.400% due 06/15/01 (a) 1,850 1,610
Cox Communications, Inc.
7.000% due 08/15/01 2,000 1,995
CSX Corp.
Series C
5.850% due 12/01/03 1,000 958
DaimlerChrysler North America Holding
Corp.
7.125% due 03/01/02 400 400
6.960% due 08/23/02 (a) 2,250 2,256
7.750% due 05/27/03 7,300 7,431
Duke Energy Corp.
7.125% due 09/03/02 1,750 1,758
El Paso Energy Corp.
Series B
6.625% due 07/15/01 1,050 1,044
ERAC USA Finance Co.
6.375% due 05/15/03 1,900 1,822
First Bank South Dakota
6.834% due 12/20/00 (a) 500 500
First Union Corp.
6.950% due 11/01/04 1,500 1,478
Firstar Corp.
6.500% due 07/15/02 2,145 2,134
FleetBoston Financial Corp.
7.250% due 09/15/05 1,850 1,860
Ford Motor Credit Co.
7.500% due 06/15/03 7,000 7,049
5.750% due 02/23/04 5,000 4,775
6.700% due 07/16/04 2,870 2,811
Franchise Finance Corp.
7.000% due 11/30/00 1,575 1,573
General Electric Capital Corp.
5.430% due 02/25/02 4,000 3,937
Series A
5.180% due 02/01/02 2,380 2,331
6.520% due 10/08/02 1,025 1,021
5.880% due 05/19/03 5,500 5,394
General Motors Acceptance Corp.
5.350% due 04/16/01 5,500 5,460
7.500% due 06/06/02 6,500 6,543
8.500% due 01/01/03 1,500 1,546
5.750% due 11/10/03 750 724
Household Finance Corp.
6.125% due 07/15/02 (a) 1,000 985
IBM Credit Corp.
6.450% due 11/12/02 1,300 1,295
IMC Global, Inc.
6.625% due 10/15/01 1,550 1,527
International Lease Finance Corp.
5.625% due 05/01/02 1,000 980
Kern River Funding Corp.
Series B
6.720% due 09/30/01 1,125 1,117
Lehman Brothers Holdings, Inc.
6.625% due 04/01/04 450 437
7.750% due 01/15/05 2,000 2,017
Mellon Bank North America
6.750% due 06/01/03 1,900 1,892
Metropolitan Life Insurance Co.
6.300% due 11/01/03 730 714
Morgan Stanley Dean Witter & Co.
5.625% due 01/20/04 1,750 1,683
Nabisco, Inc.
6.000% due 02/15/01 (a) 415 412
National Westminster Bank
9.450% due 05/01/01 1,500 1,516
9.375% due 11/15/03 8,000 8,513
NationsBank Corp.
8.125% due 06/15/02 2,750 2,805
Norwest Financial, Inc.
6.375% due 09/15/02 1,000 990
Osprey Trust/Osprey I
7.797% due 01/15/03 200 200
Panamsat Corp.
6.000% due 01/15/03 1,100 1,052
Paramount Communications, Inc.
7.500% due 01/15/02 875 875
Popular North America, Inc.
Series D
6.875% due 06/15/01 1,100 1,099
127 Short Term Bond Fund
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- -------
Procter & Gamble
9.625% due 01/14/01 6,920 6,944
Qwest Corp.
7.200% due 11/01/04 1,000 994
Salomon Smith Barney
Holdings, Inc.
6.625% due 07/01/02 75 75
6.500% due 10/15/02 300 298
Sears Roebuck Acceptance Corp.
Series II
6.690% due 04/30/01 1,800 1,793
Series III
6.820% due 10/17/02 6,000 5,966
Suntrust Banks, Inc.
8.250% due 07/15/02 1,825 1,848
Textron, Inc.
6.750% due 09/15/02 11,000 10,918
TRW, Inc.
6.500% due 06/01/02 1,725 1,693
US West Capital Funding, Inc.
6.875% due 08/15/01 1,230 1,227
Waste Management, Inc.
7.100% due 08/01/26 1,175 1,139
Wells Fargo Co.
6.500% due 09/03/02 1,500 1,494
WHX Corp.
9.375% due 11/15/03 1,700 1,744
Worldcom, Inc.
7.875% due 05/15/03 1,500 1,524
-------
173,984
-------
EURODOLLAR BONDS - 1.5%
American Express Travel
6.410% due 10/24/01 (a) 1,500 1,499
Argentina, Republic of
Series B
Zero Coupon due 04/15/01 1,500 1,452
Deutsche Telekom International
Finance BV
7.750% due 06/15/05 1,250 1,271
Ontario, Province of
7.375% due 01/27/03 1,000 1,014
Telefonica Europe BV
7.350% due 09/15/05 1,275 1,277
-------
6,513
-------
MORTGAGE-BACKED SECURITIES - 12.5%
Asset Securitization Corp.
Series 1997-D5 Class A1A
6.500% due 02/14/41 747 742
Bank One Mortgage-backed
Pass-through Certificate
Series 2000-2 Class 4A
6.673% due 03/15/30 (a) 1,015 1,011
Bayview Financial Acquisition Trust
Series 1998-1 Class A1
7.010% due 05/25/29 798 790
Chase Commercial Mortgage
Securities Corp.
Series 1997-2 Class A1
6.450% due 12/19/04 1,511 1,495
Deutsche Mortgage & Asset
Receiving Corp.
Series 1998-C1 Class A1
6.220% due 09/15/07 2 2
DLJ Mortgage Acceptance Corp.
Series 1995-CF2 Class A1A
6.650% due 12/17/27 240 238
Series 1996-CF2 Class A1A
6.860% due 11/12/21 554 553
Series 1997-CF1 Class A1A
7.400% due 05/15/06 941 951
Federal Home Loan Mortgage Corp.
Participation Certificate
9.000% due 2005 92 93
6.250% due 2007 26 26
6.500% due 2008 1,636 1,602
5.500% due 2009 2,095 2,007
6.000% due 2011 1,718 1,665
7.000% due 2011 1,114 1,111
7.552% due 2022 (a) 1,404 1,419
6.968% due 2027 (a) 1,873 1,865
6.706% due 2029 (a) 1,995 1,967
Federal National Mortgage Association
7.000% due 2004 435 431
8.750% due 2004 13 13
6.500% due 2008 1,334 1,314
5.500% due 2009 8,123 7,691
7.000% due 2009 1,309 1,307
8.000% due 2009 (a) 1,381 1,406
7.000% due 2014 (a) 569 568
7.500% due 2014 1,108 1,122
6.939% due 2018 (a) 1,107 1,098
8.186% due 2022 (a) 829 852
8.280% due 2024 (a) 1,941 1,995
8.190% due 2029 (a) 903 922
7.500% due 2030 1,747 1,744
Series 1998-32 Class TB
6.000% due 05/18/13 775 764
Short Term Bond Fund 128
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
-------- -------
Goldman Sachs Mortgage
Securities Corp.
Series 2000-1 Class A
6.970% due 06/20/24 (a) 1,300 1,302
Government National Mortgage Association
7.250% due 2006 993 999
7.000% due 2007 58 58
6.000% due 2008 724 707
7.000% due 2008 722 725
7.000% due 2009 1,715 1,722
8.250% due 2009 563 574
7.000% due 2011 347 347
7.000% due 2012 349 349
7.500% due 2013 986 1,001
9.500% due 2017 4 4
6.750% due 2022 1,298 1,309
7.375% due 2024 (a) 569 573
6.750% due 2027 411 414
Prudential Home Mortgage Securities
Series 1994-19 Class A2
7.050% due 05/25/24 134 133
Residential Accredited Loans, Inc.
Series 1997-QS7 Class A1
7.500% due 07/25/27 7 7
Series 1999-QS2 Class A3
6.500% due 02/25/29 457 436
Resolution Trust Corp. Mortgage
Pass-thru Certificate
Series 1995-2 Class C1
7.450% due 05/25/29 (a) 308 303
Structured Asset Mortgage
Investments, Inc.
Series 1998-9 Class 2A2
6.125% due 11/25/13 1,185 1,142
Union Planters Mortgage
Finance Corp.
Series 1998-A Class A1
6.350% due 01/25/28 241 241
Series 1999-1 Class A1
6.250% due 04/01/29 451 438
Washington Mutual Step Up Bond
Series 2000-1 Class A1
6.911% due 06/25/24 (a) 2,173 2,170
Wilshire Funding Corporation
Series 1997-WFC1 Class A1
7.250% due 08/25/27 265 264
-------
53,982
-------
MUNICIPAL BONDS - 0.5%
Missouri Higher Education
Loan Authority
Series 97 Class P
6.600% due 07/25/08 (a) 812 804
Philadelphia, Pennsylvania, Authority
for Industrial Development
Series 1997 Class A
6.488% due 06/15/04 1,367 1,353
-------
2,157
-------
UNITED STATES GOVERNMENT AGENCIES - 1.1%
Federal Home Loan Bank
Series 1TO1
5.875% due 08/15/01 1,800 1,790
Federal National Mortgage Association
5.250% due 01/15/03 1,000 976
5.125% due 02/13/04 2,275 2,183
-------
4,949
-------
UNITED STATES GOVERNMENT TREASURIES - 2.8%
United States Treasury Notes
5.500% due 08/31/01 375 372
6.500% due 02/28/02 2,930 2,941
6.625% due 05/31/02 1,565 1,577
6.375% due 06/30/02 1,000 1,005
3.625% due 07/15/02 2,965 2,971
6.125% due 08/31/02 925 927
6.250% due 08/31/02 100 100
3.625% due 01/15/08 1,903 1,872
5.750% due 08/15/10 185 185
-------
11,950
-------
YANKEE BONDS - 4.6%
Edperbrascan Corp.
7.375% due 10/01/02 2,000 1,963
Manitoba, Province of
8.000% due 04/15/02 5,600 5,699
Series CZ
6.750% due 03/01/03 5,200 5,220
Royal Caribbean Cruises, Ltd.
7.125% due 09/18/02 2,150 2,092
Tyco International, Ltd.
6.500% due 11/01/01 3,000 2,971
Westpac Banking, Ltd.
7.875% due 10/15/02 2,006 2,041
-------
19,986
-------
TOTAL LONG-TERM INVESTMENTS
(cost $412,442) 410,206
-------
129 Short Term Bond Fund
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- -------
SHORT-TERM INVESTMENTS - 4.7%
Frank Russell Investment Company Money
Market Fund,
due on demand (b) 18,972 18,972
Merrill Lynch & Co., Inc.
Commercial Paper
6.470% due 11/16/00 (b) 274 274
Phillips Petroleum Co.
Commercial Paper
6.720% due 11/07/00 (b)
975 975
-------
TOTAL SHORT-TERM INVESTMENTS
(cost $20,221) 20,221
-------
TOTAL INVESTMENTS - 99.3%
(identified cost $432,663) 430,427
OTHER ASSETS AND LIABILITIES,
NET - 0.7% 3,027
-------
NET ASSETS - 100.0% 433,454
=======
(a) Adjustable or floating rate security.
(b) At amortized cost, which approximates market.
See accompanying notes which are an integral part of the financial statements.
Short Term Bond Fund 130
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) October 31, 2000
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments at market (identified cost $432,663)................ $ 430,427
Cash............................................................ 2,906
Receivables:
Dividends and interest......................................... 5,451
Fund shares sold............................................... 275
From Advisor................................................... 152
Prepaid expenses................................................ 4
---------
Total assets................................................. 439,215
LIABILITIES
Payables:
Investments purchased (delayed settlement)..... $ 3,637
Fund shares redeemed........................... 1,823
Accrued fees to affiliates..................... 214
Other accrued expenses......................... 87
---------
Total liabilities............................................ 5,761
---------
NET ASSETS...................................................... $ 433,454
=========
NET ASSETS CONSIST OF:
Undistributed net investment income............................. $ 3,075
Accumulated net realized gain (loss)............................ (20,902)
Unrealized appreciation (depreciation) on investments........... (2,236)
Shares of beneficial interest................................... 238
Additional paid-in capital...................................... 453,279
---------
NET ASSETS...................................................... $ 433,454
=========
NET ASSET VALUE, offering and redemption price per share:
Class C ($671,500 divided by 36,825 shares of $.01 par value
shares of beneficial interest outstanding)................... $ 18.23
=========
Class E ($9,898,412 divided by 542,647 shares of $.01 par
value shares of beneficial interest outstanding)............. $ 18.24
=========
Class S ($422,884,353 divided by 23,215,442 shares of $.01 par
value shares of beneficial interest outstanding)............... $ 18.22
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
131 Short Term Bond Fund
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Interest...................................... $ 24,355 $ 26,239
Dividends from Money Market Fund.............. 953 1,092
------------- -------------
Total investment income..................... 25,308 27,331
------------- -------------
EXPENSES
Advisory fees................................. 1,700 2,041
Administrative fees........................... 190 229
Custodian fees................................ 171 334
Distribution fees - Class C................... 5 4
Transfer agent fees........................... 325 607
Professional fees............................. 58 10
Registration fees............................. 7 159
Shareholder servicing fees - Class C.......... 2 1
Shareholder servicing fees - Class E.......... 20 15
Trustees' fees................................ 11 12
Miscellaneous................................. 53 3
------------- -------------
Expenses before reductions..................... 2,542 3,415
Expense reductions............................. (78) --
------------- -------------
Expenses, net................................ 2,464 3,415
------------- -------------
Net investment income........................... 22,844 23,916
------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investments........ (2,847) (2,426)
Net change in unrealized appreciation
(depreciation) on investments.................. 4,814 (7,220)
------------- -------------
Net realized and unrealized gain (loss)......... 1,967 (9,646)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS....................................... $ 24,811 $ 14,270
============= =============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Short Term Bond Fund 132
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income...................... $ 22,844 $ 23,916 $ 13,185
Net realized gain (loss)................... (2,847) (2,426) 1,126
Net change in unrealized appreciation
(depreciation)........................... 4,814 (7,220) 355
---------------- ----------------- -----------------
Net increase (decrease) in net assets
from operations.......................... 24,811 14,270 14,666
---------------- ----------------- -----------------
DISTRIBUTIONS
From net investment income
Class C.................................. (33) (24) --
Class E.................................. (425) (303) --
Class S.................................. (19,499) (24,023) (13,149)
---------------- ----------------- -----------------
Net decrease in net assets from
distributions.......................... (19,957) (24,350) (13,149)
---------------- ----------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from
share transactions......................... (28,484) 206,625 29,552
---------------- ----------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. (23,630) 196,545 31,069
NET ASSETS
Beginning of period........................ 457,084 260,539 229,470
---------------- ----------------- -----------------
End of period (including undistributed net
investment income of $3,075, $168 and
$621, respectively)...................... $ 433,454 $ 457,084 $ 260,539
================ ================= =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
133 Short Term Bond Fund
<PAGE>
SHORT TERM BOND FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
2000* 1999**
-------- --------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................... $ 18.13 $ 18.36
-------- --------
INCOME FROM OPERATIONS
Net investment income (a)............................. .79 .68
Net realized and unrealized gain (loss)............... .04 (.31)
-------- --------
Total income from operations........................ .83 .37
-------- --------
DISTRIBUTIONS
From net investment income............................ (.73) (.60)
-------- --------
NET ASSET VALUE, END OF PERIOD......................... $ 18.23 $ 18.13
======== ========
TOTAL RETURN (%)(b).................................... 4.67 2.02
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands).............. 672 801
Ratios to average net assets (%)(c):
Operating expenses, net............................. 1.64 1.72
Operating expenses, gross........................... 1.66 1.72
Net investment income............................... 5.01 4.41
Portfolio turnover rate (%)........................... 92.31 177.08
</TABLE>
* For the ten months ended October 31, 2000.
** 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) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
Short Term Bond Fund 134
<PAGE>
SHORT TERM 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>
2000* 1999**
-------- --------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...................... $ 18.08 $ 18.51
-------- --------
INCOME FROM OPERATIONS
Net investment income (a)................................ .88 .80
Net realized and unrealized gain (loss).................. .07 (.34)
-------- --------
Total income from operations........................... .95 .46
-------- --------
DISTRIBUTIONS
From net investment income............................... (.79) (.89)
-------- --------
NET ASSET VALUE, END OF PERIOD............................ $ 18.24 $ 18.08
======== ========
TOTAL RETURN (%)(b)....................................... 5.36 2.53
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)................. 9,898 8,693
Ratios to average net assets (%)(c):
Operating expenses, net................................ .89 .97
Operating expenses, gross.............................. .91 .97
Net investment income.................................. 5.77 5.05
Portfolio turnover rate (%).............................. 92.31 177.08
</TABLE>
* For the ten months ended October 31, 2000.
** 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) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
135 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,
---------------------------------------------------
2000* 1999 1998 1997 1996 1995
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............... $ 18.03 $ 18.46 $ 18.35 $ 18.36 $ 18.55 $ 17.98
------- ------- ------- ------- ------- -------
INCOME FROM OPERATIONS
Net investment income (a)......................... .91 .90 .99 1.08 1.04 1.16
Net realized and unrealized gain (loss)........... .09 (.36) .11 -- (.19) .59
------- ------- ------- ------- ------- -------
Total income from operations.................... 1.00 .54 1.10 1.08 .85 1.75
------- ------- ------- ------- ------- -------
DISTRIBUTIONS
From net investment income........................ (.81) (.97) (.99) (1.09) (1.04) (1.18)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD..................... $ 18.22 $ 18.03 $ 18.46 $ 18.35 $ 18.36 $ 18.55
======= ======= ======= ======= ======= =======
TOTAL RETURN (%)(b)(c)............................. 5.64 3.03 6.09 6.02 4.76 9.95
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands).......... 422,884 447,590 260,539 229,470 222,983 183,577
Ratios to average net assets (%)(c)(d):
Operating expenses, net......................... .64 .74 .66 .66 .70 .58
Operating expenses, gross....................... .66 .74 .66 .66 .70 .58
Net investment income........................... 6.00 5.22 5.37 5.70 5.70 6.41
Portfolio turnover rate (%)....................... 92.31 177.08 129.85 213.14 264.40 269.31
</TABLE>
* For the ten months ended October 31, 2000.
(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) For periods prior to April 1, 1995, Fund performance, operating expenses and
net investment income do not include any management fees paid to the Manager
or money managers. For periods thereafter, they are reported net of
investment management fees but gross of any investment services fees. See
Note 4.
(d) The ratios for periods less than one year are annualized.
Short Term Bond Fund 136
<PAGE>
DIVERSIFIED BOND FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
DIVERSIFIED BOND -
DATES CLASS S LB AGGREGATE **
Inception* $ 10,000 $ 10,000
1991 $ 11,469 $ 11,581
1992 $ 12,571 $ 12,720
1993 $ 14,062 $ 14,230
1994 $ 13,498 $ 13,708
1995 $ 15,529 $ 15,853
1996 $ 16,393 $ 16,780
1997 $ 17,781 $ 18,272
1998 $ 19,307 $ 19,978
1999 $ 19,306 $ 20,084
2000 $ 20,658 $ 21,551
Total $170,573 $174,757
YEARLY PERIODS ENDED OCTOBER 31
<TABLE>
<CAPTION>
DIVERSIFIED BOND FUND - CLASS S DIVERSIFIED BOND FUND - CLASS C++++
PERIODS ENDED GROWTH TOTAL PERIODS ENDED GROWTH TOTAL
10/31/00 OF $10,000 RETURN 10/31/00 OF $10,000 RETURN
------------------------------------------ ------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $10,700 7.00% 1 Year $10,588 5.88%
5 Years $13,303 5.87%(S) 5 Years $12,908 5.23%(S)
10 Years $20,658 7.52%(S) 10 Years $20,045 7.20%(S)
DIVERSIFIED BOND FUND - CLASS E++ LEHMAN BROTHERS AGGREGATE BOND INDEX
PERIODS ENDED GROWTH TOTAL PERIODS ENDED GROWTH TOTAL
10/31/00 OF $10,000 RETURN 10/31/00 OF $10,000 RETURN
------------------------------------------ ------------------------------------------
1 Year $10,678 6.78% 1 Year $10,730 7.30%
5 Years $13,092 5.53%(S) 5 Years $13,594 6.33%(S)
10 Years $20,330 7.35%(S) 10 Years $21,551 7.98%(S)
</TABLE>
137 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the ten months ended October 31, 2000, the Diversified Bond Fund Class S,
Class E and Class C shares gained 7.40%, 7.25%, and 6.44%, respectively. This
compared to a 7.83% return for the Lehman Brothers Aggregate Bond Index.
The Fund's performance reflected its diversified strategy, with managers
following somewhat divergent paths regarding spreads. While all of the Fund's
managers took a careful approach because of the volatility of current market
conditions, a few saw the year's spread widening as an opportunity to add excess
yield to their portfolios. Other Fund managers interpreted the widening as a
cautionary sign. All of the managers focused on adding high quality issues to
their portfolio during the period.
PORTFOLIO HIGHLIGHTS
During the first quarter, bond markets were focused on the Federal Reserve Board
(the Fed), as they waited for a definitive response regarding interest rates.
After the Fed imposed a 50 basis point interest rate hike on May 16, however,
bond investors generally reached a consensus that the Fed would hold rates
steady, and bonds enjoyed a rally. Subsequently, in June economic data provided
bond investors with the first major indications that the US economy could be
slowing, which continued to fuel the rally.
The big story was the inversion of the US Treasury yield curve which occurred
during first quarter 2000. While the 3-month and 2-year rates rose 57 and 25
basis points, respectively, the 10-year and 30-year rates declined 42 and 64
basis points, respectively. This inversion was driven by the US Treasury's debt
buyback program and a declining supply of longer-term Treasury bonds.
Corporate debt generally underperformed during the period, with high-yield
issues being the worst performers during the first quarter, and the
investment-grade corporate sector closely following their pattern. While
corporate issues lagged for most of the year, they did stage a late-period rally
that helped drive further debate regarding the direction of the equities markets
and future growth outlooks.
The Fund's managers placed emphasis on intermediate maturities during the final
three months of the period, which proved advantageous as the yield curve
steepened. The Fund's managers favored high quality corporate issues, mortgages
and asset-backed issues throughout the period.
TOP TEN ISSUERS
(as a percent of Total Investments) October 31, 2000
Federal National Mortgage Association 18.6%
United States Treasury 13.5
Government National Mortgage Association 13.3
Federal Home Loan Mortgage Corp. 8.0
Mellon Residential Funding Corp. 1.3
Small Business Investment Cos. 1.2
Federal Home Loan Bank 1.0
Ford Motor Credit Co. 0.8
Tennessee Valley Authority 0.8
General Motors Acceptance Corp. 0.8
PORTFOLIO CHARACTERISTICS
October 31, 2000
Weighted Average Quality Diversification AAA
Weighted Average Years-to-Maturity 8.8 Years
Weighted Average Duration 5.0 Years
Current Yield (SEC 30-day standardized)
Class S 6.6%
Class E 6.3%
Class C 5.6%
Number of Issues 1061
Number of Issuers 686
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
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* Diversified Bond Fund Class S assumes initial investment on
November 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.
++ 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.
(S) 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 138
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ------
LONG-TERM INVESTMENTS - 109.3%
ASSET-BACKED SECURITIES - 11.5%
ACLC Franchise Loan Receivables Trust
Series 2000-1 Class A1
7.595% due 06/15/05 564 568
Advanta Equipment Receivables
Series 2000-1 Class A3
7.405% due 02/15/07 385 390
Advanta Mortgage Loan Trust
Step Up Bond
Series 1997-2 Class A6
6.862% due 05/25/27 (c) 3,105 3,105
Series 2000-1 Class A4
8.610% due 03/25/28 480 498
AmSouth Auto Trust
Series 2000-1 Class A3
6.670% due 07/15/04 1,325 1,325
ANRC Auto Owner Trust
Series 2000-A Class A3
7.060% due 05/17/04 985 992
Associates Manufactured Housing
Pass-Thru Certificates
Series 1996-1 Class A5
7.600% due 03/15/27 205 204
BankAmerica Manufactured
Housing Contract
Series 1997-1 Class A4
6.195% due 06/10/10 27 27
Bombardier Capital Mortgage
Securitization Corp.
Series 1999-B Class A3
7.180% due 12/15/15 1,050 1,049
Series 2000-A Class A2
7.575% due 06/15/30 920 927
California Infrastructure SDG&E
Series 1997-1 Class A6
6.310% due 09/25/08 2,230 2,180
Case Equipment Loan Trust
Series 1999-B Class A4
6.900% due 06/15/06 1,000 1,002
Charter Financial, Inc.
Series 1999-1 Class A4
7.070% due 01/25/06 1,890 1,898
Chase Credit Card Master Trust
Series 1999-3 Class B
6.950% due 01/15/07 975 975
Chase Funding Mortgage Loan
Series 2000-2 Class IA3
7.794% due 05/25/15 195 197
Citibank Credit Card Issuance Trust
Series 2000-A1 Class A1
6.900% due 10/17/07 1,100 1,099
Citibank Credit Card Master Trust I
Series 1997-3 Class A
6.839% due 02/10/04 980 979
Conseco Finance
Series 1999-F Class A2
6.720% due 10/15/30 955 950
Conseco Finance Lease LLC
Series 2000-1 Class A3
7.360% due 04/20/04 940 948
Conseco Finance Securitizations Corp.
Series 2000-1 Class A4
7.620% due 05/01/31 520 525
Series 2000-4 Class A2
7.350% due 05/01/32 190 191
Series 2000-5 Class A3
7.210% due 02/01/32 (c) 600 602
DaimlerChrysler Auto Trust
Series 2000-A Class A3
7.090% due 12/06/03 1,430 1,438
Series 2000-A Class A4
7.230% due 01/06/05 1,075 1,089
DVI Receivables Corp.
Series 2000-1 Class A4
7.780% due 06/14/08 755 767
First Deposit Master Trust
Series 1996-1 Class A
6.791% due 08/15/07 (c) 1,600 1,602
First Sierra Receivables
Series 2000-1 Class A1
7.490% due 01/18/05 (c) 1,302 1,301
Fleetwood Credit Corp. Grantor Trust
Series 1997-B Class A
6.400% due 05/15/13 (c) 1,549 1,539
Ford Credit Auto Owner Trust
Series 2000-A Class B
7.370% due 07/15/04 (c) 1,000 1,013
Series 2000-D Class A3
7.150% due 12/15/03 400 402
GMAC Commercial Mortgage Securities,
Inc.
Series 2000-FL1A Class A
7.610% due 01/15/12 (c) 2,496 2,491
Gracechurch Card Funding PLC
Series 1 Class A
6.800% due 11/15/04 (c) 3,000 3,006
139 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ------
Green Tree Home Improvement
Loan Trust
Series 1998-D Class HEA5
6.320% due 08/15/29 1,360 1,318
Series 1998-E Class HIA1
5.907% due 08/15/07 1 1
Green Tree Lease Finance
Series 1998-1 Class A4
5.740% due 01/20/04 540 531
Green Tree Recreational, Equipment &
Consumer Loan Trust
Series 1998-A Class A1C
6.180% due 06/15/19 212 210
Series 1998-C Class A4
6.170% due 02/15/11 470 467
Greenpoint Manufactured Housing
Series 1999-1 Class A3
6.110% due 11/15/18 335 317
GRMT II, LLC
Series 2000-1 Class AF1
6.764% due 06/20/32 (c) 2,346 2,344
Heller Equipment Asset Receivables Trust
Series 1999-2 Class A3
6.650% due 03/14/04 1,500 1,496
Household Automotive Trust
Series 2000-3 Class A3
7.050% due 02/17/05 415 418
Household Automotive Trust IV
Series 2000-1 Class A3
7.300% due 07/19/04 2,735 2,759
Household Automotive Trust V
Series 2000-2 Class A4
7.430% due 04/17/07 1,435 1,467
IndyMac Home Equity Loan Trust Step Up
Bond
Series 1998-A Class AF4
6.310% due 10/25/29 (c) 855 832
Series 2000-A Class AF2
7.820% due 05/25/26 (c) 645 653
MBNA Master Credit Card Trust
Series 1999-G Class B
6.600% due 12/15/06 1,500 1,485
MMCA Auto Owner Trust
Series 1999-2 Class A3
7.000% due 05/15/04 1,030 1,037
MMCA Automobile Trust
Series 1999-2 Class A2
6.800% due 08/15/03 770 770
Navistar Financial Corp. Owner Trust
Series 2000-A Class A4
7.340% due 01/15/07 1,975 2,007
Series 2000-B Class A3
6.670% due 11/15/04 690 690
Series 2000-B Class A4
6.780% due 09/17/07 120 120
Newcourt Equipment Trust Securities
Series 1999-1 Class A3
6.924% due 07/20/03 (c) 3,340 3,344
Onyx Acceptance Auto Trust
Series 2000-A Class A3
7.270% due 12/15/03 2,020 2,035
Series 2000-A Class A4
7.420% due 12/15/04 1,780 1,803
Series 2000-C Class A3
7.160% due 09/15/04 2,440 2,452
Pacificamerica Home Equity Loan Step Up
Bond
Series 1998-2 Class AF
6.590% due 06/26/28 (c) 905 887
PNC Student Loan Trust I
Series 1997-2 Class A7
6.728% due 01/25/07 545 546
Premier Auto Trust
Series 1999-3 Class A4
6.430% due 03/08/04 890 886
Residential Asset Securities Corp.
Series 2000-KS3 Class AI4
8.035% due 09/25/28 1,600 1,635
Residential Funding Mortgage Securities
II
Series 1999-HI1 Class A3
6.310% due 09/25/29 835 823
Series 1999-HI6 Class AI3
7.340% due 07/25/12 1,330 1,331
Series 2000-HI4 Class AI3
7.490% due 10/25/13 1,180 1,183
Saxon Asset Securities Trust
Series 2000-2 Class AF4
8.234% due 03/25/24 1,600 1,643
Step Up Bond
Series 1998-3 Class AV1
6.892% due 05/25/28 (c) 839 839
Sears Credit Account Master Trust
Series 1995-5 Class A
6.050% due 01/15/08 250 246
Series 1999-2 Class A
6.350% due 02/16/07 3,645 3,619
Diversified Bond Fund 140
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ------
Student Loan Marketing Association
Series 1996-3 Class A1
6.475% due 10/25/04 (c) 799 795
United Airlines
Series 2000-1 Class A-2
7.730% due 07/01/10 1,135 1,140
Vanderbilt Mortgage & Finance, Inc.
Series 1999-A Class 1A3
6.080% due 12/07/15 690 655
Series 1999-B Class 1A3
6.280% due 03/07/13 905 889
Series 1999-D Class IA2
6.815% due 08/07/12 505 503
Series 2000-B Class IA2
8.045% due 07/07/12 620 634
WFS Financial Owner Trust
Series 2000-A Class A3
7.220% due 09/20/04 935 943
Series 2000-B Class A3
7.750% due 11/20/04 470 477
Series 2000-C Class A3
7.070% due 02/20/05 190 192
------
83,701
------
BANKERS ACCEPTANCE NOTES - 0.0%
Signet Bank
7.800% due 09/15/06
255 257
------
CORPORATE BONDS AND NOTES - 22.5%
Ahold Finance USA, Inc.
6.250% due 05/01/09 2,135 1,894
Air Products & Chemicals, Inc.
8.750% due 04/15/21 250 257
Allegiance Corp.
7.000% due 10/15/26 130 127
America West Airlines
Series A
6.850% due 07/02/09 450 432
American Financial Group, Inc.
7.125% due 04/15/09 100 86
American General Corp.
7.125% due 02/15/04 340 338
Anheuser-Busch Companies, Inc.
7.550% due 10/01/30 520 525
Archer Daniels Co.
8.375% due 04/15/17 665 690
Aristar, Inc.
6.000% due 05/15/02 1,635 1,607
Associates Corp. of North America
6.500% due 10/15/02 450 446
5.750% due 11/01/03 3,000 2,896
5.500% due 02/15/04 875 835
Series H
7.090% due 04/11/03 400 401
AT&T Corp.
6.500% due 03/15/29 1,015 797
8.625% due 12/01/31 220 220
Atlantic Richfield Co.
9.125% due 08/01/31 550 668
Avco Financial Services, Inc.
6.000% due 08/15/02 800 788
AXA Financial, Inc.
7.750% due 08/01/10 835 848
Baltimore Gas & Electric Co.
7.250% due 07/01/02 500 501
6.500% due 02/15/03 840 832
Bank of New York, Inc.
7.875% due 11/15/02 350 357
Bank One Corp.
6.875% due 08/01/06 800 783
BankAmerica Corp.
6.850% due 03/01/03 425 424
6.875% due 06/01/03 260 259
Series H
5.750% due 03/01/04 400 385
BankBoston Corp.
6.125% due 03/15/02 250 247
Barnett Bank, Inc.
6.900% due 09/01/05 405 398
Baxter International, Inc.
6.630% due 02/15/28 825 707
Bear Stearns Co., Inc.
7.010% due 03/28/03 (c) 2,000 1,998
Series B
7.012% due 05/16/03 (c) 500 499
Bell Telephone Co. of Pennsylvania
8.350% due 12/15/30 355 379
BellSouth Capital Funding Corp.
7.750% due 02/15/10 750 765
BellSouth Telecommunications, Inc.
7.000% due 12/01/95 385 334
Beneficial Corp.
8.400% due 05/15/08 1,235 1,272
Boeing Co.
8.750% due 08/15/21 550 621
Burlington Northern Santa Fe
7.082% due 05/13/29 1,200 1,039
141 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ------
Camden Property Trust
7.000% due 04/15/04 600 583
Campbell Soup Co.
8.875% due 05/01/21 420 449
Canadian National Railway Co.
6.900% due 07/15/28 325 282
Carolina Power & Light Co.
6.875% due 08/15/23 410 363
Case Corp.
7.250% due 08/01/05 330 238
7.250% due 01/15/16 295 151
Caterpillar Financial Services Corp.
9.500% due 02/06/07 420 470
Series 2
6.771% due 02/12/01 (c) 4,000 4,001
Central Fidelity Banks, Inc.
8.150% due 11/15/02 170 174
Central Power & Light Co.
Series FF
6.875% due 02/01/03 600 595
Champion International Corp.
6.400% due 02/15/26 460 436
Chase Manhattan Corp.
6.500% due 08/01/05 300 293
Series C
6.750% due 12/01/04 700 693
Chesapeake & Potomac Telephone Co.
8.375% due 10/01/29 230 243
Chrysler Financial Corp.
6.649% due 06/11/01 (c) 2,000 2,001
Cincinnati Gas & Electric Co.
7.200% due 10/01/23 410 362
CIT Group, Inc.
6.150% due 12/15/02 500 489
7.250% due 08/15/05 1,250 1,224
Citicorp
6.815% due 05/24/01 (c) 2,000 2,001
9.500% due 02/01/02 120 124
7.125% due 06/01/03 390 393
Citigroup, Inc.
6.875% due 02/15/98 790 645
City National Bank
6.375% due 01/15/08 600 552
Clear Channel Communications
7.650% due 09/15/10 1,050 1,031
Coastal Corp.
7.500% due 08/15/06 650 659
Coca Cola Enterprises, Inc.
7.000% due 10/01/26 675 663
6.750% due 01/15/38 250 211
Comcast Cable Communications
8.375% due 05/01/07 850 889
Commercial Credit Group, Inc.
7.875% due 07/15/04 805 827
6.500% due 06/01/05 540 527
8.700% due 06/15/10 380 410
Commonwealth Edison Co.
Series 85
7.375% due 09/15/02 945 949
Compaq Computer Corp.
7.450% due 08/01/02 485 484
Conagra, Inc.
8.100% due 05/20/02 300 303
Consolidated Edison Inc.
8.125% due 05/01/10 395 408
Series 98-A
6.250% due 02/01/08 795 748
Countrywide Home Loan
Series H
6.250% due 04/15/09 500 451
Cox Communications, Inc.
6.500% due 11/15/02 550 542
7.500% due 08/15/04 800 802
6.690% due 09/20/04 400 390
CSX Corp.
7.250% due 05/01/04 750 746
6.250% due 10/15/08 75 68
CVS Corp.
5.500% due 02/15/04 1,050 1,005
DaimlerChrysler North America Holding
Corp.
6.900% due 09/01/04 1,625 1,603
8.000% due 06/15/10 1,000 1,016
Deere & Co.
8.100% due 05/15/30 800 812
Delta Air Lines, Inc.
Series C
6.650% due 03/15/04 1,000 951
Duke Capital Corp.
7.250% due 10/01/04 900 903
Duke Energy Corp.
7.000% due 07/01/33 395 347
Duke Energy Field Services LLC
7.500% due 08/16/05 500 504
Duke Weeks Realty, L.P.
7.750% due 11/15/09 635 623
Diversified Bond Fund 142
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ------
Eastman Chemical Co.
7.250% due 01/15/24 300 262
Enron Corp.
6.750% due 08/01/09 1,275 1,224
EOP Operating, L.P.
6.500% due 01/15/04 685 664
Federal Express Corp.
7.600% due 07/01/97 300 250
Fifth Third Capital Trust I
Series A
8.136% due 03/15/27 315 296
First Bank Systems, Inc.
8.000% due 07/02/04 700 714
First Chicago NBD
6.781% due 11/14/01 (c) 3,000 2,996
First Interstate Bancorp
9.375% due 01/23/02 135 139
First Union Corp.
6.950% due 11/01/04 250 246
6.875% due 09/15/05 400 391
7.500% due 07/15/06 175 175
First Union Institutional Capital Trust I
8.040% due 12/01/26 225 200
First Union National Bank
7.125% due 10/15/06 500 490
Firstar Bank North America
7.125% due 12/01/09 950 920
Fleet Financial Group, Inc.
6.875% due 03/01/03 300 299
8.125% due 07/01/04 595 613
Fleetboston Financial Corp.
7.250% due 09/15/05 575 578
Ford Motor Co.
7.450% due 07/16/31 950 876
8.900% due 01/15/32 475 500
Ford Motor Credit Co.
7.750% due 11/15/02 2,000 2,025
6.700% due 07/16/04 4,550 4,457
6.750% due 05/15/05 350 341
Fort James Corp.
6.625% due 09/15/04 1,020 972
Fortune Brands, Inc.
7.875% due 01/15/23 380 363
GE Global Insurance Holding Corp.
6.450% due 03/01/19 650 576
General Electric Capital Corp.
8.300% due 09/20/09 235 256
Series A
6.650% due 09/03/02 795 794
General Motors Acceptance Corp.
5.480% due 12/16/02 2,535 2,463
6.750% due 03/15/03 4,000 3,981
Goldman Sachs Group, Inc.
Series B
7.500% due 01/28/05 1,075 1,075
Grand Metropolitan Investment Corp.
7.450% due 04/15/35 300 304
Great Lakes Chemical Corp.
7.000% due 07/15/09 1,225 1,156
GTE California, Inc.
6.750% due 05/15/27 550 490
Harrahs Operating Co., Inc.
7.500% due 01/15/09 515 486
Heller Financial, Inc.
7.500% due 08/23/02 775 777
Hertz Corp.
7.625% due 08/01/02 550 553
9.000% due 11/01/09 230 244
Household Finance Corp.
7.200% due 07/15/06 370 366
ICI Wilmington, Inc.
9.500% due 11/15/00 5,000 5,003
Indiana Michigan Power Co.
Series B
7.305% due 09/03/02 (c) 500 500
International Business Machines Corp.
6.220% due 08/01/27 150 146
7.125% due 12/01/96 780 712
International Paper Co.
8.000% due 07/08/03 375 380
ITT Financial Corp.
7.400% due 11/15/25 955 815
JPM Capital Trust I
7.540% due 01/15/27 225 197
KeyCorp
8.000% due 07/01/04 150 153
7.500% due 06/15/06 750 741
Knight-Ridder, Inc.
6.875% due 03/15/29 900 735
Liberty Property, LP
8.500% due 08/01/10 425 430
Lincoln National Corp.
7.250% due 05/15/05 450 446
6.500% due 03/15/08 200 184
7.000% due 03/15/18 450 402
Loral Corp.
7.000% due 09/15/23 675 600
Lowes Cos., Inc.
6.875% due 02/15/28 680 578
143 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ------
Lucent Technologies, Inc.
6.450% due 03/15/29 400 310
Manufacturers & Traders Trust Co.
7.000% due 07/01/05 435 425
Marsh & McLennan Cos., Inc.
6.625% due 06/15/04 475 467
Mattel, Inc.
6.000% due 07/15/03 500 452
May Department Stores Co.
6.875% due 11/01/05 480 462
MCI WorldCom, Inc.
6.400% due 08/15/05 (c) 1,150 1,109
6.950% due 08/15/28 500 439
Mercantile Bancorp.
7.050% due 06/15/04 825 819
Merck & Co., Inc.
Series B
5.760% due 05/03/37 1,200 1,195
Mirage Resorts, Inc.
6.625% due 02/01/05 360 341
6.750% due 02/01/08 225 203
Morgan (J.P.) & Co., Inc.
5.750% due 02/25/04 200 192
Nabisco, Inc.
6.375% due 02/01/35 850 803
National City Corp.
6.875% due 05/15/19 325 284
Nationsbank Corp.
7.750% due 08/15/04 450 460
New England Telephone & Telegraph Co.
7.875% due 11/15/29 235 239
News America Holdings, Inc.
8.500% due 02/15/05 525 542
8.875% due 04/26/23 500 508
7.750% due 01/20/24 450 409
Norfolk Southern Corp.
7.050% due 05/01/37 725 720
Northwestern Bell Telephone Co.
7.750% due 05/01/30 630 632
Norwest Corp.
Series H
6.750% due 06/15/07 300 287
Norwest Financial, Inc.
6.250% due 11/01/02 525 520
6.375% due 11/15/03 575 565
6.000% due 02/01/04 600 580
6.750% due 06/01/05 200 197
NYNEX Capital Funding Co.
Series B
8.750% due 12/01/04 450 473
NYNEX Corp.
9.550% due 05/01/10 294 317
Panamsat Corp.
6.125% due 01/15/05 600 549
Park Place Entertainment Corp.
8.500% due 11/15/06 700 696
Philadelphia Electric Co.
7.125% due 09/01/02 550 549
Philip Morris Cos., Inc.
6.950% due 06/01/06 295 293
7.200% due 02/01/07 1,000 962
7.650% due 07/01/08 310 303
Pitney Bowes Credit Corp.
8.550% due 09/15/09 460 488
Praxair, Inc.
6.850% due 06/15/05 700 680
Procter & Gamble Co.
Series A
9.360% due 01/01/21 90 104
Provident Cos., Inc.
6.375% due 07/15/05 500 470
Qwest Communications International, Inc.
Series B
7.500% due 11/01/08 825 816
Qwest Corp.
7.625% due 06/09/03 800 810
Raytheon Co.
6.300% due 03/15/05 880 846
Resolution Funding Corp.
Series A
8.875% due 07/15/20 1,855 2,304
8.625% due 01/15/21 715 895
8.625% due 01/15/30 390 498
Safeco Corporation
7.875% due 03/15/03 605 611
Safeway, Inc.
7.000% due 09/15/02 650 650
6.050% due 11/15/03 440 427
7.250% due 09/15/04 575 574
Sears Roebuck Acceptance Corp.
7.000% due 06/15/07 245 229
6.750% due 01/15/28 800 626
Security Capital Group, Inc.
6.950% due 06/15/05 600 563
Simon Debartolo Group, L.P.
6.750% due 06/15/05 850 807
Small Business Administration-SBIC
Series 10B
7.449% due 08/01/10 300 307
Diversified Bond Fund 144
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- -------
Sprint Capital Corp.
5.700% due 11/15/03 425 407
6.125% due 11/15/08 1,150 1,021
6.900% due 05/01/19 900 762
Suntrust Banks, Inc.
7.375% due 07/01/02 700 705
6.250% due 06/01/08 150 139
7.750% due 05/01/10 525 523
Texaco Capital, Inc.
9.750% due 03/15/20 440 539
8.875% due 09/01/21 220 256
Texas Utilities Electric Co.
8.250% due 04/01/04 425 441
Time Warner, Inc.
7.975% due 08/15/04 (f) 300 307
7.750% due 06/15/05 550 561
6.875% due 06/15/18 950 869
6.950% due 01/15/28 300 267
Times Mirror Co.
7.450% due 10/15/09 350 347
Tosco Corp.
8.125% due 02/15/30 250 254
Transamerica Finance Corp.
7.250% due 08/15/02 1,000 1,000
TRW, Inc.
7.125% due 06/01/09 1,200 1,114
UBS PFD Funding Trust I
8.622% due 10/29/49 (c)(g) 505 510
Unilever Capital Corp.
6.750% due 11/01/03 1,075 1,068
Union Carbide Corp.
7.875% due 04/01/23 590 575
Union Oil Co.
9.400% due 02/15/11 470 531
Union Pacific Corp.
7.600% due 05/01/05 570 574
Union Pacific Railroad Trust
Pass-thru Certificate
Series 1996-A2
7.060% due 05/15/03 500 494
United Technologies Corp.
8.750% due 03/01/21 380 420
US Bank National Association Minnesota
6.729% due 12/19/01 (c) 2,000 2,001
5.625% due 11/30/05 750 700
US West Communications, Inc.
7.200% due 11/10/26 500 443
Viacom, Inc.
7.875% due 07/30/30 250 254
Virginia Electric & Power Co.
8.750% due 04/01/21 200 197
Wachovia Corp. New
6.800% due 06/01/05 305 301
Wal-Mart Stores, Inc.
7.500% due 05/15/04 300 307
Series 1994-B3
8.800% due 12/30/14 315 355
Wells Fargo Co.
6.625% due 07/15/04 1,100 1,085
6.875% due 04/01/06 500 490
Wellsford Residential Property Trust
9.375% due 02/01/02 750 763
Westdeutsche Landesbank NY
6.050% due 01/15/09 100 91
Westvaco Corp.
9.750% due 06/15/20 115 133
Willamette Industries, Inc.
7.850% due 07/01/26 520 515
Williams Cos., Inc.
7.625% due 07/15/19 500 485
Wilmington Trust
10.370% due 01/02/07 1,372 1,514
Wisconsin Central Transportation Corp.
6.625% due 04/15/08 850 767
World Financial Properties Tower
Series 1996 WBF-B
6.910% due 09/01/13 1,093 1,058
Worldcom, Inc.
8.000% due 05/15/06 800 822
Zurich Capital Trust I
8.376% due 06/01/37 600 567
-------
163,362
-------
EURODOLLAR BONDS - 2.4%
Asian Development Bank
6.250% due 10/24/05 315 310
Australian Gas Light Co.
6.400% due 04/15/08 1,000 921
Bank of Tokyo Mitsubishi, Ltd.
8.400% due 04/15/10 400 406
Deutsche Telekom International Finance
BV
7.750% due 06/15/05 1,000 1,017
8.000% due 06/15/10 550 561
8.250% due 06/15/30 525 536
HSBC Holdings PLC
7.500% due 07/15/09 500 500
Korea Development Bank
7.125% due 09/17/01 2,000 1,988
7.375% due 09/17/04 1,500 1,465
145 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ------
Merita Bank, Ltd.
7.150% due 12/29/49 (g) 250 247
7.500% due 12/29/49 (g) 850 805
Nationsbank Corp.
6.810% due 06/17/02 (c) 3,000 3,001
Sanwa Finance Aruba AEC
8.350% due 07/15/09 2,000 2,073
Telefonica Europe BV
7.350% due 09/15/05 500 501
7.750% due 09/15/10 400 402
8.250% due 09/15/30 200 204
Vodafone Group PLC
Series 144A
6.859% due 12/19/01 1,900 1,901
7.625% due 02/15/05 950 965
----------
17,803
----------
MORTGAGE-BACKED SECURITIES - 48.1%
American Southwest Financial Corp.
Series G Class G-4
12.250% due 11/01/14 (f) 108 108
Chase Commercial Mortgage Securities
Corp.
Series 1997-1 Class E
7.370% due 12/19/07 (c) 1,475 1,403
Series 2000-2 Class A2
7.631% due 06/15/10 400 412
Collateralized Mortgage Obligation Trust
Series 56 Class B CMO
9.985% due 12/01/18 107 110
Commercial Mortgage Acceptance Corp.
Series 1999-C1 Class A2
7.030% due 05/15/09 980 972
Credit Suisse First Boston Mortgage
Securities Corp.
Series 1999-C1 Class A2
7.290% due 09/15/09 1,090 1,101
DLJ Commercial Mortgage Corp.
Series 2000-CF1 Class A1B
7.620% due 05/10/10 170 175
DLJ Mortgage Acceptance Corp.
Series 1993 Class A-2 CMO
7.650% due 09/18/03 2,500 2,491
Series 1996-CF1 Class A1B
7.580% due 02/12/06 2,000 2,023
Federal Home Loan Mortgage Corp. (b)
6.000% 30 Year Gold TBA 9,105 8,541
7.000% 30 Year Gold TBA 3,200 3,137
Federal Home Loan Mortgage Corp.
Series 1997-81 Class PC
5.000% due 04/18/27 1,000 914
Series 2006 Class B
6.500% due 08/15/23 3,650 3,613
Federal Home Loan Mortgage Corp.
Participation Certificate
7.500% due 2001 54 54
7.000% due 2002 (f) 22 22
6.500% due 2003 46 45
7.000% due 2003 (f) 136 136
7.000% due 2003 7 7
5.500% due 2006 3,683 3,507
6.750% due 2007 (f) 181 179
7.500% due 2007 328 331
7.000% due 2008 274 274
8.000% due 2008 (f) 47 47
8.500% due 2008 (f) 52 52
6.500% due 2009 1,044 1,030
7.500% due 2009 932 941
7.500% due 2009 (c) 61 62
8.000% due 2009 102 104
6.500% due 2010 70 69
7.000% due 2010 215 215
7.500% due 2010 22 22
8.000% due 2010 16 16
6.000% due 2011 2,960 2,868
7.000% due 2011 67 66
7.500% due 2011 99 100
8.000% due 2011 206 209
6.000% due 2012 61 59
7.500% due 2012 339 341
8.000% due 2012 131 134
6.000% due 2014 4,735 4,562
6.500% due 2014 704 689
7.500% due 2014 157 158
12.000% due 2014 61 66
6.000% due 2015 1,568 1,511
7.500% due 2015 510 514
12.000% due 2015 (f) 43 48
9.000% due 2016 311 319
12.500% due 2016 33 37
8.000% due 2017 275 279
9.000% due 2017 2 2
9.000% due 2018 607 627
9.000% due 2020 293 303
9.000% due 2022 94 97
9.000% due 2024 380 392
6.500% due 2025 481 464
8.500% due 2025 340 348
9.000% due 2025 111 114
9.000% due 2026 8 8
8.500% due 2027 1,355 1,387
6.000% due 2028 2,687 2,521
Diversified Bond Fund 146
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ------
6.500% due 2028 3,835 3,692
6.000% due 2029 1,505 1,412
6.500% due 2029 7,481 7,193
6.500% due 2030 277 266
7.500% due 2030 2,221 2,220
7.813% due 2030 500 501
Federal Home Loan Mortgage Corp.
Series 1053 Class G
7.000% due 03/15/21 (f) 656 645
Federal National Mortgage Association (b)
7.000% 30 Year TBA 845 828
7.500% 30 Year TBA 50,535 50,462
Federal National Mortgage Association
Pools
8.000% due 2002 104 104
9.500% due 2002 17 17
6.000% due 2003 235 231
7.000% due 2003 203 203
7.500% due 2003 252 253
8.000% due 2003 47 47
9.500% due 2003 61 62
6.500% due 2004 14 14
8.000% due 2004 51 51
9.500% due 2005 47 48
9.500% due 2006 46 48
7.000% due 2007 56 56
7.200% due 2007 965 980
7.280% due 2007 655 648
7.000% due 2008 223 223
7.000% due 2009 316 315
7.125% due 2010 925 953
8.000% due 2010 19 20
10.500% due 2010 13 14
7.000% due 2011 146 146
8.000% due 2011 33 33
6.500% due 2012 301 295
7.000% due 2012 104 104
5.500% due 2013 235 221
6.000% due 2013 2,359 2,272
6.500% due 2013 61 59
5.500% due 2014 4,862 4,581
7.000% due 2015 182 181
9.000% due 2016 13 13
8.000% due 2017 349 356
8.500% due 2017 42 43
9.000% due 2017 325 336
8.000% due 2020 20 20
7.500% due 2022 637 640
7.000% due 2023 176 173
7.500% due 2023 18 18
6.500% due 2024 136 131
7.500% due 2024 556 558
8.000% due 2024 1,396 1,417
7.000% due 2025 258 254
7.500% due 2025 186 187
8.500% due 2025 142 145
9.000% due 2025 1,490 1,538
9.000% due 2026 202 208
7.500% due 2027 186 186
6.000% due 2028 12,847 12,048
6.500% due 2028 2,746 2,641
7.500% due 2028 420 421
6.000% due 2029 3,658 3,431
6.500% due 2029 (f) 5,917 5,685
6.500% due 2029 15,220 14,633
7.000% due 2029 742 727
7.500% due 2029 734 733
7.000% due 2030 2,896 2,837
7.500% due 2030 6,127 6,117
8.000% due 2030 4,306 4,358
8.500% due 2030 2,900 2,963
Federal National Mortgage Association
Series 1993-134 Class H
6.500% due 08/25/08 1,385 1,338
Federal National Mortgage Association
(REMIC)
Series 1992-10 Class ZD
8.000% due 11/25/21 2,043 2,078
Federal National Mortgage Association
ACES
Series 1998-M1 Class A
6.250% due 01/25/08 1,250 1,194
Series 1999-M4 Class A
7.354% due 12/25/09 1,622 1,629
Federal National Mortgage Association
Interest Only Inverse Floater
Series 1993-208 Class SA
0.165% due 02/25/23 (c)(d) 18,856 143
First Union Lehman Brothers Commercial
Mortgage Trust
Series 1997-C1 Class C
7.440% due 04/18/07 750 751
First Union Lehman Brothers Commercial
Mortgage Trust
Pass-Thru Certificates
Series 1997-C1 Class D
7.500% due 10/18/08 300 293
First Union National Bank Commercial
Mortgage Trust
Series 2000-C1 Class A2
7.841% due 03/15/10 50 52
147 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ------
GMAC Commercial Mortgage Securities,
Inc.
Series 1996-C1 Class A2A
6.790% due 09/15/03 618 616
Series 1999-C2 Class A1
6.570% due 09/15/33 1,285 1,263
Government National Mortgage
Association (b)
6.000% 30 Year TBA 1,200 1,131
6.500% 30 Year TBA 26,600 25,677
7.000% 30 Year TBA 5,400 5,322
7.500% 30 Year TBA 5,000 5,017
8.000% 30 Year TBA 12,460 12,666
8.500% 30 Year TBA 900 923
Government National Mortgage Association
8.000% due 2007 3 3
6.500% due 2008 112 111
6.500% due 2009 1,014 1,005
7.000% due 2011 13 13
8.000% due 2016 3 3
9.500% due 2016 31 33
8.000% due 2017 89 91
9.000% due 2017 1,107 1,161
9.000% due 2020 14 14
10.500% due 2020 133 145
7.000% due 2022 1,870 1,850
8.000% due 2022 297 303
8.500% due 2022 161 166
7.000% due 2023 4,025 3,980
7.125% due 2023 (c)(f) 1,994 2,012
7.125% due 2023 (f) 1,471 1,485
7.375% due 2023 (f) 1,820 1,834
7.500% due 2023 4,471 4,499
7.000% due 2024 9,859 9,746
7.375% due 2024 (f) 804 807
7.500% due 2024 746 750
7.500% due 2025 230 231
8.000% due 2025 829 843
9.000% due 2025 2,578 2,686
6.500% due 2026 201 195
8.000% due 2027 17 17
6.500% due 2028 1,336 1,290
7.000% due 2028 1,451 1,430
6.500% due 2029 3,765 3,627
7.500% due 2029 (c) 1,505 1,511
8.000% due 2029 4,826 4,906
8.500% due 2029 199 204
8.000% due 2030 5,546 5,638
8.500% due 2030 1,115 1,143
Government National Mortgage
Association REMIC
Series 1998-23 Class ZA
6.500% due 09/20/28 5,688 4,762
GS Mortgage Securities Corp. II
Series 1997-GL Class A2A
6.940% due 07/13/30 540 538
Housing Securities, Inc.
Series 1994-2 Class A1
6.500% due 07/25/09 544 536
HSBC
Series 2000-1 Class A3
7.130% due 11/15/03 900 900
Keycorp
Series 2000-C1 Class A2
7.727% due 02/15/10 3,750 3,883
Mellon Residential Funding Corp.
Series 2000-TBC1 Class A2B
6.922% due 03/25/30 1,730 1,710
Series 2000-TBC3 Class A1
6.841% due 12/15/30 (c) 9,246 9,246
Merrill Lynch Mortgage Investors, Inc.
Pass-Thru Certificates
Series 1999-C1 Class A2
7.560% due 09/15/09 1,700 1,746
Morgan Stanley Capital I
Series 1999-CAM1 Class A3
6.920% due 11/15/08 375 373
Morgan Stanley Dean Witter Capital I
Series 2000-1345 Class A2
7.459% due 09/03/10 1,325 1,350
Series 2000-Prin Class A3
7.360% due 05/23/09 1,595 1,611
Series 2000-Prin Class A4
7.490% due 01/23/15 1,345 1,364
Series 2000-XLF Class A
6.870% due 06/05/03 1,111 1,111
Mortgage Capital Funding, Inc.
Series 1996-MC1 Class A2B
7.900% due 02/15/06 775 805
Nationslink Funding Corp.
Series 1999-2 Class A1C
7.030% due 01/20/08 420 421
Series 1999-SL Class A4
6.654% due 02/10/06 500 495
Resolution Trust Corp.
Series 1995 - C1 Class D
6.900% due 02/25/27 775 762
Diversified Bond Fund 148
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- -------
Ryland Acceptance Corp. Four
Series 88, Class E CMO
7.950% due 01/01/19 1,376 1,378
Small Business Investment Cos.
Series 1999-P10B Class 1
7.540% due 08/10/09 4,295 4,402
Series 2000-10B Class 1
7.452% due 09/01/10 5,000 5,022
TIAA Retail Commercial Mortgage Trust
Series 1999-1 Class A
7.170% due 04/15/08 279 281
Washington Mutual
Series 2000-1R Class A
6.780% due 07/26/03 492 493
-------
349,565
-------
NON-US BONDS - 0.4%
Bundesrepublik Deutschland
Series 00
5.250% due 01/04/11 EUR 1,800 1,530
Germany, Federal Republic of
Series 99
4.500% due 07/04/09 EUR 200 161
Series 00
5.250% due 07/04/10 EUR 1,800 1,529
-------
3,220
-------
UNITED STATES GOVERNMENT AGENCIES - 6.2%
Federal Home Loan Bank
5.625% due 03/19/01 200 199
Series I202
6.450% due 03/13/02 4,250 4,232
Series TV09
5.790% due 04/27/09 2,580 2,411
Series V703
5.233% due 11/17/03 1,600 1,543
Federal Home Loan Mortgage Corp.
7.375% due 05/15/03 1,245 1,272
7.000% due 07/15/05 1,035 1,054
5.750% due 03/15/09 3,400 3,193
7.000% due 03/15/10 2,965 3,024
Federal National Mortgage Association
6.250% due 11/15/02 900 897
6.250% due 11/20/02 1,335 1,321
5.750% due 04/15/03 4,160 4,095
6.100% due 06/26/03 505 496
6.010% due 07/17/03 2,000 1,965
7.000% due 07/15/05 1,460 1,488
6.940% due 03/19/07 1,065 1,043
6.750% due 07/30/07 365 358
6.900% due 08/21/07 2,155 2,107
6.500% due 04/29/09 4,930 4,694
6.210% due 08/06/38 320 292
Series B
5.300% due 11/13/03 1,600 1,547
Government Backed Trust Certificates
Series 1-C
9.250% due 11/15/01 831 843
Series T-3
9.625% due 05/15/02 (f) 175 177
Tennessee Valley Authority
Series A
6.375% due 06/15/05 2,730 2,709
Series E
6.250% due 12/15/17 4,085 3,842
-------
44,802
-------
UNITED STATES GOVERNMENT TREASURIES - 15.3%
United States Treasury Bond
Principal Strip
11.250% due 02/15/15 1,300 556
8.750% due 05/15/20 700 218
8.000% due 11/15/21 12,040 3,447
United States Treasury Bonds
11.750% due 02/15/10 20 24
12.750% due 11/15/10 2,680 3,452
12.000% due 08/15/13 6,065 8,289
13.250% due 05/15/14 680 1,004
12.500% due 08/15/14 4,620 6,636
9.875% due 11/15/15 2,430 3,353
9.125% due 05/15/18 800 1,067
8.875% due 02/15/19 7,820 10,277
8.000% due 11/15/21 100 124
6.875% due 08/15/25 25 28
6.000% due 02/15/26 1,700 1,705
6.375% due 08/15/27 18,670 19,677
3.625% due 04/15/28 320 308
5.500% due 08/15/28 200 188
3.875% due 04/15/29 2,101 2,109
6.250% due 05/15/30 5,600 5,964
United States Treasury Notes
6.625% due 04/30/02 255 257
3.625% due 07/15/02 (f) 1,186 1,188
5.750% due 11/30/02 2,425 2,415
7.250% due 05/15/04 2,410 2,513
7.250% due 08/15/04 220 230
5.875% due 11/15/04 105 105
7.875% due 11/15/04 3,355 3,594
7.500% due 02/15/05 2,380 2,525
6.500% due 10/15/06 2,455 2,531
3.375% due 01/15/07 2,834 2,761
6.125% due 08/15/07 3,705 3,757
149 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- -------
3.625% due 01/15/08 2,245 2,209
5.625% due 05/15/08 10,045 9,904
3.875% due 01/15/09 211 211
6.000% due 08/15/09 8,295 8,378
-------
111,004
-------
YANKEE BONDS - 2.9%
Abbey National PLC
6.700% due 06/29/49 (g) 2,125 1,916
African Development Bank
9.750% due 12/15/03 325 351
6.750% due 10/01/04 300 301
6.875% due 10/15/15 1,245 1,209
8.800% due 09/01/19 295 338
Alberta Energy Co., Ltd.
8.125% due 09/15/30 260 262
Canadian National Railway Co.
6.800% due 07/15/18 450 399
Carter Holt Harvey, Ltd.
8.875% due 12/01/04 350 367
Diageo Capital PLC
6.125% due 08/15/05 600 577
Hydro Quebec
Series GH
8.250% due 04/15/26 505 543
International American Development Bank
6.950% due 08/01/26 155 157
Italy, Republic of
6.875% due 09/27/23 150 149
Manitoba, Province of
Series CB
8.800% due 01/15/20 200 235
Series CD
9.250% due 04/01/20 200 244
National Australia Bank, Ltd.
Series A
8.600% due 05/19/10 435 462
National Westminster Bank PLC
7.375% due 10/01/09 550 542
7.750% due 04/29/49 (g) 1,275 1,236
New Brunswick, Province of
7.125% due 10/01/02 400 403
9.750% due 05/15/20 190 239
Newfoundland, Province of
10.000% due 12/01/20 90 111
Noranda Forest, Inc.
6.875% due 11/15/05 250 236
Nova Scotia, Province of
9.125% due 05/01/21 690 800
Pemex Finance, Ltd.
6.125% due 11/15/03 2,600 2,548
Quebec, Province of
8.800% due 04/15/03 500 524
7.500% due 09/15/29 250 253
Series NN
7.125% due 02/09/24 985 959
Royal Caribbean Cruises, Ltd.
8.125% due 07/28/04 475 464
7.250% due 03/15/18 640 497
Saskatchewan, Province of
8.000% due 07/15/04 1,045 1,088
Trans-Canada Pipelines, Ltd.
7.150% due 06/15/06 800 791
Tyco International Group SA
6.875% due 09/05/02 575 570
6.375% due 06/15/05 700 674
United News & Media PLC
7.250% due 07/01/04 1,100 1,071
-------
20,516
-------
TOTAL LONG-TERM INVESTMENTS
(cost $797,414) 794,230
-------
NOTIONAL
AMOUNT
(000)
$
--------
OPTIONS PURCHASED - 0.0%
United States Treasury Bonds (e)*
Dec 104.56 Call 1,025 32
Dec 104.58 Call 1,025 32
Feb 99.59 Call 2,175 36
Mar 104.33 Call 650 27
Dec 104.56 Put 1,025 7
Dec 104.58 Put 1,025 8
United States Treasury Notes (e)*
Jan 104.53 Call 750 21
-------
TOTAL OPTIONS PURCHASED
(cost $179) 163
-------
Diversified Bond Fund 150
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- -------
PREFERRED STOCKS - 0.3%
Credit Lyonnais Capital S.C.A. - ADR 50,000 1,200
Equity Office Properties Trust Series B 22,000 957
-------
TOTAL PREFERRED STOCKS
(cost $2,350) 2,157
-------
PRINCIPAL
AMOUNT
(000)
$
---------
SHORT-TERM INVESTMENTS - 3.6%
Dominion Resources, Inc.
6.100% due 01/26/01 900 900
Frank Russell Investment Company Money
Market Fund,
due on demand (a) 25,436 25,436
-------
TOTAL SHORT-TERM INVESTMENTS
(cost $26,336) 26,336
-------
TOTAL INVESTMENTS - 113.2%
(identified cost $826,279) 822,886
OTHER ASSETS AND LIABILITIES,
NET, INCLUDING OPTIONS WRITTEN - (13.2%) (95,926)
-------
726,960
NET ASSETS - 100.0% =======
* 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) Held as collateral in connection with options written by the Fund.
(g) Perpetual floating rate note.
Abbreviations:
ADR - American Depositary Receipt
CMO - Collateralized Mortgage Obligation
REMIC - Real Estate Mortgage Investment Conduit
TBA - To Be Announced Security
Foreign Currency Abbreviations:
EUR - Euro dollar
ITL - Italian lira
USD - United States dollar
NOTIONAL MARKET
AMOUNT VALUE
(000) (000)
OPTIONS WRITTEN $ $
--------- -------
United States Treasury Bonds*
Jan 100.50 Call 750 47
Mar 108.30 Call 650 14
Dec 103.42 Put 3,792 20
Jan 108.56 Put 750 20
Feb 98.86 Put 2,175 20
Mar 100.36 Put 650 4
United States Treasury Notes*
Dec 100.14 Call 9,328 23
Dec 103.42 Call 3,793 25
Dec 100.14 Put 9,328 20
-------
Total Liability for Options Written
(premiums received $184) 193
=======
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION
DELIVER FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
------------ ----------- ---------- --------------
EUR 1,867 USD 1,638 11/13/00 $ 53
USD 1,484 EUR 1,739 11/20/00 (7)
--------------
$ 46
==============
See accompanying notes which are an integral part of the financial statements.
151 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts)
October 31, 2000
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
Investments at market (identified cost $826,279)........................................................ $ 822,886
Unrealized appreciation on forward foreign currency exchange contracts.................................. 53
Receivables:
Dividends and interest............................................................................... 8,955
Investments sold (regular settlement)................................................................ 11,280
Investments sold (delayed settlement)................................................................ 28,557
Fund shares sold..................................................................................... 647
From Advisor......................................................................................... 63
Prepaid expenses........................................................................................ 6
----------
Total assets...................................................................................... 872,447
LIABILITIES
Payables:
Investments purchased (regular settlement)...................................... $ 13,296
Investments purchased (delayed settlement)...................................... 128,796
Fund shares redeemed............................................................ 2,717
Accrued fees to affiliates...................................................... 352
Other accrued expenses.......................................................... 126
Unrealized depreciation on forward foreign currency exchange contracts............. 7
Options written, at market value (premiums received $184).......................... 193
----------
Total liabilities................................................................................. 145,487
----------
NET ASSETS.............................................................................................. $726,960
==========
NET ASSETS CONSIST OF:
Undistributed net investment income..................................................................... $4,755
Accumulated net realized gain (loss).................................................................... (35,451)
Unrealized appreciation (depreciation) on:
Investments.......................................................................................... (3,393)
Options written...................................................................................... (9)
Foreign currency-related transactions................................................................ 179
Shares of beneficial interest........................................................................... 326
Additional paid-in capital.............................................................................. 760,553
----------
NET ASSETS.............................................................................................. $726,960
==========
NET ASSET VALUE, offering and redemption price per share:
Class C ($7,315,058 divided by 322,149 shares of $.01 par value
shares of beneficial interest outstanding)........................................................ $22.71
Class E ($5,492,443 divided by 241,457 shares of $.01 par value...................................... ==========
shares of beneficial interest outstanding)........................................................ $22.75
Class S ($714,152,652 divided by 32,014,908 shares of $.01 par value................................. ==========
shares of beneficial interest outstanding)........................................................ $22.31
==========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Diversified Bond Fund 152
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 2000
---------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Interest................................................................ $ 41,156 $ 49,620
Dividends from Money Market Fund........................................ 2,420 3,655
Dividends............................................................... 173 226
---------------- -----------------
Total investment income.............................................. 43,749 53,501
---------------- -----------------
EXPENSES
Advisory fees........................................................... 2,469 3,277
Administrative fees..................................................... 313 419
Custodian fees.......................................................... 485 529
Distribution fees - Class C............................................. 35 19
Transfer agent fees..................................................... 448 598
Professional fees....................................................... 78 48
Registration fees....................................................... 54 138
Shareholder servicing fees - Class C.................................... 12 6
Shareholder servicing fees - Class E.................................... 9 12
Trustees' fees.......................................................... 15 9
Miscellaneous........................................................... 73 79
---------------- -----------------
Expenses before reductions.............................................. 3,991 5,134
Expense reductions...................................................... (40) --
---------------- -----------------
Expenses, net........................................................ 3,951 5,134
---------------- -----------------
Net investment income...................................................... 39,798 48,367
---------------- -----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments............................................................. (7,192) (18,318)
Options written......................................................... (82) 434
Foreign currency-related transactions................................... 316 42
---------------- -----------------
(6,958) (17,842)
---------------- -----------------
Net change in unrealized appreciation (depreciation) on:
Investments............................................................. 20,249 (41,035)
Options written......................................................... 132 (243)
Foreign currency-related transactions................................... 179 --
---------------- -----------------
20,560 (41,278)
---------------- -----------------
Net realized and unrealized gain (loss).................................... 13,602 (59,120)
---------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS...................... $ 53,400 $ (10,753)
================ =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
153 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income................................... $ 39,798 $ 48,367 $ 45,167
Net realized gain (loss)................................ (6,958) (17,842) 15,381
Net change in unrealized appreciation (depreciation).... 20,560 (41,278) (183)
---------------- ----------------- -----------------
Net increase (decrease) in net assets from operations 53,400 (10,753) 60,365
---------------- ----------------- -----------------
DISTRIBUTIONS
From net investment income
Class C.............................................. (229) (122) --
Class E.............................................. (190) (255) (241)
Class S.............................................. (34,810) (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..... (35,229) (54,084) (57,725)
---------------- ----------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share
transactions............................................ (65,176) 25,338 121,024
---------------- ----------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS................ (47,005) (39,499) 123,664
NET ASSETS
Beginning of period..................................... 773,965 813,464 689,800
---------------- ----------------- -----------------
End of period (including undistributed net investment
income of $4,755 at October 31, 2000)................... $ 726,960 $ 773,965 $ 813,464
================ ================= =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Diversified Bond Fund 154
<PAGE>
DIVERSIFIED BOND FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
2000* 1999**
------- -------
NET ASSET VALUE, BEGINNING OF PERIOD..................... $ 22.24 $ 24.00
------- -------
INCOME FROM OPERATIONS
Net investment income (a)............................. .99 1.03
Net realized and unrealized gain (loss)............... .41 (1.61)
------- -------
Total income from operations....................... 1.40 (.58)
------- -------
DISTRIBUTIONS
From net investment income............................ (.93) (1.05)
From net realized gain................................ -- (.13)
------- -------
Total distributions................................ (.93) (1.18)
------- -------
NET ASSET VALUE, END OF PERIOD........................... $ 22.71 $ 22.24
======= =======
TOTAL RETURN (%)(b)...................................... 6.44 (2.47)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands).............. 7,315 4,652
Ratios to average net assets (%)(c):
Operating expenses, net............................ 1.62 1.62
Operating expenses, gross.......................... 1.63 1.62
Net investment income.............................. 5.37 4.88
Portfolio turnover rate (%)........................... 128.88 152.23
* For the ten months ended October 31, 2000.
** 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) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
155 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
2000* 1999 1998 1997 1996**
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 22.23 $ 23.92 $ 24.06 $ 22.98 $ 23.16
------- ------- ------- ------- -------
INCOME FROM OPERATIONS
Net investment income (a)..................... 1.13 1.30 1.32 1.22 .25
Net realized and unrealized gain (loss)....... .44 (1.65) .45 .66 (.09)
------- ------- ------- ------- -------
Total income from operations............... 1.57 (.35) 1.77 1.88 .16
------- ------- ------- ------- -------
DISTRIBUTIONS
From net investment income.................... (1.05) (1.21) (1.56) (.72) (.34)
From net realized gain........................ -- (.13) (.35) (.08) --
------- ------- ------- ------- -------
Total distributions........................ (1.05) (1.34) (1.91) (.80) (.34)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD................... $ 22.75 $ 22.23 $ 23.92 $ 24.06 $ 22.98
======= ======= ======= ======= =======
TOTAL RETURN (%)(b).............................. 7.25 (1.51) 7.63 8.35 .67
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)...... 5,492 3,639 4,703 2,469 962
Ratios to average net assets (%)(c):
Operating expenses, net.................... .87 .87 .98 1.29 1.31
Operating expenses, gross.................. .88 .87 .98 1.29 1.31
Net investment income...................... 6.13 5.49 5.42 5.64 5.75
Portfolio turnover rate (%)................... 128.88 152.23 216.88 172.43 138.98
</TABLE>
* For the ten months ended October 31, 2000.
** 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.
Diversified Bond Fund 156
<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>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
2000* 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 21.77 $ 23.53 $ 23.43 $ 22.97 $ 23.69 $ 21.53
-------- -------- -------- -------- -------- --------
INCOME FROM OPERATIONS
Net investment income (a)..................... 1.16 1.31 1.38 1.45 1.47 1.54
Net realized and unrealized gain (loss)....... .41 (1.60) .47 .56 (.71) 2.18
-------- -------- -------- -------- -------- --------
Total income from operations............... 1.57 (.29) 1.85 2.01 .76 3.72
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS
From net investment income.................... (1.03) (1.32) (1.40) (1.47) (1.48) (1.56)
From net realized gain........................ -- (.13) (.35) (.08) -- --
Tax return of capital......................... -- (.02) -- -- -- --
-------- -------- -------- -------- -------- --------
Total distributions........................ (1.03) (1.47) (1.75) (1.55) (1.48) (1.56)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD................... $ 22.31 $ 21.77 $ 23.53 $ 23.43 $ 22.97 $ 23.69
======== ======== ======== ======== ======== ========
TOTAL RETURN (%)(b)(c)........................... 7.40 (1.26) 8.09 9.09 3.43 17.76
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)...... 714,153 765,674 808,761 687,331 554,804 513,808
Ratios to average net assets (%)(c)(d):
Operating expenses, net.................... .62 .61 .57 .60 .61 .59
Operating expenses, gross.................. .63 .61 .57 .60 .61 .59
Net investment income...................... 6.35 5.78 5.83 6.35 6.46 6.69
Portfolio turnover rate (%)................... 128.88 152.23 216.88 172.43 138.98 135.85
</TABLE>
* For the ten months ended October 31, 2000.
(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) For periods prior to April 1, 1995, Fund performance, operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net of
investment management fees but gross of any investment services fees. See
Note 4.
(d) The ratios for periods less than one year are annualized.
157 Diversified Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
DATES MULTISTRATEGY BOND - CLASS S LB AGGREGATE **
Inception* $ 10,000 $ 10,000
1993 $ 10,893 $ 10,802
1994 $ 10,414 $ 10,406
1995 $ 11,886 $ 12,034
1996 $ 12,731 $ 12,738
1997 $ 13,891 $ 13,870
1998 $ 14,806 $ 15,165
1999 $ 15,004 $ 15,246
2000 $ 15,914 $ 16,359
Total $115,538 $116,621
YEARLY PERIODS ENDED OCTOBER 31
<TABLE>
<CAPTION>
MULTISTRATEGY BOND FUND - CLASS S MULTISTRATEGY BOND FUND - CLASS C ++++
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
----------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $10,607 6.07% 1 Year $10,509 5.09%
5 Years $13,388 6.00%(S) 5 Years $13,142 5.61%(S)
Inception* $15,914 6.17%(S) Inception* $15,621 5.92%(S)
MULTISTRATEGY BOND FUND - CLASS E ++ LEHMAN BROTHERS AGGREGATE BOND INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
----------------------------------------- --------------------------------------------
1 Year $10,588 5.88% 1 Year $10,730 7.30%
5 Years $13,313 5.88%(S) 5 Years $13,594 6.33%(S)
Inception* $15,825 6.09%(S) Inception* $16,359 6.56%(S)
</TABLE>
159 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the year ended October 31, 2000, the Multistrategy Bond Fund Class S, Class
E and Class C shares gained 6.56%, 6.46%, and 5.77%, respectively. This compared
to a 7.83% return for the Lehman Brothers Aggregate Bond Index.
The Fund's wide variety of non-Treasury issues across many fixed-income sectors
left it exposed to the general underperformance of corporate bonds, particularly
high-yield issues. However, emerging markets issues were strong, particularly
during much of the first and second quarters, and performance from mortgages
also helped offset the lackluster performance of corporate issues.
PORTFOLIO HIGHLIGHTS
During the first quarter, bond markets were focused on the Federal Reserve Board
(the Fed), as they waited for a definitive response regarding interest rates.
After the Fed imposed a 50 basis point interest rate hike on May 16, however,
bond investors generally reached a consensus that the Fed would hold rates
steady, and bonds enjoyed a rally. Subsequently, in June economic data provided
bond investors with the first major indications that the US economy could be
slowing, which continued to fuel the rally.
The big story was the inversion of the US Treasury yield curve which occurred
during first quarter 2000. While the 3-month and 2-year rates rose 57 and 25
basis points, respectively, the 10-year and 30-year rates declined 42 and 64
basis points, respectively. This inversion was driven by the US Treasury's debt
buyback program and a declining supply of longer-term Treasury bonds.
Corporate debt generally underperformed during the period, with high-yield
issues being the worst performers during the first quarter, and the
investment-grade corporate sector closely following their pattern. While
corporate issues lagged for most of the year, they did stage a late-period rally
that helped drive further debate regarding the direction of the equities markets
and future growth outlooks.
TOP TEN ISSUERS
(as a percent of Total Investments) October 31, 2000
Government National Mortgage Association 19.0%
Federal National Mortgage Association 12.1
United States Treasury 9.9
Federal Home Loan Mortgage Corp. 9.9
Ford Motor Credit Co. 3.1
Lehman Brothers Holdings 1.1
Ford Credit Auto Owner Trust 0.9
Merrill Lynch & Co., Inc. 0.8
AT&T 0.8
Citicorp 0.8
PORTFOLIO CHARACTERISTICS
October 31, 2000
Weighted Average Quality Diversification AA
Weighted Average Years-to-Maturity 10.2 Years
Weighted Average Duration 5.3 Years
Current Yield (SEC 30-day standardized)
Class S 6.4%
Class E 6.4%
Class C 5.2%
Number of Issues 790
Number of Issuers 552
MONEY MANAGERS STYLE
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
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* Multistrategy Bond Fund Class S assumes initial investment on January 29,
1993. Lehman Brothers Index comparison for the initial investment began
February 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.
++ 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.
(S) 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 160
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ------
LONG-TERM INVESTMENTS - 115.1%
ASSET-BACKED SECURITIES - 6.3%
ACLC Franchise Loan Receivables
Series 1997-B Class A1
6.728% due 04/15/14 892 865
Advanta Business Card Master Trust
Series 2000-B Class C
7.872% due 01/20/06 (b) 790 790
Arcadia Automobile
Receivables Trust
Series 1997-D Class A3
6.200% due 05/15/03 240 239
Associates Automobile
Receivables Trust
Series 2000-1 Class M
7.510% due 05/15/05 510 520
Caterpillar Financial Asset Trust
Series 1999-A Class A2
5.900% due 03/25/02 112 112
Centex Home Equity
Series 1999-2 Class A1
5.910% due 04/25/19 230 228
Chase Credit Card Master Trust
Series 1997-3 Class A
6.777% due 05/15/07 1,628 1,630
Chevy Chase Automobile
Receivables Trust
Series 2000-1 Class A4
7.470% due 07/15/05 490 499
Citibank Credit Card
Issuance Trust
Series 2000-C1 Class C1
7.450% due 09/15/07 530 526
Series 2000-C2 Class C2
7.310% due 09/15/07 (b) 470 472
Conseco Finance
Series 1999-H Class AF1
6.450% due 12/15/29 267 267
Series 2000-B Class AF1
6.940% due 11/15/14 (b) 423 422
Conseco Finance
Securitization Corp.
Series 2000-C Class A
6.991% due 10/15/31 (b) 4,883 4,890
Series 2000-1 Class A1
6.840% due 05/01/31 400 399
Contimortgage Home Equity
Loan Trust
Series 1999-3
6.420% due 04/25/14 364 362
Cross Country Master Credit
Card Trust II
Series 1999-1 Class A
7.121% due 09/15/05 (b) 1,700 1,700
Daimler-Benz Automobile
Grantor Trust
Series 1997-A Class A
6.050% due 03/31/05 326 324
Daimler-Benz Vehicle Trust
Series 1998-A Class A3
5.160% due 01/20/03 692 687
DaimlerChrysler Automobile Trust
Series 2000-C Class A3
6.820% due 09/06/04 1,600 1,604
Dealer Automobile
Receivables Trust
Series 2000-1 Class A4
7.120% due 03/15/05 (b) 505 508
Discover Card Master Trust I
Series 1998-7 Class A
5.600% due 05/16/06 330 319
Duck Automobile Grantor Trust
Step-Up Bond
Series 1999-B Class A
6.450% due 04/15/04 (b) 656 654
EQCC Home Equity Loan Trust
Series 1999-1 Class A1F
5.770% due 05/20/10 438 433
Series 1999-3 Class A1F
6.548% due 04/25/10 511 506
Federal Housing Authority
7.430% due 07/01/22 1,559 1,570
First USA Credit Card Master Trust
Series 1997-10 Class A
6.710% due 09/17/03 (b) 525 525
Ford Credit Automobile Owner Trust
Series 1998-B Class A3
5.850% due 10/15/01 89 89
Series 1999-B Class A3
5.470% due 09/15/01 260 260
Series 1999-B Class A4
5.800% due 06/15/02 1,000 995
Series 1999-C Class A3
5.770% due 11/15/01 435 434
Series 1999-D Class A3
6.200% due 04/15/02 559 558
GMAC Commercial Mortgage Securities,
Inc.
Series 1996-C1 Class F
7.860% due 11/15/06 500 434
161 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ------
Green Tree Financial Corp.
Series 1998-1 Class A2
5.850% due 11/01/29 29 29
Series 1999-C Class A1
5.990% due 07/15/30 184 183
Green Tree Home Improvement
Loan Trust
Series 1998-E Class HIA1
5.907% due 08/15/07 2 2
Green Tree Lease Finance LLC
Series 1997-1 Class A3
6.170% due 09/20/05 104 104
Greenpoint Manufactured Housing
Series 1999-5 Class A1
6.750% due 04/15/11 347 345
Greenwich Capital Acceptance, Inc.
Series 1994 Class A-1
9.476% due 11/25/24 (b) 9 9
Harley-Davidson Eaglemark Motorcycle
Trust
Series 1998-2 Class A1
5.770% due 09/16/02 80 80
Series 1999-3 Class A1
6.220% due 02/15/04 259 257
Household Home Equity Loan Trust
Series 1999-1 Class A1
6.830% due 12/20/16 (b) 601 598
MBNA Master Credit Card Trust
Series 2000-E Class A
7.800% due 10/15/12 375 396
Series 2000-E Class B
8.150% due 10/15/12 (b) 775 826
MMCA Automobile Owner Trust
Series 1999-2 Class A1
6.300% due 06/15/02 285 285
Series 2000-1 Class A4
7.080% due 02/15/05 (b) 535 540
Nissan Automobile Receivables Grantor
Trust
Series 1998-A Class A
5.450% due 04/15/04 272 269
Series 2000-A Class A2
6.730% due 05/15/02 545 545
Peco Energy Transition Trust
Series 2000-A Class A3
7.630% due 03/01/10 (b) 575 589
Premier Automobile Trust
Series 1998-5 Class A3
5.070% due 07/08/02 299 298
Series 1999-2 Class A2
5.280% due 11/08/01 89 89
Series 1999-3 Class A2
5.820% due 02/08/02 456 455
Residential Asset Securities Corp.
Series 1999-KS2 Class AI1
6.720% due 04/25/14 (b) 92 92
Sears Credit Account Master Trust
Series 1998-2 Class A
5.250% due 10/16/08 450 432
Series 1999-1 Class A
5.650% due 03/17/09 1,780 1,726
Student Loan Marketing Association
Series 1996-4 Class A1
6.718% due 07/25/04 (b) 1,207 1,203
Series 1997-3 Class A1
6.838% due 04/25/06 (b) 1,363 1,359
The Money Store Home Equity Trust
Series 1998-B Class AF3
6.040% due 08/15/17 1,482 1,475
Toyota Automobile Receivables Owner
Trust
Series 1999-A Class A2
5.800% due 12/17/01 119 119
USAA Automobile Loan
Grantor Trust
Series 1997-1 Class A
6.000% due 05/15/04 322 321
WFS Financial Owner Trust
Series 1998-C Class A3
5.650% due 11/20/02 (b) 1,947 1,941
------
38,388
------
CORPORATE BONDS AND NOTES - 33.2%
Abitibi-Consolidated Finance
7.875% due 08/01/09 514 486
Adelphia Business Solutions
12.000% due 11/01/07 135 61
Adelphia Communications Corp.
7.875% due 05/01/09 65 51
9.375% due 11/15/09 391 333
10.875% due 10/01/10 1,085 1,020
Advantica Restaurant Group, Inc.
11.250% due 01/15/08 130 64
Agrilink Foods, Inc.
11.875% due 11/01/08 85 61
Ahold Finance USA, Inc.
6.250% due 05/01/09 1,025 910
8.250% due 07/15/10 90 91
6.875% due 05/01/29 350 289
Albertson's, Inc.
7.450% due 08/01/29 510 457
Multistrategy Bond Fund 162
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ------
Alcoa, Inc.
7.375% due 08/01/10 100 100
Allied Waste North America, Inc.
Series B
7.375% due 01/01/04 550 501
7.625% due 01/01/06 175 153
10.000% due 08/01/09 95 81
Alpha Wind Frn Reinsur
11.320% due 05/23/01 275 281
American Airlines, Inc.
9.710% due 01/02/07 279 290
Series 1990-H
9.800% due 01/02/08 1,190 1,267
American General Corp.
7.500% due 07/15/25 110 104
American General Institutional
Capital
Series B
8.125% due 03/15/46 1,260 1,176
American Standard, Inc.
8.250% due 06/01/09 70 103
7.625% due 02/15/10 600 558
AMR Corp.
9.950% due 03/07/01 1,000 1,009
Amresco, Inc.
Series 98-A
9.875% due 03/15/05 650 351
Amtrol, Inc.
10.625% due 12/31/06 45 38
Anchor Gaming
9.875% due 10/15/08 500 505
Anthem Insurance Company, Inc.
9.125% due 04/01/10 440 406
Aramark Corp.
6.750% due 08/01/04 1,450 1,291
Arco Chemical Co.
9.800% due 02/01/20 65 63
AT&T Capital Corp.
7.000% due 08/15/01 (b) 5,700 5,707
AT&T Corp.
6.500% due 03/15/29 415 326
Avon Products Inc.
7.150% due 11/15/09 510 489
AXA Financial, Inc.
6.500% due 04/01/08 250 236
7.000% due 04/01/28 420 371
Banc One Corp.
7.625% due 10/15/26 305 286
8.000% due 04/29/27 150 146
Banesto Delaware, Inc.
8.250% due 07/28/02 500 510
Bank of America Corp.
6.680% due 03/05/01 (b) 5,000 4,999
Bank One Corp.
Series A
6.000% due 02/17/09 175 156
Bank United Corp.
8.875% due 05/01/07 915 902
BankBoston NA
6.375% due 04/15/08 495 461
Beckman Coulter, Inc.
7.450% due 03/04/08 175 162
BellSouth Telecommunications, Inc.
6.375% due 06/01/28 595 503
Beneficial Corp.
7.025% due 04/01/02 (b) 2,000 2,000
BNP Paribas Capital Trust
9.003% due 06/30/49 (e) 320 318
Budget Group, Inc.
9.125% due 04/01/06 30 12
Buhrmann US, Inc.
12.250% due 11/01/09 65 66
Building One Services Corp.
10.500% due 05/01/09 105 78
Canadian National Railway Co.
6.900% due 07/15/28 525 455
Charter Communications Holdings, LLC
8.250% due 04/01/07 750 671
8.625% due 04/01/09 40 36
Chase Manhattan Corp.
7.000% due 11/15/09 510 491
Cheasapeake Energy
9.625% due 05/01/05 50 50
Chrysler Financial Corp., LLC
Series R
6.784% due 03/10/03 (b) 1,000 1,008
Cincinnati Financial Corp.
6.900% due 05/15/28 1,000 867
Citibank Mxn Linked Deposit
Zero Coupon due 12/03/01 40 48
Citicorp
6.850% due 08/13/02 (b) 2,000 1,999
6.375% due 11/15/08 1,046 984
Citigroup, Inc.
7.250% due 10/01/10 520 517
Clear Channel Communications
7.650% due 09/15/10 1,995 1,958
Cleveland Electric Illumination Co.
7.430% due 11/01/09 400 391
Cleveland Electric/Toledo Edison
Series B
7.670% due 07/01/04 125 126
163 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ------
CMS Energy Corp.
9.875% due 10/15/07 450 448
7.500% due 01/15/09 275 240
Coastal Corp.
7.122% due 03/01/02 3,000 3,000
7.750% due 06/15/10 1,100 1,117
Colo.Com
Series UNIT
13.875% due 03/15/10 20 15
Columbia Healthcare Corp.
7.500% due 12/15/23 645 540
Columbia/ HCA Healthcare Corp.
8.020% due 08/05/02 2,000 1,975
7.190% due 11/15/15 250 210
Comcast Corp.
7.625% due 02/15/08 100 99
Commercial Federal Corp.
7.950% due 12/01/06 100 94
Compaq Computer Corp.
7.650% due 08/01/05 675 670
Comstock Res., Inc.
11.250% due 05/01/07 55 58
Conmed Corp.
9.000% due 03/15/08 350 280
Conoco, Inc.
6.950% due 04/15/29 735 681
Courtyard Marriott II, Ltd.
Series B
10.750% due 02/01/08 70 70
Covad Communications Group, Inc.
Series B
12.000% due 02/15/10 25 12
Crescent Real Estate Equities
7.000% due 09/15/02 (b) 900 843
7.500% due 09/15/07 (b) 525 441
Crompton Corp.
8.500% due 03/15/05 550 529
Crown Castle International Corp.
10.750% due 08/01/11 65 66
CSC Holdings, Inc.
7.875% due 12/15/07 325 315
7.250% due 07/15/08 395 362
Series B
8.125% due 08/15/09 200 196
CSX Corp.
6.800% due 12/01/28 1,400 1,173
DaimlerChrysler North America Holding
Corp.
7.400% due 01/20/05 1,625 1,630
8.000% due 06/15/10 200 203
Dayton Superior Corp.
13.000% due 06/15/09 24 23
Delphi Automotive Systems Corp.
7.125% due 05/01/29 110 93
Delta Air Lines, Inc.
7.700% due 12/15/05 450 433
8.300% due 12/15/29 1,075 915
Deutsche Bank Ltn
17.400% due 08/01/01 80 79
Dominion Resources, Inc.
Series A
8.125% due 06/15/10 500 516
Dow Chemical Co.
7.375% due 11/01/29 490 471
Dynegy, Inc.
7.450% due 07/15/06 519 515
Echostar Broadband Corp.
10.375% due 10/01/07 45 45
Echostar DBS Corp.
9.375% due 02/01/09 19 19
Enron Corp.
7.110% due 09/10/01 (b) 3,000 3,000
7.875% due 06/15/03 900 918
EOP Operating, LP
6.500% due 01/15/04 1,100 1,066
7.500% due 04/19/29 510 450
Exide Corp.
2.900% due 12/15/05 750 319
Exodus Communications, Inc.
11.250% due 07/01/08 90 83
11.375% due 07/15/08 80 63
11.625% due 07/15/10 620 580
Extendicare Health Services, Inc.
9.350% due 12/15/07 1,150 621
Federated Department Stores, Inc.
8.500% due 06/01/10 60 58
7.000% due 02/15/28 325 241
6.900% due 04/01/29 210 153
Finova Capital Corp.
6.750% due 03/09/09 509 285
Series EMTN
6.910% due 06/18/03 (b) 2,000 1,982
First Security Corp.
5.875% due 11/01/03 3,000 2,891
First Union Corp.
6.950% due 11/01/04 489 482
FleetBoston Financial Corp.
7.250% due 09/15/05 875 880
7.375% due 12/01/09 500 494
Florida Windstorm Underwriting
7.125% due 02/25/19 450 428
Multistrategy Bond Fund 164
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ------
Foamex LP
13.500% due 08/15/05 25 20
9.875% due 06/15/07 60 44
Ford Motor Co.
6.625% due 10/01/28 145 119
7.450% due 07/16/31 170 157
Ford Motor Credit Co.
8.200% due 02/15/02 2,755 2,786
6.806% due 02/13/03 2,000 1,991
6.890% due 05/21/04 (b) 5,000 5,011
6.700% due 07/16/04 3,525 3,453
7.600% due 08/01/05 5,000 5,027
5.800% due 01/12/09 500 439
7.375% due 10/28/09 705 685
Fort James Corp.
6.625% due 09/15/04 350 334
Fred Meyer, Inc.
7.450% due 03/01/08 450 437
Fugi JGB Investment, LLC
9.870% due 12/31/49 (e) 575 549
Generac Portable Products, LLC
11.250% due 07/01/06 40 16
General Electric Capital Corp.
Series A
7.375% due 01/19/10 520 535
General Motors Acceptance Corp.
7.053% due 04/05/04 (b) 2,000 1,994
7.750% due 01/19/10 155 156
GEO Specialty Chemicals, Inc.
10.125% due 08/01/08 45 35
Global Crossing Holdings, Ltd.
9.625% due 05/15/08 925 883
Globix Corp.
12.500% due 02/01/10 25 16
Gold Eagle Capital, Ltd.
12.198% due 04/15/01 (b) 285 285
Golden State Holdings
7.125% due 08/01/05 2,160 2,008
Goldman Sachs Group
6.920% due 02/22/02 (b) 5,000 5,007
7.625% due 08/17/05 50 51
Series B
7.350% due 10/01/09 500 488
GS Escrow Corp.
7.000% due 08/01/03 600 573
GTE Corp.
6.940% due 04/15/28 670 609
GTE North, Inc.
6.900% due 11/01/08 195 190
Halyard Re BV
12.779% due 04/05/02 (b) 300 296
Hanger Orthopedic Group
11.250% due 06/15/09 40 28
Hartford Financial Services
Group Inc.
7.900% due 06/15/10 190 195
Hartford Life, Inc.
7.650% due 06/15/27 220 210
HCA - The Healthcare Co.
8.750% due 09/01/10 175 177
Healthsouth Corp.
10.750% due 10/01/08 90 91
Heller Financial, Inc.
Series I
7.063% due 02/05/01 (b) 2,000 2,002
Hertz Corp.
7.625% due 08/15/07 130 129
High Voltage Engineering
10.500% due 08/15/04 45 29
HMH Properties, Inc.
Series A
7.875% due 08/01/05 135 128
Holley Performance Products, Inc.
Series B
12.250% due 09/15/07 55 32
Horseshoe Gaming Holding Corp.
8.625% due 05/15/09 1,125 1,097
Household Finance Corp.
7.875% due 03/01/07 504 513
5.875% due 02/01/09 560 500
8.000% due 07/15/10 235 240
Huntsman ICI Holdings
Zero Coupon due 12/31/09 500 168
Imperial Capital Trust I
Series B
9.980% due 12/31/26 250 205
Intermedia Communications, Inc.
8.600% due 06/01/08 350 327
Series B
8.500% due 01/15/08 205 192
International Paper Co.
8.000% due 07/08/03 425 430
Interpool Capital Trust
Series B
9.875% due 02/15/27 415 237
IPC Magazines Group PLC
9.625% due 03/15/08 40 49
IT Group, Inc.
Series B
11.250% due 04/01/09 165 140
165 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ------
ITC Deltacom, Inc.
11.000% due 06/01/07 25 21
9.750% due 11/15/08 45 36
John Hancock Mutual Life
Insurance Co.
7.375% due 02/15/24 350 326
John Q. Hammons Hotels
8.875% due 02/15/04 65 60
Jostens, Inc.
12.750% due 05/01/10 22 22
K Mart Funding Corp.
Series F
8.800% due 07/01/10 421 372
Kaufman and Broad Home Corp.
7.750% due 10/15/04 300 281
Kroger Co.
7.250% due 06/01/09 750 719
8.050% due 02/01/10 475 479
8.000% due 09/15/29 475 454
LCI International, Inc.
7.250% due 06/15/07 850 835
Lear Corp.
Series B
7.960% due 05/15/05 1,400 1,303
Lehman Brothers Holdings, Inc.
6.625% due 04/01/04 375 364
6.800% due 11/30/06 (b) 4,118 3,829
8.250% due 06/15/07 1,435 1,465
Series E
7.715% due 04/02/02 (b) 3,000 3,024
Lenfest Communications, Inc.
8.375% due 11/01/05 330 342
Lesotho Highlands Water
13.000% due 09/15/10 1,000 124
Level 3 Communications, Inc.
11.000% due 03/15/08 195 176
9.125% due 05/01/08 105 85
11.250% due 03/15/10 100 90
Step Up Bond
Zero Coupon due 03/15/10 (b) 1,700 842
Liberty Media Corp.
8.500% due 07/15/29 475 434
Litton Industries, Inc.
8.000% due 10/15/09 650 660
Lockheed Martin Corp.
8.200% due 12/01/09 425 442
8.500% due 12/01/29 445 475
Lodgenet Entertainment Corp.
10.250% due 12/15/06 55 55
Lodgian Financing Corp.
12.250% due 07/15/09 85 78
Louisiana Land and Exploration Co.
7.650% due 12/01/23 494 483
Lowes Cos., Inc.
6.875% due 02/15/28 535 455
6.500% due 03/15/29 205 167
Lucent Technologies, Inc.
6.450% due 03/15/29 405 314
Lyondell Chemical Co.
10.875% due 05/01/09 40 39
Mandalay Resort Group
10.250% due 08/01/07 95 97
May Department Stores Co.
6.700% due 09/15/28 165 131
MCI WorldCom, Inc.
6.950% due 08/15/28 635 558
McLeodUSA, Inc.
8.375% due 03/15/08 825 724
8.125% due 02/15/09 200 173
Step Up Bond
Zero Coupon due 03/01/07 (b) 950 779
Merrill Corp.
Series B
12.000% due 05/01/09 52 31
Merrill Lynch & Co., Inc.
6.791% due 11/01/01 (b) 5,000 5,004
6.375% due 10/15/08 1,000 940
6.875% due 11/15/18 605 547
Metromedia Fiber Network, Inc.
10.000% due 12/15/09 35 31
Series B
10.000% due 11/15/08 775 690
MGM Grand, Inc.
9.750% due 06/01/07 95 98
MGM Mirage, Inc.
8.500% due 09/15/10 425 420
Mohegan Tribal Gaming Authority
8.125% due 01/01/06 300 290
8.750% due 01/01/09 250 244
Morgan Stanley Dean Witter & Co.
7.750% due 06/15/05 850 870
Motorola, Inc.
6.500% due 11/15/28 145 121
Namazu Re, Ltd.
11.180% due 12/02/04 (b) 285 281
NATG Holdings, LLC
Series B
12.750% due 02/01/10 129 119
National City Corp.
6.875% due 05/15/19 500 437
Neff Corp.
10.250% due 06/01/08 60 27
Multistrategy Bond Fund 166
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ------
New England Education Loan Marketing
Corp.
6.830% due 06/11/01 (b) 4,000 4,000
News America Holdings, Inc.
8.875% due 04/26/23 300 305
News America, Inc.
7.300% due 04/30/28 250 212
7.625% due 11/30/28 375 331
Nextel Communications, Inc.
9.375% due 11/15/09 110 107
Step Up Bond
Zero Coupon due 09/15/07 (b) 855 682
Zero Coupon due 02/15/08 (b) 425 318
Nextlink Communications, Inc.
12.500% due 04/15/06 100 96
10.750% due 11/15/08 1,075 941
10.750% due 06/01/09 35 31
Step Up Bond
Zero Coupon due 04/15/08 (b) 625 350
Zero Coupon due 06/01/09 (b) 400 209
Niagara Mohawk Power Corp.
Series F
7.625% due 10/01/05 510 514
Norfolk Southern Corp.
7.800% due 05/15/27 400 385
North American Van Lines, Inc.
13.375% due 12/01/09 75 67
Official Information Co.
Series B
10.375% due 11/01/07 35 31
Oil Purchase Co.
7.100% due 04/30/02 165 156
Orion Power Holdings, Inc.
12.000% due 05/01/10 50 53
Paine Webber Group, Inc.
6.450% due 12/01/03 500 493
6.375% due 05/15/04 425 416
Panamsat Corp.
6.125% due 01/15/05 925 847
Park Place Entertainment Corp.
9.375% due 02/15/07 200 202
Paxson Communications Corp.
11.625% due 10/01/02 550 562
Penhall International Corp.
12.000% due 08/01/06 125 114
Petro Stopping Centers
10.500% due 02/01/07 155 132
Pharmacia Corp.
6.600% due 12/01/28 570 500
Phoenix Color Corp.
10.375% due 02/01/09 60 49
Pinnacle Partners
8.830% due 08/15/04 1,300 1,313
Plains Resources, Inc.
Series B
10.250% due 03/15/06 5 5
Series E
10.250% due 03/15/06 55 55
PNC Funding Corp.
6.125% due 02/15/09 105 95
7.500% due 11/01/09 330 326
Precision Partners, Inc.
12.000% due 03/19/09 15 8
Premier Parks, Inc.
9.750% due 06/15/07 575 536
Step Up Bond
Zero Coupon due 04/01/08 (b) 375 247
Procter & Gamble Co.
6.600% due 12/15/04 585 583
Prudential Insurance Co. of America
6.875% due 04/15/03 700 697
6.375% due 07/23/06 475 449
PSEG Energy Holdings, Inc.
9.125% due 02/10/04 225 230
Psinet, Inc.
10.500% due 12/01/06 165 91
11.500% due 11/01/08 45 23
PX Escrow Corp.
Step Up Bond
Zero Coupon due 02/01/06 (b) 1,275 434
Qwest Corp.
7.200% due 11/01/04 650 646
Railworks Corp.
11.500% due 04/15/09 110 32
Raytheon Co.
8.200% due 03/01/06 255 264
8.300% due 03/01/10 475 498
Series 144A
8.300% due 03/01/10 160 167
RBF Finance Co.
11.000% due 03/15/06 35 40
Regional Independent Media
12.875% due 07/01/08 (b) 50 57
Rent-A-Center, Inc.
11.000% due 08/15/08 80 78
Republic Services, Inc.
7.125% due 05/15/09 175 157
Resolution Funding Corp.
Principal Strip
6.340% due 01/15/21 1,232 349
Rockwell International Corp.
6.700% due 01/15/28 400 334
167 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ------
Rose Hills Corp.
9.500% due 11/15/04 500 291
Sabreliner Corp.
11.000% due 06/15/08 40 33
Saks, Inc.
7.375% due 02/15/19 320 183
Salomon, Inc.
6.356% due 11/28/00 45 46
6.000% due 12/03/02 (b) 51 51
Scotts Co.
8.625% due 01/15/09 500 480
Seagate Technology, Inc.
7.450% due 03/01/37 850 876
Shopping Center Associates
7.625% due 05/15/05 500 492
Simon Debartolo Group, LP
6.625% due 06/15/03 500 487
Small Business Administration-SBIC
Series 10B
7.449% due 08/01/10 600 613
Smithfield Foods, Inc.
7.625% due 02/15/08 325 295
Spectrasite Holdings, Inc.
Step Up Bond
Series B
Zero Coupon due 03/15/10 (b) 120 58
Spieker Properties, LP
6.950% due 12/15/02 500 496
Sprint Capital Corp.
6.375% due 05/01/09 500 447
6.875% due 11/15/28 994 812
State Street Corp.
7.650% due 06/15/10 215 219
Station Casinos, Inc.
10.125% due 03/15/06 100 100
9.750% due 04/15/07 75 75
9.875% due 07/01/10 325 325
Sterling Chemicals Holdings, Inc.
Step Up Bond
Zero Coupon due 08/15/08 (b) 30 8
Sterling Chemicals, Inc.
Series A
11.250% due 04/01/07 25 13
Sun Microsystems, Inc.
7.650% due 08/15/09 170 171
Suntrust Banks, Inc.
7.750% due 05/01/10 180 179
Tekni-Plex, Inc.
12.750% due 06/15/10 90 82
Tenet Healthcare Corp.
7.875% due 01/15/03 50 50
8.000% due 01/15/05 150 148
6.000% due 12/01/05 725 631
9.250% due 09/01/10 225 236
Time Warner Entertainment Co., LP
7.250% due 09/01/08 125 123
Time Warner, Inc.
7.975% due 08/15/04 225 231
7.750% due 06/15/05 300 306
6.625% due 05/15/29 1,780 1,511
Times Mirror Co.
7.450% due 10/15/09 500 496
Tokai Preferred Capital Co. LLC
9.980% due 12/29/49 (e) 1,500 1,440
Toledo Edison Co.
8.700% due 09/01/02 500 505
Toll Brothers Corp.
7.750% due 09/15/07 825 767
Transdigm, Inc.
10.375% due 12/01/08 50 46
Trenwick Capital Trust I
8.820% due 02/01/37 625 430
TRW, Inc.
6.625% due 06/01/04 6,000 5,765
U.S. Bancorp
Series J
6.875% due 12/01/04 850 840
Ubquitel Operating Co. Step Up Bond
Zero Coupon due 04/15/10 (b) 108 52
Zero Coupon due 04/15/10 (b) 45 21
UBS PFD Funding Trust I
8.622% due 10/29/49 (e) 290 293
Unicredito Italiano Capital Trust
9.200% due 10/29/49 (e) 200 199
Unilever Capital Corp.
7.125% due 11/01/10 1,155 1,140
Union Planters Bank
6.500% due 03/15/18 475 418
United Rentals, Inc.
Series B
8.800% due 08/15/08 50 40
9.250% due 01/15/09 125 103
URS Corp.
Series B
12.250% due 05/01/09 145 149
US Airways Pass-Thru Certificate
Series 2000-1
8.110% due 02/20/17 200 201
Multistrategy Bond Fund 168
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- -------
US West Capital Funding, Inc.
6.875% due 08/15/01 1,900 1,895
6.250% due 07/15/05 700 669
6.875% due 07/15/28 750 659
USA Waste Services, Inc.
6.500% due 12/15/02 575 550
Viacom, Inc.
7.750% due 06/01/05 325 331
7.700% due 07/30/10 450 458
Wal-Mart Stores, Inc.
6.875% due 08/10/09 85 84
7.550% due 02/15/30 525 543
Walt Disney Co.
5.125% due 12/15/03 850 813
Washington Mutual, Inc.
7.500% due 08/15/06 478 469
8.250% due 04/01/10 155 157
Series A
8.206% due 02/01/27 370 322
Waste Management, Inc.
6.875% due 05/15/09 575 506
7.100% due 08/01/26 1,175 1,139
7.000% due 07/15/28 400 323
Wells Fargo Bank NA
7.550% due 06/21/10 410 415
Series BNKT
7.800% due 06/15/10 2,000 2,028
Wells Fargo Co.
6.625% due 07/15/04 425 418
Wellsford Residential Property Trust
9.375% due 02/01/02 475 482
Westdeutsche Landesbank NY
6.050% due 01/15/09 600 546
Western Resources, Inc.
7.125% due 08/01/09 475 394
Williams Communications
Group, Inc.
10.700% due 10/01/07 100 86
11.700% due 08/01/08 875 777
10.875% due 10/01/09 145 122
WRC Media, Inc.
12.750% due 11/15/09 60 52
XM Satellite Radio Holdings, Inc.
14.000% due 03/15/10 15 10
Yanknets LLC
12.750% due 03/01/07 35 33
-------
202,646
-------
EURODOLLAR BONDS - 5.4%
Bayerische Hypo-und Vereinsbank
8.741% due 06/30/31 210 196
Brazil, Federal Republic of
7.875% due 01/01/01 (b) 1,464 1,462
Brazil, Republic of
11.625% due 04/15/04 400 404
Series - 20 YR
8.000% due 04/15/14 81 60
Bulgaria, National Republic of
7.750% due 07/28/11 (b) 240 179
Citicorp
6.710% due 06/27/02 (b) 3,000 2,996
Colombia, Republic of
11.750% due 02/25/20 375 302
Deutsche Telekom International
Finance BV Step Up Bond
8.000% due 06/15/10 (b) 2,275 2,319
Flextronics International, Ltd.
9.875% due 07/01/10 575 581
Ford Credit of Canada, Ltd.
6.820% due 12/16/02 (b) 5,000 4,984
Ford Motor Credit Co.
6.896% due 01/17/02 (b) 2,175 2,173
Household Bank Nevada NA
6.948% due 10/22/03 (b) 4,000 3,985
Hurst Group PLC
11.125% due 08/06/08 55 81
Hutchison Whampoa Finance, Ltd.
7.450% due 08/01/17 300 274
Jazztel PLC
14.000% due 07/15/10 75 49
KPNQwest BV
8.125% due 06/01/09 900 817
Merita Bank, Ltd.
7.150% due 12/29/49 (e) 1,200 1,186
Mexico (United Mexican States)
9.875% due 02/01/10 390 405
Morgan Stanley Dean Witter
Series T
6.848% due 03/11/03 (b) 1,700 1,699
Series B
9.250% due 11/15/06 115 84
NTL Communications Corp.
Step-Up Bond
Series B
Zero Coupon due 11/15/09 (b) 25 11
Ono Finance PLC
14.000% due 07/15/10 100 66
Pacific Re, Ltd.
10.380% due 05/31/03 (b) 345 348
169 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ------
Panama, Republic of
9.375% due 04/01/29 295 283
Series 20 YR
7.750% due 07/17/16 (b) 66 51
Step Up Bond
4.500% due 07/17/14 (b) 145 115
Philippines, Republic of
9.875% due 01/15/19 41 30
Poland, Republic of
Step Up Bond
Series RSTA
4.000% due 10/27/24 (b) 1,250 850
Royal Bank of Scotland PLC
Series 1
9.118% due 03/31/49 (e) 2,650 2,760
Russian Federation
8.250% due 03/31/10 285 181
Seismic, Ltd.
11.315% due 01/01/02 (b) 320 320
Swiss Life Finance, Ltd.
2.000% due 05/20/05 865 868
Telefonica Europe BV
7.750% due 09/15/10 500 502
8.250% due 09/15/30 350 358
Turkey, Republic of
12.375% due 06/15/09 225 226
United Mexican States
9.875% due 01/15/07 45 47
United Pan-Europe Communications Step
Up Bond
Series B
Zero Coupon due 11/01/09 35 14
Versatel Telecom International
11.875% due 07/15/09 35 22
Vodafone Group PLC
7.625% due 02/15/05 1,000 1,017
7.750% due 02/15/10 65 66
7.875% due 02/15/30 515 513
------
32,884
------
MORTGAGE-BACKED SECURITIES - 50.3%
Advanta Mortgage Loan Trust
Series 97-4 Class M1
7.040% due 01/25/29 1,600 1,568
Chase Commercial Mortgage Securities
Corp.
Series 1997-2 Class D
6.600% due 12/19/07 1,500 1,394
Chase Mortgage Finance Corp.
Series 1994-C Class A6
6.250% due 02/25/10 403 391
Credit Suisse First Boston Mortgage
Securities Corp.
Series 1998-C2 Class A1
5.960% due 12/15/07 599 578
DLJ Mortgage Acceptance Corp.
Series 1996-Q5 Class A1
7.188% due 06/25/26 (b) 499 495
Federal Home Loan Mortgage Corp.
7.500% 30 Year TBA Gold (d) 11,421 11,403
6.000% 30 Year TBA Gold (d) 1,000 938
6.500% 30 Year TBA Gold (d) 9,700 9,327
7.000% 30 Year TBA Gold (d) 3,300 3,233
7.500% 30 Year TBA Gold (d) 3,500 3,498
8.000% 30 Year TBA Gold (d) 800 811
Series 1037 Class Z
9.000% due 02/15/21 570 588
Series 2006 Class B
6.500% due 08/15/23 3,650 3,613
Federal Home Loan Mortgage Corp.
Participation Certificate
8.000% due 2015 986 1,004
11.000% due 2020 506 555
8.500% due 2025 567 581
8.500% due 2027 2,698 2,763
6.500% due 2029 (f) 4,001 3,850
6.757% due 2029 (b) 1,549 1,511
7.500% due 2030 3,187 3,185
7.813% due 2030 900 902
8.000% due 2030 9,072 9,194
Series 2246 Class Z
7.500% due 08/30/30 5,500 5,488
Step Up Bond
Series 1707 Class S
2.175% due 03/15/24 (b) 1,215 100
Federal National Mortgage Association
7.500% 15 Year TBA (d) 1,725 1,737
6.000% 30 Year TBA (d) 5,000 4,688
6.500% 30 Year TBA (d) 9,020 8,665
7.000% 30 Year TBA (d) 3,175 3,109
7.500% 30 Year TBA (d) 1,800 1,797
8.000% 30 Year TBA (d) 3,890 3,936
8.500% 30 Year TBA (d) 4,150 4,241
6.000% due 2003 131 129
10.000% due 2005 76 78
11.000% due 2016 500 550
7.598% due 2023 (b) 351 357
9.000% due 2025 1,822 1,880
7.718% due 2026 (b) 2,524 2,604
8.500% due 2026 (f) 1,466 1,499
9.000% due 2026 476 492
6.000% due 2029 4,039 3,788
Multistrategy Bond Fund 170
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- -------
6.500% due 2029 11,278 10,838
7.000% due 2029 3,422 3,352
6.750% due 2030 515 504
6.875% due 2030 350 344
7.500% due 2030 6,778 6,767
8.000% due 2030 6,573 6,653
1.000% due 2040 (b) 5,200 5,207
Series 1997-68 Class SC
1.875% due 05/18/27 (b) 2,035 103
Series 1997-77 Class G
6.500% due 05/18/23 1,821 1,811
Federal National Mortgage Association
(REMIC)
Series 1992-10 Class ZD
8.000% due 11/25/21 2,009 2,044
Federal National Mortgage Association
Interest Only Strip
Series 281 Class 2
9.000% due 11/01/26 557 154
First Union Lehman Brothers
Commercial Mortgage Trust
Pass-through Certificates
Series 1997-C1 Class D
7.500% due 10/18/08 250 245
GMAC Commercial Mortgage Securities,
Inc.
Series 1997-C1 Class A2
6.850% due 09/15/06 230 229
Series 1998-C1 Class A2
6.700% due 03/15/08 3,000 2,913
Government National Mortgage
Association
10.000% due 08/15/22 474 509
10.000% due 04/15/25 684 735
6.000% 30 Year TBA (d) 17,800 16,793
6.500% 30 Year TBA (d) 41,650 40,208
7.000% 30 Year TBA (d) 27,920 27,519
7.500% 30 Year TBA (d) 27,200 27,295
9.000% due 2017 1,487 1,560
6.750% due 2023 (b) 282 284
7.125% due 2023 (b) 441 445
7.375% due 2023 (b) 856 862
6.750% due 2024 (b) 1,796 1,812
7.125% due 2024 (b) 1,933 1,952
8.000% due 2024 128 130
6.750% due 2025 (b) 151 152
7.125% due 2025 (b) 216 218
7.375% due 2025 (b) 1,762 1,777
7.125% due 2026 (b) 1,267 1,279
8.500% due 2026 1,041 1,062
6.750% due 2027 (b) 1,745 1,760
7.375% due 2027 (b) 1,439 1,450
7.500% due 2029 (b) 1,294 1,298
8.000% due 2029 (b) 8,810 8,957
8.000% due 2030 8,855 9,002
Series 2000-8 Class SA
1.830% due 01/16/30 (b) 1,772 86
Series 2000-9 Class SH
2.380% due 02/16/30 (b) 3,499 195
Government National Mortgage
Association Pass-through Certificate
Series 1999-43 Class UD
1.380% due 11/16/29 (b) 2,523 91
Series 1999-44 Class SA
1.930% due 12/16/29 (b) 2,008 98
Midland Realty Acceptance Corp.
Series 1996-C2 Class A2
7.233% due 01/25/29 1,000 1,008
Morgan Stanley Capital I, Inc.
Series 1998-XL1 Class A3
6.480% due 05/03/08 303 293
Nationslink Funding Corp.
Series 1999-SL Class A4
6.654% due 02/10/06 500 494
Residential Funding Mortgage
Securities I
Series 1993-S20 Class A8
6.980% due 06/25/08 900 897
Series 1997-S6 Class A5
7.000% due 05/25/12 896 857
Residential Funding Mortgage
Securities II
Series 1997-HS5 Class M1
7.010% due 05/25/27 1,400 1,370
Resolution Trust Corp.
Series 1994 - C2 Class G
8.000% due 04/25/25 572 555
Series 1994-1 Class M-2
7.750% due 09/25/29 333 331
Salomon Brothers Mortgage Securities
VII
Series 1999-NC3 Class A
6.970% due 07/25/29 (b) 3,275 3,276
Mortgage Pass-through Certificate
Series 1994-16 Class A
9.089% due 11/25/24 (b) 248 252
Vendee Mortgage Trust
Series 2000-1 Class 2G
7.250% due 06/15/09 330 329
171 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- -------
Vornado Finance LLC
Series 2000-VNO Class C
8.095% due 03/15/10 (b) 1,000 1,031
Washington Mutual
Series 2000-1R Class A
6.780% due 07/26/03 901 901
-------
306,807
-------
NON-US BONDS - 0.2%
AES Drax Energy, Ltd.
11.250% due 08/30/10 GBP 35 53
Argentina, Republic of
Series PRE1
2.696% due 04/01/01 (b) ARS 45 6
Series PRO1
2.696% due 04/01/07 (b) ARS 22 13
Series PRO2
6.620% due 04/01/07 (b) ARS 63 42
Brokat AG
11.500% due 03/31/10 EUR 5 3
Colt Telecom Group PLC
7.625% due 12/15/09 GBP 5 4
Coral Group Holdings PLC
Series B
13.500% due 09/30/09 GBP 10 15
CP Kelco Capital Corp.
11.875% due 09/15/10 EUR 10 8
Diamond Holdings PLC
10.000% due 02/01/08 GBP 20 27
Energis PLC
9.500% due 06/15/09 GBP 45 62
Flowserve Finance BV
12.250% due 08/15/10 EUR 10 8
Gala Group Holdings PLC
12.000% due 06/01/10 GBP 40 60
Greece, Republic of
5.900% due 02/11/03 GRD 7,000 18
Hungary, Government of
9.500% due 06/12/02 HUF 36,600 115
Series 01/E
15.500% due 05/12/01 HUF 12,000 39
Hungary, Republic of
13.500% due 11/24/01 HUF 23,300 76
9.500% due 01/12/02 HUF 24,500 77
IPC Magazines Group, PLC
Step Up Bond
Zero Coupon due 03/15/08 (b) GBP 20 18
Jones Lang Lasalle Finance BV
9.000% due 06/15/07 (b) EUR 10 9
Kappa Beheer BV
10.625% due 07/15/09 EUR 10 9
Step Up Bond
Series EUR
Zero Coupon due 07/15/09 (b) EUR 5 3
Lesotho Highlands Water
12.000% due 12/01/05 ZAR 230 29
Series WS02
12.500% due 04/15/02 ZAR 600 79
PTC International Finance
Series EUR
11.250% due 12/01/09 EUR 5 4
Telewest Communications, PLC
Step Up Bond
Zero Coupon due 04/15/09 (b) GBP 90 66
Tlel1 Europe BV
13.000% due 05/15/09 EUR 105 78
Travelex PLC
10.500% due 07/31/10 GBP 20 28
United Pan-Europe
Communications
Series B
11.250% due 02/01/10 EUR 35 25
-------
974
-------
UNITED STATES GOVERNMENT AGENCIES - 5.0%
Federal Home Loan Bank Corp.
Discount Note
Zero Coupon due 11/03/00 210 210
Federal Home Loan
Mortgage Corp.
5.750% due 03/15/09 7,575 7,115
6.750% due 09/15/29 4,725 4,707
Federal National
Mortgage Association
6.250% due 05/15/29 2,170 2,029
7.125% due 01/15/30 9,145 9,558
Federal National
Mortgage Association
Zero Coupon due 06/01/17 6,400 2,128
Small Business Administration
Series 97-D
7.500% due 04/01/17 4,764 4,840
-------
30,587
-------
UNITED STATES GOVERNMENT
TREASURIES - 12.6%
United States Treasury Bond
Principal Strip
8.875% due 02/15/19 600 203
Multistrategy Bond Fund 172
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- -------
8.000% due 11/15/21 16,483 4,718
7.500% due 11/15/24 12,278 2,961
6.125% due 11/15/27 5,950 1,234
United States Treasury Bonds
10.625% due 08/15/15 4,000 5,796
8.125% due 08/15/19 300 371
8.750% due 08/15/20 1,200 1,577
8.125% due 05/15/21 8,500 10,602
6.000% due 02/15/26 700 702
6.500% due 11/15/26 500 534
6.625% due 02/15/27 1,195 1,298
6.125% due 11/15/27 750 766
3.625% due 04/15/28 641 615
5.500% due 08/15/28 300 282
3.875% due 04/15/29 6,933 6,959
6.250% due 05/15/30 10,775 11,475
United States Treasury
Interest Only Strip
Zero Coupon due 02/15/11 7,705 4,212
United States Treasury Notes
6.625% due 04/30/02 5,150 5,186
3.625% due 07/15/02 (f) 755 756
4.125% due 11/15/03 1,580 1,509
7.875% due 11/15/04 100 107
7.500% due 02/15/05 4,890 5,189
6.500% due 10/15/06 1,600 1,650
3.375% due 01/15/07 3,298 3,212
3.625% due 01/15/08 2,245 2,209
3.875% due 01/15/09 2,106 2,106
6.000% due 08/15/09 400 404
-------
76,633
-------
YANKEE BONDS - 2.1%
360networks, Inc.
13.000% due 05/01/08 20 17
Abbey National PLC
7.950% due 10/26/29 430 432
Abitibi-Consolidated, Inc.
8.850% due 08/01/30 865 833
Alestra Sa de RL de CV
12.625% due 05/15/09 240 202
Amvescap PLC
6.600% due 05/15/05 925 884
Asia Pulp & Paper Finance IX, Ltd.
10.750% due 10/04/01 800 480
Avecia Group PLC
11.000% due 07/01/09 85 81
British Sky Broadcasting
6.875% due 02/23/09 525 448
8.200% due 07/15/09 750 694
Cable Satisfaction International Inc.
12.750% due 03/01/10 20 16
Cellco Finance N.V.
15.000% due 08/01/05 115 118
Colt Telecom Group PLC
Step Up Bond
Zero Coupon due 12/15/06 (b) 600 547
Edperbrascan Corp.
7.125% due 12/16/03 925 887
Glencore Nickel Party, Ltd.
9.000% due 12/01/14 305 241
Global Crossing Holdings, Ltd.
9.125% due 11/15/06 310 296
Grupo Iusacell SA de CV
Series B
10.000% due 07/15/04 750 736
GT Group Telecom, Inc.
Step-Up Bond
Zero Coupon due 02/01/10 (b) 1,515 553
Hyundai Semiconductor America, Inc.
8.625% due 05/15/07 360 289
Innova S. de R.L.
12.875% due 04/01/07 240 215
Korea Electric Power Corp.
7.000% due 02/01/27 305 286
National Westminster Bank PLC
7.750% due 04/29/49 (e) 600 582
Quebec, Province of
7.500% due 09/15/29 440 446
Series NN
7.125% due 02/09/24 75 73
Regional Independent Media
10.500% due 07/01/08 70 74
Royal Caribbean Cruises, Ltd.
7.000% due 10/15/07 900 792
7.500% due 10/15/27 550 436
RSL Communications PLC
Step Up Bond
Zero Coupon due 03/01/08 (b) 300 32
St. George Bank, Ltd.
7.150% due 10/01/05 700 692
Stagecoach Holdings PLC
8.625% due 11/15/09 975 762
Tembec Industries, Inc.
8.625% due 06/30/09 185 182
Tyco International Group SA
6.875% due 09/05/02 800 793
-------
13,119
-------
TOTAL LONG-TERM INVESTMENTS
(cost $705,857) 702,038
-------
173 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
NOTIONAL MARKET
AMOUNT VALUE
(000) (000)
$ $
-------- ------
OPTIONS PURCHASED - 0.0%
United States Treasury Bonds (c)*
Feb 99.59 Call 3,475 57
Mar 104.33 Call 1,000 42
Dec 104.56 Call 1,650 51
Dec 104.58 Call 1,650 52
Dec 104.56 Put 1,650 11
Dec 104.58 Put 1,650 13
United States Treasury Notes (c)*
Jan 104.53 Call 1,200 34
United States Treasury Notes
5 Year Futures (c)*
Feb 108.00 Call 100 2
Nov 105.00 Call
50 --
-----
TOTAL OPTIONS PURCHASED
(cost $288) 262
-----
NUMBER
OF
SHARES
------
PREFERRED STOCKS - 0.5%
Avecia Group PLC Payment in Kind 100 3
California Federal Preferred
Capital Corp. Series A 38,700 890
Equity Office Properties Trust
Series B 18,000 801
Global Crossing Holdings, Ltd. 10,000 960
Granite Broadcasting Corp. 44 24
High Voltage Engineering Corp.
Series A 9 5
Paxson Communications Corp. 423 415
Psinet, Inc.
Series D 610 8
-----
TOTAL PREFERRED STOCKS
(cost $3,325) 3,106
-----
PRINCIPAL
AMOUNT
(000)
$
---------
SHORT-TERM INVESTMENTS - 11.9%
American Express
Credit Corp. 1&2
5.150% due 11/13/00 3,000 2,994
British Telecomm PLC
6.852% due 10/09/01 1,750 1,667
Chase Daily Reset
30.450% due 11/22/00 (b) 167 167
Chase Daily Reset 6
30.400% due 11/22/00 503 503
Citi CRC
14.750% due 11/22/00 18 18
Citi SVC Linked Deposit
8.750% due 11/07/00 45 45
Citibank CRC Linked Deposit
14.280% due 12/21/00 127 127
Citibank Credit Linked Deposit
14.500% due 01/18/01 30 30
Citibank Service Time Deposit
8.750% due 11/20/00 86 86
CSFB TRL Weekly Reset 5
37.373% due 03/09/01 144 144
Deutsche Bank Ltn Brl Linked
19.300% due 03/01/01 170 177
Federal Agriculture Mortgage Corp.
Discount Note
6.400% due 11/13/00 100 100
Credit Discount Notes
Zero Coupon due 11/13/00 2,500 2,495
Federal Home Loan Bank
Consolidated Discount Notes
6.480% due 11/06/00 100 100
6.591% due 11/20/00 260 259
6.350% due 11/22/00 100 100
6.350% due 11/27/00 100 100
6.420% due 11/29/00 217 216
6.360% due 12/01/00 (f) 250 249
6.273% due 12/04/00 100 99
6.413% due 01/31/01 142 140
6.389% due 02/28/01 143 140
6.572% due 06/04/01 100 96
Federal Home Loan Bank Corp.
Discount Notes
6.447% due 12/13/00 100 99
6.446% due 12/15/00 210 208
6.443% due 12/20/00 100 99
6.620% due 12/29/00 140 139
6.640% due 02/26/01 110 108
6.336% due 03/08/01 95 93
6.302% due 03/23/01 100 98
6.150% due 04/09/01 100 97
Zero Coupon due 11/01/00 120 120
Federal Home Loan Mortgage Corp.
6.331% due 03/01/01 230 225
Federal Home Loan Mortgage Corp.
Discount Notes
6.379% due 11/02/00 305 305
6.405% due 11/07/00 100 100
6.375% due 11/09/00 146 146
6.400% due 11/16/00 537 536
6.390% due 11/30/00 320 318
Multistrategy Bond Fund 174
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- ---------
6.430% due 01/11/01 126 124
6.400% due 01/18/01 269 265
6.413% due 02/01/01 100 98
6.069% due 10/11/01 146 137
Federal National Mortgage
Association Discount Notes
6.469% due 11/06/00 130 130
5.160% due 11/13/00 100 100
6.370% due 11/22/00 146 145
6.390% due 11/29/00 178 177
6.452% due 12/04/00 157 156
6.451% due 12/06/00 243 241
6.447% due 12/13/00 251 249
6.340% due 12/19/00 276 274
5.180% due 12/20/00 457 453
6.410% due 01/25/01 135 133
6.310% due 02/20/01 151 148
6.279% due 04/12/01 165 160
6.364% due 05/14/01 100 97
6.573% due 05/30/01 100 96
6.319% due 07/27/01 272 259
6.310% due 08/10/01 100 95
6.084% due 09/27/01 225 212
Zero Coupon due 11/02/00 29 29
Ford Motor Credit Co.
6.470% due 11/23/00 2,500 2,495
Frank Russell Investment Company
Money Market Fund,
due on demand (a) 44,319 44,319
General Motors Acceptance Corp.
Zero Coupon due 11/13/00 3,000 2,994
Household Finance Corp.
6.470% due 11/13/00 2,500 2,495
Prudential Funding Corp.
6.480% due 11/13/00 3,000 2,994
Salomon Korean MSB Linked
6.950% due 01/10/01 (b) 115 114
United States Treasury Bills
5.800% due 02/01/01 (f) 190 186
5.900% due 03/01/01 100 98
5.750% due 05/31/01
103 99
---------
TOTAL SHORT-TERM INVESTMENTS
(cost $72,219) 72,315
---------
WARRANTS - 0.0% (c)
GT Group Telecom, Inc. 2010
Warrants 1,515 77
Jostens, Inc. 2010 Warrants 102 2
Motient Corp. 2008 Warrants 35 1
XM Satellite Radio Holdings, Inc.
2010 Warrants 15 2
Cable Satisfaction Intl.
20 --
---------
TOTAL WARRANTS
(cost $87) 82
---------
TOTAL INVESTMENTS - 127.5%
(identified cost $781,776) 777,803
OTHER ASSETS AND LIABILITIES,
INCLUDING OPTIONS WRITTEN,
NET - (27.5%) (167,722)
---------
610,081
NET ASSETS - 100.0% =========
* 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.
Abbreviations:
REMIC - Real Estate Mortgage Investment Conduit
TBA - To Be Announced Security
See accompanying notes which are an integral part of the financial statements.
175 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
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 dollar
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
MXN - Mexican peso
PEN - Peruvian nouveau sol
PHP - Philippine peso
PLN - Polish zloty
SEK - Swedish krona
SKK - Slovakian koruna
TWD - New Taiwan dollar
USD - United States dollar
VEB - Venezuelan bolivar
ZAR - South African rand
See accompanying notes which are an integral part of the financial statements.
Multistrategy Bond Fund 176
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
FUTURES CONTRACTS CONTRACTS* (000)
---------- --------------
LONG POSITIONS
Germany, Fed. Rep. 10 Year Bonds
expiration date 12/00 244 $ 35
Municipal Bond Index
expiration date 12/00 2 3
United States Treasury Bonds
expiration date 12/00 40 (1)
United States Treasury 2 Year Notes
expiration date 12/00 4 4
United States Treasury 5 Year Notes
expiration date 12/00 52 14
United States Treasury 10 Year Notes
expiration date 12/00 182 94
SHORT POSITIONS
Germany Bond 10 Year
expiration date 12/00 26 9
United States Treasury Bonds
expiration date 12/00 213 49
United States Treasury
5 Year Notes
expiration date 12/00 489 (412)
------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts $ (205)
============
NOTIONAL MARKET
AMOUNT VALUE
(000) (000)
OPTIONS WRITTEN $ $
-------- ------------
United States Treasury Bonds*
Mar 93.25 Call 198 55
Dec 92.25 Put 45 --
Mar 92.75 Put 188 1
Eurodollar 3 Month Futures*
Dec 93.00 Put 150 1
United States Treasury Bonds*
Jan 100.50 Call 1,200 75
Mar 108.30 Call 1,000 22
Jan 108.56 Put 1,200 32
Dec 103.42 Put 6,105 32
Feb 98.86 Put 3,475 31
Mar 100.36 Put 1,000 6
United States Treasury Notes*
Dec 103.42 Call 6,105 41
Dec 100.14 Call 15,015 38
Dec 100.14 Put 15,015 33
United States Treasury Notes*
10 Year Futures
Nov 102.00 Call 47 6
Nov 103.00 Call 62 2
Nov 97.00 Put 18 --
Nov 98.00 Put 18 --
Nov 98.00 Put 18 --
----------
Total Liability for Options Written
(premiums received $438) 375
==========
See accompanying notes which are an integral part of the financial statements.
177 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION
DELIVER FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
------------ ----------- ---------- --------------
USD 65 ARS 66 11/06/00 $ 1
USD 49 ARS 49 11/16/00 --
USD 102 ARS 103 11/20/00 --
USD 92 ARS 93 12/21/00 --
USD 15 ARS 15 12/27/00 --
USD 170 ARS 172 01/24/01 --
USD 143 ARS 145 02/28/01 (1)
USD 151 ARS 153 02/28/01 (1)
USD 70 ARS 72 03/06/01 1
USD 50 ARS 51 03/06/01 --
USD 13 BRL 24 11/30/00 --
USD 129 BRL 242 12/04/00 (3)
USD 81 BRL 151 12/05/00 (3)
USD 144 BRL 274 12/18/00 (2)
USD 94 BRL 184 12/27/00 1
USD 145 CLP 81,200 11/02/00 (3)
USD 217 CLP 124,395 12/04/00 --
USD 10 CLP 5,672 12/18/00 --
USD 62 CLP 34,643 05/14/01 (2)
USD 60 CLP 34,080 08/14/01 (2)
USD 15 CLP 8,642 10/10/01 --
USD 29 CNY 241 11/08/00 --
USD 160 CNY 1,328 11/20/00 --
USD 83 CNY 688 12/20/00 --
USD 116 CNY 963 12/20/00 (1)
USD 126 CNY 1,046 01/11/01 --
USD 135 CNY 1,122 01/29/01 (1)
USD 92 CNY 765 03/12/01 (1)
USD 45 COP 100,665 11/30/00 2
USD 107 COP 231,334 11/30/00 --
USD 75 COP 167,250 12/04/00 2
USD 28 COP 62,076 12/05/00 1
USD 89 COP 196,868 12/06/00 2
USD 210 COP 459,480 12/15/00 2
USD 60 COP 134,100 12/18/00 2
USD 53 COP 117,925 12/19/00 2
USD 99 COP 217,305 01/24/01 1
USD 116 CZK 4,797 11/20/00 1
USD 25 CZK 1,020 12/04/00 (1)
USD 52 CZK 1,965 02/05/01 (4)
USD 142 CZK 5,500 02/05/01 (8)
USD 102 CZK 3,891 06/01/01 (7)
USD 59 CZK 2,215 06/07/01 (5)
USD 87 CZK 3,240 06/12/01 (8)
USD 18 DKK 154 01/26/01 --
USD 114 EUR 135 11/20/00 1
USD 40 EUR 45 12/14/00 (1)
USD 18 EUR 20 01/26/01 (1)
USD 15 EUR 16 01/26/01 (1)
USD 8 EUR 9 01/26/01 --
USD 14 EUR 16 01/26/01 (1)
USD 2 EUR 2 01/26/01 --
USD 82 EUR 93 01/26/01 (3)
USD 46 EUR 52 01/26/01 (1)
USD 4 EUR 4 01/26/01 --
USD 51 EUR 58 01/26/01 (1)
USD 30 EUR 34 01/26/01 (1)
USD 48 EUR 55 01/26/01 (1)
USD 24 EUR 28 01/26/01 --
USD 4 EUR 5 01/26/01 --
USD 60 EUR 71 01/26/01 --
USD 13 EUR 16 01/26/01 --
USD 101 EUR 119 01/26/01 --
USD 41 EUR 46 03/09/01 (2)
USD 69 GBP 47 01/26/01 --
USD 296 GRD 95,401 11/06/00 (58)
USD 78 GRD 31,590 11/27/00 1
USD 41 HUF 12,336 03/12/01 (2)
USD 272 HUF 78,244 08/06/01 (29)
USD 146 HUF 45,520 10/15/01 (5)
USD 54 ILS 227 11/15/00 1
USD 64 ILS 270 11/20/00 1
USD 76 ILS 320 11/20/00 1
USD 68 ILS 278 03/09/01 (1)
USD 35 ILS 145 03/28/01 --
USD 67 INR 3,095 11/06/00 (1)
USD 34 INR 1,581 11/14/00 --
USD 32 INR 1,493 11/30/00 --
USD 208 INR 9,813 12/20/00 1
USD 65 JPY 7,004 01/26/01 --
USD 49 JPY 5,232 01/26/01 --
USD 26 JPY 2,786 01/26/01 --
USD 17 JPY 1,824 01/26/01 --
USD 47 KES 3,710 12/28/00 --
USD 112 KRW 124,835 11/14/00 (2)
USD 97 KRW 108,761 11/20/00 (2)
USD 146 KRW 164,936 11/28/00 (1)
USD 251 KRW 280,259 12/20/00 (5)
USD 10 KRW 11,303 01/05/01 --
USD 210 MXN 2,297 11/08/00 29
USD 90 MXN 919 11/13/00 6
USD 140 MXN 1,423 12/29/00 6
USD 34 MXN 365 12/29/00 3
USD 35 MXN 380 12/29/00 4
USD 30 MXN 314 02/15/01 2
USD 100 MXN 1,025 04/16/01 2
See accompanying notes which are an integral part of the financial statements
Multistrategy Bond Fund 178
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION
DELIVER FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
------------ ----------- ---------- --------------
USD 165 MXN 1,657 04/16/01 $ (1)
USD 104 PEN 367 11/08/00 --
USD 50 PEN 177 11/16/00 --
USD 39 PEN 137 11/16/00 --
USD 65 PEN 228 11/20/00 --
USD 84 PEN 296 11/30/00 --
USD 45 PEN 160 02/14/01 --
USD 191 PHP 8,748 11/03/00 (20)
USD 118 PHP 5,800 11/03/00 (5)
USD 79 PHP 3,634 12/01/00 (9)
USD 40 PHP 2,400 04/03/01 4
USD 250 PLN 1,121 12/04/00 (12)
USD 26 PLN 120 01/10/01 (1)
USD 110 PLN 535 02/26/01 --
USD 127 PLN 582 03/02/01 (7)
USD 95 PLN 435 03/12/01 (5)
USD 226 PLN 1,139 10/02/01 (6)
USD 20 SKK 1,000 11/22/00 (1)
USD 224 SKK 10,790 12/05/00 (13)
USD 25 SKK 1,226 12/12/00 (1)
USD 40 SKK 1,978 12/14/00 (1)
USD 14 SKK 620 12/18/00 (2)
USD 95 SKK 4,720 12/19/00 (3)
USD 46 SKK 2,040 03/09/01 (6)
USD 143 TWD 4,432 11/21/00 (7)
USD 93 TWD 2,916 11/27/00 (3)
USD 43 TWD 1,350 12/20/00 (2)
USD 89 VEB 61,661 11/07/00 --
USD 81 VEB 56,275 11/13/00 --
USD 215 VEB 149,535 11/20/00 --
USD 94 VEB 65,495 11/30/00 --
USD 184 VEB 128,524 12/19/00 --
ARS 66 USD 66 11/06/00 (1)
CLP 81,200 USD 142 11/02/00 --
CZK 4,710 USD 114 11/20/00 (1)
DKK 154 USD 18 01/26/01 1
EUR 135 USD 116 11/20/00 --
EUR 29 USD 25 12/04/00 1
EUR 250 USD 224 12/05/00 11
EUR 29 USD 25 12/12/00 1
EUR 46 USD 40 12/14/00 1
EUR 14 USD 14 12/18/00 2
EUR 109 USD 95 12/19/00 2
EUR 14 USD 11 01/26/01 --
EUR 229 USD 201 01/26/01 6
EUR 2,612 USD 2,293 01/26/01 67
EUR 183 USD 161 01/26/01 5
EUR 55 USD 48 01/26/01 1
EUR 86 USD 73 01/26/01 --
EUR 93 USD 78 01/26/01 (1)
EUR 55 USD 52 02/05/01 5
EUR 155 USD 142 02/05/01 10
EUR 47 USD 46 03/09/01 6
EUR 107 USD 102 06/01/01 11
EUR 61 USD 59 06/07/01 7
EUR 89 USD 87 06/12/01 11
EUR 217 USD 202 09/05/01 15
EUR 164 USD 146 10/15/01 4
GBP 163 USD 238 01/26/01 1
GBP 93 USD 136 01/26/01 1
GBP 228 USD 333 01/26/01 2
GBP 10 USD 14 01/26/01 --
GRD 47,000 USD 135 11/06/00 18
ILS 227 USD 55 11/15/00 1
ILS 346 USD 84 11/17/00 1
ILS 323 USD 79 11/20/00 1
INR 1,413 USD 30 11/06/00 --
INR 1,558 USD 33 11/14/00 --
JPY 2,125 USD 20 01/26/01 --
JPY 10,668 USD 100 01/26/01 1
JPY 30,331 USD 284 01/26/01 2
JPY 4,171 USD 39 01/26/01 --
JPY 8,357 USD 79 01/26/01 1
MXN 327 USD 31 11/08/00 (3)
MXN 219 USD 22 11/13/00 --
MXN 745 USD 70 12/29/00 (7)
PEN 229 USD 65 11/16/00 --
PEN 395 USD 111 12/21/00 --
PEN 160 USD 45 02/14/01 --
PHP 2,381 USD 48 11/03/00 2
PHP 7,556 USD 162 11/03/00 14
PHP 3,419 USD 66 11/03/00 (1)
PHP 1,192 USD 23 11/03/00 --
PLN 1,121 USD 244 12/04/00 5
PLN 120 USD 26 01/10/01 --
PLN 435 USD 91 03/12/01 2
SEK 2 USD 0 01/26/01 --
SKK 1,978 USD 40 12/14/00 1
SKK 2,040 USD 41 03/09/01 1
TWD 1,791 USD 57 11/21/00 2
TWD 2,642 USD 82 11/21/00 1
TWD 1,547 USD 48 11/27/00 1
--------------
$ 14
==============
See accompanying notes which are an integral part of the financial statements.
179 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) October 31, 2000
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $781,776)............................................ $ 777,803
Cash........................................................................................ 203
Foreign currency holdings (identified cost $30)............................................. 30
Unrealized appreciation on forward foreign currency exchange contracts...................... 305
Receivables:
Dividends and interest................................................................... 7,597
Investments sold (regular settlement).................................................... 8,601
Investments sold (delayed settlement).................................................... 29,284
Fund shares sold......................................................................... 1,501
Daily variation margin on futures contracts.............................................. 121
Prepaid expenses............................................................................ 2
-------------
Total assets.......................................................................... 825,447
LIABILITIES
Payables:
Investments purchased (regular settlement)............................ $ 7,789
Investments purchased (delayed settlement)............................ 205,207
Fund shares redeemed.................................................. 1,083
Accrued fees to affiliates............................................ 460
Other accrued expenses................................................ 116
Daily variation margin on futures contracts........................... 45
Unrealized depreciation on forward foreign currency exchange contracts... 291
Options written, at market value (premiums received $438)................ 375
------------
Total liabilities..................................................................... 215,366
------------
NET ASSETS.................................................................................. $ 610,081
============
NET ASSETS CONSIST OF:
Undistributed net investment income......................................................... $ 4,186
Accumulated net realized gain (loss)........................................................ (29,494)
Unrealized appreciation (depreciation) on:
Investments.............................................................................. (3,973)
Futures contracts........................................................................ (205)
Options written.......................................................................... 63
Foreign currency-related transactions.................................................... 14
Shares of beneficial interest............................................................... 635
Additional paid-in capital.................................................................. 638,855
------------
NET ASSETS.................................................................................. $ 610,081
============
NET ASSET VALUE, offering and redemption price per share:
Class C ($10,878,887 divided by 1,133,333 shares of $.01 par value
shares of beneficial interest outstanding)............................................ $ 9.60
============
Class E ($6,182,452 divided by 643,497 shares of $.01 par value
shares of beneficial interest outstanding)............................................ $ 9.61
============
Class S ($593,019,808 divided by 61,688,519 shares of $.01 par value
shares of beneficial interest outstanding)............................................ $ 9.61
============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Multistrategy Bond Fund 180
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Interest.......................................................... $ 34,116 $ 33,288
Dividends from Money Market Fund.................................. 2,257 3,945
Dividends......................................................... 240 703
---------------- -----------------
Total investment income........................................ 36,613 37,936
---------------- -----------------
EXPENSES
Advisory fees..................................................... 2,944 3,380
Administrative fees............................................... 248 288
Custodian fees.................................................... 449 387
Distribution fees - Class C....................................... 53 24
Transfer agent fees............................................... 572 668
Professional fees................................................. 68 37
Registration fees................................................. 89 110
Shareholder servicing fees - Class C.............................. 18 8
Shareholder servicing fees - Class E.............................. 8 8
Trustees' fees.................................................... 15 7
Miscellaneous..................................................... 69 57
---------------- -----------------
Expenses before reductions........................................ 4,533 4,974
Expense reductions................................................ (199) (327)
---------------- -----------------
Expenses, net.................................................. 4,334 4,647
---------------- -----------------
Net investment income................................................ 32,279 33,289
---------------- -----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments....................................................... (3,818) (21,697)
Futures contracts................................................. (610) (2,837)
Options written................................................... 108 307
Foreign currency-related transactions............................. 767 25
---------------- -----------------
(3,553) (24,202)
---------------- -----------------
Net change in unrealized appreciation (depreciation) on:
Investments....................................................... 8,933 (13,250)
Futures contracts................................................. 443 (123)
Options written................................................... 385 (472)
Foreign currency-related transactions............................. (146) 165
---------------- -----------------
9,615 (13,680)
---------------- -----------------
Net realized and unrealized gain (loss).............................. 6,062 (37,882)
---------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS................ $ 38,341 $ (4,593)
================ =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
181 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
NET INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income..................................... $ 32,279 $ 33,289 $ 29,477
Net realized gain (loss).................................. (3,553) (24,202) 10,515
Net change in unrealized appreciation
(depreciation)......................................... 9,615 (13,680) (6,774)
--------------- ----------------- -----------------
Net increase (decrease) in net assets from operations.. 38,341 (4,593) 33,218
--------------- ----------------- -----------------
DISTRIBUTIONS
From net investment income
Class C................................................ (362) (148) --
Class E................................................ (188) (173) (43)
Class S................................................ (27,820) (32,695) (29,983)
From net realized gain
Class E................................................ -- (2) (48)
Class S................................................ -- (430) (11,829)
--------------- ----------------- -----------------
Net decrease in net assets from distributions....... (28,370) (33,448) (41,903)
--------------- ----------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share
transactions........................................... 33,493 54,301 121,730
--------------- ----------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS.................. 43,464 16,260 113,045
NET ASSETS
Beginning of period....................................... 566,617 550,357 437,312
--------------- ----------------- -----------------
End of period (including undistributed net investment
income of $4,186 and $58, and accumulated distributions
in excess of net investment income of $350,
respectively.)......................................... $ 610,081 $ 566,617 $ 550,357
=============== ================= =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Mulitstrategy Bond Fund 182
<PAGE>
MULTISTRATEGY BOND FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
2000* 1999**
------ -------
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 9.47 $ 10.14
------ -------
INCOME FROM OPERATIONS
Net investment income (a)..................... .44 .42
Net realized and unrealized gain (loss)....... .09 (.63)
------ -------
Total income from operations............... .53 (.21)
------ -------
DISTRIBUTIONS
From net investment income.................... (.40) (.45)
From net realized gain........................ -- (.01)
------ -------
Total distributions........................ (.40) (.46)
------ -------
NET ASSET VALUE, END OF PERIOD................... $ 9.60 $ 9.47
====== =======
TOTAL RETURN (%)(b).............................. 5.77 (2.10)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)...... 10,879 6,666
Ratios to average net assets (%)(c):
Operating expenses, net.................... 1.86 1.80
Operating expenses, gross.................. 1.90 1.84
Net investment income...................... 5.56 4.80
Portfolio turnover rate (%)................... 105.03 134.11
* For the ten months ended October 31, 2000.
** 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) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
183 Mulitstrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
2000* 1999 1998**
------- ------ -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................ $ 9.47 $ 10.10 $ 10.30
------- ------- -------
INCOME FROM OPERATIONS
Net investment income (a)........................ .49 .56 .16
Net realized and unrealized gain (loss).......... .11 (.66) .07
------- ------- -------
Total income from operations.................. .60 (.10) .23
------- ------- -------
DISTRIBUTIONS
From net investment income....................... (.46) (.52) (.20)
From net realized gain........................... -- (.01) (.23)
------- ------- -------
Total distributions........................... (.46) (.53) (.43)
------- ------- -------
NET ASSET VALUE, END OF PERIOD...................... $ 9.61 $ 9.47 $ 10.10
======= ======= =======
TOTAL RETURN (%)(b)................................. 6.46 (1.08) 1.89
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)......... 6,182 3,248 2,610
Ratios to average net assets (%)(c)(d):
Operating expenses, net....................... 1.11 1.05 --
Operating expenses, gross..................... 1.15 1.11 --
Net investment income......................... 6.31 5.54 --
Portfolio turnover rate (%)...................... 105.03 134.11 334.86
</TABLE>
* For the ten months ended October 31, 2000.
** 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 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.
Multistrategy Bond Fund 184
<PAGE>
MULTISTRATEGY BOND FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
2000* 1999 1998 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................ $ 9.46 $10.11 $10.26 $10.11 $10.25
------ ------ ------ ------ ------
INCOME FROM OPERATIONS
Net investment income (a)........................ .52 .57 .60 .60 .61
Net realized and unrealized gain (loss).......... .08 (.65) .08 .33 (.12)
------ ------ ------ ------ ------
Total income from operations.................. .60 (.08) .68 .93 .49
------ ------ ------ ------ ------
DISTRIBUTIONS
From net investment income....................... (.45) (.56) (.60) (.61) (.62)
From net realized gain........................... -- (.01) (.23) (.17) (.01)
------ ------ ------ ------ ------
Total distributions........................... (.45) (.57) (.83) (.78) (.63)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD...................... $ 9.61 $ 9.46 $10.11 $10.26 $10.11
====== ====== ====== ====== ======
TOTAL RETURN (%)(b)................................. 6.56 (.81) 6.79 9.50 4.97
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)......... 593,020 556,703 547,747 437,312 305,428
Ratios to average net assets (%)(c):
Operating expenses, net....................... .86 .80 .80 .80 .81
Operating expenses, gross..................... .90 .86 .81 .83 .88
Net investment income......................... 6.54 5.79 5.76 5.93 6.19
Portfolio turnover rate (%)...................... 105.03 134.11 334.86 263.75 145.38
</TABLE>
* For the ten months ended October 31, 2000.
(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.
185 Multistrategy Bond Fund
<PAGE>
TAX EXEMPT BOND FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
DATES TAX EXEMPT BOND - CLASS S SSB 3-MONTH T-BILL **
Inception* $ 10,000 $ 10,000
1991 $ 10,672 $ 10,618
1992 $ 11,364 $ 11,028
1993 $ 12,195 $ 11,368
1994 $ 12,264 $ 11,804
1995 $ 13,029 $ 12,479
1996 $ 13,495 $ 13,141
1997 $ 14,134 $ 13,830
1998 $ 14,893 $ 14,545
1999 $ 14,829 $ 15,220
2000 $ 15,678 $ 16,093
Total $142,551 $140,126
YEARLY PERIODS ENDED OCTOBER 31
<TABLE>
<CAPTION>
TAX EXEMPT BOND FUND - CLASS S TAX EXEMPT BOND FUND - CLASS C ++++
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
----------------------------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $10,572 5.72% 1 Year $10,471 4.71%
5 Years $12,034 3.77%(S) 5 Years $11,852 3.45%(S)
10 Years $15,678 4.60%(S) 10 Years $15,441 4.44%(S)
TAX EXEMPT BOND FUND - CLASS E ++ SALOMON SMITH BARNEY 3-MONTH TREASURY BILL INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
----------------------------------------- -----------------------------------------------------
1 Year $10,552 5.52% 1 Year $10,574 5.74%
5 Years $11,994 3.70%(S) 5 Years $12,896 5.22%(S)
10 Years $15,627 4.56%(S) 10 Years $16,093 4.87%(S)
</TABLE>
187 Tax Exempt Bond Fund
<PAGE>
TAX EXEMPT BOND FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the ten months ended October 31, 2000, the Tax Exempt Bond Fund Class S,
Class E, and Class C shares gained 5.37%, 5.17%, and 4.53%, respectively. This
compared to a 5.90% return for the Lehman Brothers Municipal 1-10 Year Index.
The Fund generally maintained a longer benchmark-relative duration, which during
the periods of rising interest rates resulted in underperformance versus the
Index. However, by the final three months of the fiscal period, this slightly
longer duration provided a boost to Fund returns.
PORTFOLIO HIGHLIGHTS
During the first quarter, bond markets were focused on the Federal Reserve Board
(the Fed), as they waited for a definitive response regarding interest rates.
After the Fed imposed a 50 basis point interest rate hike on May 16, however,
bond investors generally reached a consensus that the Fed would hold rates
steady, and bonds enjoyed a rally. Subsequently, in June economic data provided
bond investors with the first major indications that the US economy could be
slowing, which continued to fuel the rally.
The big story was the inversion of the US Treasury yield curve which occurred
during first quarter 2000. While the 3-month and 2-year rates rose 57 and 25
basis points, respectively, the 10-year and 30-year rates declined 42 and 64
basis points, respectively. This inversion was driven by the US Treasury's debt
buyback program and a declining supply of longer-term Treasury bonds. During the
same period, the municipal curve also flattened, however, it did not invert.
TOP TEN ISSUING STATES
(as a percent of Total Investments) October 31, 2000
New York 10.4%
Texas 8.3
Illinois 5.8
Washington 5.4
Georgia 5.2
Michigan 4.7
Indiana 4.7
Arizona 4.6
Massachusetts 4.1
California 3.7
PORTFOLIO CHARACTERISTICS
October 31, 2000
Weighted Average Quality Diversification AAA
Weighted Average Years-to-Maturity 5.8 Years
Weighted Average Duration 4.4 Years
Current Yield (SEC 30-day standardized)
Class S 4.2%
Class E 4.0%
Class C 3.2%
Number of Issues 185
Number of Issuers 156
MONEY MANAGERS
MFS Institutional Advisors, Inc.
Standish, Ayer & Wood, Inc.
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* Tax Exempt Bond Fund Class S assumes initial investment on November 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.
++ 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.
Lehman Brothers Municipal 1-10 year is an index, with income reinvested,
representative of municipal bonds with maturities ranging from 1-10 years.
(S) 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 188
<PAGE>
TAX EXEMPT BOND FUND
STATEMENT OF NET ASSETS
October 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY $
--------- ------- -------- ------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS - 97.2%
ALASKA - 0.8%
Alaska State Housing Finance Corp. Revenue, Series A-1 (a) 620 4.550 12/01/02 618
Anchorage, Alaska General Obligation, Series A (a) 500 5.750 12/01/16 518
-----
1,136
-----
ARIZONA - 4.6%
Arizona State Transportation Board Excise Tax Revenue, Series A (a) 500 5.750 07/01/04 521
Arizona State Transportation Board Highway Revenue, Series A
(pre-refunded 07/01/01)(e) 1,000 6.450 07/01/06 1,029
Phoenix, Arizona Civic Improvement Corporate Business Acquisition
Special Revenue (a) 250 5.500 07/01/07 262
Phoenix, Arizona Civic Plaza Building Corporate Excise Tax Revenue 1,000 5.900 07/01/10 1,054
Pinal County, Arizona University School District Number 43 Apache
Junction General Obligation, Series A (a) 500 6.800 07/01/08 567
Salt River, Arizona Agricultural Improvement & Power District Electric
System Revenue, Series A 500 5.500 01/01/05 518
Salt River, Arizona Agricultural Improvement & Power District Electric
System Revenue, Series A 2,000 6.000 01/01/08 2,156
-----
6,107
-----
CALIFORNIA - 3.6%
ABAG Finance Authority For Nonprofit Corporations California Insured
Revenue Certificate Participation 600 5.700 08/15/14 625
California, State of, General Obligation 1,000 6.600 02/01/10 1,153
California Statewide Communities Development Authority Multi-family
Revenue, Series C 1,000 5.200 12/01/29 997
Sacramento, California Municipal Utility District Revenue,
Series Z (a) 1,000 6.000 07/01/01 1,015
San Diego County, California Regional Transportation Community Sales
Tax Revenue 1,000 7.000 04/01/06 1,052
-----
4,842
-----
COLORADO - 1.7%
Colorado Housing Finance Authority Revenue, Series A-3 590 7.250 04/01/10 660
Colorado Housing Finance Authority Revenue, Series B-3 250 6.700 10/01/16 273
Colorado Housing Finance Authority Revenue, Series C-2 410 4.500 11/01/05 404
Denver, Colorado Health & Hospital Revenue, Series A 1,000 5.000 12/01/04 985
-----
2,322
-----
CONNECTICUT - 0.8%
Connecticut State Special Tax Obligation Revenue (a)(b) 1,000 5.250 10/01/09 1,042
-----
</TABLE>
189 Tax Exempt Bond Fund
<PAGE>
TAX EXEMPT BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY $
--------- ------- -------- ------
<S> <C> <C> <C> <C>
DELAWARE - 0.8%
Delaware State Economic Development Authority Revenue, Series A 1,000 6.500 01/01/08 1,073
-----
DISTRICT OF COLUMBIA - 1.8%
District of Columbia General Obligation, Series A (pre-refunded 06/01/06)(e) 800 6.375 06/01/16 881
District of Columbia General Obligation, Series B 1,000 5.500 06/01/09 1,046
Washington, DC Metropolitan Area Transportation Authority Gross Revenue (a) 500 6.000 07/01/10 543
-----
2,470
-----
FLORIDA - 3.7%
Florida State Board of Education Lottery Revenue, Series B (a) 750 5.500 07/01/11 790
Florida State Division of Bond Finance Revenue, Series 2000-B (a) 500 5.750 07/01/06 529
Florida, State of, General Obligation 500 5.800 07/01/18 530
Hillsborough County, Florida Educational Facilities Authority Revenue 1,500 5.750 04/01/18 1,526
Hillsborough County, Florida Utility Reform Revenue 190 6.200 12/01/08 199
Orlando, Florida Utilities Community Water & Electric Revenue 1,225 5.900 10/01/08 1,324
-----
4,898
-----
GEORGIA - 5.1%
Columbia County, Georgia Water & Sewer Revenue (a) 750 6.000 06/01/20 807
Dalton, Georgia Utilities Revenue 500 5.750 01/01/09 533
Georgia State Municipal Electric Authority General Resolution Revenue,
Series A (a) 850 5.000 01/01/02 855
Georgia State Municipal Electric Authority Revenue, Series B (a) 850 6.250 01/01/17 938
Georgia, State of, General Obligation, Series B 1,000 5.750 08/01/08 1,071
Georgia, State of, General Obligation, Series C 750 6.500 07/01/07 830
Georgia, State of, General Obligation, Series D 1,000 7.400 08/01/07 1,158
Georgia, State of, General Obligation, Series F 600 6.500 12/01/09 678
-----
6,870
-----
HAWAII - 2.8%
Hawaii State Housing Financial & Development Corporation, Single Family Mortgage
Purchasing Revenue, Series B 1,000 4.450 07/01/03 997
Hawaii, State of, General Obligation, Series CA (a) 1,000 5.750 01/01/10 1,066
Hawaii, State of, General Obligation, Series CP (a) 600 5.000 10/01/02 606
Honolulu, Hawaii City & County General Obligation, Series A (a) 650 5.000 11/01/02 657
Kauai County, Hawaii General Obligation, Series A (a) 375 6.250 08/01/19 400
-----
3,726
-----
ILLINOIS - 5.8%
Chicago, Illinois General Obligation (a) 750 6.000 01/01/11 811
Chicago, Illinois Public Building Commercial Building Revenue, Series B (a) 500 5.250 12/01/18 489
Chicago, Illinois Tax Increment Revenue, Series A, Zero Coupon (a) 700 0.000 12/01/07 491
Illinois Development Finance Authority Revenue, Series A (a) 1,145 5.500 05/15/05 1,182
Illinois Health Facilities Authority Revenue 1,000 5.250 09/01/04 991
Illinois Health Facilities Authority Revenue (a) 500 5.000 08/01/03 505
Illinois Health Facilities Authority Revenue, Series A (a) 1,420 5.500 08/15/05 1,467
Illinois Housing Development Authority Elderly Housing Revenue 265 4.350 01/01/04 261
</TABLE>
Tax Exempt Bond Fund 190
<PAGE>
TAX EXEMPT BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY $
--------- ------- -------- ------
<S> <C> <C> <C> <C>
Illinois, State of, Dedicated Tax Revenue, Series A (a) 1,000 7.000 12/15/13 1,023
Macon County & Decatur, Illinois Certificate Participation (a) 425 6.500 01/01/05 453
-----
7,673
-----
INDIANA - 4.7%
Allen County, Indiana Jail Building Corporate Revenue 300 5.750 10/01/09 319
Franklin Township, Indiana School Building Corporate Revenue 500 5.750 07/15/06 526
Indiana Health Facilities Financing Authority Hospital Revenue 395 4.500 02/15/05 387
Indiana Health Facilities Financing Authority Hospital Revenue, Series A (a) 500 5.000 11/01/02 504
Indiana Health Facilities Financing Authority Hospital Revenue, Series A (a) 1,250 5.000 12/01/03 1,264
Indiana Health Facilities Financing Authority Hospital Revenue, Series D (b) 1,410 5.000 11/01/26 1,424
Indiana State Housing Finance Authority Single-family Mortgage Revenue,
Series A 725 6.600 07/01/05 752
Indiana University Revenue, Series M 500 5.750 08/01/10 533
Monroe County, Indiana Hospital Authority Revenue (a) 500 4.500 05/01/03 499
-----
6,208
-----
IOWA - 0.2%
Iowa Financing Authority Health Care Facilities Revenue 290 6.000 07/01/10 300
-----
KANSAS - 0.6%
Butler & Sedgwick Counties, Kansas University School District Number 385 Andover
General Obligation 500 5.000 09/01/09 509
Kansas, State of, Department of Transportation Highway Revenue 300 7.250 03/01/04 325
-----
834
-----
LOUISIANA - 1.9%
De Soto Parish, Louisiana Pollution Control Revenue, Series A 650 5.050 12/01/02 651
Jefferson Parish, Louisiana Hospital Service District Number 2 Hospital
Revenue (a) 1,000 5.250 12/01/15 1,029
Shreveport, Louisiana General Obligation Zero Coupon (a) 1,000 0.000 01/01/05 820
-----
2,500
-----
MASSACHUSETTS - 4.1%
Massachusetts Bay Transportation Authority Revenue, Series C 500 6.000 03/01/06 533
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 Development Finance Agency Revenue, Series C 360 5.750 08/01/05 369
Massachusetts State General Obligation, Series A 430 6.000 02/01/11 471
Massachusetts State Health & Educational Facilities Authority Revenue,
Series B (a)(b) 470 4.550 01/01/21 467
Massachusetts State Industrial Finance Agency Resource Recovery Revenue,
Series A 500 4.850 12/01/05 489
Massachusetts, State Special Obligation Revenue, Series A 1,000 5.500 06/01/13 1,043
Massachusetts State Turnpike Authority Revenue, Series A 1,100 5.000 01/01/13 1,102
Massachusetts State Water Resources Authority Revenue, Series A (a) 575 6.000 11/01/06 618
-----
5,432
-----
</TABLE>
191 Tax Exempt Bond Fund
<PAGE>
TAX EXEMPT BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY $
--------- ------- -------- ------
<S> <C> <C> <C> <C>
MICHIGAN - 4.7%
Bishop International Airport Authority, Michigan Airport Revenue, Series B 1,000 5.000 12/01/10 977
Bishop International Airport Authority, Michigan Airport Revenue, Series B 1,030 5.250 12/01/11 1,017
Jackson County, Michigan Hospital Finance Authority Revenue, Series A (a) 300 4.375 06/01/02 299
Manistee, Michigan Area Public Schools General Obligation (a) 235 6.000 05/01/08 253
Michigan Municipal Bond Authority Revenue 500 5.750 10/01/11 536
Michigan State Building Authority Revenue, Series I 375 5.400 10/01/03 389
Michigan State Hospital Finance Authority Revenue, Series A 1,000 5.500 10/01/04 1,033
Michigan State Hospital Finance Authority Revenue, Series A 500 5.000 07/01/02 504
Michigan State Hospital Finance Authority Revenue, Series A 250 5.000 05/15/07 254
Michigan State Hospital Finance Authority Revenue, Series B 1,000 5.200 11/15/33 995
-----
6,257
-----
MINNESOTA - 0.7%
Minnesota, State of, General Obligation 500 6.000 08/01/05 531
St. Cloud, Minnesota Health Care Revenue, Series A 340 5.500 05/01/06 352
-----
883
-----
NEBRASKA - 0.9%
Nebraska Public Power District Revenue (pre-refunded 01/01/03)(e) 1,160 6.000 01/01/08 1,217
-----
NEVADA - 1.1%
Clark County, Nevada School District General Obligation 1,000 5.250 06/15/10 1,026
Henderson, Nevada General Obligation, Series A (a) 475 6.000 06/01/06 505
-----
1,531
-----
NEW HAMPSHIRE - 0.9%
New Hampshire Health & Educational Facilities Authority Revenue 300 6.500 07/01/10 309
New Hampshire Higher Educational & Health Facilities Authority Revenue
(pre-refunded 03/01/03)(e) 750 9.000 03/01/23 835
-----
1,144
-----
NEW JERSEY - 2.3%
New Jersey State Housing & Mortgage Finance Agency Revenue, Series 1 835 6.000 11/01/02 848
New Jersey State Transportation Corporation Capital Grant Anticipation Notes,
Series A 670 4.900 09/01/01 673
New Jersey State Transportation Corporation, Series A (a) 500 5.000 02/01/03 501
New Jersey State Transportation Trust Fund Authority Revenue, Series B 500 6.000 06/15/07 538
New Jersey State Turnpike Authority Revenue, Series A (a) 500 5.500 01/01/09 528
-----
3,088
-----
NEW MEXICO - 1.8%
New Mexico Mortgage Finance Authority Revenue, Series A-1 175 6.200 01/01/01 175
New Mexico State Highway Commission Tax Revenue 1,000 5.750 06/15/09 1,069
New Mexico State Highway Commission Tax Revenue, Series A 570 5.500 06/15/06 595
Rio Rancho, New Mexico Water & Wastewater System Revenue, Series A 500 8.000 05/15/04 555
-----
2,394
-----
</TABLE>
Tax Exempt Bond Fund 192
<PAGE>
TAX EXEMPT BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY $
--------- ------- -------- ------
<S> <C> <C> <C> <C>
NEW YORK - 10.3%
Long Island, New York Power Authority Electric System Revenue, Series A (a) 500 6.000 12/01/07 540
Metropolitan Transportation Authority, New York Service Contract Commuter
Facilities, Series 7 1,000 5.300 07/01/05 1,027
Metropolitan Transportation Authority, New York Transit Facilities Revenue,
Series R (d) 650 5.000 07/01/03 660
Municipal Assistance Corporation, New York, New York Revenue, Series E 1,000 4.700 07/01/02 1,006
Nassau County, New York Tobacco Settlement Corporation Revenue, Series A (b) 595 5.400 07/15/12 602
New York, New York General Obligation, Series E 500 5.300 08/01/03 510
New York, New York General Obligation, Series F 500 5.300 08/01/03 510
New York, New York General Obligation, Series H 750 5.250 08/01/03 765
New York State Certificate Participation 1,000 5.000 09/01/02 1,008
New York State Dormitory Authority Revenue 250 5.000 04/01/03 252
New York State Dormitory Authority Revenue (a) 1,900 7.000 07/01/09 2,110
New York State Dormitory Authority Revenue, Series 1 500 5.000 07/01/03 505
New York State Dormitory Authority Revenue, Series A 375 6.000 02/15/03 387
New York State Dormitory Authority Revenue, Series A 375 6.000 08/15/04 393
New York State Dormitory Authority Revenue, Series B 745 4.500 02/15/03 744
New York State Dormitory Authority Revenue, Series E 1,000 5.500 02/15/03 1,020
New York State Urban Development Corporation Revenue, Series 7 125 5.500 01/01/01 125
Suffolk County, New York Judicial Facilities Agency Service Agreement
Revenue (a) TSASC Inc., New York Revenue, Series 1 500 5.500 04/15/09 526
TSASC Inc., New York Revenue, Series 1 1,000 5.500 07/15/13 998
------
13,688
------
NORTH CAROLINA - 1.2%
North Carolina Municipal Power Agency Number 1, Catawba Electric
Revenue (a) 1,500 6.000 01/01/12 1,619
------
OHIO - 2.6%
Cleveland, Ohio General Obligation (a) 500 5.000 11/15/08 511
Cuyahoga County, Ohio Hospital Revenue (b) 300 4.550 01/01/16 300
Hamilton County, Ohio Sewer System Revenue, Series A (a) 500 6.000 12/01/05 533
Jackson, Ohio Local School District Stark & Summit Counties,
General Obligation, Zero Coupon 500 0.000 12/01/07 355
Ohio State Building Authority Revenue, Series A 575 5.750 04/01/08 614
Ohio State Building Authority Revenue, Series A (a) 500 6.000 04/01/06 533
Richland County, Ohio Hospital Facilities Revenue, Series A 300 5.400 11/15/03 301
Steubenville, Ohio Hospital Revenue 280 5.700 10/01/10 278
------
3,425
------
OKLAHOMA - 0.5%
Oklahoma Housing Finance Agency Single Family Revenue 400 7.600 09/01/15 445
Stillwater, Oklahoma Medical Center Authority Revenue, Series A 155 5.550 05/15/01 155
------
600
------
OREGON - 0.4%
Clackamas County, Oregon School District Number 62C General Obligation 435 6.000 06/15/11 474
------
</TABLE>
193 Tax Exempt Bond Fund
<PAGE>
TAX EXEMPT BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY $
--------- ------- -------- ------
<S> <C> <C> <C> <C>
PENNSYLVANIA - 1.9%
Norwin, Pennsylvania School District General Obligation (a) 250 6.000 04/01/20 262
Philadelphia, Pennsylvania Gas Works Revenue, Series A 500 5.500 07/01/07 521
Philadelphia, Pennsylvania Hospitals & Higher Educational Facilities
Authority Revenue, Series A 500 5.000 05/15/02 504
Philadelphia, Pennsylvania Water & Wastewater Revenue (a) 500 6.750 08/01/05 545
Scranton-Lackawanna, Pennsylvania Health & Welfare Authority Revenue,
Series A 700 7.375 07/15/08 728
------
2,560
------
RHODE ISLAND - 1.3%
Rhode Island Housing & Mortgage Finance Authority Housing Revenue,
Series A (a) 1,000 5.150 07/01/01 1,004
Rhode Island State Health & Educational Building Corporation Revenue (a) 785 5.500 04/01/17 793
------
1,797
------
SOUTH CAROLINA - 1.6%
Columbia, South Carolina Waterworks & Sewer System Revenue, Zero Coupon 1,000 0.000 02/01/04 858
Medical University South Carolina Hospital Facilities Revenue 680 5.500 07/01/03 692
Winnsboro, South Carolina Utility Revenue (a) 550 5.250 08/15/14 558
------
2,108
------
SOUTH DAKOTA - 0.8%
South Dakota Housing Development Authority Revenue, Series A 1,000 5.200 05/01/02 1,011
------
TENNESSEE - 1.5%
Metropolitan Government, Nashville & Davidson Counties, Tennessee
Health & Educational Facilities Board Revenue, Series A 920 5.000 11/01/06 935
White House Utility District, Tennessee, Robertson & Sumner Counties
Waterworks Revenue, Zero Coupon, Series B (a) 650 0.000 01/01/05 531
Williamson County, Tennessee General Obligation 500 6.000 03/01/06 533
------
1,999
------
TEXAS - 8.2%
Alvin, Texas Independent School District General Obligation 515 6.750 08/15/09 587
Alvin, Texas Independent School District General Obligation 545 6.750 08/15/10 625
Brazos River Authority, Texas Revenue Series B (b) 1,500 5.200 12/01/18 1,504
Harris County, Texas General Obligation, Series A 500 6.125 08/15/20 536
Houston, Texas General Obligation, Series C 720 5.900 03/01/03 733
Houston, Texas General Obligation, Series C (pre-refunded 03/01/02)(e) 280 5.900 03/01/03 285
Houston, Texas Hotel Occupancy Revenue 500 6.000 07/01/04 523
Matagorda County, Texas Navigation District Number 1 Pollution Control
Revenue, Series A (b) 1,000 4.900 05/01/30 996
Pasadena, Texas Independent School District General Obligation 1,000 5.900 02/15/09 1,077
Round Rock, Texas Independent School District General Obligation 1,000 6.500 08/01/10 1,124
Round Rock, Texas Independent School District General Obligation 750 6.500 08/01/11 840
San Antonio, Texas Electric & Gas Revenue, Zero Coupon, Series B (a) 1,000 0.000 02/01/04 856
Texas A&M University Permanent University Funding Revenue (b) 1,000 5.000 07/01/08 1,017
Waco, Texas Health Facilities Development Corporate Revenue, Series A 250 5.200 11/15/06 254
------
10,957
------
</TABLE>
Tax Exempt Bond Fund 194
<PAGE>
TAX EXEMPT BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY $
--------- ------- -------- ------
<S> <C> <C> <C> <C>
UTAH - 1.4%
Intermountain Power Agency, Utah Power Supply Revenue, Series C 1,000 4.700 07/01/02 1,002
Utah State Board of Regents Revenue (a) 300 5.000 08/01/02 302
Utah State Board of Regents Revenue, Series A (a) 565 5.750 04/01/03 582
-------
1,886
-------
VIRGINIA - 2.5%
Arlington County, Virginia Industrial Development Authority Resource
Recovery Revenue, Series A 1,000 5.250 01/01/04 1,021
Fairfax County, Virginia Certificate Participation 200 5.750 04/15/13 206
Prince William County, Virginia Water & Sewer Service System Authority
Revenue (a) 555 5.500 07/01/05 577
Virginia State Housing Development Authority Revenue, Series D 1,000 6.050 07/01/10 1,051
Virginia State Public Building Authority Revenue, Series A 500 5.750 08/01/07 534
-------
3,389
-------
WASHINGTON - 5.4%
CDP King County III, Washington Lease Revenue (a) 500 4.600 06/01/03 500
Kitsap County, Washington General Obligation (a) 775 5.750 07/01/14 808
Washington State Public Power Supply System Nuclear Project Number 1
Revenue, Series A 1,000 7.000 07/01/08 1,131
Washington State Public Power Supply System Nuclear Project Number 3
Revenue, Series A 1,000 5.000 07/01/04 1,011
Washington, State of, General Obligation, Series A 1,060 6.500 07/01/04 1,128
Washington, State of, General Obligation, Series B 1,000 5.750 05/01/10 1,029
Washington, State of, General Obligation, Series R 1,500 6.400 09/01/03 1,538
-------
7,145
-------
WEST VIRGINIA - 0.7%
South Charleston, West Virginia Pollution Control Revenue 700 7.625 08/01/05 765
West Virginia State Hospital Finance Authority Revenue 150 6.500 09/01/05 157
-------
922
-------
WISCONSIN - 1.5%
Oconto Falls, Wisconsin Public School District General Obligation,
Series A 750 5.750 03/01/13 788
Wisconsin Housing & Economic Development Authority Revenue, Series A 700 6.850 11/01/12 727
Wisconsin State Certificate Participation Series A 500 5.000 03/01/02 503
-------
2,018
-------
TOTAL MUNICIPAL BONDS
(cost $128,875) 129,545
-------
SHORT-TERM INVESTMENTS - 1.9%
Frank Russell Investment Company Tax Free Money Market Fund, due on
demand (c) 2,563 2,563
-------
TOTAL SHORT-TERM INVESTMENTS
(cost $2,563) 2,563
-------
</TABLE>
195 Tax Exempt Bond Fund
<PAGE>
TAX EXEMPT BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
VALUE
(000)
$
--------
TOTAL INVESTMENTS - 99.1%
(identified cost $131,438) 132,108
OTHER ASSETS AND LIABILITIES, NET - 0.9% 1,201
--------
NET ASSETS - 100.0% 133,309
========
(a) Bond is insured by AMBAC, FGIC, or MBIA.
(b) Adjustable or floating rate security.
(c) At amortized cost, which approximates market.
(d) Forward commitment.
(e) Pre-refunded: These bonds are collateralized by U.S. Treasury securities,
which are held in escrow by the 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.
Abbreviations:
AMBAC - AMBAC Indemnity Corporation
FGIC - Financial Guaranty Insurance Corporation
MBIA - Municipal Bond Investors Assurance
QUALITY RATINGS AS A % OF VALUE (UNAUDITED)
AAA 51%
AA 29
A 9
BBB 11
-----
100%
=====
ECONOMIC SECTOR EMPHASIS AS A % OF VALUE (UNAUDITED)
General Obligation 23%
Other 18
Utility Revenue 17
Healthcare Revenue 16
State & Community Lease 9
Housing Revenue 8
Universities 5
Cash Equivalents 2
Pollution Control Revenue 1
Refunded & Special Obligation 1
-----
100%
=====
See accompanying notes which are an integral part of the financial statements.
Tax Exempt Bond Fund 196
<PAGE>
TAX EXEMPT BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) October 31, 2000
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $131,438)................................................ $132,108
Receivables:
Dividends and interest....................................................................... 2,206
Fund shares sold............................................................................. 45
Prepaid expenses................................................................................ 1
--------
Total assets.............................................................................. 134,360
LIABILITIES
Payables:
Investments purchased................................................... $ 696
Fund shares redeemed.................................................... 247
Accrued fees to affiliates.............................................. 68
Other accrued expenses.................................................. 40
--------
Total liabilities......................................................................... 1,051
--------
NET ASSETS...................................................................................... $133,309
========
NET ASSETS CONSIST OF:
Undistributed net investment income............................................................. $ 409
Accumulated net realized gain (loss)............................................................ (2,389)
Unrealized appreciation (depreciation) on investments........................................... 670
Shares of beneficial interest................................................................... 64
Additional paid-in capital...................................................................... 134,555
--------
NET ASSETS...................................................................................... $133,309
========
NET ASSET VALUE, offering and redemption price per share:
Class C ($779,806 divided by 37,433 shares of $.01 par value
shares of beneficial interest outstanding)................................................ $ 20.83
========
Class E ($3,445,055 divided by 165,110 shares of $.01 par value
shares of beneficial interest outstanding)................................................ $ 20.87
========
Class S ($129,084,588 divided by 6,192,623 shares of $.01 par value
shares of beneficial interest outstanding)................................................ $ 20.84
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
197 Tax Exempt Bond Fund
<PAGE>
TAX EXEMPT BOND FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Interest........................................................ $ 5,449 $ 6,457
Dividends from Tax Free Money Market Fund....................... 296 --
Dividends....................................................... 79 61
---------------- -----------------
Total investment income...................................... 5,824 6,518
---------------- -----------------
EXPENSES
Advisory fees................................................... 343 427
Administrative fees............................................. 59 71
Custodian fees.................................................. 92 81
Distribution fees - Class C..................................... 4 1
Transfer agent fees............................................. 126 86
Professional fees............................................... 36 35
Registration fees............................................... 45 95
Shareholder servicing fees - Class C............................ 1 1
Shareholder servicing fees - Class E............................ 7 5
Trustees' fees.................................................. 11 6
Miscellaneous................................................... 44 17
---------------- -----------------
Expenses before reductions...................................... 768 825
Expense reductions.............................................. (3) --
---------------- -----------------
Expenses, net................................................ 765 825
---------------- -----------------
Net investment income.............................................. 5,059 5,693
---------------- -----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investments......................... (747) (1,498)
Net change in unrealized appreciation (depreciation)
on investments................................................. 3,182 (5,063)
---------------- -----------------
Net realized and unrealized gain (loss)............................ 2,435 (6,561)
---------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS.............. $ 7,494 $ (868)
================ =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Tax Exempt Bond Fund 198
<PAGE>
TAX EXEMPT BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- ------------------ ------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income.......................................... $ 5,059 $ 5,693 $ 4,119
Net realized gain (loss)....................................... (747) (1,498) (141)
Net change in unrealized appreciation (depreciation)........... 3,182 (5,063) 1,153
---------------- ----------------- -----------------
Net increase (decrease) in net assets from operations....... 7,494 (868) 5,131
---------------- ----------------- -----------------
DISTRIBUTIONS
From net investment income
Class C..................................................... (16) (7)
Class E..................................................... (113) (77)
Class S..................................................... (4,377) (5,753) (4,154)
---------------- ----------------- -----------------
Net decrease in net assets from distributions............ (4,506) (5,837) (4,154)
---------------- ----------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions.. 3,033 5,034 44,906
---------------- ----------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS....................... 6,021 (1,671) 45,883
NET ASSETS
Beginning of period............................................ 127,288 128,959 83,076
---------------- ----------------- -----------------
End of period (including undistributed net investment income of
$409 at October 31, 2000 and $144 at December 31, 1999)..... $ 133,309 $ 127,288 $ 128,959
================ ================= =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
199 Tax Exempt Bond Fund
<PAGE>
TAX EXEMPT BOND FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
2000* 1999**
------ ------
NET ASSET VALUE, BEGINNING OF PERIOD.................... $20.45 $21.38
------ ------
INCOME FROM OPERATIONS
Net investment income (a)............................ .59 .45
Net realized and unrealized gain (loss).............. .32 (.84)
------ ------
Total income from operations...................... .91 (.39)
------ ------
DISTRIBUTIONS
From net investment income........................... (.53) (.54)
------ ------
NET ASSET VALUE, END OF PERIOD.......................... $20.83 $20.45
====== ======
TOTAL RETURN (%)(b)..................................... 4.53 (1.82)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)............. 780 474
Ratios to average net assets (%)(c):
Operating expenses................................ 1.64 1.57
Net investment income............................. 3.48 3.12
Portfolio turnover rate (%).......................... 38.16 119.34
* For the ten months ended October 31, 2000.
** 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) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
Tax Exempt Bond Fund 200
<PAGE>
TAX EXEMPT 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.
2000* 1999**
------ ------
NET ASSET VALUE, BEGINNING OF PERIOD............... $20.47 $21.19
------ ------
INCOME FROM OPERATIONS
Net investment income (a)....................... .71 .50
Net realized and unrealized gain (loss)......... .33 (.71)
------ ------
Total income from operations................. 1.04 (.21)
------ ------
DISTRIBUTIONS
From net investment income...................... (.64) (.51)
------ ------
NET ASSET VALUE, END OF PERIOD..................... $20.87 $20.47
====== ======
TOTAL RETURN (%)(b)................................ 5.17 (.99)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)........ 3,445 2,854
Ratios to average net assets (%)(c):
Operating expenses........................... .89 .82
Net investment income........................ 4.08 3.76
Portfolio turnover rate (%)..................... 38.16 119.34
* For the ten months ended October 31, 2000.
** 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) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
201 Tax Exempt Bond Fund
<PAGE>
TAX EXEMPT BOND FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table include selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
2000* 1999 1998 1997 1996 1995
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............... $20.42 $21.39 $21.19 $21.02 $21.24 $20.48
------ ------ ------ ------ ------ ------
INCOME FROM OPERATIONS
Net investment income (a)....................... .75 .84 .81 .84 .85 .81
Net realized and unrealized gain (loss)......... .33 (.95) .19 .18 (.21) .77
------ ------ ------ ------ ------ ------
Total income from operations................. 1.08 (.11) 1.00 1.02 .64 1.58
------ ------ ------ ------ ------ ------
DISTRIBUTIONS
From net investment income...................... (.66) (.86) (.80) (.85) (.86) (.82)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD..................... $20.84 $20.42 $21.39 $21.19 $21.02 $21.24
====== ====== ====== ====== ====== ======
TOTAL RETURN (%)(b)(c)............................. 5.37 (.52) 4.82 4.92 3.07 7.81
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)........ 129,084 123,960 128,959 83,076 66,344 63,838
Ratios to average net assets (%)(c)(d):
Operating expenses........................... .64 .57 .72 .71 .75 .74
Net investment income........................ 4.32 3.99 3.80 3.99 4.02 3.91
Portfolio turnover rate (%)..................... 38.16 119.34 74.42 40.79 74.34 73.91
</TABLE>
* For the ten months ended October 31, 2000.
(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) Prior to April 1, 1995, Fund performance, operating expenses, and net
investment income do not include any management fees paid to the Manager or
money managers. For periods thereafter, they are reported net of investment
management fees but gross of any investment services fees. See Note 4.
(d) The ratios for periods less than one year are annualized.
Tax Exempt Bond Fund 202
<PAGE>
TAX-MANAGED LARGE CAP FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
DATES TAX MANAGED LARGE CAP S&P 500(R)**
- CLASS S
Inception* $10,000 $10,000
1996 $10,030 $10,279
1997 $13,260 $13,602
1998 $16,239 $16,597
1999 $20,271 $20,876
2000 $21,284 $22,140
Total $91,084 $93,493
YEARLY PERIODS ENDED OCTOBER 31
<TABLE>
<CAPTION>
TAX-MANAGED LARGE CAP FUND - CLASS S STANDARD & POORS(R) 500 COMPOSITE STOCK PRICE INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
-------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $10,500 5.00% 1 Year $10,605 6.05%
Inception $21,284 20.40%(S) Inception $22,140 21.49%(S)
TAX-MANAGED LARGE CAP FUND - CLASS C ++
PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN
--------------------------------------------
1 Year $10,398 3.98%
Inception $21,078 20.11%(S)
</TABLE>
203 Tax-Managed Large Cap Fund
<PAGE>
TAX-MANAGED LARGE CAP FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the ten months ended October 31, 2000, the Tax-Managed Large Cap Fund Class
S and Class C shares lost 1.39%, and 2.30%, respectively. This compared to a
loss of 1.87% for the S&P 500/(R)/ Index during the same period.
The Fund's performance as a highly tax efficient investment vehicle generally
kept pace with the benchmark, however, overall returns were impacted by
difficult market conditions and a dramatically changing investment environment.
PORTFOLIO HIGHLIGHTS
During the first quarter of the year, active managers faced challenges from a
narrowly focused stock market that emphasized Technology stocks at the expense
of most other sectors. During the remainder of the period, the market broadened,
although its favor continued to fluctuate between growth and value. It ended
with a value bias and a decidedly unfavorable climate for technology.
The Fund began the period with solid stock selections in the Health Care sector
(Human Genome Sciences), as well as beneficial overweighted positions in Sun
Microsystems (Technology), Global Crossing (Telecom Services), and Exodus
Communications (Communications). However, weaker stock selections in the
Financials sector (US Bancorp) and benchmark-relative underweight positions in
Qualcomm and Nortel Networks (both Technology) pulled down the previously
stellar performers.
Improving the returns of large-cap stocks proved to be challenging for the Fund,
particularly during the final months of the fiscal period. During the quarter
ending in September, the performance differential between style and
capitalization was extreme, with the largest capitalization stocks lagging their
smaller counterparts significantly. Within the Russell 1000/(R)/ Growth Index,
the largest capitalization stocks lost 10.40% for the quarter, while the
medium/large-cap tier gained 6.20%. Within the Russell 1000/(R)/ Value Index,
the largest capitalization tier benefited from the switch to value stocks,
returning 6.10%, but it still trailed the value index's medium/large-cap tier,
which returned 11.20%. As the Fund is structured similar to the S&P 500/(R)/
Index in terms of market capitalization, its performance results were also, in
part, affected by these style biases.
TOP TEN EQUITY HOLDINGS
(as a percent of Total Investments) October 31, 2000
General Electric Co. 4.6%
Microsoft Corp. 3.4
Cisco Systems, Inc. 3.4
Exxon Mobil Corp. 2.9
Intel Corp. 2.6
Citigroup, Inc. 2.3
Philip Morris Cos., Inc. 2.2
Sun Microsystems, Inc. 2.0
Merck & Co., Inc. 1.9
Pfizer, Inc. 1.8
PORTFOLIO CHARACTERISTICS
October 31, 2000
Current P/E Ratio 22.1x
Portfolio Price/Book Ratio 4.74x
Market Capitalization - $-Weighted Average 134.36 Bil
Number of Holdings 204
MONEY MANAGER STYLE
J.P. Morgan Investment Management, Inc. Market-Oriented
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* The Fund commenced operations on October 7, 1996. Index comparison began
October 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.
(S) 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 204
<PAGE>
TAX-MANAGED LARGE CAP FUND
STATEMENT OF NET ASSETS
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------ ------
COMMON STOCKS - 99.3%
AUTO AND TRANSPORTATION - 2.5%
AMR Corp. (a) 39,300 1,287
Burlington Northern, Inc. 21,500 571
C.H. Robinson Worldwide, Inc. 14,700 804
Dana Corp. 20,400 453
Delphi Automotive Systems Corp. 95,000 1,490
Eaton Corp. 35,700 2,430
FedEx Corp. (a) 13,500 633
Ford Motor Co. 17,778 464
General Motors Corp. 77,200 4,796
Norfolk Southern Corp. 6,600 93
PACCAR, Inc. 1,900 80
Southwest Airlines Co. 9,100 259
Union Pacific Corp. 66,600 3,122
Visteon Corp. 10,959 194
------
16,676
------
CONSUMER DISCRETIONARY - 9.2%
Best Buy Co. (a) 78,300 3,930
Cendant Corp. (a) 137,900 1,655
Estee Lauder Cos., Class A 16,200 752
Fox Entertainment Group, Inc.
Class A (a) 9,100 196
Gannett Co., Inc. 50,000 2,900
Gap, Inc. 87,900 2,269
Hasbro, Inc. 119,000 1,279
Home Depot, Inc. (The) 96,600 4,154
Jones Apparel Group, Inc. (a) 87,700 2,439
Kimberly-Clark Corp. 24,900 1,643
Knight-Ridder, Inc. 18,300 920
Limited, Inc. (The) 128,300 3,240
Lowe's Cos., Inc. 5,200 238
Marriott International, Inc. Class A 65,900 2,668
May Department Stores Co. 23,700 622
McDonald's Corp. 11,900 369
New York Times Co. Class A 41,400 1,520
Starwood Hotels & Resorts Worldwide,
Inc. 42,900 1,271
Target Corp. 137,400 3,796
Time Warner, Inc. 106,750 8,103
TJX Cos., Inc. 173,600 4,731
Viacom, Inc. Class B (a) 63,100 3,589
Wal-Mart Stores, Inc. 232,300 10,541
------
62,825
------
CONSUMER STAPLES - 5.6%
Clorox Co. (The) 16,600 741
Coca-Cola Co. (The) 66,100 3,991
Gillette Co. 95,200 3,320
Heinz (H.J.) Co. 35,600 1,493
Kellogg Co. 37,000 939
Kroger Co. (a) 24,600 555
Philip Morris Cos., Inc. 407,600 14,928
Procter & Gamble Co. 99,400 7,101
Quaker Oats Co. (The) 32,900 2,683
Safeway, Inc. (a) 8,500 465
Seagram Co., Ltd. 7,900 451
Unilever 31,825 1,617
------
38,284
------
FINANCIAL SERVICES - 15.9%
AFLAC, Inc. 15,200 1,111
Allstate Corp. 40,600 1,634
Ambac Financial Group, Inc. 64,700 5,164
American International Group, Inc. 49,779 4,878
Associates First Capital Corp. Class A 47,200 1,752
Bank of America Corp. 35,100 1,687
Bank One Corp. 27,600 1,007
Capital One Financial Corp. 33,900 2,140
CIGNA Corp. 32,800 4,000
CIT Group, Inc. 148,800 2,595
Citigroup, Inc. 297,666 15,665
Countrywide Credit Industries, Inc. 9,800 367
Dime Bancorp, Inc. 134,100 3,277
E*TRADE Group, Inc. (a) 72,600 1,057
Edwards (A.G.), Inc. 45,400 2,304
Federal Home Loan Mortgage Corp. 13,900 834
Federal National Mortgage Association 52,300 4,027
Franklin Resources, Inc. 54,800 2,348
Goldman Sachs Group, Inc. (The) 27,700 2,765
Greenpoint Financial Corp. 129,700 3,859
Hartford Financial Services
Group, Inc. (The) 35,000 2,605
John Hancock Financial
Services, Inc. (a) 100,300 3,172
KeyCorp 69,000 1,703
Lehman Brothers Holdings, Inc. 4,400 284
Lincoln National Corp. 12,100 585
Marsh & McLennan Cos., Inc. 4,200 549
MBIA, Inc. 17,200 1,250
Merrill Lynch & Co., Inc. 67,400 4,718
MetLife, Inc. New 82,000 2,265
Morgan Stanley Dean Witter & Co. 38,000 3,052
National Commerce Bancorp 45,300 963
PNC Bank Corp. 37,800 2,528
Providian Financial Corp. 39,200 4,077
Schwab (Charles) Corp. 24,838 872
SouthTrust Corp. 46,900 1,518
Summit Bancorp 37,700 1,414
TD Waterhouse Group, Inc. (a) 80,900 1,340
205 Tax-Managed Large Cap Fund
<PAGE>
TAX-MANAGED LARGE CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
Torchmark Corp. 31,700 1,056
U.S. Bancorp 339,100 8,202
Washington Mutual, Inc. 76,925 3,385
-------
108,009
-------
HEALTH CARE - 11.9%
Abbott Laboratories 40,300 2,128
ALZA Corp. (a) 49,300 3,990
American Home Products Corp. 52,700 3,346
Amgen, Inc. (a) 7,200 417
Bard (C.R.), Inc. 69,300 2,902
Baxter International, Inc. 13,100 1,077
Boston Scientific Corp. (a) 10,500 167
Bristol-Myers Squibb Co. 100,800 6,143
Forest Labs, Inc. (a) 10,000 1,325
Genzyme Corp. (a) 10,800 766
Guidant Corp. (a) 4,300 228
HCA-The Healthcare Co. 49,000 1,957
Human Genome Sciences, Inc. (a) 8,400 742
Johnson & Johnson 34,700 3,197
Lilly (Eli) & Co. 67,600 6,042
Medtronic, Inc. 4,500 244
Merck & Co., Inc. 145,500 13,086
PE Corp. - PE Biosystems Group 11,300 1,322
Pfizer, Inc. 277,800 11,997
Pharmacia Corp. 160,200 8,811
Schering-Plough Corp. 117,000 6,047
St. Jude Medical, Inc. (a) 13,500 743
Tenet Healthcare Corp. 105,100 4,132
Vertex Pharmaceuticals, Inc. (a) 2,500 233
-------
81,042
-------
INTEGRATED OILS - 6.2%
Chevron Corp. 128,300 10,537
Exxon Mobil Corp. 225,002 20,067
Royal Dutch Petroleum Co. 160,700 9,541
Texaco, Inc. 38,600 2,280
-------
42,425
-------
MATERIALS AND PROCESSING - 3.5%
Air Products & Chemicals, Inc. 51,600 1,925
Alcoa, Inc. 143,904 4,128
Allegheny Technologies, Inc. 22,700 460
Dow Chemical Co. 49,600 1,519
Fort James Corp. 24,900 820
Georgia-Pacific Group 19,700 529
International Paper Co. 39,800 1,458
Praxair, Inc. 14,200 529
Rohm & Haas Co. 86,200 2,592
Smurfit-Stone Container Corp. (a) 19,800 266
Temple-Inland, Inc. 21,800 976
Tyco International, Ltd. 123,506 7,001
Union Carbide Corp. 32,100 1,380
-------
23,583
-------
OTHER ENERGY - 0.3%
Global Marine, Inc. (a) 49,200 1,304
TXU Corp. 23,500 871
-------
2,175
-------
PRODUCER DURABLES - 7.2%
Applied Materials, Inc. (a) 67,500 3,586
B.F. Goodrich Co. 27,424 1,123
Boeing Co. (The) 47,300 3,207
Cooper Industries, Inc. 73,200 2,800
General Electric Co. 569,500 31,216
Grainger (W.W.), Inc. 5,400 172
Honeywell International, Inc. 51,500 2,770
ITT Industries, Inc. 7,300 238
Johnson Controls, Inc. 60,000 3,578
Parker-Hannifin Corp. 5,700 236
United Technologies Corp. 6,200 433
-------
49,359
-------
TECHNOLOGY - 29.0%
Adobe Systems, Inc. 13,600 1,034
Agilent Technologies, Inc. (a) 18,764 869
Altera Corp. (a) 45,000 1,839
America Online, Inc. (a) 90,900 4,584
Analog Devices, Inc. (a) 8,400 546
Automatic Data Processing, Inc. 30,400 1,986
Avaya, Inc. (a) 15,583 209
Broadcom Corp. Class A (a) 4,000 889
Cisco Systems, Inc. (a) 424,600 22,875
COMPAQ Computer Corp. 139,100 4,230
Corning, Inc. 61,000 4,667
Dell Computer Corp. (a) 159,700 4,701
Electronic Data Systems Corp. 24,500 1,150
EMC Corp. (a) 108,000 9,619
Hewlett-Packard Co. 117,600 5,461
Intel Corp. 396,800 17,831
International Business
Machines Corp. 78,000 7,683
JDS Uniphase Corp. (a) 76,600 6,238
Lattice Semiconductor Corp. (a) 46,800 1,369
Linear Technology Corp. 8,900 574
Lucent Technologies, Inc. 187,000 4,359
Micron Technology, Inc. (a) 30,500 1,060
Microsoft Corp. (a) 338,700 23,328
Motorola, Inc. 6,800 170
National Semiconductor Corp. (a) 32,000 832
NCR Corp. (a) 22,600 975
Tax-Managed Large Cap Fund 206
<PAGE>
TAX-MANAGED LARGE CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- --------
Network Appliance, Inc. (a) 6,200 738
Nortel Networks Corp. 177,200 8,063
Oracle Systems Corp. (a) 305,200 10,072
PMC - Sierra, Inc. (a) 4,400 748
QUALCOMM, Inc. (a) 27,700 1,804
Qwest Communications
International, Inc. (a) 122,188 5,941
Seagate Technology, Inc. (a) 26,700 1,866
Siebel Systems, Inc. (a) 25,500 2,676
Sun Microsystems, Inc. (a) 125,800 13,940
Symantec Corp. (a) 33,200 1,295
Tellabs, Inc. (a) 45,400 2,267
Texas Instruments, Inc. 106,200 5,210
TIBCO Software, Inc. (a) 4,900 308
Veritas Software Corp. (a) 18,200 2,565
Verizon Communications 151,600 8,764
Williams Communications
Group, Inc. New (a) 20,600 377
Xilinx, Inc. (a) 16,900 1,224
Yahoo!, Inc. (a) 12,900 755
-------
197,691
-------
UTILITIES - 8.0%
AT&T Corp. 84,520 1,960
BellSouth Corp. 49,400 2,387
BroadWing, Inc. (a) 25,000 706
Columbia Energy Group 13,650 982
Comcast Corp. Special Class A (a) 191,300 7,784
CP&L Energy, Inc. 58,000 2,338
DTE Energy Co. 82,800 2,991
Dynegy, Inc. Class A 47,000 2,177
Entergy Corp. 147,300 5,643
Global Crossing, Ltd. (a) 51,535 1,214
Level 3 Communications, Inc. (a) 33,100 1,576
Nextel Communications, Inc.
Class A (a) 79,000 3,037
Pinnacle West Capital Corp. 72,000 3,128
SBC Communications, Inc. 187,166 10,797
Sprint Corp. (PCS Group) (a) 91,200 3,478
Williams Cos. (The) 16,800 702
WorldCom, Inc. (a) 147,585 3,496
-------
54,396
-------
TOTAL COMMON STOCKS
(cost $534,517) 676,465
-------
SHORT-TERM INVESTMENTS - 0.7%
Frank Russell Investment Company Money
Market Fund,
due on demand (b) 3,503 3,503
United States Treasury Bills (b)(c)(d)
5.940% due 12/21/00 900 893
-------
TOTAL SHORT-TERM INVESTMENTS
(cost $4,396) 4,396
-------
TOTAL INVESTMENTS - 100.0%
(identified cost $538,913) 680,861
OTHER ASSETS AND LIABILITIES,
NET - 0.0% 195
-------
NET ASSETS - 100.0% 681,056
=======
(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.
UNREALIZED
NUMBER APPRECIATION
FUTURES CONTRACTS OF (DEPRECIATION)
CONTRACTS (000)
--------- --------------
S&P 500 Index
expiration date 12/00 3 $ 30
--------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ 30
========
See accompanying notes which are an integral part of the financial statements.
207 Tax-Managed Large Cap Fund
<PAGE>
TAX-MANAGED LARGE CAP FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) October 31, 2000
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $538,913)............... $ 680,861
Receivables:
Dividends..................................................... 450
Investments sold.............................................. 3,159
Fund shares sold.............................................. 489
From Advisor.................................................. 148
Daily variation margin on futures contracts................... 23
Deferred organization expenses................................. 4
------------
Total assets................................................ 685,134
LIABILITIES
Payables:
Investments purchased.......................... $ 3,102
Fund shares redeemed........................... 434
Accrued fees to affiliates..................... 456
Other accrued expenses......................... 86
------------
Total liabilities........................................... 4,078
------------
NET ASSETS..................................................... $ 681,056
============
NET ASSETS CONSIST OF:
Undistributed net investment income............................ $ 2,402
Accumulated net realized gain (loss)........................... (17,223)
Unrealized appreciation (depreciation) on:
Investment.................................................... 141,948
Futures contracts............................................. 30
Shares of beneficial interest.................................. 326
Additional paid-in capital..................................... 553,573
------------
NET ASSETS..................................................... $ 681,056
============
NET ASSET VALUE, offering and redemption price per share:
Class C ($6,596,119 divided by 318,931 shares of $.01 par
value shares of beneficial interest outstanding).............. $ 20.68
============
Class S ($674,459,395 divided by 32,322,616 shares of $.01 par
value shares of beneficial interest outstanding).............. $ 20.87
============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Tax-Managed Large Cap Fund 208
<PAGE>
TAX-MANAGED LARGE CAP FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Dividends................................ $ 6,613 $ 6,220
Dividends from Money Market Fund......... 338 371
Interest................................. 27 53
---------------- ----------------
Total investment income................ 6,978 6,644
---------------- ----------------
EXPENSES
Advisory fees............................ 3,688 2,968
Administrative fees...................... 267 212
Custodian fees........................... 212 120
Distribution fees - Class C.............. 23 --
Transfer agent fees...................... 163 122
Professional fees........................ 35 28
Registration fees........................ 90 119
Shareholder servicing fees - Class C..... 8 --
Trustees' fees........................... 9 5
Amortization of deferred organization
expenses................................ 3 7
Miscellaneous............................ 80 34
---------------- ----------------
Expenses before reductions............... 4,578 3,615
Expense reductions....................... (3) --
---------------- ----------------
Expenses, net.......................... 4,575 3,615
---------------- ----------------
Net investment income..................... 2,403 3,029
---------------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments.............................. (12,694) (2,785)
Futures contracts........................ (1,200) 224
---------------- ----------------
(13,894) (2,561)
---------------- ----------------
Net change in unrealized appreciation
(depreciation) on:
Investments.............................. 4,318 65,388
Futures contracts........................ (240) 167
---------------- ----------------
4,078 65,555
---------------- ----------------
Net realized and unrealized gain (loss)... (9,816) 62,994
---------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS................................ $ (7,413) $ 66,023
================ ================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
209 Tax-Managed Large Cap Fund
<PAGE>
TAX-MANAGED LARGE CAP FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income............. $ 2,403 $ 3,029 $ 1,202
Net realized gain (loss).......... (13,894) (2,561) (729)
Net change in unrealized
appreciation (depreciation)....... 4,078 65,555 58,053
---------------- ----------------- -----------------
Net increase (decrease) in net
assets from operations.......... (7,413) 66,023 58,526
---------------- ----------------- -----------------
DISTRIBUTIONS
From net investment income
Class C......................... -- (2) --
Class S......................... (141) (2,888) (1,334)
From net realized gain
Class S......................... -- -- (78)
---------------- ----------------- -----------------
Net decrease in net assets
from distributions............ (141) (2,890) (1,412)
---------------- ----------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net
assets from share transactions.... 122,301 197,724 138,603
---------------- ----------------- -----------------
TOTAL NET INCREASE (DECREASE) IN
NET ASSETS......................... 114,747 260,857 195,717
NET ASSETS
Beginning of period............... 566,309 305,452 109,735
---------------- ----------------- -----------------
End of period (including
undistributed net investment
income of $2,402 and $140, and
accumulated distributions in
excess of net investment income
of $110, respectively)........... $ 681,056 $ 566,309 $ 305,452
================ ================= =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Tax-Managed Large Cap Fund 210
<PAGE>
TAX-MANAGED LARGE CAP FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
2000* 1999**
------- --------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................... $ 21.17 $ 20.92
------- --------
INCOME FROM OPERATIONS
Net investment income (loss)(a)***..................... (.10) --
Net realized and unrealized gain (loss)................ (.39) .35
-------- --------
Total income from operations......................... (.49) .35
-------- --------
DISTRIBUTIONS
From net investment income............................. -- (.10)
-------- --------
NET ASSET VALUE, END OF PERIOD.......................... $ 20.68 $ 21.17
======== ========
TOTAL RETURN (%)(b)..................................... (2.30) 2.24
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)............... 6,596 308
Ratios to average net assets (%)(c):
Operating expenses................................... 1.86 1.57
Net investment income (loss)......................... (.58) (.28)
Portfolio turnover rate (%)............................ 43.48 48.35
</TABLE>
* For the ten months ended October 31, 2000.
** For the period December 1, 1999 (commencement of sale) to December 31, 1999.
*** Less than $.01 per share for the period ended December 31, 1999.
(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.
211 Tax-Managed Large Cap Fund
<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,
----------------------------------------
2000* 1999 1998 1997 1996**
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD..................................... $ 21.17 $ 18.26 $ 13.90 $ 10.61 $ 10.00
------- ------- ------- ------- -------
INCOME FROM OPERATIONS
Net investment income (a).............................. .08 .14 .10 .08 .03
Net realized and unrealized gain (loss)................ (.37) 2.88 4.35 3.28 .61
Total income from operations......................... (.29) 3.02 4.45 3.36 .64
------- ------- ------- ------- -------
DISTRIBUTIONS
From net investment income............................. (.01) (.11) (.08) (.07) (.03)
From net realized gain................................. -- -- (.01) -- --
------- ------- ------- ------- -------
Total distributions.................................. (.01) (.11) (.09) (.07) (.03)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD.......................... $ 20.87 $ 21.17 $ 18.26 $ 13.90 $ 10.61
======= ======= ======= ======= =======
TOTAL RETURN (%)(b)..................................... (1.39) 16.57 32.08 31.73 6.10
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)............... 674,460 566,001 305,452 109,735 19,931
Ratios to average net assets (%)(c):
Operating expenses, net.............................. .86 .85 .99 1.00 1.00
Operating expenses, gross............................ .86 .85 .99 1.08 2.83
Net investment income................................ .46 .71 .61 .92 1.62
Portfolio turnover rate (%)............................ 43.48 48.35 50.59 39.23 8.86
</TABLE>
* For the ten months ended October 31, 2000.
** For the period October 7, 1996 (commencement of operations) 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.
Tax-Managed Large Cap Fund 212
<PAGE>
TAX-MANAGED SMALL CAP FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
DATES TAX MANAGED SMALL RUSSELL SMALL CAP
CAP - CLASS S COMPLETENESS(TM) INDEX **
Inception* $10,000 $10,000
2000 $11,168 $11,526
YEARLY PERIOD ENDED OCTOBER 31
<TABLE>
<CAPTION>
TAX-MANAGED SMALL CAP FUND - CLASS S RUSSELL SMALL CAP COMPLETENESS(TM) INDEX
PERIOD ENDED GROWTH OF TOTAL PERIOD ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
--------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C>
Inception $11,168 11.68% Inception $11,526 15.26%
TAX-MANAGED SMALL CAP FUND - CLASS C ++
PERIOD ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN
---------------------------------------
Inception $11,087 10.87%
</TABLE>
213 Tax-Managed Small Cap Fund
<PAGE>
TAX-MANAGED SMALL CAP FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the ten months ended October 31, 2000, the Tax-Managed Small Cap Fund Class
S and Class C shares gained 4.08%, and 3.52%, respectively. This compared to the
return of 1.63% for the Russell Small Cap Completeness(TM) Index.
PORTFOLIO HIGHLIGHTS
Geewax, Terker & Co., assumes responsibility for managing the Fund's growth and
value assignments through two distinct portfolios of investments. Geewax, Terker
faced significant challenges during the beginning of the year. Geewax missed the
opportunities presented by the extreme upward advance of Internet and
Internet-related technology stocks. The Manager's emphasis on financial quality,
and actual earnings with reasonable valuations prevented them from participating
in the market's narrow advance dominated by these speculative stocks. In the
growth arena, Geewax chose to limit exposure to aggressively valued technology
stocks, particularly Internet issues in what turned out to be a price
momentum-dominated market. However, this cautious investment strategy was
rewarded during the last six months of the period, as the markets finally
broadened, sharply cutting technology stock valuations, and rapidly rotating
performance among sectors.
The markets' volatility was illustrated through its frequently changing bias
between value and growth styles. The Fund's allocation to value stocks resulted
in a slightly lower exposure to this investment style when, in March, value
investing gained an edge and generally overshadowed growth performance for the
rest of the period.
A 50 basis point interest rate increase from the Federal Reserve Board (the Fed)
in May marked the beginning of a market slide that dealt a particularly harsh
blow to technology, media and telecommunications stocks. While this interest
rate hike was the Fed's final increase for the period, these securities remained
highly volatile and generally performed poorly through the end of October.
The Fund's diversification, which included strong stock selection across various
sectors such as Financial Services, Retail, and Utilities, helped boost returns
despite the drop in Technology. Throughout the period, the manager's stock
selection within the Health Care sector, however, detracted from performance.
The Fund did not fully participate in the spectacular, but highly speculative,
returns from the biotechnology companies and remained underweight in this
sector.
TOP TEN EQUITY HOLDINGS
(as a percent of Total Investments) October 31, 2000
AT&T Corp. - Liberty Media Group Class A 2.3%
Juniper Networks, Inc. 2.2
CIENA Corp. 1.6
VoiceStream Wireless Corp. 1.5
BEA Systems, Inc. 1.5
PMC - Sierra, Inc. 1.4
Brocade Communications Systems, Inc. 1.4
Ariba, Inc. New 1.1
Goldman Sachs Group, Inc. 1.1
SDL, Inc. 1.1
PORTFOLIO CHARACTERISTICS
October 31, 2000
Current P/E Ratio 22.0x
Portfolio Price/Book Ratio 3.55x
Market Capitalization - $-Weighted Average 10.58 Bil
Number of Holdings 1059
MONEY MANAGER STYLES
Geewax, Terker & Co. Growth
Geewax, Terker & Co. Value
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* The Fund commenced operations on November 30, 1999. Index comparison began
December 1, 1999.
** The Russell Small Cap Completeness(TM) Index measures the performance of the
companies in the Russell 3000(R) Index excluding the companies in the
standard & Poor's(R) 500 Index.
++ 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 214
<PAGE>
TAX-MANAGED SMALL CAP FUND
STATEMENT OF NET ASSETS
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- ------
COMMON STOCKS - 95.8%
AUTO AND TRANSPORTATION - 1.3%
Alaska Air Group, Inc. (a) 1,600 42
Alexander & Baldwin, Inc. 2,500 62
American Axle & Manufacturing Holdings,
Inc. (a) 500 6
American Freightways Corp. (a) 1,400 22
Arnold Industries, Inc. 1,300 23
ArvinMeritor, Inc. 375 6
Avis Rent A Car, Inc. (a) 1,500 45
Bandag, Inc. 900 32
Borg-Warner Automotive, Inc. 2,100 79
CNF Transportation, Inc. 3,000 80
Delco Remy International, Inc. (a) 1,400 9
Dura Automotive Systems, Inc. (a) 800 7
EGL, Inc. (a) 1,800 51
Fleetwood Enterprises, Inc. 2,100 28
Forward Air Corp. (a) 900 37
Fritz Companies, Inc. (a) 1,500 12
Frontier Airlines, Inc. (a) 1,100 26
Group 1 Automotive, Inc. (a) 300 3
Hayes Lemmerz International, Inc. (a) 1,100 12
Heartland Express, Inc. (a) 800 14
Hunt (JB) Transportation Services, Inc. 1,100 14
Knight Transportation, Inc. (a) 100 2
Landstar Systems, Inc. (a) 500 24
Lear Corp. (a) 4,600 125
M.S. Carriers, Inc. (a) 600 9
Midwest Express Holdings, Inc. (a) 900 17
Monaco Coach Corp. (a) 1,000 17
Myers Industries, Inc. 1,100 15
Newport News Shipbuilding, Inc. 800 39
O'Reilly Automotive, Inc. (a) 3,300 59
Offshore Logistics, Inc. (a) 1,400 24
Overseas Shipholding Group, Inc. 1,900 46
Polaris Industries, Inc. 1,500 52
Roadway Express, Inc. 900 18
Skywest, Inc. 1,500 76
Superior Industries International, Inc. 1,400 48
Swift Transportation Co., Inc. (a) 3,900 55
Thor Industries, Inc. 500 10
United Rentals, Inc. (a) 1,300 28
Werner Enterprises, Inc. 2,200 31
Wisconsin Central Transportation Corp. (a) 3,200 41
XTRA Corp. (a) 900 41
-----
1,387
-----
CONSUMER DISCRETIONARY - 12.9%
24/7 Media, Inc. (a) 1,600 8
7-Eleven, Inc. (a) 1,600 17
99 Cents Only Stores (a) 800 18
Aaron Rents, Inc. 1,600 27
ABM Industries, Inc. 1,100 31
About.com, Inc. (a) 900 22
AC Nielsen Corp. (a) 3,500 84
Adminstaff, Inc. (a) 1,100 39
Advo, Inc. (a) 1,700 63
Agribrands International, Inc. (a) 700 30
AMERCO (a) 600 12
Anchor Gaming (a) 600 51
AnnTaylor Stores Corp. (a) 1,600 48
Apollo Group, Inc. Class A (a) 5,100 199
Applebee's International, Inc. 1,600 48
Argosy Gaming Co. (a) 1,300 21
Ask Jeeves, Inc. (a) 1,300 17
AT&T Corp. - Liberty Media Group
Class A (a) 135,700 2,443
Aztar Corp. (a) 2,200 33
Bacou USA, Inc. (a) 300 8
Barnes & Noble, Inc. (a) 2,500 47
Belo (A.H.) Corp. Class A 7,100 136
BJ's Wholesale Club, Inc. (a) 4,800 158
Bob Evans Farms, Inc. 2,200 41
Borders Group, Inc. (a) 5,900 82
Bowne & Co., Inc. 2,600 22
Brinker International, Inc. (a) 4,900 192
Brown Shoe Co., Inc. 1,200 12
Buckeye Technologies, Inc. (a) 2,000 34
Buckle, Inc. (The) (a) 500 8
Burlington Coat Factory
Warehouse Corp. 1,100 17
Career Education Corp. (a) 1,500 58
Cash America International, Inc. 1,700 9
Catalina Marketing Corp. (a) 3,000 118
Cato Corp. Class A 1,000 12
CBRL Group, Inc. 3,600 64
CEC Entertainment, Inc. (a) 2,000 64
Central Parking Corp. 700 13
Cheesecake Factory, Inc. (The) (a) 1,700 75
Chicos Fas, Inc. (a) 800 26
Children's Place Retail
Stores, Inc. (The) (a) 1,100 29
Choice Hotels International, Inc. (a) 3,300 39
Cintas Corp. 7,900 366
Claire's Stores, Inc. 2,500 50
215 Tax-Managed Small Cap Fund
<PAGE>
TAX-MANAGED SMALL CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- ------
Clear Channel
Communications, Inc. (a) 20 1
Columbia Sportswear Co. (a) 400 17
Consolidated Products, Inc. (a) 1,500 11
Copart, Inc. (a) 2,300 35
Corporate Executive Board
Company, (The)(a) 1,300 60
Cost Plus, Inc. (a) 1,300 36
Cox Radio, Inc. Class A (a) 1,800 41
Diamond Technology
Partners, Inc. (a) 1,500 67
Dollar Tree Stores, Inc. (a) 7,000 273
Dover Downs Entertainment, Inc. 700 8
EchoStar Communications Corp.
Class A (a) 7,000 317
Education Management Corp. 1,300 40
Engage, Inc. New (a) 2,600 11
Ethan Allen Interiors, Inc. 1,600 47
Extended Stay America, Inc. (a) 4,700 58
F.Y.I., Inc. (a) 700 28
Fairfield Communities, Inc. (a) 2,700 34
Family Dollar Stores, Inc. 9,100 177
First Consulting Group, Inc. (a) 1,200 8
Footstar, Inc. (a) 1,700 61
Fossil, Inc. (a) 900 12
Fred's, Inc. Class A 600 13
Furniture Brands International, Inc. (a) 4,700 79
Genesco, Inc. (a) 1,300 23
Guess?, Inc. (a) 400 3
Guitar Center, Inc. (a) 1,400 18
Harman International Industries, Inc. 2,200 106
Harte Hanks Communications 3,100 69
Havas Advertising SA (a) 3,975 64
Haverty Furniture Co., Inc. 1,100 12
Hillenbrand Industries, Inc. 3,300 153
Hispanic Broadcasting Corp. (a) 5,000 156
HON Industries, Inc. 1,600 39
HotJobs.com, Ltd. (a) 1,100 17
Houghton Mifflin Co. 2,100 77
IHOP Corp. (a) 1,300 27
Infinity Broadcasting Corp. Class A (a) 8,600 286
Insurance Auto Auctions, Inc. (a) 600 7
Intimate Brands, Inc. Class A 5,300 127
Iron Mountain, Inc. (a) 1,200 41
Isle of Capri Casinos, Inc. (a) 1,600 17
ITT Educational Services, Inc. (a) 900 14
Jones Apparel Group, Inc. (a) 5,600 156
Journal Register Co. (a) 2,800 50
Kellwood Co. 1,600 31
Kelly Services, Inc. Class A 1,300 29
Key3Media Group, Inc. New (a) 950 9
Korn/Ferry International (a) 2,400 84
La-Z-Boy Inc. 3,800 60
Land's End, Inc. (a) 900 23
Landry's Seafood Restaurants, Inc. 1,300 10
Learning Tree International, Inc. (a) 700 32
Lee Enterprises, Inc. 3,000 83
Libbey, Inc. 1,000 27
Lodgenet Entertainment Corp. (a) 400 7
Lone Star Steakhouse & Saloon 1,900 16
Mandalay Resort Group (a) 4,500 94
Manpower, Inc. 300 10
McClatchy Co. (The) Class A 1,400 53
MemberWorks, Inc. (a) 600 21
Men's Wearhouse, Inc. (The)(a) 1,300 38
Metro-Goldwyn-Mayer, Inc. (a) 1,100 22
MGM Grand, Inc. 4,200 145
Michaels Stores, Inc. (a) 1,900 46
Morrison Management Specialists, Inc. 800 27
MSC Industrial Direct Co., Inc.
Class A (a) 2,300 34
Musicland Stores Corp. (a) 1,300 11
Nautica Enterprises, Inc. (a) 1,800 22
NPC International, Inc. (a) 500 5
NTL, Inc. (a) 19,100 839
Nu Skin Enterprises, Inc. Class A (a) 2,900 16
O'Charleys, Inc. (a) 900 13
Oakley, Inc. (a) 1,400 29
Ogden Corp. 3,100 43
On Assignment, Inc. (a) 1,400 35
Oshkosh B' Gosh, Inc. Class A 700 11
Outback Steakhouse, Inc. (a) 4,000 114
P.F. Chang's China Bistro, Inc. (a) 600 25
Papa Johns International, Inc. (a) 1,100 28
Park Place Entertainment Corp. (a) 19,300 246
Paxson Communications Corp. (a) 2,100 24
Payless ShoeSource, Inc. (a) 1,600 93
Phillips-Van Heusen Corp. 1,600 19
Pier 1 Imports, Inc. 5,900 78
Pinnacle Entertainment, Inc. (a) 2,400 55
Plantronics, Inc. (a) 3,300 151
Playtex Products, Inc. (a) 1,800 18
Polo Ralph Lauren Corp. Class A (a) 3,800 75
Pre-paid Legal Services, Inc. (a) 1,200 53
Prime Hospitality Corp. (a) 3,300 31
PRIMEDIA, Inc. (a) 4,400 50
RARE Hospitality International, Inc. (a) 1,100 25
Rayovac Corp. (a) 1,700 25
Tax-Managed Small Cap Fund 216
<PAGE>
TAX-MANAGED SMALL CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- ------
Reader's Digest Association, Inc.
Class A 7,200 264
Regis Corp. 3,200 48
Rent-A-Center, Inc. (a) 800 23
Rent-Way, Inc. (a) 1,200 6
Robert Half International, Inc. (a) 12,600 384
Ruby Tuesday, Inc. 3,900 53
Ryan's Family Steak Houses, Inc. (a) 3,000 25
Safeguard Scientifics, Inc. (a) 7,600 117
Saks, Inc. (a) 10,100 103
Salem Communications Corp.
Class A New (a) 1,500 18
Salton, Inc. (a) 600 14
Scholastic Corp. (a) 1,300 104
School Specialty, Inc. (a) 800 12
SCP Pool Corp. (a) 1,100 28
Scripps (E.W.) Co. Class A 1,900 111
Sonic Corp. (a) 1,100 40
Specialty Equipment Cos., Inc. (a) 700 21
Speedway Motorsports, Inc. (a) 700 12
Spherion Corp. (a) 800 10
SportsLine.com, Inc. (a) 700 6
Starwood Hotels & Resorts Worldwide, Inc. 13,000 385
Station Casinos, Inc. (a) 2,100 34
Stein Mart, Inc. (a) 1,400 22
Sturm, Ruger & Co., Inc. 1,400 12
Sunglass Hut International, Inc. (a) 2,300 17
TeleTech Holdings, Inc. (a) 1,600 44
Ticketmaster Online-CitySearch, Inc.
Class B (a) 600 10
TMP Worldwide, Inc. (a) 3,900 271
Topps Co., Inc. (a) 2,700 24
Toro Co. 800 28
Trans World Entertainment Corp. (a) 2,100 18
Trendwest Resorts, Inc. (a) 200 4
United Natural Foods, Inc. (a) 500 6
United Stationers, Inc. (a) 2,100 63
UnitedGlobalCom, Inc. Class A (a) 5,200 165
USA Networks, Inc. (a) 7,600 153
Vail Resorts, Inc. (a) 900 19
Value City Department Stores, Inc. (a) 1,000 8
Valuevision International, Inc.
Class A (a) 200 4
Venator Group, Inc. (a) 9,900 140
Vicinity Corp. New (a) 400 4
Wackenhut Corp. (a) 1,000 13
Wallace Computer Services, Inc. 2,400 35
Whitehall Jewellers, Inc. (a) 900 7
Wiley (John) & Sons Inc. Class A 2,900 59
WMS Industries, Inc. (a) 1,500 33
Wolverine World Wide, Inc. 2,900 31
Zale Corp. (a) 2,400 82
------
13,912
------
CONSUMER STAPLES - 1.7%
Bush Boake Allen, Inc. (a) 400 19
Casey's General Stores, Inc. 4,600 58
Church and Dwight Co., Inc. 2,400 47
Constellation Brands, Inc. Class A (a) 1,400 68
Dean Foods Co. 2,600 83
Dial Corp. 3,500 39
Dreyers Grand Ice Cream, Inc. 1,000 25
Flowers Industries, Inc. 7,100 109
Hain Celestial Group, Inc. (a) 1,900 75
IBP, Inc. 6,000 123
International Multifoods Corp. 1,100 19
Interstate Bakeries Corp. 2,300 32
Keebler Foods Co. 100 4
Lance, Inc. 1,600 16
McCormick & Co., Inc. 4,900 155
Michael Foods, Inc. 900 24
Pepsi Bottling Group, Inc. (The) 4,000 139
Performance Food Group Co. (a) 900 36
Pilgrim's Pride Corp. 1,000 7
Ralcorp Holdings, Inc. (a) 2,000 28
Riviana Foods, Inc. 500 9
Robert Mondavi Corp. Class A (a) 1,000 45
Ruddick Corp. 2,000 26
Schweitzer-Mauduit International, Inc. 1,100 18
Smithfield Foods, Inc. (a) 4,000 115
Suiza Foods Corp. (a) 2,200 102
Tootsie Roll Industries, Inc. 2,400 92
Tyson Foods, Inc. Class A 8,800 98
Universal Corp. 1,800 50
Universal Foods Corp. 3,100 61
Whole Foods Market, Inc. (a) 1,900 89
Wild Oats Markets, Inc. (a) 700 4
------
1,815
------
FINANCIAL SERVICES - 16.7%
Affiliated Managers Group, Inc. (a) 1,700 102
Alexandria Real Estate Equities, Inc. (e) 800 27
Alleghany Corp. (a) 396 76
Allied Capital Corp. 5,500 113
Allmerica Financial Corp. 4,100 259
Ambac Financial Group, Inc. 4,300 343
AmeriCredit Corp. (a) 5,000 134
Ameritrade Holding Corp. Class A (a) 4,500 66
Andover Bancorp, Inc. 500 15
Astoria Financial Corp. 3,300 124
217 Tax-Managed Small Cap Fund
<PAGE>
TAX-MANAGED SMALL CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- ------
Avalonbay Communities, Inc. (e) 4,900 225
AXA Financial, Inc. 15,400 833
BancFirst Corp. 300 11
BancorpSouth, Inc. 6,125 80
BancWest Corp. 7,300 149
Bank United Corp. Class A 2,300 130
Bay View Capital Corp. 1,800 15
Bedford Property Investors, Inc. (e) 1,400 28
Berkley (W.R.) Corp. 1,100 37
BlackRock, Inc. New (a) 1,200 51
BOK Financial Corp. (a) 700 13
BRE Properties, Inc. (e) 3,200 101
Brown & Brown, Inc. 1,400 46
Cabot Industrial Trust 2,500 47
Camden Property Trust (e) 2,700 77
Catellus Development Corp. (a)(e) 7,500 136
Cathay Bancorp, Inc. 600 29
CB Richard Ellis Services (a) 1,300 16
CenterPoint Properties Corp. (e) 1,300 58
Chelsea GCA Realty, Inc. (e) 1,000 32
Chittenden Corp. 1,700 45
Citizens Banking Corp. 3,000 71
CNA Surety Corp. 1,100 13
Colonial BancGroup, Inc. 6,200 55
Commerce Bancorp, Inc. 2,100 127
Commerce Bancshares, Inc. 4,400 158
Commerce Group, Inc. 1,600 41
Compass Bancshares, Inc. 8,600 156
CompuCredit Corp. (a) 800 24
Concord EFS, Inc. (a) 16,300 672
CORUS Bankshares, Inc. 700 28
Cullen Frost Bankers, Inc. 3,700 123
CVB Financial Corp. 800 13
Developers Diversified Realty Corp. (e) 4,000 48
Digital Insight Corp. New (a) 1,300 25
Dime Bancorp, Inc. 9,000 220
Dime Community Bancorp, Inc. 900 20
Doral Financial Corp. 2,100 38
Downey Financial Corp. 1,500 72
E.W. Blanch Holdings, Inc. 800 15
EastGroup Properties, Inc. (e) 1,100 22
Enhance Financial Services
Group, Inc. 1,900 22
Equity Office Properties Trust (e) 24,900 750
Equity Residential Properties Trust (e) 8,800 414
Erie Indemnity Co. Class A 4,600 128
Essex Property Trust, Inc. (e) 1,100 57
F&M National Corp. 1,600 41
Federated Investors, Inc. Class B 5,400 157
FelCor Lodging Trust, Inc. (e) 3,000 66
Fidelity National Financial, Inc. 3,900 96
Financial Federal Corp. (a) 500 11
First American Financial Corp. 3,400 71
First Citizens BancShares, Inc. 400 29
First Commonwealth Financial Corp. 3,900 39
First Federal Capital Corp. 1,000 12
First Financial Bancorp 2,300 36
First Financial Holdings, Inc. 900 15
First Industrial Realty Trust, Inc. (e) 2,400 74
First Midwest Bancorp, Inc. 2,300 58
First Sentinel Bancorp, Inc. 2,300 21
First Tennessee National Corp. 9,700 223
First Virginia Banks, Inc. 3,300 137
FirstFed Financial Corp. (a) 1,300 33
FirstMerit Corp. 5,800 132
Fiserv, Inc. (a) 11,400 597
Florida East Coast Industries, Inc.
Class B (a) 415 14
Fulton Financial Corp. 4,600 101
Gallagher (Arthur J.) & Co. 3,050 193
GBC Bancorp 1,200 38
Glenborough Realty Trust, Inc. (e) 1,900 31
Goldman Sachs Group, Inc. 11,900 1,188
Great American Financial
Resources, Inc. (a) 2,100 37
Greater Bay Bancorp 2,600 85
Greenpoint Financial Corp. 6,400 190
Hancock Holding Co. 600 19
Harbor Florida Bancshares, Inc. 1,500 18
Health Care REIT, Inc. (e) 2,000 35
Healthcare Realty Trust, Inc. (e) 2,500 50
Heller Financial, Inc. Class A 2,300 67
Hibernia Corp. Class A (a) 11,400 136
Hilb, Rogal & Hamilton Co. 800 32
Horace Mann Educators Corp. 2,500 42
HSB Group, Inc. 3,100 123
Independence Community Bank Corp. 4,100 60
IndyMac Mortgage Holdings, Inc. 4,800 100
Innkeepers USA Trust 2,300 23
Insignia Financial Group, Inc. (a) 1,200 12
Interpool, Inc. 900 12
Investment Technology Group (a) 1,800 65
Investors Financial Services Corp. 2,300 165
iStar Financial Inc. (e) 6,100 122
Jack Henry & Associates, Inc. 2,000 110
John Hancock Financial
Services, Inc. (a) 7,500 237
John Nuveen & Co., Inc. Class A 400 19
Jones Lang Lasalle, Inc. (a) 1,800 23
Knight Trading Group, Inc. (a) 5,900 177
Tax-Managed Small Cap Fund 218
<PAGE>
TAX-MANAGED SMALL CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------ -------
Leucadia National Corp. 2,400 60
Liberty Financial Cos., Inc. 1,000 27
LNR Property Corp. 1,500 32
M&T Bank Corp. 5,100 256
MAF Bancorp, Inc. 1,700 41
McGrath RentCorp 500 8
Mercantile Bankshares Corp. 5,200 196
Mercury General Corp. 1,700 62
MeriStar Hospitality Corp. (e) 2,800 54
Metris Companies, Inc. 3,900 126
MidAmerica Bancorp 600 15
Mississippi Valley Bancshares, Inc. 400 11
MONY Group, Inc. (The) 3,400 140
Multex.com, Inc. (a) 1,100 14
National Commerce Bancorp 13,600 289
National Discount Brokers
Group, Inc. (a) 400 19
National Penn Bancshares, Inc. 1,400 29
Nationwide Financial Services, Inc.
Class A 1,500 73
Nationwide Health Properties, Inc. (e) 3,100 46
NCO Group, Inc. (a) 1,200 26
Net.B@nk, Inc. (a) 1,000 9
NextCard, Inc. (a) 1,300 10
North Fork Bancorp, Inc. 13,000 262
OceanFirst Financial Corp. 900 19
Ocwen Financial Corp. (a) 2,300 14
Old Republic International Corp. 8,700 226
Omega Financial Corp. 600 17
Pacific Gulf Properties, Inc. (e) 1,300 35
Pacific Northwest Bancorp 900 12
Parkway Properties, Inc. (e) 700 20
PFF Bancorp, Inc. 900 16
Philadelphia Consolidated
Holding Corp. (a) 400 9
PMI Group, Inc. (The) 2,200 163
Prentiss Properties Trust (e) 2,300 58
Presidential Life Corp. 1,300 19
ProLogis Trust (e) 6,800 143
Protective Life Corp. 3,800 88
Provident Bankshares Corp. 1,900 36
Provident Financial Group, Inc. 1,400 42
PS Business Parks, Inc. 1,700 45
Radian Group, Inc. 3,000 213
Raymond James Financial, Inc. 2,800 95
Regency Realty Corp. (e) 2,300 52
Reinsurance Group Of America 1,200 45
Republic Bancorp, Inc. 3,200 30
RFS Hotel Investors, Inc. (e) 1,700 22
Richmond County Financial Corp. 2,200 52
Riggs National Corp. 1,400 16
S&T Bancorp, Inc. 100 2
SEI Corp. 2,500 227
Selective Insurance Group, Inc. 1,700 29
Silicon Valley Bancshares (a) 3,200 148
Simon Property Group, Inc. (e) 7,800 174
SL Green Realty Corp. (e) 1,800 48
South Financial Group, Inc. (The) 2,800 28
Southwest Bancorporation of
Texas, Inc. (a) 1,800 66
Southwest Securities Group, Inc. 1,000 28
Sovereign Bancorp, Inc. 16,100 134
Stancorp Financial Group, Inc. 2,300 94
State Auto Financial Corp. 1,000 13
Staten Island Bancorp, Inc. 2,700 52
Sterling Bancshares, Inc. 1,700 29
Student Loan Corp., (The) 300 16
Summit Properties, Inc. (e) 1,600 38
Susquehanna Bancshares, Inc. 2,800 39
TCF Financial Corp. 6,400 258
TD Waterhouse Group, Inc. (a) 1,600 27
Texas Regional Bancshares, Inc.
Class A 1,100 33
Trammell Crow Co. (a) 1,600 21
Triad Guaranty, Inc. (a) 900 26
TrustCo Bank Corp. NY 4,310 52
UCBH Holdings, Inc. 500 18
UICI (a) 2,400 18
UMB Financial Corp. 1,200 41
United National Bancorp 1,100 20
Unitrin, Inc. 3,300 102
Valley National Bancorp 4,300 118
Webster Financial Corp. 3,400 83
Wells Fargo Co. 5,218 242
Westamerica Bancorporation 800 29
Whitney Holding Corp. 1,600 59
Zenith National Insurance Corp. 700 16
Zions Bancorp 5,500 315
------
18,037
------
HEALTH CARE - 9.0%
Accredo Health, Inc. (a) 700 30
Acuson (a) 1,300 30
ADAC Laboratories (a) 1,300 17
Advance Paradigm, Inc. (a) 1,200 58
Albany Molecular Research, Inc. (a) 1,100 64
Alpharma, Inc. Class A 1,600 62
AmeriPath, Inc. (a) 300 5
AmeriSource Health Corp. Class A (a) 4,500 195
Andrx Group (a) 2,500 180
219 Tax-Managed Small Cap Fund
<PAGE>
TAX-MANAGED SMALL CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- ------
Arrow International, Inc. 700 28
Aurora Biosciences Corp. (a) 1,300 79
Bergen Brunswig Corp. Class A 9,900 90
Bindley Western Industries, Inc. 1,100 40
Biomatrix, Inc. (a) 900 17
Biopure Corp. New (a) 800 16
Biosite Diagnostics, Inc. (a) 900 20
Cell Therapeutics, Inc. (a) 1,900 127
Cerner Corp. (a) 1,800 111
Cerus Corp. (a) 400 22
ChromaVision Medical Systems, Inc. (a) 1,500 7
Conmed Corp. (a) 700 10
Covance, Inc. (a) 6,200 53
Coventry Health Care, Inc. (a) 4,200 76
Cubist Pharmaceuticals, Inc. (a) 1,700 73
Cytyc Corp. (a) 2,400 142
Datascope Corp. 700 24
DaVita, Inc. (a) 4,400 50
Diagnostic Products Corp. 1,000 46
Digene Corp. (a) 700 22
Diversa Corp. New (a) 400 10
Dura Pharmaceuticals, Inc. (a) 1,900 65
EntreMed, Inc. (a) 900 28
Enzon, Inc. (a) 2,700 192
Express Scripts, Inc. Class A (a) 1,300 87
First Health Group Corp. (a) 6,100 238
Forest Labs, Inc. (a) 6,800 901
Foundation Health Systems, Inc. (a) 8,900 180
GelTex Pharmaceuticals, Inc. (a) 1,000 49
Genzyme Corp. (a) 3,500 248
Health Management Associates
Class A (a) 16,100 319
Henry Schein, Inc. (a) 1,500 37
Human Genome Sciences, Inc. (a) 8,600 760
ICN Pharmaceuticals, Inc. 5,900 225
Inhale Therapeutic Systems, Inc. (a) 2,100 104
Invacare Corp. 1,300 37
Invitrogen Corp. (a) 3,600 274
King Pharmaceuticals, Inc. (a) 8,200 367
LifePoint Hospitals, Inc. (a) 2,000 78
Maxygen Inc. New (a) 700 28
Medicis Pharmaceutical Corp. Class A. (a) 1,800 133
Mentor Corp. 1,300 23
Mid Atlantic Medical Services, Inc. (a) 2,700 46
Molecular Devices Corp. (a) 2,300 157
Mylan Laboratories, Inc. 8,200 230
Myriad Genetics, Inc. (a) 400 48
National Data Corp. 1,700 65
NBTY, Inc. (a) 3,500 23
Noven Pharmaceuticals, Inc. (a) 1,200 53
NPS Pharmaceuticals, Inc. (a) 1,300 56
Omnicare, Inc. 4,300 75
Owens & Minor, Inc., Holding Co. 2,200 33
Oxford Health Plans, Inc. (a) 5,400 182
Parexel International Corp. (a) 200 2
Patterson Dental Co. (a) 1,300 41
Perrigo Co. (a) 4,000 26
Pharmaceutical Product
Development, Inc. (a) 900 28
PolyMedica Corp. (a) 600 34
PRAECIS Pharmaceuticals, Inc. New (a) 500 13
Priority Healthcare Corp. Class B (a) 700 38
Professional Detailing, Inc. (a) 700 62
Province Healthcare Co. (a) 1,900 80
Quest Diagnostics, Inc. (a) 2,600 250
Quorum Health Group, Inc. (a) 4,500 60
Regeneron Pharmaceuticals, Inc. (a) 1,300 35
RehabCare Group, Inc. (a) 800 35
Respironics, Inc. (a) 3,500 68
SangStat Medical Corp. (a) 1,400 14
SciClone Pharmaceuticals, Inc. (a) 2,600 21
STAAR Surgical Co. New (a) 900 14
Steris Corp. (a) 4,200 63
Stryker Corp. 11,200 528
Sunrise Assisted Living, Inc. (a) 1,200 28
Sunrise Technologies
International, Inc. (a) 3,600 26
Sybron International Corp. (a) 6,600 163
Syncor International Corp. (a) 1,300 33
Techne Corp. (a) 1,400 156
Thoratec Laboratories Corp. (a) 900 11
Titan Pharmaceuticals, Inc. (a) 1,500 63
Universal Health Services, Inc.
Class B (a) 600 50
Varian Medical Systems, Inc. (a) 2,100 103
Vertex Pharmaceuticals, Inc. (a) 3,300 307
Vical, Inc. (a) 1,200 25
Vital Signs, Inc. 400 12
WebMD Corp. (a) 20,650 234
Zoll Medical Corp. (a) 700 35
-----
9,703
-----
INTEGRATED OILS - 0.6%
Basin Exploration, Inc. (a) 400 8
Berry Petroleum Co. Class A 1,000 17
Cabot Oil & Gas Corp. 1,700 33
Comstock Resources, Inc. (a) 1,300 13
Cross Timbers Oil Co. 4,700 88
Tax-Managed Small Cap Fund 220
<PAGE>
TAX-MANAGED SMALL CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- ------
Equitable Resources, Inc. 2,400 140
Helmerich & Payne, Inc. 4,300 136
Houston Exploration Co. (The) (a) 500 11
HS Resources, Inc. (a) 1,000 31
Noble Affiliates, Inc. 4,100 151
Patina Oil & Gas Corp. 800 14
Tesoro Petroleum Corp. (a) 2,300 24
Unit Corp. (a) 2,200 29
--------
695
--------
MATERIALS AND PROCESSING - 3.8%
Advanced Energy Industries, Inc. (a) 700 12
AK Steel Holding Corp. 5,400 50
Albany International Corp. Class A (a) 1,100 12
American Standard Cos., Inc. (a) 5,100 234
AptarGroup, Inc. 2,300 48
Bowater, Inc. 3,800 206
Brush Wellman, Inc. 1,100 22
Cabot Corp. 4,800 106
Cabot Microelectronics Corp. New (a) 1,233 54
Calgon Carbon Corp. 2,200 13
Cambrex Corp. 1,000 40
CARBO Ceramics, Inc. 300 9
Carlisle Cos., Inc. 1,600 67
Carpenter Technology Corp. 1,300 40
Centex Construction Products, Inc. 500 13
Century Aluminum Co. 800 7
ChemFirst, Inc. 1,200 28
Clarcor, Inc. 1,700 33
Commercial Metals Co. 900 25
CUNO, Inc. (a) 1,100 28
Cytec Industries, Inc. (a) 3,200 111
Dal-Tile International, Inc. (a) 3,400 42
Deltic Timber Corp. 800 16
Ferro Corp. 2,300 47
Florida Rock Industries, Inc. 500 19
Forest City Enterprises, Inc. Class A 1,400 52
Fuller (H.B.) Co. 900 30
Georgia Gulf Corp. 1,000 13
Granite Construction, Inc. 1,200 27
Griffon Corp. (a) 2,200 17
Harland (John H.) Co. 2,200 31
Harsco Corp. 2,500 50
Hexcel Corp. (a) 1,200 13
Hughes Supply, Inc. 2,200 41
Insituform Technologies, Inc.
Class A (a) 1,200 43
International Specialty
Products, Inc. (a) 900 6
Jacob's Engineering Group, Inc. (a) 1,400 58
Johns Manville Corp. 2,100 19
Kaydon Corp. 1,900 42
Lilly Industrial Coatings, Inc. Class A 1,800 54
Lone Star Technologies, Inc. (a) 1,500 60
Longview Fibre Co. 3,700 50
Martin Marietta Materials, Inc. 3,300 127
Mascotech, Inc. 2,300 38
Maverick Tube Corp. (a) 1,100 17
Methode Electronics, Inc. Class A 2,700 101
Mohawk Industries, Inc. (a) 2,600 57
NCI Building Systems, Inc. (a) 1,200 19
Olin Corp. 2,000 36
OM Group 1,300 60
Omnova Solutions, Inc. 2,200 12
P.H. Glatfelter Co. 1,700 18
Precision Castparts Corp. 3,800 143
Quanex Corp. 1,000 20
Rayonier, Inc. 1,900 67
Reliance Steel & Aluminum Co. 1,300 31
Rock-Tenn Co. Class A 900 8
Scotts Co. (The) Class A (a) 700 25
Shaw Group, Inc. (The) (a) 1,100 90
Simpson Manufacturing Co., Inc. (a) 400 17
Smurfit-Stone Container Corp. (a) 8,300 111
Southern Peru Copper Corp. 1,600 22
Spartech Corp. 1,100 17
SPS Technologies, Inc. (a) 800 41
St. Joe Co. (The) 1,900 38
Standard Register Co. 900 11
Standex International Corp. 700 13
Steel Dynamics, Inc. (a) 2,000 24
Stericycle, Inc. (a) 800 26
Stora Enso Oyj (a) 5,711 58
Symyx Technologies, Inc. New (a) 1,300 61
Texas Industries, Inc. 1,400 33
Tredegar Industries, Inc. 700 13
Uniroyal Technology Corp. (a) 900 9
Universal Forest Products, Inc. 1,000 13
US Industries, Inc. 4,800 43
Valmont Industries, Inc. 1,800 36
Walter Industries, Inc. 2,100 16
Washington Group
International, Inc. (a) 2,100 22
Waters Corp. (a) 10,000 725
WD-40 Co. 800 17
Webb (Del E.) Corp. (a) 1,100 30
Wolverine Tube, Inc. (a) 900 12
-----
4,165
-----
OTHER ENERGY - 5.0%
Atwood Oceanics, Inc. (a) 500 17
221 Tax-Managed Small Cap Fund
<PAGE>
TAX-MANAGED SMALL CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- ------
Barrett Resources Corp. (a) 2,200 80
BJ Services Co. (a) 5,400 283
Brown (Tom), Inc. (a) 4,000 92
Cal Dive International, Inc. (a) 800 40
Chesapeake Energy Corp. (a) 7,100 40
Cleco Corp. 1,900 90
Diamond Offshore Drilling, Inc. 4,900 169
Dril-Quip, Inc. (a) 600 20
ENSCO International, Inc. 10,300 342
EOG Resources, Inc. 7,100 280
Evergreen Resources, Inc. (a) 600 17
Flowserve Corp. 2,300 46
Forest Oil Corp. (a) 1,200 17
FuelCell Energy, Inc. (a) 600 46
Global Industries, Inc. (a) 4,400 46
Global Marine, Inc. (a) 11,400 302
Grey Wolf, Inc. (a) 11,500 53
Hanover Compressor Co. (a) 4,000 131
Key Energy Group, Inc. (a) 6,100 55
Kinder Morgan, Inc. 7,600 293
Louis Dreyfus Natural Gas Corp. (a) 1,800 58
Marine Drilling Co, Inc. (a) 5,100 122
McMoRan Exploration Co. (a) 1,100 13
Mitchell Energy & Development Corp.
Class A 1,300 60
Nabors Industries, Inc. (a) 10,100 514
National-Oilwell, Inc. (a) 3,900 114
Newfield Exploration Co. (a) 2,500 94
Noble Drilling Corp. (a) 9,100 378
Northwestern Corp. 1,600 35
Nuevo Energy Co. (a) 1,300 24
Ocean Energy, Inc. (a) 12,500 173
Oceaneering International, Inc. (a) 1,500 21
Patterson Energy, Inc. (a) 2,200 61
Pennaco Energy, Inc. New (a) 1,000 12
Pioneer Natural Resources Co. (a) 7,400 97
Pogo Producing Co. 3,100 78
Seacor Holdings, Inc. (a) 1,200 50
Seitel, Inc. (a) 1,200 18
SEMCO Energy, Inc. 1,300 20
Smith International, Inc. (a) 3,300 233
St. Mary Land & Exploration Co. 1,700 40
Stone Energy Corp. (a) 1,100 56
Superior Energy Services, Inc. (a) 3,100 28
Swift Energy Co. (a) 1,300 42
Syntroleum Corp. (a) 2,300 45
Tidewater, Inc. 1,500 69
Ultramar Diamond Shamrock Corp. 6,400 168
UTI Energy Corp. (a) 1,900 38
Valero Energy Corp. 3,800 126
Varco International, Inc. (a) 4,100 71
Vintage Petroleum, Inc. 3,000 63
--------
5,380
--------
PRODUCER DURABLES - 3.6%
Applied Industrial Technology, Inc. 1,500 25
Applied Science & Technology, Inc. (a) 700 10
ATMI, Inc. (a) 1,800 34
Baldor Electric Co. 1,800 36
Beckman Coulter, Inc. 2,100 147
Belden, Inc. 1,700 44
C-COR Electronics, Inc. (a) 1,900 30
Clayton Homes, Inc. 6,200 57
Cohu, Inc. 1,300 20
Columbus McKinnon Corp. 800 11
Credence Systems Corp. (a) 1,300 24
CTS Corp. 1,800 77
D.R. Horton, Inc. 3,961 73
Diebold, Inc. 5,100 133
Donaldson Co., Inc. 2,500 57
DuPont Photomasks, Inc. (a) 400 23
Efficient Networks, Inc. (a) 1,800 75
Electroglas, Inc. (a) 1,200 17
ESCO Technologies, Inc. (a) 600 11
Fastenal Co. 1,800 103
Foster Wheeler Corp. 2,500 18
Franklin Electric Co., Inc. 300 20
GaSonics International Corp. (a) 800 16
GenCorp, Inc. 2,400 20
General Cable Corp. 1,900 11
GenRad, Inc. (a) 1,800 16
Helix Technology Corp. 1,600 44
Hubbell, Inc. Class B 4,100 98
IDEX Corp. 1,900 61
JLG Industries, Inc. 2,600 36
Kennametal, Inc. 1,900 56
Kent Electronics Corp. (a) 3,000 56
Kimball International, Inc. Class B 2,300 36
Lennar Corp. 3,900 125
Littlefuse, Inc. (a) 400 12
Litton Industries, Inc. (a) 2,300 119
LTX Corp. (a) 3,000 42
Mathews International Corp. Class A 900 24
Mettler-Toledo International, Inc. (a) 2,500 117
Micrel, Inc. (a) 3,900 176
Miller (Herman), Inc. 1,800 47
MKS Instruments, Inc. (a) 400 7
Nordson Corp. 800 23
NVR, Inc. (a) 500 52
Tax-Managed Small Cap Fund 222
<PAGE>
TAX-MANAGED SMALL CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- ------
Photon Dynamics, Inc. (a) 900 32
Plexus Corp. (a) 2,600 164
Power-One, Inc. (a) 3,300 234
Ryland Group, Inc. (The) 1,600 52
Semitool, Inc. (a) 900 12
Sensormatic Electronics Corp. (a) 5,900 107
Silicon Valley Group, Inc. (a) 2,100 69
Spectralink Corp. (a) 700 5
SPX Corp. (a) 2,100 261
Standard Pacific Corp. 1,500 28
Stewart & Stevenson Services, Inc. 2,000 48
Technitrol, Inc. 800 89
Teleflex, Inc. 2,400 83
Terex Corp. (a) 1,700 21
Toll Brothers, Inc. (a) 1,300 42
Triquint Semiconductor, Inc. (a) 4,300 166
Triumph Group, Inc. (a) 800 27
Ultratech Stepper, Inc. (a) 700 16
Viasystems Group, Inc. New (a) 3,300 47
Vicor Corp. (a) 1,200 65
Waste Connections, Inc. (a) 900 23
Watsco, Inc. 1,300 12
Watts Industries, Inc. Class A 1,200 13
Woodward Governor Co. 600 27
York International Corp. 2,700 73
-----
3,955
-----
TECHNOLOGY - 31.7%
3Com Corp. (a) 24,500 433
ACT Manufacturing, Inc. (a) 800 26
Actel Corp. (a) 1,400 51
Actuate Corp. (a) 3,600 101
Acxiom Corp. (a) 4,600 185
ADE Corp. (a) 800 14
Adtran, Inc. (a) 1,600 61
Advanced Fibre Communications (a) 1,700 55
Advantage Learning Systems, Inc. (a) 600 18
Advent Software, Inc. (a) 1,700 102
Aeroflex, Inc. (a) 1,800 105
Aether Systems, Inc. (a) 2,300 185
Affiliated Computer Services, Inc.
Class A (a) 2,400 134
Agile Software Corp. New (a) 1,700 128
Akamai Technologies, Inc. (a) 2,900 147
Alliant Techsystems, Inc. (a) 500 45
Allscripts, Inc. New (a) 1,200 14
Alpha Industries, Inc. (a) 800 32
American Classic Voyages Co. (a) 500 7
Amphenol Corp. Class A (a) 2,600 167
Analysts International Corp. 100 1
Anaren Microwave, Inc. (a) 700 73
AnswerThink Consulting
Group, Inc. (a) 2,100 34
Applied Micro Circuits Corp. (a) 13,590 1,040
Ariba, Inc. New (a) 9,500 1,200
Arrow Electronics, Inc. (a) 7,300 234
Art Technology Group, Inc. (a) 600 38
Artesyn Technologies, Inc. (a) 2,100 85
At Home Corp. Series A (a) 16,800 173
Atmel Corp. (a) 31,500 469
Avanex Corp. New (a) 400 40
Avant! Corp. (a) 2,000 33
Avid Technology, Inc. (a) 1,500 21
Avnet, Inc. 6,600 177
AVX Corp. 1,400 40
AXENT Technologies, Inc. (a) 1,800 35
AXT, Inc. (a) 1,200 46
Barra, Inc. (a) 700 43
BEA Systems, Inc. (a) 21,900 1,570
Benchmark Electronics, Inc. (a) 1,400 56
BISYS Group, Inc. (a) 3,900 184
Black Box Corp. (a) 400 26
Bluestone Software, Inc. New (a) 800 17
Bottomline Technologies, Inc. (a) 500 17
Braun Consulting, Inc. New (a) 500 4
Brocade Communications
Systems, Inc. (a) 6,400 1,455
BSQUARE Corp. New (a) 1,200 18
CACI International, Inc. Class A (a) 800 16
Cadence Design Systems, Inc. (a) 16,000 411
CDW Computer Centers, Inc. (a) 3,300 213
Checkpoint Systems, Inc. (a) 2,000 16
ChoicePoint, Inc. New (a) 2,100 107
CIENA Corp. (a) 16,300 1,713
Cirrus Logic, Inc. (a) 3,900 168
Clarent Corp. (a) 1,500 47
CNET Networks, Inc. (a) 1,000 31
Commerce One, Inc. New (a) 14,800 949
Critical Path, Inc. (a) 3,200 155
CyberOptics Corp. (a) 600 14
CyberSource Corp. (a) 100 1
Cymer, Inc. (a) 1,800 45
Cypress Semiconductor Corp. (a) 7,900 296
Cysive, Inc. New (a) 400 3
Daleen Technologies, Inc. (a) 800 8
Dallas Semiconductor Corp. 1,300 52
Datastream Systems, Inc. (a) 1,600 20
Digital Island, Inc. New (a) 500 6
Digital Lightwave, Inc. (a) 700 35
Ditech Communications Corp. New (a) 2,100 72
223 Tax-Managed Small Cap Fund
<PAGE>
TAX-MANAGED SMALL CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- ------
DoubleClick, Inc. (a) 6,800 111
DSP Group, Inc. (a) 1,700 48
DST Systems, Inc. (a) 5,400 333
E.piphany, Inc. New (a) 2,000 180
eBay, Inc. (a) 9,700 500
Eclipsys Corp. (a) 2,600 64
eGain Communications Corp. New (a) 1,500 9
Electro Scientific Industries, Inc. (a) 1,700 59
eMerge Interactive, Inc. Class A New (a) 400 4
ESS Technology, Inc. (a) 100 2
Esterline Corp. (a) 1,100 25
Exar Corp. (a) 2,400 107
Excalibur Technologies Corp. (a) 700 41
Extensity, Inc. New (a) 200 2
Extreme Networks, Inc. (a) 3,600 299
F5 Networks, Inc. (a) 1,200 37
FactSet Research Systems, Inc. 1,300 49
Fairchild Semiconductor Corp.
Class A (a) 3,700 78
FEI Co. (a) 1,000 24
FileNet Corp. (a) 2,100 56
Forrester Research, Inc. (a) 700 29
Foundry Networks, Inc. New (a) 4,500 299
Galileo International, Inc. 3,200 63
GTECH Holdings Corp. (a) 900 16
Haemonetics Corp. (a) 600 14
Hall, Kinion & Associates, Inc. (a) 600 16
Hutchinson Technology, Inc. (a) 1,600 35
i2 Technologies, Inc. (a) 5,400 918
Identix, Inc. (a) 1,700 24
IDX Systems Corp. (a) 1,200 38
Illuminet Holdings, Inc. New (a) 1,400 34
Impath, Inc. (a) 1,000 76
Inet Technologies, Inc. (a) 500 20
InFocus Corp. (a) 2,400 106
Informatica Corp. (a) 1,900 180
InfoSpace.com, Inc. (a) 9,200 185
Ingram Micro, Inc. Class A (a) 600 10
Inktomi Corp. (a) 1,900 121
Integrated Device Technology, Inc. (a) 8,000 451
Integrated Silicon Solution, Inc. (a) 1,800 24
Inter-Tel, Inc. 1,700 20
Interact Commerce Corp. New (a) 500 5
Interlogix, Inc. (a) 600 7
International FiberCom, Inc. (a) 3,400 44
International Game Technology (a) 4,900 179
International Rectifier Corp. (a) 4,600 205
Internet Security Systems, Inc. (a) 1,700 150
internet.com Corp. New (a) 700 14
Interwoven, Inc. (a) 2,700 272
IntraNet Solutions, Inc. (a) 1,100 51
Intuit, Inc. (a) 9,000 553
Jabil Circuit, Inc. (a) 8,800 502
JDS Uniphase Corp. (a) 3,400 277
JNI Corp. New (a) 400 36
Juniper Networks, Inc. (a) 11,800 2,309
Kana Communications, Inc. (a) 5,000 117
Keane, Inc. (a) 1,300 17
Keithley Instruments, Inc. 600 32
Kemet Corp. (a) 8,400 234
L-3 Communications Holdings, Inc. (a) 2,300 152
Lam Research Corp. (a) 8,400 162
Lattice Semiconductor Corp. (a) 5,200 152
LifeMinders, Inc. New (a) 700 8
Lightbridge, Inc. (a) 1,100 12
MCK Communications, Inc. New (a) 800 13
MCSi, Inc. (a) 500 14
MEMC Electronic Materials, Inc. (a) 2,200 22
Mentor Graphics Corp. (a) 4,100 96
Microchip Technology, Inc. (a) 3,450 109
Micromuse, Inc. (a) 2,700 458
Micron Electronics, Inc. (a) 1,500 12
Motient Corp. (a) 1,600 19
Mynd Corp. (a) 2,200 28
National Instruments Corp. (a) 1,700 79
Natural Microsystems Corp. (a) 2,400 108
NetIQ Corp. (a) 1,500 129
NETsilicon, Inc. New (a) 400 6
NetSolve, Inc. (a) 300 2
Network Associates, Inc. (a) 9,700 187
Network Peripherals, Inc. (a) 1,100 12
New Era of Networks, Inc. (a) 2,100 33
Newport Corp. 2,000 227
Nortel Networks Corp. 3,662 167
NVIDIA Corp. (a) 3,000 186
ONYX Software Corp. (a) 1,500 24
Packeteer, Inc. New (a) 1,300 32
Park Electrochemical Corp. 1,000 66
Pericom Semiconductor Corp. (a) 1,300 34
Persistence Software, Inc. New (a) 700 8
Phoenix Technologies, Ltd. (a) 1,500 24
Phone.com, Inc. (a) 1,900 176
Photronics, Inc. (a) 1,900 43
Pioneer-Standard Electronics, Inc. 2,100 29
Pixar, Inc. (a) 800 26
PLX Technology, Inc. (a) 1,100 26
Tax-Managed Small Cap Fund 224
<PAGE>
TAX-MANAGED SMALL CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
------ ------
PMC - Sierra, Inc. (a) 9,100 1,546
Polycom, Inc. (a) 3,600 234
ProBusiness Services, Inc. (a) 1,000 33
Progress Software Corp. (a) 2,100 33
Project Software &
Development, Inc. (a) 800 10
Proxim, Inc. (a) 1,700 103
PurchasePro.com, Inc. New (a) 1,600 43
QLogic Corp. (a) 2,738 265
QRS Corp. (a) 1,400 12
Quantum Corp. - DLT & Storage
Systems (a) 11,100 167
Quest Software, Inc. (a) 1,200 52
Rambus, Inc. (a) 1,000 45
Rational Software Corp. (a) 14,600 871
Redback Networks, Inc. (a) 8,000 847
REMEC, Inc. (a) 2,400 71
Rogers Corp. (a) 900 32
RSA Security, Inc. (a) 700 41
Rudolph Technologies, Inc. New (a) 300 12
Sandisk Corp. (a) 3,500 187
SBS Technologies, Inc. (a) 700 18
Scott Technologies, Inc. (a) 800 18
SeaChange International, Inc. (a) 1,300 29
Semtech Corp. (a) 4,400 140
SERENA Software, Inc. (a) 1,000 51
Silicon Storage Technology, Inc. (a) 5,300 121
SIPEX Corp. (a) 1,500 59
SmartDisk Corp. New (a) 400 2
SPSS, Inc. (a) 500 11
StarTek, Inc. (a) 400 10
SunGard Data Systems (a) 6,400 327
Supertex, Inc. (a) 600 17
Sybase, Inc. (a) 6,400 134
Symantec Corp. (a) 3,700 144
Synopsys, Inc. (a) 3,700 129
Systems & Computer Technology Corp. (a) 2,000 29
Tanning Technology Corp. New (a) 800 4
Tech Data Corp. (a) 2,900 121
Tekelec, Inc. (a) 1,000 37
TelCom Semiconductor, Inc. (a) 1,000 14
Teledyne Technologies, Inc. (a) 2,100 53
Terra Networks SA - ADR 1,935 47
Titan Corp. (a) 3,300 44
Total Systems Services, Inc. 2,300 38
Transaction Systems Architects, Inc.
Class A (a) 700 9
Tumbleweed Communications
Corp. New (a) 700 12
Turnstone Systems, Inc. (a) 400 9
Tut Systems, Inc. (a) 1,100 36
Universal Electronics, Inc. (a) 900 16
US LEC Corp. (a) 600 4
VA Linux Systems, Inc. New (a) 700 20
Varian Semiconductor Equipment
Associates, Inc. (a) 2,000 46
Varian, Inc. (a) 2,100 65
Ventro Corp. New (a) 1,200 6
Verity, Inc. (a) 2,000 47
VerticalNet, Inc. (a) 6,100 170
Virata Corp. (a) 400 8
Vishay Intertechnology, Inc. (a) 2,600 78
Vitesse Semiconductor Corp. (a) 14,000 977
Vitria Technology, Inc. (a) 5,200 138
Volt Information Sciences, Inc. (a) 600 13
WatchGuard Technologies, Inc. (a) 800 40
WebTrends Corp. (a) 1,300 42
Wind River Systems, Inc. (a) 4,000 163
Wink Communications, Inc. New (a) 1,400 14
Zoran Corp. (a) 1,000 50
------
34,273
------
UTILITIES - 9.5%
AGL Resources, Inc. 3,400 69
Alamosa PCS Holdings, Inc. New (a) 700 11
Allegheny Energy, Inc. 7,800 319
Allegiance Telecom, Inc. (a) 7,400 233
ALLETE (a) 5,300 114
American States Water Co. 800 25
American Tower Corp. Class A (a) 5,100 209
American Water Works, Inc. 7,300 178
AT&T Wireless Group New (a) 7,700 192
Avista Corp. 2,900 65
Aware, Inc. (a) 1,000 31
Black Hills Corp. 1,500 47
C&D Technologies, Inc. 1,700 101
Cable Design Technologies Corp. (a) 2,700 62
Cablevision Systems Corp. Class A (a) 3,500 261
California Water Service Group 900 24
Conectiv, Inc. 6,700 120
DPL, Inc. 10,600 301
Dycom Industries, Inc. (a) 2,900 109
E'town Corp. 600 40
Energen Corp. 1,900 54
Finisar Corp. (a) 5,700 164
Hawaiian Electric Industries, Inc. 2,300 76
Idacorp, Inc. 3,000 148
IMRglobal Corp. (a) 1,300 11
Kansas City Power & Light Co. 4,600 111
225 Tax-Managed Small Cap Fund
<PAGE>
TAX-MANAGED SMALL CAP FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- ------
Laclede Gas Co. 1,300 28
MasTec, Inc. (a) 1,500 43
McLeodUSA, Inc. (a) 37,000 712
MCN Energy Group, Inc. 6,700 165
MDU Resources Group, Inc. 4,800 140
Metricom, Inc. (a) 1,300 23
Midcoast Energy Resources, Inc. 700 14
National Fuel Gas Co. 3,000 161
New Jersey Resources Corp. 1,700 68
NiSource, Inc. 9,000 224
Northwest Natural Gas Co. 1,800 42
NRG Energy, Inc. (a) 1,500 39
NUI Corp. 900 28
Otter Tail Power Co. 1,500 33
Pac-West Telecomm, Inc. New (a) 900 8
Philadelphia Suburban Corp. 2,100 49
Piedmont Natural Gas Co., Inc. 2,000 61
Potomac Electric Power Co. 8,500 194
Powerwave Technologies, Inc. (a) 2,800 135
Public Service Co. of New Mexico 2,200 61
Quanta Services, Inc. (a) 1,900 59
Rural Cellular Corp. Class A (a) 700 37
SBA Communications Corp. (a) 1,700 85
SCANA Corp. 7,000 186
SDL, Inc. (a) 4,500 1,166
Sierra Pacific Resources 6,000 103
SJW Corp. 100 12
South Jersey Industries, Inc. 700 20
Southwest Gas Corp. 2,200 46
Southwestern Energy Co. 1,600 13
Telephone & Data Systems, Inc. 3,600 380
Terayon Communication
Systems, Inc. (a) 2,400 53
Tollgrade Communications, Inc. (a) 800 76
TranSwitch Corp. (a) 6,200 359
UGI Corp. 2,200 51
UIL Holdings Corp. 1,000 47
United States Cellular Corp. (a) 1,100 70
UtiliCorp United, Inc. 6,900 184
Vectren Corp. 4,400 102
VoiceStream Wireless Corp. (a) 12,200 1,604
West TeleServices Corp. (a) 600 15
Western Resources, Inc. 5,200 111
WGL Holdings, Inc. (a) 3,300 84
WPS Resources Corp. 2,100 68
-------
10,234
-------
TOTAL COMMON STOCKS
(cost $97,116) 103,556
-------
Short-Term Investments - 3.3%
Frank Russell Investment Company
Money Market Fund, 3,004 3,004
due on demand (b)
United States Treasury Bills (b)(c)(d)
5.930% due 12/21/00 150 149
5.940% due 12/21/00 400 396
-------
Total Short-Term Investments
(cost $3,549) 3,549
-------
Total Investments - 99.1%
(identified cost $100,665) 107,105
Other Assets and Liabilities,
Net - 0.9% 939
-------
Net Assets - 100.0% 108,044
=======
(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).
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
FUTURES CONTRACTS CONTRACTS (000)
---------- -------------
S&P 500 Index
expiration date 12/00 2 $ 27
S&P 400 Midcap Index
expiration date 12/00 5 (65)
Russell 2000 Index
expiration date 12/00 6 51
-------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ 13
=============
See accompanying notes which are an integral part of the financial statements.
Tax-Managed Small Cap Fund 226
<PAGE>
TAX-MANAGED SMALL CAP FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) October 31, 2000
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $100,665)................................................ $ 107,105
Receivables:
Dividends.................................................................................... 53
Investments sold............................................................................. 37
Fund shares sold............................................................................. 908
From Advisor................................................................................. 66
Daily variation margin on futures contracts.................................................. 82
-----------
Total assets.............................................................................. 108,251
LIABILITIES
Payables:
Due to Custodian............................................................ $ 127
Accrued fees to affiliates.................................................. 9
Other accrued expenses...................................................... 71
-------
Total liabilities......................................................................... 207
-----------
NET ASSETS...................................................................................... $ 108,044
===========
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss)............................................................ $ (4,828)
Unrealized appreciation
(depreciation) on:
Investments.................................................................................. 6,440
Futures contracts............................................................................ 13
Shares of beneficial interest................................................................... 97
Additional paid-in capital...................................................................... 106,322
-----------
NET ASSETS...................................................................................... $108,044
===========
NET ASSET VALUE, offering and redemption price per share:
Class C ($2,413,605 divided by 217,953 shares of $.01 par value
shares of beneficial interest outstanding)................................................ $ 11.07
===========
Class S ($105,630,147 divided by 9,469,634 shares of $.01 par value
shares of beneficial interest outstanding)................................................ $11.15
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
227 Tax-Managed Small Cap Fund
<PAGE>
TAX-MANAGED SMALL CAP FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED
OCTOBER 31, 2000 1999*
---------------- ---------------
<S> <C> <C>
INVESTMENT INCOME
Dividends......................................................... $ 518 $ 25
Dividends from Money Market Fund.................................. 251 31
Interest.......................................................... 21 1
---------------- ---------------
Total investment income........................................ 790 57
---------------- ---------------
EXPENSES
Advisory fees..................................................... 635 18
Administrative fees............................................... 34 1
Custodian fees.................................................... 264 40
Distribution fees - Class C....................................... 10
Transfer agent fees............................................... 22 21
Professional fees................................................. 36 14
Registration fees................................................. 71 44
Shareholder servicing fees - Class C.............................. 3 --
Trustees' fees.................................................... 11 --
Miscellaneous..................................................... 132 4
---------------- ---------------
Expenses before reductions........................................ 1,218 142
Expense reductions................................................ (390) (120)
---------------- ---------------
Expenses, net.................................................. 828 22
---------------- ---------------
Net investment income (loss)......................................... (38) 35
---------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments....................................................... (4,975) (155)
Futures contracts................................................. 311 (26)
---------------- ---------------
(4,664) (181)
---------------- ---------------
Net change in unrealized appreciation (depreciation) on:
Investments....................................................... 4,723 1,717
Futures contracts................................................. (116) 129
---------------- ---------------
4,607 1,846
---------------- ---------------
Net realized and unrealized gain (loss).............................. (57) 1,665
---------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS................ $ (95) $ 1,700
================ ===============
</TABLE>
* For the period December 1, 1999 (commencement of operations) to December 31,
1999.
See accompanying notes which are an integral part of the financial statements.
Tax-Managed Small Cap Fund 228
<PAGE>
TAX-MANAGED SMALL CAP FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED
OCTOBER 31, 2000 1999*
---------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss)............................................. $ (38) $ 35
Net realized gain (loss)................................................. (4,664) (181)
Net change in unrealized appreciation (depreciation)..................... 4,607 1,846
---------------- ---------------
Net increase (decrease) in net assets from operations................. (95) 1,700
DISTRIBUTIONS
From net investment income
Class C............................................................... (1) --
Class S............................................................... (33) --
---------------- ---------------
Net decrease in net assets from distributions...................... (34) --
---------------- ---------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions............ 78,898 27,575
---------------- ---------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS................................. 78,769 29,275
NET ASSETS
Beginning of period...................................................... 29,275 --
---------------- ---------------
End of period (including undistributed net investment income
of $35 at December 31, 1999)......................................... $ 108,044 $ 29,275
================ ===============
</TABLE>
* For the period December 1, 1999 (commencement of operations) to December 31,
1999.
See accompanying notes which are an integral part of the financial statements.
229 Tax-Managed Small Cap Fund
<PAGE>
TAX-MANAGED SMALL CAP FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
2000* 1999**
------ ------
NET ASSET VALUE, BEGINNING OF PERIOD..................... $10.71 $10.00
------ ------
INCOME FROM OPERATIONS
Net investment income (loss)(a)***.................... (.10) --
Net realized and unrealized gain (loss)............... .47 .71
------ ------
Total income from operations....................... .37 .71
------ ------
DISTRIBUTIONS
From net investment income............................ (.01) --
------ ------
NET ASSET VALUE, END OF PERIOD........................... $11.07 $10.71
====== ======
TOTAL RETURN (%)(b)...................................... 3.52 7.10
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands).............. 2,414 222
Ratios to average net assets (%)(c):
Operating expenses, net............................ 2.25 2.18
Operating expenses, gross.......................... 2.77 8.78
Net investment income (loss)....................... (1.05) .73
Portfolio turnover rate (%)........................... 71.20 3.33
* For the ten months ended October 31, 2000.
** For the period December 1, 1999 (commencement of operations) to December 31,
1999.
*** Less than $.01 per share for the period ended December 31, 1999.
(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.
Tax-Managed Small Cap Fund 230
<PAGE>
TAX-MANAGED SMALL 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.
2000* 1999**
------ ------
NET ASSET VALUE, BEGINNING OF PERIOD...................... $10.73 $10.00
------ ------
INCOME FROM OPERATIONS
Net investment income (loss)(a)***..................... -- .01
Net realized and unrealized gain (loss)................ .43 .72
------ ------
Total income from operations........................ .43 .73
------ ------
DISTRIBUTIONS
From net investment income............................. (.01) --
------ ------
NET ASSET VALUE, END OF PERIOD............................ $11.15 $10.73
====== ======
TOTAL RETURN (%)(b)....................................... 4.08 7.30
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)............... 105,630 29,053
Ratios to average net assets (%)(c):
Operating expenses, net............................. 1.25 1.25
Operating expenses, gross........................... 1.85 7.95
Net investment income (loss)........................ (.04) 1.92
Portfolio turnover rate (%)............................ 71.20 3.33
* For the ten months ended October 31, 2000.
** For the period December 1, 1999 (commencement of operations) to December 31,
1999.
*** Less than $.01 per share for the period ended October 31, 2000.
(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.
231 Tax-Managed Small Cap Fund
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 2000
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company") is a series
mutual fund with 29 different investment portfolios, referred to as "Funds."
These financial statements report on thirteen 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.
The Investment Company's Board of Trustees approved a change in the Funds'
fiscal year end from December 31 to October 31. As a result, this financial
report reflects the ten-month period commencing on January 1, 2000 through
October 31, 2000.
On February 26, 1999, the Fixed Income II Fund acquired all the net assets
of the Volatility Constrained Bond Fund 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 $320,538,146 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 was made for the year ended December 31, 1999:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED NET ADDITIONAL
NET INVESTMENT REALIZED GAIN PAID-IN CAPITAL
INCOME (LOSS)
-------------- --------------- ---------------
<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 232
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
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.
At October 31, 2000, 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>
10/31/01 10/31/02 10/31/03 10/31/04
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Equity Income $ -- $ -- $ -- $ --
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 -- -- -- --
Tax-Managed Large Cap -- -- -- --
Tax-Managed Small -- -- -- --
Tax Exempt Bond -- 345,504 110,634 15,075
<CAPTION>
10/31/05 10/31/06 10/31/07 10/31/08 Totals
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Equity Income $ -- $ -- $ -- $11,719,875 $11,719,875
Emerging Markets -- 56,335,865 30,325,300 6,323,823 96,220,969
Real Estate Securities -- 2,695,613 22,984,087 10,831,361 36,511,061
Short Term Bond 574,853 51,911 3,481,990 2,691,693 21,557,985
Diversified Bond -- -- 11,038,464 9,492,174 20,530,638
Multistrategy Bond -- -- 17,356,510 9,143,431 26,499,941
Tax-Managed Large Cap -- 655,350 716,803 15,494,001 16,866,154
Tax-Managed Small Cap -- -- -- 6,678,580 6,678,580
Tax Exempt Bond -- 141,152 399,028 1,845,627 2,857,020
</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.
233 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
The aggregate cost of investments and the composition of gross unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of October 31, 2000 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 $1,203,952,224 $407,467,312 $(37,045,240) $370,422,072
Special Growth 659,694,141 167,898,417 (39,044,942) 128,853,475
Equity Income 123,880,129 33,314,788 (3,354,973) 29,959,815
Quantitative Equity 1,160,126,874 492,903,581 (62,577,943) 430,325,638
International Securities 949,654,330 182,774,644 (62,295,222) 120,479,422
Emerging Markets 377,294,329 78,668,225 (88,314,722) (9,646,497)
Real Estate Securities 615,254,116 101,517,866 (25,126,228) 76,391,638
Short Term Bond 432,077,359 1,344,497 (2,995,094) (1,650,597)
Diversified Bond 837,337,140 58,599,008 (73,050,103) (14,451,095)
Multistrategy Bond 785,235,075 14,243,312 (21,675,500) (7,432,188)
Tax-Managed Large Cap 539,239,576 164,480,896 (22,859,948) 141,620,948
Tax-Managed Small Cap 98,801,870 12,222,155 (3,919,070) 8,303,085
Tax Exempt Bond 130,968,792 2,342,556 (1,203,599) 1,138,957
</TABLE>
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: For all Funds, income dividends
and capital gain distributions, if any, are recorded on the ex-dividend
date. Dividends are generally declared and paid quarterly for the equity
Funds, annually for the International Securities Fund and monthly for the
fixed income Funds. Capital gain distributions are generally declared and
paid annually. An additional distribution may be paid by the Funds to avoid
imposition of federal income tax on any remaining undistributed capital
gains and net investment income.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from 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
ten months ended October 31, 2000:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED NET
NET INVESTMENT REALIZED GAIN ADDITIONAL
INCOME (LOSS) PAID-IN CAPITAL
-------------- --------------- ---------------
<S> <C> <C> <C>
Diversified Equity $ (243,388) $ 243,388 $ --
Equity Income (39,900) 134,567 (94,667)
Quantitative Equity 1,113,160 (1,113,160) --
International Securities (11,434,190) 11,390,865 43,325
Real Estate Securities 14,056 1,751,583 (1,765,639)
Short Term Bond 20,515 (20,515) --
Diversified Bond 186,110 (186,110) --
Multistrategy Bond 219,698 (260,064) 40,366
Tax Exempt Bond -- 468,406 (468,406)
Tax-Managed Small Cap 38,448 16,237 (54,685)
</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 to a specific Fund or Class are allocated among all Funds and/or
Classes based on their relative net assets.
DEFERRED ORGANIZATIONAL 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.
Notes to Financial Statements 234
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
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.
The Funds do not isolate that portion of the results of operations of the
Funds that arises as a result of changes in exchange rates from that portion
that arises from changes in market prices of investments during the year.
Such fluctuations are included with the net realized and unrealized gain or
loss from investments. However, for federal income tax purposes the Funds do
isolate the effects of changes in foreign exchange rates from the
fluctuations arising from changes in market prices for realized gain (or
loss) on debt obligations.
DERIVATIVES: To the extent permitted by the investment objectives,
restrictions and policies set forth in the Funds' Prospectus and Statement
of Additional Information, the Funds may participate in various
derivative-based transactions. Derivative securities are instruments or
agreements whose value is derived from an underlying security or index. They
include options, futures, swaps, forwards, structured notes and stripped
securities. These instruments offer unique characteristics and risks that
assist the Funds in meeting their investment strategies.
The Funds typically use derivatives in three ways: cash equitization,
hedging, and return enhancement. Cash equitization is a technique that may
be used by certain Funds through the use of options and futures to earn
"market-like" returns with their excess and liquidity reserve cash balances.
Hedging is used by some Funds to limit or control risks, such as adverse
movements in exchange rates and interest rates. Return enhancement can be
accomplished through the use of derivatives in a Fund. By purchasing certain
instruments, Funds may more effectively achieve the desired portfolio
characteristics that assist them in meeting their investment objectives.
Depending on how the derivatives are structured and utilized, the risks
associated with them may vary widely. These risks are generally categorized
as market risk, liquidity risk and counterparty or credit risk.
FOREIGN CURRENCY EXCHANGE CONTRACTS: In connection with portfolio purchases
and sales of securities denominated in a foreign currency, certain Funds may
enter into foreign currency exchange spot contracts and forward foreign
currency exchange contracts ("contracts"). The International 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 October 31, 2000 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.
235 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
INVESTMENT IN EMERGING MARKETS: Investing in emerging markets may involve
special risks and considerations for the Emerging Markets Fund not typically
associated with investing in the United States markets. These risks include
revaluation of currencies, high rates of inflation, repatriation on income
and capital, and future adverse political and economic developments.
Moreover, securities issued in these markets may be less liquid, subject to
government ownership controls, delayed settlements, and their prices more
volatile than those of comparable securities in the United States.
OPTIONS: The Funds may purchase and sell (write) call and put options on
securities and securities indices, provided such options are traded on a
national securities exchange or in an over-the-counter market. These Funds
may also purchase and sell call and put options on foreign currencies. The
domestic equity Funds may utilize options to equitize liquidity reserve
balances.
When a Fund writes a covered call or a put option, an amount equal to the
premium received by the Fund is included in the Fund's Statement of Assets
and Liabilities as an asset and as an equivalent liability. The amount of
the liability is subsequently marked-to-market to reflect the current market
value of the option written. The Fund receives a premium on the sale of a
call option but gives up the opportunity to profit from any increase in
stock value above the exercise price of the option, and when the Fund writes
a put option it is exposed to a decline in the price of the underlying
security. If an option which the Fund has written either expires on its
stipulated expiration date or the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or loss, if the cost of a closing
purchase transaction exceeds the premium received when the option was sold)
without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option is extinguished. If a call option
which the Fund has written is exercised, the Fund realizes a capital gain or
loss from the sale of the underlying security, and the proceeds from such
sale are increased by the premium originally received. When a put option
which a Fund has written is exercised, the amount of the premium originally
received will reduce the cost of the security which a Fund purchases upon
exercise of the option. Realized gains (losses) on purchased options are
included in net realized gain (loss) from investments.
The Funds' use of written options involves, to varying degrees, elements of
market risk in excess of the amount recognized in the Statement of Assets
and Liabilities. The face or contract amounts of these instruments reflect
the extent of the Funds' exposure to off balance sheet risk. The risks may
be caused by an imperfect correlation between movements in the price of the
instrument and the price of the underlying securities and interest rates.
FUTURES CONTRACTS: The domestic and international equity Funds utilize
futures to equitize liquidity reserve balances. Multistrategy Bond Fund may
utilize futures contracts (i.e., interest rate, foreign currency and index
futures contracts) to a limited extent. The face or contract amounts of
these instruments reflect the extent of the Funds' exposure to off balance
sheet risk. The primary risks associated with the use of futures contracts
are an imperfect correlation between the change in market value of the
securities held by the Fund and the prices of futures contracts and the
possibility of an illiquid market. Changes in the initial 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 ten months ended October 31, 2000 and 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:
<TABLE>
<CAPTION>
OCTOBER 31, 2000 DECEMBER 31, 1999
--------------------------------- ---------------------------------
PURCHASES SALES PURCHASES SALES
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Diversified Equity $2,715,991,133 $2,076,779,613 Diversified Equity $1,521,244,958 $1,569,446,810
Special Growth 961,605,803 950,252,564 Special Growth 658,486,286 699,090,245
Equity Income 149,418,942 182,495,801 Equity Income 293,288,562 349,872,503
Quantitative Equity 973,769,555 899,373,577 Quantitative Equity 1,241,536,459 1,331,405,947
International Securities 1,128,120,770 1,060,981,505 International Securities 1,130,214,027 1,204,341,093
Emerging Markets 336,464,626 294,759,768 Emerging Markets 314,913,984 318,289,477
Real Estate Securities 340,288,457 334,983,671 Real Estate Securities 233,099,531 183,072,057
Short-Term Bond 221,860,569 244,480,893 Short-Term Bond 320,528,572 221,515,031
Diversified Bond 192,912,847 172,085,577 Diversified Bond 296,438,209 293,837,690
Multistrategy Bond 238,553,373 214,956,878 Multistrategy Bond 270,895,190 259,610,245
Tax-Managed Large Cap 417,373,521 270,493,706 Tax-Managed Large Cap 375,918,148 200,558,704
Tax-Managed Small Cap 169,465,009 89,048,103 Tax-Managed Small Cap 22,635,473 780,856
Tax Exempt Bond 67,741,572 51,983,382 Tax Exempt Bond 168,206,682 176,539,632
</TABLE>
Notes to Financial Statements 236
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
Purchases and sales of U.S. Government and Agency obligations (excluding
short-term investments, options, futures and repurchase agreements) were as
follows:
<TABLE>
<CAPTION>
OCTOBER 31, 2000 DECEMBER 31, 1999
------------------------------- --------------------------------
PURCHASES SALES PURCHASES SALES
------------ ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
Short-Term Bond $176,953,691 $187,592,969 Short-Term Bond $ 537,710,748 $ 536,585,617
Diversified Bond 797,577,464 865,432,623 Diversified Bond 1,045,345,020 977,100,173
Multistrategy Bond 498,126,507 469,242,621 Multistrategy Bond 671,701,035 655,613,680
</TABLE>
WRITTEN OPTIONS CONTRACTS: Fund transactions in written options contracts
for the ten months ended October 31, 2000 and the year ended December 31,
1999 were as follows:
<TABLE>
<CAPTION>
DIVERSIFIED BOND MULTISTRATEGY BOND
NOTIONAL VALUE (1) PREMIUMS NOTIONAL VALUE (1) PREMIUMS
(000) RECEIVED (000) RECEIVED
------------------ ------------ ------------------ ------------
<S> <C> <C> <C> <C>
Outstanding December 31, 1999 $ 15,082 $ 141,138 $ 20,624 $ 411,434
Opened 52,320 382,081 79,375 913,154
Closed (30,464) (273,135) (36,516) (443,118)
Exercised -- -- (14) (3,206)
Expired (5,723) (65,904) (12,610) (439,745)
------------ ------------ ------------- ------------
Outstanding October 31, 2000 $31,215 $184,180 $50,859 $438,519
============ ============ ============= ============
<CAPTION>
DIVERSIFIED BOND MULTISTRATEGY BOND
NOTIONAL VALUE (1) PREMIUMS NOTIONAL VALUE (1) PREMIUMS
(000) RECEIVED (000) RECEIVED
------------------ ------------ ------------------ ------------
<S> <C> <C> <C> <C>
Outstanding December 31, 1998 $ 11,700 $ 167,531 $ 16,700 $ 251,452
Opened 114,682 902,458 121,084 1,716,897
Closed (55,213) (585,406) (86,782) (902,523)
Exercised (3,950) (80,719) (7,900) (147,000)
Expired (52,137) (262,726) (22,478) (507,392)
------------------ ------------ ------------------ ------------
Outstanding December 31, 1999 $ 15,082 $141,138 $20,624 $411,434
================== ============ ================== ============
</TABLE>
(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. 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 the
Investment Company not presented herein). As of October 31, 2000,
$401,260,000 of the Money Market Fund's net assets represents investments by
these Funds and $335,901,000 represents the investments of other affiliated
Funds not presented herein.
237 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
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 total $54,363,591 and $3,732,052, respectively, for the
ten months ended October 31, 2000. These fees for the year ended December
31, 1999 were $58,283,253 and $4,077,273, respectively. 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.
<TABLE>
<CAPTION>
ANNUAL RATE ANNUAL RATE
-------------------------- --------------------------
ADVISOR ADMINISTRATOR ADVISOR ADMINISTRATOR
-------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C>
Diversified Equity 0.73% 0.05% Short Term Bond 0.45% 0.05%
Special Growth 0.90 0.05 Diversified Bond 0.40 0.05
Equity Income 0.75 0.05 Multistrategy Bond 0.60 0.05
Quantitative Equity 0.73 0.05 Tax-Managed Large Cap 0.70 0.05
International Securities 0.90 0.05 Tax-Managed Small Cap 0.98 0.05
Emerging Markets 1.15 0.05 Tax Exempt Bond 0.30 0.05
Real Estate Securities 0.80 0.05
</TABLE>
The Advisor has contractually agreed to waive up to the full amount of its
0.65% combined advisory and administrative fees for the Multistrategy Bond
Fund to the extent that Fund level expenses exceed 0.80% of the Fund's
average daily net assets through April 30, 2000. The total amount of the
waiver for the ten months ended October 31, 2000 and the year ended December
31 1999 were $166,373 and $327,074, respectively.
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 ten months ended October 31, 2000 and the
year ended December 31, 1999 were $388,516 and $18,535, respectively. There
were no reimbursements for the ten months ended October 31, 2000 and year
ended December 31, 1999.
Effective September 29, 2000 the Advisor has contractually agreed to waive
up to the full amount of its 0.50% combined advisory and administrative fees
for the Short Term Bond Fund, and to reimburse the Fund to the extent that
fund level expenses exceed 0.52% of the Fund's average daily net assets for
the month of October and thereafter on an annual basis. The total amount of
the waiver for the month ending October 31, 2000 was $51,875.
In accordance with the special servicing agreement entered into in February
1999 by the Advisor, the Fund of Funds (a group of five LifePoints and the
Tax-Managed Global Equity Fund which invest in a combination of Class S
shares of the Investment Company's portfolios) and the Funds listed below,
with the exception of the Equity Income Fund and the Tax-Exempt Bond Fund,
the "Underlying Funds" in which the Fund of Funds invest, expenses from the
operation of the Fund of Funds are borne by the Underlying Funds based on
each Underlying Fund's proportionate share of assets owned by the Fund of
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 Fund of Fund, the Advisor will
reimburse the respective Underlying Funds.
For the ten months ended October 31, 2000, the special servicing expense
charged to the Underlying Funds amounted to:
<TABLE>
<CAPTION>
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------------------------------- ---------------------------------------
AMOUNT AMOUNT
UNDERLYING FUNDS PAID UNDERLYING FUND PAID
---------------------------------------- ---------------------------------------
<S> <C> <C> <C>
Diversified Equity $220,932 Diversified Equity 135,935
Quantitative Equity 231,144 Quantitative Equit 137,369
International Securities 203,975 International Secu ties 123,933
Emerging Markets 57,465 Emerging Markets 30,586
Short Term Bond 53,514 Short Term Bond 35,722
Diversified Bond 121,266 Diversified Bond 80,328
Real Estate Securities 71,715 Real Estate Securities 45,435
Multistrategy Bond 115,837 Multistrategy Bond 71,281
Special Growth 90,045 Special Growth 54,910
Tax-Managed Large Cap 8,027
Tax-Managed Small Cap 8,027
</TABLE>
Notes to Financial Statements 238
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
CUSTODIAN: The Funds have entered into arrangements with their Custodian
whereby custody credits realized as a result of uninvested cash balances
were used to reduce a portion of the Funds' expenses. During the ten months
ended October 31, 2000 the Fund's custodian fees were reduced by the
following amounts under these arrangements:
<TABLE>
<S> <C> <C> <C>
Diversified Equity $ 14,591 Tax Exempt Bond $ 2,513
Special Growth 19,607 Short Term Bond 26,062
Equity Income 554 International Securities 10,277
Quantitative Equity 9,936 Emerging Markets 30,566
Diversified Bond 39,767 Real Estate Securities 4,303
Multistrategy Bond 33,029 Tax-Managed Large Cap 3,087
Tax-Managed Small Cap 1,334
</TABLE>
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. Total fees for the
Funds reported herein for the ten months ended October 31, 2000 and the year
ended December 31, 1999 were $123,994 and $94,578, respectively.
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 ten months ended October 31, 2000, and the year ended
December 31, 1999 were $8,610,832 and $9,753,462, respectively.
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. Amounts retained by Frank Russell Securities, Inc. for the
ten months ended October 31, 2000, and the year ended December 31, 1999 were
as follows:
October 31, 2000 December 31, 1999
---------------- -----------------
Diversified Equity $ 85,149 $ 248,110
Special Growth 64,554 35,351
Equity Income 26,939 90,000
Quantitative Equity 21,762 58,576
International Securities 358,827 220,903
Emerging Markets 241,637 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 $55,000 per year plus out-of-pocket
expenses. Total Trustee expenses for the ten months ended October 31, 2000
were $181,014, and were allocated to each Fund, where appropriate, on a pro
rata basis. Total expenses paid for the year ended December 31, 1999 were
$92,764 and were allocated to each Fund, where appropriate on a pro rata
basis.
239 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
5. FUND SHARE TRANSACTIONS
Share transactions for the ten months ended October 31, 2000 and the years
ended December 31, 1999 and December 31, 1998 were as follows:
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
------------------------------------- -----------------------------------
2000 1999 1998 2000 1999 1998
DIVERSIFIED EQUITY ---------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS C (a)
Proceeds from shares sold 197,825 283,102 -- $ 10,109 $15,432 $ --
Proceeds from reinvestment of distributions 7,426 24,102 -- 360 1,252 --
Payments for shares redeemed (48,986) (34,012) -- (2,517) (1,856) --
---------- ---------- ---------- -------- -------- --------
Net increase (decrease) 156,265 273,192 -- 7,952 14,828 --
---------- ---------- ---------- -------- -------- --------
CLASS E (b)
Proceeds from shares sold 189,781 184,280 123,298 9,750 9,964 5,595
Proceeds from reinvestment of distributions 7,099 23,961 5,378 349 1,251 257
Payments for shares redeemed (45,922) (145,404) (18,482) (2,334) (8,037) (892)
---------- ---------- ---------- -------- -------- --------
Net increase (decrease) 150,958 62,837 110,194 7,765 3,178 4,960
---------- ---------- ---------- -------- -------- --------
CLASS S
Proceeds from shares sold 6,923,099 8,172,792 9,507,360 354,896 440,700 448,918
Proceeds from reinvestment of distributions 654,758 2,438,734 1,274,778 32,100 127,171 59,999
Payments for shares redeemed (6,476,771) (8,318,075) (8,070,726) (333,224) (450,865) (384,259)
---------- ---------- ---------- -------- -------- --------
Net increase (decrease) 1,101,086 2,293,451 2,711,412 53,772 117,006 124,658
---------- ---------- ---------- -------- -------- --------
Total increase (decrease) 1,408,309 2,629,480 2,821,606 $ 69,489 $135,012 $129,618
---------- ---------- ---------- -------- -------- --------
SPECIAL GROWTH
CLASS C (a)
Proceeds from shares sold 98,773 130,681 -- $ 4,960 $ 5,765 $ --
Proceeds from reinvestment of distributions 3,788 7,607 -- 183 342 --
Payments for shares redeemed (15,961) (14,078) -- (795) (629) --
---------- ---------- ---------- -------- -------- --------
Net increase (decrease) 86,600 124,210 -- 4,348 5,478 --
---------- ---------- ---------- -------- -------- --------
CLASS E (b)
Proceeds from shares sold 100,328 96,481 98,025 5,103 4,107 4,008
Proceeds from reinvestment of distributions 3,272 6,816 5,154 159 308 203
Payments for shares redeemed (27,964) (134,930) (29,520) (1,411) (5,986) (1,255)
---------- ---------- ---------- -------- -------- --------
Net increase (decrease) 75,636 (31,633) 73,659 3,851 (1,571) 2,956
---------- ---------- ---------- -------- -------- --------
CLASS S
Proceeds from shares sold 3,413,882 5,069,523 6,148,876 174,926 222,630 275,513
Proceeds from reinvestment of distributions 314,496 743,772 617,896 15,527 34,121 25,944
Payments for shares redeemed (3,443,606) (5,387,701) (5,540,547) (177,146) (238,216) (242,340)
---------- ---------- ---------- -------- -------- --------
Net increase (decrease) 284,772 425,594 1,226,225 13,307 18,535 59,117
---------- ---------- ---------- -------- -------- --------
Total increase (decrease) 447,008 518,171 1,299,884 $ 21,506 $ 22,442 $ 62,073
========== ========== ========== ======== ======== ========
</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.
Notes to Financial Statements 240
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
-------------------------------------- -----------------------------------
2000 1999 1998 2000 1999 1998
EQUITY INCOME ----------- ----------- ----------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS C (a)
Proceeds from shares sold 12,816 37,194 -- $448 $1,522 $ --
Proceeds from reinvestment of distributions 171 1,899 -- 6 68 --
Payments for shares redeemed (11,688) (12,211) -- (404) (479) --
----------- ----------- ----------- -------- --------- --------
Net increase (decrease) 1,299 26,882 -- 50 1,111 --
----------- ----------- ----------- -------- --------- --------
CLASS E (b)
Proceeds from shares sold 11,622 20,927 22,270 407 855 940
Proceeds from reinvestment of distributions 294 2,209 547 10 81 21
Payments for shares redeemed (10,752) (12,573) (13,005) (370) (522) (543)
----------- ----------- ----------- -------- --------- --------
Net increase (decrease) 1,164 10,563 9,812 47 414 418
----------- ----------- ----------- -------- --------- --------
CLASS S
Proceeds from shares sold 1,077,300 1,558,390 2,229,736 37,308 62,668 93,208
Proceeds from reinvestment of distributions 49,815 487,753 512,914 1,665 18,019 20,629
Payments for shares redeemed (2,100,815) (3,052,584) (2,196,713) (72,406) (121,986) (91,318)
----------- ----------- ----------- -------- --------- --------
Net increase (decrease) (973,700) (1,006,441) 545,937 (33,433) (41,299) 22,519
----------- ----------- ----------- -------- --------- --------
Total increase (decrease) (971,237) (968,996) 555,749 $(33,336) $(39,774) $22,937
----------- ----------- ----------- -------- --------- --------
QUANTITATIVE EQUITY
CLASS C (a)
Proceeds from shares sold 208,443 312,907 -- $ 9,158 $ 14,227 $ --
Proceeds from reinvestment of distributions 7,290 29,988 -- 296 1,297 --
Payments for shares redeemed (41,533) (39,969) -- (1,834) (1,831) --
----------- ----------- ----------- -------- --------- --------
Net increase (decrease) 174,200 302,926 -- 7,620 13,693 --
----------- ----------- ----------- -------- --------- --------
CLASS E (b)
Proceeds from shares sold 201,200 98,189 135,230 8,969 4,483 5,167
Proceeds from reinvestment of distributions 4,356 20,011 7,335 180 868 292
Payments for shares redeemed (35,574) (117,457) (30,285) (1,568) (5,392) (1,234)
----------- ----------- ----------- -------- --------- --------
Net increase (decrease) 169,982 743 112,280 7,581 (41) 4,225
----------- ----------- ----------- -------- --------- --------
CLASS S
Proceeds from shares sold 7,964,248 10,418,764 10,401,417 350,749 468,516 411,247
Proceeds from reinvestment of distributions 688,453 3,368,265 1,801,116 28,459 146,301 71,013
Payments for shares redeemed (7,683,282) (10,546,550) (8,361,539) (339,916) (476,897) (332,333)
----------- ----------- ----------- -------- --------- --------
Net increase (decrease) 969,419 3,240,479 3,840,994 39,292 137,920 149,927
----------- ----------- ----------- -------- --------- --------
Total increase (decrease) 1,313,601 3,544,148 3,953,274 $ 54,493 $151,572 $154,152
=========== =========== =========== ======== ========= ========
</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.
241 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
----------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998
INTERNATIONAL SECURITIES --------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLASS C (a)
Proceeds from shares sold 99,230 107,715 -- $ 6,873 $ 6,967 $ --
Proceeds from reinvestment of distributions 4,154 4,664 -- 291 329 --
Payments for shares redeemed (14,645) (11,427) -- (1,007) (759) --
--------- --------- ---------- ---------- ---------- ---------
Net increase (decrease) 88,739 100,952 -- 6,157 6,537 --
--------- --------- ---------- ---------- ---------- ---------
CLASS E (b)
Proceeds from shares sold 95,935 45,491 59,331 6,553 2,885 3,346
Proceeds from reinvestment of distributions 2,649 3,442 588 187 245 35
Payments for shares redeemed (15,085) (47,879) (10,159) (1,024) (3,102) (591)
--------- --------- ---------- ---------- ---------- ---------
Net increase (decrease) 83,499 1,054 49,760 5,716 28 2,790
--------- --------- ---------- ---------- ---------- ---------
CLASS S
Proceeds from shares sold 4,547,192 4,491,720 5,496,045 317,087 289,151 326,448
Proceeds from reinvestment of distributions 428,653 642,480 171,775 30,263 45,572 10,072
Payments for shares redeemed (3,357,316) (5,502,727) (5,562,388) (234,553) (357,980) (329,404)
--------- --------- ---------- ---------- ---------- ---------
Net increase (decrease) 1,618,529 (368,527) 05,432 112,797 (23,257) 7,116
--------- --------- ---------- ---------- ---------- ---------
Total increase (decrease) 1,790,767 (266,521) 155,192 $ 124,670 $ (16,692) $ 9,906
========= ========= ========== ========== ========== =========
EMERGING MARKETS
CLASS C (a)
Proceeds from shares sold 140,959 147,290 -- $ 1,606 $ 1,466 $ --
Proceeds from reinvestment of distributions 228 45 -- 3 -- --
Payments for shares redeemed (28,302) (16,617) -- (319) (167) --
--------- --------- ---------- ---------- ---------- ---------
Net increase (decrease) 112,885 130,718 -- 1,290 1,299 --
--------- --------- ---------- ---------- ---------- ---------
CLASS E (b)
Proceeds from shares sold 288,875 852,482 4,558 3,222 8,575 38
Proceeds from reinvestment of distributions 1,435 1,091 -- 19 13 --
Payments for shares redeemed (103,971) (353,467) -- (1,246) (3,674) --
--------- --------- ---------- ---------- ---------- ---------
Net increase (decrease) 186,339 500,106 4,558 1,995 4,914 38
--------- --------- ---------- ---------- ---------- ---------
CLASS S
Proceeds from shares sold 13,110,992 14,900,682 22,508,124 150,574 140,982 221,964
Proceeds from reinvestment of distributions 131,179 281,096 188,272 1,688 2,639 2,070
Payments for shares redeemed (8,818,705) (15,483,258) (16,241,312) (100,976) (152,294) (149,675)
--------- --------- ---------- ---------- ---------- ---------
Net increase (decrease) 4,423,466 (301,480) 6,455,084 51,286 (8,673) 74,359
--------- --------- ---------- ---------- ---------- ---------
Total increase (decrease) 4,722,690 329,344 6,459,642 $ 54,571 $ (2,460) $74,397
========= ========= ========== ========== ========== =========
</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.
Notes to Financial Statements 242
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
------------------------------------ ------------------------------------
REAL ESTATE SECURITIES 2000 1999 1998 2000 1999 1998
CLASS C (a) ---------- ---------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Proceeds from shares sold 64,749 84,921 -- $ 1,594 $ 2,034 $ --
Proceeds from reinvestment of distributions 3,034 2,678 -- 76 59 --
Payments for shares redeemed (14,954) (9,550) -- (367) (227) --
---------- ---------- ---------- --------- --------- ----------
Net increase (decrease) 52,829 78,049 -- 1,303 1,866 --
---------- ---------- ---------- --------- --------- ----------
CLASS E (b)
Proceeds from shares sold 142,796 378,070 28,391 3,584 9,451 715
Proceeds from reinvestment of distributions 9,694 13,837 375 243 312 9
Payments for shares redeemed (117,101) (113,177) (6,530) (2,906) (2,588) (183)
---------- ---------- ---------- --------- --------- ----------
Net increase (decrease) 35,389 278,730 22,236 921 7,175 541
---------- ---------- ---------- --------- --------- ----------
CLASS S
Proceeds from shares sold 6,443,988 10,307,873 9,286,206 156,960 247,786 254,637
Proceeds from reinvestment of distributions 687,466 1,500,692 1,114,356 17,315 34,444 30,226
Payments for shares redeemed (7,381,200) (9,610,223) (6,759,461) (183,340) (227,746) (178,741)
---------- ---------- ---------- --------- --------- ----------
Net increase (decrease) (249,746) 2,198,342 3,641,101 (9,065) 54,484 106,122
---------- ---------- ---------- --------- --------- ----------
Total increase (decrease) (161,528) 2,555,121 3,663,337 $ (6,841) $ 63,525 $ 106,663
---------- ---------- ---------- --------- --------- ----------
SHORT-TERM BOND
CLASS C (a)
Proceeds from shares sold 22,477 104,488 -- $ 408 $1,907 $ --
Proceeds from reinvestment of distributions 1,599 1,225 -- 29 22 --
Payments for shares redeemed (31,409) (61,555) (571) (1,119) --
---------- ----------- ---------- --------- --------- ----------
Net increase (decrease) (7,333) 44,158 -- (134) 810 --
---------- ----------- ---------- --------- --------- ----------
Class E (c)
Proceeds from shares sold 116,497 550,310 -- 2,122 10,084 --
Proceeds from reinvestment of distributions 22,134 14,963 -- 401 271 --
Payments for shares redeemed (76,745) (84,513) -- (1,395) (1,538) --
---------- ----------- ---------- --------- --------- ----------
Net increase (decrease) 61,886 480,760 -- 1,128 8,817 --
---------- ----------- ---------- --------- --------- ----------
CLASS S
Proceeds from shares sold 6,650,792 12,497,701 6,088,176 120,544 229,357 112,707
Shares issued in connection with acquisition
of Volatility Constrained Bond Fund -- 8,934,738 -- -- 163,684 --
Proceeds from reinvestment of distributions 866,714 1,023,507 604,269 15,671 18,557 11,141
Payments for shares redeemed (9,120,589) (11,748,485) (5,088,094) (165,693) (214,600) (94,296)
---------- ----------- ---------- --------- --------- ----------
Net increase (decrease) (1,603,083) 10,707,461 1,604,351 (29,478) 196,998 29,552
---------- ---------- ---------- --------- --------- ----------
Total increase (decrease) (1,548,530) 11,232,379 1,604,351 $ (28,484) $ 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 September 22, 1998
(commencement of sale) to December 31, 1998.
243 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
-------------------------------------- --------------------------------------
DIVERSIFIED BOND 2000 1999 1998 2000 1999 1998
CLASS C (a) ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Proceeds from shares sold 153,720 229,269 -- $ 3,446 $ 5,279 $ --
Proceeds from reinvestment of distributions 9,351 4,803 -- 209 109 --
Payments for shares redeemed (50,119) (24,874) -- (1,116) (564) --
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) 112,952 209,198 -- 2,539 4,824 --
----------- ----------- ----------- ----------- ----------- -----------
CLASS E (b)
Proceeds from shares sold 108,553 143,481 155,188 2,439 3,337 3,757
Proceeds from reinvestment of distributions 7,766 9,869 6,059 174 226 146
Payments for shares redeemed (38,548) (186,265) (67,274) (863) (4,229) (1,615)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) 77,771 (32,915) 93,973 1,750 (666) 2,288
----------- ----------- ----------- ----------- ----------- -----------
CLASS S
Proceeds from shares sold 8,152,464 15,223,893 15,009,859 178,255 346,136 355,143
Proceeds from reinvestment of distributions 900,230 1,396,770 1,508,462 19,707 31,387 35,660
Payments for shares redeemed (12,206,800) (15,825,030) (11,474,358) (267,427) (356,343) (272,067)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) (3,154,106) 795,633 5,043,963 (69,465) 21,180 118,736
----------- ----------- ----------- ----------- ----------- -----------
Total increase (decrease) (2,963,383) 971,916 5,137,936 $ (65,176) $ 25,338 $ 121,024
=========== =========== =========== =========== =========== ===========
MULTISTRATEGY BOND
CLASS C (c)
Proceeds from shares sold 520,921 775,114 -- $ 4,950 $ 7,565 $ --
Proceeds from reinvestment of distributions 36,812 14,479 -- 350 139 --
Payments for shares redeemed (128,260) (85,733) -- (1,214) (826) --
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) 429,473 703,860 -- 4,086 6,878 --
----------- ----------- ----------- ----------- ----------- -----------
CLASS E (d)
Proceeds from shares sold 344,280 198,146 253,909 3,287 1,968 2,611
Proceeds from reinvestment of distributions 19,789 17,908 8,900 188 174 90
Payments for shares redeemed (63,444) (131,598) (4,393) (602) (1,294) (45)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) 300,625 84,456 258,416 2,873 848 2,656
----------- ----------- ----------- ----------- ----------- -----------
CLASS S
Proceeds from shares sold 17,206,474 23,568,739 22,246,273 162,990 231,504 228,942
Proceeds from reinvestment of distributions 2,083,567 2,582,271 3,444,172 19,762 25,159 35,248
Payments for shares redeemed (16,462,730) (21,484,524) (14,104,977) (156,218) (210,088) (145,116)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) 2,827,311 4,666,486 11,585,468 26,534 46,575 119,074
----------- ----------- ----------- ----------- ----------- -----------
Total increase (decrease) 3,557,409 5,454,802 11,843,884 $ 33,493 $ 54,301 $ 121,730
=========== =========== =========== =========== =========== ===========
</TABLE>
(a) Share transactions for Class C are for the period January 27, 1999
(commencement of sales) to December 31, 1999.
(b) Effective May 18, 1998, Class C was renamed Class E.
(c) Share transactions for Class C are for the period March 3, 1999
(commencement of sales) to December 31, 1999.
(d) Share transactions for Class E are for the period February 18, 1999
(commencement of sales) to December 31, 1999.
Notes to Financial Statements 244
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
--------------------------------------- --------------------------------------
TAX MANAGED LARGE CAP 2000 1999 1998 2000 1999 1998
CLASS C (a) ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Proceeds from shares sold 312,797 16,790 -- $ 6,423 $ 350 $ --
Proceeds from reinvestment of distributions 15 54 -- 1 1 --
Payments for shares redeemed (8,434) (2,291) -- (182) (48) --
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) 304,378 14,553 -- 6,242 303 --
----------- ----------- ----------- ----------- ----------- -----------
CLASS S
Proceeds from shares sold 9,157,756 12,066,862 10,018,318 $ 189,727 $ 237,975 $ 157,138
Proceeds from reinvestment of distributions 6,754 121,536 66,849 131 2,510 1,142
Payments for shares redeemed (3,579,786) (2,179,216) (1,253,400) (73,799) (43,064) (19,677)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) 5,584,724 10,009,182 8,831,767 116,059 197,421 138,603
----------- ----------- ----------- ----------- ----------- -----------
Total increase (decrease) 5,889,102 10,023,735 8,831,767 $ 122,301 $ 197,724 $ 138,603
=========== =========== =========== =========== =========== ===========
TAX MANAGED SMALL CAP
CLASS C (a)
Proceeds from shares sold 228,528 23,465 -- 2,584 240 --
Proceeds from reinvestment of distributions 43 -- -- -- -- --
Payments for shares redeemed (31,322) (2,761) -- (352) (29) --
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) 197,249 20,704 -- 2,232 211 --
----------- ----------- ----------- ----------- ----------- -----------
CLASS S (a)
Proceeds from shares sold 7,159,888 2,756,585 -- 81,153 27,852 --
Proceeds from reinvestment of distributions 2,801 -- -- 32 -- --
Payments for shares redeemed (400,912) (48,728) -- (4,519) (488) --
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) 6,761,777 2,707,857 -- 76,666 27,364 --
----------- ----------- ----------- ----------- ----------- -----------
Total increase (decrease) 6,959,026 2,728,561 -- $ 78,898 $ 27,575 $ --
=========== =========== =========== =========== =========== ===========
TAX EXEMPT BOND
CLASS C (b)
Proceeds from shares sold 22,332 34,719 -- $ 457 $ 722 $ --
Proceeds from reinvestment of distributions 740 320 -- 16 7 --
Payments for shares redeemed (8,822) (11,856) -- (181) (243) --
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) 14,250 23,183 -- 292 486 --
----------- ----------- ----------- ----------- ----------- -----------
CLASS E (c)
Proceeds from shares sold 64,102 292,005 -- 1,309 6,103 --
Proceeds from reinvestment of distributions 700 626 -- 15 13 --
Payments for shares redeemed (39,101) (153,223) -- (806) (3,153) --
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) 25,701 139,408 -- 518 2,963 --
----------- ----------- ----------- ----------- ----------- -----------
CLASS S
Proceeds from shares sold 3,231,422 4,520,673 3,941,290 66,192 95,714 83,966
Proceeds from reinvestment of distributions 169,294 211,531 140,598 3,473 4,417 2,994
Payments for shares redeemed (3,279,140) (4,689,527) (1,973,744) (67,442) (98,546) (42,054)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) 121,576 42,677 2,108,144 2,223 1,585 44,906
----------- ----------- ----------- ----------- ----------- -----------
Total increase (decrease) 161,527 205,268 2,108,144 $ 3,033 $ 5,034 $ 44,906
=========== =========== =========== =========== =========== ===========
</TABLE>
(a) Share transactions are for the period December 1, 1999 (commencement
of sales) to December 31, 1999.
(b) Share transactions for Class C are for the period January 27, 1999
(commencement of sales) to December 31, 1999.
(c) Share transactions for Class E are for the period September 11, 1998
(commencement of sales) to December 31, 1998.
245 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
6. LINE OF CREDIT
The Investment Company 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 Funds may borrow up to a
maximum of 10 percent of the value of their net assets under the agreement.
The agreement will expire December 30, 2000. The Fund did not have any
drawdowns for the ten months ended October 31, 2000 of the year ended
December 31, 1999.
7. DIVIDENDS
On November 1, 2000 and December 1, 2000, the Fund's declared the following
dividends from net investment income payable on November 6, 2000 and
December 6, 2000, to shareholders of record on November 2, 2000 and December
4, 2000, respectively.
<TABLE>
<CAPTION>
NOVEMBER 2000 DECEMBER 2000
------------- -------------
<S> <C> <C> <C>
Diversified Bond - Class C $ 0.1208 Diversified Bond - Class C $ 0.0975
Diversified Bond - Class E 0.1353 Diversified Bond - Class E 0.1109
Diversified Bond - Class S 0.1405 Diversified Bond - Class S 0.1154
Multistrategy Bond - Class C 0.0528 Multistrategy Bond - Class C 0.0427
Multistrategy Bond - Class E 0.0596 Multistrategy Bond - Class E 0.0484
Multistrategy Bond - Class S 0.0617 Multistrategy Bond - Class S 0.0504
Tax Exempt Bond - Class C 0.0673 Tax Exempt Bond - Class C 0.0603
Tax Exempt Bond - Class E 0.0812 Tax Exempt Bond - Class E 0.0702
Tax Exempt Bond - Class S 0.0867 Tax Exempt Bond - Class S 0.0745
</TABLE>
On December 7, 2000, the Fund's declared the following dividends from net
investment income payable on December 12, 2000 to shareholders of record on
December 8, 2000.
DECEMBER 2000
-------------
Diversified Bond - Class C $ 0.0962
Diversified Bond - Class E 0.1109
Diversified Bond - Class S 0.1155
Multistrategy Bond - Class C 0.0456
Multistrategy Bond - Class E 0.0517
Multistrategy Bond - Class S 0.0536
Tax Exempt Bond - Class C 0.0623
Tax Exempt Bond - Class E 0.0749
Tax Exempt Bond - Class S 0.0793
Short Term Bond - Class C 0.2479
Short Term Bond - Class E 0.2889
Short Term Bond - Class S 0.3008
Notes to Financial Statements 246
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
8. BENEFICIAL INTEREST
As of October 31, 2000, 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:
<TABLE>
<CAPTION>
% % % %
---------- --------- --------- --------
<S> <C> <C> <C> <C>
Diversified Equity - Class C 26.4
Diversified Equity - Class E 23.8 -- -- --
Special Growth - Class C 25.2 -- -- --
Equity Income - Class C 21.2 -- -- --
Equity Income - Class E 23.6 11.9 -- --
Quantitative Equity Class C 26.0 -- -- --
Quantitative Equity Class E 11.3 -- -- --
International Securities - Class C 33.0 -- -- --
International Securities - Class E 13.4 -- -- --
Emerging Markets - Class C 36.6 -- -- --
Emerging Markets - Class E 14.2 11.0 -- --
Emerging Markets - Class S 10.2 -- -- --
Real Estate Securities - Class C 39.5 -- -- --
Real Estate Securities - Class E 13.8 -- -- --
Real Estate Securities - Class S 16.4 -- -- --
Short Term Bond - Class E 36.6 -- -- --
Short Term Bond - Class S 14.9 -- -- --
Diversified Bond - Class C 56.7 -- -- --
Diversified Bond - Class E 16.5 -- -- --
Diversified Bond - Class S 14.8 14.1 -- --
Multistrategy Bond - Class C 43.2 -- -- --
Multistrategy Bond - Class S 11.6 -- -- --
Tax-Managed Large Cap - Class C 12.4 -- -- --
Tax-Managed Large Cap - Class S 18.7 16.5 -- --
Tax-Managed Small Cap - Class C 10.1 -- -- --
Tax-Managed Small Cap - Class S 27.9 -- -- --
Tax Exempt Bond - Class C 28.7 16.1 13.4 11.8
Tax Exempt Bond - Class E 16.5 10.8 -- --
Tax Exempt Bond - Class S 32.8 -- -- --
</TABLE>
247 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 Diversified Equity, Special
Growth, Equity Income, Quantitative Equity, International Securities, Emerging
Markets, Real Estate Securities, Short Term Bond, Diversified Bond,
Multistrategy Bond, Tax Exempt Bond, Tax-Managed Large Cap, and Tax-Managed
Small Cap (the "Funds")) at October 31, 2000, 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 accounting principles
generally accepted in the United States of America. 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 auditing standards
generally accepted in the United States of America, 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 October
31, 2000 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Seattle, Washington
December 15, 2000
Report of Independent Accountants 248
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
TAX INFORMATION
October 31, 2000 (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 October 31, 2000:
TOTAL LONG-TERM
CAPITAL GAINS
---------------
Diversified Equity $ 19,768,272
Special Growth 3,590,059
Equity Income 873,690
Quantitative Equity 19,727,054
International Securities 14,340,978
Of the dividends paid by the Tax Exempt Bond Fund from the net investment income
for the taxable year ended October 31, 2000, 100% were exempt interest dividends
which are tax exempt for purposes of regular federal income tax, and for
purposes of the federal alternative minimum tax.
Please consult a tax advisor for any questions about federal or state income tax
laws.
The Emerging Markets Fund and International Securities Fund paid foreign taxes
of $621,631 and $2,283,539, and recognized $3,966,698 and $21,937,414 of foreign
source income, respectively, during the taxable year ended October 31, 2000.
Pursuant to Section 853 of the Internal Revenue Code, the Emerging Markets Fund
and International Fund designates $.0156 and $.1339 per share of foreign taxes
paid and $.0998 and $1.2862 of gross income earned from foreign sources,
respectively, in the taxable year ended October 31, 2000.
249 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
Kristianne Blake
Lee C. Gingrich
Eleanor W. Palmer
Raymond P. Tennison, Jr.
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
Marsico Capital Management, LLC, Denver, CO
Peachtree Asset Management, Atlanta, GA
Sanford C. Bernstein & Co., Inc., New York, NY
Strong Capital Management, Inc. Menomonee Falls, WI
Suffolk Capital Management, Inc., New York, NY
Turner Investment Partners, Inc., Berwyn, PA
Westpeak Investment Advisors, L.P., Boulder, CO
SPECIAL GROWTH FUND
CapitalWorks Investment Partners, LLC, San Diego, CA
David J. Greene and Company, LLC, New York, NY
Delphi Management, Inc., Boston, MA
GlobeFlex Capital, L.P., San Diego, CA
Jacobs Levy Equity Management, Inc., Roseland, NJ
Sirach Capital Management, Inc., Seattle, WA
TimesSquare Capital Management, Inc., New York, NY
Westpeak Investment Advisors, L.P., Boulder, CO
EQUITY INCOME FUND
Barclays Global Fund Advisors, San Francisco, CA
Equinox Capital Management, LLC, New York, NY
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
Driehaus Capital Management, Inc., Chicago, IL
Fidelity Management Trust Company, Boston, MA
J.P. Morgan Investment Management, Inc., New York, NY
Marvin & Palmer Associates, Inc., Wilmington, DE
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 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 250
<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
Security Capital Global Capital Management Group, Inc., Chicago, IL
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
TAX EXEMPT BOND FUND
MFS Institutional Advisors, Inc., Boston, MA
Standish, Ayer & Wood, Inc., Boston, MA
TAX-MANAGED LARGE CAP FUND
J.P. Morgan Investment Management, Inc. New York, NY
TAX-MANAGED SMALL CAP FUND
Geewax, Terker & Co., Phoenixville, PA
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.
251 Manager, Money Managers and Service Providers
<PAGE>
[LOGO OF FRANK RUSSELL INVESTMENT COMPANY]
Frank Russell Investment Company
909 A Street
Tacoma, Washington 98402
253-627-7001
800-787-7354
Fax:253-591-3495
www.russell.com 36-08-019 (1000)
<PAGE>
-------------------
INSTITUTIONAL FUNDS
-------------------
FRANK RUSSELL INVESTMENT COMPANY
2000 Annual Report
CLASS E, I, AND Y SHARES
EQUITY I FUND
EQUITY II FUND
EQUITY III FUND
EQUITY Q FUND
INTERNATIONAL FUND
FIXED INCOME I FUND
FIXED INCOME III FUND
CLASS C, E, AND S SHARES
EMERGING MARKETS FUND
REAL ESTATE SECURITIES FUND
SHORT TERM BOND FUND
OCTOBER 31, 2000
[LOGO OF FRANK RUSSELL INVESTMENT COMPANY]
<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
OCTOBER 31, 2000
TABLE OF CONTENTS
Page
Letter to Our Clients .................................. 2
Equity I Fund .......................................... 3
Equity II Fund ......................................... 21
Equity III Fund ........................................ 41
Equity Q Fund .......................................... 55
International Fund ..................................... 71
Fixed Income I Fund .................................... 93
Fixed Income III Fund .................................. 115
Emerging Markets Fund .................................. 143
Real Estate Securities Fund ............................ 161
Short Term Bond Fund ................................... 171
Notes to Financial Statements .......................... 185
Report of Independent Accounts ......................... 199
Tax Information ........................................ 200
Manager, Money Managers and Service Providers .......... 201
FRANK RUSSELL INVESTMENT COMPANY - INSTITUTIONAL 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 as of April 1, 1995 is reported gross of
investment advisory fees. For periods thereafter, performance and yields are
reported net of investment advisory fees but gross of investment services fees,
descriptions of which can be obtained from the investment advisor. Investment
services fees and other account expenses will reduce performance (e.g., an
investment services fee of 0.2% off average managed assets will reduce a 10.0%
Semiannual return to 9.8%). The performance quoted represents past performance
and the investment return and principal value of an investment will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Investments in securities of non-US issuers and foreign currencies involve
investment risks different than those of US issuers; the Prospectus contains
further information and details regarding these risks. Russell Fund
Distributors, Inc., is the distributor of Frank Russell Investment Company.
<PAGE>
TO OUR CLIENTS
We are pleased to present the Frank Russell Investment Company 2000 Annual
Report. This report covers information on ten of the Funds and represents our
nineteenth 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 2000, 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 1999 we have implemented changes in our Funds' structure
which we believe will benefit current and potential investors. Class Y shares of
the Institutional Funds were opened for investment, and the LifePoints/(R)/
Funds added Class S shares during 2000. Additionally, the Tax-Managed Global
Equity Fund was opened for investment in January 2000, providing a diversified
asset-allocated product to compliment the existing tax-managed Russell funds.
Thank you for your continued confidence and investment with Frank Russell
Investment Company. We look forward to 2001 and continuing to earn your support.
Sincerely,
/s/ Lynn L. Anderson
Lynn L. Anderson.
Chairman of the Board
Frank Russell Investment Company
<PAGE>
EQUITY I FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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 three separate and distinct
investment styles.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
Dates Equity I - Class I++ Russell 1000(R)**
Inception* $ 10,000 $ 10,000
1991 $ 13,524 $ 13,659
1992 $ 14,785 $ 15,127
1993 $ 17,368 $ 17,515
1994 $ 18,117 $ 18,058
1995 $ 22,667 $ 22,935
1996 $ 27,935 $ 28,192
1997 $ 37,411 $ 37,168
1998 $ 43,392 $ 44,495
1999 $ 53,736 $ 55,878
2000 $ 55,961 $ 60,939
-------- --------
Total $314,897 $323,966
======== ========
Yearly periods ended October 31
<TABLE>
<CAPTION>
EQUITY I FUND - CLASS I EQUITY I FUND - CLASS Y ++++++
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
------------- --------- ---------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C>
1 Year $10,414 4.14% 1 Year $10,420 4.20%
5 Years $24,688 19.79%(S) 5 Years $24,701 19.80%(S)
10 Years $55,961 18.78%(S) 10 Years $55,991 18.78%(S)
<CAPTION>
EQUITY I FUND - CLASS E++++ RUSSELL 1000/(R)/ INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
------------- --------- ---------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C>
1 Year $10,391 3.91% 1 Year $10,906 9.06%
5 Years $24,597 19.70%(S) 5 Years $26,571 21.59%(S)
10 Years $55,755 18.73%(S) 10 Years $60,939 19.81%(S)
</TABLE>
3 Equity I Fund
<PAGE>
EQUITY I FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the ten months ended October 31, 2000, the Equity I Fund Class I, Class E
and Class Y shares lost 3.80%, 4.02% and 3.75%, respectively. This compared to a
gain of 0.28% for the Russell 1000/(R)/ Index.
The Fund's performance reflected the impact of both general stock market
transitions and Fund-specific manager changes implemented during the period.
During the first quarter of the year, active managers faced challenges from a
narrowly focused stock market that emphasized technology stocks at the expense
of most other sectors. During the last six months of the period, the market
trends reversed, ending with a value bias and a decidedly unfavorable climate
for technology. This reversal coupled with the Fund's new manager lineup, helped
produce solid late-period results.
PORTFOLIO HIGHLIGHTS
In a period that was highlighted by significant market volatility and sharp
switches in style and sector leadership, the Fund's structure was enhanced in
keeping with a changing market and index environment. After careful analysis, in
March 2000 the Fund's manager lineup was modified. Strong Capital Management, a
growth-stock manager with a mid-cap bias, and Turner Investment Partners, a
concentrated, large-cap growth manager were added to the Fund. Lincoln Capital
Management Company, a growth manager, and Trinity Investment Management Corp., a
value manager were terminated. At the same time, Barclays' assignment was
modified to focus more narrowly on value and eliminate midcap exposure, which
had become redundant under the new manager lineup. The Fund's manager structure
now includes a broader cap exposure on the growth side and a more diversified
value strategy.
The Fund trailed its benchmark during the first quarter as it felt the impact of
transition costs related to hiring the new managers. This effect on Fund results
also drove down performance through much of the remaining period. The last
several months of the period, however, provided a positive validation of the
changes implemented earlier in the year. Within the volatile Technology sector,
the Fund successfully de-emphasized personal computer and semiconductor stocks
such as Dell, Intel and Microsoft, while emphasizing rapidly growing Internet
infrastructure and fiber optics companies, such as Juniper, I2, and Integrated
Device Technology.
During the last three months of the period, the Fund's new manager lineup also
captured significant opportunity in both growth and value styles during the
stock market's unexpected switch from growth to value stocks. The Fund's late-
period positive performance reflected the potential benefits of broader cap
exposure in growth and a more diversified value strategy.
TOP TEN EQUITY HOLDINGS
(as a percent of Total Investments) October 31, 2000
General Electric Co. 3.8%
Cisco Systems, Inc. 2.6
Citigroup, Inc. 2.5
Exxon Mobil Corp. 1.9
Pfizer, Inc. 1.8
EMC Corp. 1.6
Merck & Co., Inc. 1.5
American International Group, Inc. 1.5
Sun Microsystems, Inc. 1.4
SBC Communications, Inc. 1.4
PORTFOLIO CHARACTERISTICS
October 31, 2000
Current P/E Ratio 23.7x
Portfolio Price/Book Ratio 4.71x
Market Capitalization - $-Weighted Average 109.65 Bil
Number of Holdings 698
MONEY MANAGERS STYLE
Alliance Capital Management L.P. Growth
Barclays Global Fund Advisors Market-Oriented
Equinox Capital Management, Inc. Value
Jacobs Levy Equity Management, Inc. Market-Oriented
Marsico Capital Management, LLC Growth
Peachtree Asset Management Market-Oriented
Sanford C. Bernstein & Co., Inc. Value
Strong Capital Management, Inc. Growth
Suffolk Capital Management, Inc. Market-Oriented
Turner Investment Partners, Inc. Growth
Westpeak Investment Advisors, LP Market-Oriented
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* Equity I Fund Class I assumes initial investment on November 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 $1.6
billion. The Russell 1000/(R)/ Index represents the universe of stocks
from which most active money managers typically select. The Russell
1000/(R)/ 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.
++++ 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.
++++++ Equity I Fund Class I performance has been linked with Class Y to provide
historical perspective.
(S) 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
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
COMMON STOCKS - 95.6%
AUTO AND TRANSPORTATION - 1.8%
Airborne Freight Corp. 1,000 10
AMR Corp. (a) 21,300 698
ArvinMeritor, Inc. 9,125 153
AutoNation, Inc. (a) 38,500 260
AutoZone, Inc. (a) 14,900 400
Bandag, Inc. 1,700 61
Burlington Northern, Inc. 48,870 1,298
CNF Transportation, Inc. 600 16
Continental Airlines, Inc. Class B (a) 39,400 2,069
Cooper Tire & Rubber Co. 9,400 103
Delphi Automotive Systems Corp. 23,217 364
Delta Air Lines, Inc. 72,600 3,430
Eaton Corp. 4,800 327
Expeditors International of
Washington, Inc. 1,000 52
FedEx Corp. (a) 16,000 750
Ford Motor Co. 172,382 4,503
GATX Corp. 2,200 93
General Motors Corp. 64,360 3,998
Genuine Parts Co. 5,410 115
Harley-Davidson, Inc. 13,900 670
Hertz Corp. Class A 2,200 72
Hunt (JB) Transportation
Services, Inc. 7,300 95
KLM Royal Dutch Airlines (a) 57,700 1,046
Lear Corp. (a) 54,900 1,496
Northwest Airlines Corp. Class A (a) 53,300 1,512
Ryder System, Inc. 13,900 275
Southwest Airlines Co. 2,300 66
Swift Transportation Co., Inc. (a) 1,300 18
Trinity Industries, Inc. 700 17
TRW, Inc. 2,400 101
UAL Corp. 62,730 2,380
Union Pacific Corp. 28,020 1,312
Visteon Corp. 6,159 108
----------
27,868
----------
CONSUMER DISCRETIONARY - 9.1%
Abercrombie & Fitch Co. Class A (a) 100 2
AC Nielsen Corp. (a) 8,100 194
Advo Systems, Inc. (a) 3,300 121
AT&T Corp. - Liberty Media Group
Class A (a) 467,867 8,422
Avon Products, Inc. 5,300 257
Banta Corp. 5,100 118
Bed Bath & Beyond, Inc. (a) 45,600 1,174
Best Buy Co. (a) 7,200 361
BJ's Wholesale Club, Inc. (a) 2,000 66
Black & Decker Corp. 34,300 1,291
Brinker International, Inc. (a) 8,900 349
Brunswick Corp. 18,700 363
Callaway Golf Co. 3,300 53
Carnival Corp. 300 7
Catalina Marketing Corp. (a) 2,700 106
CBRL Group, Inc. 3,800 68
Cendant Corp. (a) 53,100 637
Circuit City Stores - Circuit
City Group 5,100 68
Clear Channel
Communications, Inc. (a) 76,806 4,613
Convergys Corp. (a) 9,700 423
Costco Wholesale Corp. (a) 97,538 3,572
Darden Restaurants, Inc. 27,000 608
Diamond Technology
Partners, Inc. (a) 800 36
Disney (Walt) Co. 281,647 10,086
Dollar Tree Stores, Inc. (a) 26,200 1,023
Donnelley (R.R.) & Sons Co. 24,800 533
Eastman Kodak Co. 17,800 799
EchoStar Communications Corp.
Class A (a) 1,600 72
Energizer Holdings, Inc. (a) 10,533 208
Federated Department Stores, Inc. (a) 24,600 801
Fluor Corp. 6,300 221
Fortune Brands, Inc. 8,400 247
Four Seasons Hotels, Inc. 37,673 2,750
Gannett Co., Inc. 29,009 1,683
Gap, Inc. 7,900 204
Harcourt General, Inc. 4,200 235
Harrah's Entertainment, Inc. (a) 14,500 415
Hasbro, Inc. 5,200 56
Home Depot, Inc. (The) 284,808 12,247
Infinity Broadcasting Corp.
Class A (a) 13,800 459
Interpublic Group Cos., Inc. 5,400 232
JC Penney & Co., Inc. 2,400 28
Kelly Services, Inc. Class A 800 18
Kimberly-Clark Corp. 68,400 4,514
Kmart Corp. (a) 48,100 286
Knight-Ridder, Inc. 9,930 499
Kohl's Corp. (a) 218,760 11,854
Lancaster Colony Corp. 1,300 31
Learning Tree International, Inc. (a) 1,900 86
Limited, Inc. (The) 37,900 957
Linens 'N Things, Inc. (a) 70,600 2,171
Liz Claiborne, Inc. 9,100 387
Lowe's Cos., Inc. 52,240 2,387
May Department Stores Co. 36,400 956
Maytag Corp. 1,500 43
McDonald's Corp. 45,500 1,411
5 Equity I Fund
<PAGE>
EQUITY I FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
McGraw-Hill, Inc. 8,600 552
MGM Grand, Inc. 6,500 225
Neiman Marcus Group, Inc. (The)
Class A (a) 2,100 78
New York Times Co. Class A 114,500 4,208
Newell Rubbermaid, Inc. 8,000 154
NIKE, Inc. Class B 2,300 92
NTL, Inc. (a) 5,600 246
Office Depot, Inc. (a) 5,517 46
Omnicom Group, Inc. 24,356 2,247
PanAmSat Corp. (a) 1,300 43
Park Place Entertainment Corp. (a) 36,000 459
Payless ShoeSource, Inc. (a) 3,700 214
Penton Media, Inc. 2,300 70
Pier 1 Imports, Inc. 15,400 204
Pittston Brink's Group 5,700 90
Plantronics, Inc. (a) 6,300 287
Reebok International, Ltd. (a) 1,400 30
Robert Half International, Inc. (a) 48,700 1,485
Russell Corp. 800 13
Sabre Holdings, Corp. 7,800 261
Safeguard Scientifics, Inc. (a) 4,200 65
Saks, Inc. (a) 6,300 64
Sears Roebuck & Co. 53,326 1,585
Shaw Industries, Inc. 6,900 128
Sirius Satellite Radio, Inc. (a) 1,100 55
Stanley Works (The) 9,600 256
Starbucks Corp. (a) 700 31
Starwood Hotels & Resorts
Worldwide, Inc. 4,500 133
Target Corp. 38,490 1,063
Tiffany & Co. 85,450 3,648
Time Warner, Inc. 88,900 6,748
TJX Cos., Inc. 1,000 27
Toys "R" Us, Inc. (a) 17,800 306
Tribune Co. 48,200 1,786
Tricon Global Restaurants, Inc. (a) 2,500 75
Tupperware Corp. 7,500 128
United Stationers, Inc. (a) 3,700 111
UnitedGlobalCom, Inc. Class A (a) 1,700 54
Univision Communications, Inc.
Class A (a) 400 15
USA Networks, Inc. (a) 220,300 4,447
V.F. Corp. 1,000 27
Venator Group, Inc. (a) 4,600 65
Viacom, Inc. Class B (a) 206,556 11,748
Viad Corp. 1,800 38
Wal-Mart Stores, Inc. 283,924 12,883
Wallace Computer Services, Inc. 8,400 122
Wendy's International, Inc. 16,465 358
Westwood One, Inc. (a) 3,700 70
Whirlpool Corp. 9,400 409
Zale Corp. (a) 46,910 1,590
----------
139,847
----------
CONSUMER STAPLES - 4.7%
Albertson's, Inc. 13,383 317
Anheuser-Busch Cos., Inc. 184,736 8,452
Campbell Soup Co. 2,600 76
Clorox Co. (The) 60,000 2,678
Coca-Cola Co. (The) 46,617 2,815
Coca-Cola Enterprises, Inc. 300 6
Colgate-Palmolive Co. 56,100 3,296
ConAgra, Inc. 40,020 855
Coors (Adolph) Co. Class B 3,600 229
Delhaize America, Inc. 8,112 138
Dreyers Grand Ice Cream, Inc. 800 20
General Mills, Inc. 5,400 225
Gillette Co. (The) 9,100 317
Heinz (H.J.) Co. 79,380 3,329
IBP, Inc. 17,900 368
Interstate Bakeries Corp. 8,800 123
Keebler Foods Co. 5,800 235
Kroger Co. (The) (a) 108,200 2,441
McCormick & Co., Inc. 11,400 361
Nabisco Group Holdings Corp. 11,700 338
Nabisco Holdings Corp. Class A 2,100 114
Pepsi Bottling Group, Inc. (The) 52,441 1,816
PepsiCo, Inc. 233,100 11,291
Philip Morris Cos., Inc. 216,821 7,941
Procter & Gamble Co. 121,449 8,676
Quaker Oats Co. (The) 20,000 1,631
R.J. Reynolds Tobacco Holdings, Inc. 24,900 890
Ralston-Purina Group 35,500 861
Safeway, Inc. (a) 66,021 3,611
Sara Lee Corp. 17,913 386
Smithfield Foods, Inc. (a) 4,100 118
SuperValu, Inc. 13,100 201
SYSCO Corp. 38,000 1,983
Tyson Foods, Inc. Class A 11,500 129
Walgreen Co. 101,700 4,640
Winn-Dixie Stores, Inc. 20,500 395
Wrigley (Wm.), Jr. Co. 5,100 403
----------
71,705
----------
FINANCIAL SERVICES - 18.2%
Aetna, Inc. 13,900 804
Affiliated Managers Group, Inc. (a) 3,500 210
AFLAC, Inc. 26,700 1,951
Allmerica Financial Corp. 1,500 95
Allstate Corp. 78,300 3,152
Ambac Financial Group, Inc. 6,230 497
Equity I Fund 6
<PAGE>
EQUITY I FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
American Express Co. 144,597 8,676
American General Corp. 42,200 3,397
American International Group, Inc. 231,470 22,684
AmSouth Bancorp 19,400 270
AON Corp. 34,900 1,446
Apartment Investment & Management
Co. Class A (e) 9,600 439
Associates First Capital Corp. Class A 84,600 3,141
Astoria Financial Corp. 8,120 305
AXA Financial, Inc. 19,500 1,054
BancWest Corp. 1,200 25
Bank of America Corp. 226,194 10,871
Bank of New York Co., Inc. 55,000 3,166
Bank One Corp. 125,200 4,570
BB&T Corp. 21,000 669
Bear Stearns Companies Inc. (The) 16,483 999
Block (H&R), Inc. 2,900 103
Catellus Development Corp. (a)(e) 3,200 58
Charter One Financial, Inc. 49,190 1,128
Chase Manhattan Corp. 131,150 5,967
Chubb Corp. (The) 25,420 2,146
CIGNA Corp. 37,000 4,512
Cincinnati Financial Corp. 8,800 323
CIT Group, Inc. 25,100 438
Citigroup, Inc. 747,018 39,312
CNA Financial Corp. (a) 4,420 161
Colonial BancGroup, Inc. 4,300 38
Comerica, Inc. 9,400 567
Commerce Bancshares, Inc. 700 25
Compass Bancshares, Inc. 4,100 75
Concord EFS, Inc. (a) 21,500 887
Conseco, Inc. 51,100 355
Crescent Real Estate Equities, Inc. (e) 12,500 252
Dime Bancorp, Inc. 2,000 49
Donaldson, Lufkin & Jenrette, Inc. 4,900 440
Dow Jones & Co., Inc. 41,300 2,432
Duke-Weeks Realty Corp. (e) 14,000 332
Edwards (A.G.), Inc. 5,600 284
Equity Office Properties Trust (e) 14,607 440
Equity Residential Properties Trust (e) 1,400 66
Erie Indemnity Co. Class A 500 14
Everest Re Group, Ltd. 900 53
Federal Home Loan Mortgage Corp. 79,500 4,770
Federal National
Mortgage Association 169,400 13,044
Federated Investors, Inc. Class B 6,150 179
FelCor Lodging Trust, Inc. (e) 11,100 244
FINOVA Group, Inc. 3,700 9
First Data Corp. 30,600 1,534
First Tennessee National Corp. 1,300 30
First Union Corp. 47,700 1,446
Firstar Corp. 32,900 648
FleetBoston Financial Corp. 279,884 10,636
Franchise Finance Corp.
of America (e) 6,500 132
Franklin Resources, Inc. 73,700 3,157
Fulton Financial Corp. 2,540 56
Gallagher (Arthur J.) & Co. 2,000 126
General Growth Properties, Inc. (e) 800 24
Golden State Bancorp, Inc. 5,740 150
Golden West Financial Corp. 44,320 2,485
Goldman Sachs Group, Inc. 59,635 5,952
Greater Bay Bancorp 2,800 91
Greenpoint Financial Corp. 8,570 255
Hartford Financial Services
Group, Inc. (The) 52,500 3,908
Hibernia Corp. Class A 9,700 116
Household International, Inc. 61,000 3,069
Jefferson-Pilot Corp. 12,700 873
John Hancock Financial
Services, Inc. (a) 900 28
KeyCorp 48,113 1,188
Lehman Brothers Holdings, Inc. 119,885 7,733
Liberty Property Trust (e) 400 11
Lincoln National Corp. 55,200 2,670
Loews Corp. 16,520 1,502
Marsh & McLennan Cos., Inc. 36,395 4,759
Marshall & Ilsley Corp. 900 41
MBIA, Inc. 4,840 352
MBNA Corp. 221,200 8,309
Mellon Financial Corp. 63,600 3,069
Merrill Lynch & Co., Inc. 180,379 12,627
Metris Companies, Inc. 2,200 71
MGIC Investment Corp. 21,300 1,451
MONY Group, Inc. (The) 3,000 123
Moody's Corp. (a) 16,610 437
Morgan (J.P.) & Co., Inc. 25,800 4,270
Morgan Stanley Dean Witter & Co. 133,180 10,696
National City Corp. 51,560 1,102
National Commerce Bancorp 2,700 57
Nationwide Financial Services, Inc.
Class A 300 15
New Dun & Bradstreet Corp. (The) (a) 8,305 180
North Fork Bancorp, Inc. 4,000 81
Northern Trust Corp. 31,500 2,685
Old Kent Financial Corp. 3,265 90
Old Republic International Corp. 25,200 655
Paine Webber Group, Inc. 7,500 534
Paychex, Inc. 60,550 3,432
PMI Group, Inc. (The) 1,900 140
PNC Bank Corp. 53,100 3,551
Popular, Inc. 2,000 56
7 Equity I Fund
<PAGE>
EQUITY I FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Price (T. Rowe) & Associates, Inc. 16,000 748
Providian Financial Corp. 20,800 2,163
Radian Group, Inc. 4,200 298
Regions Financial Corp. 9,100 214
Reinsurance Group of America 700 26
SAFECO Corp. 8,570 207
SEI Corp. 2,900 263
Silicon Valley Bancshares (a) 7,300 337
Simon Property Group, Inc. (e) 8,900 199
SouthTrust Corp. 10,100 327
Sovereign Bancorp, Inc. 24,200 201
Spieker Properties, Inc. (e) 300 17
St. Paul Cos., Inc. 68,410 3,506
State Street Corp. 13,800 1,721
Stilwell Financial, Inc. 32,900 1,474
Summit Bancorp 6,830 256
SunTrust Banks, Inc. 13,500 659
TCF Financial Corp. 16,800 679
Torchmark Corp. 3,400 113
Transatlantic Holdings, Inc. 970 90
U.S. Bancorp 52,600 1,272
Union Planters Corp. 3,800 128
UnionBanCal Corp. 9,900 208
UnumProvident Corp. 34,300 969
USA Education, Inc. 11,100 620
Wachovia Corp. 5,500 297
Waddell & Reed Financial, Inc.
Class A 6,800 217
Washington Mutual, Inc. 81,115 3,569
Wells Fargo Co. 92,897 4,302
Wilmington Trust Corp. 200 11
XL Capital, Ltd. Class A 6,400 491
----------
279,309
----------
HEALTH CARE - 12.5%
Abbott Laboratories 216,210 11,419
Allergan, Inc. 2,900 244
ALZA Corp. (a) 30,000 2,428
American Home Products Corp. 98,350 6,245
Amgen, Inc. (a) 79,380 4,594
Bard (C.R.), Inc. 3,400 142
Bausch & Lomb, Inc. 3,500 135
Baxter International, Inc. 116,769 9,597
Becton, Dickinson & Co. 82,000 2,747
Bergen Brunswig Corp. Class A 14,100 128
Boston Scientific Corp. (a) 18,500 295
Bristol-Myers Squibb Co. 176,710 10,768
Cardinal Health, Inc. 70,700 6,699
Covance, Inc. (a) 2,800 24
DENTSPLY International, Inc. 9,000 312
Elan Corp. PLC - ADR (a) 91,000 4,726
First Health Group Corp. (a) 2,500 97
Forest Labs, Inc. (a) 28,811 3,817
Foundation Health Systems, Inc. (a) 14,700 297
Genentech, Inc. (a) 121,510 10,025
Genzyme Corp. (a) 1,900 135
Gilead Sciences, Inc. (a) 1,300 112
Guidant Corp. (a) 47,056 2,491
HCA-The Healthcare Co. 125,880 5,027
HEALTHSOUTH Corp. (a) 10,500 126
Human Genome Sciences, Inc. (a) 12,800 1,131
Humana, Inc. (a) 14,570 177
ICOS Corp. (a) 700 36
Immunex Corp. (a) 100 4
IVAX Corp. (a) 49,550 2,155
Johnson & Johnson 187,546 17,278
Lilly (Eli) & Co. 15,500 1,385
McKesson HBOC, Inc. 15,300 429
Medtronic, Inc. 36,700 1,993
Merck & Co., Inc. 262,073 23,570
Millennium Pharmaceuticals, Inc. (a) 26,000 1,887
MiniMed, Inc. (a) 7,000 511
PacifiCare Health Systems, Inc. (a) 8,700 90
PE Corp. - PE Biosystems Group 31,400 3,674
Perrigo Co. (a) 5,100 33
Pfizer, Inc. 638,173 27,561
Pharmacia Corp. 110,580 6,082
Priority Healthcare Corp. Class B (a) 34,771 1,865
Quest Diagnostics, Inc. (a) 2,600 250
Schering-Plough Corp. 93,600 4,838
St. Jude Medical, Inc. (a) 17,300 952
Steris Corp. (a) 5,700 86
Stryker Corp. 5,500 259
SYNAVANT, Inc. (a) 645 3
Techne Corp. (a) 2,500 279
Tenet Healthcare Corp. 44,470 1,748
Trigon Healthcare, Inc. (a) 7,900 566
United Health Corp (a) 50,700 5,545
Universal Health Services, Inc.
Class B (a) 13,400 1,124
Varian Medical Systems, Inc. (a) 3,600 176
Watson Pharmaceuticals, Inc. (a) 15,200 951
Wellpoint Health Networks, Inc. (a) 27,300 3,193
----------
192,461
----------
INTEGRATED OILS - 3.8%
Amerada Hess Corp. 45,950 2,849
Ashland, Inc. 7,120 233
Burlington Resources, Inc. 8,200 295
Chevron Corp. 58,100 4,771
Coastal Corp. 27,500 2,075
Conoco, Inc. Class B 147,030 3,997
Equity I Fund 8
<PAGE>
EQUITY I FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Exxon Mobil Corp. 329,155 29,357
Helmerich & Payne, Inc. 3,700 116
Murphy Oil Corp. 4,200 243
Occidental Petroleum Corp. 71,700 1,425
Phillips Petroleum Co. 66,610 4,113
Texaco, Inc. 39,306 2,322
Unocal Corp. 75,900 2,590
USX-Marathon Group 143,700 3,907
----------
58,293
----------
MATERIALS AND PROCESSING - 3.3%
Air Products & Chemicals, Inc. 68,900 2,571
AK Steel Holding Corp. 3,000 28
Albemarle Corp. 8,100 188
Alcoa, Inc. 93,952 2,695
American Standard Cos., Inc. (a) 16,100 739
Archer-Daniels-Midland Co. 46,381 510
Barrick Gold Corp. 7,400 99
Bemis Co., Inc. 7,100 184
Boise Cascade Corp. 100 3
Bowater, Inc. 7,600 411
Centex Corp. 20,200 747
Dow Chemical Co. 129,488 3,966
du Pont (E.I.) de Nemours & Co. 88,800 4,029
Eastman Chemical Co. 10,700 459
Ecolab, Inc. 1,300 51
Engelhard Corp. 8,300 173
FMC Corp. (a) 2,000 152
Fort James Corp. 5,500 181
Freeport-McMoRan Copper & Gold,
Inc. Class B (a) 2,600 21
Georgia-Pacific Group 17,940 482
Granite Construction, Inc. 200 5
Harsco Corp. 2,700 55
Illinois Tool Works, Inc. 3,800 211
IMC Global, Inc. 10,400 135
International Paper Co. 23,684 867
Johns Manville Corp. 8,500 78
Kaufman & Broad Home Corp. 7,960 237
Lafarge Corp. 2,300 43
Longview Fibre Co. 3,000 41
Louisiana Pacific Corp. 5,600 48
Lyondell Petrochemical Co. 8,300 119
Masco Corp. 3,800 71
Minnesota Mining &
Manufacturing Co. 82,000 7,923
Nucor Corp. 5,500 191
PPG Industries, Inc. 6,400 286
Praxair, Inc. 76,860 2,863
Precision Castparts Corp. 8,800 332
Sherwin-Williams Co. 37,100 805
Sigma Aldrich Corp. 8,300 297
Smurfit-Stone Container Corp. (a) 2,500 34
Southdown, Inc. 100 7
Standard Register Co. 600 7
Timken Co. 8,100 114
Tyco International, Ltd. 271,093 15,368
Union Carbide Corp. 10,300 443
US Industries, Inc. 1,700 15
Waters Corp. (a) 15,700 1,139
Westvaco Corp. 24,500 698
Weyerhaeuser Co. 16,900 792
Willamette Industries, Inc. 7,700 279
----------
51,192
----------
OTHER ENERGY - 2.1%
AES Corp. (a) 49,140 2,776
Anadarko Petroleum Corp. 57,388 3,676
Apache Corp. 16,600 918
Baker Hughes, Inc. 16,400 564
BP Amoco PLC - ADR 63,484 3,234
Constellation Energy Group 9,100 379
Devon Energy Corp. 1,210 61
El Paso Energy Corp. 77,170 4,838
ENSCO International, Inc. 38,500 1,280
EOG Resources, Inc. 16,200 638
Flowserve Corp. 3,400 68
Halliburton Co. 4,000 148
Kerr-McGee Corp. 18,100 1,182
Mitchell Energy & Development
Corp. Class A 2,600 120
Nabors Industries, Inc. (a) 26,700 1,359
Noble Drilling Corp. (a) 6,300 262
Ocean Energy, Inc. (a) 8,500 118
Pioneer Natural Resources Co. (a) 3,000 39
R&B Falcon Corp. (a) 18,400 460
Rowan Cos., Inc. (a) 4,300 108
Schlumberger, Ltd. 5,400 411
Sempra Energy 45,900 950
Smith International, Inc. (a) 1,100 78
Sunoco, Inc. 12,380 371
Tosco Corp. 11,930 341
Transocean Sedco Forex, Inc. 57,800 3,063
TXU Corp. 76,040 2,818
Ultramar Diamond Shamrock Corp. 46,770 1,228
Valero Energy Corp. 10,100 334
Vintage Petroleum, Inc. 6,200 131
Weatherford International, Inc. (a) 800 29
----------
31,982
----------
9 Equity I Fund
<PAGE>
EQUITY I FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
PRODUCER DURABLES - 8.1%
Applied Materials, Inc. (a) 104,400 5,546
B.F. Goodrich Co. 20,440 837
Beckman Coulter, Inc. 2,800 196
Boeing Co. (The) 127,690 8,659
Caterpillar, Inc. 14,400 505
Celestica, Inc. (a) 45,270 3,254
Clayton Homes, Inc. 1,000 9
Cooper Industries, Inc. 3,660 140
Crane Co. 5,000 131
D.R. Horton, Inc. 10,137 188
Danaher Corp. 3,900 246
Deere & Co. 21,558 794
Dover Corp. 34,400 1,460
Emerson Electric Co. 103,600 7,608
General Dynamics Corp. 53,173 3,805
General Electric Co. 1,073,697 58,852
Honeywell International, Inc. 104,033 5,598
Ingersoll-Rand Co. 79,650 3,007
ITT Industries, Inc. 10,100 329
Johnson Controls, Inc. 11,400 680
Kennametal, Inc. 7,600 223
KLA Tencor Corporation (a) 3,700 125
Koninklijke (Royal) Philips
Electronics (a) 94,175 3,761
Lennar Corp. 8,000 257
Littlefuse, Inc. (a) 3,100 90
Litton Industries, Inc. (a) 5,360 278
Lockheed Martin Corp. 76,900 2,757
Mettler-Toledo International, Inc. (a) 3,600 168
Millipore Corp. 1,200 63
Molex, Inc. 1,550 84
Northrop Grumman Corp. 8,700 731
Pall Corp. 4,700 101
Parker-Hannifin Corp. 11,400 472
Pitney Bowes, Inc. 7,700 229
Plexus Corp. (a) 1,800 114
Pulte Corp. 6,580 219
Raytheon Co. Class B 6,800 232
Republic Services, Inc. (a) 4,800 65
Rockwell International Corp. 17,400 684
Sawtek, Inc. (a) 100 5
Solectron Corp. (a) 44,070 1,939
SPX Corp. (a) 600 74
Stewart & Stevenson Services, Inc. 4,900 117
Technitrol, Inc. 4,000 444
Tektronix, Inc. 3,100 221
Teradyne, Inc. (a) 1,800 56
Textron, Inc. 43,360 2,187
Thermo Electron Corp. (a) 750 22
United Technologies Corp. 93,800 6,548
Waste Management, Inc. 19,700 393
Xerox Corp. 11,000 92
----------
124,595
----------
TECHNOLOGY - 23.9%
3Com Corp. (a) 34,939 618
Adobe Systems, Inc. 38,573 2,932
Advanced Micro Devices, Inc. (a) 19,500 441
Agilent Technologies, Inc. (a) 6,593 305
Alliance Semiconductor Corp. (a) 3,000 60
Altera Corp. (a) 14,200 580
America Online, Inc. (a) 145,920 7,359
Analog Devices, Inc. (a) 83,180 5,407
Andrew Corp. (a) 4,000 105
Apple Computer, Inc. (a) 12,800 250
Applied Micro Circuits Corp. (a) 51,560 3,944
Arrow Electronics, Inc. (a) 63,300 2,026
At Home Corp. Series A (a) 3,700 38
Atmel Corp. (a) 113,400 1,687
Automatic Data Processing, Inc. 57,691 3,768
Avnet, Inc. 10,800 290
AVX Corp. 16,000 458
BEA Systems, Inc. (a) 65,390 4,688
Broadcom Corp. Class A (a) 10,670 2,372
Brocade Communications
Systems, Inc. (a) 32,720 7,440
Cabletron Systems, Inc. (a) 14,300 388
Cadence Design Systems, Inc. (a) 3,500 90
Check Point Software
Technologies, Ltd. (a) 22,150 3,508
CIENA Corp. (a) 59,120 6,211
Cisco Systems, Inc. (a) 747,015 40,245
CMGI, Inc. (a) 13,500 228
CNET Networks, Inc. (a) 62,000 1,949
Comdisco, Inc. 3,800 47
Commerce One, Inc. New (a) 2,600 167
COMPAQ Computer Corp. 167,562 5,096
Computer Associates
International, Inc. 126,700 4,039
Computer Sciences Corp. (a) 39,500 2,489
Comverse Technology, Inc. (a) 27,500 3,071
Corning, Inc. 174,801 13,372
Critical Path, Inc. (a) 31,700 1,537
Dell Computer Corp. (a) 21,600 636
DST Systems, Inc. (a) 7,200 444
EarthLink, Inc. (a) 110,846 724
Electronic Data Systems Corp. 56,700 2,661
EMC Corp. (a) 274,382 24,437
Exar Corp. (a) 3,200 143
Exodus Communications, Inc. (a) 5,700 191
Extreme Networks, Inc. (a) 300 25
Equity I Fund 10
<PAGE>
EQUITY I FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Fairchild Semiconductor Corp.
Class A (a) 24,300 512
Flextronics International, Ltd. (a) 148,256 5,624
Galileo International, Inc. 2,400 47
General Motors Corp. Class H (a) 23,491 761
GTECH Holdings Corp. (a) 7,600 132
Hewlett-Packard Co. 112,366 5,218
i2 Technologies, Inc. (a) 36,200 6,152
Ikon Office Solutions, Inc. 5,400 18
IMS Health, Inc. 11,300 267
Ingram Micro, Inc. Class A (a) 7,700 131
Insight Enterprises, Inc. (a) 500 16
Integrated Device Technology, Inc. (a) 21,600 1,216
Intel Corp. 194,476 8,739
International Business
Machines Corp. 125,512 12,363
International Game Technology (a) 11,200 410
Internet Capital Group, Inc. New (a) 6,100 80
Intuit, Inc. (a) 2,900 178
JDS Uniphase Corp. (a) 110,840 9,027
Juniper Networks, Inc. (a) 63,600 12,446
Keane, Inc. (a) 3,900 51
Kemet Corp. (a) 19,700 549
Lam Research Corp. (a) 55,000 1,059
Lattice Semiconductor Corp. (a) 71,100 2,080
Linear Technology Corp. 25,000 1,613
LSI Logic Corp. (a) 79,700 2,620
Lucent Technologies, Inc. 44,000 1,026
MarchFirst, Inc. (a) 10,100 59
Maxim Integrated Products, Inc. (a) 7,000 464
Mercury Interactive Corp. (a) 2,000 222
Metromedia Fiber Network, Inc.
Class A (a) 13,500 257
Microchip Technology, Inc. (a) 46,800 1,480
Micron Technology, Inc. (a) 44,100 1,532
Microsoft Corp. (a) 206,120 14,197
Motorola, Inc. 93,800 2,339
National Semiconductor Corp. (a) 5,200 135
NCR Corp. (a) 2,500 108
Network Appliance, Inc. (a) 35,260 4,196
New Focus, Inc. New (a) 200 13
Nortel Networks Corp. 295,124 13,428
Novell, Inc. (a) 2,900 26
ONI Systems Corp. New (a) 22,830 1,851
Oracle Systems Corp. (a) 471,674 15,565
Palm, Inc. New (a) 80,935 4,335
PeopleSoft, Inc. (a) 400 17
PerkinElmer, Inc. 2,900 347
PMC - Sierra, Inc. (a) 21,430 3,642
QUALCOMM, Inc. (a) 300 20
Quantum Corp. - DLT & Storage Systems (a) 10,700 161
Qwest Communications
International, Inc. (a) 116,591 5,669
RadioShack, Corp. 4,600 274
Rational Software Corp. (a) 5,200 310
Sandisk Corp. (a) 28,000 1,503
Sanmina Corp. (a) 30,050 3,435
SCI Systems, Inc. (a) 3,400 146
Seagate Technology (a) 9,400 657
Siebel Systems, Inc. (a) 68,830 7,223
Storage Technology Corp. (a) 4,600 45
Structural Dynamics Research
Corp. (a) 4,500 46
Sun Microsystems, Inc. (a) 195,264 21,638
SunGard Data Systems (a) 4,934 252
Sybase, Inc. (a) 3,500 73
Symantec Corp. (a) 42,400 1,654
Tech Data Corp. (a) 5,600 233
Texas Instruments, Inc. 23,500 1,153
Total Systems Services, Inc. 4,900 81
VeriSign, Inc. (a) 2,900 383
Veritas Software Corp. (a) 44,640 6,291
Verizon Communications 304,991 17,632
Vishay Intertechnology, Inc. (a) 20,550 617
Vitesse Semiconductor Corp. (a) 25,000 1,746
Xilinx, Inc. (a) 7,500 542
Yahoo!, Inc. (a) 37,500 2,195
----------
366,993
----------
UTILITIES - 8.1%
ADC Telecommunications, Inc. (a) 300 6
Adelphia Communications Corp. (a) 19,500 647
Allegheny Energy, Inc. 5,800 237
Alliant Energy Corp. 6,600 200
Alltel Corp. 12,600 812
Amdocs, Ltd. (a) 19,500 1,264
Ameren Corp. 17,160 682
American Electric Power Co., Inc. 16,980 705
AT&T Corp. 305,535 7,085
AT&T Wireless Group New (a) 151,800 3,786
BellSouth Corp. 149,700 7,232
BroadWing, Inc. (a) 58,000 1,639
C&D Technologies, Inc. 6,300 372
Cable Design Technologies Corp. (a) 3,700 85
Cablevision Systems Corp.
Class A (a) 3,000 224
Calpine Corp. (a) 47,870 3,779
Centennial Cellular Corp. Class A (a) 1,700 33
CenturyTel, Inc. 72,100 2,776
Cinergy Corp. 15,900 487
11 Equity I Fund
<PAGE>
EQUITY I FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Citizens Communications Co. (a) 12,500 181
Columbia Energy Group 2,800 201
Comcast Corp. Special Class A (a) 190,600 7,755
Consolidated Edison Inc. 14,200 500
Cox Communications, Inc. Class A (a) 6,200 273
Dominion Resources, Inc. 13,501 804
DPL, Inc. 10,300 292
DTE Energy Co. 6,500 235
Duke Energy Corp. 5,900 510
Dynegy, Inc. Class A 62,700 2,904
Edison International 12,200 291
Energy East Corp. 300 6
Enron Corp. 118,740 9,744
Entergy Corp. 18,230 698
Exelon Corp. (a) 14,963 900
FirstEnergy Corp. 63,800 1,651
Florida Progress Corp. 17,300 920
FPL Group, Inc. 34,900 2,303
GPU, Inc. 13,720 454
KeySpan Corp. 14,400 507
Level 3 Communications, Inc. (a) 1,900 90
MCN Energy Group, Inc. 3,200 79
Nokia Corp. - ADR 130,405 5,575
Northeast Utilities 23,600 481
PG&E Corp. 134,660 3,627
Pinnacle West Capital Corp. 12,200 530
Powerwave Technologies, Inc. (a) 600 29
PPL Corp. 80,500 3,316
Public Service Enterprise Group, Inc. 25,100 1,042
Questar Corp. 4,000 108
RCN Corp. (a) 100 2
Redback Networks, Inc. 20,940 2,218
Reliant Energy, Inc. 37,510 1,550
SBC Communications, Inc. 365,555 21,088
SCANA Corp. 28,000 742
SCANA Corp. 1,000 27
SDL, Inc. (a) 16,960 4,396
Southern Co. 37,779 1,110
Southern Energy, Inc. New (a) 20,426 557
Sprint Corp. (Fon Group) 56,200 1,433
Sprint Corp. (PCS Group) (a) 29,000 1,106
Telephone & Data Systems, Inc. 4,200 443
TyCom, Ltd. New (a) 5,700 191
UtiliCorp United, Inc. 6,790 180
Viacom, Inc. Class A (a) 1,300 74
Vodafone Group PLC - ADR 124,000 5,278
West TeleServices Corp. (a) 900 22
Western Resources, Inc. 3,800 81
Williams Cos. (The) 43,700 1,827
Wisconsin Energy Corp. 21,100 397
WorldCom, Inc. (a) 124,698 2,954
Xcel Energy, Inc. 39,455 1,008
----------
124,741
----------
TOTAL COMMON STOCKS
(cost $1,218,612) 1,468,986
----------
PRINCIPAL
AMOUNT
(000)
$
-----------
SHORT-TERM INVESTMENTS - 5.6%
Frank Russell Investment Company Money
Market Fund, due on demand (b) 76,415 76,415
United States Treasury Bills (b)(c)(d)
5.925% due 12/21/00 4,500 4,463
5.940% due 12/21/00 5,000 4,959
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $85,837) 85,837
----------
TOTAL INVESTMENTS - 101.2%
(identified cost $1,304,449) 1,554,823
OTHER ASSETS AND LIABILITIES,
NET - (1.2%) (18,095)
----------
NET ASSETS - 100.0% 1,536,728
==========
(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 as yield-to-maturity from date of acquisition.
(e) Real Estate Investment Trust (REIT).
Abbreviations:
ADR - American Depositary Receipt
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
October 31, 2000
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
FUTURES CONTRACTS CONTRACTS (000)
----------- ----------------
S&P 500 Index
expiration date 12/00 208 $ (1,037)
S&P Midcap 400 Index
expiration date 12/00 69 236
----------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ (801)
================
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
Amounts in thousands (except per share amounts) October 31, 2000
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments at market (identified cost $1,304,449) ...................................... $ 1,554,823
Cash ..................................................................................... 2,979
Receivables:
Dividends ............................................................................... 1,199
Investments sold ........................................................................ 31,922
Fund shares sold ........................................................................ 1,288
Daily variation margin on futures contracts ............................................. 1,810
Prepaid expenses ......................................................................... 12
-----------
Total assets .......................................................................... 1,594,033
LIABILITIES
Payables:
Investments purchased ................................................... $ 53,950
Fund shares redeemed .................................................... 2,377
Accrued fees to affiliates .............................................. 851
Other accrued expenses .................................................. 127
-----------
Total liabilities ..................................................................... 57,305
-----------
NET ASSETS ............................................................................... $ 1,536,728
===========
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) .................................................... $ 155,601
Unrealized appreciation (depreciation) on:
Investments ............................................................................. 250,374
Futures contracts ....................................................................... (801)
Shares of beneficial interest ............................................................ 436
Additional paid-in capital ............................................................... 1,131,118
-----------
NET ASSETS ............................................................................... $ 1,536,728
===========
NET ASSET VALUE, offering and redemption price per share:
Class E ($43,170,867 divided by 1,226,118 shares of $.01 par value
shares of beneficial interest outstanding) ........................................... $ 35.21
===========
Class I ($1,456,456,308 divided by 41,367,734 shares of $.01 par value
shares of beneficial interest outstanding) ........................................... $ 35.21
===========
Class Y ($37,100,514 divided by 1,053,623 shares of $.01 par value
shares of beneficial interest outstanding) ........................................... $ 35.21
===========
</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
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Dividends ........................................................ $ 13,682 $ 17,335
Dividends from Money Market Fund ................................. 4,011 3,418
Interest ......................................................... 385 401
--------- ---------
Total investment income ........................................ 18,078 21,154
--------- ---------
EXPENSES
Advisory fees .................................................... 7,419 8,157
Administrative fees .............................................. 668 748
Custodian fees ................................................... 637 620
Transfer agent fees .............................................. 386 497
Professional fees ................................................ 76 40
Registration fees ................................................ 83 114
Shareholder servicing fees - Class E ............................. 95 60
Trustees' fees ................................................... 11 5
Miscellaneous .................................................... 89 116
--------- ---------
Expenses before reductions ....................................... 9,464 10,357
Expense reductions ............................................... (26) --
--------- ---------
Expenses, net .................................................. 9,438 10,357
--------- ---------
Net investment income ............................................. 8,640 10,797
--------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ...................................................... 42,346 253,148
Futures contracts ................................................ (122) 11,105
Foreign currency-related transactions ............................ (6) (1)
--------- ---------
42,218 264,252
--------- ---------
Net change in unrealized appreciation (depreciation) on:
Investments ...................................................... (105,375) (9,387)
Futures contracts ................................................ (6,165) 3,606
Foreign currency-related transactions ............................ 6 (3)
--------- ---------
(111,534) (5,784)
--------- ---------
Net realized and unrealized gain (loss) .......................... (69,316) 258,468
--------- ---------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ............. $ (60,676) $ 269,265
========= =========
</TABLE>
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
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income .............................................. $ 8,640 $ 10,797 $ 10,430
Net realized gain (loss) ........................................... 42,218 264,252 122,357
Net change in unrealized appreciation (depreciation) ............... (111,534) (5,784) 155,425
----------- ----------- -----------
Net increase (decrease) in net assets from operations ............ (60,676) 269,265 288,212
----------- ----------- -----------
DISTRIBUTIONS
From net investment income
Class E .......................................................... (178) (121) --
Class I .......................................................... (7,640) (11,264) (10,494)
Class Y .......................................................... (212) -- --
From net realized gain
Class E .......................................................... (852) (4,447) --
Class I .......................................................... (28,217) (154,221) (92,776)
----------- ----------- -----------
Net decrease in net assets from distributions .................. (37,099) (170,053) (103,270)
----------- ----------- -----------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ...... (47,564) 201,151 60,389
----------- ----------- -----------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ......................... (145,339) 300,363 245,331
NET ASSETS
Beginning of period ................................................ 1,682,067 1,381,704 1,136,373
----------- ----------- -----------
End of period ...................................................... $ 1,536,728 $ 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
each period and other performance information derived from the financial
statements.
2000* 1999**
--------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD ................ $ 37.51 $ 38.01
--------- ---------
INCOME FROM OPERATIONS
Net investment income (a) ......................... .11 .13
Net realized and unrealized gain (loss) ........... (1.64) 3.11
--------- ---------
Total income from operations ..................... (1.53) 3.24
--------- ---------
DISTRIBUTIONS
From net investment income ......................... (.14) (.12)
From net realized gain ............................. (.63) (3.62)
--------- ---------
Total distributions .............................. (.77) (3.74)
--------- ---------
NET ASSET VALUE, END OF PERIOD ...................... $ 35.21 $ 37.51
========= =========
TOTAL RETURN (%)(b) ................................ (4.02) 8.97
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) .......... 43,171 49,284
Ratios to average net assets (%)(c):
Operating expenses ............................... .96 .95
Net investment income ............................ .38 .57
Portfolio turnover rate (%) ....................... 144.37 111.56
* For the ten months ended October 31, 2000.
** 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) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are 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,
----------------------------------------------------------
2000* 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD .............. $ 37.46 $ 35.17 $ 30.51 $ 30.34 $ 28.00 $ 23.32
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM OPERATIONS
Net investment income (a) ........................ .19 .27 .27 .34 .42 .52
Net realized and unrealized gain (loss) .......... (1.63) 6.18 7.10 8.89 5.96 7.71
---------- ---------- ---------- ---------- ---------- ----------
Total income from operations ................... (1.44) 6.45 7.37 9.23 6.38 8.23
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS
From net investment income ....................... (.18) (.28) (.27) (.34) (.42) (.52)
From net realized gain ........................... (.63) (3.88) (2.44) (8.72) (3.62) (3.03)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions ............................ (.81) (4.16) (2.71) (9.06) (4.04) (3.55)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD .................... $ 35.21 $ 37.46 $ 35.17 $ 30.51 $ 30.34 $ 28.00
========== ========== ========== ========== ========== ==========
TOTAL RETURN (%)(b)(c) ............................ (3.80) 18.98 25.10 32.02 23.58 35.94
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ......... 1,456,456 1,632,783 1,381,704 1,136,373 961,953 751,497
Ratios to average net assets (%)(c)(d):
Operating expenses ............................. .69 .69 .70 .70 .71 .59
Net investment income .......................... .64 .72 .82 .96 1.38 1.91
Portfolio turnover rate (%) ...................... 144.37 111.56 100.68 110.75 99.51 92.04
</TABLE>
* For the ten months ended October 31, 2000.
(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) For periods prior to April 1, 1995, Fund performance, operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net of
investment management fees but gross of any investment service fees. See
Note 4.
(d) The ratios for periods less than one year are annualized.
Equity I Fund 18
<PAGE>
EQUITY I FUND
FINANCIAL HIGHLIGHTS - CLASS Y
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
2000*
---------
NET ASSET VALUE, BEGINNING OF PERIOD .............................. $ 36.90
---------
INCOME FROM OPERATIONS
Net investment income (a) ....................................... .14
Net realized and unrealized gain (loss) ......................... (1.64)
---------
Total income from operations ................................... (1.50)
---------
DISTRIBUTIONS
From net investment income ....................................... (.19)
---------
NET ASSET VALUE, END OF PERIOD .................................... $ 35.21
=========
TOTAL RETURN (%)(b) .............................................. (4.03)
RATIOS SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ........................ 37,101
Ratios to average net assets (%)(c):
Operating expenses, net ........................................ .62
Operating expenses, gross ...................................... .67
Net investment income .......................................... .65
Portfolio turnover rate (%) ..................................... 144.37
* For the period March 29, 2000 (commencement of sale) to October 31, 2000.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
19 Equity I Fund
<PAGE>
EQUITY II FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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 eight small capitalization stock fund managers with three
separate and distinct investment styles.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
DATES EQUITY II - CLASS I++ RUSSELL 2500(TM)**
Inception* $ 10,000 $ 10,000
1991 $ 15,313 $ 15,765
1992 $ 16,521 $ 17,516
1993 $ 21,289 $ 22,388
1994 $ 21,680 $ 22,797
1995 $ 25,538 $ 27,668
1996 $ 30,918 $ 32,867
1997 $ 40,606 $ 42,438
1998 $ 37,033 $ 39,171
1999 $ 44,108 $ 46,222
2000 $ 55,861 $ 56,979
-------- --------
Total $318,866 $333,811
======== ========
Yearly periods ended October 31
<TABLE>
<CAPTION>
EQUITY II FUND - CLASS I EQUITY II FUND - CLASS Y ++++++
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
------------- --------- ------ ------------- --------- ------
<S> <C> <C> <C> <C> <C>
1 Year $12,664 26.64% 1 Year $12,669 26.69%
5 Years $21,874 16.92%(S) 5 Years $21,882 16.93%(S)
10 Years $55,861 18.75%(S) 10 Years $55,881 18.76%(S)
<CAPTION>
EQUITY II FUND - CLASS E ++++ RUSSELL 2500(TM) INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
------------- --------- ------ ------------- --------- ------
<S> <C> <C> <C> <C> <C>
1 Year $12,626 26.26% 1 Year $12,327 23.27%
5 Years $21,792 16.84%(S) 5 Years $20,593 15.54%(S)
10 Years $55,861 18.71%(S) 10 Years $56,979 19.01%(S)
</TABLE>
21 Equity II Fund
<PAGE>
EQUITY II FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the ten months ended October 31, 2000, the total returns for the Equity II
Fund Class I, Class E and Class Y shares were 9.73%, 9.49%, and 9.73%,
respectively. This compares favorably with the Russell 2500/(TM)/ Index, which
gained 5.26% for the same period.
PORTFOLIO HIGHLIGHTS
An extremely narrow market characterized the first quarter of the year, with
much of the performance generated by a small universe of stocks across several
sectors. Due to the Fund's broadly diversified investment strategy, this
environment proved to be particularly challenging. However, the Fund's approach
was rewarded during the last six months of the fiscal period, as the markets
finally broadened, although frequently changing favor between value and growth
styles. The volatility associated with this style leadership rotation was, in
part, mitigated by the Fund's strategic diversification.
A 50 basis point interest rate increase from the Federal Reserve Board (the Fed)
in May increased investor concerns, and dealt a particularly harsh blow to
technology and telecommunications stocks. While the interest rate hike was the
Fed's final increase for the period, technology and telecommunications issues
maintained their high volatility and generally performed poorly through the end
of October. The Fund's diversification, which included an overweight allocation
to the Energy sector during that period, helped offset some of the disappointing
Technology stock returns.
The Fund's managers, particularly those with a growth-style mandate, showed a
strong mid-cap bias during the last three months of the period. This made a
positive contribution to returns, as most of this period's earnings strength
occurred within mid-cap equities. The mid-cap bias was based on stock
fundamentals rather than a long-term, tactical bias toward mid cap issues, and
the Fund's managers ended the fiscal period with what appeared to be a shift
toward smaller cap issues.
During the ten months of the period, the Fund's investment managers were
realigned. In March, CapitalWorks, a manager with a focus on higher growth and
higher valuations was retained. This move helped eliminate any inadvertent bets
against the higher growth segment of the market. Subsequently, during the second
quarter, the Fund's returns were boosted as CapitalWorks outperformed. At the
same time, the Fund terminated Wellington, as their portfolio fell below the
market cap of the Russell 2500/(TM)/ Index.
During the final two months of the period, David J. Greene and Co., a small-cap
value manager, was added to the Fund's lineup. Greene's concentrated stock
picking strategy is complimentary to the other two value managers, Jacobs Levy
Equity Management, Inc. and Delphi Management, Inc. Within the growth segment of
the Fund, Fiduciary Trust International was replaced with TimesSquare Capital
Management, Inc. subsequent to Fiduciary's investment team transitioning to
TimesSquare.
TOP TEN EQUITY HOLDINGS
(as a percent of Total Investments) October 31, 2000
Pepsi Bottling Group, Inc. (The) 0.7%
Radian Group, Inc. 0.7
DST Systems, Inc. 0.6
HEALTHSOUTH Corp. 0.6
Foundation Health Systems, Inc. 0.6
Charter Communications Holdings, Inc. 0.5
Paychex, Inc. 0.5
International Game Technology 0.5
R.J. Reynolds Tobacco Holdings, Inc. 0.4
Harris Corp. 0.4
PORTFOLIO CHARACTERISTICS
October 31, 2000
Current P/E Ratio 16.3x
Portfolio Price/Book Ratio 2.6x
Market Capitalization - $-Weighted Average 3.37 Bil
Number of Holdings 983
MONEY MANAGERS STYLES
CapitalWorks Investment Partners, LLC Growth
David J. Greene & Co., LLC Value
Delphi Management, Inc. Value
GlobeFlex Capital, L.P. Market-Oriented
Jacobs Levy Equity Management, Inc. Value
Sirach Capital Management, Inc. Growth
TimesSquare Capital Management, Inc. Growth
Westpeak Investment Advisors, L.P. Market-Oriented
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* Equity II Fund Class I assumes initial investment on November 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 $4.0
billion. The Russell 2500/(TM)/ 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.
++++ 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.
++++++ Equity II Fund Class I performance has been linked with Class Y to
provide historical perspective.
(S) 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 22
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
COMMON STOCKS - 93.2%
AUTO AND TRANSPORTATION - 2.9%
American Axle & Manufacturing
Holdings, Inc. (a) 4,000 50
American Freightways Corp. (a) 47,900 769
Arkansas Best Corp. (a) 10,400 166
AutoNation, Inc. (a) 74,000 500
AutoZone, Inc. (a) 66,000 1,770
Avis Rent A Car, Inc. (a) 7,900 236
Bandag, Inc. 4,400 157
C.H. Robinson Worldwide, Inc. 28,100 1,537
Continental Airlines, Inc. Class B (a) 4,500 236
Cooper Tire & Rubber Co. 22,500 246
Dana Corp. 7,800 173
Dollar Thrifty Automotive
Group, Inc. (a) 48,200 741
Dura Automotive Systems, Inc. (a) 10,700 90
EGL, Inc. New (a) 4,400 125
Expeditors International of
Washington, Inc. 35,800 1,850
FedEx Corp. (a) 35,000 1,640
Fleetwood Enterprises, Inc. 7,400 98
GATX Corp. 27,400 1,153
Goodyear Tire & Rubber Co. 7,800 144
Lear Corp. (a) 7,300 199
Mesa Airlines, Inc. (a) 102,400 595
Monaco Coach Corp. (a) 12,500 213
Navistar International Corp. (a) 38,800 1,283
Newport News Shipbuilding, Inc. 21,700 1,067
Offshore Logistics, Inc. (a) 7,800 134
Polaris Industries, Inc. 13,400 466
Roadway Express, Inc. 5,900 120
Ryder System, Inc. 133,400 2,635
Skywest, Inc. 8,500 429
Sonic Automotive, Inc. (a) 27,900 249
Superior Industries International, Inc. 45,500 1,550
Thor Industries, Inc. 15,400 308
Tower Automotive, Inc. (a) 13,500 149
UAL Corp. 36,500 1,385
USFreightways Corp. 54,400 1,394
Visteon Corp. 5,400 96
Wabash National Corp. 15,600 125
Wabtec Corp. 51,200 518
Wisconsin Central Transportation
Corp. (a) 10,400 133
XTRA Corp. (a) 2,000 91
Yellow Corp. (a) 16,300 291
----------
25,111
----------
CONSUMER DISCRETIONARY - 13.6%
Aaron Rents, Inc. 9,000 151
Abercrombie & Fitch Co. Class A (a) 77,000 1,814
ABM Industries, Inc. 4,400 123
AC Nielsen Corp. (a) 4,700 113
Advo Systems, Inc. (a) 38,000 1,399
Agribrands International, Inc. (a) 2,100 91
American Greetings Corp. Class A 120,200 2,185
Anchor Gaming (a) 2,000 170
AnnTaylor Stores Corp. (a) 59,000 1,770
Apollo Group, Inc. Class A (a) 22,400 875
Applebee's International, Inc. 4,600 139
Argosy Gaming Co. (a) 55,400 900
Aztar Corp. (a) 59,100 894
Bacou USA, Inc. (a) 3,800 95
Banta Corp. 84,600 1,951
Barnes & Noble, Inc. (a) 6,500 123
Belo (A.H.) Corp. Class A 11,900 228
BJ's Wholesale Club, Inc. (a) 7,000 231
Black & Decker Corp. 4,200 158
Blockbuster Entertainment Corp. 1,300 12
Borders Group, Inc. (a) 6,600 92
Bowne & Co., Inc. 30,900 259
Brown Shoe Co., Inc. 6,300 62
Brunswick Corp. 91,400 1,777
Buckeye Technologies, Inc. (a) 25,300 433
Callaway Golf Co. 7,100 114
Career Education Corp. (a) 22,000 854
Catalina Marketing Corp. (a) 3,100 122
Cato Corp. Class A 9,300 111
CBRL Group, Inc. 34,100 607
CEC Entertainment, Inc. (a) 22,825 728
Charming Shoppes, Inc. (a) 28,600 172
Claire's Stores, Inc. 65,500 1,318
Coldwater Creek, Inc. (a) 4,400 130
Columbia Sportswear Co. (a) 8,000 338
Copart, Inc. (a) 10,700 161
Corporate Executive Board
Company, (The) (a) 48,000 2,214
Cox Radio, Inc. Class A (a) 14,600 332
Crestline Capital Corp. (a) 7,300 152
Darden Restaurants, Inc. 18,100 407
DeVry, Inc. (a) 61,900 2,286
Diamond Technology
Partners, Inc. (a) 33,900 1,515
Dollar Tree Stores, Inc. (a) 28,350 1,107
Dress Barn, Inc. (a) 10,900 273
Emmis Broadcasting Corp.
Class A (a) 35,000 934
23 Equity II Fund
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Energizer Holdings, Inc. (a) 6,500 128
Entercom Communications Corp. (a) 10,900 427
Extended Stay America, Inc. (a) 39,500 486
F.Y.I., Inc. (a) 16,700 669
Fairfield Communities, Inc. (a) 10,500 133
Federated Department Stores, Inc. (a) 47,100 1,534
Footstar, Inc. (a) 56,900 2,041
Furniture Brands International, Inc. (a) 49,300 832
Gemstar-TV Guide
International, Inc. (a) 9,700 664
Genesco, Inc. (a) 10,300 183
Genlyte Group, Inc. (The) (a) 5,000 126
Grey Global Group, Inc. 4,270 2,370
Guess?, Inc. (a) 5,500 41
Guitar Center, Inc. (a) 6,800 90
Handleman Co. (a) 12,700 125
Harman International Industries, Inc. 2,200 106
Harrah's Entertainment, Inc. (a) 8,300 238
Harte Hanks Communications 56,200 1,243
Haverty Furniture Co., Inc. 17,400 196
Hearst-Argyle Television, Inc. (a) 49,500 888
Hilton Hotels Corp. 18,300 174
Hispanic Broadcasting Corp. (a) 4,000 125
IHOP Corp. (a) 2,120 45
Information Holdings, Inc. (a) 2,700 70
Interpublic Group Cos., Inc. 42,250 1,814
Isle of Capri Casinos, Inc. (a) 5,500 60
Jones Apparel Group, Inc. (a) 6,700 186
K-Swiss, Inc. Class A 4,000 110
Kelly Services, Inc. Class A 6,400 142
Kenneth Cole Productions, Inc.
Class A 2,600 118
Knight-Ridder, Inc. 31,000 1,558
Lamar Advertising Co. Class A (a) 33,700 1,605
Landry's Seafood Restaurants, Inc. 25,100 202
Learning Tree International, Inc. (a) 19,200 865
Lee Enterprises, Inc. 39,500 1,091
Lexar Media, Inc. New (a) 166,600 1,229
Libbey, Inc. 5,300 144
Liz Claiborne, Inc. 2,600 111
Lone Star Steakhouse & Saloon 8,600 73
Mandalay Resort Group (a) 19,500 406
Manpower, Inc. 34,500 1,201
MAXIMUS, Inc. (a) 21,900 538
McClatchy Co. (The) Class A 45,200 1,718
McGraw-Hill, Inc. 35,000 2,246
Men's Wearhouse (The), Inc. (a) 23,000 673
Meredith Corp. 19,800 629
MGM Grand, Inc. 30,000 1,037
Michaels Stores, Inc. (a) 21,300 517
Modis Professional Services, Inc. (a) 72,000 297
MSC Industrial Direct Co., Inc.
Class A (a) 9,000 134
Musicland Stores Corp. (a) 19,100 155
Nautica Enterprises, Inc. (a) 6,800 85
Neiman Marcus Group, Inc. (The)
Class A (a) 23,700 880
Nu Skin Enterprises, Inc. Class A (a) 15,600 85
Oakley, Inc. (a) 39,400 827
On Assignment, Inc. (a) 86,400 2,176
Outback Steakhouse, Inc. (a) 25,800 735
Park Place Entertainment Corp. (a) 171,900 2,191
PC Connection, Inc. (a) 8,300 226
Penn National Gaming, Inc. (a) 6,800 117
Penton Media, Inc. 112,661 3,443
Phillips-Van Heusen Corp. 15,700 186
Pier 1 Imports, Inc. 172,000 2,279
Pinnacle Entertainment, Inc. (a) 27,300 623
Pittston Brink's Group 75,200 1,194
Playtex Products, Inc. (a) 83,700 847
Polo Ralph Lauren Corp. Class A (a) 56,700 1,113
Pomeroy Computer
Resources, Inc. (a) 4,000 70
Pre-paid Legal Services, Inc. (a) 79,300 3,479
Prime Hospitality Corp. (a) 27,900 265
R.H. Donnelley Corp. (a) 40,200 910
Radio One, Inc. New (a) 16,300 127
RARE Hospitality
International, Inc. (a) 7,200 167
Reader's Digest Association, Inc.
Class A 3,500 128
Reebok International, Ltd. (a) 7,300 157
Regis Corp. 7,500 113
Rent-A-Center, Inc. (a) 16,800 490
Robert Half International, Inc. (a) 26,500 808
Ross Stores, Inc. 80,400 1,060
Ruby Tuesday, Inc. 53,300 723
Russell Corp. 13,800 221
Ryan's Family Steak Houses, Inc. (a) 121,300 1,008
Sabre Holdings, Corp. 35,600 1,190
Saks, Inc. (a) 8,000 82
Salton, Inc. (a) 33,750 772
Scholastic Corp. (a) 13,200 1,053
School Specialty, Inc. (a) 3,800 57
Schultz Sav-o Stores, Inc. 63,750 701
SCP Pool Corp. (a) 3,900 100
Scripps (E.W.) Co. Class A 37,600 2,197
Skechers U.S.A., Inc. Class A New (a) 10,900 166
Spiegel, Inc. Class A 35,000 243
Springs Industries, Inc. 19,800 467
Stanley Works (The) 4,100 109
Equity II Fund 24
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Starwood Hotels & Resorts
Worldwide, Inc. 16,400 486
Station Casinos, Inc. (a) 6,750 109
Stein Mart, Inc. (a) 7,100 110
Sylvan Learning Systems, Inc. (a) 2,600 40
Talbots, Inc. 26,900 2,127
TETRA Technologies, Inc. (a) 55,700 1,932
Tiffany & Co. 60,900 2,600
Timberland Co. Class A (a) 20,400 1,053
TMP Worldwide, Inc. (a) 2,200 153
Topps Co., Inc. (a) 85,600 773
Toro Co. 12,800 448
Toys "R" Us, Inc. (a) 11,100 191
True North Communications, Inc. 21,300 803
Tupperware Corp. 4,000 69
Tweeter Home Entertainment Group,
Inc. New 12,300 295
United Natural Foods, Inc. (a) 9,400 117
United Stationers, Inc. (a) 53,900 1,614
United Television, Inc. 11,000 1,474
URS Corp. (a) 9,200 118
Valassis Communications, Inc. (a) 3,900 108
Valuevision International, Inc.
Class A (a) 3,800 77
Venator Group, Inc. (a) 82,000 1,158
Viad Corp. 42,400 906
Wackenhut Corp. (a) 2,300 29
Warnaco Group, Inc. Class A 12,600 33
Washington Post Co (The), Class B 3,700 1,975
Zale Corp. (a) 61,400 2,080
----------
116,461
----------
CONSUMER STAPLES - 3.5%
Alberto-Culver Co. Class A 58,500 1,623
Block Drug Co., Inc. Class A 38,739 2,027
Coca-Cola Bottling Co. Consolidated 24,500 870
Constellation Brands, Inc. Class A (a) 24,600 1,199
Coors (Adolph) Co. Class B 26,900 1,713
Dean Foods Co. 13,600 435
Dole Food Co., Inc. 37,700 455
Fleming Cos., Inc. 23,500 333
Hormel Foods Corp. 51,100 859
International Multifoods Corp. 15,800 268
Interstate Bakeries Corp. 60,600 848
Keebler Foods Co. 3,800 154
McCormick & Co., Inc. 7,600 241
Michael Foods, Inc. 4,800 129
Pathmark Stores, Inc. New (a) 3,200 50
Pepsi Bottling Group, Inc. (The) 183,500 6,355
Performance Food Group Co. (a) 10,300 412
R.J. Reynolds Tobacco Holdings, Inc. 107,300 3,836
Ralcorp Holdings, Inc. (a) 16,900 238
Robert Mondavi Corp. Class A (a) 5,100 227
Smithfield Foods, Inc. (a) 35,600 1,021
Suiza Foods Corp. (a) 53,100 2,459
SuperValu, Inc. 59,500 915
Tootsie Roll Industries, Inc. 44,404 1,704
Universal Corp. 19,500 546
Whitman Corp. 37,000 481
Whole Foods Market, Inc. (a) 4,600 212
----------
29,610
----------
FINANCIAL SERVICES - 16.7%
ACE, Ltd. 25,700 1,009
Advanta Corp. Class A 122,600 1,241
Affiliated Managers Group, Inc. (a) 42,900 2,579
Alexandria Real Estate Equities, Inc. (e)6,700 227
Allmerica Financial Corp. 38,000 2,396
Ambac Financial Group, Inc. 6,800 543
American Financial Group, Inc. 10,900 234
American National Insurance Co. 1,100 74
AmeriCredit Corp. (a) 84,200 2,263
AmerUs Group Co. (a) 13,000 343
Amli Residential Properties Trust (e) 600 14
Andover Bancorp, Inc. 1,600 48
Arden Realty Group, Inc. (e) 3,031 73
Associated Banc-Corp 5,500 132
Astoria Financial Corp. 35,900 1,346
Avalonbay Communities, Inc. (e) 4,072 187
BancWest Corp. 15,100 309
Bank of Granite Corp. 4,200 97
Banknorth Group, Inc. 87,200 1,581
Bay View Capital Corp. 20,700 168
Bear Stearns Companies Inc. (The) 33,599 2,037
Bedford Property Investors, Inc. (e) 17,947 353
BlackRock, Inc. New (a) 4,300 183
Boston Properties, Inc. (e) 2,093 85
Boykin Lodging Co. (e) 7,980 72
BRE Properties, Inc. (e) 5,340 169
Brookline Bancorp, Inc. 3,200 34
Burnham Pacific Properties, Inc. (e) 31,600 172
Capital Automotive 22,300 287
Capitol Federal Financial 22,700 328
Catellus Development Corp. (a)(e) 41,400 753
Cathay Bancorp, Inc. 13,400 651
CBL & Associates Properties, Inc. (e) 12,600 291
Charter One Financial, Inc. 46,133 1,058
Chelsea GCA Realty, Inc. (e) 22,100 713
Citizens Banking Corp. 1,000 24
City National Corp. 38,300 1,317
Colonial BancGroup, Inc. 87,000 767
Commerce Bancorp, Inc. 3,417 207
25 Equity II Fund
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Commerce Bancshares, Inc. 7,470 268
Commerce Group, Inc. 11,700 299
Commonwealth Bancorp, Inc. 8,500 126
Community Bank System, Inc. 53,100 1,290
CompuCredit Corp. (a) 2,400 73
Concord EFS, Inc. (a) 82,100 3,387
Conseco, Inc. 219,000 1,519
Cousins Properties, Inc. (e) 15,900 413
Crescent Real Estate Equities, Inc. (e) 14,926 300
Cullen Frost Bankers, Inc. 20,400 680
Delphi Financial Group, Inc. (a) 2,100 78
Dime Bancorp, Inc. 19,000 464
Dime Community Bancorp, Inc. 12,400 274
Doral Financial Corp. 4,800 86
Downey Financial Corp. 23,500 1,122
Duke-Weeks Realty Corp. (e) 98,477 2,333
East West Bancorp, Inc. 21,000 395
EastGroup Properties, Inc. (e) 13,700 279
Eaton Vance Corp. 25,600 1,275
Edwards (A.G.), Inc. 12,400 629
Enhance Financial Services
Group, Inc. 5,800 67
Entertainment Properties Trust (e) 9,900 110
Everest Re Group, Ltd. 23,700 1,389
F&M National Corp. 5,300 137
FBL Financial Group, Inc. Class A 2,700 43
Federated Investors, Inc. Class B 38,050 1,108
FelCor Lodging Trust, Inc. (e) 52,278 1,147
Fidelity National Financial, Inc. 5,300 130
Financial Federal Corp. (a) 3,800 81
FINOVA Group, Inc. 143,500 368
First Bancorp 5,600 128
First Commonwealth Financial Corp. 2,600 26
First Federal Capital Corp. 6,500 76
First Industrial Realty Trust, Inc. (e) 30,500 942
First Tennessee National Corp. 7,300 168
FirstFed Financial Corp. (a) 23,400 597
FirstMerit Corp. 1,800 41
Frontier Financial Corp. 3,700 69
Gabelli Asset Management,
Inc. New (a) 2,900 104
Gallagher (Arthur J.) & Co. 14,500 915
GBC Bancorp 32,100 1,019
Golden State Bancorp, Inc. 56,600 1,479
Great Lakes, Inc. 4,800 81
Greater Bay Bancorp 34,200 1,114
Greenpoint Financial Corp. 54,400 1,618
Hamilton Bancorp, Inc. (a) 9,600 142
Harbor Florida Bancshares, Inc. 9,500 116
Heller Financial, Inc. Class A 41,300 1,208
Hibernia Corp. Class A 53,100 634
Hospitality Properties Trust 33,700 727
Host Marriott Corp. (e) 90,481 961
HRPT Properties Trust (e) 22,900 147
Imperial Bancorp (a) 107,908 2,623
Independence Community Bank Corp. 14,400 211
IndyMac Mortgage Holdings, Inc. 6,300 132
Innkeepers USA Trust (e) 44,982 458
Investment Technology Group (a) 25,600 922
Investors Financial Services Corp. 52,300 3,749
IPC Holdings, Ltd. 74,500 1,518
IRT Property Co. (e) 12,200 100
IStar Financial Inc. (e) 30,300 606
Jack Henry & Associates, Inc. 33,600 1,846
Jefferies Group, Inc. 58,400 1,591
LaBranche & Co., Inc. New (a) 9,400 372
LandAmerica Financial Group, Inc. 6,600 195
LaSalle Hotel Properties (e) 13,100 188
Legg Mason, Inc. 38,200 1,984
Leucadia National Corp. 22,400 557
Liberty Corp. 5,800 201
LNR Property Corp. (e) 67,200 1,453
Mack-Cali Realty Corp. (e) 14,200 385
MAF Bancorp, Inc. 2,400 58
Markel Corp. (a) 13,600 1,970
Medical Assurance, Inc. (a) 2,540 35
Mercantile Bankshares Corp. 15,300 576
MeriStar Hospitality Corp. 40,770 780
Metris Companies, Inc. 42,575 1,378
Mid-America Apartment
Communities, Inc. (e) 5,200 114
MONY Group, Inc. (The) 24,200 995
Moody's Corp. (a) 28,300 745
Morgan Keegan, Inc. 11,200 223
Nationwide Financial Services, Inc.
Class A 27,100 1,318
Neuberger Berman, Inc. 2,600 171
New Century Financial Corp. (a) 11,100 128
New Plan Excel Realty Trust (e) 54,400 670
North Fork Bancorp, Inc. 89,000 1,797
OceanFirst Financial Corp. 10,400 217
Ocwen Financial Corp. (a) 9,700 57
Ohio Casualty Corp. 26,800 225
Old Republic International Corp. 76,300 1,984
Pacific Century Financial Corp. 69,800 886
Pacific Gulf Properties, Inc. (e) 19,900 529
Pan Pacific Retail Properties, Inc. (e) 3,000 61
Parkway Properties, Inc. (e) 4,300 123
Paychex, Inc. 71,000 4,024
Penn Treaty American Corp. (a) 5,700 109
Pennsylvania Real Estate
Investment Trust (e) 3,800 65
Equity II Fund 26
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
People's Bank 4,000 81
PFF Bancorp, Inc. 16,300 297
PMI Group, Inc. (The) 16,950 1,252
Prentiss Properties Trust (e) 14,600 370
Presidential Life Corp. 5,900 86
Price (T. Rowe) & Associates, Inc. 43,000 2,010
Protective Life Corp. 38,500 890
Provident Bankshares Corp. 11,903 225
Radian Group, Inc. 86,900 6,158
Raymond James Financial, Inc. 32,200 1,089
Reckson Associates Realty Corp. (e) 41,700 943
Regency Realty Corp. (e) 11,400 257
RenaissanceRe Holdings, Ltd. 33,500 2,431
Republic Bancorp, Inc. 2,530 24
RFS Hotel Investors, Inc. (e) 27,100 349
Richmond County Financial Corp. 70,900 1,662
RightCHOICE Managed Care, Inc.
Class A (a) 12,400 343
RLI Corp. 2,300 90
Rollins Truck Leasing Corp. 14,400 76
SAFECO Corp. 82,000 1,983
SEI Corp. 4,300 390
Senior Housing Properties Trust (e) 11,900 111
Silicon Valley Bancshares (a) 79,300 3,657
SL Green Realty Corp. (e) 22,700 609
Smith (Charles E.) Residential
Realty, Inc. (e) 36,600 1,610
Southwest Bancorporation of
Texas, Inc. (a) 24,900 907
Southwest Securities Group, Inc. 30,980 875
Sovereign Bancorp, Inc. 246,524 2,049
Sovran Self Storage, Inc. (e) 46,500 878
Spieker Properties, Inc. (e) 6,436 356
Stancorp Financial Group, Inc. 26,700 1,088
State Auto Financial Corp. 5,700 77
State Street Corp. 18,300 2,283
Staten Island Bancorp, Inc. 23,200 448
Sterling Bancshares, Inc. 14,200 243
Stewart Information Services Corp. 7,000 110
TCF Financial Corp. 9,500 384
Texas Regional Bancshares, Inc.
Class A 25,600 762
Torchmark Corp. 12,000 400
Trammell Crow Co. (a) 5,200 70
Triad Guaranty, Inc. (a) 5,300 154
Trustmark Corp. 4,800 91
Tucker Anthony Sutro Corp. 6,500 150
U.S.B. Holding Co., Inc. 4,500 56
UMB Financial Corp. 1,650 56
Union Planters Corp. 28,702 970
Vornado Realty Trust (e) 41,520 1,445
Waddell & Reed Financial, Inc.
Class A 12,000 383
Washington Federal, Inc. 8,955 199
Watson Wyatt & Co. Holdings
New (a) 23,600 409
Webster Financial Corp. 56,500 1,377
Weingarten Realty Investors (e) 9,100 382
Westamerica Bancorporation 47,800 1,718
Whitney Holding Corp. 5,700 210
XL Capital, Ltd. Class A 28,000 2,153
----------
142,552
----------
HEALTH CARE - 10.7%
Abgenix, Inc. (a) 12,200 964
Affymetrix, Inc. (a) 17,000 938
Alkermes, Inc. (a) 54,700 2,024
Alliance Pharmaceutical Corp. (a) 51,700 730
AmeriPath, Inc. (a) 10,000 179
Andrx Group (a) 11,200 804
Arrow International, Inc. 2,300 92
Aurora Biosciences Corp. (a) 1,500 91
Bard (C.R.), Inc. 74,600 3,125
Bausch & Lomb, Inc. 18,000 694
Bergen Brunswig Corp. Class A 128,100 1,161
Bindley Western Industries, Inc. 64,500 2,318
Biomet, Inc. 6,800 249
Caremark Rx, Inc. (a) 139,800 1,748
Celgene Corp. (a) 8,100 521
Cell Therapeutics, Inc. (a) 7,100 475
Cephalon, Inc. (a) 13,000 695
Chiron Corp. (a) 11,100 480
Ciphergen Biosystems, Inc. New (a) 2,000 63
Cooper Companies, Inc. 21,000 751
Cor Therapeutics, Inc. (a) 19,000 1,072
Corixa Corp. (a) 56,600 2,515
Covance, Inc. (a) 44,400 383
Cubist Pharmaceuticals, Inc. (a) 10,400 448
CuraGen Corp. (a) 1,900 122
Cytyc Corp. (a) 3,600 214
Datascope Corp. 13,200 453
DaVita, Inc. (a) 83,000 934
DENTSPLY International, Inc. 2,700 94
Diagnostic Products Corp. 9,800 447
Drugstore.com, Inc. (a) 41,200 103
Dyax Corp. New (a) 14,000 518
Express Scripts, Inc. Class A (a) 8,200 550
First Health Group Corp. (a) 51,900 2,021
Foundation Health Systems, Inc. (a) 239,600 4,837
Health Management Associates
Class A (a) 67,700 1,341
HEALTHSOUTH Corp. (a) 404,800 4,858
27 Equity II Fund
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Henry Schein, Inc. (a) 8,300 202
Human Genome Sciences, Inc. (a) 18,500 1,635
ICN Pharmaceuticals, Inc. 24,200 921
IDEC Pharmaceuticals Corp. (a) 15,200 2,981
IDEXX Laboratories, Inc. (a) 32,500 780
Incyte Pharmaceuticals, Inc. (a) 17,200 630
Informax, Inc. New (a) 35,100 974
Inhale Therapeutic Systems, Inc. (a) 10,700 532
Invacare Corp. 4,200 120
Invitrogen Corp. (a) 22,000 1,673
IVAX Corp. (a) 17,600 766
King Pharmaceuticals, Inc. (a) 39,112 1,753
Large Scale Biology Corp. New (a) 34,800 644
LifePoint Hospitals, Inc. (a) 18,300 709
Lincare Holdings, Inc. (a) 65,000 2,734
Maxim Pharmaceuticals, Inc. (a) 17,400 773
Medarex, Inc. (a) 29,000 1,771
Medicines Co. (The) New (a) 20,400 609
MedImmune, Inc. (a) 10,600 692
Medquist, Inc. (a) 20,000 221
Mentor Corp. 13,100 229
Mid Atlantic Medical
Services, Inc. (a) 37,000 629
MiniMed, Inc. (a) 18,900 1,379
Mylan Laboratories, Inc. 8,300 232
National Data Corp. 9,100 347
NBTY, Inc. (a) 16,000 103
Neurocrine Biosciences, Inc. (a) 16,300 626
Noven Pharmaceuticals, Inc. (a) 7,900 351
Ocular Sciences, Inc. (a) 9,200 113
Omnicare, Inc. 38,700 677
Orthodontic Centers of
America, Inc. (a) 23,200 774
OSI Pharmaceuticals, Inc. (a) 21,000 1,502
Owens & Minor, Inc., Holding Co. 38,900 588
Oxford Health Plans, Inc. (a) 80,600 2,715
PacifiCare Health Systems, Inc. (a) 33,300 345
Parexel International Corp. (a) 22,800 198
Patterson Dental Co. (a) 3,500 109
Perrigo Co. (a) 41,000 269
POZEN, Inc. (a) 32,000 512
PRAECIS Pharmaceuticals, Inc. (a)25,400 641
Professional Detailing, Inc. (a) 3,200 283
Province Healthcare Co. (a) 42,300 1,777
QLT PhotoTherapeutics, Inc. (a) 5,700 283
Quest Diagnostics, Inc. (a) 30,500 2,936
Quintiles Transnational Corp. 52,200 724
RehabCare Group, Inc. (a) 5,200 225
Renal Care Group, Inc. (a) 30,100 705
Respironics, Inc. (a) 16,800 329
SpaceLabs, Inc. (a) 37,900 400
St. Jude Medical, Inc. (a) 6,300 347
Syncor International Corp. (a) 21,300 535
Techne Corp. (a) 1,100 123
Tenet Healthcare Corp. 61,200 2,406
Teva Pharmaceutical
Industries, Ltd. - ADR 17,400 1,029
Thermo Cardiosystems, Inc. (a) 13,400 110
Trigon Healthcare, Inc. (a) 22,700 1,627
United Therapeutics Corp. New (a) 11,200 599
Universal Health Services, Inc.
Class B (a) 25,300 2,122
Varian Medical Systems, Inc. (a) 41,100 2,009
Vital Signs, Inc. 200 6
----------
91,046
----------
INTEGRATED OILS - 1.0%
Cross Timbers Oil Co. 162,887 3,064
Helmerich & Payne, Inc. 82,700 2,600
Murphy Oil Corp. 25,700 1,489
Tesoro Petroleum Corp. (a) 20,000 208
Unocal Corp. 40,500 1,382
----------
8,743
----------
MATERIALS AND PR OCESSING - 4.8%
Advanced Energy Industries, Inc. (a) 8,300 142
AK Steel Holding Corp. 93,100 861
Albany International Corp. Class A (a) 14,000 151
Albemarle Corp. 17,900 415
Allegheny Technologies, Inc. 26,000 527
AMCOL International Corp. 4,100 30
American Standard Cos., Inc. (a) 3,800 174
AptarGroup, Inc. 57,600 1,191
Arch Chemicals, Inc. 14,900 290
Ball Corp. 22,000 773
Boise Cascade Corp. 86,100 2,470
Bowater, Inc. 6,100 330
Brookfield Properties Corp. 6,200 95
Brush Wellman, Inc. 5,200 106
Cabot Corp. 5,600 123
Calgon Carbon Corp. 86,100 506
Carlisle Cos., Inc. 21,300 887
Carpenter Technology Corp. 14,000 434
Centex Corp. 65,000 2,405
Century Aluminum Co. 9,400 80
Chemed Corp. 10,600 348
Commercial Metals Co. 8,800 240
Cytec Industries, Inc. (a) 3,000 104
Delta and Pine Land Co. 5,800 142
Eastman Chemical Co. 5,500 235
Elcor Chemical Corp. 8,000 125
Engelhard Corp. 7,000 146
Equity II Fund 28
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Freeport-McMoRan Copper & Gold,
Inc. Class B (a) 14,300 114
Georgia Gulf Corp. 10,300 138
Georgia-Pacific Corp. (Timber Group) 3,100 88
Georgia-Pacific Group 48,900 1,314
Harland (John H.) Co. 21,600 300
Hughes Supply, Inc. 18,800 353
IMC Global, Inc. 22,000 285
Insituform Technologies, Inc.
Class A (a) 5,000 178
Kaufman & Broad Home Corp. 49,200 1,464
Kaydon Corp. 28,700 630
Lafarge Corp. 33,100 625
Lennox International, Inc. 6,900 55
Lyondell Petrochemical Co. 17,300 249
MacDermid, Inc. 16,300 350
Martin Marietta Materials, Inc. 23,900 918
Maverick Tube Corp. (a) 22,700 353
Mead Corp. 3,100 90
Minerals Technologies, Inc. 36,200 1,134
Mueller Industries, Inc. (a) 3,500 81
NCI Building Systems, Inc. (a) 4,800 75
Newmont Mining Corp. 9,600 130
NL Industries, Inc. 23,900 565
Nucor Corp. 44,500 1,544
Olin Corp. 88,700 1,574
OM Group 15,000 694
P.H. Glatfelter Co. 10,900 114
Paxar Corp. (a) 18,100 148
Phelps Dodge Corp. 7,800 365
Plum Creek Timber Co., Inc. 47,600 1,234
Pope & Talbot, Inc. 7,800 121
Precision Castparts Corp. 70,200 2,650
Reliance Steel & Aluminum Co. 1,000 24
Sealed Air Corp. New (a) 13,400 644
Sherwin-Williams Co. 7,400 160
Sigma Aldrich Corp. 5,000 179
Solutia, Inc. 6,700 85
Southdown, Inc. 5,800 411
Spartech Corp. 16,300 252
SPS Technologies, Inc. (a) 35,600 1,837
St. Joe Co. (The) 55,700 1,124
Standex International Corp. 3,700 68
Temple-Inland, Inc. 2,400 107
Texas Industries, Inc. 51,600 1,203
Timken Co. 5,500 77
USG Corp. 16,800 287
USX-U.S. Steel Group 46,800 746
W.R. Grace & Co. (a) 57,000 217
Washington Group
International, Inc. (a) 11,400 120
Waters Corp. (a) 9,200 668
Webb (Del E.) Corp. (a) 23,100 621
Westvaco Corp. 7,100 202
Worthington Industries, Inc. 51,400 492
----------
40,787
----------
MISCELLANEOUS - 0.5%
Bright Horizons Family
Solutions, Inc. (a) 6,200 153
Corinthian Colleges, Inc. New (a) 14,900 1,023
Descartes Systems
Group, Inc. (The) (a) 76,200 3,086
Education Management Corp. 4,100 127
----------
4,389
----------
OTHER ENERGY - 5.9%
Barrett Resources Corp. (a) 26,900 978
Berry Petroleum Co. Class A 20,000 344
BJ Services Co. (a) 29,200 1,531
Brown (Tom), Inc. (a) 13,400 307
Cleco Corp. 6,500 309
CONSOL Energy, Inc. 4,400 75
Cooper Cameron Corp. (a) 15,800 861
Devon Energy Corp. 27,300 1,376
Diamond Offshore Drilling, Inc. 10,600 366
EEX Corp. (a) 30,700 144
ENSCO International, Inc. 15,600 519
EOG Resources, Inc. 38,300 1,508
Global Industries, Inc. (a) 31,150 327
Global Marine, Inc. (a) 68,065 1,804
HS Resources, Inc. (a) 19,600 610
Key Production, Inc. (a) 6,200 136
Kinder Morgan, Inc. 52,700 2,032
Louis Dreyfus Natural Gas Corp. (a) 55,100 1,767
Nabors Industries, Inc. (a) 60,807 3,095
Noble Drilling Corp. (a) 44,500 1,850
Northwestern Corp. 6,600 146
Ocean Energy, Inc. (a) 10,100 140
ONEOK, Inc. 20,000 793
Patterson Energy, Inc. (a) 4,900 137
Pioneer Natural Resources Co. (a) 74,500 973
Pogo Producing Co. 27,100 678
Pride International, Inc. (a) 52,900 1,339
Rowan Cos., Inc. (a) 67,700 1,705
Santa Fe International Corp. 69,900 2,551
Seacor Holdings, Inc. (a) 2,850 119
Seitel, Inc. (a) 29,900 449
Sempra Energy 17,700 366
Smith International, Inc. (a) 51,300 3,616
Sunoco, Inc. 79,300 2,374
Talisman Energy, Inc. (a) 42,900 1,333
29 Equity II Fund
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Tidewater, Inc. 74,500 3,440
Transocean Sedco Forex, Inc. 15,000 795
Ultramar Diamond Shamrock Corp. 86,500 2,271
UTI Energy Corp. (a) 7,600 152
Valero Energy Corp. 61,400 2,030
Varco International, Inc. (a) 118,233 2,040
Vintage Petroleum, Inc. 159,050 3,360
----------
50,746
----------
PRODUCER DURABLES - 7.0%
Actuant Corp. Class A (a) 65,700 238
AGCO Corp. 49,900 568
American Superconductor Corp. (a) 13,800 659
Applied Industrial Technology, Inc. 11,100 188
APW, Ltd. (a) 31,800 1,469
Armor Holdings, Inc. (a) 7,200 112
B.F. Goodrich Co. 7,800 319
Beckman Coulter, Inc. 4,300 301
Belden, Inc. 5,300 137
Briggs & Stratton Corp. 2,500 89
Brooks Automation, Inc. (a) 34,500 914
Celestica, Inc. (a) 23,000 1,653
Cognex Corp. (a) 2,800 93
Cohu, Inc. 54,000 851
CoorsTek, Inc. (a) 45,400 1,331
Credence Systems Corp. (a) 29,100 546
Crossmann Communities, Inc. (a) 7,000 126
CTS Corp. 2,000 86
Cummins Engine Co., Inc. 5,600 190
D.R. Horton, Inc. 144,834 2,679
Diebold, Inc. 43,300 1,126
Donaldson Co., Inc. 14,800 335
Efficient Networks, Inc. (a) 80,700 3,384
Electroglas, Inc. (a) 64,500 903
EMCOR Group, Inc. (a) 14,700 380
ESCO Technologies, Inc. (a) 4,500 82
GenCorp, Inc. 33,300 279
General Cable Corp. 15,200 91
General Dynamics Corp. 28,000 2,004
General Semiconductor, Inc. (a) 6,700 77
GenRad, Inc. (a) 14,200 130
Grant Prideco, Inc. (a) 5,100 95
Hubbell, Inc. Class B 22,300 534
ITT Industries, Inc. 17,900 583
JLG Industries, Inc. 40,800 569
Johnson Controls, Inc. 25,100 1,497
Kaman Corp. Class A 19,600 281
Kennametal, Inc. 2,800 82
Kent Electronics Corp. (a) 24,600 458
KLA Tencor Corporation (a) 34,500 1,164
Kulicke & Soffa Industries, Inc. (a) 71,700 1,053
Lennar Corp. 108,900 3,498
Littlefuse, Inc. (a) 20,500 593
Litton Industries, Inc. (a) 36,600 1,901
M.D.C. Holdings, Inc. 17,700 485
Mettler-Toledo International, Inc. (a) 4,400 205
Micrel, Inc. (a) 3,300 149
Miller (Herman), Inc. 13,100 342
Millipore Corp. 24,900 1,307
Moog, Inc. (a) 4,200 122
National-Oilwell, Inc. (a) 56,800 1,661
Northrop Grumman Corp. 6,600 554
Novellus Systems, Inc. (a) 10,400 425
NVR, Inc. (a) 30,000 3,102
Orbital Sciences Corp. Class A (a) 53,500 425
Pall Corp. 57,500 1,240
Penn Engineering &
Manufacturing Corp. 18,500 700
Plexus Corp. (a) 17,400 1,097
Power-One, Inc. (a) 13,800 979
Presstek, Inc. (a) 5,500 86
Primex Technologies, Inc. 12,600 369
Pulte Corp. 51,500 1,716
Republic Services, Inc. (a) 5,100 69
Ryland Group, Inc. (The) 13,300 429
Sawtek, Inc. (a) 2,700 137
Sensormatic Electronics Corp. (a) 10,000 180
SPX Corp. (a) 4,700 581
Standard Pacific Corp. 38,000 713
Starrett (L.S.) Co. Class A 24,000 401
Steelcase, Inc. Class A 48,500 855
Technitrol, Inc. 1,800 200
Tektronix, Inc. 2,600 185
Teleflex, Inc. 18,500 639
Teradyne, Inc. (a) 22,800 713
Terex Corp. (a) 17,400 214
Textron, Inc. 28,100 1,417
Thermo Electron Corp. (a) 8,600 249
Thomas & Betts Corp. 11,300 171
Toll Brothers, Inc. (a) 75,200 2,444
Triquint Semiconductor, Inc. (a) 9,400 360
UNOVA, Inc. (a) 59,300 285
Varian, Inc. New (a) 2,000 62
Veeco Instruments, Inc. (a) 5,000 331
Watsco, Inc. 6,900 65
Watts Industries, Inc. Class A 3,200 36
Woodhead Industries 6,800 148
York International Corp. 3,300 90
----------
59,586
----------
TECHNOLOGY - 20.3%
Acacia Research Corp. (a) 32,200 1,020
Equity II Fund 30
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Actel Corp. (a) 2,700 99
Acterna Corp. (a) 11,400 181
Activision, Inc. (a) 39,300 538
Actuate Corp. (a) 64,300 1,808
Adtran, Inc. (a) 2,400 91
Advanced Fibre Communications (a) 4,600 150
Aeroflex, Inc. (a) 26,425 1,546
Affiliated Computer Services, Inc.
Class A (a) 1,800 100
AGENCY.COM, Inc. New (a) 35,400 372
Allen Telecom, Inc. (a) 67,400 1,260
Alliance Semiconductor Corp. (a) 76,700 1,529
Alliant Techsystems, Inc. (a) 6,300 567
Alpha Industries, Inc. (a) 2,200 88
American Management
Systems, Inc. (a) 45,000 965
Amkor Technology, Inc. (a) 4,000 90
Amphenol Corp. Class A (a) 3,900 251
Anaren Microwave, Inc. (a) 11,850 1,232
Andrew Corp. (a) 5,200 137
Anixter International, Inc. (a) 137,900 3,344
Applied Micro Circuits Corp. (a) 4,706 360
Arrow Electronics, Inc. (a) 116,300 3,722
Art Technology Group, Inc. (a) 36,700 2,303
Aspen Technology, Inc. (a) 37,100 1,528
AudioCodes, Ltd. (a) 9,600 380
Audiovox Corp. Class A (a) 25,000 341
Autodesk, Inc. 25,000 550
Avnet, Inc. 106,900 2,873
Avocent Corp. New (a) 18,899 1,341
AVX Corp. 81,600 2,336
AXENT Technologies, Inc. (a) 5,500 106
Barra, Inc. (a) 23,800 1,453
BindView Development Corp. (a) 42,500 329
BISYS Group, Inc. (a) 78,500 3,693
Black Box Corp. (a) 4,800 316
Bookham Technology PLC - ADR (a) 10,500 352
Business Objects SA - ADR (a) 22,800 1,796
CACI International, Inc. Class A (a) 11,600 238
Cadence Design Systems, Inc. (a) 38,600 992
Caliper Technologies Corp. New (a) 20,000 1,126
Ceridian Corp. (a) 7,300 183
Check Point Software
Technologies, Ltd. (a) 4,200 665
ChoicePoint, Inc. (a) 44,000 2,252
CIENA Corp. (a) 21,600 2,268
Cirrus Logic, Inc. (a) 51,000 2,196
Clarent Corp. (a) 19,600 608
Cognos, Inc. (a) 82,400 3,434
Comdisco, Inc. 77,200 951
Comverse Technology, Inc. (a) 11,000 1,229
Covad Communications
Group, Inc. (a) 89,900 475
Cree, Inc. (a) 1,500 149
Critical Path, Inc. (a) 8,600 417
Cubic Corp. 5,100 140
Cymer, Inc. (a) 17,100 425
Cypress Semiconductor Corp. (a) 37,400 1,400
Dallas Semiconductor Corp. 4,600 182
Dendrite International, Inc. (a) 38,400 833
Digex, Inc. (a) 6,600 258
DMC Stratex Networks, Inc. (a) 41,800 964
Documentum, Inc. (a) 5,500 466
DSP Group, Inc. (a) 2,100 60
DST Systems, Inc. (a) 81,700 5,035
eFunds Corp. New (a) 32,300 254
ePresence, Inc. (a) 100 1
Esterline Corp. (a) 10,500 234
Exar Corp. (a) 2,200 98
Extreme Networks, Inc. (a) 37,300 3,094
FactSet Research Systems, Inc. 6,800 258
Fair, Isaac and Co., Inc. 2,800 115
FileNet Corp. (a) 48,400 1,289
Floware Wireless Systems
Ltd. New (a) 30,400 413
Forrester Research, Inc. (a) 1,300 53
Freemarkets Inc. (a) 31,000 1,533
Galileo International, Inc. 143,100 2,826
Galileo Technology, Ltd. (a) 76,600 2,078
Genuity, Inc. New (a) 76,900 423
Haemonetics Corp. (a) 2,600 61
Harris Corp. 119,000 3,771
i2 Technologies, Inc. (a) 6,500 1,105
Ikon Office Solutions, Inc. 16,800 55
InFocus Corp. (a) 21,200 937
Informatica Corp. (a) 16,700 1,578
InfoSpace.com, Inc. (a) 36,036 725
Ingram Micro, Inc. Class A (a) 64,100 1,094
Insight Enterprises, Inc. (a) 18,750 609
Integrated Device Technology, Inc. (a) 29,200 1,644
Integrated Silicon Solution, Inc. (a) 52,500 702
Internap Network Services Corp. (a) 20,700 329
International Game Technology (a) 107,500 3,936
International Rectifier Corp. (a) 11,100 495
Internet Security Systems, Inc. (a) 11,700 1,032
Intersil Holding Corp. New (a) 25,600 1,226
Interwoven, Inc. (a) 28,500 2,872
IntraNet Solutions, Inc. (a) 21,800 1,012
JDA Software Group, Inc. (a) 6,400 95
Jupiter Media Metrix, Inc. New (a) 33,500 450
Kana Communications, Inc. (a) 20,000 469
Kemet Corp. (a) 98,500 2,746
31 Equity II Fund
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
L-3 Communications
Holdings, Inc. (a) 9,400 620
Lam Research Corp. (a) 6,700 129
Lattice Semiconductor Corp. (a) 6,000 176
Loral Space &
Communications, Ltd. (a) 206,500 1,174
LSI Logic Corp. (a) 33,400 1,097
Macromedia, Inc. (a) 7,450 574
Macrovision Corp. (a) 5,700 415
Manugistics Group, Inc. (a) 18,600 2,117
MarchFirst, Inc. (a) 61,400 357
MatrixOne, Inc. New (a) 69,800 2,077
Mercury Interactive Corp. (a) 24,100 2,674
Microchip Technology, Inc. (a) 21,100 667
Micromuse, Inc. (a) 11,200 1,901
Microsemi Corp. (a) 20,800 833
N2H2, Inc. (a) 5,500 3
National Instruments Corp. (a) 15,050 702
National Semiconductor Corp. (a) 17,800 463
Natural Microsystems Corp. (a) 29,000 1,307
NCR Corp. (a) 64,400 2,776
Netegrity, Inc. (a) 25,900 2,019
Netro Corp. (a) 18,000 392
Network Appliance, Inc. (a) 23,000 2,737
Network Associates, Inc. (a) 9,900 191
Newport Corp. 13,600 1,545
NVIDIA Corp. (a) 2,400 149
Oak Technology, Inc. (a) 29,100 817
Oplink Communications, Inc. New (a) 6,300 154
Orbotech, Ltd. (a) 11,250 595
Park Electrochemical Corp. 12,900 852
Pegasus Systems, Inc. (a) 30,200 513
PeopleSoft, Inc. (a) 11,500 502
PerkinElmer, Inc. 1,800 215
Perot Systems Corp. Class A (a) 18,400 183
Photronics, Inc. (a) 53,800 1,211
Pioneer-Standard Electronics, Inc. 34,100 473
Pivotal Corp. New (a) 44,200 2,699
Pixelworks, Inc. New (a) 9,900 329
PMC - Sierra, Inc. (a) 14,100 2,395
Polycom, Inc. (a) 15,100 980
QLogic Corp. (a) 5,900 570
Quantum Corp. - DLT & Storage
Systems (a) 87,800 1,317
Quantum Corp. - Hard Disk Drive (a) 85,900 982
Quest Software, Inc. (a) 12,800 559
Rational Software Corp. (a) 6,500 388
Redback Networks, Inc. (a) 2,800 297
REMEC, Inc. (a) 92,100 2,717
RSA Security, Inc. (a) 9,200 532
Sandisk Corp. (a) 25,775 1,384
SCI Systems, Inc. (a) 6,500 280
Scott Technologies, Inc. (a) 3,800 87
Semtech Corp. (a) 4,600 148
Silicon Storage Technology, Inc. (a) 31,000 705
Spectrasite Holdings, Inc. New (a) 4,200 83
Stamps.com, Inc. New (a) 10,000 39
StarTek, Inc. (a) 2,200 56
Stoneridge, Inc. (a) 9,000 88
SunGard Data Systems (a) 34,000 1,738
Sybase, Inc. (a) 16,800 351
Sycamore Networks, Inc. (a) 14,200 900
Symantec Corp. (a) 26,100 1,018
Tekelec, Inc. (a) 13,400 493
Teledyne Technologies, Inc. (a) 49,300 1,236
THQ, Inc. (a) 25,600 523
Titan Corp. (a) 4,000 54
Turnstone Systems, Inc. (a) 56,900 1,209
Tut Systems, Inc. (a) 2,100 69
Unisys Corp. (a) 150,000 1,913
VA Linux Systems, Inc. New (a) 45,700 1,317
Varian Semiconductor Equipment
Associates, Inc. (a) 33,900 780
VelocityHSI, Inc. New (a) 1,068 1
VeriSign, Inc. (a) 7,545 995
Veritas Software Corp. (a) 5,000 705
Virata Corp. (a) 23,200 448
Vishay Intertechnology, Inc. (a) 20,500 614
Volt Information Sciences, Inc. (a) 3,200 70
WatchGuard Technologies, Inc. (a) 6,700 334
Wireless Facilities, Inc. (a) 39,900 1,990
Zoran Corp. (a) 42,100 2,089
----------
173,797
----------
UTILITIES - 6.3%
AGL Resources, Inc. 45,600 929
ALLETE (a) 21,800 470
Alliant Energy Corp. 19,900 603
Amdocs, Ltd. (a) 7,700 499
American Tower Corp. Class A (a) 15,000 614
American Water Works, Inc. 10,300 251
Black Hills Corp. 5,900 184
BroadWing, Inc. (a) 115,040 3,250
C&D Technologies, Inc. 5,200 307
Cable Design Technologies Corp. (a) 71,350 1,646
Cascade Natural Gas Corp. 15,200 280
CenturyTel, Inc. 9,200 354
CH Energy Group, Inc. 7,700 303
Charter Communications
Holdings, Inc. (a) 226,500 4,403
Citizens Communications Co. (a) 25,400 368
Comcast Corp. Special Class A (a) 50,400 2,051
Equity II Fund 32
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Conectiv, Inc. 36,200 649
CT Communications, Inc. 4,100 82
Dobson Communications
Corp. New (a) 36,300 461
DQE, Inc. 47,800 1,670
Dycom Industries, Inc. (a) 71,650 2,696
El Paso Electric Co. (a) 50,800 609
Energen Corp. 17,700 507
Energy East Corp. 9,900 200
Finisar Corp. (a) 51,700 1,490
Hawaiian Electric Industries, Inc. 28,700 945
Hickory Tech Corp. 10,300 229
Idacorp, Inc. 38,100 1,879
MDU Resources Group, Inc. 4,000 117
Montana Power Co. 10,900 308
New Jersey Resources Corp. 2,600 104
NICOR, Inc. 38,100 1,345
NRG Engery, Inc. (a) 33,300 866
NSTAR 2,300 89
OGE Energy Corp. 23,800 489
Peoples Energy Corp. 21,900 753
Piedmont Natural Gas Co., Inc. 6,605 201
Pinnacle Holdings, Inc. (a) 3,200 50
Pinnacle West Capital Corp. 23,000 999
Powerwave Technologies, Inc. (a) 16,400 789
PPL Corp. 4,900 202
Primus Telecommunications
Group, Inc. (a) 32,900 166
Public Service Co. of New Mexico 80,400 2,216
Puget Sound Energy, Inc. 17,900 440
Quanta Services, Inc. (a) 18,400 572
Questar Corp. 16,200 438
RCN Corp. (a) 56,300 996
RGS Energy Group, Inc. 33,000 974
SBA Communications Corp. (a) 2,100 105
SCANA Corp. 8,000 212
South Jersey Industries, Inc. 1,800 52
Stratos Lightwave, Inc. New (a) 52,200 1,380
TECO Energy, Inc. 4,300 120
Telephone & Data Systems, Inc. 14,800 1,561
Time Warner Telecom, Inc.
Class A (a) 31,500 1,884
TNPC, Inc. (a) 2,300 38
Tollgrade Communications, Inc. (a) 900 86
TranSwitch Corp. (a) 4,700 271
UGI Corp. 15,400 357
UIL Holdings Corp. 11,400 534
UniSource Energy Corp. 15,900 238
United States Cellular Corp. (a) 25,500 1,632
UtiliCorp United, Inc. 54,700 1,453
Vyyo, Inc. New (a) 32,600 719
West TeleServices Corp. (a) 9,100 226
Western Resources, Inc. 92,000 1,967
Wisconsin Energy Corp. 28,900 544
WPS Resources Corp. 11,100 357
Xcel Energy, Inc. 12,100 309
----------
54,088
----------
TOTAL COMMON STOCKS
(cost $669,572) 796,916
----------
PREFERRED STOCKS - 0.0%
Sovereign Bancorp, Inc. (conv.) 2,000 101
----------
TOTAL PREFERRED STOCKS
(cost $100) 101
----------
PRINCIPAL
AMOUNT
(000)
$
-----------
SHORT-TERM INVESTMENTS - 8.2%
Frank Russell Investment Company Money
Market Fund,
due on demand (b) 63,683 63,683
United States Treasury Bills (b)(c)(d)
5.925% due 12/21/00 2,500 2,479
5.940% due 12/21/00 3,050 3,025
5.985% due 12/21/00 500 496
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $69,683) 69,683
----------
TOTAL INVESTMENTS - 101.4%
(identified cost $739,355) 866,700
OTHER ASSETS AND LIABILITIES,
NET - (1.4%) (11,994)
----------
NET ASSETS - 100.0% 854,706
==========
(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.
(e) Real Estate Investment Trusts (REIT).
Abbreviations:
ADR - American Depositary
See accompanying notes which are an integral part of the financial statements.
33 Equity II Fund
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
FUTURES CONTRACTS CONTRACTS (000)
----------- ----------------
Nasdaq 100 Index
expiration date 12/00 19 $ 291
Russell 2000 Index
expiration date 12/00 35 258
S&P Midcap 400 Index
expiration date 12/00 163 (2,102)
S&P 500 Index
expiration date 12/00 24 (314)
----------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ (1,867)
================
See accompanying notes which are an integral part of the financial statements.
Equity II Fund 34
<PAGE>
EQUITY II FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) October 31, 2000
<TABLE>
<S> <C>
ASSETS
Investments at market (identified cost $739,355) ......................................... $ 866,700
Receivables:
Dividends and interest ................................................................... 736
Investments sold ......................................................................... 5,655
Fund shares sold ......................................................................... 843
Daily variation margin on futures contracts .............................................. 1,689
Prepaid expenses .......................................................................... 3
---------
Total assets ........................................................................... 875,626
LIABILITIES
Payables:
Due to Custodian ........................................................... $ 235
Investments purchased ...................................................... 18,475
Fund shares redeemed ....................................................... 1,518
Accrued fees to affiliates ................................................. 604
Other accrued expenses ..................................................... 88
---------
Total liabilities ...................................................................... 20,920
---------
NET ASSETS ................................................................................ $ 854,706
=========
NET ASSETS CONSIST OF:
Undistributed net investment income ....................................................... $ 695
Accumulated net realized gain (loss) ..................................................... 114,699
Unrealized appreciation (depreciation) on:
Investments .............................................................................. 127,345
Futures contracts ........................................................................ (1,867)
Shares of beneficial interest ............................................................. 223
Additional paid-in capital ................................................................ 613,611
---------
NET ASSETS ................................................................................ $ 854,706
=========
NET ASSET VALUE, offering and redemption price per share:
Class E ($35,498,495 divided by 926,152 shares of $.01 par value
shares of beneficial interest outstanding) ............................................ $ 38.33
=========
Class I ($769,095,747 divided by 20,056,659 shares of $.01 par value
shares of beneficial interest outstanding) ............................................ $ 38.35
=========
Class Y ($50,112,177 divided by 1,306,692 shares of $.01 par value
shares of beneficial interest outstanding) ............................................ $ 38.35
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
35 Equity II Fund
<PAGE>
EQUITY II FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Dividends ..................................................... $ 5,697 $ 5,107
Dividends from Money Market Fund .............................. 2,846 2,294
Interest ...................................................... 183 296
--------- ---------
Total investment income ..................................... 8,726 7,697
--------- ---------
EXPENSES
Advisory fees ................................................. 4,895 4,325
Administrative fees ........................................... 339 312
Custodian fees ................................................ 433 453
Transfer agent fees ........................................... 365 451
Professional fees ............................................. 49 24
Registration fees ............................................. 64 118
Shareholder servicing fees - Class E .......................... 73 40
Trustees' fees ................................................ 11 5
Miscellaneous ................................................. 60 74
--------- ---------
Expenses before reductions .................................... 6,289 5,802
Expense reductions ............................................ (33) --
--------- ---------
Expenses, net ............................................... 6,256 5,802
--------- ---------
Net investment income .......................................... 2,470 1,895
--------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ................................................... 105,925 51,643
Futures contracts ............................................. 6,074 7,164
Foreign currency-related transactions ......................... -- 1
--------- ---------
111,999 58,808
--------- ---------
Net change in unrealized appreciation (depreciation) on:
Investments ................................................... (31,691) 86,803
Futures contracts ............................................. (4,500) (405)
--------- ---------
(36,191) 86,398
--------- ---------
Net realized and unrealized gain (loss) ........................ 75,808 145,206
--------- ---------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS .......... $ 78,278 $ 147,101
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Equity II Fund 36
<PAGE>
EQUITY II FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income ................................................. $ 2,470 $ 1,895 $ 1,453
Net realized gain (loss) .............................................. 111,999 58,808 29,064
Net change in unrealized appreciation (depreciation) .................. (36,191) 86,398 (25,411)
--------- --------- ---------
Net increase (decrease) in net assets from operations ............... 78,278 147,101 5,106
--------- --------- ---------
DISTRIBUTIONS
From net investment income
Class E ............................................................. (22) (6) --
Class I ............................................................. (1,776) (1,914) (1,505)
Class Y ............................................................. (131) -- --
From net realized gain
Class E ............................................................. (683) (1,580) --
Class I ............................................................. (15,153) (37,803) (32,392)
--------- --------- ---------
Net decrease in net assets from distributions ..................... (17,765) (41,303) (33,897)
--------- --------- ---------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ......... 8,138 146,438 80,451
--------- --------- ---------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ............................ 68,651 252,236 51,660
NET ASSETS
Beginning of period ................................................... 786,055 533,819 482,159
--------- --------- ---------
End of period (including undistributed net investment income of
$695, $154 and $178, respectively) .................................. $ 854,706 $ 786,055 $ 533,819
========= ========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
37 Equity II Fund
<PAGE>
EQUITY II 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.
2000* 1999**
--------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD ................ $ 35.71 $ 31.37
--------- ---------
INCOME FROM OPERATIONS
Net investment income (a) ......................... .03 .02
Net realized and unrealized gain (loss) ........... 3.32 5.99
--------- ---------
Total income from operations ..................... 3.35 6.01
--------- ---------
DISTRIBUTIONS
From net investment income ......................... (.02) (.01)
From net realized gain ............................. (.71) (1.66)
--------- ---------
Total distributions .............................. (.73) (1.67)
--------- ---------
NET ASSET VALUE, END OF PERIOD ...................... $ 38.33 $ 35.71
========= =========
TOTAL RETURN (%)(b) ................................ 9.49 19.55
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) .......... 35,498 33,525
Ratios to average net assets (%)(c):
Operating expenses ............................... 1.13 1.17
Net investment income ............................ .10 .09
Portfolio turnover rate (%) ....................... 137.51 111.89
* For the ten months ended October 31, 2000.
** 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) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
Equity II Fund 38
<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,
----------------------------------------------------------
2000* 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........... $ 35.71 $ 30.94 $ 32.96 $ 30.05 $ 28.88 $ 25.00
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM OPERATIONS
Net investment income (a) .................... .11 .10 .09 .11 .16 .27
Net realized and
unrealized gain (loss) ..................... 3.33 6.68 .04 8.11 4.96 6.80
---------- ---------- ---------- ---------- ---------- ----------
Total income from operations ................ 3.44 6.78 .13 8.22 5.12 7.07
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS
From net investment income .................... (.09) (.10) (.10) (.11) (.16) (.29)
From net realized gain ........................ (.71) (1.91) (2.05) (5.20) (3.79) (2.90)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions ......................... (.80) (2.01) (2.15) (5.31) (3.95) (3.19)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD ................. $ 38.35 $ 35.71 $ 30.94 $ 32.96 $ 30.05 $ 28.88
========== ========== ========== ========== ========== ==========
TOTAL RETURN (%)(b)(c) ......................... 9.73 22.60 .70 28.66 18.51 28.67
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ..... 769,096 752,530 533,819 482,159 365,955 279,566
Ratios to average net assets (%)(c)(d):
Operating expenses .......................... .88 .92 .91 .92 .95 .83
Net investment income ....................... .35 .31 .29 .35 .52 .97
Portfolio turnover rate (%) .................. 137.51 111.89 128.87 103.00 120.78 89.31
</TABLE>
* For the ten months ended October 31, 2000.
(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) Prior to April 1, 1995, Fund performance, operating expenses, and net
investment income do not include any management fees paid to the Manager or
money managers. For periods thereafter, they are reported net of investment
management fees but gross of any investment services fees. See Note 4.
(d) The ratios for periods less than one year are annualized.
39 Equity II Fund
<PAGE>
EQUITY II FUND
FINANCIAL HIGHLIGHTS - CLASS Y
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
2000*
---------
NET ASSET VALUE, BEGINNING OF PERIOD .............................. $ 38.89
---------
INCOME FROM OPERATIONS
Net investment income (a) ....................................... .11
Net realized and unrealized gain (loss) ......................... (.55)
---------
Total income from operations ................................... (.44)
---------
DISTRIBUTIONS
From net investment income ....................................... (.10)
---------
NET ASSET VALUE, END OF PERIOD .................................... $ 38.35
=========
TOTAL RETURN (%)(b) .............................................. (1.15)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ........................ 50,112
Ratios to average net assets (%)(c):
Operating expenses, net ........................................ .78
Operating expenses, gross ...................................... .83
Net investment income .......................................... .51
Portfolio turnover rate (%) ..................................... 137.51
* For the period March 29, 2000 (commencement of sale) to October 31, 2000.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
Equity II Fund 40
<PAGE>
EQUITY III FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
DATES EQUITY III - CLASS I++ RUSSELL 1000(R) VALUE**
<S> <C> <C>
Inception* $10,000 $10,000
1991 $13,819 $13,289
1992 $15,205 $14,706
1993 $18,340 $18,406
1994 $19,296 $18,548
1995 $23,839 $23,126
1996 $28,967 $28,614
1997 $38,576 $38,110
1998 $42,506 $43,760
1999 $46,117 $50,992
2000 $46,515 $53,805
---------- ------- -------
Total $303,180 $313,356
========== ======== ========
Yearly periods ended October 31
</TABLE>
<TABLE>
<CAPTION>
EQUITY III FUND - CLASS I RUSSELL 1000/(R)/ VALUE INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
------------- --------- --------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C>
1 Year $10,086 0.86% 1 Year $10,552 5.52%
5 Years $19,512 14.29%(S) 5 Years $23,266 18.40%(S)
10 Years $46,515 16.60%(S) 10 Years $53,805 18.33%(S)
<CAPTION>
EQUITY III FUND - CLASS E ++++
PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN
------------- --------- ---------
<S> <C> <C>
1 Year $10,058 0.58%
5 Years $19,445 14.21%(S)
10 Years $46,356 16.56%(S)
</TABLE>
41 Equity III Fund
<PAGE>
EQUITY III FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the ten months ended October 31, 2000, the Equity III Fund Class I and Class
E shares gained 1.59% and 1.40%, respectively, as compared to the Russell
1000/(R)/ Value Index, which gained 5.84%.
The Fund faced a difficult first quarter, as growth issues, particularly
technology stocks, vastly outperformed value stocks. However, the climate
abruptly changed in March 2000 and the Fund's value managers began to enjoy a
much more favorable, although highly volatile, climate.
PORTFOLIO HIGHLIGHTS
A high level of confidence and a more speculative investment philosophy marked
the beginning of the fiscal period. This provided significant challenges for
value investors, as valuation models performed poorly in a world driven almost
exclusively by price momentum. Further complicating matters for diversified
investors, sector concentration, notably in the Technology arena, provided an
exceptionally narrow window for investment opportunities.
However, by the end of the first quarter, value managers began to feel
vindicated. Beginning in March, investors experienced an abrupt turnaround from
growth to value investing and the long-favored Technology sector fell
dramatically, as market opportunities broadened. During the remainder of the
period, market breadth increased substantially, and the Fund's diversification
was again a benefit. Strong stock selection in the Utilities, Consumer
Discretionary, and Health Care sectors contributed to the Fund's late-period
rally. During this time, overweight positions in JP Morgan and St. Paul (both
issues within the Financials sector), Reliant Energy (Utilities), and Boeing
(Producer Durables), as well as an underweight position in Worldcom (Utilities),
added to the Fund's overall returns.
The Fund's performance was also affected by a second quarter modification to the
investment manager lineup. After careful consideration, the Fund terminated
Trinity Investment Management Corp. and retained Barclays Global Fund Advisors
in April 2000. This provided an additional level of diversification for the
Fund, and helped align the portfolio with the changing nature of the value
indexes. Barclays utilizes a process that incorporates earnings momentum into
its portfolio building approach. This helps give the Fund broader coverage of
the former growth-oriented stocks that have become part of the value segment of
the Russell 1000/(R)/ Index since the June reconstitution of the Index. That
annual evaluation revealed that some slower-growth companies had become value
stocks as extremely high-growth issues, such as technology stocks, crowded them
out of the growth segment of the Russell 1000/(R)/ Index.
TOP TEN EQUITY HOLDINGS
(as a percent of Total Investments) October 31, 2000
Exxon Mobil Corp. 4.0%
Citigroup, Inc. 3.6
SBC Communications, Inc. 2.5
Merck & Co., Inc. 2.3
Morgan Stanley Dean Witter & Co. 1.9
Fleetboston Financial Corp. 1.8
Johnson & Johnson 1.7
American International Group, Inc. 1.6
Morgan (J.P.) & Co., Inc. 1.6
Verizon Communications 1.6
PORTFOLIO CHARACTERISTICS
October 31, 2000
Current P/E Ratio 16.3x
Portfolio Price/Book Ratio 3.07x
Market Capitalization - $-Weighted Average 78.69 Bil
Number of Holdings 511
MONEY MANAGERS STYLE
Barclays Global Fund Advisors Value
Equinox Capital Management, Inc. Value
Westpeak Investment Advisors, L.P. Value
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* Equity III Fund Class I assumes initial investment on November 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.
++++ 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.
(S) 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 42
<PAGE>
EQUITY III FUND
STATEMENT OF NET ASSETS
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
COMMON STOCKS - 93.7%
AUTO AND TRANSPORTATION - 3.7%
Airborne Freight Corp. 200 2
AMR Corp. (a) 5,300 174
ArvinMeritor, Inc. 1,775 30
AutoZone, Inc. (a) 2,800 75
Bandag, Inc. 300 11
Burlington Northern, Inc. 7,800 207
CNF Transportation, Inc. 100 3
Delphi Automotive Systems Corp. 2,500 39
Delta Air Lines, Inc. 23,000 1,087
Eaton Corp. 500 34
Expeditors International of
Washington, Inc. 200 10
FedEx Corp. (a) 2,400 112
Ford Motor Co. 41,184 1,076
GATX Corp. 400 17
General Motors Corp. 29,012 1,802
Hertz Corp. Class A 500 16
Hunt (JB) Transportation
Services, Inc. 1,400 18
Lear Corp. (a) 800 22
Ryder System, Inc. 100 2
Southwest Airlines Co. 500 14
Swift Transportation Co., Inc. (a) 300 4
Trinity Industries, Inc. 200 5
UAL Corp. 100 4
Union Pacific Corp. 5,800 272
Visteon Corp. 1,143 21
----------
5,057
----------
CONSUMER DISCRETIONARY - 6.9%
AC Nielsen Corp. (a) 1,400 34
AT&T Corp. - Liberty Media Group
Class A (a) 59,565 1,072
Banta Corp. 900 21
Best Buy Co. (a) 1,300 65
BJ's Wholesale Club, Inc. (a) 400 13
Brinker International, Inc. (a) 1,600 63
Brunswick Corp. 8,200 159
Callaway Golf Co. 700 11
Catalina Marketing Corp. (a) 500 20
Cendant Corp. (a) 2,700 32
Chris Craft Industries, Inc. (a) 1,133 83
Circuit City Stores - Circuit
City Group 400 5
Clear Channel Communications, Inc. (a) 1,422 85
Costco Wholesale Corp. (a) 700 26
Darden Restaurants, Inc. 4,900 110
Disney (Walt) Co. 46,400 1,662
Donnelley (R.R.) & Sons Co. 4,500 97
Eastman Kodak Co. 1,900 85
EchoStar Communications Corp.
Class A (a) 300 14
Energizer Holdings, Inc. (a) 5,100 101
Federated Department Stores, Inc. (a) 2,200 72
Fluor Corp. 1,200 42
Gannett Co., Inc. 2,000 116
Harrah's Entertainment, Inc. (a) 1,600 46
Hasbro, Inc. 900 10
Home Depot, Inc. (The) 200 9
Infinity Broadcasting Corp.
Class A (a) 1,300 43
JC Penney & Co., Inc. 500 6
Kelly Services, Inc. Class A 200 4
Kimberly-Clark Corp. 4,200 277
Kmart Corp. (a) 4,300 26
Knight-Ridder, Inc. 2,100 106
Lancaster Colony Corp. 300 7
Limited, Inc. (The) 9,000 227
Liz Claiborne, Inc. 1,000 43
Lowe's Cos., Inc. 1,700 78
Manpower, Inc. 3,800 132
Marriott International, Inc. Class A 4,100 166
May Department Stores Co. 4,400 116
Maytag Corp. 300 9
McDonald's Corp. 4,400 136
McGraw-Hill, Inc. 4,200 270
MGM Grand, Inc. 6,400 221
Neiman Marcus Group, Inc. (The)
Class A (a) 3,800 141
New York Times Co. Class A 1,700 62
Newell Rubbermaid, Inc. 900 17
NTL, Inc. (a) 1,000 44
Office Depot, Inc. (a) 900 7
PanAmSat Corp. (a) 300 10
Park Place Entertainment Corp. (a) 1,400 18
Payless ShoeSource, Inc. (a) 700 41
Pittston Brink's Group 1,100 17
Reebok International, Ltd. (a) 300 6
Robert Half International, Inc. (a) 300 9
Ross Stores, Inc. 100 1
Russell Corp. 200 3
Sabre Holdings, Corp. 1,500 50
Safeguard Scientifics, Inc. (a) 800 12
Saks, Inc. (a) 1,200 12
Sears Roebuck & Co. 26,400 785
Shaw Industries, Inc. 1,300 24
Starbucks Corp. (a) 100 4
Starwood Hotels & Resorts
Worldwide, Inc. 900 27
43 Equity III Fund
<PAGE>
EQUITY III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Target Corp. 4,100 113
Tiffany & Co. 300 13
Time Warner, Inc. 1,300 99
TJX Cos., Inc. 200 5
Toys "R" Us, Inc. (a) 3,100 53
Tribune Co. 16,300 604
Tricon Global Restaurants, Inc. (a) 400 12
Tupperware Corp. 200 3
UnitedGlobalCom, Inc. Class A (a) 300 10
USA Networks, Inc. (a) 700 14
V.F. Corp. 200 5
Valassis Communications, Inc. (a) 100 3
Venator Group, Inc. (a) 800 11
Viacom, Inc. Class B (a) 18,597 1,058
Viad Corp. 300 6
Wal-Mart Stores, Inc. 1,000 45
Wallace Computer Services, Inc. 1,600 23
Wendy's International, Inc. 1,500 34
Westwood One, Inc. (a) 700 14
Whirlpool Corp. 1,700 75
----------
9,410
----------
CONSUMER STAPLES - 6.7%
Albertson's, Inc. 2,400 57
Anheuser-Busch Cos., Inc. 23,300 1,066
Campbell Soup Co. 500 15
Clorox Co. (The) 4,000 179
Coca-Cola Co. (The) 1,500 91
Coca-Cola Enterprises, Inc. 100 2
Colgate-Palmolive Co. 15,700 923
ConAgra, Inc. 1,000 21
Coors (Adolph) Co. Class B 600 38
Delhaize America, Inc. 1,569 27
Dreyers Grand Ice Cream, Inc. 200 5
Gillette Co. (The) 500 17
Heinz (H.J.) Co. 18,200 763
IBP, Inc. 2,100 43
Interstate Bakeries Corp. 1,500 21
Keebler Foods Co. 1,000 41
Kroger Co., (The)(a) 2,400 54
McCormick & Co., Inc. 2,100 67
Nabisco Group Holdings Corp. 2,100 61
Nabisco Holdings Corp. Class A 400 22
Pepsi Bottling Group, Inc. (The) 3,300 114
PepsiCo, Inc. 25,200 1,221
Philip Morris Cos., Inc. 37,000 1,355
Procter & Gamble Co. 24,100 1,722
Quaker Oats Co. (The) 2,400 196
R.J. Reynolds Tobacco Holdings, Inc. 6,600 236
Ralston-Purina Group 3,000 73
Safeway, Inc. (a) 1,800 98
Sara Lee Corp. 2,100 45
SuperValu, Inc. 900 14
SYSCO Corp. 8,000 417
Tyson Foods, Inc. Class A 2,200 24
UST Corp. 100 3
Winn-Dixie Stores, Inc. 2,700 51
Wrigley (Wm.), Jr. Co. 900 70
----------
9,152
----------
FINANCIAL SERVICES - 30.2%
AFLAC, Inc. 1,300 95
Allmerica Financial Corp. 300 19
Allstate Corp. 5,500 221
Ambac Financial Group, Inc. 700 56
American Express Co. 7,200 432
American General Corp. 11,900 958
American International Group, Inc. 22,775 2,232
AmSouth Bancorp 3,500 49
AON Corp. 11,100 460
Apartment Investment & Management
Co. Class A (b) 1,700 78
Associates First Capital Corp. Class A 6,400 238
AXA Financial, Inc. 1,100 59
BancWest Corp. 19,700 403
Bank of America Corp. 29,613 1,423
Bank of New York Co., Inc. 17,800 1,025
Bank One Corp. 26,300 960
BB&T Corp. 3,800 121
Bear Stearns Companies Inc. (The) 100 6
Block (H&R) Co., Inc. 600 21
Catellus Development Corp. (a)(b) 600 11
Charter One Financial, Inc. 105 2
Chase Manhattan Corp. 8,300 378
Chubb Corp. (The) 7,700 650
CIGNA Corp. 14,700 1,793
Cincinnati Financial Corp. 1,600 59
CIT Group, Inc. 900 16
Citigroup, Inc. 92,566 4,871
City National Corp. 13,400 461
Colonial BancGroup, Inc. 800 7
Comerica, Inc. 1,700 103
Commerce Bancshares, Inc. 6,000 215
Compass Bancshares, Inc. 800 15
Conseco, Inc. 1,600 11
Crescent Real Estate Equities, Inc. (b) 2,300 46
Dime Bancorp, Inc. 400 10
Donaldson, Lufkin & Jenrette, Inc. 900 81
Dow Jones & Co., Inc. 3,500 206
Duke-Weeks Realty Corp. (b) 2,600 62
Dun & Bradstreet Corp. (a) 100 2
Edwards (A.G.), Inc. 4,100 208
Equity III Fund 44
<PAGE>
EQUITY III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Equity Office Properties Trust (b) 2,613 79
Equity Residential Properties Trust (b) 300 14
Erie Indemnity Co. Class A 8,800 245
Everest Re Group, Ltd. 200 12
Federal Home Loan Mortgage Corp. 3,400 204
Federal National
Mortgage Association 23,800 1,833
FelCor Lodging Trust, Inc. (b) 1,300 29
FINOVA Group, Inc. 600 2
First Data Corp. 5,300 266
First Tennessee National Corp. 300 7
First Union Corp. 6,700 203
Firstar Corp. 5,900 116
FleetBoston Financial Corp. 66,600 2,531
Franchise Finance Corp. of America 1,200 24
Franklin Resources, Inc. 600 26
Fulton Financial Corp. 530 12
General Growth Properties, Inc. (b) 200 6
Golden State Bancorp, Inc. 5,500 144
Golden West Financial Corp. 17,000 953
Goldman Sachs Group, Inc. (The) 2,900 289
Greenpoint Financial Corp. 700 21
Hartford Financial Services
Group, Inc. (The) 12,500 930
Hibernia Corp. Class A 1,800 21
Household International, Inc. 4,900 247
Jefferson-Pilot Corp. 5,800 399
John Hancock Financial
Services, Inc. (a) 200 6
KeyCorp 5,200 128
Lehman Brothers Holdings, Inc. 8,900 574
Liberty Property Trust (b) 100 3
Lincoln National Corp. 1,600 77
Loews Corp. 12,300 1,119
Marsh & McLennan Cos., Inc. 2,600 340
Marshall & Ilsley Corp. 200 9
MBNA Corp. 2,000 75
Mellon Financial Corp. 2,600 125
Mercantile Bankshares Corp. 3,900 147
Merrill Lynch & Co., Inc. 15,500 1,085
MGIC Investment Corp. 7,200 491
MONY Group, Inc. (The) 7,900 325
Moody's Corp. (a) 200 5
Morgan (J.P.) & Co., Inc. 13,100 2,168
Morgan Stanley Dean Witter & Co. 31,600 2,538
National City Corp. 6,200 133
National Commerce Bancorp 500 11
North Fork Bancorp, Inc. 800 16
Northern Trust Corp. 1,900 162
Old Kent Financial Corp. 630 17
Old Republic International Corp. 500 13
Paine Webber Group, Inc. 400 29
PMI Group, Inc. (The) 4,800 355
PNC Bank Corp. 13,200 883
Popular, Inc. 400 11
Radian Group, Inc. 4,000 284
Regions Financial Corp. 1,600 38
Reinsurance Group of America 200 7
Simon Property Group, Inc. (b) 1,700 38
SouthTrust Corp. 1,800 58
Spieker Properties, Inc. (b) 100 6
St. Paul Cos., Inc. 19,000 974
State Street Corp. 500 62
Stilwell Financial, Inc. 500 22
SunTrust Banks, Inc. 1,500 73
Synovus Financial Corp. 13,900 300
TCF Financial Corp. 800 32
Torchmark Corp. 600 20
U.S. Bancorp 7,400 179
UnionBanCal Corp. 9,700 204
UnumProvident Corp. 2,200 61
USA Education, Inc. 1,500 83
Wachovia Corp. 800 42
Washington Mutual, Inc. 9,400 413
Wells Fargo Co. 11,062 511
----------
40,928
----------
HEALTH CARE - 8.4%
Abbott Laboratories 7,500 396
Allergan, Inc. 500 42
Bausch & Lomb, Inc. 700 27
Baxter International, Inc. 3,800 312
Becton, Dickinson & Co. 900 30
Boston Scientific Corp. (a) 3,400 54
Bristol-Myers Squibb Co. 23,900 1,456
Cardinal Health, Inc. 2,700 256
Covance, Inc. (a) 400 3
DENTSPLY International, Inc. 6,300 219
First Health Group Corp. (a) 300 12
Forest Labs, Inc. (a) 400 53
Foundation Health Systems, Inc. (a) 800 16
Genzyme Corp. (a) 300 21
Gilead Sciences, Inc. (a) 200 17
HCA-The Healthcare Co. 27,450 1,096
HEALTHSOUTH Corp. (a) 1,900 23
Humana, Inc. (a) 1,100 13
ICOS Corp. (a) 100 5
Johnson & Johnson 26,000 2,395
Lilly (Eli) & Co. 300 27
Merck & Co., Inc. 35,500 3,193
PacifiCare Health Systems, Inc. (a) 300 3
Perrigo Co. (a) 1,000 7
45 Equity III Fund
<PAGE>
EQUITY III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Pfizer, Inc. 400 17
Pharmacia Corp. 2,488 137
St. Jude Medical, Inc. (a) 100 6
Steris Corp. (a) 1,000 15
Stryker Corp. 1,000 47
Tenet Healthcare Corp. 12,100 476
Trigon Healthcare, Inc. (a) 100 7
United Health Corp (a) 4,500 492
Universal Health Services, Inc.
Class B (a) 400 34
Watson Pharmaceuticals, Inc. (a) 5,200 326
Wellpoint Health Networks, Inc. (a) 1,700 199
----------
11,432
----------
INTEGRATED OILS - 8.2%
Amerada Hess Corp. 18,200 1,128
Burlington Resources, Inc. 1,500 54
Chevron Corp. 17,400 1,429
Coastal Corp. 1,100 83
Conoco, Inc. Class B 4,900 133
Exxon Mobil Corp. 61,253 5,463
Helmerich & Payne, Inc. 700 22
Murphy Oil Corp. 800 46
Occidental Petroleum Corp. 15,000 298
Phillips Petroleum Co. 22,000 1,359
Texaco, Inc. 3,000 177
Unocal Corp. 23,500 802
USX-Marathon Group 4,900 134
----------
11,128
----------
MATERIALS AND PR OCESSING - 4.0%
Air Products & Chemicals, Inc. 1,900 71
AK Steel Holding Corp. 500 5
Albemarle Corp. (a) 1,500 35
Alcoa, Inc. 5,560 160
Allegheny Technologies, Inc. 100 2
American Standard Cos., Inc. (a) 1,500 69
Archer-Daniels-Midland Co. 17,935 197
Barrick Gold Corp. 1,400 19
Bowater, Inc. 1,000 54
Centex Corp. 6,500 241
Dow Chemical Co. 37,624 1,152
du Pont (E.I.) de Nemours 17,600 799
Eastman Chemical Co. 2,000 86
Ecolab, Inc. 200 8
FMC Corp. (a) 400 30
Freeport-McMoRan Copper & Gold,
Inc. Class B (a) 500 4
Georgia-Pacific Group 1,300 35
Harsco Corp. 500 10
Illinois Tool Works, Inc. 300 17
IMC Global, Inc. 2,000 26
International Paper Co. 1,865 68
Johns Manville Corp. 1,800 17
Lafarge Corp. 500 9
Longview Fibre Co. 500 7
Louisiana Pacific Corp. 1,100 9
Lyondell Petrochemical Co. 1,600 23
Masco Corp. 700 13
Minnesota Mining &
Manufacturing Co. 15,000 1,449
Nucor Corp. 1,000 35
PPG Industries, Inc. 800 36
Praxair, Inc. 1,100 41
Sigma Aldrich Corp. 1,500 54
Smurfit-Stone Container Corp. (a) 500 7
Standard Register Co. 300 4
Timken Co. 1,500 21
Tyco International, Ltd. 2,233 126
Union Carbide Corp. 800 33
US Industries, Inc. 300 3
USX-U.S. Steel Group 100 2
Washington Group International, Inc.
2003 warrants (a) 350 1
Westvaco Corp. 10,000 284
Weyerhaeuser Co. 1,400 65
Willamette Industries, Inc. 1,400 51
----------
5,378
----------
OTHER ENERGY - 1.8%
Anadarko Petroleum Corp. 755 48
Apache Corp. 3,100 171
Baker Hughes, Inc. 3,000 103
Devon Energy Corp. 242 12
El Paso Energy Corp. 400 25
ENSCO International, Inc. 1,200 40
EOG Resources, Inc. 600 24
Flowserve Corp. 600 12
Halliburton Co. 700 26
Kerr-McGee Corp. 1,700 111
Noble Drilling Corp. (a) 3,000 125
Ocean Energy, Inc. (a) 1,600 22
Pioneer Natural Resources Co. (a) 600 8
Sempra Energy 24,000 497
Smith International, Inc. (a) 200 14
Tosco Corp. 1,100 31
TXU Corp. 17,500 649
Ultramar Diamond Shamrock Corp. 18,300 480
Weatherford International, Inc. (a) 200 8
----------
2,406
----------
Equity III Fund 46
<PAGE>
EQUITY III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
PRODUCER DURABLES - 6.5%
B.F. Goodrich Co. 1,300 53
Beckman Coulter, Inc. 6,000 420
Boeing Co. (The) 23,000 1,560
Caterpillar, Inc. 5,900 207
Clayton Homes, Inc. 200 2
Crane Co. 900 24
Danaher Corp. 700 44
Deere & Co. 15,500 571
Dover Corp. 8,100 344
Emerson Electric Co. 2,900 213
General Dynamics Corp. 200 14
General Electric Co. 25,700 1,409
Honeywell International, Inc. 4,600 248
Ingersoll-Rand Co. 300 11
ITT Industries, Inc. 1,800 59
Johnson Controls, Inc. 1,600 95
Kennametal, Inc. 1,400 41
Lennar Corp. 9,700 312
Litton Industries, Inc. (a) 700 36
Lockheed Martin Corp. 23,600 846
Molex, Inc. 225 12
Northrop Grumman Corp. 1,000 84
Pall Corp. 100 2
Parker-Hannifin Corp. 6,000 248
Pitney Bowes, Inc. 1,400 42
Republic Services, Inc. (a) 900 12
Rockwell International Corp. 2,400 94
SPX Corp. (a) 100 12
Steelcase, Inc. Class A 4,800 85
Stewart & Stevenson Services, Inc. 900 21
Teradyne, Inc. (a) 400 13
Textron, Inc. 15,700 792
United Technologies Corp. 10,700 747
Waste Management, Inc. 3,600 72
Xerox Corp. 2,200 18
----------
8,763
----------
TECHNOLOGY - 6.7%
3Com Corp. (a) 1,300 23
Advanced Micro Devices, Inc. (a) 1,600 36
Agilent Technologies, Inc. (a) 200 9
Altera Corp. (a) 300 12
America Online, Inc. (a) 100 5
Analog Devices, Inc. (a) 200 13
Apple Computer, Inc. (a) 2,300 45
At Home Corp. Series A (a) 600 6
Avnet, Inc. 6,200 167
AVX Corp. 5,500 157
Cabletron Systems, Inc. (a) 1,700 46
Cadence Design Systems, Inc. (a) 700 18
Cisco Systems, Inc. (a) 500 27
Comdisco, Inc. 6,600 81
COMPAQ Computer Corp. 34,600 1,052
Computer Associates
International, Inc. 20,700 660
Computer Sciences Corp. (a) 400 25
Corning, Inc. 400 31
Critical Path, Inc. (a) 100 5
Dell Computer Corp. (a) 2,100 62
DST Systems, Inc. (a) 1,300 80
Electronic Data Systems Corp. 4,100 192
Galileo International, Inc. 500 10
General Motors Corp. Class H (a) 1,034 34
GTECH Holdings Corp. (a) 1,400 24
Hewlett-Packard Co. 15,400 715
Ikon Office Solutions, Inc. 1,000 3
IMS Health, Inc. 2,000 47
Integrated Device Technology, Inc. (a) 100 6
Intel Corp. 14,212 639
International Business
Machines Corp. 9,300 916
Internet Capital Group, Inc. (a) 1,100 15
Intuit, Inc. (a) 500 31
Keane, Inc. (a) 700 9
Kemet Corp. (a) 1,000 28
MarchFirst, Inc. (a) 600 3
Metromedia Fiber Network, Inc.
Class A (a) 800 15
Microchip Technology, Inc. (a) 600 19
Motorola, Inc. 16,200 404
NCR Corp. (a) 500 22
Nortel Networks Corp. 1,300 59
Novell, Inc. (a) 500 4
Oracle Systems Corp. (a) 400 13
Palm, Inc. (a) 176 9
PerkinElmer, Inc. 100 12
QUALCOMM, Inc. (a) 100 7
Quantum Corp. - DLT &
Storage Systems (a) 2,100 32
Qwest Communications
International, Inc. (a) 18,205 885
RadioShack, Corp. 100 6
Seagate Technology (a) 900 63
Storage Technology Corp. (a) 800 8
Structural Dynamics
Research Corp. (a) 800 8
Sun Microsystems, Inc. (a) 500 55
SunGard Data Systems (a) 900 46
Sybase, Inc. (a) 700 15
Symantec Corp. (a) 200 8
Total Systems Services, Inc. 900 15
47 Equity III Fund
<PAGE>
EQUITY III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Veritas Software Corp. (a) 300 42
Verizon Communications 37,038 2,141
Vishay Intertechnology, Inc. (a) 1,150 34
----------
9,154
----------
UTILITIES - 10.6%
ADC Telecommunications, Inc. (a) 100 2
Allegheny Energy, Inc. 100 4
Alltel Corp. 1,500 97
Ameren Corp. 600 24
American Electric Power Co., Inc. 8,780 364
AT&T Corp. 49,816 1,155
AT&T Wireless Group (a) 600 15
BellSouth Corp. 40,600 1,961
BroadWing, Inc. (a) 6,600 186
Cablevision Systems Corp.
Class A (a) 500 37
Centennial Cellular Corp. Class A (a) 400 8
CenturyTel, Inc. 800 31
Columbia Energy Group 500 36
Comcast Corp. Special Class A (a) 6,700 273
Consolidated Edison, Inc. 1,800 63
Cox Communications, Inc. Class A (a) 1,200 53
Dominion Resources, Inc. 1,200 71
DTE Energy Co. 1,200 43
Dycom Industries, Inc. (a) 2,500 94
Edison International 2,200 53
Energy East Corp. 100 2
Enron Corp. 7,100 583
Entergy Corp. 900 34
Exelon Corp. (a) 1,050 63
FirstEnergy Corp. 8,600 223
Florida Progress Corp. 600 32
FPL Group, Inc. 10,600 700
Idacorp, Inc. 16,700 824
KeySpan Corp. 2,600 91
Level 3 Communications, Inc. (a) 400 19
MCN Energy Group, Inc. 600 15
National Fuel Gas Co. 5,000 268
Northeast Utilities 600 12
OGE Energy Corp. 100 2
PG&E Corp. 33,800 910
Pinnacle West Capital Corp. 2,200 96
Powerwave Technologies, Inc. (a) 100 5
PPL Corp. 8,700 358
Public Service Enterprise Group, Inc. 3,900 162
Questar Corp. 800 22
Reliant Energy, Inc. 20,900 863
SBC Communications, Inc. 60,000 3,461
SCANA Corp. 200 5
Southern Co. 2,500 73
Sprint Corp. (Fon Group) 5,300 135
Telephone & Data Systems, Inc. 800 84
Viacom, Inc. Class A (a) 200 11
West TeleServices Corp. (a) 200 6
Western Resources, Inc. 700 16
Williams Cos. (The) 1,000 42
WorldCom, Inc. (a) 26,550 629
Xcel Energy, Inc. 1,140 29
----------
14,345
----------
TOTAL COMMON STOCKS
(cost $107,148) 127,153
----------
PRINCIPAL
AMOUNT
(000)
$
------------
SHORT-TERM INVESTMENTS - 7.4%
Frank Russell Investment Company Money
Market Fund,
due on demand (c) 8,628 8,628
United States Treasury Bills (c)(d)(e)
5.925% due 12/21/00 400 397
5.940% due 12/21/00 1,000 992
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $10,017) 10,017
----------
TOTAL INVESTMENTS - 101.1%
(identified cost $117,165) 137,170
OTHER ASSETS AND LIABILITIES,
NET - (1.1%) (1,438)
----------
NET ASSETS - 100.0% 135,732
==========
(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.
See accompanying notes which are an integral part of the financial statements.
Equity III Fund 48
<PAGE>
EQUITY III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
FUTURES CONTRACTS CONTRACTS (000)
----------- ----------------
S&P Barra Value Index
expiration date 12/00 27 $ (27)
S&P 500 Index
expiration date 12/00 17 120
----------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ 93
================
See accompanying notes which are an integral part of the financial statements.
49 Equity III Fund
<PAGE>
EQUITY III FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) October 31, 2000
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $117,165) ..................................... $ 137,170
Receivables:
Dividends ............................................................................ 163
Investments sold ..................................................................... 26
Fund shares sold ..................................................................... 46
Daily variation margin on futures contracts .......................................... 168
Prepaid expenses ...................................................................... 5
---------
Total assets ....................................................................... 137,578
LIABILITIES
Payables:
Investments purchased .................................................. $ 1,324
Fund shares redeemed ................................................... 386
Accrued fees to affiliates ............................................. 85
Other accrued expenses ................................................. 51
---------
Total liabilities .................................................................. 1,846
---------
NET ASSETS ............................................................................ $ 135,732
=========
NET ASSETS CONSIST OF:
Undistributed net investment income ................................................... $ 44
Accumulated net realized gain (loss) ................................................. (4,915)
Unrealized appreciation (depreciation) on:
Investments .......................................................................... 20,005
Futures contracts .................................................................... 93
Shares of beneficial interest ......................................................... 52
Additional paid-in capital ............................................................ 120,453
---------
NET ASSETS ............................................................................ $ 135,732
=========
NET ASSET VALUE, offering and redemption price per share:
Class E ($6,327,438 divided by 240,421 shares of $.01 par value
shares of beneficial interest outstanding) ........................................ $ 26.32
=========
Class I ($129,404,913 divided by 4,914,747 shares of $.01 par value
shares of beneficial interest outstanding) ........................................ $ 26.33
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Equity III Fund 50
<PAGE>
EQUITY III FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Dividends ................................................... $ 2,234 $ 3,746
Dividends from Money Market Fund ............................ 366 479
Interest .................................................... 40 106
-------- --------
Total investment income ................................... 2,640 4,331
-------- --------
EXPENSES
Advisory fees ............................................... 673 1,080
Administrative fees ......................................... 62 99
Custodian fees .............................................. 186 148
Transfer agent fees ......................................... 88 99
Professional fees ........................................... 38 20
Registration fees ........................................... 41 77
Shareholder servicing fees - Class E ........................ 14 10
Trustees' fees .............................................. 11 6
Miscellaneous ............................................... 38 34
-------- --------
Expenses before reductions .................................. 1,151 1,573
Expense reductions .......................................... (1) --
-------- --------
Expenses, net ............................................. 1,150 1,573
-------- --------
Net investment income ........................................ 1,490 2,758
-------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ................................................. (8,360) 14,007
Futures contracts ........................................... (624) 1,696
-------- --------
(8,984) 15,703
-------- --------
Net change in unrealized appreciation (depreciation) on:
Investments ................................................. 7,654 (18,033)
Futures contracts ........................................... (179) (276)
-------- --------
7,475 (18,309)
-------- --------
Net realized and unrealized gain (loss) ..................... (1,509) (2,606)
-------- --------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ........ $ (19) $ 152
======== ========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
51 Equity III Fund
<PAGE>
EQUITY III FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income ................................................ $ 1,490 $ 2,758 $ 3,613
Net realized gain (loss) ............................................. (8,984) 15,703 28,478
Net change in unrealized appreciation (depreciation) ................. 7,475 (18,309) (9,816)
--------- --------- ---------
Net increase (decrease) in net assets from operations .............. (19) 152 22,275
--------- --------- ---------
DISTRIBUTIONS
From net investment income
Class E ............................................................ (58) (52) --
Class I ............................................................ (1,388) (2,693) (3,541)
From net realized gain
Class E ............................................................ -- (545) --
Class I ............................................................ -- (16,024) (25,167)
--------- --------- ---------
Net decrease in net assets from distributions .................... (1,446) (19,314) (28,708)
--------- --------- ---------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ........ (39,091) (15,041) (25,188)
--------- --------- ---------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ........................... (40,556) (34,203) (31,621)
NET ASSETS
Beginning of period .................................................. 176,288 210,491 242,112
--------- --------- ---------
End of period (including undistributed net investment income of
$44 at October 31, 2000 and $72 at December 31, 1998) .............. $ 135,732 $ 176,288 $ 210,491
========= ========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Equity III Fund 52
<PAGE>
EQUITY III 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.
2000* 1999**
--------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD .................. $ 26.18 $ 30.27
--------- ---------
INCOME FROM OPERATIONS
Net investment income (a) ........................... .20 .21
Net realized and unrealized gain (loss) ............. .15 (2.12)
--------- ---------
Total income from operations ....................... .35 (1.91)
--------- ---------
DISTRIBUTIONS
From net investment income ........................... (.21) (.25)
From net realized gain ............................... -- (1.93)
--------- ---------
Total distributions ................................ (.21) (2.18)
--------- ---------
NET ASSET VALUE, END OF PERIOD ........................ $ 26.32 $ 26.18
========= =========
TOTAL RETURN (%)(b) .................................. 1.40 (6.13)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ............ 6,327 7,927
Ratios to average net assets (%)(c):
Operating expenses ................................. 1.17 1.03
Net investment income .............................. .97 1.25
Portfolio turnover rate (%) ......................... 108.39 146.28
* For the ten months ended October 31, 2000.
** 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) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
53 Equity III Fund
<PAGE>
EQUITY III FUND
FINANCIAL HIGHLIGHTS - CLASS I
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
2000* 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............... $ 26.18 $ 29.12 $ 29.80 $ 29.68 $ 29.11 $ 24.18
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM OPERATIONS
Net investment income (a) ........................ .25 .40 .47 .60 .70 .82
Net realized and unrealized gain (loss) ......... .15 (.41) 2.75 8.69 5.10 7.73
---------- ---------- ---------- ---------- ---------- ----------
Total income from operations .................... .40 (.01) 3.22 9.29 5.80 8.55
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS
From net investment income ........................ (.25) (.40) (.47) (.61) (.71) (.83)
From net realized gain ............................ -- (2.53) (3.43) (8.56) (4.52) (2.79)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions ............................. (.25) (2.93) (3.90) (9.17) (5.23) (3.62)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD ..................... $ 26.33 $ 26.18 $ 29.12 $ 29.80 $ 29.68 $ 29.11
========== ========== ========== ========== ========== ==========
TOTAL RETURN (%)(b)(c) ............................. 1.59 .25 11.53 33.13 20.90 35.96
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ......... 129,405 168,361 210,491 242,112 221,778 222,541
Ratios to average net assets (%)(c)(d):
Operating expenses .............................. .92 .79 .74 .78 .79 .65
Net investment income ........................... 1.22 1.39 1.54 1.77 2.23 2.90
Portfolio turnover rate (%) ...................... 108.39 146.28 135.53 128.86 100.78 $ 103.40
</TABLE>
* For the ten months ended October 31, 2000.
(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) Prior to April 1, 1995, Fund performance, operating expenses, and net
investment income do not include any management fees paid to the Manager or
money managers. For periods thereafter, they are reported net of investment
management fees but gross of any investment services fees. See Note 4.
(d) The ratios for periods less than one year are annualized.
Equity III Fund 54
<PAGE>
EQUITY Q FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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/(R)/ Index. The Fund employed the investment management services of
four managers using four distinctive quantitative approaches to investment.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
DATES EQUITY Q - CLASS I++ RUSSELL 1000(R)**
<S> <C> <C>
Inception* $10,000 $0
1991 $13,668 $13,659
1992 $15,021 $15,127
1993 $18,152 $17,515
1994 $18,832 $18,058
1995 $23,994 $22,935
1996 $29,605 $28,192
1997 $39,246 $37,168
1998 $46,297 $44,495
1999 $58,937 $55,878
2000 $64,305 $60,939
---------- -------- ---------
Total $338,057 $313,966
========== ======== =========
Yearly periods ended October 31
</TABLE>
<TABLE>
<CAPTION>
EQUITY Q FUND - CLASS I EQUITY Q FUND - CLASS Y ++++++
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
------------- --------- ------ ------------- --------- ------
<S> <C> <C> <C> <C> <C>
1 Year $10,911 9.11% 1 Year $10,913 9.13%
5 Years $26,801 21.77%(S) 5 Years $26,807 21.78%(S)
10 Years $64,305 20.44%(S) 10 Years $64,319 20.44%(S)
<CAPTION>
EQUITY Q FUND - CLASS E ++++ RUSSELL 1000/(R)/ INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
------------- --------- ------ ------------- --------- ------
<S> <C> <C> <C> <C> <C>
1 Year $10,882 8.82% 1 Year $10,906 9.06%
5 Years $26,716 21.69%(S) 5 Years $26,571 21.59%(S)
10 Years $64,101 20.40%(S) 10 Years $60,939 19.81%(S)
</TABLE>
55 Equity Q Fund
<PAGE>
EQUITY Q FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the ten months ended October 31, 2000, the Equity Q Fund Class I, Class E
and Class Y shares gained 0.40%, 0.17% and 0.42%, respectively, as compared to
the Russell 1000/(R)/ Index, which gained 0.28%.
The Fund's performance was influenced by the market's first quarter shift from
an emphasis on growth stocks to an environment that favored value issues. This
factor, coupled with the market's extreme volatility, provided continual
challenges for both diversified investors and active managers. However, through
maintaining full exposure to all economic sectors, the Fund's managers were able
to mitigate some of the market's unpredictability.
PORTFOLIO HIGHLIGHTS
Investor enthusiasm and speculation dominated the market during the first
quarter, with growth stocks, particularly the technology and Internet-related
shares, posting extraordinary returns. Further complicating matters for
diversified investors, sector concentration, notably in the Technology arena,
provided an exceptionally narrow window for investment opportunities.
The Fund's market-oriented managers faced this challenging environment by
capitalizing on their risk-controlled sector constraints. Early in the period,
the managers' benchmark-mandated sector exposures in Producer Durables (e.g.
Nokia), Technology (Cisco, Oracle, Texas Instruments), and Financial Services
(Morgan Stanley) boosted returns.
During the final months of the period, the managers generally maintained caution
by assuming a more conservative investment discipline with regard to valuation.
Given concerns over earnings estimates and the uncertainty surrounding the
presidential election, the Fund's managers retained more positions in order to
control risk levels versus their strategy during more stable market conditions.
Some solid late-period stock decisions included benchmark-relative underweight
positions in Lucent (Technology) and Sprint (Utilities), and overweights in Sun
Microsystems (Technology), Alza (Health Care), Citigroup (Financials), and
Lehman (Financials).
TOP TEN EQUITY HOLDINGS
(as a percent of Total Investments) October 31, 2000
General Electric Co. 4.4%
Cisco Systems, Inc. 3.3
Citigroup, Inc. 2.5
Exxon Mobil Corp. 2.5
Microsoft Corp. 2.2
Merck & Co., Inc. 2.1
Sun Microsystems, Inc. 2.1
Intel Corp. 2.1
American International Group, Inc. 1.6
Oracle Systems Corp. 1.6
PORTFOLIO CHARACTERISTICS
October 31, 2000
Current P/E Ratio 21.2x
Portfolio Price/Book Ratio 4.44x
Market Capitalization - $-Weighted Average 124.11 Bil
Number of Holdings 573
MONEY MANAGERS STYLE
Barclays Global Fund Advisors Market-Oriented
Franklin Portfolio Associates, LLC Market-Oriented
J.P. Morgan Investment Management, Inc. Market-Oriented
Jacobs Levy Equity Management, Inc. Market-Oriented
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* Equity Q Fund Class I assumes initial investment on November 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/(R)/ Index represents the universe of
stocks from which most active money managers typically select. The
Russell 1000/(R)/ 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.
++++ 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.
++++++ Equity Q Fund Class I performance has been linked with Class Y to provide
historical perspective.
(S) 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 56
<PAGE>
EQUITY Q FUND
STATEMENT OF NET ASSETS
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
COMMON STOCKS - 97.2%
AUTO AND TRANSPORTATION - 2.4%
AMR Corp. (a) 33,100 1,084
ArvinMeritor, Inc. New 23,550 394
AutoNation, Inc. (a) 16,300 110
AutoZone, Inc. (a) 31,000 831
Burlington Northern, Inc. 98,000 2,603
C.H. Robinson Worldwide, Inc. 5,000 273
Dana Corp. 27,400 608
Delphi Automotive Systems Corp. 73,025 1,146
Delta Air Lines, Inc. 66,700 3,152
Eaton Corp. 21,900 1,491
Expeditors International of Washington,
Inc. 6,300 326
FedEx Corp. (a) 300 14
Ford Motor Co. 326,018 8,517
General Motors Corp. 115,744 7,191
Harley-Davidson, Inc. 36,700 1,768
Kansas City Southern Industries, Inc. (a) 135,600 1,178
Lear Corp. (a) 19,200 523
Northwest Airlines Corp. Class A (a) 1,200 34
PACCAR, Inc. 3,900 164
Trinity Industries, Inc. 6,300 152
UAL Corp. 12,600 478
Union Pacific Corp. 35,900 1,683
Visteon Corp. 20,568 363
-----------
34,083
-----------
CONSUMER DISCRETIONARY - 8.4%
Abercrombie & Fitch Co. Class A (a) 15,700 370
Advo Systems, Inc. (a) 7,100 261
Amazon.com, Inc. (a) 6,700 245
AT&T Corp. - Liberty Media Group Class
A (a) 303,400 5,461
Banta Corp. 13,500 311
Best Buy Co. (a) 83,600 4,196
BHC Communications, Inc. Class A 500 72
BJ's Wholesale Club, Inc. (a) 5,100 168
Brunswick Corp. 91,100 1,771
Callaway Golf Co. 40,600 650
CBRL Group, Inc. 9,000 160
Cendant Corp. (a) 181,900 2,183
Cheesecake Factory, Inc. (The) (a) 5,250 232
Clear Channel Communications, Inc. (a) 27,300 1,640
Convergys Corp. (a) 17,100 745
Darden Restaurants, Inc. 118,000 2,655
Diamond Technology Partners, Inc. (a) 1,500 67
Disney (Walt) Co. 257,503 9,222
Donnelley (R.R.) & Sons Co. 48,500 1,043
Eastman Kodak Co. 100 4
Energizer Holdings, Inc. (a) 28,133 556
Estee Lauder Cos., Class A 11,100 515
Federated Department Stores, Inc. (a) 33,100 1,078
Fortune Brands, Inc. 18,930 557
Fox Entertainment Group, Inc.
Class A (a) 4,600 99
Gannett Co., Inc. 46,091 2,673
Gap, Inc. 79,300 2,047
Gemstar-TV Guide International, Inc. (a) 8,800 603
Hasbro, Inc. 18,300 197
Home Depot, Inc. (The) 176,890 7,606
Infinity Broadcasting Corp. Class A (a) 19,200 638
Interpublic Group Cos., Inc. 2,860 123
JC Penney & Co., Inc. 42,800 500
Jones Apparel Group, Inc. (a) 18,700 520
Kimberly-Clark Corp. 33,359 2,202
Kmart Corp. (a) 37,500 223
Knight-Ridder, Inc. 10,300 518
Kohl's Corp. (a) 30,500 1,653
Learning Tree International, Inc. (a) 6,100 275
Limited, Inc. (The) 41,100 1,038
Lowe's Cos., Inc. 56,900 2,600
Marriott International, Inc. Class A 17,900 725
May Department Stores Co. 51,900 1,362
McDonald's Corp. 8,500 264
New York Times Co. Class A 5,200 191
NIKE, Inc. Class B 17,200 687
Office Depot, Inc. (a) 29,183 243
Omnicom Group, Inc. 23,370 2,156
Payless ShoeSource, Inc. (a) 15,600 904
Penton Media, Inc. 4,800 147
Pier 1 Imports, Inc. 26,400 350
Plantronics, Inc. (a) 13,400 611
Priceline.com, Inc. (a) 1,100 6
Russell Corp. 1,900 30
Sabre Holdings, Corp. 42,000 1,404
Safeguard Scientifics, Inc. (a) 3,600 55
Sears Roebuck & Co. 254,184 7,557
Shaw Industries, Inc. 33,500 622
Starwood Hotels & Resorts
Worldwide, Inc. 14,300 424
Target Corp. 94,510 2,611
TeleTech Holdings, Inc. (a) 23,600 655
The Men's Wearhouse, Inc. (a) 10,500 307
Tiffany & Co. 35,200 1,503
Time Warner, Inc. 181,700 13,793
TJX Cos., Inc. 46,100 1,256
TMP Worldwide, Inc. (a) 14,100 981
Toys "R" Us, Inc. (a) 105,000 1,805
Tribune Co. 20,504 760
Tupperware Corp. 23,500 402
United Stationers, Inc. (a) 5,900 177
57 Equity Q Fund
<PAGE>
EQUITY Q FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Univision Communications, Inc.
Class A (a) 1,000 38
Venator Group, Inc. (a) 16,000 226
Viacom, Inc. Class B (a) 75,112 4,272
Wal-Mart Stores, Inc. 281,943 12,793
Westwood One, Inc. (a) 6,900 131
Whirlpool Corp. 33,700 1,465
Zale Corp. (a) 22,300 754
-----------
119,344
-----------
CONSUMER STAPLES - 4.6%
Albertson's, Inc. 1,117 26
Anheuser-Busch Cos., Inc. 71,340 3,264
Clorox Co. (The) 27,400 1,223
Coca-Cola Co. (The) 13,600 821
Colgate-Palmolive Co. 30,000 1,763
ConAgra, Inc. 96,556 2,064
Delhaize America, Inc. 5,800 99
Gillette Co. (The) 123,000 4,290
Heinz (H.J.) Co. 29,400 1,233
Hormel Foods Corp. 88,500 1,488
IBP, Inc. 154,900 3,185
International Flavors & Fragrances, Inc. 29,000 486
Interstate Bakeries Corp. 27,000 378
Keebler Foods Co. 12,500 506
Kellogg Co. 21,400 543
Kroger Co. (a) 81,300 1,834
Nabisco Group Holdings Corp. 10,500 303
Nabisco Holdings Corp. Class A 1,800 97
Pepsi Bottling Group, Inc. (The) 65,900 2,282
PepsiCo, Inc. 177,400 8,593
Philip Morris Cos., Inc. 370,839 13,582
Procter & Gamble Co. 89,200 6,372
Quaker Oats Co. (The) 15,000 1,223
R.J. Reynolds Tobacco Holdings, Inc. 34,600 1,237
Safeway, Inc. (a) 30,425 1,664
Sara Lee Corp. 4,187 90
Smithfield Foods, Inc. (a) 5,600 161
SuperValu, Inc. 800 12
SYSCO Corp. 51,125 2,668
Tyson Foods, Inc. Class A 17,800 199
Unilever 42,200 2,144
Universal Corp. 31,400 879
Walgreen Co. 22,700 1,036
Winn-Dixie Stores, Inc. 5,000 97
-----------
65,842
-----------
FINANCIAL SERVICES - 15.6%
Aetna, Inc. 29,900 1,729
Affiliated Managers Group, Inc. (a) 8,100 487
AFLAC, Inc. 5,700 416
Allstate Corp. 111,900 4,504
Ambac Financial Group, Inc. 11,900 950
American General Corp. 300 24
American International Group, Inc. 232,305 22,766
American National Insurance Co. 1,600 107
AmSouth Bancorp 89,575 1,248
AON Corp. 13,400 555
Apartment Investment & Management Co.
Class A 1,200 55
Associates First Capital Corp. Class A 89,200 3,312
Astoria Financial Corp. 14,300 536
AXA Financial, Inc. 28,100 1,519
Bank of America Corp. 275,923 13,262
Bank One Corp. 36,800 1,343
Banknorth Group, Inc. 11,200 203
BB&T Corp. 900 29
Bear Stearns Companies Inc. (The) 28,570 1,732
Charter One Financial, Inc. 11,135 255
Chase Manhattan Corp. 98,082 4,463
CIGNA Corp. 13,800 1,683
Cincinnati Financial Corp. 6,800 250
CIT Group, Inc. 73,900 1,289
Citigroup, Inc. 672,597 35,395
City National Corp. 1,200 41
CNA Financial Corp. (a) 7,900 288
Comerica, Inc. 29,100 1,755
Conseco, Inc. 97,500 676
Countrywide Credit Industries, Inc. 29,200 1,093
Dime Bancorp, Inc. 19,800 484
Dow Jones & Co., Inc. 22,800 1,342
E*TRADE Group, Inc. (a) 39,000 568
Edwards (A.G.), Inc. 19,000 964
Federal Home Loan Mortgage Corp. 142,784 8,567
Federal National Mortgage Association 116,600 8,978
Federated Investors, Inc. Class B 16,050 467
FelCor Lodging Trust, Inc. 8,900 195
FINOVA Group, Inc. 16,100 41
First Data Corp. 50,800 2,546
First Tennessee National Corp. 9,300 214
First Union Corp. 70,700 2,143
Firstar Corp. 32,800 646
FleetBoston Financial Corp. 110,792 4,210
Franklin Resources, Inc. 23,500 1,007
Golden State Bancorp, Inc. 29,800 779
Golden West Financial Corp. 10,700 600
Goldman Sachs Group, Inc. 64,700 6,458
Greater Bay Bancorp 2,200 72
Greenpoint Financial Corp. 19,800 589
Hartford Financial Services
Group, Inc. (The) 26,200 1,950
Heller Financial, Inc. Class A 4,900 143
Equity Q Fund 58
<PAGE>
EQUITY Q FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Hibernia Corp. Class A (a) 15,600 186
Household International, Inc. 21,100 1,062
John Hancock Financial Services, Inc. (a) 53,200 1,682
KeyCorp 69,817 1,724
Lehman Brothers Holdings, Inc. 95,400 6,153
Lincoln National Corp. 6,700 324
Loews Corp. 9,100 828
MBIA, Inc. 10,100 734
MBNA Corp. 67,673 2,542
Merrill Lynch & Co., Inc. 158,700 11,109
MetLife, Inc. New 97,600 2,696
MGIC Investment Corp. 7,300 497
MONY Group, Inc. (The) 5,000 206
Morgan (J.P.) & Co., Inc. 15,018 2,485
Morgan Stanley Dean Witter & Co. 185,196 14,874
National City Corp. 15,700 336
National Commerce Bancorp 17,500 372
North Fork Bancorp, Inc. 9,600 194
Paychex, Inc. 40,250 2,282
PMI Group, Inc. (The) 26,800 1,980
PNC Bank Corp. 46,850 3,133
Providian Financial Corp. 11,397 1,185
Radian Group, Inc. 3,300 234
Regions Financial Corp. 19,500 458
SEI Corp. 7,300 662
Silicon Valley Bancshares (a) 16,000 738
SouthTrust Corp. 99,450 3,220
Sovereign Bancorp, Inc. 40,100 333
St. Paul Cos., Inc. 7,800 400
Summit Bancorp 15,000 563
SunTrust Banks, Inc. 18,160 886
TCF Financial Corp. 7,600 307
TD Waterhouse Group, Inc. (a) 51,700 856
Torchmark Corp. 22,900 763
Transatlantic Holdings, Inc. 1,800 167
U.S. Bancorp 116,800 2,825
UnionBanCal Corp. 11,771 247
UnumProvident Corp. 26,700 754
USA Education, Inc. 1,800 101
Waddell & Reed Financial, Inc. Class A 16,500 526
Washington Mutual, Inc. 71,891 3,164
Wells Fargo Co. 58,175 2,695
-----------
221,411
-----------
HEALTH CARE - 12.3%
Abbott Laboratories 48,600 2,567
Allergan, Inc. 59,100 4,968
ALZA Corp. (a) 59,500 4,816
American Home Products Corp. 8,600 546
Amgen, Inc. (a) 50,200 2,905
Andrx Group (a) 12,500 898
Bard (C.R.), Inc. 11,900 498
Becton, Dickinson & Co. 43,500 1,457
Bergen Brunswig Corp. Class A 22,900 208
Boston Scientific Corp. (a) 78,300 1,248
Bristol-Myers Squibb Co. 284,960 17,365
Cardinal Health, Inc. 25,073 2,376
Celgene Corp. (a) 12,200 785
Chiron Corp. (a) 14,271 617
Cytyc Corp. (a) 15,100 896
First Health Group Corp. (a) 3,900 152
Forest Labs, Inc. (a) 42,700 5,658
Foundation Health Systems, Inc. (a) 16,700 337
Genentech, Inc. (a) 3,700 305
Genzyme Corp. (a) 15,300 1,085
HCA-The Healthcare Co. 92,871 3,709
HEALTHSOUTH Corp. (a) 16,200 194
Human Genome Sciences, Inc. (a) 4,600 407
Humana, Inc. (a) 16,200 196
ICOS Corp. (a) 8,700 445
IDEC Pharmaceuticals Corp. (a) 1,400 275
Immunex Corp. (a) 9,300 395
Incyte Pharmaceuticals, Inc. (a) 1,300 48
IVAX Corp. (a) 36,150 1,573
Johnson & Johnson 195,014 17,966
King Pharmaceuticals, Inc. (a) 12,200 547
Lilly (Eli) & Co. 139,400 12,459
McKesson HBOC, Inc. 9,100 255
Medtronic, Inc. 32,200 1,749
Merck & Co., Inc. 329,071 29,596
Millennium Pharmaceuticals, Inc. (a) 2,800 203
PacifiCare Health Systems, Inc. (a) 60,900 632
PE Corp. - PE Biosystems Group 1,100 129
Perrigo Co. (a) 6,400 42
Pfizer, Inc. 473,900 20,467
Pharmacia Corp. 210,239 11,563
Province Healthcare Co. (a) 5,500 231
Quest Diagnostics, Inc. (a) 13,400 1,290
Schering-Plough Corp. 129,800 6,709
St. Jude Medical, Inc. (a) 18,300 1,007
Techne Corp. (a) 4,900 546
Tenet Healthcare Corp. 115,100 4,525
United Health Corp (a) 35,932 3,930
Universal Health Services, Inc.
Class B (a) 10,200 855
Varian Medical Systems, Inc. (a) 7,800 380
Wellpoint Health Networks, Inc. (a) 23,578 2,756
-----------
174,766
-----------
INTEGRATED OILS - 4.4%
Amerada Hess Corp. 20,500 1,271
Ashland, Inc. 11,800 386
59 Equity Q Fund
<PAGE>
EQUITY Q FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Chevron Corp. 88,600 7,276
Coastal Corp. 6,200 468
Conoco, Inc. Class B 26,287 715
Exxon Mobil Corp. 393,405 35,087
Occidental Petroleum Corp. 193,300 3,842
Phillips Petroleum Co. 14,000 865
Royal Dutch Petroleum Co. 122,700 7,285
Texaco, Inc. 45,800 2,705
USX-Marathon Group 112,400 3,056
-----------
62,956
-----------
MATERIALS AND PR OCESSING - 3.3%
Air Products & Chemicals, Inc. 48,500 1,810
Alcoa, Inc. 51,500 1,477
Allegheny Technologies, Inc. 10,700 217
Archer-Daniels-Midland Co. 212,955 2,343
Boise Cascade Corp. 4,900 141
Bowater, Inc. 6,200 336
Centex Corp. 28,000 1,036
Dow Chemical Co. 123,306 3,776
Eastman Chemical Co. 25,400 1,089
Georgia-Pacific Group 58,100 1,561
Illinois Tool Works, Inc. 31,691 1,761
IMC Global, Inc. 7,400 96
International Paper Co. 15,100 553
Kaufman & Broad Home Corp. 13,500 402
Lafarge Corp. 6,800 128
Lubrizol Corp. 3,600 78
Lyondell Petrochemical Co. 87,000 1,251
Minnesota Mining & Manufacturing Co. 83,115 8,031
Nucor Corp. 16,900 586
PPG Industries, Inc. 20,000 893
Praxair, Inc. 20,000 745
Precision Castparts Corp. 17,000 642
Rohm & Haas Co. 50,500 1,518
RPM, Inc. 1,205 11
Sherwin-Williams Co. 38,091 826
Sigma Aldrich Corp. 15,000 536
Smurfit-Stone Container Corp. (a) 37,900 509
Temple-Inland, Inc. 7,500 336
Tyco International, Ltd. 196,503 11,139
Union Carbide Corp. 5,500 237
USG Corp. 80,700 1,376
Weyerhaeuser Co. 31,834 1,493
-----------
46,933
-----------
OTHER ENERGY - 2.0%
Anadarko Petroleum Corp. 37,721 2,416
Apache Corp. 64,100 3,546
Baker Hughes, Inc. 15,100 519
BJ Services Co. (a) 6,000 315
Cooper Cameron Corp. (a) 13,800 752
Devon Energy Corp. 2,200 111
El Paso Energy Corp. 4,800 301
ENSCO International, Inc. 13,400 446
EOG Resources, Inc. 2,400 95
Global Marine, Inc. (a) 29,700 787
Kerr-McGee Corp. 47,385 3,095
Marine Drilling Co, Inc. (a) 24,300 580
Mitchell Energy & Development Corp.
Class A 7,100 327
Nabors Industries, Inc. (a) 7,400 377
Noble Drilling Corp. (a) 43,700 1,816
Ocean Energy, Inc. (a) 33,900 470
Pioneer Natural Resources Co. (a) 8,700 114
Sunoco, Inc. 26,200 784
Tidewater, Inc. 7,900 365
Tosco Corp. 61,700 1,766
TXU Corp. 109,743 4,067
Ultramar Diamond Shamrock Corp. 160,000 4,200
Valero Energy Corp. 34,600 1,143
Vintage Petroleum, Inc. 12,200 257
-----------
28,649
-----------
PRODUCER DURABLES - 7.4%
Applied Materials, Inc. (a) 104,600 5,557
B.F. Goodrich Co. 8,800 360
Boeing Co. (The) 126,500 8,578
Caterpillar, Inc. 50,800 1,781
Cooper Industries, Inc. 15,700 601
Credence Systems Corp. (a) 19,200 360
D.R. Horton, Inc. 23,217 430
Deere & Co. 1,842 68
Dover Corp. 70,000 2,971
Emerson Electric Co. 13,100 962
General Dynamics Corp. 19,696 1,409
General Electric Co. 1,131,489 62,020
Grainger (W.W.), Inc. 14,100 450
Honeywell International, Inc. 43,200 2,325
Ingersoll-Rand Co. 37,527 1,417
ITT Industries, Inc. 25,300 824
Johnson Controls, Inc. 9,500 566
KLA Tencor Corporation (a) 20,400 689
Lennar Corp. 12,000 386
Littlefuse, Inc. (a) 6,000 174
Litton Industries, Inc. (a) 10,400 540
Mettler-Toledo International, Inc. (a) 8,600 402
Molex, Inc. 11,800 636
Northrop Grumman Corp. 36,800 3,091
Parker-Hannifin Corp. 15,300 633
Plexus Corp. (a) 7,500 473
Pulte Corp. 11,400 380
Equity Q Fund 60
<PAGE>
EQUITY Q FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Raytheon Co. Class B 32,300 1,104
Rockwell International Corp. 16,831 662
Solectron Corp. (a) 22,048 970
Technitrol, Inc. 8,400 931
Teleflex, Inc. 354 12
Teradyne, Inc. (a) 30,200 943
United Technologies Corp. 27,000 1,884
-----------
104,589
-----------
TECHNOLOGY - 29.6%
3Com Corp. (a) 68,561 1,213
Adobe Systems, Inc. 6,000 456
Adtran, Inc. (a) 21,000 798
Advanced Fibre Communications (a) 1,300 42
Advanced Micro Devices, Inc. (a) 95,700 2,165
Agilent Technologies, Inc. (a) 37,445 1,734
Akamai Technologies, Inc. (a) 1,400 71
Alliance Semiconductor Corp. (a) 9,300 185
Altera Corp. (a) 105,554 4,315
America Online, Inc. (a) 195,881 9,878
Amkor Technology, Inc. (a) 2,100 47
Amphenol Corp. Class A (a) 13,900 893
Analog Devices, Inc. (a) 54,000 3,510
Apple Computer, Inc. (a) 12,900 252
Applied Micro Circuits Corp. (a) 20,200 1,545
Ariba, Inc. New (a) 10,500 1,326
Arrow Electronics, Inc. (a) 52,700 1,686
Art Technology Group, Inc. (a) 1,800 113
At Home Corp. Series A (a) 5,100 53
Atmel Corp. (a) 39,800 592
Automatic Data Processing, Inc. 43,000 2,808
Avaya, Inc. (a) 5,469 73
Avnet, Inc. 59,300 1,594
AVX Corp. 87,600 2,508
BEA Systems, Inc. (a) 46,400 3,326
Broadcom Corp. Class A (a) 10,200 2,268
BroadVision, Inc. (a) 27,200 809
Brocade Communications Systems, Inc. (a) 4,700 1,069
Cabletron Systems, Inc. (a) 60,000 1,628
CacheFlow, Inc. New (a) 500 54
CIENA Corp. (a) 19,300 2,028
Cisco Systems, Inc. (a) 867,114 46,716
CMGI, Inc. (a) 8,100 137
CNET Networks, Inc. (a) 1,800 57
Commerce One, Inc. New (a) 11,600 744
COMPAQ Computer Corp. 128,700 3,914
Computer Sciences Corp. (a) 3,600 227
Corning, Inc. 126,000 9,639
Critical Path, Inc. (a) 1,400 68
CSG Systems International, Inc. (a) 11,200 520
Cybear Group (a) 1,861 1
Cypress Semiconductor Corp. (a) 54,500 2,040
Dallas Semiconductor Corp. 2,100 83
Dell Computer Corp. (a) 427,100 12,573
DoubleClick, Inc. (a) 3,100 50
DST Systems, Inc. (a) 52,000 3,205
E.piphany, Inc. New (a) 600 54
eBay, Inc. (a) 4,200 216
Electro Scientific Industries, Inc. (a) 6,900 241
Electronic Data Systems Corp. 77,801 3,652
EMC Corp. (a) 162,572 14,479
Emulex Corp. (a) 400 59
Exar Corp. (a) 6,200 277
Exodus Communications, Inc. (a) 26,400 886
Extreme Networks, Inc. (a) 3,000 249
Fairchild Semiconductor Corp.
Class A (a) 12,400 261
Galileo International, Inc. 110,100 2,174
GlobeSpan, Inc. (a) 7,000 537
GTECH Holdings Corp. (a) 18,500 320
Hewlett-Packard Co. 118,284 5,493
i2 Technologies, Inc. (a) 9,500 1,614
Infonet Services Corp. Class B (a) 5,300 34
InfoSpace.com, Inc. (a) 21,807 439
Inktomi Corp. (a) 2,800 178
Integrated Device Technology, Inc. (a) 24,200 1,363
Intel Corp. 647,500 29,097
International Business Machines Corp. 141,660 13,954
International Game Technology (a) 5,400 198
Internet Capital Group, Inc. New (a) 6,100 80
Internet Security Systems, Inc. (a) 900 79
Intuit, Inc. (a) 28,100 1,726
JDS Uniphase Corp. (a) 65,900 5,367
Juniper Networks, Inc. (a) 25,600 5,010
Kana Communications, Inc. (a) 2,600 61
Kemet Corp. (a) 129,700 3,615
Lattice Semiconductor Corp. (a) 8,800 257
Liberate Technologies, Inc. New (a) 1,500 29
Linear Technology Corp. 25,300 1,632
LSI Logic Corp. (a) 19,900 654
Lucent Technologies, Inc. 47,632 1,110
Macromedia, Inc. (a) 1,600 123
MarchFirst, Inc. (a) 11,000 64
Maxim Integrated Products, Inc. (a) 53,900 3,571
Mentor Graphics Corp. (a) 2,700 63
Mercury Interactive Corp. (a) 8,900 987
Metromedia Fiber Network, Inc.
Class A (a) 53,700 1,020
Microchip Technology, Inc. (a) 49,200 1,556
Micromuse, Inc. (a) 5,600 950
Micron Technology, Inc. (a) 69,300 2,408
Microsoft Corp. (a) 452,931 31,196
61 Equity Q Fund
<PAGE>
EQUITY Q FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Motorola, Inc. 137,487 3,429
National Semiconductor Corp. (a) 41,225 1,072
NCR Corp. (a) 1,500 65
Network Appliance, Inc. (a) 34,100 4,058
Network Associates, Inc. (a) 6,800 131
Nortel Networks Corp. 265,231 12,068
NVIDIA Corp. (a) 8,400 521
Oracle Systems Corp. (a) 685,720 22,629
Palm, Inc. New (a) 37,232 1,994
Parametric Technology Corp. (a) 1,800 22
Phone.com, Inc. (a) 900 83
PMC - Sierra, Inc. (a) 17,000 2,889
Portal Software, Inc. (a) 15,600 551
PSINet, Inc. (a) 3,900 26
QUALCOMM, Inc. (a) 56,816 3,700
Qwest Communications
International, Inc. (a) 136,381 6,632
RadioShack, Corp. 11,300 674
Rational Software Corp. (a) 11,600 692
RealNetworks, Inc. (a) 2,000 41
Redback Networks, Inc. (a) 9,900 1,049
RSA Security, Inc. (a) 1,300 75
Sandisk Corp. (a) 7,500 403
Seagate Technology (a) 62,374 4,358
Siebel Systems, Inc. (a) 40,800 4,281
Silicon Storage Technology, Inc. (a) 8,400 191
Software.com, Inc. New (a) 4,100 609
Sun Microsystems, Inc. (a) 266,970 29,584
SunGard Data Systems (a) 67,300 3,441
Sybase, Inc. (a) 38,600 806
Symantec Corp. (a) 52,600 2,051
Tellabs, Inc. (a) 37,300 1,863
Terra Networks SA - ADR 6,020 145
Texas Instruments, Inc. 147,500 7,237
TIBCO Software, Inc. (a) 10,200 642
Unisys Corp. (a) 10,000 128
VeriSign, Inc. (a) 19,640 2,591
Veritas Software Corp. (a) 64,589 9,103
Verizon Communications 302,997 17,517
Vignette Corp. (a) 2,400 72
Vishay Intertechnology, Inc. (a) 56,700 1,701
Vitria Technology, Inc. (a) 2,300 62
webMethods, Inc. New (a) 500 44
Williams Communications
Group, Inc. New (a) 16,000 293
Xilinx, Inc. (a) 39,562 2,863
Yahoo!, Inc. (a) 22,300 1,306
-----------
420,038
-----------
UTILITIES - 7.2%
ADC Telecommunications, Inc. (a) 51,100 1,089
Allegiance Telecom, Inc. (a) 1,400 44
Ameren Corp. 13,100 521
American Electric Power Co., Inc. 17,680 734
AT&T Corp. 259,277 6,012
AT&T Wireless Group New (a) 50,100 1,249
BellSouth Corp. 378,151 18,269
BroadWing, Inc. (a) 30,400 859
C&D Technologies, Inc. 20,100 1,188
Cable Design Technologies Corp. (a) 10,500 242
Calpine Corp. (a) 27,800 2,194
Cinergy Corp. 17,300 530
CMS Energy Corp. 13,500 365
Columbia Energy Group 2,100 151
Comcast Corp. Special Class A (a) 94,495 3,845
Consolidated Edison, Inc. 27,401 964
Copper Mountain Networks, Inc. (a) 1,400 16
CP&L, Inc. 29,900 1,205
Dominion Resources, Inc. 14,600 870
DTE Energy Co. 54,600 1,972
Duke Energy Corp. 22,400 1,936
Dycom Industries, Inc. (a) 12,900 485
Dynegy, Inc. Class A 38,900 1,802
Edison International 24,600 587
Energy East Corp. 24,800 501
Entergy Corp. 77,500 2,969
FirstEnergy Corp. 49,900 1,291
FPL Group, Inc. 19,893 1,313
Global Crossing, Ltd. (a) 50,800 1,197
GPU, Inc. 11,700 387
KeySpan Corp. 54,200 1,907
Level 3 Communications, Inc. (a) 28,500 1,357
MasTec, Inc. (a) 19,100 553
MCN Energy Group, Inc. 3,200 79
Nextel Communications, Inc. Class A (a) 30,500 1,172
NiSource, Inc. 13,400 334
OGE Energy Corp. 4,200 86
PG&E Corp. 135,700 3,655
Pinnacle West Capital Corp. 32,800 1,425
Powerwave Technologies, Inc. (a) 10,600 510
PPL Corp. 6,900 284
Public Service Enterprise Group, Inc. 69,400 2,880
Quanta Services, Inc. (a) 6,000 186
Reliant Energy, Inc. 59,769 2,469
SBC Communications, Inc. 220,686 12,731
SDL, Inc. (a) 2,400 622
Southern Co. 68,481 2,012
Sprint Corp. (Fon Group) 45,800 1,168
Sprint Corp. (PCS Group) (a) 83,800 3,195
Telephone & Data Systems, Inc. 7,300 770
Terayon Communication Systems, Inc. (a) 6,000 134
United States Cellular Corp. (a) 16,600 1,062
UtiliCorp United, Inc. 11,600 308
Equity Q Fund 62
<PAGE>
EQUITY Q FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Williams Cos. (The) 10,900 457
Wisconsin Energy Corp. 15,600 294
WorldCom, Inc. (a) 308,564 7,310
-----------
101,747
-----------
TOTAL COMMON STOCKS
(cost $1,102,641) 1,380,358
-----------
PRINCIPAL
AMOUNT
(000)
$
------------
SHORT-TERM INVESTMENTS - 2.6%
Frank Russell Investment Company Money
Market Fund,
due on demand (b) 31,994 31,994
United States Treasury Bills (b)(c)(d)
5.940% due 12/21/00 4,950 4,909
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $36,903) 36,903
-----------
TOTAL INVESTMENTS - 99.8%
(identified cost $1,139,544) 1,417,261
OTHER ASSETS AND LIABILITIES,
NET - 0.2% 2,292
-----------
1,419,553
NET ASSETS - 100.0% ===========
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
FUTURES CONTRACTS CONTRACTS (000)
----------- ----------------
S&P 400 Midcap Index
expiration date 12/00 42 $ (207)
S&P 500 Index
expiration date 12/00 80 (636)
----------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ (843)
================
(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.
Abbreviation:
ADR - American Depositary Receipt
See accompanying notes which are an integral part of the financial statements.
63 Equity Q Fund
<PAGE>
EQUITY Q FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) October 31, 2000
ASSETS
Investments at market (identified cost $1,139,544) .............. $ 1,417,261
Cash ............................................................. 433
Receivables:
Dividends ....................................................... 1,106
Investments sold ................................................ 5,276
Fund shares sold ................................................ 972
Daily variation margin on futures contracts ..................... 806
Prepaid expenses ................................................. 8
-----------
Total assets .................................................. 1,425,862
LIABILITIES
Payables:
Investments purchased ............................... $ 4,276
Fund shares redeemed ................................ 1,165
Accrued fees to affiliates .......................... 770
Other accrued expenses .............................. 98
-----------
Total liabilities ............................................. 6,309
-----------
NET ASSETS ....................................................... $ 1,419,553
===========
NET ASSETS CONSIST OF:
Undistributed net investment income .............................. $ 1,719
Accumulated net realized gain (loss) ............................ 143,137
Unrealized appreciation (depreciation) on:
Investments ..................................................... 277,717
Futures contracts ............................................... (843)
Shares of beneficial interest .................................... 349
Additional paid-in capital ....................................... 997,474
-----------
NET ASSETS ....................................................... $ 1,419,553
===========
NET ASSET VALUE, offering and redemption price per share:
Class E ($25,205,329 divided by 619,347 shares of $.01 par
value shares of beneficial interest outstanding)................. $ 40.70
===========
Class I ($1,355,536,079 divided by 33,310,059 shares of $.01
par value shares of beneficial interest outstanding)............. $ 40.69
===========
Class Y ($38,811,927 divided by 953,831 shares of $.01 par
value shares of beneficial interest outstanding)................. $ 40.69
===========
See accompanying notes which are an integral part of the financial statements.
Equity Q Fund 64
<PAGE>
EQUITY Q FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Dividends ................................................... $ 13,356 $ 16,490
Dividends from Money Market Fund ............................ 2,442 1,688
Interest .................................................... 167 243
---------------- -----------------
Total investment income ................................... 15,965 18,421
---------------- -----------------
EXPENSES
Advisory fees ............................................... 6,485 6,772
Administrative fees ......................................... 584 619
Custodian fees .............................................. 453 472
Transfer agent fees ......................................... 356 467
Professional fees ........................................... 66 31
Registration fees ........................................... 113 88
Shareholder servicing fees - Class E ........................ 58 38
Trustees' fees .............................................. 11 5
Miscellaneous ............................................... 69 90
---------------- -----------------
Expenses before reductions .................................. 8,195 8,582
Expense reductions .......................................... (20) --
---------------- -----------------
Expenses, net ............................................. 8,175 8,582
---------------- -----------------
Net investment income ........................................ 7,790 9,839
---------------- -----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ................................................. 70,765 235,895
Futures contracts ........................................... 778 5,206
---------------- -----------------
71,543 241,101
---------------- -----------------
Net change in unrealized appreciation (depreciation) on:
Investments ................................................. (67,564) 774
Futures contracts ........................................... (3,392) 1,719
---------------- -----------------
(70,956) 2,493
---------------- -----------------
Net realized and unrealized gain (loss) ..................... 587 243,594
---------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ........ $ 8,377 $ 253,433
================ =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
65 Equity Q Fund
<PAGE>
EQUITY Q FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income ........................................... $ 7,790 $ 9,839 $ 9,340
Net realized gain (loss) ....................................... 71,543 241,101 153,911
Net change in unrealized appreciation (depreciation) .......... (70,956) 2,493 87,859
----------- ----------- -----------
Net increase (decrease) in net assets from operations ......... 8,377 253,433 251,110
----------- ----------- -----------
DISTRIBUTIONS
From net investment income
Class E ....................................................... (93) (133) (9,349)
Class I ....................................................... (6,938) (10,782) --
Class Y ....................................................... (221) -- --
From net realized gain
Class E ....................................................... (644) (4,279) (117,001)
Class I ....................................................... (25,404) (191,979) --
----------- ----------- -----------
Net decrease in net assets from distributions ............... (33,300) (207,173) (126,350)
----------- ----------- -----------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions .. 50,395 171,921 63,380
----------- ----------- -----------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ...................... 25,472 218,181 188,140
NET ASSETS
Beginning of period ............................................. 1,394,081 1,175,900 987,760
----------- ----------- -----------
End of period (including undistributed net investment income of
$1,719 at October 31, 2000 and $40 at December 31, 1998)....... $ 1,419,553 $ 1,394,081 $ 1,175,900
=========== =========== ===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Equity Q Fund 66
<PAGE>
EQUITY Q 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>
2000* 1999**
------------- -------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ................... $ 41.58 $ 42.99
------------- -------------
INCOME FROM OPERATIONS
Net investment income (a) ............................ .13 .14
Net realized and unrealized gain (loss) .............. (.12) 4.35
------------- -------------
Total income from operations ........................ .01 4.49
------------- -------------
DISTRIBUTIONS
From net investment income ............................ (.13) (.24)
From net realized gain ................................ (.76) (5.66)
------------- -------------
Total distributions ................................. (.89) (5.90)
------------- -------------
NET ASSET VALUE, END OF PERIOD ......................... $ 40.70 $ 41.58
============= =============
TOTAL RETURN (%)(b) ................................... .17 11.01
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ............. 25,205 30,746
Ratios to average net assets (%)(c):
Operating expenses, net ............................. .95 .94
Operating expenses, gross ........................... .96 --
Net investment income ............................... .39 .55
Portfolio turnover rate (%) .......................... 59.91 90.16
</TABLE>
* For the ten months ended October 31, 2000.
** 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) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
67 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,
-------------------------------------------------------------
2000* 1999 1998 1997 1996 1995
----------- ----------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........... $ 41.55 $ 40.22 $ 35.90 $ 32.94 $ 30.40 $ 24.43
----------- ----------- ---------- ---------- --------- ---------
INCOME FROM OPERATIONS
Net investment income (a) ..................... .22 .34 .32 .44 .58 .59
Net realized and unrealized gain (loss) ...... (.11) 8.03 8.53 10.01 6.33 8.52
----------- ----------- ---------- ---------- --------- ---------
Total income from operations................. .11 8.37 8.85 10.45 6.91 9.11
----------- ----------- ---------- ---------- --------- ---------
DISTRIBUTIONS
From net investment income .................... (.21) (.38) (.32) (.44) (.59) (.61)
From net realized gain......................... (.76) (6.66) (4.21) (7.05) (3.78) (2.53)
----------- ----------- ---------- ---------- --------- ---------
Total distributions ......................... (.97) (7.04) (4.53) (7.49) (4.37) (3.14)
----------- ----------- ---------- ---------- --------- ---------
NET ASSET VALUE, END OF PERIOD ................. $ 40.69 $ 41.55 $ 40.22 $ 35.90 $ 32.94 $ 30.40
=========== =========== ========== ========== ========= =========
TOTAL RETURN (%)(b)(d) ......................... .40 21.96 25.98 33.07 23.67 37.91
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ..... 1,355,536 1,363,336 1,175,900 987,760 818,281 620,259
Ratios to average net assets (%)(c)(d):
Operating expenses .......................... .68 .69 .69 .68 .71 .58
Net investment income ....................... .66 .80 .85 1.17 1.80 2.07
Portfolio turnover rate (%) ................. 59.91 90.16 74.56 94.89 74.59 74.00
</TABLE>
* For the ten months ended October 31, 2000.
(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.
(d) For periods prior to April 1, 1995, Fund performance, operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net of
investment management fees but gross of any investment services fees. See
Note 4.
Equity Q Fund 68
<PAGE>
EQUITY Q FUND
FINANCIAL HIGHLIGHTS - CLASS Y
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
2000*
----------
NET ASSET VALUE, BEGINNING OF PERIOD ............................. $ 42.29
----------
INCOME FROM OPERATIONS
Net investment income (a) ...................................... .16
Net realized and unrealized gain (loss) ........................ (1.54)
----------
Total income from operations .................................. (1.38)
----------
DISTRIBUTIONS
From net investment income ...................................... (.22)
----------
NET ASSET VALUE, END OF PERIOD ................................... $ 40.69
==========
TOTAL RETURN (%)(b) ............................................. (3.21)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ....................... 38,812
Ratios to average net assets (%)(c):
Operating expenses, net ....................................... .61
Operating expenses, gross ..................................... .66
Net investment income ......................................... .68
Portfolio turnover rate (%) .................................... 59.91
* For the period March 29, 2000 (commencement of sale) to October 31, 2000.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
69 Equity Q Fund
<PAGE>
INTERNATIONAL FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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 ten 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.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
DATES INTERNATIONAL - CLASS I++ MSCI EAFE **
<S> <C> <C>
Inception* $ 10,000 $ 10,000
1991 $ 10,702 $ 10,732
1992 $ 9,937 $ 9,347
1993 $ 13,395 $ 12,887
1994 $ 15,254 $ 14,225
1995 $ 15,155 $ 14,216
1996 $ 16,808 $ 15,751
1997 $ 17,634 $ 16,526
1998 $ 18,371 $ 18,171
1999 $ 22,380 $ 22,417
2000 $ 22,658 $ 21,819
---------- -------- --------
Total $172,293 $166,091
========== ======== ========
Yearly periods ended October 31
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL FUND - CLASS I MSCI EAFE INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
------------- ---------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
1 Year $10,124 1.24% 1 Year $ 9,734 (2.66)%
5 Years $14,951 8.36%(S) 5 Years $15,349 8.95%(S)
10 Years $22,658 8.51%(S) 10 Years $21,819 8.12%(S)
<CAPTION>
INTERNATIONAL FUND - CLASS E ++++ SALOMON SMITH BARNEY BROAD MARKET INDEX (BMI)
EX-US+
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
------------- ---------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
1 Year $10,098 0.98% 1 Year $ 9,917 (0.83)%
5 Years $14,891 8.28%(S) 5 Years $15,835 9.63%(S)
10 Years $22,568 8.47%(S) 10 Years $21,949 8.18%(S)
<CAPTION>
INTERNATIONAL FUND - CLASS Y ++++++
PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN
------------- ---------- ------------
<S> <C> <C>
1 Year $10,129 1.29%
5 Years $14,958 8.38%(S)
10 Years $22,669 8.52%(S)
</TABLE>
71 International Fund
<PAGE>
INTERNATIONAL FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the ten months ended October 31, 2000, the International Fund Class I, Class
E and Class Y shares lost 12.38%, 12.59%, and 12.33%, respectively. This
compared to the Salomon Smith Barney BMI World ex-US, which lost 11.57%, and the
MSCI EAFE Index which lost 13.71% during the same period.
The Fund's performance was mixed, and was a result of the international markets'
sector rotations. This was similar to the US markets' behavior during the year,
as both growth managers and value managers enjoyed periods during which their
style was favored.
PORTFOLIO HIGHLIGHTS
Similar to the US markets, the performance of international Technology and
Telecommunications sectors exceeded all others during the first quarter. This
benefited the Fund's growth managers, but penalized those managers trying to
adhere to strict valuation disciplines.
During the first quarter, currency movements had a significant impact on
returns. The decline in the Euro muted European gains, while the gain in the Yen
boosted returns from Japan. However, while Japan's outlook remained strong
during the first half of the year, investors became impatient with the pace of
the country's restructuring effort later in the period and returns suffered as a
result.
Second quarter was a difficult time internationally, just as it was in the US.
During this period, growth managers faced a steep decline in technology and
telecommunications issues, while value managers gained some ground in this
environment. The Fund managers' stock selection, particularly in Germany where
holdings of Jenoptik (Technology), Systematics (Information Technology), Consors
Discount (Banking) contributed positive results to performance.
By mid-year, international markets lost ground amidst extreme sector rotation,
heightened volatility and the "tech wreck", which dramatically cut valuations
for technology issues.
The Fund's manager lineup was broadened during the second quarter with the
addition of Driehaus Capital Management, Inc. and Marvin & Palmer Associates,
Inc. Driehaus and Marvin & Palmer were both retained to expand the Fund's
aggressive growth exposure, and as a result, existing growth managers' asset
allocation was rebalanced.
TOP TEN EQUITY HOLDINGS
(as a percent of Total Investments) October 31, 2000
Vodafone Group PLC (United Kingdom) 1.8%
Rhone-Poulenc SA Class A - ADR (France) 1.4
Total Co. SA Class B (France) 1.3
ING Groep (Netherlands) 1.1
Novartis AG (Regd) (Switzerland) 1.1
Canon, Inc. (Japan) 1.0
Telefonica SA (Spain) 0.9
Glaxo Wellcome PLC (United Kingdom) 0.8
Nippon Telegraph & Telephone Corp. (Japan) 0.8
Royal Dutch Petroleum Co. (Netherlands) 0.8
PORTFOLIO CHARACTERISTICS
October 31, 2000
Current P/E Ratio 20.02x
Portfolio Price/Book Ratio 2.65x
Market Capitalization - $-Weighted Average 39.0 Bil
Number of Holdings 770
MONEY MANAGERS STYLES
Delaware International Advisors, Ltd. Value
Driehaus Capital Management, Inc. Growth
Fidelity Management Trust Company Growth
J.P. Morgan Investment Management, Inc. Value
Marvin & Palmer Associates, Inc. Growth
Mastholm Asset Management, LLC Growth
Montgomery Asset Management, LLC Growth
Oechsle International Advisors, LLC Growth
Sanford C. Bernstein & Co., Inc. Value
The Boston Company Asset Management, Inc. Value
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* International Fund Class I assumes initial investment on November 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.
++++ 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.
++++++ International Fund Class I performance has been linked with Class Y to
provide historical perspective.
+ 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.
(S) 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 72
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
COMMON STOCKS - 89.7%
AUSTRALIA - 1.9%
Amcor, Ltd. 610,010 1,692
AMP, Ltd. 40,688 367
Australia & New Zealand Bank
Group, Ltd. 487,482 3,601
Australian Gas & Light Co. 5,670 34
Australian Stock Exchange, Ltd. 3,000 18
BHP, Ltd. - ADR 2,829 56
Billabong International, Ltd. (a) 10,700 23
Boral, Ltd. 36,973 37
Brambles Industries, Ltd. 2,700 70
Broken Hill Proprietary Co. 127,310 1,234
Cable & Wireless Optus, Ltd. (a) 15,100 32
Coles Myer, Ltd. 7,030 25
Commonwealth Bank of Australia 21,586 321
CSL, Ltd. 17,572 313
CSR, Ltd. 1,009,095 2,067
F.H. Faulding & Co., Ltd. 3,600 19
Fairfax (John) Holdings, Ltd. 6,400 15
Foster's Brewing Group, Ltd. 1,144,200 2,592
Goodman Fielder Wattie 942,042 610
Harvey Norman Holdings, Ltd. 20,300 45
Leighton Holdings, Ltd. Class A 8,200 28
Lend Lease Corp. 20,137 236
Macquarie Bank, Ltd. 1,800 26
National Australia Bank, Ltd. 311,542 4,328
National Foods, Ltd. 10,800 14
News Corp., Ltd. 57,959 606
News Corp., Ltd. - ADR 10,629 457
Oil Search, Ltd. (Australia Regd)(a) 10,600 9
OneSteel, Ltd. (a) 27,326 13
Orica, Ltd. 284,900 857
Paperlinx, Ltd. 177,070 303
PMP Communications, Ltd. 196,000 186
Rio Tinto, Ltd. 3,200 44
Southcorp Holdings, Ltd. 68,700 177
Tabcorp. Holdings, Ltd. 7,700 42
Telstra Corp., Ltd. 120,059 392
Telstra Corp., Ltd. Installment Receipts 32,569 107
Wesfarmers, Ltd. 4,553 35
Westfield Holdings, Ltd. 7,900 51
Westfield Trust 190,703 307
Westfield Trust Units (a) 6,392 11
Westpac Banking Corp. 191,640 1,309
WMC, Ltd. 35,122 134
Woodside Petroleum, Ltd. 4,600 33
Woolworths, Ltd. 99,061 394
-----------
23,270
-----------
AUSTRIA - 0.2%
Bank Austria AG 34,633 1,874
Erste Bank der Oesterreichischen
Sparkassen AG 5,400 220
OMV AG 2,900 197
Voest-Alpine Stahl AG 13,000 304
Wienerberger Baustoffindustrie AG 12,800 241
-----------
2,836
-----------
BELGIUM - 0.6%
Agfa Gevaert 86,091 1,783
Dexia 29,473 4,483
Electrabel 5,900 1,282
Real Software 480 8
-----------
7,556
-----------
CANADA - 4.0%
Abitibi-Consolidated, Inc. 53,270 466
Agrium, Inc. 4,390 45
Alberta Energy Co., Ltd. 54,089 1,992
Alcan Aluminum, Ltd. 9,720 306
Anderson Exploration, Ltd. (a) 96,450 1,768
Ballard Power Systems, Inc. (a) 19,660 2,105
Bank of Montreal 29,060 1,341
Bank of Nova Scotia 25,134 716
Barrick Gold Corp. 12,000 159
BCE, Inc. 8,600 231
Biovail Corp. (a) 33,270 1,395
Bombardier, Inc. Class B 110,344 1,730
C.I. Fund Management, Inc. 2,980 62
Canadian Hunter Exploration, Ltd. (a) 2,770 58
Canadian Imperial Bank of Commerce 25,095 795
Canadian National Railway Co. 21,000 660
Canadian Natural Resources, Ltd. (a) 37,600 1,108
Canadian Occidental Petroleum, Ltd. 25,650 615
Canadian Pacific, Ltd. 20,850 604
Celestica, Inc. (a) 16,900 1,210
Cognos, Inc. (a) 1,170 47
Descartes Systems Group, Inc. (The) 21,825 884
Dofasco, Inc. 32,701 453
Enbridge, Inc. 8,890 239
Finning International, Inc. 15,200 116
Gulf Canada Resources, Ltd. (a) 10,310 44
Hudson's Bay Co. 12,000 106
Imperial Oil, Ltd. 12,252 309
Inco, Ltd. (a) 1,460 23
Leitch Technology Corp. (a) 36,800 460
Loblaw Cos., Ltd. 12,770 436
Mackenzie Financial Corp. 1,550 20
Magna International, Inc. Class A
Sub Voting 5,350 239
73 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Manitoba Telecom Services, Inc. 52,800 1,089
Manulife Financial Corp. 6,820 177
Mitel Corp. (a) 168,900 2,764
Molson Cos., Ltd. Class A 820 20
National Bank of Canada 50,910 832
Nortel Networks Corp. 154,292 6,980
Petro-Canada 128,135 2,684
Potash Corp. of Saskatchewan, Inc. 3,400 202
Precision Drilling Corp. (a) 670 19
QLT PhotoTherapeutics, Inc. 4,292 213
Quebecor World, Inc. 19,000 415
Research in Motion, Ltd. 11,555 1,156
Rogers Communications, Inc. Class B 33,095 641
Royal Bank of Canada 37,450 1,184
Seagram Co., Ltd. 11,458 656
Shell Canada, Ltd. Class A 20,000 458
Sun Life Financial Services, Inc. New 7,740 160
Suncor, Inc. 17,530 341
Talisman Energy, Inc. (a) 116,620 3,661
TD Waterhouse Group, Inc. (a) 20,180 332
Tembec, Inc. Class A (a) 109,000 960
Thomson Corp. (The) 19,290 776
Toronto Dominion Bank (The) New 11,200 307
Torstar Corp. Class B 14,800 217
TransAlta Corp. 24,700 319
Westcoast Energy, Inc. 63,778 1,419
-----------
48,724
-----------
CHINA - 0.1%
China Unicom Ltd. - ADR (a) 22,500 461
Cosco Pacific, Ltd. 1,130,000 833
PetroChina Co., Ltd. Class H 1,948,000 410
-----------
1,704
-----------
DENMARK - 0.8%
ISS A/S (a) 19,971 1,230
Jyske Bank A/S (Regd) 34,237 652
Novo Nordisk AS Series B 18,700 3,966
Vestas Wind Systems A/S (a) 79,910 4,328
-----------
10,176
-----------
FINLAND - 1.1%
Elisa Communications Oyj 88,270 2,449
Kesko Oyj 101,824 851
Metsa-Serla Oyj Series B 37,600 236
Nokia Oyj 126,240 5,195
Sampo Insurance Co., Ltd. Series A 29,090 1,185
Sonera Group Oyj 51,200 1,128
Stora Enso Oyj Series R 46,000 472
Tietoenator Oyj 9,149 176
UPM-Kymmene Oyj 40,345 1,142
Valmet - Rauma Oyj 27,225 208
-----------
13,042
-----------
FRANCE - 9.6%
Accor SA 4,000 162
Air Liquide 23,349 2,760
Alcatel 132,153 8,063
Alcatel Alsthom Compagnie Generale
d'Electricite - ADR 47,483 2,962
Alstom 101,046 2,221
Assurances Generales de France 45,324 2,481
Aventis SA Class A - ADR 227,361 16,400
AXA 22,277 2,949
Banque Nationale Paris 51,071 4,403
Bongrain SA 19,956 542
Bouygues SA 7,478 381
Bull SA 76,200 434
Business Objects SA - ADR 8,473 667
Carrefour SA 38,786 2,603
Castorama Dubois 12,673 2,577
Chargeurs International SA 3,100 174
Christian Dior SA 7,588 386
Cie de St. Gobain 26,800 3,546
Credit Lyonnais 9,218 315
Eridania Beghin-Say SA 1,843 142
European Aeronautic Defense
and Space Co. 78,000 1,589
Fimatex 11,290 122
France Telecom SA 9,000 941
Gecina 988 85
Genset 3,944 196
Groupe Air France 51,710 922
Groupe Danone 11,924 1,668
L'Oreal SA 4,300 328
Lafarge SA 13,735 1,014
Lagardere S.C.A 4,665 265
Legris Industries SA 4,600 150
Michelin (Cie Gen) Class B 64,394 1,863
Pernod-Ricard 1,400 64
Peugeot SA 3,515 647
Publicis 2,500 82
Publicis Groupe SA 16,000 523
Rallye SA 2,500 125
Renault (Regie Nationale) 26,616 1,324
Rhodia SA 105,233 1,316
Sanofi-Synthelabo SA 88,049 4,633
Schneider Electric SA 5,827 380
Scor SA 6,000 276
SEB SA 10,000 509
Simco (Regd) 3,900 242
International Fund 74
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Societe Generale Class A 103,012 5,848
Societe Generale d'Entreprises SA 6,211 312
STMicroelectronics NV 14,400 726
Suez Lyonnaise des Eaux SA 40,264 6,143
Technip 2,032 260
Thomson-CSF 29,000 1,302
Total Co. SA Class B 105,058 15,031
Total Fina SA - ADR 38,525 2,759
Usinor Sacilor 166,653 1,817
Vivendi 89,225 6,413
Vivendi Environnement 45,071 1,683
-----------
115,726
-----------
GERMANY - 7.2%
Allianz AG (Reqd) 19,951 6,765
Altana AG 23,800 2,866
BASF AG 63,856 2,503
Bayer AG 212,816 9,237
Bayerische Hypo Vereinsbank AG 59,800 3,286
Bayerische Motoren Werke AG 42,415 1,404
Commerzbank AG 54,953 1,551
Consors Discount Broker AG 26,140 2,081
Continental AG 86,000 1,314
Deutsche Bank AG 67,114 5,495
Deutsche Lufthansa AG 78,475 1,532
Deutsche Pfandbrief & Hypothekenbank AG 8,000 591
Deutsche Telekom AG 50,489 1,896
Dresdner Bank AG 86,013 3,584
E.On AG 145,465 7,392
Fresenius Medical Care AG 2,400 191
Hannover Rueckversicherungs AG 7,200 605
Heidelberg Zement AG 8,000 380
IKB Deutsche Industriebank AG 11,150 153
Intershop Communications AG 3,712 161
Jenoptik AG 177,200 4,856
MAN AG 14,700 388
Mannheimer Aktiengesellschaft 5,000 280
Marschollek, Lautenschlaeger and Partner AG 869 119
Merck KGAA 63,968 2,432
Metallgesellschaft AG 84,508 908
Muenchener Rueckversicherungs-Gesellschaft AG 21,901 6,886
PrimaCom AG 1,762 34
RWE AG 77,230 3,097
SAP AG 185 30
Schering AG 103,828 5,815
SGL Carbon AG 4,476 274
Siemens AG 45,198 5,755
Software AG 8,983 643
United Internet AG 14,053 89
Volkswagen AG 37,392 1,867
-----------
86,460
-----------
GREECE - 0.2%
Cosmote SA - GDR (a) 19,000 285
Hellenic Telecommunication
Organization SA - ADR 211,507 1,851
-----------
2,136
-----------
HONG KONG - 1.6%
ASAT Holdings, Ltd. - ADR (a) 24,400 153
Asia Satellite Telecommunications Holdings,
Ltd 10,000 20
Bank of East Asia, Ltd. 101,035 228
Cathay Pacific Airways 46,000 83
Cheung Kong Holdings, Ltd. 27,686 306
China Petroleum and Chemical Corp.
Series H New (a) 112,000 22
China Telecom (Hong Kong), Ltd. (a) 437,400 2,804
China Unicom, Ltd. (a) 82,000 165
CLP Holdings, Ltd. 87,800 410
Dairy Farm International
Holdings, Ltd. (a) 45,000 19
Dao Heng Bank Group, Ltd. 7,000 35
Great Eagle Holdings 242,209 348
Hang Lung Development Co. 250,000 224
Hang Seng Bank 9,700 114
Henderson Land Development Co., Ltd. 20,000 86
Hong Kong & China Gas Co., Ltd. 78,047 99
Hong Kong Electric Holding, Ltd. 1,495,170 4,937
Hong Kong Land Holdings, Ltd. - ADR (a) 10,000 19
Hutchison Whampoa, Ltd. 111,189 1,383
Jardine Matheson Holdings, Ltd. - ADR (a) 232,700 1,291
JCG Holdings, Ltd. 60,800 32
Johnson Electric Holdings, Ltd. (a) 55,600 112
Li & Fung, Ltd. (a) 66,800 124
MTR Corporation, Ltd. (a) 653,000 967
New World Infrastructure, Ltd. (a) 15,000 14
Pacific Century CyberWorks, Ltd. (a) 158,816 122
SmarTone Telecommunications Holdings, Ltd. 77,595 115
Sun Hung Kai Properties, Ltd. 363,400 2,982
Sunevision Holdings, Ltd. (a) 213,641 104
Swire Pacific, Ltd. Class A 17,900 110
75 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Television Broadcast 7,000 38
Wharf Holdings 706,537 1,441
Wing Hang Bank, Ltd. 11,900 37
Yue Yuen Industrial Holdings 100,000 187
-----------
19,131
-----------
IRELAND - 0.4%
Allied Irish Banks 19,400 198
Bank of Ireland 580,248 4,420
CRH PLC 39,574 607
Independent Newspapers PLC 58,900 182
Trintech Group PLC 9,898 106
-----------
5,513
-----------
ISRAEL - 0.3%
Check Point Software Technologies, Ltd. 8,533 1,351
Nice Systems, Ltd. - ADR 17,600 818
Teva Pharmaceutical Industries,
Ltd. - ADR 25,532 1,510
-----------
3,679
-----------
ITALY - 4.5%
Alleanza Assicurazioni 66,600 883
Assicurazioni Generali SPA 15,900 523
Autostrade SPA 37,636 219
Banca Commerciale Italiana 283,000 1,664
Banca Nazionale del Lavoro 776,624 2,518
Banca Pop di Milano 55,343 348
Banca Popolare di Bergamo CV 105,697 1,812
Banca Popolare di Novara 56,000 330
Banca Popolare di Verona 62,800 693
Benetton Group SPA 175,000 318
Bipop Carire SPA 73,000 577
Bulgari SPA 38,485 453
Credito Emiliano SPA 57,836 222
Ente Nazionale Idrocarburi SPA 1,498,371 8,112
Fiat SPA 26,435 346
Finmeccanica SPA 1,533,092 1,758
Ifil (Finanziaria di Partecipazioni) SPA 31,000 139
Luxottica Group SPA - ADR 35,100 507
Mediaset SPA 300,644 4,350
Mediolanum SPA 70,047 1,027
Montefibre di Risp 82,000 38
Parmalat Finanziaria SPA 1,146,800 1,654
Pirelli SPA 431,200 1,251
Riunione Adriatica de Sicurta 281,380 3,694
Saipem SPA 73,711 384
San Paolo - IMI SPA 575,729 9,332
Tecnost SPA 98,000 330
Telecom Italia Mobile SPA 323,698 2,752
Telecom Italia SPA di Risp 770,489 4,191
Telecom Italia SPA 322,913 3,740
Unicredito Italiano SPA 147,319 751
-----------
54,916
-----------
JAPAN - 17.7%
77th Bank, Ltd. (The) 217,000 1,607
Advantest Corp. 3,400 443
AIFUL Corp. 16,100 1,269
Aisin Seiki Co., Ltd. 26,000 371
Ajinomoto Co., Inc. 34,000 380
Aoyama Trading Co. 56,900 464
Asahi Bank, Ltd. 268,000 1,056
Asahi Breweries 8,000 79
Asahi Chemical Industrial 71,000 440
Bank of Fukuoka, Ltd. (The) 36,000 177
Bank of Tokyo - Mitsubishi, Ltd. 78,000 936
Bridgestone Tire Corp. 186,000 1,844
Canon, Inc. 306,000 12,143
Capcom Co. 3,700 143
Central Glass Co., Ltd. 33,000 151
Chugai Pharmaceutical Co., Ltd. 19,000 322
Credit Saison Co. 151,000 3,197
Dai Ichi Pharmaceutical Co. 23,000 653
Dai-Tokyo Fire & Marine 431,000 1,260
Daido Steel Co. 92,000 254
Dainippon Pharmaceutical Co., Ltd. 11,000 141
Daito Trust Construction 6,990 118
Daiwa Securities Group, Inc. 164,000 1,817
DDI Corp. 52 242
Dowa Mining Co. 37,000 143
Ebara Corp. 45,000 699
Eisai Co., Ltd. 127,000 3,911
Ezaki Glico Co. 76,000 439
Fast Retailing Co., Ltd. 10,600 2,608
Fuji Heavy Industries, Ltd. 78,000 543
Fuji Machine Manufacturing Co. 48,200 1,316
Fuji Photo Film Co. 8,000 297
Fujikura 48,000 423
Fujisawa Pharmaceutical 3,000 94
Fujitsu, Ltd. 186,000 3,314
Funai Electric Co., Ltd. 1,400 106
Furukawa Electric Co. 147,000 3,866
Futaba Corp. 22,000 784
Gunze, Ltd. 28,000 93
Hitachi Chemical Co., Ltd. 17,500 439
Hitachi Maxell 28,000 523
Hitachi Software Engineering Co., Ltd. 1,000 108
International Fund 76
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Hitachi, Ltd. 556,000 5,962
Hokkaido Electric Power Co., Inc. 24,400 329
Honda Motor Co., Ltd. 52,000 1,797
Hosiden Electronics 5,000 159
Hoya Corp. 4,300 355
Ines Corp. 6,400 80
Isetan Co. 76,000 646
Ito-Yokado Co., Ltd. 5,000 226
Itochu Corp. (a) 184,000 784
Itochu Techno Science Corp. 7,200 1,712
Japan Tobacco, Inc. 112 770
JGC Corp. 100,000 624
Kaken Pharmaceutical Co., Ltd. 8,000 48
Kao Corp. 75,000 2,248
Katokichi Co. 37,000 1,068
Kawasaki Steel Corp. 294,000 288
Keyence Corp. 1,100 342
Kissei Pharmaceutical Co. 35,000 641
Koa Fire & Marine 97,000 359
Konami Co., Ltd. 45,900 3,870
Konica Corp. 29,000 224
Kubota Corp. 60,000 202
Kurimoto Iron Works 97,000 208
Kyocera Corp. 26,300 3,423
Kyorin Pharmaceutical Co., Ltd. 7,000 230
Kyushu Electric Power 13,100 192
Lawson, Inc. 5,700 196
Mabuchi Motor Co., Ltd. 23,700 2,533
MACNICA, Inc. 1,700 192
Makita Corp. 106,000 772
Marubeni Corp. (a) 1,067,000 2,494
Marui Co., Ltd. 14,000 207
Maruichi Steel Tube 51,000 724
Matsumotokiyoshi 36,700 2,906
Matsushita Communication 7,900 1,035
Matsushita Electric Industrial Co., Ltd. 242,000 7,031
Minebea Co., Ltd. 272,000 2,717
Mitsubishi Chemical 205,000 648
Mitsubishi Corp. 87,000 718
Mitsubishi Electric Corp. 218,000 1,566
Mitsubishi Estate Co., Ltd. 49,000 521
Mitsubishi Heavy Industries 255,000 991
Mitsubishi Trust & Banking 28,000 227
Mitsui Fudosan Co., Ltd. 80,000 969
Mitsui Mining & Smelting 40,000 337
Mitsui O.S.K. Lines 156,000 343
Mitsumi Electric Co. 4,000 132
Mizuho Holdings, Inc. (a) 787 6,051
Murata Manufacturing Co., Ltd. 3,000 359
Mycal Corp. 104,000 240
Namco 56,500 1,460
NEC Corp. 87,000 1,658
NGK Insulators, Ltd. 19,000 252
NGK Spark Plug Co. 2,000 31
Nichicon Corp. 11,000 196
Nichido Fire & Marine 188,000 972
NIDEC COPAL Corp. 5,000 75
NIDEC Corp. 2,700 166
Nikko Securities Co., Ltd. 19,000 164
Nintendo Co., Ltd. 6,400 1,059
Nippon Comsys Corp. 6,000 115
Nippon Electric Glass 7,000 163
Nippon Express Co., Ltd. 529,000 3,176
Nippon Fire & Marine 113,000 420
Nippon Meat Packers, Inc. 17,000 216
Nippon Oil Co. 45,000 242
Nippon Sheet Glass 32,000 487
Nippon System Development 700 76
Nippon Telegraph & Telephone Corp. 1,031 9,383
Nippon Yusen 251,000 1,178
Nippon Zeon Co., Ltd. 19,000 82
Nishimatsu Construction 302,000 955
Nissan Chemical Industries, Ltd. 23,000 170
Nissan Motor Co., Ltd. (a) 968,000 6,645
Nisshin Steel Co. 94,000 72
Nisshinbo Industries, Inc. 116,000 557
Nitto Denko Corp. 8,000 271
NOK Corp. 11,000 105
Nomura Securities Co., Ltd. 281,000 5,962
NTT Mobile Communication Network, Inc. 173 4,265
Oki Electric Industries (a) 36,000 214
Omron Corp. 59,000 1,455
Oriental Land Co., Ltd. 2,700 163
Orix Corp. 4,500 472
Osaka Gas Co. 89,000 219
Paris Miki, Inc. 3,200 132
Pioneer Corp. 78,000 2,416
Promise Co., Ltd. 3,300 248
Ricoh Co., Ltd. 22,000 339
Rinnai Corp. 95,900 1,964
Rohm Co. 18,900 4,765
Ryohin Keikaku Co., Ltd. 1,600 81
Sakura Bank, Ltd. 462,000 3,366
Sankyo Co., Ltd. 90,000 1,984
Sanseido Co., Ltd. 25,500 222
Sanyo Electric Co., Ltd. 28,000 213
Sekisui Chemical Co., Ltd. 241,000 696
77 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Sekisui House, Ltd. 70,000 740
Shimachu Co., Ltd. 7,700 116
Shin-Etsu Chemical Co., Ltd. 56,400 2,316
Shohkoh Fund & Co., Ltd. 10,730 881
SMC Corp. 1,200 170
Snow Brand Milk Products Co., Ltd. 25,000 91
Softbank Corp. 6,000 360
Sony Corp. 53,500 4,275
Stanley Electric 10,000 104
Sumitomo Bank 48,000 583
Sumitomo Electric Industries, Ltd. 69,000 1,274
Sumitomo Osaka Cement Co., Ltd. 34,000 145
Sumitomo Realty & Development 197,000 1,130
Sumitomo Rubber Industries 99,000 472
Sumitomo Trust & Banking 78,000 600
Suruga Bank, Ltd. 15,000 206
Suzuki Motor Corp. 14,000 150
Taiheiyo Cement Corp. 34,000 53
Taisho Pharmaceutical Co., Ltd. 54,000 1,554
Takeda Chemical Industries, Ltd. 90,000 5,930
Takefuji Corp. 10,700 1,059
TDK Corp. 19,900 2,006
Terumo Corp. 3,300 93
THK Co., Ltd. 6,800 168
Toc Co. 50,000 335
Toho Bank 100,000 369
Tohoku Electric Power 19,700 265
Tokio Marine & Fire Insurance Co. 19,000 210
Tokuyama Corp. 36,000 149
Tokyo Electric Power 15,500 376
Tokyo Gas Co. 78,000 204
Tokyo Seimitsu Co., Ltd. 1,200 85
Tokyo Steel Manufacturing 20,600 84
Tokyo Tomin Bank, Ltd. 1,500 42
Tokyu Corp. 317,000 1,639
Toppan Printing Co., Ltd. 17,000 150
Toshiba Corp. 32,000 229
Toshiba Machine Co. (a) 12,000 50
Tostem Corp. 25,000 364
Toto, Ltd. 6,000 46
Toyo Information Systems 13,000 882
Toyoda Gosei Co., Ltd. 12,000 735
Toyota Motor Corp. 75,600 3,021
Trend Micro, Inc. (a) 500 47
UNY Co., Ltd. 23,000 282
West Japan Railway Co. 816 3,350
Yakult Honsha Co., Ltd. 20,000 228
Yamaha Corp. 60,000 517
Yamanouchi Pharmaceutical 129,000 5,840
Yamato Kogyo Co. 42,000 137
Yamato Transport 4,000 82
Yasuda Fire & Marine Insurance Co., Ltd.
(The) 31,000 161
Yodogawa Steel Works, Ltd. 71,000 160
York-Benimaru Co., Ltd. 3,400 83
Yoshitomi Pharmaceutical Ind., Ltd. 3,000 23
-----------
214,052
-----------
LUXEMBOURG - 0.1%
Carrier 1 International SA 3,467 84
Thiel Logistik AG New 3,895 602
-----------
686
-----------
MEXICO - 0.1%
Grupo Television SA de CV - GDR 12,964 702
-----------
NETHERLANDS - 7.3%
ABN Amro Holding 207,840 4,815
Aegon 6,500 258
Akzo Nobel 86,288 3,928
ASM Lithography Holding 94,936 2,595
Bols Wessanen CVA 24,300 284
Buhrmann 63,579 1,737
DSM 16,200 467
Elsevier 229,000 2,925
Equant 4,175 140
Fortis (NL) 94,378 2,883
Fox Kids Europe NV 36,117 414
Getronics 17,173 193
Heineken 50,783 2,758
Heineken Holding Class A 35,508 1,266
Hunter Douglas 74,316 2,132
ING Groep 192,326 13,207
Koninklijke Ahold 304,080 8,833
Koninklijke KPN 174,249 3,530
Koninklijke Numico 144,601 6,761
Koninklijke (Royal) Philips Electronics 114,908 4,516
Koninklijke Vopak 12,631 241
Nutreco Holding 22,891 987
QIAGEN 4,700 202
Royal Dutch Petroleum Co. 157,471 9,339
Stork 97,442 1,091
TNT Post Group 28 1
Unilever 73,404 3,681
Unique International 3,400 69
United Pan-Europe Communications 38,361 672
Vedior 67,755 1,009
International Fund 78
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Verenigde Nederlandse Uitgeversbedrijven 44,476 2,095
Wereldhave 10,338 455
Wolters Kluwer 190,729 4,292
-----------
87,776
-----------
NEW ZEALAND - 0.4%
Air New Zealand Class B 15,100 13
Air New Zealand, Ltd. (a) 5,033 5
Carter Holt Harvey 773,300 512
Lion Nathan, Ltd. 127,385 245
Telecom Corp. of New Zealand, Ltd. 1,637,246 3,623
Warehouse Group (The), Ltd. 8,600 22
-----------
4,420
-----------
NORWAY - 0.2%
Christiania Bank OG Kreditkasse 45,000 235
Den Norske Creditbank A/S 120,383 523
Norsk Hydro AS 32,922 1,309
Norske Skogindustrier AS Class A 4,000 144
Orkla ASA Class A 4,285 77
Petroleum Geo-Services AS - ADR (a) 42,900 588
-----------
2,876
-----------
PORTUGAL - 0.4%
Banco Comercial Portugues, SA 289,800 1,448
Electricidade de Portugal SA 279,200 758
Portugal Telecom SA 194,326 1,732
Telecel - Comunicacoes Pessoais SA 26,654 292
-----------
4,230
-----------
RUSSIA - 0.1%
Lukoil Oil Co. - ADR 20,335 1,086
-----------
SINGAPORE - 1.3%
Chartered Semiconductor Manufacturing, Ltd.
(a) 16,000 69
City Developments 102,700 474
Creative Technology, Ltd. 13,000 219
Datacraft Asia, Ltd. (a) 6,240 43
DBS Group Holdings, Ltd. 183,385 2,161
DBS Land 16,000 24
Flextronics International, Ltd. (a) 100,000 3,794
Jardine Strategic Holdings, Ltd. (a) 18,000 50
Natsteel Electronics, Ltd. 249,000 646
Oversea-Chinese Banking Corp., Ltd. 615,820 3,927
Overseas Union Bank 316,456 1,532
Parkway Holdings 4,000 8
Singapore Airlines, Ltd. (Alien Market) 35,300 354
Singapore Land 46,000 95
Singapore Land, Ltd. 2005 Warrants (a)9,200 8
Singapore Press Holdings, Ltd. 19,426 278
Singapore Technologies Engineering, Ltd.44,400 72
Singapore Telecommunications, Ltd. 70,400 117
Straits Steamship Land, Ltd. 110,000 164
United Overseas Bank, Ltd. 250,438 1,854
Venture Manufacturing (Singapore), Ltd. 4,000 39
-----------
15,928
-----------
SPAIN - 2.7%
Acerinox SA 7,403 206
Altadis 230,429 3,451
Amadeus Global Travel Distribution SA Class A 18,026 147
Banco Bilbao Vizcaya SA 240,108 3,199
Banco Popular Espanol SA 51,217 1,532
Banco Santander Central Hispano SA 289,000 2,801
Centros Commerciales Pryca 19,300 245
Endesa SA 205,971 3,356
Grupo Dragados SA 19,800 192
Iberdrola SA 264,561 3,235
Prosegur CIA de Seguridad SA (Regd) 26,500 261
Repsol SA - ADR 113,763 1,813
Respol - YPF SA 55,385 880
Telefonica SA 552,434 10,534
Union Electrica Fenosa SA 20,480 379
-----------
32,231
-----------
SWEDEN - 1.8%
Assa Abloy AB Series B 73,126 1,347
Autoliv, Inc. 89,974 1,972
Investor AB Class B 99,804 1,318
Mo och Domsjo AB Series B 10,000 255
Nordic Baltic Holding AB 622,900 4,675
Securitas AB Series B 45,834 977
Skandia Forsakrings AB 96,111 1,630
Skandinaviska Enskilda Banken Class A 78,822 931
Stora Enso Oyj Class R 51,966 533
Svenska Handelsbanken AB Class A 37,005 581
Tele1 Europe Holding AB (a) 15,658 121
Telefonaktiebolaget LM Ericsson AB Series B
(a) 478,000 6,362
Telefonaktiebolaget LM Ericsson Class B - ADR 23,600 327
Tornet Fastighets AB 27,200 362
Volvo AB Series B 8,100 126
-----------
21,517
-----------
79 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
SWITZERLAND - 5.0%
ABB, Ltd. 21,941 1,950
Baloise Holding, Ltd. 1,415 1,400
Barry Callebaut AG (Regd) 14,016 1,941
Bobst AG 370 467
Clariant AG (Regd) 12,145 3,702
Credit Suisse Group (Reqd) 14,478 2,714
Forbo Holding AG 1,520 591
Holderbank Financiere Glarus AG (BR) 200 210
Julius Baer Holding, Ltd. Class B 959 4,748
Kuoni Reisen AG Series B 855 366
Nestle SA (Reqd) 2,607 5,402
Novartis AG (Reqd) 8,317 12,617
Richemont Series A 406 1,129
Roche Holdings Genusscheine AG 135 1,233
Schweiz Ruckversicher (Regd) 955 1,883
Serono SA Series B 1,050 945
SGS Holding (BR) 120 147
Sulzer AG (Regd) 1,840 1,188
Sulzer Medica AG (Regd) 3,218 815
Swatch Group (The) AG 767 1,015
Swisscom AG 4,168 1,058
UBS AG 45,594 6,317
Valora Holding AG (Regd) 2,900 591
Zurich Financial Services AG (a) 16,284 7,882
-----------
60,311
-----------
UNITED KINGDOM - 20.1%
3i Group PLC 66,042 1,500
Alliance & Leicester PLC 110,000 940
Alliance UniChem PLC 138,000 1,169
ARM Holdings PLC (a) 37,498 370
Associated British Foods PLC 257,840 1,459
AstraZeneca Group PLC 27,784 1,312
Avis Europe PLC 53,600 140
AWG PLC (a) 208,916 1,807
Bank of Scotland Governor & Co. PLC 70,261 656
Barclays PLC 150,723 4,313
Barratt Developments PLC 200,000 828
Bass PLC 350,080 3,426
BBA Group PLC 129,369 710
BG Group PLC 579,722 2,322
Billiton PLC 98,100 374
Blue Circle Industries PLC 433,400 2,647
BOC Group PLC 119,319 1,662
Bookham Technology PLC (a) 3,600 119
Boots Co. PLC 421,300 3,362
BP Amoco PLC 909,702 7,715
British Aerospace PLC 1,108,562 6,297
British Airways PLC 673,300 3,009
British American Tobacco PLC 272,191 1,908
British Energy PLC 73,200 191
British Sky Broadcasting Group PLC (a) 48,709 703
British Telecom PLC 271,069 3,178
Brixton Estate PLC 100,000 353
Bunzl PLC 514,374 2,944
Cable & Wireless PLC 361,535 5,115
Cadbury Schweppes PLC 30,400 188
Canary Wharf Finance Group PLC 122,295 955
Capita Group PLC 132,830 1,012
Carphone Warehouse (The) PLC (a) 29,000 74
Celltech Group PLC (a) 23,874 475
Centrica PLC 364,100 1,252
CGNU PLC 275,929 3,691
CMG PLC 52,460 866
COLT Telecom Group PLC (a) 79,685 2,544
COLT Telecom Group PLC - ADR (a) 10,460 1,366
Computacenter PLC 43,197 251
Corus Group PLC 543,600 489
Debenhams PLC 120,000 373
Diageo PLC 842,690 7,954
Dimension Data Holdings PLC (a) 75,452 661
Dixons Group PLC 64,360 191
Elan Corp. PLC - ADR 41,857 2,174
Energis PLC (a) 121,346 1,038
Enterprise Oil PLC 471,296 3,727
Freeserve PLC (a) 138,100 330
Gallaher Group PLC 53,600 314
GKN PLC 222,300 2,548
Glaxo Wellcome PLC 328,413 9,454
Glynwed International PLC 41,468 110
Granada Compass PLC (a) 303,933 2,619
Great University Stores PLC 475,600 3,285
Halifax PLC 290,700 2,286
Hanson PLC 70,300 371
Hays PLC 65,700 359
HSBC Holdings PLC 673,687 9,545
Invesco PLC 182,497 4,078
Jazztel PLC 8,889 160
Johnson Matthey PLC 14,266 223
Ladbroke Group, Ltd. PLC 49,000 136
LASMO PLC 780,000 1,658
Lattice Group PLC (a) 579,722 1,236
Legal & General Group PLC 187,400 466
Lloyds TSB Group PLC 413,958 4,216
Logica PLC 130,820 3,870
Marconi PLC 37,492 473
MFI Furniture Group PLC 88,748 71
International Fund 80
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
Misys PLC 139,455 1,453
Morgan Crucible PLC 555,542 2,184
National Grid Group PLC 108,359 939
Next PLC 283,900 2,824
Northern Foods PLC 52,077 85
Nycomed Amersham PLC 72,750 651
Ocean Group PLC 8,233 141
Pearson PLC 124,480 3,340
Powell Duffryn PLC 38,000 328
PowerGen PLC 656,650 5,088
QXL.com PLC (a) 95,600 37
Railtrack Group PLC 222,179 3,436
Rank Group PLC 285,000 707
Reckitt Benckiser PLC 196,538 2,584
Reed International PLC 594,890 5,498
Reuters Group PLC 63,692 1,240
Rexam PLC 757,431 2,561
Rio Tinto Corp. PLC (Regd) 229,852 3,719
Royal & Sun Alliance Insurance Group PLC 974,213 6,933
Royal Bank of Scotland Group PLC 123,012 2,761
Safeway PLC 402,053 1,671
Scottish & Newcastle PLC 183,000 1,253
Scottish & Southern Energy PLC 157,029 1,306
ScottishPower PLC 356,900 2,680
SEMA Group PLC 9,900 125
Severn Trent PLC 18,896 202
Shell Transport & Trading Co. PLC 586,291 4,717
Shire Pharmaceuticals Group PLC (a) 13,700 278
Shire Pharmaceuticals Group PLC - ADR 9,552 601
Smith & Nephew PLC 407,454 1,673
Smith (David S.) Holdings PLC 342,000 754
SmithKline Beecham PLC 275,913 3,563
Somerfield PLC 746,765 834
SSL International PLC 75,900 878
Standard Chartered Bank Group PLC 26,200 378
Tate & Lyle, Ltd. PLC 48,000 154
Taylor Woodrow PLC 150,000 396
TeleWest Communications PLC (a) 342,967 567
Tesco Store Holdings PLC 359,600 1,371
Thistle Hotels PLC 272,222 458
TI Group PLC 50,100 270
Tomkins PLC 798,590 1,900
Trinity PLC 130,000 852
Unilever PLC 481,200 3,255
United Newspaper, Ltd. PLC 61,296 767
Vodafone Group PLC 5,075,904 21,119
Williams PLC 43,900 210
Wimpey (George), Ltd. PLC 150,000 326
Wolseley PLC 340,634 1,883
WPP Group PLC 48,064 645
Zeneca Group PLC 72,192 3,382
-----------
242,595
-----------
TOTAL COMMON STOCKS
(cost $1,034,299) 1,083,279
-----------
PREFERRED STOCKS - 1.1%
AUSTRALIA - 0.1%
News Corp., Ltd. 84,140 755
-----------
FRANCE - 0.0%
Casino Guichard Perrach 2,400 138
-----------
GERMANY - 1.0%
Dyckerhoff AG 3,268 52
Fresenius AG 4,800 1,185
Henkel KGAA 5,000 303
Hugo Boss AG 4,226 1,077
Krones AG 14,000 345
M.A.N. AG 9,200 188
Marschollek, Lautenschlaeger und Partner AG 4,630 627
Porsche AG 775 2,611
ProSieben Media AG 24,540 773
Systeme, Anwendungen, Produkte in der
Datenverarbeitung AG 20,521 4,135
Volkswagen AG 7,395 212
Wella AG 27,179 1,090
-----------
12,598
-----------
ITALY - 0.0%
Fiat SPA 3,139 46
-----------
TOTAL PREFERRED STOCKS
(cost $10,965) 13,537
-----------
81 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
SHORT-TERM INVESTMENTS - 8.0%
UNITED STATES - 8.0%
Frank Russell Investment Company Money Market
Fund,
due on demand (b) 83,272 83,272
United States Treasury Bills (b)(c)(d)
5.925% due 12/21/00 7,000 6,942
5.960% due 12/21/00 7,000 6,942
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $97,156) 97,156
-----------
TOTAL INVESTMENTS - 98.8%
(identified cost $1,142,420) 1,193,972
OTHER ASSETS AND LIABILITIES,
NET - 1.2% 14,399
-----------
NET ASSETS - 100.0% 1,208,371
===========
(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.
Abbreviations:
ADR - American Depositary Receipt
BR - Bearer
GDR - Global Depositary Receipt
Foreign Currency Abbreviations:
AUD - Australian dollar
CAD - Canadian dollar
CHF - Swiss franc
DKK - Danish krone
EUR - Euro dollar
GBP - British pound
HKD - Hong Kong dollar
JPY - Japanese yen
NOK - Norwegian krona
NZD - New Zealand dollar
SEK - Swedish krona
SGD - Singapore dollar
USD - United States dollar
See accompanying notes which are an integral part of the financial statements.
International Fund 82
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
UNREALIZED
NUMBER APPRECIATION
FUTURES CONTRACTS OF (DEPRECIATION)
CONTRACTS (000)
----------- -----------
CAC-40 Index (France)
expiration date 12/00 207 $ 215
DAX Index (Germany)
expiration date 12/00 56 22
EUR STOXX 50 Index (EMU)
expiration date 12/00 466 (210)
FTSE-100 Index (UK)
expiration date 12/00 299 (133)
TOPIX Index (Japan)
expiration date 12/00 215 (1,778)
-----------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ (1,884)
===========
MARKET
INDUSTRY % OF VALUE
DIVERSIFICATION NET (000)
(Unaudited) ASSETS $
-------- --------
Auto & Transportation 5.1% 60,766
Basic Industries 0.2 2,151
Consumer Discretionary 8.9 107,568
Consumer Staples 6.2 75,070
Energy 7.0 84,950
Financial Services 21.1 255,269
Health Care 7.5 90,568
Materials & Processing 9.0 108,538
Miscellaneous 1.6 19,560
Producer Durables 6.8 82,107
Technology 6.1 73,806
Utilities 11.3 136,463
Short-Term Investments 8.0 97,156
Total Investments 98.8 1,193,972
Other Assets and Liabilities, net 1.2 14,399
-------- -----------
NET ASSETS 100.0% 1,208,371
======== ===========
MARKET
GEOGRAPHIC DIVERSIFICATION % OF VALUE
(Unaudited) NET (000)
ASSETS $
-------- --------
Europe 43.1% 520,770
Japan 17.7 214,052
Latin America 0.1 702
Middle East 0.3 3,679
Pacific Basin 5.4 65,208
United Kingdom 20.1 242,595
Other 4.1 49,810
Short-Term Investments 8.0 97,156
-------- -----------
Total Investments 98.8 1,193,972
Other Assets and Liabilities, net 1.2 14,399
-------- -----------
NET ASSETS 100.0% 1,208,371
======== ===========
See accompanying notes which are an integral part of the financial statements.
83 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION
DELIVER FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
---------------- --------------------- ------------- ----------------------
USD 42,728 EUR 49,500 12/07/00 $ (650)
USD 2,597 EUR 3,000 12/07/00 (47)
USD 5,110 EUR 6,000 12/07/00 (9)
USD 2,586 EUR 3,000 12/07/00 (36)
USD 2,245 EUR 2,600 12/07/00 (35)
USD 33,153 GBP 23,575 12/07/00 1,078
USD 4,234 GBP 3,000 12/07/00 122
USD 1,460 GBP 1,000 12/07/00 (8)
USD 1,447 GBP 1,000 12/07/00 5
USD 1,442 GBP 1,000 12/07/00 9
USD 71 GBP 50 12/07/00 2
USD 875 JPY 94,900 11/10/00 (5)
USD 950 JPY 102,492 11/10/00 (10)
USD 24,210 JPY 2,550,000 12/07/00 (682)
USD 1,420 JPY 150,000 12/07/00 (36)
USD 2,837 JPY 300,000 12/07/00 (70)
USD 946 JPY 100,000 12/07/00 (23)
USD 1,861 JPY 200,000 12/07/00 (16)
USD 930 JPY 100,000 12/07/00 (7)
USD 924 JPY 100,000 12/07/00 (1)
USD 3,795 JPY 400,000 12/07/00 (105)
USD 1,361 JPY 145,300 12/07/00 (21)
AUD 6 USD 3 11/10/00 --
EUR 505 USD 428 11/07/00 --
EUR 7,000 USD 6,190 12/07/00 240
EUR 2,000 USD 1,771 12/07/00 71
EUR 2,000 USD 1,770 12/07/00 70
EUR 2,000 USD 1,770 12/07/00 69
EUR 2,000 USD 1,745 12/07/00 44
EUR 2,000 USD 1,703 12/07/00 3
EUR 2,880 USD 2,423 12/07/00 (26)
GBP 132 USD 192 11/06/00 --
GBP 23 USD 34 11/06/00 --
GBP 479 USD 694 11/06/00 (1)
GBP 36 USD 53 11/06/00 --
GBP 369 USD 535 11/06/00 (1)
GBP 29 USD 42 11/07/00 --
GBP 3,000 USD 4,387 12/07/00 31
GBP 1,000 USD 1,465 12/07/00 13
GBP 1,000 USD 1,474 12/07/00 22
GBP 1,000 USD 1,475 12/07/00 23
GBP 2,000 USD 2,907 12/07/00 3
GBP 1,000 USD 1,459 12/07/00 7
GBP 1,000 USD 1,468 12/07/00 16
JPY 150,000 USD 1,413 12/07/00 29
JPY 150,000 USD 1,414 12/07/00 30
JPY 100,000 USD 934 12/07/00 11
JPY 300,000 USD 2,774 12/07/00 6
JPY 100,000 USD 925 12/07/00 2
JPY 200,000 USD 1,871 12/07/00 25
JPY 100,000 USD 939 12/07/00 16
JPY 145,300 USD 1,354 12/07/00 13
------------
$ 171
============
See accompanying notes which are an integral part of the financial statements.
International Fund 84
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
FOREIGN CURRENCY EXCHANGE SPOT CONTRACTS
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION
DELIVER FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
---------------- ------------------- --------------- ---------------------
USD 37 AUD 71 11/01/00 $ --
USD 183 AUD 347 11/01/00 (3)
USD 31 CAD 47 11/02/00 --
USD 348 CAD 529 11/02/00 (2)
USD 242 CHF 435 11/01/00 --
USD 24 DKK 211 11/01/00 --
USD 497 EUR 590 11/01/00 4
USD 104 EUR 123 11/01/00 --
USD 865 EUR 1,018 11/01/00 (2)
USD 79 EUR 93 11/01/00 --
USD 91 EUR 108 11/02/00 1
USD 238 EUR 280 11/02/00 --
USD 29 EUR 35 11/03/00 --
USD 400 GBP 278 11/01/00 4
USD 117 GBP 81 11/01/00 1
USD 75 GBP 53 11/01/00 2
USD 233 GBP 164 11/01/00 5
USD 364 GBP 250 11/02/00 (1)
USD 73 GBP 51 11/02/00 --
USD 567 GBP 388 11/03/00 (4)
USD 81 HKD 634 11/01/00 --
USD 287 JPY 31,235 11/01/00 (1)
USD 569 JPY 61,703 11/01/00 (4)
USD 133 JPY 14,389 11/01/00 (1)
USD 479 JPY 51,912 11/01/00 (3)
USD 454 JPY 49,238 11/01/00 (3)
USD 444 JPY 48,413 11/01/00 (1)
USD 66 JPY 7,093 11/02/00 --
USD 344 JPY 37,522 11/02/00 --
USD 97 JPY 10,538 11/02/00 --
USD 105 JPY 11,454 11/02/00 --
USD 156 JPY 17,042 11/02/00 --
USD 388 JPY 42,224 11/02/00 (1)
USD 15 NOK 141 11/01/00 --
USD 3 NZD 8 11/03/00 --
USD 167 SEK 1,674 11/01/00 1
USD 140 SEK 1,401 11/02/00 --
USD 78 SEK 776 11/02/00 --
EUR 5 USD 4 11/02/00 --
EUR 287 USD 244 11/02/00 --
EUR 1,811 USD 1,524 11/02/00 (13)
EUR 1,190 USD 1,000 11/02/00 (10)
EUR 1,391 USD 1,169 11/03/00 (12)
EUR 2 USD 1 11/03/00 --
GBP 6 USD 9 11/01/00 --
GBP 213 USD 311 11/01/00 1
GBP 353 USD 501 11/01/00 (11)
GBP 28 USD 41 11/02/00 --
GBP 251 USD 366 11/02/00 1
GBP 303 USD 434 11/02/00 (5)
GBP 425 USD 616 11/03/00 --
GBP 242 USD 351 11/03/00 --
JPY 265 USD 2 11/01/00 --
JPY 39,865 USD 366 11/01/00 1
JPY 21,437 USD 197 11/01/00 --
JPY 10,194 USD 94 11/02/00 --
JPY 22,075 USD 203 11/02/00 --
JPY 10,447 USD 96 11/02/00 --
JPY 4,210 SGD 68 11/01/00 --
------------
$ (56)
============
See accompanying notes which are an integral part of the financial statements.
85 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) October 31, 2000
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments at market (identified cost $1,142,420) ........................................... $ 1,193,972
Foreign currency holdings (identified cost $13,567) .......................................... 13,462
Unrealized appreciation on forward foreign currency exchange contracts ........................ 1,960
Unrealized appreciation in foreign currency exchange spot contracts ........................... 21
Receivables:
Dividends and interest ....................................................................... 1,800
Investments sold ............................................................................. 19,192
Fund shares sold ............................................................................. 2,506
Foreign taxes recoverable .................................................................... 1,212
Daily variation margin on futures contracts .................................................. 854
Prepaid expenses .............................................................................. 9
-----------
Total assets ............................................................................... 1,234,988
LIABILITIES
Payables:
Due to Custodian .............................................................. $ 152
Investments purchased ......................................................... 21,363
Fund shares redeemed .......................................................... 2,070
Accrued fees to affiliates .................................................... 845
Other accrued expenses ........................................................ 321
Unrealized depreciation on forward foreign currency exchange contracts ......... 1,789
Unrealized depreciation on foreign currency exchange spot contracts ............ 77
-----------
Total liabilities .......................................................................... 26,617
-----------
NET ASSETS .................................................................................... $ 1,208,371
===========
NET ASSETS CONSIST OF:
Accumulated distributions in excess of net investment income .................................. $ (1,707)
Accumulated net realized gain (loss) ......................................................... 113,075
Unrealized appreciation (depreciation) on:
Investments .................................................................................. 51,552
Futures contracts ............................................................................ (1,884)
Foreign currency-related transactions ........................................................ (153)
Shares of beneficial interest ................................................................. 305
Additional paid-in capital .................................................................... 1,047,183
-----------
NET ASSETS .................................................................................... $ 1,208,371
===========
NET ASSET VALUE, offering and redemption price per share:
Class E ($25,984,374 divided by 657,724 shares of $.01 par value
shares of beneficial interest outstanding) ................................................ $ 39.51
===========
Class I ($1,104,283,666 divided by 27,887,856 shares of $.01 par value
shares of beneficial interest outstanding) ................................................ $ 39.60
===========
Class Y ($78,102,740 divided by 1,971,351 shares of $.01 par value
shares of beneficial interest outstanding) ................................................ $ 39.62
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
International Fund 86
<PAGE>
INTERNATIONAL FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Dividends ............................................................. $ 26,889 $ 22,034
Dividends from Money Market Fund ...................................... 4,219 2,688
Interest .............................................................. 346 491
Less foreign taxes withheld ........................................... (2,462) (2,525)
--------- ---------
Total investment income ............................................. 28,992 22,688
--------- ---------
EXPENSES
Advisory fees ......................................................... 7,280 7,599
Administrative fees ................................................... 505 546
Custodian fees ........................................................ 2,002 2,067
Transfer agent fees ................................................... 390 490
Professional fees ..................................................... 106 65
Registration fees ..................................................... 78 97
Shareholder servicing fees - Class E .................................. 58 44
Trustees' fees ........................................................ 11 6
Miscellaneous ......................................................... 97 107
--------- ---------
Expenses before reductions ............................................ 10,527 11,021
Expense reductions .................................................... (21) --
--------- ---------
Expenses, net ....................................................... 10,506 11,021
--------- ---------
Net investment income .................................................. 18,486 11,667
--------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ........................................................... 77,282 124,531
Futures contracts ..................................................... (2,638) 17,317
Foreign currency-related transactions ................................. (16,670) (9,253)
--------- ---------
57,974 132,595
--------- ---------
Net change in unrealized appreciation (depreciation) on:
Investments ........................................................... (235,569) 161,400
Futures contracts ..................................................... (5,965) 2,286
Foreign currency-related transactions ................................. (240) 2,612
--------- ---------
(241,774) 166,298
--------- ---------
Net realized and unrealized gain (loss) ................................ (183,800) 298,893
--------- ---------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS .................. $(165,314) $ 310,560
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
87 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C> <C>
OPERATIONS
Net investment income ......................................... $ 18,486 $ 11,667 $ 14,307
Net realized gain (loss) ...................................... 57,974 132,595 39,005
Net change in unrealized appreciation (depreciation)........... (241,774) 166,298 73,399
----------- ----------- -----------
Net increase (decrease) in net assets from operations ....... (165,314) 310,560 126,711
----------- ----------- -----------
DISTRIBUTIONS
From net investment income
Class E ..................................................... -- (276) --
Class I ..................................................... -- (12,571) (15,707)
From net realized gain
Class E ..................................................... (946) (1,407) --
Class I ..................................................... (39,155) (59,070) (16,426)
----------- ----------- -----------
Net decrease in net assets from distributions ............. (40,101) (73,324) (32,133)
----------- ----------- -----------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions . 119,569 43,302 (53,634)
----------- ----------- -----------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS .................... (85,846) 280,538 40,944
NET ASSETS
Beginning of period ........................................... 1,294,217 1,013,679 972,735
----------- ----------- -----------
End of period (including accumulated distributions in excess of
net investment income of $1,707, $4,911 and $4,172,
respectively) ............................................... $ 1,208,371 $ 1,294,217 $ 1,013,679
=========== =========== ===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
International Fund 88
<PAGE>
INTERNATIONAL 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.
2000* 1999**
---------- ----------
NET ASSET VALUE, BEGINNING OF PERIOD ............... $ 46.68 $ 39.07
---------- ----------
INCOME FROM OPERATIONS
Net investment income (a) ........................ .53 .24
Net realized and unrealized gain (loss) .......... (6.26) 9.73
---------- ----------
Total income from operations .................... (5.73) 9.97
---------- ----------
DISTRIBUTIONS
From net investment income ........................ -- (.38)
From net realized gain ............................ (1.44) (1.98)
---------- ----------
Total distributions ............................. (1.44) (2.36)
---------- ----------
NET ASSET VALUE, END OF PERIOD ..................... $ 39.51 $ 46.68
========== ==========
TOTAL RETURN (%)(b) ............................... (12.59) 25.87
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ......... 25,984 30,541
Ratios to average net assets (%)(c):
Operating expenses .............................. 1.28 1.27
Net investment income ........................... 1.50 .92
Portfolio turnover rate (%) ...................... 105.17 118.99
* For the ten months ended October 31, 2000.
** 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) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
89 International Fund
<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,
----------------------------------------------------------
2000* 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD .............. $ 46.67 $ 38.03 $ 34.60 $ 37.39 $ 36.26 $ 34.28
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM OPERATIONS
Net investment income (a) ....................... .64 .43 .52 .46 .44 .48
Net realized and unrealized gain (loss) ......... (6.27) 10.93 4.10 (.28) 2.41 3.16
---------- ---------- ---------- ---------- ---------- ----------
Total income from operations ................... (5.63) 11.36 4.62 .18 2.85 3.64
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS
From net investment income ....................... -- (.48) (.59) (.55) (.35) (.72)
From net realized gain ........................... (1.44) (2.24) (.60) (2.42) (1.37) (.94)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions ............................ (1.44) (2.72) (1.19) (2.97) (1.72) (1.66)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD .................... $ 39.60 $ 46.67 $ 38.03 $ 34.60 $ 37.39 $ 36.26
========== ========== ========== ========== ========== ==========
TOTAL RETURN (%)(b)(c) ............................ (12.38) 30.46 13.52 .58 7.98 10.71
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ........ 1,104,284 1,263,676 1,013,679 972,735 944,380 796,777
Ratios to average net assets (%)(c)(d):
Operating expenses, net ........................ 1.00 1.00 .98 1.00 1.04 .88
Operating expenses, gross ...................... 1.00 1.00 .98 1.00 1.05 .89
Net investment income .......................... 1.76 1.07 1.38 1.14 1.20 1.41
Portfolio turnover rate (%) ..................... 105.17 118.99 64.47 79.45 42.69 36.78
</TABLE>
* For the ten months ended October 31, 2000.
(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) For periods prior to April 1, 1995, Fund performance, operating expenses
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net of
investment management fees, but gross of any investment services fees. See
Note 4.
(d) The ratios for periods less than one year are annualized.
International Fund 90
<PAGE>
INTERNATIONAL FUND
FINANCIAL HIGHLIGHTS - CLASS Y
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
2000*
----------
NET ASSET VALUE, BEGINNING OF PERIOD ............................ $ 46.09
----------
INCOME FROM OPERATIONS
Net investment income (a) ..................................... .46
Net realized and unrealized gain (loss) ....................... (6.93)
----------
Total income from operations ................................. (6.47)
----------
NET ASSET VALUE, END OF PERIOD .................................. $ 39.62
==========
TOTAL RETURN (%)(b) ............................................ (14.04)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ...................... 78,103
Ratios to average net assets (%)(c):
Operating expenses, net ...................................... .91
Operating expenses, gross .................................... .94
Net investment income ........................................ 1.85
Portfolio turnover rate (%) ................................... 105.17
* For the period March 29, 2000 (commencement of sale) to October 31, 2000.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
91 International Fund
<PAGE>
FIXED INCOME I FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
DATES FIXED I - CLASS I++ LB AGGREGATE **
<S> <C> <C>
Inception* $ 10,000 $ 10,000
1991 $ 11,538 $ 11,581
1992 $ 12,718 $ 12,720
1993 $ 14,301 $ 14,230
1994 $ 13,765 $ 13,708
1995 $ 15,861 $ 15,853
1996 $ 16,791 $ 16,780
1997 $ 18,272 $ 18,272
1998 $ 19,881 $ 19,978
1999 $ 19,951 $ 20,084
2000 $ 21,394 $ 21,551
---------- -------- --------
Total $174,471 $174,757
========== ======== ========
Yearly periods ended October 31
</TABLE>
<TABLE>
<CAPTION>
FIXED INCOME I FUND - CLASS I FIXED INCOME I FUND - CLASS Y ++++++
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
------------- --------- ------ ------------- --------- ------
<S> <C> <C> <C> <C> <C>
1 Year $10,723 7.23% 1 Year $10,727 7.27%
5 Years $13,488 6.16%(S) 5 Years $13,493 6.17%(S)
10 Years $21,394 7.89%(S) 10 Years $21,401 7.90%(S)
<CAPTION>
FIXED INCOME I FUND - CLASS E ++++ LEHMAN BROTHERS AGGREGATE BOND INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
------------- --------- ------ ------------- --------- ------
<S> <C> <C> <C> <C> <C>
1 Year $10,693 6.93% 1 Year $10,730 7.30%
5 Years $13,435 6.08%(S) 5 Years $13,594 6.33%(S)
10 Years $21,310 7.85%(S) 10 Years $21,551 7.98%(S)
</TABLE>
93 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the ten months ended October 31, 2000, the Fixed Income I Fund Class I,
Class E and Class Y shares gained 7.63%, 7.36%, and 7.66%, respectively. This
compared to a 7.83% return for the Lehman Brothers Aggregate Bond Index.
The Fund's performance reflected its diversified strategy, with managers
following somewhat divergent paths regarding spreads. While all of the Fund's
managers took a careful approach because of the volatility of current market
conditions, a few saw the year's spread widening as an opportunity to add excess
yield to their portfolios. Other Fund managers interpreted the widening as a
cautionary sign. All of the managers focused on adding high quality issues to
their portfolio during the period.
PORTFOLIO HIGHLIGHTS
During the first quarter, bond markets were focused on the Federal Reserve Board
(the Fed), as they waited for a definitive response regarding interest rates.
After the Fed imposed a 50 basis point interest rate hike on May 16, however,
bond investors generally reached a consensus that the Fed would hold rates
steady, and bonds enjoyed a rally. Subsequently, in June economic data provided
bond investors with the first major indications that the US economy could be
slowing, which continued to fuel the rally.
The big story was the inversion of the US Treasury yield curve which occurred
during first quarter 2000. While the 3-month and 2-year rates rose 57 and 25
basis points, respectively, the 10-year and 30-year rates declined 42 and 64
basis points, respectively. This inversion was driven by the US Treasury's debt
buyback program and a declining supply of longer-term Treasury bonds.
Corporate debt generally underperformed during the period, with high-yield
issues being the worst performers during the first quarter, and the
investment-grade corporate sector closely following their pattern. While
corporate issues lagged for most of the year, they did stage a late-period rally
that helped drive further debate regarding the direction of the equities markets
and future growth outlooks.
The Fund's managers placed emphasis on intermediate maturities during the final
three months of the period, which proved advantageous as the yield curve
steepened. The Fund's managers favored high quality corporate issues, mortgages
and asset-backed issues throughout the period.
TOP TEN ISSUERS
(as a percent of Total Investments) October 31, 2000
Federal National Mortgage Association 18.2%
United States Treasury 14.1
Government National Mortgage Association 13.9
Federal Home Loan Mortgage Corp. 6.4
Mellon Residential Funding Corp. 1.3
Ford Motor Credit Co. 1.0
General Motors Acceptance Corp. 0.9
Morgan Stanley Dean Witter 0.8
Federal Home Loan Bank 0.8
GMAC Commercial Mortgage 0.7
PORTFOLIO CHARACTERISTICS
October 31, 2000
Weighted Average Quality Diversification AAA
Weighted Average Years-to-Maturity 8.9 years
Weighted Average Duration 5.0 years
Current Yield (SEC 30-day standardized)
Class I 6.6%
Class E 6.3%
Class Y 6.7%
Number of Issues 1,200
Number of Issuers 740
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
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* Fixed Income I Fund Class I assumes initial investment on November 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.
++++ 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.
++++++ Fixed Income I Fund Class I performance has been linked with Class Y to
provide historical perspective.
(S) 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 94
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -----------
LONG-TERM INVESTMENTS - 108.4%
ASSET-BACKED SECURITIES - 13.8%
Advanta Equipment Receivables
Series 2000-1 Class A3
7.405% due 02/15/07 1,600 1,620
Advanta Mortgage Loan Trust
Step Up Bond
Series 1997-2 Class A6
6.862% due 05/25/27 (c) 4,402 4,402
Series 2000-1 Class A4
8.610% due 03/25/28 575 596
AFC Home Equity Loan Trust
Series 2000-2 Class 2A
6.922% due 07/25/30 (c) 4,598 4,605
Americredit Automobile
Receivables Trust
Series 2000-A Class A4
7.290% due 12/12/06 1,575 1,594
Ameriquest Mortgage Securities, Inc.
Series 2000-2 Class A
6.921% due 07/15/30 (c) 4,636 4,641
AmSouth Auto Trust
Series 2000-1 Class A3
6.670% due 07/15/04 1,445 1,445
ANRC Auto Owner Trust
Series 2000-A Class A3
7.060% due 05/17/04 2,895 2,916
Associates Manufactured Housing
Pass-Thru Certificates
Series 1996-1 Class A5
7.600% due 03/15/27 870 866
BankAmerica Manufactured Housing
Contract
Series 1997-1 Class A4
6.195% due 06/10/10 27 27
Bombardier Capital Mortgage
Securitization Corp.
Series 1999-B Class A3
7.180% due 12/15/15 1,230 1,229
Series 2000-A Class A2
7.575% due 06/15/30 1,075 1,083
California Infrastructure SDG&E
Series 1997-1 Class A6
6.310% due 09/25/08 4,050 3,960
Case Equipment Loan Trust
Series 1999-B Class A4
6.900% due 06/15/06 1,245 1,248
Champion Home Equity Loan Trust
Step Up Bond
Series 1999-3 Class IIA
7.021% due 09/25/29 (c) 3,630 3,638
Charter Financial, Inc.
Series 1999-1 Class A4
7.070% due 01/25/06 2,075 2,084
Chase Credit Card Master Trust
Series 1999-3 Class B
6.950% due 01/15/07 200 200
Chase Funding Mortgage Loan
Series 2000-2 Class IA3
7.794% due 05/25/15 (c) 865 875
Citibank Credit Card Issuance Trust
Series 2000-A1 Class A1
6.900% due 10/17/07 1,600 1,599
Citibank Credit Card Master Trust I
Series 1997-3 Class A
6.839% due 02/10/04 1,100 1,099
Conseco Finance Lease LLC
Series 2000-1 Class A3
7.360% due 04/20/04 1,305 1,316
Conseco Finance Securitizations Corp.
Series 2000-1 Class A4
7.620% due 05/01/31 645 651
Series 2000-4 Class A2
7.350% due 05/01/32 2,545 2,561
Series 2000-5 Class A3
7.210% due 02/01/32 (c) 925 928
Countrywide Home Loans, Inc.
Series 1999-1 Class AF2
6.160% due 09/25/25 400 389
Cross Country Master Credit Card Trust II
Series 1999-1 Class A
7.121% due 09/15/05 (c) 1,700 1,700
DaimlerChrysler Auto Trust
Series 2000-A Class A3
7.090% due 12/06/03 1,735 1,744
Discover Card Master Trust I
Series 1998-7 Class A
5.600% due 05/16/06 1,750 1,694
DVI Receivables Corp.
Series 2000-1 Class A4
7.780% due 06/14/08 1,020 1,036
Federal Housing Authority: Project Citi 68
7.430% due 06/27/21 (c) 1,127 1,108
First Deposit Master Trust
Series 1996-1 Class A
6.790% due 08/15/07 (c) 2,900 2,905
First Sierra Receivables
Series 2000-1 Class A1
7.490% due 01/18/05 1,467 1,466
First USA Credit Card Master Trust
Series 1996-6 Class A
6.760% due 07/10/06 (c) 100 100
95 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -----------
Fleet Credit Card Master Trust II
Series 2000-B Class A
6.731% due 09/15/05 (c) 100 100
Fleetwood Credit Corp. Grantor Trust
Series 1997-B Class A
6.400% due 05/15/13 (c) 1,818 1,807
FMAC Loan Receivables Trust
Series 1998-BA Class A1
6.220% due 11/15/20 2,098 2,064
Ford Credit Auto Owner Trust
Series 2000-A Class B
7.370% due 07/15/04 2,000 2,026
Series 2000-D Class A3
7.150% due 12/15/03 380 382
Series 2000-F Class A2
6.560% due 05/17/04 200 200
GMAC Commercial Mortgage
Securities, Inc.
7.080% due 01/15/12 (c) 3,394 3,387
Gracechurch Card Funding PLC
Series 1 Class A
6.801% due 11/15/04 (c) 4,400 4,409
Green Tree Financial Corp.
Series 1994-1 Class A4
7.200% due 04/15/19 1,392 1,392
Green Tree Home Improvement
Loan Trust
Series 1998-D Class HEA5
6.320% due 08/15/29 1,360 1,318
Series 1998-E Class HIA1
5.907% due 08/15/07 1 1
Green Tree Lease Finance
Series 1998-1 Class A4
5.740% due 01/20/04 610 600
Green Tree Recreational, Equipment &
Consumer Loan Trust
Series 1998-A Class A1C
6.180% due 06/15/19 239 236
Series 1998-C Class A4
6.170% due 02/15/11 465 462
Greenpoint Manufactured Housing
Series 1999-1 Class A3
6.110% due 11/15/18 425 403
GRMT II, LLC
Series 2000-1 Class AF1
6.764% due 06/20/32 (c) 6,605 6,599
Heller Equipment Asset Receivables Trust
Series 1999-2 Class A3
6.650% due 03/14/04 3,600 3,591
Household Automotive Trust
Series 2000-3 Class A3
7.050% due 02/17/05 395 398
Household Automotive Trust IV
Series 2000-1 Class A3
7.300% due 07/19/04 4,830 4,872
Household Automotive Trust V
Series 2000-2 Class A4
7.430% due 04/17/07 1,930 1,973
IndyMac Home Equity Loan Trust Step Up
Bond
Series 1998-A Class AF4
6.310% due 10/25/29 (c) 855 832
Series 2000-A Class AF2
7.820% due 05/25/26 (c) 2,755 2,791
MBNA Master Credit Card Trust
Series 1999-G Class B
6.600% due 12/15/06 1,250 1,238
Series 2000-I Class C
7.650% due 01/15/08 (c) 350 351
MMCA Auto Owner Trust
Series 1999-2 Class A3
7.000% due 05/15/04 1,165 1,173
Navistar Financial Corp. Owner Trust
Series 2000-A Class A4
7.340% due 01/15/07 2,345 2,383
Series 2000-B Class A3
6.670% due 11/15/04 1,260 1,260
Series 2000-B Class A4
6.780% due 09/17/07 215 215
Newcourt Equipment Trust Securities
Series 1999-1 Class A3
6.924% due 07/20/03 (c) 4,866 4,873
Nissan Auto Lease Trust
Series 2000-A Class A3
7.800% due 05/20/03 2,325 2,358
Onyx Acceptance Auto Trust
Series 2000-A Class A3
7.270% due 12/15/03 2,470 2,489
Series 2000-A Class A4
7.420% due 12/15/04 2,710 2,746
Series 2000-C Class A3
7.160% due 09/15/04 2,985 3,000
Pacificamerica Home Equity Loan
Step Up Bond
Series 1998-2 Class AF
6.590% due 06/26/28 (c) 1,047 1,025
PNC Student Loan Trust I
Series 1997-2 Class A7
6.728% due 01/25/07 250 250
Fixed Income I Fund 96
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -----------
Premier Auto Trust
Series 1999-3 Class A4
6.430% due 03/08/04 1,925 1,917
Residential Asset Securities Corp.
Series 2000-KS3 Class AI4
8.035% due 09/25/28 770 787
Residential Funding Mortgage
Securities II
Series 1999-HI1 Class A3
6.310% due 09/25/29 900 888
Series 1999-HI6 Class AI3
7.340% due 07/25/12 1,440 1,442
Series 2000-HI4 Class AI3
7.490% due 10/25/13 1,210 1,213
Saxon Asset Securities Trust
Series 2000-2 Class AF3
8.051% due 06/25/15 635 645
Series 2000-2 Class AF4
8.234% due 03/25/24 2,485 2,551
Step Up Bond
Series 1998-3 Class AV1
6.892% due 05/25/28 (c) 1,192 1,193
Sears Credit Account Master Trust
Series 1995-5 Class A
6.050% due 01/15/08 1,070 1,055
Series 1999-2 Class A
6.350% due 02/16/07 3,890 3,862
Sears Mortgage Securities Corp.
Series 1992 Class A
7.587% due 10/25/22 (c) 764 773
United Airlines
Series 2000-1 Class A-2
7.730% due 07/01/10 1,310 1,316
Vanderbilt Mortgage & Finance, Inc.
Series 1999-A Class 1A3
6.080% due 12/07/15 530 503
Series 1999-B Class 1A3
6.280% due 03/07/13 880 863
Series 1999-D Class IA2
6.815% due 08/07/12 1,410 1,402
Series 2000-B Class IA2
8.045% due 07/07/12 760 776
West Penn Funding, L.L.C
Series 1999-A Class A2
6.630% due 12/26/05 3,200 3,206
WFS Financial Owner Trust
Series 2000-A Class A3
7.220% due 09/20/04 1,615 1,627
Series 2000-C Class A3
7.070% due 02/20/05 2,445 2,463
----------
149,011
----------
BANKERS ACCEPTANCE NOTES - 0.1%
Signet Bank
7.800% due 09/15/06 480 484
----------
CORPORATE BONDS AND NOTES - 22.9%
Ahold Finance USA, Inc.
6.250% due 05/01/09 2,560 2,272
6.875% due 05/01/29 415 342
Air Products & Chemicals, Inc.
8.750% due 04/15/21 300 308
Albertson's, Inc.
7.450% due 08/01/29 885 793
Allegiance Corp.
7.000% due 10/15/26 100 98
America West Airlines
Series A
6.850% due 07/02/09 548 525
American Financial Group, Inc.
7.125% due 04/15/09 200 173
Anheuser-Busch Companies, Inc.
7.550% due 10/01/30 715 722
Appalachian Power Co.
6.800% due 03/01/06 1,250 1,227
Archer Daniels Co.
8.375% due 04/15/17 900 934
Aristar, Inc.
6.000% due 05/15/02 1,935 1,902
Associates Corp. of North America
6.500% due 10/15/02 400 397
5.500% due 02/15/04 2,000 1,909
Series H
7.090% due 04/11/03 400 401
AT&T Corp.
6.500% due 03/15/29 2,250 1,767
8.625% due 12/01/31 440 440
Atlantic Richfield Co.
9.125% due 08/01/31 700 850
Avco Financial Services, Inc.
6.000% due 08/15/02 400 394
AXA Financial, Inc.
7.750% due 08/01/10 735 747
Baltimore Gas & Electric Co.
6.500% due 02/15/03 550 544
Banco De Latinoamerica
6.500% due 04/02/01 1,400 1,397
97 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -----------
Banco Latinoamericano de
Exportaciones SA
7.730% due 11/30/01 (c) 500 501
Bank of New York, Inc.
7.875% due 11/15/02 500 510
Bank One Corp.
6.875% due 08/01/06 695 680
BankAmerica Corp.
6.850% due 03/01/03 425 424
BankBoston Corp.
6.125% due 03/15/02 1,200 1,186
Banque Centrale de Tunisie
7.500% due 08/06/09 2,300 1,959
Barnett Bank, Inc.
6.900% due 09/01/05 665 654
Baxter International, Inc.
6.630% due 02/15/28 1,150 985
Bear Stearns Co., Inc.
7.010% due 03/28/03 (c) 1,800 1,798
Bell Telephone Co. of Pennsylvania
8.350% due 12/15/30 645 689
BellSouth Capital Funding Corp.
7.875% due 02/15/30 1,000 1,018
BellSouth Telecommunications, Inc.
7.000% due 12/01/95 295 256
Beneficial Corp.
8.400% due 05/15/08 757 780
Boeing Capital Corp.
7.100% due 09/27/05 1,200 1,209
Burlington Northern Santa Fe
7.875% due 04/15/07 210 213
7.082% due 05/13/29 1,100 953
Camden Property Trust
7.000% due 04/15/04 1,310 1,274
Campbell Soup Co.
8.875% due 05/01/21 500 535
Canadian National Railway Co.
6.900% due 07/15/28 475 412
Carolina Power & Light Co.
6.875% due 08/15/23 250 221
Case Corp.
7.250% due 08/01/05 395 285
7.250% due 01/15/16 400 204
Case Credit Corp.
Series B
5.850% due 02/20/01 3,000 2,990
Caterpillar Financial Services Corp.
9.500% due 02/06/07 80 89
Central Fidelity Banks, Inc.
8.150% due 11/15/02 280 287
Central Power & Light Co.
Series FF
6.875% due 02/01/03 550 546
Champion International Corp.
6.400% due 02/15/26 570 540
Chase Manhattan Corp.
Series C
6.750% due 12/01/04 1,065 1,055
Chesapeake & Potomac Telephone Co.
8.375% due 10/01/29 405 428
Chrysler Financial Co., L.L.C
Series R
6.789% due 02/10/03 (c) 2,000 2,015
Cincinnati Gas & Electric Co.
7.200% due 10/01/23 250 220
CIT Group, Inc.
6.150% due 12/15/02 300 293
7.250% due 08/15/05 2,120 2,076
Citicorp
6.815% due 05/24/01 (c) 3,000 3,002
9.500% due 02/01/02 195 201
7.125% due 06/01/03 485 488
Citigroup, Inc.
6.875% due 02/15/98 920 751
City National Bank
6.375% due 01/15/08 575 529
Clear Channel Communications
7.650% due 09/15/10 1,545 1,516
Coastal Corp.
6.200% due 05/15/04 295 286
7.500% due 08/15/06 845 856
7.625% due 09/01/08 1,350 1,354
Coca Cola Enterprises, Inc.
7.000% due 10/01/26 665 653
Comcast Cable Communications
8.375% due 05/01/07 300 314
6.200% due 11/15/08 950 874
Commercial Credit Group, Inc.
7.875% due 07/15/04 500 514
6.500% due 06/01/05 300 293
8.700% due 06/15/10 795 859
Commonwealth Edison Co.
Series 85
7.375% due 09/15/02 1,120 1,125
Compaq Computer Corp.
7.450% due 08/01/02 700 699
Conagra, Inc.
8.100% due 05/20/02 300 303
Conoco, Inc.
6.950% due 04/15/29 800 741
Fixed Income I Fund 98
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -----------
Consolidated Edison Co. of
New York, Inc.
8.125% due 05/01/10 470 486
Consolidated Edison Inc.
Series 98-A
6.250% due 02/01/08 955 899
Countrywide Home Loan
6.923% due 06/03/03 (c) 3,200 3,188
Series H
6.250% due 04/15/09 1,300 1,172
Cox Communications, Inc.
6.500% due 11/15/02 600 592
7.500% due 08/15/04 1,525 1,529
6.690% due 09/20/04 500 488
CPC International, Inc.
Series E
7.250% due 12/15/26 1,150 1,090
CSX Corp.
6.250% due 10/15/08 1,325 1,202
CVS Corp.
5.500% due 02/15/04 1,525 1,459
DaimlerChrysler AG
7.450% due 03/01/27 990 928
DaimlerChrysler North America
Holding Corp.
6.900% due 09/01/04 2,000 1,973
8.000% due 06/15/10 1,625 1,651
Deere & Co.
8.100% due 05/15/30 1,250 1,269
Delta Air Lines, Inc.
Series C
6.650% due 03/15/04 1,500 1,427
Duke Capital Corp.
7.250% due 10/01/04 500 502
Duke Energy Corp.
6.875% due 08/01/23 600 523
7.000% due 07/01/33 1,030 904
Duke Weeks Realty, L.P.
7.750% due 11/15/09 1,425 1,397
E. I. Du Pont de Nemours
6.750% due 10/15/04 1,000 994
Electronic Data Systems Corp.
6.850% due 10/15/04 1,300 1,288
Enron Corp.
7.875% due 06/15/03 850 867
6.750% due 08/01/09 1,855 1,780
EOP Operating, L.P.
6.500% due 01/15/04 1,225 1,188
6.625% due 02/15/05 825 796
Federal Express Corp.
7.600% due 07/01/97 400 333
Fifth Third Bank
6.750% due 07/15/05 900 883
Fifth Third Capital Trust I
Series A
8.136% due 03/15/27 365 343
First Bank Systems, Inc.
8.000% due 07/02/04 1,050 1,071
First Chicago NBD
6.781% due 11/14/01 (c) 3,000 2,996
First Interstate Bancorp
9.375% due 01/23/02 225 232
First Union Corp.
6.950% due 11/01/04 575 567
6.875% due 09/15/05 625 611
7.500% due 07/15/06 425 425
First Union Institutional Capital Trust I
8.040% due 12/01/26 100 89
First Union National Bank
7.125% due 10/15/06 555 544
Firstar Bank North America
7.125% due 12/01/09 850 823
Fleet Financial Group, Inc.
6.875% due 03/01/03 350 348
8.125% due 07/01/04 675 696
Fleetboston Financial Corp.
7.250% due 09/15/05 800 804
Ford Motor Co.
7.450% due 07/16/31 900 830
8.900% due 01/15/32 440 463
Ford Motor Credit Co.
6.950% due 06/20/03 (c) 2,200 2,195
6.700% due 07/16/04 8,670 8,493
6.750% due 05/15/05 425 414
7.375% due 10/28/09 740 719
Fort James Corp.
6.625% due 09/15/04 1,375 1,310
Fortune Brands, Inc.
7.875% due 01/15/23 400 382
GE Global Insurance Holding Corp.
6.450% due 03/01/19 900 797
General Electric Capital Corp.
8.300% due 09/20/09 470 512
Series A
6.650% due 09/03/02 900 899
General Motors Acceptance Corp.
5.480% due 12/16/02 3,075 2,987
6.750% due 03/15/03 5,000 4,976
General Motors Acceptance Corp. of
Canada, Ltd.
6.790% due 08/18/03 (c) 3,000 3,007
99 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -----------
Goldman Sachs Group, Inc.
6.978% due 01/15/01 (c) 1,500 1,501
Series A
6.920% due 02/20/01 (c) 3,000 3,002
Series B
7.500% due 01/28/05 1,575 1,575
Grand Metropolitan Investment Corp.
7.450% due 04/15/35 425 431
Great Lakes Chemical Corp.
7.000% due 07/15/09 1,500 1,415
GTE California, Inc.
6.750% due 05/15/27 600 535
Harrahs Operating Co., Inc.
7.500% due 01/15/09 1,300 1,227
Heller Financial, Inc.
7.500% due 08/23/02 1,145 1,147
Hertz Corp.
7.625% due 08/01/02 450 452
9.000% due 11/01/09 390 414
Household Finance Corp.
6.125% due 07/15/02 800 788
7.200% due 07/15/06 770 761
International Bank for Reconstruction &
Development
7.000% due 01/27/05 4,800 4,873
International Business Machines Corp.
6.220% due 08/01/27 225 219
7.125% due 12/01/96 1,200 1,095
International Paper Co.
9.400% due 06/01/02 600 616
8.000% due 07/08/03 550 557
ITT Financial Corp.
7.400% due 11/15/25 1,165 994
John Deere Capital Corp.
Series C
6.940% due 04/21/03 (c) 3,200 3,202
JPM Capital Trust I
7.540% due 01/15/27 285 249
KeyCorp
7.500% due 06/15/06 875 864
8.000% due 07/01/04 200 204
Knight-Ridder, Inc.
6.875% due 03/15/29 1,288 1,051
Lincoln National Corp.
7.250% due 05/15/05 450 446
6.500% due 03/15/08 250 231
7.000% due 03/15/18 600 536
Loral Corp.
7.000% due 09/15/23 900 801
Lowes Cos., Inc.
6.875% due 02/15/28 1,520 1,292
Lucent Technologies, Inc.
6.450% due 03/15/29 875 679
Manufacturers & Traders Trust Co.
7.000% due 07/01/05 525 513
Marsh & McLennan Cos., Inc.
6.625% due 06/15/04 650 639
Martin Marietta Corp.
7.000% due 03/15/11 325 297
Mattel, Inc.
6.000% due 07/15/03 925 836
MCI WorldCom, Inc.
6.950% due 08/15/28 1,300 1,142
Mercantile Bancorp
7.050% due 06/15/04 1,000 993
Merck & Co., Inc.
Series B
5.760% due 05/03/37 1,575 1,568
Merrill Lynch & Co.
Series 144
6.965% due 10/01/03 (c) 5,250 5,237
MidAmerican Energy Co.
7.375% due 08/01/02 (MTN) 1,750 1,751
Mirage Resorts, Inc.
6.625% due 02/01/05 525 497
6.750% due 02/01/08 325 294
Nabisco, Inc.
6.375% due 02/01/35 1,000 945
National City Corp.
5.750% due 02/01/09 340 298
6.875% due 05/15/19 450 393
New England Telephone & Telegraph Co.
7.875% due 11/15/29 430 438
News America Holdings, Inc.
8.500% due 02/15/05 750 775
8.875% due 04/26/23 575 584
7.750% due 01/20/24 600 545
Noram Energy Corp.
6.375% due 11/01/03 (c) 3,000 2,942
Norfolk Southern Corp.
7.050% due 05/01/37 1,050 1,043
Northwestern Bell Telephone Co.
7.750% due 05/01/30 455 457
Norwest Corp.
Series H
6.750% due 06/15/07 150 144
Norwest Financial, Inc.
6.250% due 11/01/02 425 421
6.375% due 11/15/03 650 638
NRG Energy, Inc.
7.500% due 06/01/09 680 657
Fixed Income I Fund 100
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -----------
NYNEX Corp.
9.550% due 05/01/10 456 492
Panamsat Corp.
6.125% due 01/15/05 700 641
Pepsi Bottling Group, Inc.
Series B
7.000% due 03/01/29 500 460
Philip Morris Cos., Inc.
7.000% due 07/15/05 1,700 1,635
6.950% due 06/01/06 380 377
7.650% due 07/01/08 395 386
Pitney Bowes Credit Corp.
8.550% due 09/15/09 780 827
Praxair, Inc.
6.850% due 06/15/05 880 854
Provident Cos., Inc.
6.375% due 07/15/05 700 658
Qwest Communications International, Inc.
Series B
7.500% due 11/01/08 1,225 1,212
Qwest Corp.
7.625% due 06/09/03 1,850 1,874
Raytheon Co.
6.300% due 03/15/05 1,020 980
Resolution Funding Corp.
Series A
8.875% due 07/15/20 2,275 2,826
8.625% due 01/15/21 880 1,102
8.625% due 01/15/30 240 307
Safeway, Inc.
7.000% due 09/15/02 900 900
6.050% due 11/15/03 500 485
7.250% due 09/15/04 1,075 1,072
Salomon Smith Barney Holdings, Inc.
Series H
6.960% due 06/23/03 (c) 2,000 2,000
Sears Roebuck Acceptance Corp.
7.030% due 06/04/03 800 798
6.750% due 01/15/28 950 744
Security Capital Group, Inc.
6.950% due 06/15/05 700 657
Simon Debartolo Group, L.P.
6.750% due 06/15/05 1,250 1,187
Small Business Administration-SBIC
Series 10B
7.449% due 08/01/10 500 511
Southern California Edison Co.
6.375% due 01/15/06 415 397
6.650% due 04/01/29 500 417
Sprint Capital Corp.
5.700% due 11/15/03 625 598
6.125% due 11/15/08 1,100 977
6.375% due 05/01/09 250 224
6.900% due 05/01/19 1,385 1,173
Suntrust Banks, Inc.
7.375% due 07/01/02 575 579
6.250% due 06/01/08 160 148
7.750% due 05/01/10 775 772
Temple Inland, Inc.
7.250% due 09/15/04 575 571
Texaco Capital, Inc.
9.750% due 03/15/20 225 276
8.875% due 09/01/21 440 511
Texas Utilities Electric Co.
8.250% due 04/01/04 625 648
Time Warner, Inc.
7.975% due 08/15/04 (f) 450 461
7.750% due 06/15/05 650 662
6.875% due 06/15/18 1,050 960
6.625% due 05/15/29 975 828
Times Mirror Co.
7.450% due 10/15/09 475 472
Tosco Corp.
8.125% due 02/15/30 375 381
Transamerica Finance Corp.
7.250% due 08/15/02 1,300 1,301
TRW, Inc.
6.625% due 06/01/04 875 841
7.125% due 06/01/09 750 696
UBS PFD Funding Trust I
8.622% due 10/29/49 (c) 525 531
Unilever Capital Corp.
6.750% due 11/01/03 1,575 1,564
Union Carbide Corp.
7.875% due 04/01/23 835 814
Union Oil Co.
9.400% due 02/15/11 390 441
Union Pacific Corp.
7.600% due 05/01/05 350 352
Union Pacific Railroad Trust Pass-thru
Certificate
Series 1996-A2
7.060% due 05/15/03 450 444
United Technologies Corp.
7.000% due 09/15/06 800 797
8.750% due 03/01/21 445 492
US Bank National Association Minnesota
6.729% due 12/19/01 (c) 3,000 3,002
5.625% due 11/30/05 750 700
101 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -----------
US West Communications, Inc.
7.200% due 11/10/26 1,500 1,330
Viacom, Inc.
7.875% due 07/30/30 375 381
Virginia Electric & Power Co.
8.750% due 04/01/21 335 331
Wachovia Corp.
6.800% due 06/01/05 280 276
Wal-Mart Stores, Inc.
7.550% due 02/15/30 1,000 1,034
Series 1994-B3
8.800% due 12/30/14 360 405
Wells Fargo Co.
6.625% due 07/15/04 1,500 1,479
6.875% due 04/01/06 500 490
Westdeutsche Landesbank NY
6.050% due 01/15/09 400 365
Westvaco Corp.
6.850% due 11/15/04 1,200 1,177
Willamette Industries, Inc.
7.850% due 07/01/26 750 742
Williams Cos., Inc.
7.625% due 07/15/19 750 727
Wisconsin Central Transportation Corp.
6.625% due 04/15/08 1,190 1,074
World Financial Properties Tower
Series 1996 WBF-B
6.910% due 09/01/13 1,207 1,169
Worldcom, Inc.
6.920% due 11/26/01 (c) 3,900 3,898
8.000% due 05/15/06 1,665 1,713
Zurich Capital Trust I
8.376% due 06/01/37 650 614
----------
247,550
----------
EURODOLLAR BONDS - 2.3%
Asian Development Bank
6.250% due 10/24/05 400 393
Australian Gas Light Co.
6.400% due 04/15/08 1,350 1,244
Bank of Tokyo Mitsubishi, Ltd.
8.400% due 04/15/10 568 576
Bear Stearns Co., Inc.
7.035% due 03/18/05 (c) 1,300 1,292
BSCH Issuances, Ltd.
7.625% due 09/14/10 1,135 1,118
Deutsche Telekom International Finance
BV Step Up Bond
8.000% due 06/15/10 (c) 945 963
8.250% due 06/15/30 (c) 775 791
HSBC Holdings PLC
7.500% due 07/15/09 1,000 1,000
Koninklijke KPN
8.000% due 10/01/10 1,050 1,026
Korea Development Bank
7.375% due 09/17/04 1,555 1,519
Merita Bank, Ltd.
7.150% due 12/29/49 (d) 250 247
7.500% due 12/29/49 (d) 675 639
Nationsbank Corp.
6.810% due 06/17/02 (c) 3,000 3,001
Ontario, Province of
7.375% due 01/27/03 450 456
Sanwa Finance Aruba AEC
8.350% due 07/15/09 3,000 3,109
SCL Term Aereo Santiago SA
6.950% due 07/01/12 3,000 2,762
Skandinaviska Enskilda Banken
8.125% due 09/06/49 (d) 375 364
Telefonica Europe BV
7.350% due 09/15/05 700 701
7.750% due 09/15/10 650 653
8.250% due 09/15/30 300 307
Vodafone Group PLC
Series 144A
6.859% due 12/19/01 1,400 1,401
7.625% due 02/15/05 1,555 1,581
----------
25,143
----------
MORTGAGE-BACKED SECURITIES - 44.7%
Chase Commercial Mortgage Securities
Corp
Series 1997-1 Class E
7.370% due 12/19/07 1,800 1,712
Series 2000-2 Class A2
7.631% due 06/15/10 1,565 1,611
COMM Mortgage Trust
Series 1999-1 Class A1
6.145% due 02/15/08 2,635 2,562
Credit Suisse First Boston Mortgage
Securities Corp.
Series 1999-C1 Class A2
7.290% due 09/15/09 1,880 1,898
Series 2000-C1 Class A2
7.545% due 04/15/10 3,500 3,590
Fixed Income I Fund 102
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -----------
DLJ Commercial Mortgage Corp.
Series 2000-CF1 Class A1B
7.620% due 05/10/10 315 324
DLJ Mortgage Acceptance Corp.
Series 1996-CF1 Class A1B
7.580% due 02/12/06 2,000 2,023
Federal Home Loan Mortgage Corp. (b)
6.000% 30 Year TBA Gold 10,090 9,466
7.000% 30 Year TBA Gold 2,200 2,155
Federal Home Loan Mortgage Corp.
Series 1997-81 Class PC
5.000% due 04/18/27 1,500 1,371
Series K Class 5
7.760% due 05/01/12 (f) 850 854
Federal Home Loan Mortgage Corp.
Participation Certificate
6.500% due 2003 137 135
7.000% due 2003 7 7
5.500% due 2006 5,575 5,309
7.000% due 2008 226 226
6.500% due 2009 267 263
8.000% due 2009 74 76
6.000% due 2010 154 150
6.500% due 2010 53 52
7.000% due 2010 1,219 1,217
7.500% due 2010 395 399
8.000% due 2010 293 297
6.000% due 2011 1,728 1,674
7.000% due 2011 134 133
7.500% due 2011 19 19
6.000% due 2012 130 126
7.500% due 2012 951 959
6.000% due 2013 873 841
6.000% due 2014 5,702 5,494
6.500% due 2014 952 933
7.500% due 2014 857 863
12.000% due 2014 121 132
7.500% due 2015 380 382
9.000% due 2016 607 623
12.500% due 2016 66 74
9.000% due 2017 12 12
9.000% due 2018 946 978
9.000% due 2020 584 604
6.500% due 2024 3,464 3,350
7.500% due 2024 86 87
6.500% due 2025 289 279
8.000% due 2025 685 696
8.500% due 2025 425 436
9.000% due 2025 391 404
9.000% due 2026 8 8
6.905% due 2027 (c) 635 633
8.500% due 2027 1,149 1,177
6.000% due 2028 714 670
6.500% due 2028 1,486 1,430
6.000% due 2029 1,803 1,691
6.500% due 2029 12,995 12,495
6.500% due 2030 220 212
7.500% due 2030 3,446 3,444
7.813% due 2030 700 702
Federal National Mortgage Association (b)
7.000% 15 Year TBA 810 805
7.500% 15 Year TBA 425 428
6.500% 30 Year TBA 2,160 2,075
7.000% 30 Year TBA 625 612
7.500% 30 Year TBA 50,000 49,931
Federal National Mortgage
Association Pools
8.000% due 2002 182 182
7.000% due 2003 267 266
7.500% due 2003 421 422
8.000% due 2003 83 83
6.500% due 2004 147 146
8.000% due 2004 20 20
8.000% due 2005 9 9
7.200% due 2007 966 980
7.125% due 2010 2,640 2,720
10.500% due 2010 2 2
6.500% due 2011 453 445
7.000% due 2011 116 116
8.000% due 2011 70 71
6.500% due 2012 573 562
6.000% due 2013 5,866 5,650
6.500% due 2013 6,055 5,930
5.500% due 2014 3,474 3,273
6.500% due 2014 1,121 1,098
6.500% due 2015 1,164 1,140
7.000% due 2015 149 148
7.500% due 2017 19 19
8.000% due 2017 20 21
9.000% due 2017 246 254
7.500% due 2022 16 16
7.500% due 2023 49 49
7.500% due 2024 1,492 1,497
8.000% due 2024 1,909 1,938
8.500% due 2024 408 418
7.000% due 2025 691 679
7.500% due 2025 521 523
8.500% due 2025 501 513
7.000% due 2026 988 971
7.500% due 2026 25 25
7.000% due 2027 309 303
7.500% due 2027 371 372
103 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- ----------
9.000% due 2027 13 13
6.000% due 2028 24,171 22,669
6.500% due 2028 2,670 2,567
7.500% due 2028 1,165 1,168
6.000% due 2029 3,841 3,602
6.500% due 2029 (f) 8,067 7,751
6.500% due 2029 25,427 24,449
7.000% due 2029 1,549 1,517
7.500% due 2029 (f) 2,860 2,856
7.500% due 2029 992 990
7.000% due 2030 1,592 1,560
7.500% due 2030 11,573 11,555
8.000% due 2030 5,221 5,285
8.500% due 2030 2,858 2,921
Federal National Mortgage Association
Series 1993-134 Class H
6.500% due 08/25/08 1,930 1,865
Federal National Mortgage Association
ACES
Series 1997-M5 Class B
6.650% due 08/25/07 1,720 1,695
Series 1998-M1 Class A
6.250% due 01/25/08 1,250 1,194
Series 1999-M4 Class A
7.354% due 12/25/09 1,995 2,004
Series 2000-M1 Class A
7.369% due 01/17/13 (c) 1,806 1,849
Federal National Mortgage Association
REMIC
Series 1992-158 Class ZZ
7.750% due 08/25/22 553 550
Series 1997-55 Class ZA
7.000% due 04/18/27 6,201 5,732
First Union Lehman Brothers Commercial
Mortgage Trust
Series 1997-C1 Class C
7.440% due 04/18/07 950 951
First Union National Bank Commercial
Mortgage Trust
Series 2000-C1 Class A2
7.841% due 03/15/10 95 99
GMAC Commercial Mortgage Securities,
Inc.
Series 1996-C1 Class A2A
6.790% due 09/15/03 1,765 1,759
Series 1997-C1 Class A3
6.869% due 08/15/07 140 138
Series 1999-C2 Class A1
6.570% due 09/15/33 3,028 2,978
Government National Mortgage Association (b)
6.000% 30 Year TBA 2,800 2,641
6.500% 30 Year TBA 60,740 58,633
7.000% 30 Year TBA 4,500 4,435
7.500% 30 Year TBA 5,100 5,118
8.000% 30 Year TBA 15,030 15,279
8.500% 30 Year TBA 925 949
Government National Mortgage Association
8.500% due 2005 22 22
6.500% due 2008 65 65
6.500% due 2009 479 475
6.500% due 2010 123 122
7.000% due 2011 120 120
9.500% due 2016 71 74
8.000% due 2017 66 68
9.000% due 2017 1,776 1,864
9.000% due 2020 3 3
10.500% due 2020 449 489
10.500% due 2021 64 69
7.000% due 2022 1,324 1,310
8.000% due 2022 253 258
8.500% due 2022 31 32
6.500% due 2023 616 598
7.000% due 2023 6,401 6,329
7.125% due 2023 1,471 1,485
7.500% due 2023 5,288 5,321
7.000% due 2024 15,489 15,310
7.125% due 2024 (f) 1,472 1,486
7.500% due 2024 1,882 1,892
8.000% due 2024 713 726
8.500% due 2024 93 95
6.500% due 2026 2,925 2,827
7.000% due 2026 26 25
6.500% due 2027 112 108
6.000% due 2028 4,297 4,055
6.500% due 2028 1,899 1,833
7.000% due 2028 3,326 3,278
6.500% due 2029 1,722 1,654
7.000% due 2029 (f) 989 974
7.500% due 2029 1,223 1,227
8.000% due 2029 8,923 9,072
8.500% due 2029 1,152 1,182
7.000% due 2030 (c) 3,474 3,480
8.000% due 2030 10,211 10,380
8.500% due 2030 3,279 3,363
Greenwich Capital Acceptance, Inc.
Mortgage Pass-thru Certificate
Series 1993 Class LB-1
8.194% due 04/25/23 (c)(f) 175 174
Fixed Income I Fund 104
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -----------
GS Mortgage Securities Corp. II
Series 1997-GL Class A2A
6.940% due 07/13/30 107 106
Guaranteed Export Trust
Series 1996-A
6.550% due 06/15/04 520 518
Housing Securities, Inc.
Series 1994-2 Class A1
6.500% due 07/25/09 635 625
HSBC
Series 2000-1 Class A3
7.130% due 11/15/03 2,400 2,400
Keycorp
Series 2000-C1 Class A2
7.727% due 02/15/10 225 233
Mellon Residential Funding Corp.
Series 2000-TBC1 Class A2B
6.922% due 03/25/30 1,980 1,958
Series 2000-TBC3 Class A1
6.841% due 12/15/30 (c) 13,251 13,250
Merrill Lynch Mortgage Investors, Inc.
Series 1995-C2 Class D
7.772% due 06/15/21 (c) 377 365
Merrill Lynch Mortgage Investors, Inc.
Pass-Thru Certificates
Series 1999-C1 Class A2
7.560% due 09/15/09 2,280 2,342
Morgan Stanley Capital I
Series 1999-CAM1 Class A3
6.920% due 11/15/08 260 258
Morgan Stanley Dean Witter Capital I
Series 2000-1345 Class A2
7.459% due 09/03/10 4,690 4,777
Series 2000-Prin Class A3
7.360% due 05/23/09 2,010 2,030
Series 2000-Prin Class A4
7.490% due 01/23/15 1,700 1,724
Series 2000-XLF Class A
6.870% due 06/05/03 (c) 1,296 1,296
Mortgage Capital Funding, Inc.
Series 1996-MC1 Class A2B
7.900% due 02/15/06 950 987
Nationslink Funding Corp.
Series 1999-2 Class A1C
7.030% due 01/20/08 629 631
Prudential Home Mortgage Securities Co.
Series 1992-38 Class A8
6.950% due 11/25/22 1,640 1,512
Residential Accredited Loans, Inc.
Series 1996-QS1 Class A4
6.900% due 01/25/26 (f) 269 268
Resolution Trust Corp.
Series 1995 - C1 Class D
6.900% due 02/25/27 900 883
Salomon Brothers Mortgage
Securities VII
Series 2000-C1 Class A1
7.460% due 11/18/08 569 580
Salomon Brothers Mortgage Securities
VII, Inc.
Mortgage Pass-thru Certificate
Series 1994-16 Class A
9.089% due 11/25/24 (c)(f) 413 420
Small Business Investment Cos.
Series 1999-P10B Class 1
7.540% due 08/10/09 4,295 4,401
TIAA Retail Commercial Mortgage Trust
Series 1999-1 Class A
7.170% due 04/15/08 101 101
Washington Mutual
Series 2000-1R Class A
6.780% due 07/26/03 (c) 656 654
----------
482,906
----------
MUNICIPAL BONDS - 0.3%
New York State Dormitory
Authority Revenue
Series D
4.750% due 02/15/25 4,000 3,498
----------
NON-US BONDS - 0.4%
Bundesrepublik Deutschland
Series 00
5.250% due 01/04/11 EUR 2,700 2,295
Germany, Federal Republic of
Series 99
4.500% due 07/04/09 EUR 300 242
Series 00
5.250% due 07/04/10 EUR 2,600 2,208
----------
4,745
----------
UNITED STATES GOVERNMENT AGENCIES - 5.8%
Federal Home Loan Bank
Series I202
6.450% due 03/13/02 2,625 2,614
105 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -----------
Series TV09
5.790% due 04/27/09 3,980 3,719
Series V703
5.233% due 11/17/03 3,125 3,014
Federal Home Loan Mortgage Corp.
7.375% due 05/15/03 3,625 3,703
7.000% due 07/15/05 675 688
5.750% due 03/15/09 5,000 4,696
7.000% due 03/15/10 5,330 5,436
Federal National Mortgage Association
6.625% due 01/15/02 10,155 10,176
6.250% due 11/20/02 1,955 1,935
5.750% due 04/15/03 215 212
6.100% due 06/26/03 660 648
6.010% due 07/17/03 2,000 1,965
7.000% due 07/15/05 960 978
6.940% due 03/19/07 1,550 1,518
6.900% due 08/21/07 3,650 3,568
6.500% due 04/29/09 9,095 8,660
7.125% due 01/15/30 790 826
7.250% due 05/15/30 1,050 1,116
6.210% due 08/06/38 695 634
Government Backed Trust Certificates
Series 1-C
9.250% due 11/15/01 710 719
Series T-3
9.625% due 05/15/02 (f) 277 279
Tennessee Valley Authority
Series A
6.375% due 06/15/05 850 843
Series E
6.250% due 12/15/17 4,615 4,339
----------
62,286
----------
UNITED STATES GOVERNMENT TREASURIES - 15.8%
United States Treasury Bond
Principal Strip
8.750% due 05/15/20 1,000 312
8.000% due 11/15/21 7,090 2,030
United States Treasury Bonds
10.750% due 05/15/03 585 649
10.750% due 08/15/05 1,560 1,872
10.375% due 11/15/09 2,130 2,453
11.750% due 02/15/10 3,165 3,835
12.750% due 11/15/10 16,650 21,447
13.875% due 05/15/11 3,365 4,594
14.000% due 11/15/11 1,590 2,225
10.375% due 11/15/12 2,840 3,539
12.000% due 08/15/13 235 321
13.250% due 05/15/14 2,670 3,942
12.500% due 08/15/14 2,385 3,426
11.250% due 02/15/15 3,790 5,683
10.625% due 08/15/15 245 355
7.250% due 05/15/16 335 377
7.500% due 11/15/16 1,105 1,273
8.875% due 08/15/17 6,495 8,444
9.125% due 05/15/18 1,400 1,867
8.875% due 02/15/19 13,655 17,946
8.750% due 08/15/20 1,600 2,102
8.125% due 05/15/21 335 418
8.000% due 11/15/21 100 124
6.250% due 08/15/23 700 722
6.000% due 02/15/26 2,400 2,407
6.500% due 11/15/26 200 214
6.625% due 02/15/27 (f) 2,350 2,552
6.375% due 08/15/27 21,045 22,180
3.625% due 04/15/28 419 403
5.500% due 08/15/28 300 282
3.875% due 04/15/29 3,782 3,796
6.250% due 05/15/30 6,725 7,162
United States Treasury Notes
5.875% due 11/15/04 15 14
7.875% due 11/15/04 6,325 6,774
7.500% due 02/15/05 20 21
5.625% due 02/15/06 160 159
6.500% due 10/15/06 2,580 2,660
3.375% due 01/15/07 2,180 2,124
3.625% due 01/15/08 4,880 4,802
5.625% due 05/15/08 14,690 14,483
3.875% due 01/15/09 211 211
6.000% due 08/15/09 9,840 9,938
----------
170,138
----------
YANKEE BONDS - 2.3%
Abbey National PLC
6.700% due 06/29/49 (d) 2,700 2,434
African Development Bank
9.750% due 12/15/03 425 458
6.750% due 10/01/04 400 401
6.875% due 10/15/15 775 753
8.800% due 09/01/19 535 612
Alberta Energy Co., Ltd.
8.125% due 09/15/30 1,210 1,218
Canadian National Railway Co.
6.800% due 07/15/18 555 492
Carter Holt Harvey, Ltd.
7.625% due 04/15/02 500 501
8.875% due 12/01/04 350 367
Diageo Capital PLC
6.125% due 08/15/05 550 529
Fixed Income I Fund 106
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- ----------
Hydro Quebec
Series GH
8.250% due 04/15/26 605 650
International American Development Bank
6.950% due 08/01/26 425 431
Manitoba, Province of
Series CD
9.250% due 04/01/20 335 409
National Australia Bank, Ltd.
Series A
8.600% due 05/19/10 750 797
National Westminster Bank PLC
7.375% due 10/01/09 800 788
7.750% due 04/29/49 (d) 1,250 1,212
New Brunswick, Province of
7.125% due 10/01/02 500 504
9.750% due 05/15/20 320 403
Newfoundland, Province of
10.000% due 12/01/20 150 185
Noranda Forest, Inc.
6.875% due 11/15/05 350 331
Nova Scotia, Province of
9.125% due 05/01/21 685 795
Pemex Finance, Ltd.
6.125% due 11/15/03 1,733 1,699
Quebec, Province of
8.800% due 04/15/03 1,175 1,230
7.500% due 09/15/29 375 380
Series NN
7.125% due 02/09/24 1,145 1,115
Royal Caribbean Cruises, Ltd.
8.125% due 07/28/04 625 611
7.250% due 03/15/18 1,300 1,009
Saskatchewan, Province of
6.625% due 07/15/03 100 100
8.000% due 07/15/04 1,290 1,343
Trans-Canada Pipelines, Ltd.
7.150% due 06/15/06 1,000 988
Tyco International Group SA
6.375% due 06/15/05 800 771
United News & Media PLC
7.250% due 07/01/04 1,300 1,266
----------
24,782
----------
TOTAL LONG-TERM INVESTMENTS
(cost $1,175,582) 1,170,543
----------
OPTIONS PURCHASED - 0.0%
United States Treasury Bonds (e)*
Dec 104.56 Call 1,500 46
Dec 104.58 Call 1,500 47
Feb 99.59 Call 3,150 52
Mar 104.33 Call 900 38
Dec 104.56 Put 1,500 10
Dec 104.58 Put 1,500 12
United States Treasury Notes (e)*
Jan 104.53 Call 1,075 31
----------
TOTAL OPTIONS PURCHASED
(cost $258) 236
----------
NUMBER
OF
SHARES
------
PREFERRED STOCKS - 0.2%
Banco Bilbao Vizcaya
International - ADR (f) 10,000 254
Credit Lyonnais Capital S.C.A. - ADR 30,000 720
Equity Office Properties Trust
Series B 28,000 1,237
----------
TOTAL PREFERRED STOCKS
(cost $2,485) 2,211
----------
107 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- -----------
SHORT-TERM INVESTMENTS - 3.5%
Frank Russell Investment Company
Money Market Fund,
due on demand (a) 37,791 37,791
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $37,791) 37,791
----------
TOTAL INVESTMENTS - 112.1%
(identified cost $1,216,116) 1,210,781
OTHER ASSETS AND LIABILITIES,
NET, INCLUDING OPTIONS WRITTEN - (12.1%) (130,515)
----------
NET ASSETS - 100.0% 1,080,266
==========
NOTIONAL MARKET
AMOUNT VALUE
(000) (000)
OPTIONS WRITTEN $ $
-------- ------
United States Treasury Bonds*
Jan 100.50 Call 1,075 67
Mar 108.30 Call 900 19
Dec 103.42 Put 5,550 29
Jan 108.56 Put 1,075 29
Feb 98.86 Put 3,150 29
Mar 100.36 Put 900 5
United States Treasury Notes*
Dec 100.14 Call 13,650 34
Dec 103.42 Call 5,550 37
Dec 100.14 Put 13,650 30
----------
Total Liability for Options Written
(premiums received $267) 279
==========
* Each contract represents $100,000 notional value.
(a) At amortized cost, which approximates market.
(b) Forward commitment.
(c) Adjustable or floating rate security.
(d) Perpetual floating rate security.
(e) Nonincome-producing security.
(f) Held as collateral in connection with options written by the Fund.
Abbreviations:
ADR - American Depositary Receipt
CMO - Collateralized Mortgage Obligation
REMIC - Real Estate Mortgage Investment Conduit
TBA - To Be Announced Security
Foreign Currency Abbreviations:
EUR - Euro dollar
USD - United States dollar
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION
DELIVER FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
------------ ----------- ---------- --------------
EUR 2,740 USD 2,403 11/13/00 $ 78
EUR 2,740 USD 2,403 11/13/00 77
USD 175 EUR 205 11/20/00 (1)
USD 175 EUR 205 11/20/00 (1)
------------
$ 153
============
See accompanying notes which are an integral part of the financial statements.
Fixed Income I Fund 108
<PAGE>
FIXED INCOME I FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) October 31, 2000
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $1,216,116) ............................................... $ 1,210,781
Cash .............................................................................................. 160
Unrealized appreciation on forward foreign currency exchange contracts ............................ 155
Receivables:
Dividends and interest ........................................................................... 13,530
Investments sold (regular settlement) ........................................................... 41,110
Investments sold (delayed settlement) ........................................................... 48,403
Fund shares sold ................................................................................. 1,258
Prepaid expenses .................................................................................. 9
-----------
Total assets ................................................................................... 1,315,406
LIABILITIES
Payables:
Investments purchased (regular settlement) ................................... $ 29,172
Investments purchased (delayed settlement) ................................... 203,094
Fund shares redeemed .......................................................... 2,178
Accrued fees to affiliates .................................................... 316
Other accrued expenses ........................................................ 99
Unrealized depreciation on forward foreign currency exchange contracts ......... 2
Options written, at market value (premiums received $267) ..................... 279
-----------
Total liabilities .............................................................................. 235,140
-----------
NET ASSETS ........................................................................................ $ 1,080,266
===========
NET ASSETS CONSIST OF:
Undistributed net investment income ............................................................... $ 8,544
Accumulated net realized gain (loss) ............................................................. (26,821)
Unrealized appreciation (depreciation) on:
Investments ...................................................................................... (5,335)
Options written .................................................................................. (12)
Foreign currency-related transactions ............................................................ 345
Shares of beneficial interest ..................................................................... 520
Additional paid-in capital ........................................................................ 1,103,025
-----------
NET ASSETS ........................................................................................ $ 1,080,266
===========
NET ASSET VALUE, offering and redemption price per share:
Class E ($33,321,933 divided by 1,602,695 shares of $.01 par value
shares of beneficial interest outstanding) .................................................... $ 20.79
===========
Class I ($902,895,502 divided by 43,427,994 shares of $.01 par value
shares of beneficial interest outstanding) .................................................... $ 20.79
===========
Class Y ($144,048,750 divided by 6,927,235 shares of $.01 par value
shares of beneficial interest outstanding) .................................................... $ 20.79
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
109 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Interest .................................................................. $ 59,109 $ 61,879
Dividends from Money Market Fund .......................................... 4,273 5,216
Dividends ................................................................. 180 338
-------- --------
Total investment income ................................................. 63,562 67,433
-------- --------
EXPENSES
Advisory fees ............................................................. 2,204 2,514
Administrative fees ....................................................... 409 523
Custodian fees ............................................................ 547 530
Transfer agent fees ....................................................... 242 339
Professional fees ......................................................... 78 38
Registration fees ......................................................... 72 128
Shareholder servicing fees - Class E ...................................... 72 53
Trustees' fees ............................................................ 12 6
Miscellaneous ............................................................. 51 60
-------- --------
Expenses before reductions ................................................ 3,687 4,191
Expense reductions ........................................................ (68) --
-------- --------
Expenses, net ........................................................... 3,619 4,191
-------- --------
Net investment income ...................................................... 59,943 63,242
-------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ............................................................... (9,182) (19,448)
Options written ........................................................... (9) 410
Foreign currency-related transactions ..................................... 545 60
-------- --------
(8,646) (18,978)
-------- --------
Net change in unrealized appreciation (depreciation) on:
Investments ............................................................... 28,873 (54,674)
Options written ........................................................... 140 (192)
Foreign currency-related transactions ..................................... 202 143
-------- --------
29,215 (54,723)
-------- --------
Net realized and unrealized gain (loss) .................................... 20,569 (73,701)
-------- --------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ...................... $ 80,512 $(10,459)
======== ========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Fixed Income I Fund 110
<PAGE>
FIXED INCOME I FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income ........................................... $ 59,943 $ 63,242 $ 54,878
Net realized gain (loss) ....................................... (8,646) (18,978) 19,960
Net change in unrealized appreciation (depreciation)............. 29,215 (54,723) (1,058)
----------- ----------- -----------
Net increase (decrease) in net assets from operations ......... 80,512 (10,459) 73,780
----------- ----------- -----------
DISTRIBUTIONS
From net investment income
Class E ....................................................... (1,607) (1,388) --
Class I ....................................................... (43,736) (61,700) (55,645)
Class Y ....................................................... (7,332) -- --
From net realized gain
Class I ....................................................... -- (859) (9,092)
----------- ----------- -----------
Net decrease in net assets from distributions ............... (52,675) (63,947) (64,737)
----------- ----------- -----------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions.... (34,883) 183,227 171,196
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ...................... (7,046) 108,821 180,239
NET ASSETS
Beginning of period ............................................. 1,087,312 978,491 798,252
----------- ----------- -----------
End of period (including undistributed net investment
income of $8,544 at October 31, 2000 and
$548 at December 31, 1999) ................................... $ 1,080,266 $ 1,087,312 $ 978,491
=========== =========== ===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
111 Fixed Income I Fund
<PAGE>
FIXED INCOME I 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.
2000* 1999**
--------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD .................. $ 20.30 $ 21.25
--------- ---------
INCOME FROM OPERATIONS
Net investment income (a) ........................... 1.07 .74
Net realized and unrealized gain (loss) ............. .40 (.81)
--------- ---------
Total income from operations ....................... 1.47 (.07)
--------- ---------
DISTRIBUTIONS
From net investment income ........................... (.98) (.88)
--------- ---------
NET ASSET VALUE, END OF PERIOD ........................ $ 20.79 $ 20.30
========= =========
TOTAL RETURN (%)(b) .................................. 7.36 (.32)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ............ 33,322 35,950
Ratios to average net assets (%)(c):
Operating expenses, net ............................ .67 .66
Operating expenses, gross .......................... .68 .66
Net investment income .............................. 6.31 5.79
Portfolio turnover rate (%) ......................... 117.94 138.69
* For the ten months ended October 31, 2000.
** 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) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
Fixed Income I Fund 112
<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,
----------------------------------------------------------
2000* 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD .............. $ 20.27 $ 21.76 $ 21.51 $ 20.99 $ 21.59 $ 19.59
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM OPERATIONS
Net investment income (a) ....................... 1.13 1.28 1.32 1.37 1.38 1.42
Net realized and unrealized gain (loss) ......... .39 (1.50) .45 .54 (.62) 2.02
---------- ---------- ---------- ---------- ---------- ----------
Total income from operations ................... 1.52 (.22) 1.77 1.91 .76 3.44
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS
From net investment income ....................... (1.00) (1.25) (1.31) (1.39) (1.36) (1.44)
From net realized gain .......................... -- (.02) (.21) -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions ............................ (1.00) (1.27) (1.52) (1.39) (1.36) (1.44)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD .................... $ 20.79 $ 20.27 $ 21.76 $ 21.51 $ 20.99 $ 21.59
========== ========== ========== ========== ========== ==========
TOTAL RETURN (%)(b)(c) ............................ 7.63 (1.04) 8.37 9.42 3.75 18.03
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ........ 902,895 1,051,362 978,491 798,252 662,899 638,317
Ratios to average net assets (%)(c)(d):
Operating expenses ............................. .40 .39 .39 .42 .42 .35
Net investment income .......................... 6.59 6.05 6.03 6.54 6.57 6.82
Portfolio turnover rate (%) ..................... 117.94 138.69 226.70 165.81 147.31 138.05
</TABLE>
* For the ten months ended October 31, 2000.
(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) Prior to April 1, 1995, Fund performance, operating expenses, and net
investment income do not include any management fees paid to the Manager or
money managers. For periods thereafter, they are reported net of investment
management fees but gross of any investment services fees. See Note 4.
(d) The ratios for periods less than one year are annualized.
113 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
FINANCIAL HIGHLIGHTS - CLASS Y
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
2000*
----------
NET ASSET VALUE, BEGINNING OF PERIOD ............................. $ 20.61
----------
INCOME FROM OPERATIONS
Net investment income (a) ...................................... .81
Net realized and unrealized gain (loss) ........................ .37
----------
Total income from operations .................................. 1.18
----------
DISTRIBUTIONS
From net investment income ...................................... (1.00)
----------
NET ASSET VALUE, END OF PERIOD ................................... $ 20.79
==========
TOTAL RETURN (%)(b) ............................................. 5.89
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ....................... 144,049
Ratios to average net assets (%)(c):
Operating expenses, net ....................................... .32
Operating expenses, gross ..................................... .34
Net investment income ......................................... 6.63
Portfolio turnover rate (%) .................................... 117.94
* For the period March 29, 2000 (commencement of sale) to October 31, 2000.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
Fixed Income I Fund 114
<PAGE>
FIXED INCOME III FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
DATES FIXED III - CLASS I ++ LB AGGREGATE **
<S> <C> <C>
Inception* $ 10,000 $ 10,000
1993 $ 11,031 $ 10,802
1994 $ 10,591 $ 10,406
1995 $ 12,124 $ 12,034
1996 $ 12,955 $ 12,738
1997 $ 14,150 $ 13,870
1998 $ 15,120 $ 15,165
1999 $ 15,370 $ 15,246
2000 $ 16,340 $ 16,359
----------- -------- --------
Total $117,681 $116,621
=========== ======== ========
Yearly periods ended October 31
</TABLE>
<TABLE>
<CAPTION>
FIXED INCOME III FUND - CLASS I FIXED INCOME III FUND - CLASS Y ++++++
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
------------- --------- ------ ------------- --------- ------
<S> <C> <C> <C> <C> <C>
1 Year $10,631 6.31% 1 Year $10,635 6.35%
5 Years $13,478 6.14%(S) 5 Years $13,483 6.15%(S)
Inception* $16,340 6.53%(S) Inception* $16,346 6.54%(S)
<CAPTION>
FIXED INCOME III FUND - CLASS E ++++ LEHMAN BROTHERS AGGREGATE BOND INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
------------- --------- ------ ------------- --------- ------
<S> <C> <C> <C> <C> <C>
1 Year $10,612 6.12% 1 Year $10,730 7.30%
5 Years $13,439 6.08%(S) 5 Years $13,594 6.33%(S)
Inception* $16,294 6.49%(S) Inception* $16,359 6.56%(S)
</TABLE>
115 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the ten months ended October 31, 2000, the Fixed Income III Fund Class I,
Class E and Class Y shares gained 6.75%, 6.55%, and 6.79%, respectively. This
compared to a 7.83% return for the Lehman Brothers Aggregate Bond Index.
The Fund's wide variety of non-Treasury issues across many fixed-income sectors
left it exposed to the general underperformance of corporate bonds, particularly
high-yield issues. However, emerging markets issues were strong, particularly
during much of the first and second quarters, and performance from mortgages
also helped offset the lackluster performance of corporate issues.
PORTFOLIO HIGHLIGHTS
During the first quarter, bond markets were focused on the Federal Reserve Board
(the Fed), as they waited for a definitive response regarding interest rates.
After the Fed imposed a 50 basis point interest rate hike on May 16, however,
bond investors generally reached a consensus that the Fed would hold rates
steady, and bonds enjoyed a rally. Subsequently, in June economic data provided
bond investors with the first major indications that the US economy could be
slowing, which continued to fuel the rally.
The big story was the inversion of the US Treasury yield curve which occurred
during first quarter 2000. While the 3-month and 2-year rates rose 57 and 25
basis points, respectively, the 10-year and 30-year rates declined 42 and 64
basis points, respectively. This inversion was driven by the US Treasury's debt
buyback program and a declining supply of longer-term Treasury bonds.
Corporate debt generally underperformed during the period, with high-yield
issues being the worst performers during the first quarter, and the
investment-grade corporate sector closely following their pattern. While
corporate issues lagged for most of the year, they did stage a late-period rally
that helped drive further debate regarding the direction of the equities markets
and future growth outlooks.
TOP TEN ISSUERS
(as a percent of Total Investments) October 31, 2000
Government National Mortgage Association 21.7%
Federal National Mortgage Association 11.1
United States Treasury 9.7
Federal Home Loan Mortgage Corp. 8.3
Ford Motor Credit Co. 2.8
Lehman Brothers Holdings 1.2
Ford Credit Auto Owner Trust 1.1
Sprint Capital Corp. 1.0
Citicorp 1.0
Goldman Sachs Group, Inc. 0.9
PORTFOLIO CHARACTERISTICS
October 31, 2000
Weighted Average Quality Diversification AA
Weighted Average Years-to-Maturity 10.4 Years
Weighted Average Duration 5.3 Years
Current Yield (SEC 30-day standardized)
Class I 6.6%
Class E 6.4%
Class Y 6.7%
Number of Issues 759
Number of Issuers 538
MONEY MANAGERS STYLE
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
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* 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.
** 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.
++++ 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.
++++++ Fixed Income III Fund Class I performance has been linked with Class Y to
provide historical perspective.
(S) 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 116
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- --------
LONG-TERM INVESTMENTS -114.5%
ASSET-BACKED SECURITIES - 5.9%
Advanta Business Card Master Trust
Series 2000-B Class C
7.872% due 01/20/06 (b) 680 680
AFC Home Equity Loan Trust
Series 2000-2 Class 2A
6.920% due 06/25/30 (b) 2,873 2,878
Ameriquest Mortgage Securities, Inc.
Series 2000-2 Class A
6.920% due 07/15/30 (b) 1,449 1,450
Arcadia Automobile
Receivables Trust
Series 1997-D Class A3
6.200% due 05/15/03 190 190
Associates Automobile
Receivables Trust
Series 2000-1 Class M
7.510% due 05/15/05 420 428
Caterpillar Financial Asset Trust
Series 1999-A Class A2
5.900% due 03/25/02 94 94
Centex Home Equity
Series 1999-2 Class A1
5.910% due 04/25/19 195 193
Chevy Chase Automobile
Receivables Trust
Series 1997-4 Class A
6.250% due 06/15/04 343 341
Series 2000-1 Class A4
7.470% due 07/15/05 410 417
Citibank Credit Card
Issuance Trust
Series 2000-C1 Class C1
7.450% due 09/15/07 450 446
Series 2000-C2 Class C2
7.310% due 09/15/07 (b) 390 392
Conseco Finance
Series 1999-H Class AF1
6.450% due 12/15/29 214 213
Series 2000-B Class AF1
6.940% due 11/15/14 (b) 322 322
Conseco Finance
Securitizations Corp.
Series 2000-1 Class A1
6.840% due 05/01/31 317 316
Contimortgage Home Equity
Loan Trust
Series 1996-4 Class A8
7.220% due 01/15/28 105 104
Cross Country Master Credit
Card Trust II
Series 1999-1 Class A
7.121% due 06/15/06 (b) 400 400
Daimler-Benz Automobile
Grantor Trust
Series 1997-A Class A
6.050% due 03/31/05 233 232
Daimler-Benz Vehicle Trust
Series 1998-A Class A3
5.160% due 01/20/03 484 481
DaimlerChrysler Automobile Trust
Series 2000-C Class A3
6.820% due 09/06/04 1,325 1,328
Dealer Automobile
Receivables Trust
Series 2000-1 Class A4
7.120% due 03/15/05 (b) 435 438
Delta Funding Home Equity
Loan Trust
Series 1998-4 Class A4F
6.340% due 04/15/26 1,250 1,178
Discover Card Master Trust I
Series 1998-7 Class A
5.600% due 05/16/06 280 271
DR Structured Finance Corp.
Series 1994-K1, Class A-1
7.600% due 08/15/07 65 54
Duck Automobile Grantor Trust
Step-Up Bond
Series 1999-B Class A
6.450% due 04/15/04 (b) 123 123
EQCC Home Equity Loan Trust
Series 1999-1 Class A1F
5.770% due 05/20/10 241 239
Series 1999-2 Class A1F
6.050% due 01/25/10 282 279
Series 1999-3 Class A1F
6.548% due 04/25/10 499 494
First USA Credit Card Master Trust
Series 1997-10 Class A
6.710% due 09/17/03 (b) 425 425
117 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Ford Credit Automobile Owner Trust
Series 1998-B Class A3
5.850% due 10/15/01 142 142
Series 1999-B Class A3
5.470% due 09/15/01 130 130
Series 1999-B Class A4
5.800% due 06/15/02 800 796
Series 1999-C Class A3
5.770% due 11/15/01 259 259
Series 1999-D Class A3
6.200% due 04/15/02 439 438
Green Tree Financial Corp.
Series 1998-1 Class A2
5.850% due 11/01/29 65 65
Series 1999-C Class A1
5.990% due 07/15/30 102 102
Green Tree Lease Finance LLC
Series 1997-1 Class A3
6.170% due 09/20/05 82 82
Greenpoint Manufactured Housing
Series 1999-5 Class A1
6.750% due 04/15/11 277 276
Greenwich Capital Acceptance, Inc.
Series 1994 Class A-1
9.476% due 11/25/24 (b) 9 9
Harley-Davidson Eaglemark
Motorcycle Trust
Series 1998-2 Class A1
5.770% due 09/16/02 59 59
Series 1999-2 Class A1
5.840% due 10/15/03 346 343
Series 1999-3 Class A1
6.220% due 02/15/04 207 206
Household Home Equity Loan Trust
Series 1999-1 Class A1
6.830% due 12/20/16 (b) 199 198
MBNA Master Credit Card Trust
Series 2000-E Class A
7.800% due 10/15/12 305 322
Series 2000-E Class B
8.150% due 10/15/12 (b) 625 666
MMCA Automobile Owner Trust
Series 1999-2 Class A1
6.300% due 06/15/02 193 193
Series 2000-1 Class A4
7.080% due 02/15/05 (b) 460 465
Nissan Automobile Receivables
Grantor Trust
Series 1998-A Class A
5.450% due 04/15/04 323 320
Series 2000-A Class A2
6.730% due 05/15/02 455 455
Peco Energy Transition Trust
Series 2000-A Class A3
7.630% due 03/01/10 (b) 525 538
Premier Automobile Trust
Series 1998-5 Class A3
5.070% due 07/08/02 272 271
Series 1999-2 Class A2
5.280% due 11/08/01 86 86
Series 1999-3 Class A2
5.820% due 02/08/02 184 184
Sears Credit Account Master Trust
Series 1998-2 Class A
5.250% due 10/16/08 400 384
Series 1999-1 Class A
5.650% due 03/17/09 1,525 1,479
Student Loan Marketing Association
Series 1996-4 Class A1
6.718% due 07/25/04 (b) 1,062 1,057
Series 1997-3 Class A1
6.838% due 04/25/06 (b) 1,363 1,358
USAA Automobile Loan
Grantor Trust
Series 1997-1 Class A
6.000% due 05/15/04 266 264
Vanderbilt Mortgage & Finance, Inc.
Series 1998-C Class 1A6
6.750% due 10/07/28 (c) 1,000 883
WFS Financial Owner Trust
Series 1998-C Class A3
5.650% due 11/20/02 (b) 1,947 1,941
------------
28,377
------------
CORPORATE BONDS AND NOTES - 31.8%
Abitibi-Consolidated Finance
7.875% due 08/01/09 402 380
Adelphia Business Solutions
12.000% due 11/01/07 115 52
Adelphia Communications Corp.
7.875% due 05/01/09 55 43
9.375% due 11/15/09 306 261
10.875% due 10/01/10 930 874
Advantica Restaurant Group, Inc.
11.250% due 01/15/08 105 51
Agrilink Foods, Inc.
11.875% due 11/01/08 75 54
Fixed Income III Fund 118
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Ahold Finance USA, Inc.
6.250% due 05/01/09 850 754
8.250% due 07/15/10 85 86
6.875% due 05/01/29 275 227
Albertson's, Inc.
7.450% due 08/01/29 370 331
Alcoa, Inc.
7.375% due 08/01/10 85 85
Allied Waste North America, Inc.
Series B
7.375% due 01/01/04 325 296
10.000% due 08/01/09 75 64
Alpha Wind Frn Reinsur
11.320% due 05/23/01 250 255
American Airlines, Inc.
9.710% due 01/02/07 279 290
Series 90-P
10.600% due 03/04/09 1,013 1,127
American General Institutional
Capital
Series B
8.125% due 03/15/46 1,045 975
American Standard, Inc.
8.250% due 06/01/09 60 88
7.625% due 02/15/10 500 465
AMR Corp.
9.950% due 03/07/01 1,000 1,009
Amresco, Inc.
Series 98-A
9.875% due 03/15/05 575 311
Amtrol, Inc.
10.625% due 12/31/06 40 34
Anchor Gaming
9.875% due 10/15/08 400 404
Anthem Insurance Company, Inc.
9.125% due 04/01/10 370 342
Aramark Corp.
6.750% due 08/01/04 1,365 1,215
Arco Chemical Co.
9.800% due 02/01/20 55 53
AT&T Corp.
6.500% due 03/15/29 340 267
Avon Products Inc.
7.150% due 11/15/09 409 393
AXA Financial, Inc.
7.000% due 04/01/28 530 468
Banc One Corp.
7.625% due 10/15/26 340 319
8.000% due 04/29/27 90 87
Banesto Delaware, Inc.
8.250% due 07/28/02 1,000 1,020
Bank of America Corp.
6.680% due 03/05/01 (b) 5,000 4,999
Bank United Corp.
8.875% due 05/01/07 1,050 1,035
BankBoston NA
6.375% due 04/15/08 290 270
Beckman Coulter, Inc.
7.450% due 03/04/08 150 139
BellSouth Telecommunications, Inc.
6.375% due 06/01/28 430 363
Beneficial Corp.
7.025% due 04/01/02 (b) 2,000 2,000
BNP Paribas Capital Trust
9.003% due 06/30/49 (e) 255 254
Budget Group, Inc.
9.125% due 04/01/06 25 10
Buhrmann US, Inc.
12.250% due 11/01/09 55 56
Building One Services Corp.
10.500% due 05/01/09 85 63
Canadian National Railway Co.
6.900% due 07/15/28 425 368
Charter Communications
Holdings, LLC
8.250% due 04/01/07 575 515
8.625% due 04/01/09 30 27
Chase Manhattan Corp.
7.000% due 11/15/09 320 308
Chesapeake Energy
9.625% due 05/01/05 40 40
Chevy Chase Automobile Receivables
5.970% due 10/20/04 197 196
Chrysler Financial Corp., LLC
Series R
6.784% due 03/10/03 (b) 800 806
Cincinnati Financial Corp.
6.900% due 05/15/28 1,000 867
Citibank Mxn Linked Deposit
Zero Coupon due 12/03/01 35 42
Citicorp
6.850% due 08/13/02 (b) 2,000 1,999
6.375% due 11/15/08 851 801
Citigroup, Inc.
7.250% due 10/01/10 430 427
Clear Channel Communications
7.650% due 09/15/10 1,590 1,561
Cleveland Electric Illumination Co.
7.430% due 11/01/09 325 318
119 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Cleveland Electric/Toledo Edison
Series B
7.670% due 07/01/04 125 126
CMS Energy Corp.
9.875% due 10/15/07 350 348
7.500% due 01/15/09 220 192
Coastal Corp.
7.750% due 06/15/10 900 914
Colo.Com
Series UNIT
13.875% due 03/15/10 15 11
Columbia Healthcare Corp.
7.500% due 12/15/23 530 444
Columbia/HCA Healthcare Corp.
8.020% due 08/05/02 2,000 1,975
Compaq Computer Corp.
7.650% due 08/01/05 575 571
Comstock Res., Inc.
11.250% due 05/01/07 42 44
Conmed Corp.
9.000% due 03/15/08 300 240
Conoco, Inc.
6.950% due 04/15/29 460 426
Continental Airlines, Inc.
Pass-thru Certificate
Series 1999-1 Class A
6.545% due 02/02/19 63 58
Courtyard Marriott II, Ltd.
Series B
10.750% due 02/01/08 60 60
Covad Communications Group, Inc.
Series B
12.000% due 02/15/10 20 9
Crescent Real Estate Equities
7.000% due 09/15/02 (b) 850 796
7.500% due 09/15/07 (b) 425 357
Crompton Corp.
8.500% due 03/15/05 450 433
Crown Castle International Corp.
10.750% due 08/01/11 50 51
CSC Holdings, Inc.
7.875% due 12/15/07 250 242
7.250% due 07/15/08 305 279
Series B
8.125% due 08/15/09 150 147
CSX Corp.
6.800% due 12/01/28 1,050 880
DaimlerChrysler North
America Holding Corp.
7.400% due 01/20/05 1,325 1,329
8.000% due 06/15/10 165 168
Dayton Superior Corp.
13.000% due 06/15/09 18 18
Delphi Automotive Systems Corp.
7.125% due 05/01/29 105 88
Delta Air Lines, Inc.
7.700% due 12/15/05 550 530
8.300% due 12/15/29 650 553
Series C
6.650% due 03/15/04 2,000 1,903
Deutsche Bank Ltd.
17.400% due 08/01/01 90 88
Dominion Resources, Inc.
Series A
8.125% due 06/15/10 425 438
Dow Chemical Co.
7.375% due 11/01/29 165 159
Dynegy, Inc.
7.450% due 07/15/06 406 403
Echostar Broadband Corp.
10.375% due 10/01/07 30 30
Echostar DBS Corp.
9.375% due 02/01/09 18 18
El Paso Energy Corp.
Series B
6.625% due 07/15/01 4,000 3,977
Enron Corp.
7.110% due 09/10/01 (b) 3,000 3,000
7.875% due 06/15/03 750 765
EOP Operating, LP
6.500% due 01/15/04 975 945
7.500% due 04/19/29 410 362
Exide Corp.
2.900% due 12/15/05 625 266
Exodus Communications, Inc.
11.250% due 07/01/08 75 69
11.375% due 07/15/08 65 51
11.625% due 07/15/10 505 472
Extendicare Health Services, Inc.
9.350% due 12/15/07 900 486
Federated Department Stores, Inc.
8.500% due 06/01/10 40 39
7.000% due 02/15/28 330 245
6.900% due 04/01/29 85 62
Finova Capital Corp.
6.750% due 03/09/09 425 238
First Security Corp.
5.875% due 11/01/03 3,000 2,891
First Union Corp.
6.950% due 11/01/04 394 388
Fixed Income III Fund 120
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
FleetBoston Financial Corp.
7.250% due 09/15/05 725 729
7.375% due 12/01/09 400 395
Florida Windstorm Underwriting
7.125% due 02/25/19 470 447
Foamex LP
13.500% due 08/15/05 20 16
9.875% due 06/15/07 50 37
Ford Motor Co.
7.450% due 07/16/31 215 198
Ford Motor Credit Co.
6.806% due 02/13/03 2,000 1,991
6.850% due 03/17/03 5,000 4,978
6.890% due 05/21/04 (b) 3,000 3,007
6.700% due 07/16/04 1,425 1,396
7.500% due 03/15/05 650 652
5.800% due 01/12/09 400 351
7.375% due 10/28/09 730 709
Fort James Corp.
6.625% due 09/15/04 275 262
Fred Meyer, Inc.
7.450% due 03/01/08 200 194
Fugi JGB Investment, LLC
9.870% due 12/31/49 (e) 450 430
Generac Portable Products, LLC
11.250% due 07/01/06 30 12
General Electric Capital Corp.
Series A
7.375% due 01/19/10 375 386
General Motors Acceptance Corp.
7.750% due 01/19/10 130 130
GEO Specialty Chemicals, Inc.
10.125% due 08/01/08 35 27
Global Crossing Holdings, Ltd.
9.625% due 05/15/08 750 716
Globix Corp.
12.500% due 02/01/10 20 13
Gold Eagle Capital, Ltd.
12.198% due 04/15/01 (b) 250 250
Golden State Holdings
7.125% due 08/01/05 1,215 1,130
Goldman Sachs Group, Inc.
6.920% due 02/22/02 (b) 5,000 5,007
7.625% due 08/17/05 100 101
Series B
7.350% due 10/01/09 650 635
GS Escrow Corp.
7.000% due 08/01/03 1,100 1,050
GTE Corp.
6.940% due 04/15/28 400 364
GTE North, Inc.
6.900% due 11/01/08 165 161
Halyard Re BV
12.779% due 04/05/02 (b) 250 247
Hanger Orthopedic Group
11.250% due 06/15/09 35 24
Hartford Financial Services
Group Inc.
7.900% due 06/15/10 130 133
Hartford Life, Inc.
7.650% due 06/15/27 210 200
HCA - The Healthcare Co.
8.750% due 09/01/10 150 152
Healthsouth Corp.
10.750% due 10/01/08 80 81
High Voltage Engineering
10.500% due 08/15/04 35 23
HMH Properties, Inc.
Series A
7.875% due 08/01/05 135 128
Holley Performance Products, Inc.
Series B
12.250% due 09/15/07 45 26
Horseshoe Gaming Holding Corp.
8.625% due 05/15/09 900 878
Household Finance Corp.
7.875% due 03/01/07 395 402
5.875% due 02/01/09 465 415
Huntsman ICI Holdings
Zero Coupon due 12/31/09 500 168
Imperial Capital Trust I
Series B
9.980% due 12/31/26 250 205
Intermedia Communications, Inc.
8.600% due 06/01/08 230 215
Series B
8.500% due 01/15/08 215 201
International Paper Co.
8.000% due 07/08/03 350 355
Interpool Capital Trust
Series B
9.875% due 02/15/27 355 202
IPC Magazines Group PLC
9.625% due 03/15/08 40 49
IT Group, Inc.
Series B
11.250% due 04/01/09 140 119
ITC Deltacom, Inc.
11.000% due 06/01/07 20 17
9.750% due 11/15/08 40 32
121 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
John Hancock Mutual Life
Insurance Co.
7.375% due 02/15/24 280 261
John Q. Hammons Hotels
8.875% due 02/15/04 50 47
Jostens, Inc.
12.750% due 05/01/10 20 20
K Mart Funding Corp.
Series F
8.800% due 07/01/10 160 142
Kaufman and Broad Home Corp.
7.750% due 10/15/04 325 304
Kroger Co.
7.250% due 06/01/09 650 624
8.050% due 02/01/10 550 555
8.000% due 09/15/29 375 358
LCI International, Inc.
7.250% due 06/15/07 710 697
Lear Corp.
Series B
7.960% due 05/15/05 1,200 1,117
Lehman Brothers Holdings Corp.
6.625% due 04/01/04 275 267
6.800% due 11/30/06 (b) 2,662 2,476
8.250% due 06/15/07 1,255 1,281
Series E
7.715% due 04/02/02 3,000 3,024
Lenfest Communications, Inc.
8.375% due 11/01/05 260 270
Lesotho Highlands Water
13.000% due 09/15/10 850 105
Level 3 Communications, Inc.
11.000% due 03/15/08 165 149
9.125% due 05/01/08 90 73
11.250% due 03/15/10 95 86
Step Up Bond
Zero Coupon due 03/15/10 (b) 1,325 656
Liberty Media Corp.
8.500% due 07/15/29 400 366
Litton Industries, Inc.
8.000% due 10/15/09 525 533
Lockheed Martin Corp.
8.200% due 12/01/09 400 416
8.500% due 12/01/29 315 337
Lodgenet Entertainment Corp.
10.250% due 12/15/06 45 45
Lodgian Financing Corp.
12.250% due 07/15/09 75 69
Louisiana Land and Exploration Co.
7.650% due 12/01/23 398 389
Lowes Cos., Inc.
6.875% due 02/15/28 185 157
6.500% due 03/15/29 150 122
Lucent Technologies, Inc.
6.450% due 03/15/29 325 252
Lyondell Chemical Co.
10.875% due 05/01/09 35 34
Mandalay Resort Group
10.250% due 08/01/07 75 77
MCI WorldCom, Inc.
6.950% due 08/15/28 510 448
McLeodUSA, Inc.
8.125% due 02/15/09 775 670
Step Up Bond
Zero Coupon due 03/01/07 (b) 775 636
Merrill Corp.
Series B
12.000% due 05/01/09 40 24
Merrill Lynch & Co., Inc.
6.375% due 10/15/08 3,000 2,819
6.875% due 11/15/18 505 456
Metromedia Fiber Network, Inc.
10.000% due 12/15/09 30 27
Series B
10.000% due 11/15/08 675 601
MGM Grand, Inc.
9.750% due 06/01/07 80 83
MGM Mirage, Inc.
8.500% due 09/15/10 350 346
Mohegan Tribal Gaming Authority
8.125% due 01/01/06 235 227
8.750% due 01/01/09 175 171
Morgan Stanley Dean Witter & Co.
7.750% due 06/15/05 700 716
Motorola, Inc.
6.500% due 11/15/28 120 100
Namazu Re, Ltd.
11.180% due 12/02/04 (b) 250 246
NATG Holdings, LLC
Series B
12.750% due 02/01/10 107 98
National City Corp.
6.875% due 05/15/19 375 328
Neff Corp.
10.250% due 06/01/08 45 20
News America Holdings, Inc.
8.875% due 04/26/23 250 254
News America, Inc.
7.125% due 04/08/28 225 187
7.300% due 04/30/28 160 136
Fixed Income III Fund 122
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Nextel Communications, Inc.
10.750% due 11/15/08 1,070 936
9.375% due 11/15/09 95 92
Step Up Bond
Zero Coupon due 09/15/07 (b) 645 514
Zero Coupon due 02/15/08 (b) 305 228
Nextlink Communications, Inc.
10.750% due 06/01/09 25 22
Step Up Bond
Zero Coupon due 04/15/08 (b) 575 322
Niagara Mohawk Power Corp.
Series F
7.625% due 10/01/05 435 438
Norfolk Southern Corp.
7.800% due 05/15/27 325 313
North American Van Lines, Inc.
13.375% due 12/01/09 60 53
Official Information Co.
Series B
10.375% due 11/01/07 30 27
Oil Purchase Co.
7.100% due 04/30/02 133 125
Orion Power Holdings, Inc.
12.000% due 05/01/10 40 42
Paine Webber Group, Inc.
6.450% due 12/01/03 400 394
6.375% due 05/15/04 350 342
Panamsat Corp.
6.125% due 01/15/05 775 709
Park Place Entertainment Corp.
9.375% due 02/15/07 150 151
Paxson Communications Corp.
11.625% due 10/01/02 450 460
Penhall International Corp.
12.000% due 08/01/06 100 91
Petro Stopping Centers
10.500% due 02/01/07 125 106
Pharmacia Corp.
6.600% due 12/01/28 370 324
Phoenix Color Corp.
10.375% due 02/01/09 40 33
Pinnacle Partners
8.830% due 08/15/04 1,100 1,111
Plains Resources, Inc.
Series B
10.250% due 03/15/06 5 5
Series E
10.250% due 03/15/06 45 45
PNC Funding Corp.
7.500% due 11/01/09 370 366
Precision Partners, Inc.
12.000% due 03/19/09 10 6
Premier Parks, Inc.
9.750% due 06/15/07 425 396
Step Up Bond
Zero Coupon due 04/01/08 (b) 350 230
Procter & Gamble Co.
6.600% due 12/15/04 485 483
Prudential Insurance Co. of America
6.875% due 04/15/03 700 697
6.375% due 07/23/06 235 222
PSEG Energy Holdings, Inc.
9.125% due 02/10/04 175 179
Psinet, Inc.
10.500% due 12/01/06 135 74
11.500% due 11/01/08 35 18
Public Service Co. New Mexico
7.100% due 08/01/05 500 489
PX Escrow Corp.
Step Up Bond
Zero Coupon due 02/01/06 (b) 925 315
Qwest Corp.
7.200% due 11/01/04 625 621
Railworks Corp.
11.500% due 04/15/09 90 27
Raytheon Co.
8.200% due 03/01/06 200 207
8.300% due 03/01/10 400 419
Series 144A
8.300% due 03/01/10 125 131
RBF Finance Co.
11.000% due 03/15/06 25 29
Regional Independent Media
12.875% due 07/01/08 (b) 45 51
Rent-A-Center, Inc.
11.000% due 08/15/08 65 64
Republic Services, Inc.
7.125% due 05/15/09 250 224
Resolution Funding Corp.
Principal Strip
6.340% due 01/15/21 964 273
Rockwell International Corp.
6.700% due 01/15/28 135 113
Rose Hills Corp.
9.500% due 11/15/04 475 277
Sabreliner Corp.
11.000% due 06/15/08 35 29
Saks, Inc.
7.375% due 02/15/19 260 149
123 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Salomon, Inc.
6.356% due 11/28/00 35 36
6.000% due 12/03/02 (b) 45 45
Scotts Co.
8.625% due 01/15/09 375 360
Seagate Technology, Inc.
7.450% due 03/01/37 680 701
Small Business Administration-SBIC
Series 10B
7.449% due 08/01/10 500 511
Smithfield Foods, Inc.
7.625% due 02/15/08 275 250
Spectrasite Holdings, Inc.
Step Up Bond
Series B
Zero Coupon due 03/15/10 (b) 100 49
Spieker Properties, L.P.
6.950% due 12/15/02 500 496
Sprint Capital Corp.
6.500% due 11/15/01 5,000 4,964
6.375% due 05/01/09 400 358
6.875% due 11/15/28 781 638
State Street Corp.
7.650% due 06/15/10 175 178
Station Casinos, Inc.
10.125% due 03/15/06 85 85
9.750% due 04/15/07 75 75
9.875% due 07/01/10 250 250
Sterling Chemicals Holdings, Inc.
Step Up Bond
Zero Coupon due 08/15/08 (b) 25 7
Sterling Chemicals, Inc.
Series A
11.250% due 04/01/07 20 11
Sun Microsystems, Inc.
7.650% due 08/15/09 140 141
Tekni-Plex, Inc.
12.750% due 06/15/10 75 68
Tenet Healthcare Corp.
7.875% due 01/15/03 50 50
6.000% due 12/01/05 650 566
9.250% due 09/01/10 175 183
Time Warner, Inc.
7.975% due 08/15/04 375 384
7.750% due 06/15/05 275 280
6.625% due 05/15/29 1,535 1,303
Times Mirror Co.
7.450% due 10/15/09 400 397
Tokai Preferred Capital Co. LLC
9.980% due 12/29/49 (e) 500 480
Toledo Edison Co.
8.700% due 09/01/02 500 505
Toll Brothers Corp.
7.750% due 09/15/07 740 688
Transdigm, Inc.
10.375% due 12/01/08 40 37
Trenwick Capital Trust I
8.820% due 02/01/37 575 396
Ubquitel Operating Co. Step Up Bond
Zero Coupon due 04/15/10 (b) 87 42
Zero Coupon due 04/15/10 (b) 45 21
UBS PFD Funding Trust I
8.622% due 10/29/49 (e) 240 243
Unicredito Italiano Capital Trust
9.200% due 10/29/49 (e) 100 99
Unilever Capital Corp.
7.125% due 11/01/10 935 923
Union Planters Bank
6.500% due 03/15/18 400 352
United Rentals, Inc.
Series B
8.800% due 08/15/08 40 32
9.250% due 01/15/09 105 86
URS Corp.
Series B
12.250% due 05/01/09 120 123
US Airways Pass-Thru Certificate
Series 2000-1
8.110% due 02/20/17 155 155
US West Capital Funding, Inc.
6.875% due 08/15/01 1,600 1,596
6.250% due 07/15/05 500 478
6.875% due 07/15/28 600 527
USA Waste Services, Inc.
6.500% due 12/15/02 575 550
Viacom, Inc.
7.750% due 06/01/05 300 305
7.700% due 07/30/10 350 356
Wal-Mart Stores, Inc.
6.875% due 08/10/09 75 74
7.550% due 02/15/30 415 429
Walt Disney Co.
5.125% due 12/15/03 700 668
Washington Mutual Capital I
8.375% due 06/01/27 305 267
Washington Mutual, Inc.
7.500% due 08/15/06 535 524
8.250% due 04/01/10 110 111
Fixed Income III Fund 124
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Waste Management Inc.
6.875% due 05/15/09 500 440
7.100% due 08/01/26 900 873
7.000% due 07/15/28 420 340
Wells Fargo Bank NA
7.550% due 06/21/10 335 340
Series BNKT
7.800% due 06/15/10 2,000 2,029
Westdeutsche Landesbank NY
6.050% due 01/15/09 400 364
Western Resources, Inc.
7.125% due 08/01/09 375 311
Williams Communications
Group, Inc.
10.700% due 10/01/07 75 65
11.700% due 08/01/08 725 643
10.875% due 10/01/09 125 105
WRC Media, Inc.
12.750% due 11/15/09 50 44
XM Satellite Radio Holdings, Inc.
14.000% due 03/15/10 15 10
Yanknets LLC
12.750% due 03/01/07 30 29
------------
153,694
------------
EURODOLLAR BONDS - 7.2%
Bayerische Hypo-und Vereinsbank
8.741% due 06/30/31 200 187
Brazil, Federal Republic of
7.875% due 01/01/01 1,181 1,180
Brazil, Republic of
11.625% due 04/15/04 320 323
Series EI-L
7.625% due 04/15/06 3,520 3,197
Series - 20 YR
8.000% due 04/15/14 46 34
Bulgaria, National Republic of
7.750% due 07/28/11 (b) 185 138
Citicorp
6.710% due 06/27/02 (b) 3,000 2,996
Colombia, Republic of
11.750% due 02/25/20 300 242
Deutsche Telekom International
Finance BV Step Up Bond
8.000% due 06/15/10 (b) 1,835 1,870
Flextronics International, Ltd.
9.875% due 07/01/10 475 480
Ford Credit of Canada, Ltd.
6.820% due 12/16/02 (b) 5,000 4,984
Ford Motor Credit Co.
6.896% due 01/17/02 (b) 1,500 1,499
Household Bank Nevada NA
6.948% due 10/22/03 (b) 4,000 3,985
Hurst Group PLC
11.125% due 08/06/08 45 66
Hutchison Whampoa Finance, Ltd.
7.450% due 08/01/17 250 228
Jazztel PLC
14.000% due 07/15/10 60 39
KBC Bank Funding Trust II
6.875% due 06/30/49 1,000 799
KPNQwest BV
8.125% due 06/01/09 750 681
Merita Bank, Ltd.
7.150% due 12/29/49 (e) 1,200 1,186
Mexico (United Mexican States)
9.875% due 02/01/10 300 311
Morgan Stanley Dean Witter
Series T
6.848% due 03/11/03 (b) 2,000 1,999
NTL Communications Corp.
Series B
9.250% due 11/15/06 (b) 95 69
NTL Communications Corp.
Step-Up Bond
Series B
Zero Coupon due 11/15/09 (b) 20 9
Ono Finance PLC
14.000% due 07/15/10 85 56
Pacific Re, Ltd.
10.380% due 05/31/03 (b) 300 303
Panama, Republic of
9.375% due 04/01/29 235 226
Series 20 YR
7.750% due 07/17/16 (b) 49 38
Step Up Bond
4.500% due 07/17/14 (b) 115 91
Philippines, Republic of
9.875% due 01/15/19 34 25
Poland, Republic of
Step Up Bond
Series RSTA
4.000% due 10/27/24 (b) 1,250 850
Royal Bank of Scotland PLC
Series 1
9.118% due 03/31/49 (e) 2,200 2,292
Russian Federation
8.250% due 03/31/10 220 139
SCL Term Aereo Santiago SA
6.950% due 07/01/12 2,000 1,841
Seismic, Ltd.
11.315% due 01/01/02 (b) 250 250
125 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Swiss Life Finance, Ltd.
2.000% due 05/20/05 730 733
Telefonica Europe BV
7.750% due 09/15/10 500 502
8.250% due 09/15/30 300 307
Turkey, Republic of
12.375% due 06/15/09 180 181
United Mexican States
9.875% due 01/15/07 60 62
United Pan-Europe Communications
Step Up Bond Zero Coupon
Series B
Zero Coupon due 11/01/09 30 12
Versatel Telecom International
11.875% due 07/15/09 30 19
Vodafone Group PLC
7.750% due 02/15/10 100 102
7.875% due 02/15/30 390 387
------------
34,918
------------
MORTGAGE-BACKED SECURITIES - 49.7%
Chase Commercial Mortgage
Securities Corp.
Series 1997-2 Class D
6.600% due 12/19/07 1,325 1,232
Chase Mortgage Finance Corp.
Series 1994-C Class A6
6.250% due 02/25/10 331 322
Credit Suisse First Boston Mortgage
Securities Corp.
Series 1998-C2 Class A1
5.960% due 12/15/07 488 471
DLJ Mortgage Acceptance Corp.
Series 1996-CF2 Class A1B
7.290% due 11/12/21 1,525 1,537
Series 1996-Q5 Class A1
7.188% due 06/25/26 (b) 499 495
Federal Home Loan Mortgage Corp.
6.000% 30 Year TBA Gold (d) 1,000 938
6.500% 30 Year TBA Gold (d) 7,100 6,827
7.000% 30 Year TBA Gold (d) 3,300 3,233
7.500% 30 Year TBA Gold (d) 3,200 3,198
8.000% 30 Year TBA Gold (d) 700 709
Series 1037 Class Z
9.000% due 02/15/21 (f) 570 588
Series 2006 Class B
6.500% due 08/15/23 3,650 3,613
Series 2141 Class SD
1.530% due 04/15/29 1,361 94
Federal Home Loan Mortgage Corp.
Participation Certificate
8.000% due 2015 887 904
8.500% due 2017 492 501
10.500% due 2017 240 260
10.000% due 2020 511 540
8.500% due 2025 283 291
7.500% due 2026 1 1
6.904% due 2027 (b) 675 673
8.500% due 2027 1,330 1,362
6.500% due 2028 38 36
6.705% due 2028 (b) 494 489
6.748% due 2028 (b) 614 608
6.500% due 2029 1,709 1,643
6.757% due 2029 (b) 1,241 1,211
7.500% due 2030 1,347 1,346
7.813% due 2030 700 702
8.000% due 2030 7,755 7,859
Step-up Bond
Series 1707 Class S
2.175% due 03/15/24 (b) 1,217 100
Federal National Mortgage
Association
7.500% 15 Year TBA (d) 1,350 1,359
6.000% 30 Year TBA (d) 2,000 1,875
6.500% 30 Year TBA (d) 6,150 5,910
7.500% 30 Year TBA (d) 2,950 2,945
8.000% 30 Year TBA (d) 1,400 1,417
8.500% 30 Year TBA (d) 3,400 3,474
6.000% due 2003 139 137
10.000% due 2005 76 78
10.000% due 2016 160 172
10.000% due 2018 334 358
7.575% due 2024 (b) 58 58
10.000% due 2024 333 356
6.960% due 2025 317 316
8.092% due 2026 (b) 1,853 1,912
6.000% due 2029 3,495 3,277
6.500% due 2029 9,490 9,120
7.000% due 2029 2,738 2,682
6.750% due 2030 414 405
6.875% due 2030 280 275
7.500% due 2030 7,865 7,852
8.000% due 2030 5,363 5,429
Series 1997-77 Class G
6.500% due 05/18/23 1,821 1,811
Federal National Mortgage Association
(REMIC)
Series 1992-10 Class ZD
8.000% due 11/25/21 2,009 2,044
Fixed Income III Fund 126
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Federal National Mortgage
Association Interest Only Strip
Series 281 Class 2
9.000% due 11/01/26 449 124
First Union Lehman Brothers
Commercial Mortgage Trust
Pass-through Certificates
Series 1997-C1 Class D
7.500% due 10/18/08 300 293
GMAC Commercial Mortgage
Securities, Inc.
Series 1997-C1 Class A2
6.850% due 09/15/06 200 199
Series 1998-C1 Class A2
6.700% due 03/15/08 3,000 2,913
Government National
Mortgage Association
10.500% due 03/15/16 194 212
11.000% due 06/15/20 323 354
10.000% due 08/15/22 312 335
6.000% due 02/20/27 74 75
6.000% 30 Year TBA (d) 1,850 1,743
6.500% 30 Year TBA (d) 58,160 56,145
7.000% 30 Year TBA (d) 22,600 22,275
7.500% 30 Year TBA (d) 15,200 15,254
9.000% due 2017 2,102 2,206
6.750% due 2023 282 284
7.125% due 2023 748 754
7.000% due 2024 (b) 1,852 1,869
7.125% due 2024 (b) 1,933 1,952
7.500% due 2024 281 283
6.375% due 2025 (b) 1,473 1,485
6.500% due 2025 (b) 38 38
6.750% due 2025 (b) 62 63
7.375% due 2025 (b) 349 352
7.000% due 2026 (b) 1,267 1,279
6.125% due 2027 (b) 240 242
6.500% due 2027 (b) 1,846 1,861
7.375% due 2027 (b) 1,439 1,450
6.375% due 2028 (b) 72 73
7.500% due 2029 (b) 1,341 1,345
8.000% due 2029 (b) 7,250 7,371
6.500% due 2030 3,265 3,259
8.000% due 2030 8,016 8,149
Series 2000-8 Class SA
1.830% due 01/16/30 (b) 1,686 82
Series 2000-9 Class SH
2.380% due 02/16/30 (b) 3,300 184
Government National Mortgage
Association Pass-through Certificate
Series 1999-43 Class UD
1.380% due 11/16/29 (b) 1,960 71
Series 1999-44 Class SA
1.930% due 12/16/29 (b) 1,564 76
Merrill Lynch Mortgage
Investors, Inc.
Series 1995-C2 Class D
7.770% due 06/15/21 (b) 1,079 1,045
Morgan Stanley Capital I, Inc.
Series 1998-XL1 Class A3
6.480% due 05/03/08 244 236
Residential Funding
Mortgage Securities II
Series 1997-HS5 Class M1
7.010% due 05/25/27 1,368 1,339
Resolution Trust Corp.
Series 1994 - C2 Class G
8.000% due 04/25/25 242 234
Series 1994-1 Class M-2
7.750% due 09/25/29 333 331
Salomon Brothers Mortgage
Securities VII
Series 1999-NC3 Class A
6.970% due 06/25/29 (b) 3,275 3,276
Mortgage Pass-through Certificate
Series 1994-16 Class A
9.089% due 11/25/24 (b) 165 168
Torrens Trust Step-Up Bond
Series 2000-1GA Class A
6.880% due 07/15/31 1,935 1,935
Vendee Mortgage Trust
Series 2000-1 Class 2G
7.250% due 06/15/09 260 260
Vornado Finance LLC
Series 2000-VNO Class C
8.095% due 03/15/10 (b) 790 815
Washington Mutual
Series 2000-1R Class A
6.780% due 07/26/03 737 737
------------
240,071
------------
NON-US BONDS - 0.2%
AES Drax Energy, Ltd.
11.250% due 08/30/10 GBP 30 46
127 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
---------- ---------
Argentina, Republic of
Series PRE1
2.735% due 04/01/01 (b) ARS 57 8
Series PRO1
2.696% due 04/01/07 (b) ARS 24 14
Series PRO2
6.620% due 04/01/07 (b) ARS 53 36
Brokat AG
11.500% due 03/31/10 EUR 5 3
Colt Telecom Group PLC
7.625% due 12/15/09 GBP 30 22
Coral Group Holdings PLC
Series B
13.500% due 09/30/09 GBP 10 15
CP Kelco Capital Corp.
11.875% due 09/15/10 EUR 10 8
Diamond Holdings PLC
10.000% due 02/01/08 GBP 15 20
Energis PLC
9.500% due 06/15/09 GBP 35 47
Flowserve Finance BV
12.250% due 08/15/10 EUR 10 8
Gala Group Holdings PLC
12.000% due 06/01/10 GBP 35 53
Greece, Republic of
5.900% due 02/11/03 GRD 5,500 14
Hungary, Government of
9.500% due 06/12/02 HUF 37,000 116
Series 01/E
15.500% due 05/12/01 HUF 8,000 26
Hungary, Republic of
13.500% due 11/24/01 HUF 17,500 57
9.500% due 01/12/02 HUF 19,400 61
IPC Magazines Group, PLC
Step Up Bond
Zero Coupon due 03/15/08 (b) GBP 20 18
Jones Lang Lasalle Finance BV
9.000% due 06/15/07 (b) EUR 10 9
Kappa Beheer BV
10.625% due 07/15/09 EUR 10 9
Step Up Bond
Series EUR
Zero Coupon due 07/15/09 (b) EUR 5 3
Lesotho Highlands Water
12.000% due 12/01/05 ZAR 120 15
Series WS02
12.500% due 04/15/02 ZAR 550 73
PTC International Finance
Series EUR
11.250% due 12/01/09 EUR 5 4
Telewest Communications, PLC
Step Up Bond
Zero Coupon due 04/15/09 (b) GBP 80 59
Tlel1 Europe BV
13.000% due 05/15/09 EUR 85 63
Travelex PLC
10.500% due 07/31/10 GBP 15 22
United Pan-Europe
Communications
Series B
11.250% due 02/01/10 EUR 25 18
------------
847
------------
UNITED STATES GOVERNMENT AGENCIES - 5.4%
Federal Home Loan Bank Corp.
Discount Note
Zero Coupon due 11/03/00 170 170
Federal Home Loan
Mortgage Corp.
5.750% due 03/15/09 5,800 5,447
6.750% due 09/15/29 5,425 5,405
Federal National
Mortgage Association
6.250% due 05/15/29 3,615 3,380
7.125% due 01/15/30 4,700 4,912
Federal National
Mortgage Association
Zero Coupon due 06/01/17 5,350 1,779
Small Business Administration
Series 97-D
7.500% due 04/01/17 4,764 4,841
------------
25,934
------------
UNITED STATES GOVERNMENT TREASURIES - 12. 1%
United States Treasury Bond
Principal Strip
8.875% due 02/15/19 800 269
8.000% due 11/15/21 11,734 3,359
7.500% due 11/15/24 1,934 466
6.125% due 11/15/27 5,250 1,088
United States Treasury Bonds
10.625% due 08/15/15 6,300 9,129
8.125% due 08/15/19 300 371
8.125% due 05/15/21 6,300 7,858
6.000% due 02/15/26 600 602
3.625% due 04/15/28 534 513
5.500% due 08/15/28 300 282
3.875% due 04/15/29 5,077 5,096
6.250% due 05/15/30 7,450 7,934
Fixed Income III Fund 128
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
United States Treasury
Interest Strips
Zero Coupon due 02/15/11 7,455 4,075
Zero Coupon due 02/15/15 1,400 600
United States Treasury Notes
6.625% due 04/30/02 1,050 1,057
3.625% due 07/15/02 (f) 2,480 2,485
5.750% due 11/30/02 1,025 1,021
7.875% due 11/15/04 1,075 1,151
7.500% due 02/15/05 1,700 1,804
6.500% due 10/15/06 2,550 2,629
3.375% due 01/15/07 3,815 3,716
3.625% due 01/15/08 2,590 2,548
3.875% due 01/15/09 211 211
------------
58,264
------------
YANKEE BONDS - 2.2%
360networks, Inc.
13.000% due 05/01/08 15 12
Abbey National PLC
7.950% due 10/26/29 335 336
Abitibi-Consolidated, Inc.
8.850% due 08/01/30 735 708
Alestra Sa de RL de CV
12.625% due 05/15/09 185 155
Amvescap PLC
6.600% due 05/15/05 875 836
Asia Pulp & Paper Finance IX, Ltd.
10.750% due 10/04/01 900 540
Avecia Group PLC
11.000% due 07/01/09 75 71
British Sky Broadcasting
6.875% due 02/23/09 225 192
8.200% due 07/15/09 525 486
Cable Satisfaction International Inc.
12.750% due 03/01/10 17 14
Cellco Finance N.V.
15.000% due 08/01/05 100 103
Colt Telecom Group PLC
Step Up Bond
Zero Coupon due 12/15/06 (b) 500 456
Edperbrascan Corp.
7.125% due 12/16/03 775 743
Glencore Nickel Party, Ltd.
9.000% due 12/01/14 250 198
Global Crossing Holdings, Ltd.
9.125% due 11/15/06 270 258
GT Group Telecom, Inc.
Step-Up Bond
Zero Coupon due 02/01/10 (b) 1,235 451
Hyundai Semiconductor America, Inc.
8.625% due 05/15/07 280 225
Innova S. de R.L.
12.875% due 04/01/07 195 175
Korea Electric Power Corp.
7.000% due 02/01/27 215 202
National Westminster Bank PLC
7.750% due 04/29/49 (e) 475 461
Quebec, Province of
7.500% due 09/15/29 330 335
Series NN
7.125% due 02/09/24 60 58
Regional Independent Media
10.500% due 07/01/08 60 63
Royal Caribbean Cruises, Ltd.
7.000% due 10/15/07 900 792
7.500% due 10/15/27 450 357
RSL Communications PLC
Step Up Bond
Zero Coupon due 03/01/08 (b) 250 26
St. George Bank, Ltd.
7.150% due 10/01/05 775 766
Stagecoach Holdings PLC
8.625% due 11/15/09 825 645
Tembec Industries, Inc.
8.625% due 06/30/09 140 138
Tyco International Group SA
6.875% due 09/05/02 650 644
------------
10,446
------------
TOTAL LONG-TERM INVESTMENTS
(cost $555,978) 552,551
------------
NOTIONAL
AMOUNT
(000)
$
-----------
OPTIONS PURCHASED - 0.0%
United States Treasury Bonds (c)*
Feb 99.59 Call 2,950 49
Mar 104.33 Call 800 34
Dec 104.56 Call 1,375 42
Dec 104.58 Call 1,375 43
Dec 104.56 Put 1,375 9
Dec 104.58 Put 1,375 11
United States Treasury Notes (c)*
Jan 104.53 Call 100 3
Feb 108.00 Call 250 4
Nov 105.00 Call 13 --
------------
TOTAL OPTIONS PURCHASED
(cost $213) 195
------------
129 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
Market
Number Value
of (000)
Shares $
------------ ------------
PREFERRED STOCKS - 0.5%
Avecia Group PLC Payment in Kind 81 2
California Federal Preferred
Capital Corp. Series A 30,750 706
Equity Office Properties Trust
Series B 15,000 668
Global Crossing Holdings, Ltd. 6,000 576
Granite Broadcasting Corp. 32 18
High Voltage Engineering Corp.
Series A 7 4
Paxson Communications Corp. 338 331
Psinet, Inc.
Series D 490 7
------------
TOTAL PREFERRED STOCKS
(cost $2,474) 2,312
------------
PRINCIPAL
AMOUNT
(000)
$
-----------
SHORT-TERM INVESTMENTS - 10.3%
American Express
Credit Corp. 1&2
5.150% due 11/13/00 2,500 2,495
British Telecomm PLC
6.852% due 10/09/01 1,150 1,095
Chase TRL Daily Reset
30.400% due 11/22/00 100 100
Chase TRL Daily Reset 6
37.373% due 11/22/00 434 434
Citi CRC
14.750% due 11/22/00 24 24
Citi SVC Linked Deposit
8.750% due 11/07/00 45 45
Citibank CRC Linked Deposit
14.280% due 12/21/00 98 98
Citibank Credit Linked Deposit
14.500% due 01/18/01 22 22
Citibank Service Time Deposit
8.750% due 11/20/00 65 65
CSFB TRL Weekly Reset 5
37.373% due 03/09/01 113 113
Deutsche Bank Ltn Brl Linked
19.300% due 03/01/01 130 136
Federal Farm Credit
Discount Notes
Zero Coupon due 11/13/00 1,000 998
Federal Home Loan Bank
Consolidated Discount Notes
6.591% due 11/20/00 230 229
6.350% due 11/22/00 100 100
6.350% due 11/27/00 100 100
6.360% due 12/01/00 (f) 300 298
6.273% due 12/04/00 101 100
6.413% due 01/31/01 104 102
6.389% due 02/28/01 100 98
6.572% due 06/04/01 100 96
Federal Home Loan Bank Corp.
Discount Note
6.446% due 12/15/00 165 164
6.443% due 12/20/00 100 99
6.620% due 12/29/00 120 119
6.640% due 02/26/01 120 117
6.336% due 03/08/01 180 176
6.302% due 03/23/01 100 98
6.150% due 04/09/01 100 97
Zero Coupon due 11/01/00 100 100
Federal Home Loan Mortgage Corp.
6.331% due 03/01/01 100 98
Federal Home Loan Mortgage Corp.
Discount Notes
6.379% due 11/02/00 200 200
6.405% due 11/07/00 100 100
6.375% due 11/09/00 118 118
6.400% due 11/16/00 425 424
6.390% due 11/30/00 250 249
6.430% due 01/11/01 162 160
6.400% due 01/18/01 209 206
6.069% due 10/11/01 108 102
Federal National Mortgage
Association Discount Notes
6.469% due 11/06/00 100 100
5.160% due 11/13/00 100 100
6.370% due 11/22/00 120 120
6.390% due 11/29/00 144 143
6.452% due 12/04/00 127 126
6.451% due 12/06/00 150 149
6.447% due 12/13/00 218 216
6.340% due 12/19/00 1,335 1,324
5.180% due 12/20/00 400 397
6.410% due 01/25/01 100 98
6.310% due 02/20/01 115 113
6.279% due 04/12/01 110 107
6.364% due 05/14/01 100 97
6.319% due 07/27/01 240 229
6.310% due 08/10/01 100 95
6.084% due 09/27/01 169 159
Zero Coupon due 11/02/00 38 38
Ford Motor Credit Co.
6.470% due 11/23/00 2,100 2,094
Fixed Income III Fund 130
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
Principal Market
Amount Value
(000) (000)
$ $
----------- -----------
Frank Russell Investment Company
Money Market Fund,
due on demand (a) 27,553 27,553
General Motors Acceptance Corp.
Zero Coupon due 11/13/00 2,500 2,495
Household Finance Corp.
6.470% due 11/13/00 2,100 2,095
Prudential Funding Corp.
6.480% due 11/13/00 2,500 2,495
Salomon Korean MSB Linked
6.950% due 01/10/01 (b) 93 92
United States Treasury Bills
5.900% due 02/01/01 (f) 60 58
5.790% due 05/31/01 105 100
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $49,886) 49,968
------------
NUMBER
OF
SHARES
-----------
WARRANTS - 0.0%
GT Group Telecom, Inc. 2010
Warrants 1,235 63
Jostens, Inc. 2010 Warrants 85 2
Motient Corp. 2008 Warrants 30 1
XM Satellite Radio Holdings, Inc.
2010 Warrants 15 2
------------
TOTAL WARRANTS
(cost $73) 68
------------
TOTAL INVESTMENTS - 125.3%
(identified cost $608,624) 605,094
OTHER ASSETS AND LIABILITIES,
INCLUDING OPTIONS WRITTEN,
NET - (25.3%) (122,224)
------------
NET ASSETS - 100.0% 482,870
============
* 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.
Abbreviations:
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 dollar
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
MXN - Mexican peso
PEN - Peruvian nouveau sol
PHP - Philippine peso
PLN - Polish zloty
SEK - Swedish krona
SKK - Slovakian koruna
TWD - New Taiwan dollar
USD - United States dollar
VEB - Venezuelan bolivar
ZAR - South African rand
See accompanying notes which are an integral part of the financial statements.
131 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
FUTURES CONTRACTS CONTRACTS* (000)
------------ --------------
LONG POSITIONS
Germany, Fed. Rep. 10 Year Bonds
expiration date 12/00 195 $ 28
Municipal Bond Index
expiration date 12/00 10 5
United States Treasury Bonds
expiration date 12/00 41 7
United States Treasury Notes 5 Year
expiration date 12/00 36 21
United States Treasury Notes 10 Year
expiration date 12/00 97 46
SHORT POSITIONS
Germany Bond 10 Year
expiration date 12/00 14 6
United States Treasury Bonds
expiration date 12/00 173 47
United States Treasury Notes 2 Year
expiration date 12/00 79 22
United States Treasury Notes 5 Year
expiration date 12/00 348 (263)
----------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts $ (81)
==========
NOTIONAL MARKET
AMOUNT VALUE
(000) (000)
OPTIONS WRITTEN $ $
------------ --------------
United States Treasury Notes*
Dec 100.14 Call 12,513 31
Dec 103.42 Call 5,088 34
Dec 100.14 Put 12,513 27
United States Treasury Bonds*
Jan 100.50 Call 100 6
Mar 08.30 Call 800 17
Dec 103.42 Put 5,088 26
Jan 98.86 Put 2,950 27
Jan 108.56 Put 100 3
Mar 100.36 Put 800 5
United States Treasury Notes *
10 Year Futures
Nov 102.00 Call 43 5
Nov 103.00 Call 54 2
Nov 97.00 Put 15 --
Nov 98.00 Put 15 1
Nov 98.00 Put 16 1
----------
Total Liability for Options Written
(premiums received $246) 185
==========
See accompanying notes which are an integral part of the financial statements.
Fixed Income III Fund 132
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Unrealized
Contracts to In Exchange Appreciation
Deliver For Settlement (Depreciation)
(000) (000) Date (000)
----------------- -------------- ---------- --------------
USD 46 ARS 47 11/06/00 $ 1
USD 42 ARS 42 11/16/00 --
USD 58 ARS 58 11/20/00 --
USD 75 ARS 76 12/21/00 --
USD 17 ARS 17 12/27/00 --
USD 150 ARS 152 01/24/01 --
USD 44 ARS 44 02/05/01 --
USD 55 ARS 56 02/28/01 (1)
USD 115 ARS 116 02/28/01 (1)
USD 50 ARS 52 03/06/01 1
USD 40 ARS 41 03/06/01 --
USD 104 BRL 195 12/04/00 (2)
USD 71 BRL 132 12/05/00 (2)
USD 106 BRL 202 12/18/00 (1)
USD 61 BRL 119 12/27/00 1
USD 120 CLP 67,200 11/02/00 (2)
USD 168 CLP 96,306 12/04/00 --
USD 55 CLP 30,982 05/14/01 (2)
USD 55 CLP 30,982 05/14/01 (2)
USD 55 CLP 31,240 08/14/01 (2)
USD 11 CLP 6,337 10/10/01 --
USD 26 CNY 216 11/08/00 --
USD 130 CNY 1,079 11/20/00 --
USD 96 CNY 797 12/20/00 --
USD 162 CNY 1,345 01/11/01 (1)
USD 90 CNY 748 01/29/01 --
USD 90 CNY 748 01/29/01 --
USD 86 CNY 715 03/12/01 (1)
USD 38 COP 85,006 11/30/00 2
USD 91 COP 196,742 11/30/00 --
USD 64 COP 142,720 12/04/00 2
USD 23 COP 50,991 12/05/00 1
USD 75 COP 165,900 12/06/00 2
USD 165 COP 361,020 12/15/00 2
USD 50 COP 111,750 12/18/00 2
USD 45 COP 100,125 12/19/00 1
USD 59 COP 129,505 01/24/01 --
USD 87 CZK 3,615 11/20/00 1
USD 73 CZK 2,920 12/04/00 (1)
USD 104 CZK 4,050 02/05/01 (6)
USD 105 CZK 3,998 06/01/01 (7)
USD 41 CZK 1,530 06/07/01 (3)
USD 69 CZK 2,545 06/12/01 (6)
USD 107 EUR 127 11/20/00 1
USD 35 EUR 39 12/14/00 (1)
USD 14 EUR 15 01/26/01 (1)
USD 13 EUR 15 01/26/01 (1)
USD 10 EUR 12 01/26/01 --
USD 4 EUR 5 01/26/01 --
USD 47 EUR 56 01/26/01 --
USD 84 EUR 95 01/26/01 (3)
USD 1 EUR 2 01/26/01 --
USD 40 EUR 46 01/26/01 (1)
USD 10 EUR 11 01/26/01 --
USD 4 EUR 4 01/26/01 --
USD 41 EUR 47 01/26/01 (1)
USD 25 EUR 28 01/26/01 (1)
USD 38 EUR 44 01/26/01 (1)
USD 18 EUR 21 01/26/01 1
USD 4 EUR 5 01/26/01 --
USD 47 EUR 56 01/26/01 1
USD 9 EUR 11 01/26/01 --
USD 30 EUR 34 03/09/01 (1)
USD 59 GBP 41 01/26/01 --
USD 102 GRD 39,539 11/06/00 (3)
USD 242 GRD 77,997 11/06/00 (47)
USD 14 GRD 5,500 11/13/00 --
USD 51 GRD 20,655 11/27/00 1
USD 23 HUF 7,027 03/12/01 (1)
USD 240 HUF 69,038 08/06/01 (25)
USD 108 HUF 33,830 10/15/01 (4)
USD 37 ILS 156 11/15/00 1
USD 58 ILS 245 11/20/00 1
USD 68 ILS 285 11/20/00 1
USD 14 ILS 57 02/15/01 --
USD 55 ILS 225 03/09/01 (1)
USD 30 ILS 124 03/28/01 --
USD 54 INR 2,495 11/06/00 (1)
USD 24 INR 1,116 11/14/00 --
USD 20 INR 933 11/30/00 --
USD 200 INR 9,436 12/20/00 1
USD 57 JPY 6,083 01/26/01 --
USD 37 JPY 3,940 01/26/01 --
USD 22 JPY 2,357 01/26/01 --
USD 12 JPY 1,287 01/26/01 --
USD 16 KES 1,305 11/08/00 --
USD 29 KES 2,300 12/28/00 --
USD 94 KRW 104,772 11/14/00 (2)
USD 120 KRW 135,564 11/28/00 (1)
USD 218 KRW 243,412 12/20/00 (5)
USD 170 MXN 1,860 11/08/00 24
USD 65 MXN 664 11/13/00 4
USD 31 MXN 299 12/22/00 --
USD 120 MXN 1,220 12/29/00 5
USD 27 MXN 290 12/29/00 2
USD 28 MXN 304 12/29/00 3
See accompanying notes which are an integral part of the financial statements.
133 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Unrealized
Contracts to In Exchange Appreciation
Deliver For Settlement (Depreciation)
(000) (000) Date (000)
----------------- -------------- ---------- --------------
USD 20 MXN 209 02/15/01 $ 1
USD 70 MXN 717 04/16/01 1
USD 113 MXN 1,134 04/16/01 (1)
USD 77 PEN 272 11/08/00 --
USD 18 PEN 64 11/16/00 --
USD 49 PEN 172 11/16/00 --
USD 73 PEN 256 11/20/00 --
USD 64 PEN 226 11/30/00 --
USD 36 PEN 130 02/14/01 --
USD 157 PHP 7,191 11/03/00 (17)
USD 91 PHP 4,473 11/03/00 (4)
USD 60 PHP 2,760 12/01/00 (7)
USD 35 PHP 2,100 04/03/01 4
USD 201 PLN 901 12/04/00 (9)
USD 20 PLN 90 01/10/01 (1)
USD 120 PLN 583 02/26/01 1
USD 88 PLN 405 03/02/01 (5)
USD 80 PLN 367 03/12/01 (5)
USD 16 PLN 70 03/21/01 (1)
USD 169 PLN 852 10/02/01 (4)
USD 1 SEK 6 01/26/01 --
USD 20 SKK 1,000 11/22/00 (1)
USD 196 SKK 9,448 12/05/00 (12)
USD 18 SKK 904 12/12/00 (1)
USD 35 SKK 1,731 12/14/00 (1)
USD 87 SKK 4,330 12/19/00 (3)
USD 34 SKK 1,500 03/09/01 (4)
USD 112 TWD 3,471 11/21/00 (5)
USD 80 TWD 2,509 11/27/00 (3)
USD 32 TWD 1,004 12/20/00 (1)
USD 68 VEB 47,180 11/07/00 (1)
USD 158 VEB 109,891 11/20/00 (1)
USD 80 VEB 55,740 11/30/00 (1)
USD 155 VEB 108,268 12/19/00 (1)
ARS 30 USD 30 11/06/00 --
CLP 67,200 USD 117 11/02/00 --
CZK 4,420 USD 107 11/20/00 (1)
DKK 123 USD 15 01/26/01 1
EUR 16 USD 14 11/13/00 1
EUR 102 USD 87 11/20/00 --
EUR 82 USD 73 12/04/00 3
EUR 219 USD 196 12/05/00 9
EUR 21 USD 18 12/12/00 --
EUR 40 USD 35 12/14/00 1
EUR 100 USD 87 12/19/00 2
EUR 9 USD 8 01/26/01 --
EUR 2,489 USD 2,184 01/26/01 64
EUR 66 USD 58 01/26/01 2
EUR 47 USD 41 01/26/01 1
EUR 51 USD 44 01/26/01 --
EUR 61 USD 51 01/26/01 (1)
EUR 114 USD 104 02/05/01 7
EUR 34 USD 34 03/09/01 4
EUR 110 USD 105 06/01/01 11
EUR 42 USD 41 06/07/01 4
EUR 70 USD 69 06/12/01 9
EUR 199 USD 185 09/05/01 14
EUR 122 USD 108 10/15/01 3
GBP 59 USD 86 01/26/01 1
GBP 211 USD 308 01/26/01 2
GBP 141 USD 206 01/26/01 1
GBP 10 USD 14 01/26/01 --
GRD 40,000 USD 115 11/06/00 15
ILS 64 USD 16 11/15/00 --
ILS 92 USD 22 11/15/00 --
ILS 284 USD 69 11/17/00 --
ILS 372 USD 91 11/20/00 1
INR 2,496 USD 53 11/06/00 --
INR 1,133 USD 24 11/14/00 --
JPY 8,314 USD 78 01/26/01 1
JPY 25,985 USD 244 01/26/01 2
JPY 3,492 USD 33 01/26/01 --
JPY 6,664 USD 63 01/26/01 1
MXN 300 USD 28 11/08/00 (3)
MXN 594 USD 55 12/29/00 (5)
PEN 190 USD 54 11/16/00 --
PEN 338 USD 95 12/21/00 --
PEN 130 USD 36 02/14/01 --
PHP 2,182 USD 44 11/03/00 1
PHP 5,690 USD 122 11/03/00 11
PHP 1,501 USD 29 11/03/00 --
PHP 2,290 USD 44 11/03/00 --
PLN 901 USD 196 12/04/00 4
PLN 90 USD 19 01/10/01
PLN 367 USD 77 03/12/01 1
SKK 1,731 USD 35 12/14/00 1
SKK 1,500 USD 30 03/09/01 1
TWD 1,288 USD 41 11/21/00 1
TWD 2,159 USD 67 11/21/00 1
TWD 1,353 USD 42 11/27/00 --
--------------
$ 10
==============
See accompanying notes which are an integral part of the financial statements.
Fixed Income III Fund 134
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
FORWARD FOREIGN CURRENCY EXCHANGE SPOT CONTRACTS
Unrealized
Contracts to In Exchange Appreciation
Deliver For Settlement (Depreciation)
(000) (000) Date (000)
----------------- -------------- ---------- --------------
EUR 56 USD 47 11/01/00 $ (1)
EUR 56 USD 47 11/01/00 --
EUR 11 USD 9 11/02/00 --
EUR 992 USD 871 11/20/00 29
--------------
$ 28
==============
See accompanying notes which are an integral part of the financial statements.
135 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) October 31, 2000
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments at market (identified cost $608,624) ........................................ $ 605,094
Cash .................................................................................... 1,592
Foreign currency holdings (identified cost $191) ........................................ 191
Unrealized appreciation on forward foreign currency exchange contracts................... 250
Unrealized appreciation on foreign currency exchange spot contracts ..................... 29
Receivables:
Dividends and interest ................................................................. 6,140
Investments sold (regular settlement) .................................................. 6,610
Investments sold (delayed settlement) .................................................. 10,241
Fund shares sold ....................................................................... 438
Daily variation margin on futures contracts ............................................ 102
Prepaid expenses ........................................................................ 4
-----------
Total assets ......................................................................... 630,691
LIABILITIES
Payables:
Investments purchased (regular settlement) ............................... $ 6,400
Investments purchased (delayed settlement) ............................... 139,821
Fund shares redeemed ...................................................... 780
Accrued fees to affiliates ................................................ 272
Other accrued expenses .................................................... 81
Daily variation margin on futures contracts ............................... 41
Unrealized depreciation on forward foreign currency exchange contracts ..... 240
Unrealized depreciation on foreign currency exchange spot contracts ........ 1
Options written, at market value (premiums received $246)................... 185
-----------
Total liabilities .................................................................... 147,821
-----------
NET ASSETS .............................................................................. $ 482,870
===========
NET ASSETS CONSIST OF:
Undistributed net investment income ..................................................... $ 3,590
Accumulated distributions in excess of net realized gain ................................ (21,704)
Unrealized appreciation (depreciation) on:
Investments ............................................................................ (3,530)
Futures contracts ...................................................................... (81)
Options written ........................................................................ 61
Foreign currency-related transactions .................................................. 36
Shares of beneficial interest ........................................................... 495
Additional paid-in capital .............................................................. 504,003
-----------
NET ASSETS .............................................................................. $ 482,870
===========
NET ASSET VALUE, offering and redemption price per share:
Class E ($5,362,457 divided by 548,759 shares of $.01 par value
shares of beneficial interest outstanding) ........................................... $ 9.77
===========
Class I ($456,159,714 divided by 46,723,283 shares of $.01 par value
shares of beneficial interest outstanding) ........................................... $ 9.76
===========
Class Y ($21,347,997 divided by 2,186,811 shares of $.01 par value
shares of beneficial interest outstanding) ........................................... $ 9.76
===========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Fixed Income III Fund 136
<PAGE>
FIXED INCOME III FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
----------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Interest ..................................................... $ 27,475 $ 27,352
Dividends from Money Market Fund ............................. 2,219 3,118
Dividends .................................................... 151 527
----------------- -----------------
Total investment income .................................... 29,845 30,997
----------------- -----------------
EXPENSES
Advisory fees ................................................ 2,009 2,287
Administrative fees .......................................... 200 235
Custodian fees ............................................... 415 308
Transfer agent fees .......................................... 239 272
Professional fees ............................................ 48 25
Registration fees ............................................ 62 90
Shareholder servicing fees - Class E ......................... 8 4
Trustees' fees ............................................... 11 5
Miscellaneous ................................................ 40 33
----------------- -----------------
Expenses before reductions ................................... 3,032 3,259
Expense reductions ........................................... (39) --
----------------- -----------------
Expenses, net .............................................. 2,993 3,259
----------------- -----------------
Net investment income ......................................... 26,852 27,738
----------------- -----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments .................................................. (1,968) (16,568)
Futures contracts ............................................ (763) (2,106)
Options written .............................................. 139 183
Foreign currency-related transactions ........................ 722 19
----------------- -----------------
(1,870) (18,472)
----------------- -----------------
Net change in unrealized appreciation (depreciation) on:
Investments .................................................. 6,845 (10,588)
Futures contracts ............................................ 591 (178)
Options written .............................................. 233 (330)
Foreign currency-related transactions ........................ (104) 146
----------------- -----------------
7,565 (10,950)
----------------- -----------------
Net realized and unrealized gain (loss) ....................... 5,695 (29,422)
----------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS.......... $ 32,547 $ (1,684)
================= =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
137 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C> <C>
OPERATIONS
Net investment income ............................................ $ 26,852 $ 27,738 $ 26,279
Net realized gain (loss) ......................................... (1,870) (18,472) 9,736
Net change in unrealized appreciation (depreciation) ............. 7,565 (10,950) (6,742)
---------------- ----------------- -----------------
Net increase (decrease) in net assets from operations .......... 32,547 (1,684) 29,273
---------------- ----------------- -----------------
DISTRIBUTIONS
From net investment income
Class E ....................................................... (210) (107) --
Class I ....................................................... (22,787) (28,340) (26,641)
Class Y ....................................................... (665) -- --
From net realized gain
Class I ....................................................... -- -- (11,870)
---------------- ----------------- -----------------
Net decrease in net assets from distributions ............... (23,662) (28,447) (38,511)
---------------- ----------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions .. 4,350 37,576 88,995
---------------- ----------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ...................... 13,235 7,445 79,757
NET ASSETS
Beginning of period ............................................. 469,635 462,190 382,433
---------------- ----------------- -----------------
End of period (including undistributed net investment income of
$3,590 and accumulated distributions in excess of
net investment income of $115 and $145, respectively) ........ $ 482,870 $ 469,635 $ 462,190
================ ================= =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Fixed Income III Fund 138
<PAGE>
FIXED INCOME III 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>
2000* 1999**
---------- ----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ................... $ 9.61 $ 10.12
---------- ----------
INCOME FROM OPERATIONS
Net investment income (a) ............................. .51 .35
Net realized and unrealized gain (loss) ............... .11 (.43)
---------- ----------
Total income from operations ........................ .62 (.08)
---------- ----------
DISTRIBUTIONS
From net investment income ............................ (.46) (.43)
---------- ----------
NET ASSET VALUE, END OF PERIOD ......................... $ 9.77 $ 9.61
========== ==========
TOTAL RETURN (%)(b) .................................... 6.55 (.83)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) .............. 5,362 2,367
Ratios to average net assets (%)(c):
Operating expenses, net ............................. .99 .94
Operating expenses, gross ........................... 1.15 .94
Net investment income ............................... 6.37 5.63
Portfolio turnover rate (%) .......................... 108.08 131.38
</TABLE>
* For the ten months ended October 31, 2000.
** 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) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
139 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
FINANCIAL HIGHLIGHTS - CLASS I
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
2000* 1999 1998 1997 1996
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............ $ 9.59 $ 10.22 $ 10.42 $ 10.17 $ 10.34
---------- ----------- ----------- ----------- -----------
INCOME FROM OPERATIONS
Net investment income (a) ..................... .53 .59 .62 .63 .64
Net realized and unrealized gain (loss) ........ .11 (.62) .08 .32 (.16)
---------- ----------- ----------- ----------- -----------
Total income from operations ................. .64 (.03) .70 .95 .48
---------- ----------- ----------- ----------- -----------
DISTRIBUTIONS
From net investment income ..................... (.47) (.60) (.62) (.64) (.65)
From net realized gain ......................... -- -- (.28) (.06) --
Total distributions .......................... (.47) (.60) (.90) (.70) (.65)
---------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD .................. $ 9.76 $ 9.59 $ 10.22 $ 10.42 $ 10.17
========== =========== =========== =========== ===========
TOTAL RETURN (%)(b) ............................ 6.75 (.29) 6.80 9.64 4.88
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ...... 456,160 467,268 462,190 382,433 292,077
Ratios to average net assets (%)(c):
Operating expenses, net ...................... .73 .69 .67 .70 .73
Operating expenses, gross .................... .74 .69 .67 .70 .73
Net investment income ........................ 6.58 5.91 5.91 6.13 6.32
Portfolio turnover rate (%) ................... 108.08 131.38 342.49 274.84 144.26
</TABLE>
* For the ten months ended October 31, 2000.
(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.
Fixed Income III Fund 140
<PAGE>
FIXED INCOME III FUND
FINANCIAL HIGHLIGHTS - CLASS Y
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
2000*
----------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............................. $ 9.69
----------
INCOME FROM OPERATIONS
Net investment income (a) ...................................... .25
Net realized and unrealized gain (loss) ........................ .13
----------
Total income from operations .................................. .38
----------
DISTRIBUTIONS
From net investment income ...................................... (.31)
----------
NET ASSET VALUE, END OF PERIOD ................................... $ 9.76
==========
TOTAL RETURN (%)(b) ............................................. 3.99
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ....................... 21,348
Ratios to average net assets (%)(c):
Operating expenses, net ....................................... .64
Operating expenses, gross ..................................... .74
Net investment income ......................................... 6.73
Portfolio turnover rate (%) .................................... 108.08
</TABLE>
* For the period June 7, 2000 (commencement of sale) to October 31, 2000.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
141 Fixed Income III Fund
<PAGE>
EMERGING MARKETS FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
DATES EMERGING MARKETS - CLASS S++ EXTENDED BARINGS EM++++ IFC INVESTABLE COMPOSITE **
<S> <C> <C> <C>
Inception* $ 10,000 $ 10,000 $ 10,000
1993 $ 12,150 $ 13,821 $ 14,489
1994 $ 14,884 $ 19,196 $ 18,464
1995 $ 12,176 $ 15,357 $ 14,120
1996 $ 13,492 $ 16,905 $ 15,602
1997 $ 13,448 $ 15,776 $ 14,035
1998 $ 9,450 $ 11,844 $ 9,984
1999 $ 11,371 $ 16,894 $ 14,297
2000 $ 10,645 $ 15,107 $ 12,851
-------- -------- --------
Total $107,615 $134,901 $123,842
======== ======== ========
Yearly periods ended October 31
</TABLE>
<TABLE>
<CAPTION>
EMERGING MARKETS FUND - CLASS S IFC INVESTABLE COMPOSITE INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
-------------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $ 9,362 (6.38)% 1 Year $ 8,988 (10.12)%
5 Years $ 8,743 (2.65)%(S) 5 Years $ 9,101 (1.87)%(S)
Inception $10,645 0.81%(S) Inception $12,851 3.29%(S)
<CAPTION>
EMERGING MARKETS FUND - CLASS E (S)(S) EXTENDED BARINGS EMERGING MARKETS INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
-------------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $ 9,338 (6.62)% 1 Year $ 8,942 (10.58)%
5 Years $ 8,707 (2.73)%(S) 5 Years $ 9,838 (0.33)%(S)
Inception $10,601 0.76%(S) Inception $15,107 5.47%(S)
<CAPTION>
EMERGING MARKETS FUND - CLASS C (S)(S)(S)
PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN
--------------------------------------------
<S> <C> <C>
1 Year $ 9,257 (7.43)%
5 Years $ 8,589 (2.99)%(S)
Inception $10,457 0.58%(S)
</TABLE>
143 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the ten months ended October 31, 2000, the Emerging Markets Fund Class S,
Class E, and Class C shares lost 25.79%, 25.90%, and 26.51%, respectively, as
compared to a 27.28% loss for the IFC Investable Composite Index.
Global weakness in the Technology sector plagued both the markets and the Fund
for most of the ten months, resulting in lower absolute returns. However,
benchmark-relative performance was favorable for the period.
PORTFOLIO HIGHLIGHTS
Like their counterparts in developed countries, emerging markets technology and
telecommunications issues made a strong showing during the first part of the
year, but were also responsible for a sizable portion of the downturn that
followed. Weakness in the Technology sector began to appear as early as March,
and the difficulties continued through the remainder of the year. By the final
three months of the period, overall market weaknesses were attributed to fears
of a global economic slowdown, high oil prices and a downturn in both sentiment
and prospects for technology companies. Investors also registered their
impatience with the progress of economic reforms and political instability in
some countries, including Indonesia, Turkey, Korea, and Taiwan. This resulted in
a bias towards 'safe' markets that didn't experience these inherent problems.
During a difficult environment for emerging markets, the Fund generally paced,
and sometimes outperformed, its benchmark. This economic climate also helped
illustrate the benefits of diversification. As the investing climate changed
during the year, so did manager successes. The Fund's growth managers held their
edge during the first part of the year, but their performance declined with the
overall downturn in the technology and telecommunications sectors. Late-period
strong performance from the Fund's managers employing valuation as part of their
investment selection process, notably Sanford Bernstein, helped offset the
technology bets made previously by the more aggressive market-oriented managers.
TOP TEN EQUITY HOLDINGS
(as a percent of Total Investments) October 31, 2000
Telefonos de Mexico SA Series L - ADR (Mexico) 4.1%
Samsung Electronics (South Korea) 1.6
China Telecom (Hong Kong), Ltd. (Hong Kong) 1.6
United Microelectronics Corp. - ADR (Taiwan) 1.4
Yapi ve Kredi Bankasi AS (Turkey) 1.2
SK Telecom Co., Ltd. (South Korea) 1.2
Taiwan Semiconductor Manufacturing
Co., Ltd. - ADR (Taiwan) 1.1
Genesis India Investment Co. (India) 1.1
Petroleo Brasileiro SA - ADR (Brazil) 1.1
Credit Bank (Regd) (Greece) 1.1
PORTFOLIO CHARACTERISTICS
October 31, 2000
Current P/E Ratio 14.59x
Portfolio Price/Book Ratio 1.31x
Market Capitalization - $-Weighted Average 8.3 Bil
Number of Holdings 411
MONEY MANAGERS STYLES
Foreign & Colonial Emerging Markets Limited Market-Oriented
Genesis Asset Managers Limited Market-Oriented
Nicholas Applegate Capital Management Growth
Sanford C. Bernstein & Co., Inc. Value
Schroders Investment Management North
America, Ltd. Market-Oriented
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* 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.
(S) Annualized.
(S)(S) 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.
(S)(S)(S) 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.
Investments in emerging market countries involve exposure to economic structures
that are generally less diverse and mature, and to political systems which can
be expected to have less stability than those of more developed countries.
Securities may be less liquid and more volatile than US or longer established
international markets. Please see the Prospectus for further details.
Emerging Markets Fund 144
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- ----------
COMMON STOCKS - 86.7%
ARGENTINA - 1.4%
Banco Frances del Rio la Plata - ADR 21,600 473
Central Costanera SA Class B 437,100 656
Central Puerto SA Class B 38,210 41
Inversiones y Representaciones SA Class B 209,137 439
PC Holdings SA Class B 1,008,581 1,452
Perez Companc SA - ADR (a) 9,292 134
Quilmes Industrial (Regd) (a) 63,500 508
Siderca SAIC Class A 350,000 760
Telecom Argentina SA Class B - ADR 43,300 744
----------
5,207
----------
AUSTRALIA - 0.1%
Orogen Minerals, Ltd. 545,000 421
----------
BRAZIL - 2.8%
Brasil Telecom Participacoes SA - ADR 24,200 1,311
Centrais Eletricas Brasileiras SA 23,508,997 417
Companhia Siderurgica Nacional 8,215,000 228
Companhia Vale do Rio Doce 37,500 864
Copel Parana Energ 20,000,000 140
Embraer Aircraft Corp. - ADR 4,300 124
Embratel Participacoes SA 27,962,000 356
Globo Cabo SA - ADR 34,700 373
Petroleo Brasileiro SA - Petrobras 7,500 218
Petroleo Brasileiro SA -
Petrobras - ADR (a) 142,110 4,132
Petroleo Brasileiro SA -
Petrobras - ADR 12,400 329
Tele Centro Sul Participacoes SA 39,439,000 310
Tele Norte Leste Participacoes SA 61,448,264 1,011
Ultrapar Participacoes SA - ADR 18,400 185
Votorantim Celulose e
Papel SA - ADR 8,025 138
----------
10,136
----------
CHILE - 2.7%
Antofagasta Holdings PLC 239,636 1,419
Banco de A. Edwards
Series A - ADR (a) 9,944 119
Banco Santander Chile
Series A - ADR 2,800 38
BBV Banco BHIF - ADR 33,600 477
Compania de Telecomunicaciones
de Chile SA - ADR 71,469 1,090
Distribucion y Servicio
D&S SA - ADR 94,400 1,687
Embotelladora Andina SA
Series A - ADR 51,100 613
Embotelladora Andina SA
Series B - ADR 58,000 555
Embotelladora Arica SA - ADR (a) 79,300 286
Enersis SA - ADR 31,533 560
Gener SA - ADR 139,100 1,685
Laboratorio Chile SA - ADR 30,000 486
Quinenco SA 116,200 973
----------
9,988
----------
CHINA - 4.9%
Beijing Yanhua Petrochemical Co., Ltd.
Class H 4,450,000 439
China Eastern Airlines Corp., Ltd. (a) 950,000 138
China Merchants Holdings International
Co., Ltd. 298,000 206
China Petroleum and Chemical
Corp. - ADR (a) 28,700 565
China Petroleum and Chemical
Corp. Series H New (a) 5,264,000 1,033
China Resources Enterprise, Ltd. 183,000 208
China Shipping Development Co., Ltd. Class
H (a) 560,000 85
China Southern Airlines (a) 1,402,000 345
China Telecom (Hong Kong), Ltd. (a) 895,500 5,742
Cosco Pacific, Ltd. 520,000 383
Guangdong Kelon Electrical Holdings Co.,
Ltd. Class H 1,360,000 255
Huaneng Power International, Inc. Class H 874,000 342
Huaneng Power International, Inc. Series
N - ADR 4,000 61
Jiangsu Expressway Co., Ltd. Class H 7,530,000 1,284
Jilin Chemical Industrial Company, Ltd.
Class H 1,800,000 99
New World China Land, Ltd. (a) 1,036,500 332
PetroChina Co., Ltd. Class H 14,016,000 2,947
Shanghai Petrochemical Co., Ltd. Class H 7,030,000 712
Shenzhen Expressway Co., Ltd.
Class H 4,800,000 554
Yanzhou Coal Mining Co., Ltd.
Series H 6,970,000 1,877
Yizheng Chemical Fibre Class H 480,000 88
Zhejiang Expressway Co., Ltd.
Series H 1,700,000 275
----------
17,970
----------
CROATIA - 0.3%
Pliva d.d. - GDR 94,300 981
----------
145 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- ----------
CZECH REPUBLIC - 0.5%
Ceske Energeticke Zavody AS (a) 109,200 266
Ceske Radiokomunikace - GDR 18,400 690
Cesky Telecom AS (a) 8,280 109
Czechoslovakian Value Fund (a)(c) 1,800 0
Komercni Banka AS (a) 7,100 150
Tabak AS 3,500 487
----------
1,702
----------
ECUADOR - 0.1%
La Cemento Nacional - GDR (144A)(a) 700 25
La Cemento National - GDR (a) 4,800 168
----------
193
----------
EGYPT - 0.8%
Al-Ahram Beverages Co. S.A.E. -
GDR (144A)(a) 3,280 41
Al-Ahram Beverages Co.
S.A.E. - GDR (a) 42,900 543
Commercial International Bank 18,900 167
Commercial International Bank (Regd.) -
GDR 18,700 154
Eastern Co. Tobacco & Cigarettes 5,900 88
Egypt International Pharmaceutical
Industries Co. 1,000 38
Egyptian Mobile Phone Network (a) 48,118 952
Misr International Bank 4,000 41
Orascom Construction (a) 42,125 405
Orascom Telecom (a) 30,250 377
Oriental Weavers Co. 5,500 47
Suez Cement Co. (Regd) - GDR 8,198 73
----------
2,926
----------
GREECE - 3.6%
Alpha Bank A.E. (Regd) 111,355 4,114
Aluminum Co. of Greece SA 29,300 1,064
Bank of Piraues 16,680 256
Commercial Bank of Greece 12,460 557
Cosmote SA (a) 22,000 165
EFG Eurobank 8,100 220
Hellenic Bottling Co. SA 17,100 234
Hellenic Telecommunication Organization
SA - ADR 49,800 436
Hellenic Telecommunication Organization
SA - GDR 130,774 2,284
Intracom SA 39,200 1,021
National Bank of Greece SA 61,812 2,349
Panafon Hellenic Telecom SA 55,800 464
STET Hellas Telecommunications
SA - ADR (a) 6,500 92
----------
13,256
----------
HONG KONG - 1.6%
Chen Hsong Holdings, Ltd. 1,296,000 160
China Mobile, Ltd. - ADR (a) 5,200 159
China Unicom, Ltd. (a) 1,251,000 2,510
China Unicom, Ltd. - ADR (a) 45,600 935
Legend Holdings, Ltd. 626,000 530
New World Infrastructure, Ltd. (a) 845,100 769
Shanghai Industrial Holdings, Ltd. 366,000 690
TCL International Holdings, Ltd. (a) 1,062,000 174
----------
5,927
----------
HUNGARY - 1.6%
BorsodChem - GDR 17,700 487
Egis Gyogyszergyar 12,700 536
Gedeon Richter, Ltd. - GDR 22,946 1,101
Magyar Tavkozlesi Rt (Regd) 195,476 869
Magyar Tavkozlesi Rt - ADR 62,032 1,459
Mol Magyar Olaj-Es Gazipari
Rt - GDR 69,266 1,049
OTP Bank Rt 7,534 349
----------
5,850
----------
INDIA - 3.2%
Bajaj Auto, Ltd. - GDR 71,000 419
BSES, Ltd. (a) 22,800 253
BSES, Ltd. - GDR 27,000 300
Foreign & Colonial Emerging Markets
Indian Investment Co. (a) 321,089 1,728
Genesis India Investment Co. (a) 511,800 4,130
Hindalco Industries, Ltd. - GDR 40,000 594
ICICI Bank, Ltd. - ADR 32,000 302
ICICI Bank, Ltd. - ADR (a) 22,000 105
Indo Gulf Fertilisers &
Chemicals - GDR 70,000 60
Indo Gulf Fertilizers &
Chemicals - GDR (a) 349,000 297
Infosys Technologies, Ltd. - ADR 4,220 580
ITC, Ltd. - GDR 14,900 264
Larsen & Toubro, Ltd. - GDR 11,750 72
Mahanagar Telephone Nigam,
Ltd. - GDR 19,900 115
Perusahaan Persero Telekom - ADR 32,616 171
Ranbaxy Laboratories, Ltd. - GDR 6,000 102
Reliance Industries, Ltd. - GDR 103,200 1,342
SSI, Ltd. Series S - GDR (a) 28,700 136
State Bank of India - GDR 14,100 93
Videsh Sanchar Nigam, Ltd. - ADR 79,257 585
----------
11,648
----------
Emerging Markets Fund 146
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
INDONESIA - 1.5%
Gulf Indonesia Resources, Ltd. (a) 68,900 749
Indah Kiat Pulp & Paper
(Alien Market) (a) 1,162,000 127
PT Bank Central Asia (a) 3,700,000 652
PT Bank Pan Indonesia (a) 2,014,000 53
PT Gudang Garam 369,000 396
PT Hanjaya Mandala Sampoerna Tbk 415,500 488
PT Indofood Sukses Makmur Tbk (a) 3,407,500 282
PT Indosat (Persero) Tbk 475,000 340
PT Indosat (Persero) Tbk - ADR 15,800 112
PT Matahari Putra Prima Tbk 11,000,000 676
PT Ramayana Lestari Sentosa 1,564,000 753
PT Telekomunikasi Indonesia Series B 2,039,000 523
Semen Gresik 642,000 442
----------
5,593
----------
ISRAEL - 4.4%
AudioCodes, Ltd. (a) 13,400 530
Bank Hapoalim, Ltd. 410,900 1,039
Bank Leumi Le-Israel 686,736 1,349
Bezeq Israeli Telecommunication Corp.,
Ltd. 137,523 688
Blue Square Israel, Ltd. - ADR 13,720 127
Check Point Software
Technologies, Ltd. (a) 23,000 3,643
Clal Industries, Ltd. 18,400 178
ECI Telecom, Ltd. 7,823 184
IDB Holding Corp., Ltd. 5,464 176
Israel Chemicals, Ltd. 881,724 860
Israel Discount Bank Series A 300,000 302
Leumi Insurance Holdings 182,550 147
M-Systems Flash Disk Pioneers, Ltd. (a) 21,400 530
Makhteshim-Agan Industries, Ltd. 210,000 417
Nice Systems, Ltd. - ADR (a) 7,230 336
Orbotech, Ltd. (a) 32,188 1,701
Partner Communications
Co., Ltd. - ADR (a) 7,800 47
Property & Building Corp., Ltd. 1,066 79
Scitex Corp., Ltd. (a) 19,000 195
Supersol, Ltd. 110,000 363
Tecnomatix Technologies, Ltd. (a) 41,500 246
Teva Pharmaceutical Industries,
Ltd. - ADR 48,695 2,879
----------
16,016
----------
JORDAN - 0.2%
Arab Bank Group 3,010 672
----------
LUXEMBOURG - 0.2%
Millicom International Cellular SA (a) 28,300 858
----------
858
----------
MALAYSIA - 4.4%
AMMB Holdings Berhad 137,000 154
Berjaya Sports 124,000 163
Commerce Asset-Holding Berhad 538,000 1,366
Genting Berhad 248,000 633
Golden Hope Plantation 519,000 497
IJM Corp. Berhad 570,000 537
Malakoff Berhad 251,000 618
Malayan Banking Berhad 542,000 2,168
Malaysian Pacific 109,000 617
Oriental Holdings Berhad 651,200 788
Perusahaan Otomobil
Nasional Berhad 124,000 136
Petronas Gas Berhad 168,000 305
Public Bank Berhad 878,000 758
Public Bank Berhad (Alien Market) 494,000 424
Resorts World Berhad 249,000 436
RHB Capital Berhad 202,000 163
Road Builder (M) Holdings Berhad 440,000 463
Rothmans of Pall Mall
(Malaysia) Berhad 106,200 971
Sime Darby Berhad 340,000 426
Tan Chong Motor Holdings 600,000 194
Technical Resource Industries Berhad 164,000 133
Telekom Malaysia Berhad 320,000 985
Tenaga Nasional Berhad 809,000 2,619
UMW Holdings Berhad 115,000 145
United Engineers (Malaysia) Berhad 295,000 419
YTL Corp. Berhad 182,000 191
----------
16,309
----------
MEXICO - 14.2%
Alfa SA de CV Class A 59,000 118
Carso Global Telecom Series A1 (a) 798,100 1,782
Cemex SA de CV 354,678 1,491
Cemex SA de CV - ADR 61,101 1,291
Cemex SA de CV 2000 Warrants (a) 1,737 3
Cemex SA de CV 2002 Warrants (a) 20,000 9
Cifra SA de CV Class C (a) 418,400 954
Cifra SA de CV Series V (a) 833,500 2,005
Coca-Cola Femsa SA - ADR 88,600 1,700
Compania Cervecerias Unidas
SA - ADR 62,100 1,199
Controladora Comercial Mexicana
SA de CV Units 1,102,000 1,222
Corporacion Interamericana de
Entretenimiento SA Series B (a) 565,400 2,554
Cydsa SA Series A 277,000 146
Empresa Nacional de Electricidad
SA - ADR 5,993 63
147 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- ----------
Fomento Economico Mexicano SA de CV 151,500 577
Fomento Economico Mexicano SA de CV Series
B - ADR 55,350 2,114
Grupo Aeroportuario del Sureste SA de CV -
ADR (a) 5,300 79
Grupo Elektra, SA de CV 210,000 217
Grupo Financiero Banamex Accival SA de CV
(Banacci) Class O (a) 1,561,449 2,426
Grupo Financiero Banamex Accival Series
O (a) 298,000 464
Grupo Financiero Bancomer SA de CV Series
O (a) 1,520,800 942
Grupo Financiero Banorte SA
de CV (a) 345,000 515
Grupo Financiero Inbursa SA
de CV Class O (a) 172,000 656
Grupo Industrial Durango SA -
ADR (a) 17,250 119
Grupo Iusacell SA de CV -
ADR New (a) 107,500 1,398
Grupo Modelo SA de CV Series C 336,500 897
Grupo Television SA de CV -
GDR (a) 65,595 3,550
Hylsamex SA de CV Series B (a) 230,000 225
Kimberly-Clark, Mexico Class A 598,500 1,530
Nuevo Grupo Mexico SA Series B (a) 151,100 502
Organizacion Soriana SA de CV Series B 103,000 323
Panamerican Beverages, Inc. Class A 126,100 2,081
Seguros Comercial America
Series B (a) 87,000 223
Telefonos de Mexico SA
Series L - ADR 276,774 14,928
Tubos de Acero de Mexico SA 28,300 430
TV Azteca SA de CV 222,000 171
TV Azteca SA de CV - ADR 275,000 3,438
----------
52,342
----------
PANAMA - 0.2%
Banco Latinoamericano de Exportaciones SA
Class E 27,300 684
----------
PERU - 0.4%
Compania de Minas Buenaventura SA Series B 21,800 141
Compania de Minas Buenaventura SA Series
B - ADR 52,400 674
Credicorp, Ltd. 41,650 305
Enrique Ferreyros (a) 236,970 40
Minsur SA 87,794 95
Southern Peru Copper Corp. 7,300 102
----------
1,357
----------
PHILIPPINES - 1.1%
Ayala Corp. 160,800 19
Equitable PCI Bank 620,200 697
First Philippine Holdings Corp. 270,000 111
Manila Electric Co. Class B 1,787,240 1,468
Metropolitan Bank & Trust Co. 205,970 672
Philippine Long Distance
Telephone Co. 16,100 244
Philippine Long Distance
Telephone Co. - ADR 14,027 217
San Miguel Corp. Class B 67,500 65
Security Bank Corp. 350,000 152
SM Prime Holdings 3,960,000 310
Universal Robina 3,213,000 229
----------
4,184
----------
POLAND - 0.6%
Agora SA - GDR (a) 1,957 36
Bank Polska Kasa Opieki Grupa Pekao SA (a) 5,970 60
BRE Bank SA 1,843 42
Elektrim Spolka Akcyjna SA (a) 50,053 397
KGHM Polska Miedz SA - GDR 31,300 336
Polski Koncern Naftowy SA - GDR 82,831 638
Powszechny Bank Kredytowy - GDR 6,900 121
Prokom Software SA 9,700 382
Telekomunikacja Polska SA
Class S - GDR 54,598 270
Telekomunikacja Polska SA
Series A - GDR 6,140 30
WBK 8,246 37
----------
2,349
----------
Emerging Markets Fund 148
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
RUSSIA - 2.4%
Lukoil Oil Co. - ADR 64,516 3,445
Mobile Telesystems - ADR (a) 28,989 801
OAO Gazprom - ADR (a) 14,000 113
Rostelecom - ADR 7,200 63
Surgutneftegaz SP - ADR (a) 266,545 3,425
Unified Energy Systems - ADR 12,287 155
Unified Energy Systems - GDR 25,138 318
Vimpel-Communications - ADR (a) 22,100 431
----------
8,751
----------
SINGAPORE - 0.9%
Asia Pulp & Paper Co, - ADR Ltd. (a) 79,000 138
Datacraft Asia, Ltd. (a) 288,600 1,977
Golden Agri-Resources, Ltd. (a) 814,300 146
Total Access Communication, Ltd. (a) 381,000 1,212
----------
3,473
----------
SOUTH AFRICA - 6.7%
AECI, Ltd. 474,000 699
African Bank Investments, Ltd. (a) 204,900 162
Amalgamated Banks of South Africa 356,567 1,212
Amalgamated Beverage
Industries, Ltd. 30,971 160
Anglo American Platinum Corp., Ltd. 56,200 2,192
Anglo American PLC 9,800 533
AngloGold, Ltd. 27,910 794
Ashanti Goldfields, Ltd. - ADR (a) 147,178 414
Barlow, Ltd. 53,137 278
Billiton PLC 91,600 354
De Beers Centenary Linked Units 69,654 1,916
Fedsure Holdings, Ltd. 43,400 126
FirstRand, Ltd. 968,100 871
Forbes Group, Ltd. 489,368 1,039
Impala Platinum Holdings, Ltd. 45,500 1,950
Imperial Holdings, Ltd. (a) 67,188 470
Iscor, Ltd. (a) 74,960 119
Ixchange Technology
Holdings, Ltd. (a) 67,000 58
JD Group, Ltd. 66,800 336
Johnnies Industrial Corp., Ltd. 9,600 109
Liberty Life Association of Africa 51,121 390
Lonmin PLC 33,376 412
Metro Cash and Carry, Ltd. 423,659 178
Nampak, Ltd. 162,000 236
Nasionale Pers Beperk Class N 18,000 134
Nedcor, Ltd. 39,927 750
PepsiCo International, Inc. (a) 1,190 5
Primedia, Ltd. 494,700 364
Profurn, Ltd. 367,290 180
Rembrandt Group, Ltd. 124,000 344
Remgro, Ltd. (a) 124,000 758
Sanlam, Ltd. 1,215,000 1,261
Sappi, Ltd. 180,900 1,237
Sasol 315,163 2,411
South African Breweries PLC 199,000 1,198
Standard Bank Investment Corporation, Ltd. 136,260 477
Tongaat-Hulett Group, Ltd. 103,000 432
Truworths International, Ltd. 552 1
----------
24,560
----------
SOUTH KOREA - 10.5%
Daelim Industrial Co. 150,000 525
Doosan Corp. (a) 27,372 455
H&CB - GDR (a) 8,000 190
Hanil Cement Manufacturing
Co., Ltd. 54,500 652
Hankuk Glass Industries, Inc. 63,000 803
Hite Brewery Co., Ltd. 9,600 430
Housing & Commercial Bank, Korea 42,360 1,019
Hyundai Electronics Industries Co. (a) 66,540 409
Hyundai Motor Co., Ltd. 37,428 428
Kookmin Bank 281,388 3,216
Kookmin Bank - GDR (a) 4,500 52
Korea Electric Power Corp. 174,638 3,900
Korea Electric Power Corp. - ADR 22,648 276
Korea Telecom Corp. 63,930 3,764
Korea Telecom Corp. - ADR 43,679 1,611
Korea Telecom Freetel (a) 18,100 638
Korea Tobacco & Ginseng Corp. 49,900 792
Korean Telecom Corp.
2001 Warrants (a) 48,980 680
LG Chemical, Ltd. 69,780 687
Locus Corp. (a) 429 10
Lotte Confectionery Co. 5,200 425
Pohang Iron & Steel Co., Ltd. 8,271 481
S1 Corp. 69,881 725
Samsung Display Devices Co. 13,062 509
Samsung Electronics (a) 46,310 5,801
Samsung Electronics - GDR (144A) 23,019 748
Samsung Electronics - GDR 4,700 345
Samsung Securities Co., Ltd. 37,528 680
Seoul City Gas Co., Ltd. 17,000 260
Shin Han Bank 118,530 1,188
SK Telecom Co., Ltd. (a) 20,280 4,321
Ssangyong Oil Refining Co. 84,640 2,106
Tae Young Corp. 12,139 266
----------
38,392
----------
149 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- ----------
SRI LANKA - 0.1%
Development Finance Corp. of Ceylon 97,221 123
John Keells Holdings, Ltd. 195,906 107
----------
230
----------
TAIWAN - 7.1%
Acer Communications & Multimedia, Inc. -
GDR (a) 26,400 165
Acer, Inc. - GDR 408,978 1,677
Advanced Semiconductor Engineering, Inc. -
ADR (a) 40,765 247
ASE Test, Ltd. (a) 18,000 277
Asia Cement Corp. - GDR 220,860 1,126
Asustek Computer, Inc. - GDR (Regd) 157,432 850
China Steel Corp. - GDR (a) 120,376 1,360
Compal Electronics, Inc. - GDR 140,084 1,093
Evergreen Marine Corp. - GDR (a) 66,573 416
Far Eastern Textile, Ltd. - GDR 147,864 1,168
Foreign & Colonial Emerging Markets Taiwan
Investment Co. (a) 165,200 1,703
Fubon Insurance Co., Ltd. - GDR 98,918 579
Hon Hai Precision Industry Co.,
Ltd. - GDR 63,852 730
Macronix International Co.,
Ltd. - ADR 31,499 445
Phoenixtec Power Co., Ltd. 155,100 130
Powerchip Semiconductor
Corp. - GDR (a) 71,422 464
Siliconware Precision Industries
Co. - ADR (a) 123,283 485
Synnex Technology International Corp.
(Regd) - GDR 26,228 214
Taiwan Semiconductor
Manufacturing Co., Ltd. 411,500 1,249
Taiwan Semiconductor Manufacturing Co.,
Ltd. 2001 Warrants (a) 457,000 1,451
Taiwan Semiconductor Manufacturing Co.,
Ltd. - ADR (a) 184,574 4,186
United Microelectronics Corp. -
ADR (a) 440,500 5,011
Winbond Electronics Corp. - GDR 69 1
Winbond Electronics Corp. - GDR (a) 103,013 984
Winbond Electronics Corp.
2001 Warrants (a) 36,000 35
----------
26,046
----------
THAILAND - 0.9%
Advanced Information Services
(Alien Market) (a) 25,000 205
Bangkok Bank PLC (Alien Market) (a) 95,000 81
Bangkok Expressway PLC (a) 57,000 7
Bangkok Expressway PLC (Alien Market) (a) 58,000 8
BEC World PLC (Alien Market) 8,000 37
Delta Electronics (Thailand) PLC 27,300 125
Electricity Generating PLC
(Alien Market) 5,000 5
Jasmine International PLC
(Alien Market) (a) 700,000 137
National Petrochemical PLC
(Alien Market) 880,000 590
PTT Exploration and
Production PLC (a) 406,600 970
Siam Cement Co. (Alien Market) (a) 4,000 38
Siam City Cement PLC (Alien Market) (a) 145,000 343
Siam Makro PLC (Alien Market) 3,000 4
TelecomAsia (Alien Market) (a) 223,000 134
Thai Farmers Bank (Alien Market) (a) 1,200,900 621
----------
3,305
----------
TURKEY - 5.7%
Akbank TAS 58,138,900 375
Anadolu Efes Biracilik ve Malt Sanayii
AS (a) 35,010,261 2,052
Arcelik AS 20,235,230 652
Brisa Bridgestone Sabanci Lastik
San. Ve Tic AS 12,650,000 667
Dogan Sirketler Grubu Holding AS (a) 20,041,000 345
Dogan Yayin Holding AS (a) 16,201,663 211
Eregli Demir ve Celik
Fabrikalari TAS (a) 2,000,000 63
Haci Omer Sabanci Holding AS 30,641,952 310
Haci Omer Sabanci
Holding AS - ADR 252,472 619
Hurriyet Gazetecilik ve
Matbaacilik AS (a) 35,739,900 429
Koc Holding AS 25,681,580 1,637
Migros 16,240,800 2,237
Sasa Suni ve Sentetik Elyaf Sanayii Anonim
Sirketi (a) 5,000,000 145
Tupras 17,100,000 777
Turkcell Iletisim Hizmetleri AS (a) 25,153,500 1,106
Emerging Markets Fund 150
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
----------- ----------
Turkcell Iletisim Hizmetleri
AS - ADR (a) 58,900 644
Turkiye Garanti Bankasi AS (a) 197,106,380 2,022
Turkiye Is Bankasi 106,938,328 2,036
Vestel Elektronik Sanayi ve Ticaret AS (a) 1,627,720 334
Yapi ve Kredi Bankasi AS 510,117,560 4,410
----------
21,071
----------
UNITED KINGDOM - 1.4%
Dimension Data Holdings PLC (a) 407,857 3,514
Genesis Smaller Companies Fund (a) 131,135 1,677
----------
5,191
----------
UNITED STATES - 0.0%
Tricom SA - ADR (a) 7,800 105
----------
105
----------
VENEZUELA - 0.1%
Mavesa SA - ADR 127,875 535
----------
535
----------
ZIMBABWE - 0.1%
Delta Corp. 1,010,343 220
----------
TOTAL COMMON STOCKS
(cost $358,563) 318,448
----------
PREFERRED STOCKS - 8.2%
ARGENTINA - 0.2%
Quilmes Industrial Quinsa 74,800 617
Societe - ADR ----------
BRAZIL - 7.1%
Aracruz Celulose SA - ADR 29,000 435
Banco Bradesco SA 232,949,984 1,483
Banco Itau SA 29,389,880 2,286
Companhia Brasileira de Distribuicao Grupo
Pao de Acucar - ADR 77,900 2,775
Companhia de Bebidas das
Americas - ADR 26,700 602
Companhia de Bebidas das Americas 5,375,000 1,199
Companhia Paranaense de Energia - Copel
Class B 107,147,000 973
Companhia Paranaense de Energia - Copel
Class B - ADR 31,800 288
Companhia Vale Do Rio Doce
Series A 78,200 1,802
Coteminas (Cia Tec) 5,160,171 381
Duratex SA (BR) 3,500,000 105
Eletropaulo Metropolitana-Electricidade de
Sao Paulo SA 4,210,000 236
Embratel Participacoes SA 14,941,500 240
Embratel Participacoes SA - ADR 94,534 1,530
Gerdau SA 2,000,000 21
Itausa Investimentos Itau SA 849,700 721
Marcopolo SA 471,400 568
Petroleo Brasileiro SA 66,220 1,756
Tele Celular Sul Participacoes SA 82,013,296 204
Tele Centro Sul Participacoes SA 33,594,600 364
Tele Nordeste Celular Participacoes SA -
ADR 4,900 202
Tele Norte Leste Participacoes SA 36,111,753 788
Tele Norte Leste Participacoes
SA - ADR 78,862 1,745
Telecomunicacoes do Parana SA 33,150,000 255
Telemig Celular Participacoes SA 85,821,000 224
Telemig Celular SA Class C 35,333 1
Telesp Celular Participacoes SA 154,274,690 1,825
Telesp Celular Participacoes
SA - ADR 10,600 335
Uniao de Bancos Brasileiros
SA (Units) 6,109,000 309
Uniao de Bancos Brasileiros
SA - GDR 27,400 692
Usinas Siderurgicas de Minas
Gerais SA 194,140 997
Votorantim Celulose e Papel
SA 29,200,000 976
----------
26,318
----------
RUSSIA - 0.4%
Lukoil Holding Oil Co. - ADR 66,750 1,468
----------
SOUTH KOREA - 0.1%
Samsung Electronic, Ltd. 5,700 292
----------
THAILAND - 0.4%
Siam Commercial Bank 3,669,500 1,522
----------
TOTAL PREFERRED STOCKS
(cost $28,126) 30,217
----------
151 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
---------- ----------
LONG-TERM INVESTMENTS - 0.0%
BRAZIL - 0.0%
Companhia Vale do Rio Doce (a)(c)
Variable Rate due 12/12/09 47,267 0
TAIWAN - 0.0%
Far Eastern Textile, Ltd. (conv.)(a)
Zero Coupon due 01/26/05 65,000 64
----------
TOTAL LONG-TERM INVESTMENTS
(cost $65) 64
----------
SHORT-TERM INVESTMENTS - 5.1%
UNITED STATES - 5.1%
Frank Russell Investment Company
Money Market Fund, 18,919 18,919
due on demand (b) ----------
TOTAL SHORT-TERM INVESTMENTS
(cost $18,919) 18,919
----------
TOTAL INVESTMENTS - 100.0%
(identified cost $405,673) 367,648
OTHER ASSETS AND LIABILITIES,
NET - 0.0% 169
----------
367,817
NET ASSETS - 100.0% ==========
FOREIGN CURRENCY EXCHANGE SPOT CONTRACTS
SOLD CONTRACTS TO BOUGHT IN UNREALIZED
DELIVER EXCHANGE APPRECIATION
OUT FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
----------------- -------------- ----------- ----------------
USD 54 CZK 2,252 11/02/00 $ 1
USD 266 GRD 107,668 11/02/00 3
USD 3 THB 126 11/02/00 --
USD 20 TRL 13,724,981 11/01/00 --
USD 83 ZAR 629 11/01/00 --
BRL 95 USD 49 11/01/00 (1)
----------------
$ 3
================
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
(c) This security has been valued by the Security Valuation Committee, delegated
by 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
BR - Bearer
GDR - Global Depositary Receipt
144A - Represents private placement security for qualified buyers according to
rule 144A of the Securities Act of 1933.
Foreign Currency Abbreviations:
BRL - Brazilian real
CZK - Czech koruna
GRD - Greek drachma
THB - Thailand baht
TRL - Turkish lira
USD - United States dollar
ZAR - South African rand
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 152
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
MARKET
% OF VALUE
INDUSTRY DIVERSIFICATION NET (000)
(Unaudited) ASSETS $
--------- --------
Auro & Transportation 1.4% 5,231
Basic Industries 0.8 2,880
Consumer Discretionary 7.6 27,941
Consumer Staples 7.3 26,721
Energy 8.6 31,702
Financial Services 19.7 72,523
Health Care 1.7 6,123
Materials & Processing 9.3 34,301
Miscellaneous 2.8 10,076
Producer Durables 3.7 13,475
Technology 10.1 37,067
Utilities 21.9 80,625
Long-Term Investments -- 64
Short-Term Investments 5.1 18,919
--------- --------
Total Investments 100.0 367,648
Other Assets and Liabilities, net -- 169
--------- --------
Net Assets 100.0% 367,817
========= ========
MARKET
GEOGRAPHIC DIVERSIFICATION % OF VALUE
(Unaudited) NET (000)
ASSETS $
--------- --------
Europe 8.2% 30,187
Latin America 29.2 107,377
Pacific Basin 33.7 123,434
Middle East 14.3 52,562
Africa 6.7 24,781
Other 2.8 10,324
Long-Term Investments -- 64
Short-Term Investments 5.1 18,919
--------- --------
Total Investments 100.0 367,648
Other Assets and Liabilities, net -- 169
--------- --------
Net Assets 100.0% 367,817
========= ========
See accompanying notes which are an integral part of the financial statements.
153 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) October 31, 2000
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $405,673) ................................... $ 367,648
Foreign currency holdings (identified cost $2,503) ................................. 2,465
Unrealized appreciation on foreign currency exchange spot
contracts ........................................................................... 4
Receivables:
Dividends and interest ............................................................. 596
Investments sold ................................................................... 1,027
Fund shares sold ................................................................... 1,759
From Advisor ....................................................................... 7
Prepaid expenses .................................................................... 3
---------
Total assets ..................................................................... 373,509
LIABILITIES
Payables:
Investments purchased .................................................. $ 4,448
Fund shares redeemed ................................................... 420
Accrued fees to affiliates ............................................. 602
Other accrued expenses ................................................. 221
Unrealized depreciation on foreign currency exchange spot contracts ..... 1
---------
Total liabilities ................................................................ 5,692
---------
NET ASSETS .......................................................................... $ 367,817
=========
NET ASSETS CONSIST OF:
Accumulated distributions in excess of net investment income ........................ $ (1,218)
Accumulated net realized gain (loss) ............................................... (67,155)
Unrealized appreciation (depreciation) on:
Investments ........................................................................ (38,025)
Foreign currency-related transactions .............................................. (64)
Shares of beneficial interest ....................................................... 398
Additional paid-in capital .......................................................... 473,881
---------
NET ASSETS .......................................................................... $ 367,817
=========
NET ASSET VALUE, offering and redemption price per share:
Class C ($2,228,248 divided by 243,603 shares of $.01 par
value shares of beneficial interest outstanding) .................................. $ 9.15
=========
Class E ($6,387,933 divided by 691,003 shares of $.01 par
value shares of beneficial interest outstanding) .................................. $ 9.24
=========
Class S ($359,201,208 divided by 38,831,175 shares of $.01 par
value shares of beneficial interest outstanding) .................................. $ 9.25
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 154
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Dividends ............................................... $ 6,456 $ 7,347
Dividends from Money Market Fund ........................ 1,113 894
Less foreign taxes withheld ............................. (622) (607)
---------------- -----------------
Total investment income ............................... 6,947 7,634
EXPENSES
Advisory fees ........................................... 4,095 4,046
Administrative fees ..................................... 179 177
Custodian fees .......................................... 1,164 1,137
Distribution fees - Class C ............................. 13 4
Transfer agent fees ..................................... 1,133 1,161
Professional fees ....................................... 94 48
Registration fees ....................................... 72 95
Shareholder servicing fees - Class C .................... 5 1
Shareholder servicing fees - Class E .................... 13 8
Trustees' fees .......................................... 13 6
Miscellaneous ........................................... 106 72
---------------- -----------------
Expenses before reductions .............................. 6,887 6,755
Expense reductions ...................................... (31) --
---------------- -----------------
Expenses, net ......................................... 6,856 6,755
---------------- -----------------
Net investment income .................................... 91 879
---------------- -----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ............................................. 7,586 (2,140)
Foreign currency-related transactions ................... (698) (2,085)
---------------- -----------------
6,888 (4,225)
---------------- -----------------
Net change in unrealized appreciation
(depreciation) on:
Investments ............................................. (130,365) 153,342
Foreign currency-related transactions ................... (53) (7)
---------------- -----------------
(130,418) 153,335
---------------- -----------------
Net realized and unrealized gain (loss) ................. (123,530) 149,110
---------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS .... $ (123,439) $ 149,989
================ =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
155 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income ........................................... $ 91 $ 879 $ 4,050
Net realized gain (loss) ....................................... 6,888 (4,225) (57,573)
Net change in unrealized appreciation (depreciation) .......... (130,418) 153,335 (57,066)
--------------- --------------- ---------------
Net increase (decrease) in net assets from operations.......... (123,439) 149,989 (110,589)
--------------- --------------- ---------------
DISTRIBUTIONS
From net investment income
Class C ....................................................... (3) -- --
Class E ....................................................... (22) (16) --
Class S ....................................................... (2,029) (3,161) (2,472)
--------------- --------------- ---------------
Net decrease in net assets from distributions................ (2,054) (3,177) (2,472)
--------------- --------------- ---------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions .. 54,571 (2,461) 74,397
--------------- --------------- ---------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ...................... (70,922) 144,351 (38,664)
NET ASSETS
Beginning of period ............................................. 438,739 294,388 333,052
--------------- --------------- ---------------
End of period (including accumulated distributions in excess of
net investment income of $1,218 and $2,814 and undistributed
net investment income of $495, respectively)................... $ 367,817 $ 438,739 $ 294,388
=============== =============== ===============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 156
<PAGE>
EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
2000* 1999**
---------- ---------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD .................. $ 12.47 $ 8.07
---------- ---------
INCOME FROM OPERATIONS
Net investment income (loss)(a) ..................... (.10) (.12)
Net realized and unrealized gain (loss) ............. (3.20) 4.57
---------- ---------
Total income from operations ....................... (3.30) 4.45
---------- ---------
DISTRIBUTIONS
From net investment income ........................... (.02) (.05)
---------- ---------
NET ASSET VALUE, END OF PERIOD ........................ $ 9.15 $ 12.47
========== =========
TOTAL RETURN (%)(b) .................................. (26.51) 55.43
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ............. 2,228 1,631
Ratios to average net assets (%)(c):
Operating expenses, net ............................ 2.91 2.91
Operating expenses, gross .......................... 2.92 2.91
Net investment income (loss) ...................... (1.02) (1.23)
Portfolio turnover rate (%) ......................... 73.11 94.85
</TABLE>
* For the ten months ended October 31, 2000.
** 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.
157 Emerging Markets Fund
<PAGE>
EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
2000* 1999 1998**
---------- ---------- ----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ......... $ 12.51 $ 8.48 $ 7.37
---------- ---------- ----------
INCOME FROM OPERATIONS
Net investment income (loss)(a) ............ (.03) (.04) (.02)
Net realized and unrealized gain (loss) .... (3.20) 4.14 1.13
---------- ---------- ----------
Total income from operations .............. (3.23) 4.10 1.11
---------- ---------- ----------
DISTRIBUTIONS
From net investment income .................. (.04) (.07) --
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD ............... $ 9.24 $ 12.51 $ 8.48
========== ========== ==========
TOTAL RETURN (%)(b) ......................... (25.90) 48.71 15.06
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ... 6,388 6,314 39
Ratios to average net assets (%)(c)(d):
Operating expenses, net ................... 2.16 2.17 --
Operating expenses, gross ................. 2.17 2.17 --
Net investment income (loss) ............. (.30) (.40) --
Portfolio turnover rate (%) ................ 73.11 94.85 59.35
</TABLE>
* For the ten months ended October 31, 2000.
** 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 the 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 158
<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,
----------------------------------------------------------------
2000* 1999 1998 1997 1996 1995
--------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............ $ 12.52 $ 8.48 $ 11.79 $ 12.35 $ 11.16 $ 12.25
--------- --------- --------- ---------- ---------- ----------
INCOME FROM OPERATIONS
Net investment income (loss)(a)** ............. -- .03 .12 .14 .10 .11
Net realized and unrealized gain (loss) ....... (3.21) 4.10 (3.35) (.56) 1.26 (1.12)
--------- --------- --------- ---------- ---------- ----------
Total income from operations ................. (3.21) 4.13 (3.23) (.42) 1.36 (1.01)
--------- --------- --------- ---------- ---------- ----------
DISTRIBUTIONS
From net investment income ..................... (.06) (.09) (.08) (.14) (.17) (.05)
From net realized gain ......................... -- -- -- -- -- (.03)
--------- --------- --------- ---------- ---------- ----------
Total distributions .......................... (.06) (.09) (.08) (.14) (.17) (.08)
--------- --------- --------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD .................. $ 9.25 $ 12.52 $ 8.48 $ 11.79 $ 12.35 $ 11.16
========= ========= ========= ========== ========== ==========
TOTAL RETURN (%)(b)(c) .......................... (25.79) 49.03 (27.57) (3.45) 12.26 (8.21)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ...... 359,201 430,794 294,349 333,052 271,490 172,673
Ratios to average net assets (%)(c)(d):
Operating expenses, net ...................... 1.91 1.91 1.75 1.64 1.71 1.75
Operating expenses, gross .................... 1.92 1.91 1.75 1.64 1.72 1.80
Net investment income (loss) ................ (.02) .26 1.20 .87 .77 .88
Portfolio turnover rate (%) ................... 73.11 94.85 59.35 50.60 34.62 71.16
</TABLE>
* For the ten months ended October 31, 2000.
** Less than $.01 per share for the period ended October 31, 2000.
(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) For periods prior to April 1, 1995, Fund performance, operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net of
investment management fees but gross of any investment services fees. See
Note 4.
(d) The ratios for the periods less than one year are annualized.
159 Emerging Markets Fund
<PAGE>
REAL ESTATE SECURITIES FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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 three managers with distinct approaches to investing in real estate equity
securities.
[GRAPH]
GROWTH OF A $10,00 INVESTMENT
<TABLE>
<CAPTION>
DATES REAL ESTATE SECURITIES - CLASS S NAREIT EQUITY REIT **
<S> <C> <C>
Inception* $10,000 $10,000
1991 $13,520 $13,583
1992 $16,281 $15,943
1993 $21,302 $21,007
1994 $20,115 $19,751
1995 $22,412 $22,162
1996 $28,049 $27,638
1997 $36,931 $36,696
1998 $32,604 $32,002
1999 $31,167 $29,749
2000 $38,960 $35,188
---------- -------- --------
Total $271,342 $263,718
========== ======== ========
Yearly periods ended October 31
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE SECURITIES FUND - CLASS S REAL ESTATE SECURITIES FUND - CLASS C ++++
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
-------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $12,500 25.00% 1 Year $12,373 23.73%
5 Years $17,384 11.68%(S) 5 Years $16,879 11.02%(S)
10 Years $38,960 14.56%(S) 10 Years $37,828 14.22%(S)
<CAPTION>
REAL ESTATE SECURITIES FUND - CLASS E ++ NAREIT EQUITY REIT INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
-------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $12,462 24.62% 1 Year $11,828 18.28%
5 Years $17,094 11.30%(S) 5 Years $15,878 9.69%(S)
10 Years $38,309 14.36%(S) 10 Years $35,188 13.41%(S)
</TABLE>
161 Real Estate Securities Fund
<PAGE>
REAL ESTATE SECURITIES FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the ten months ended October 31, 2000, the Real Estate Securities Fund's
Class S, Class E and Class C shares gained 18.53%, 18.24%, and 17.54%,
respectively. This compared favorably to the 16.55% return for the NAREIT Equity
REIT Index. The stock selection strategies employed by the Fund's managers
proved highly effective in capturing opportunities over the period.
The Fund's performance for the ten month period reinforced the reasons for
including real estate in a diversified portfolio. As the equities market faced
increasing challenges, particularly from the Technology sector, real estate
showed improving strength as investors looked for an asset class to hedge
against the volatility in the stock market.
PORTFOLIO HIGHLIGHTS
During the period, fundamentals improved and REIT prices generally rose,
however, sector leadership roles changed from quarter to quarter. The Fund and
the Index enjoyed a particularly strong first quarter, with Lodging/Resorts
posting the strongest sector gains. Lagging the group during that period was
Health Care, Manufactured Housing, and free-standing Retail. However, during the
second quarter the Office and Multi-Family sectors took the lead, while Health
Care, along with the Office and Residential sectors turned in strong results in
the final months of the period.
Notably, cash flows into REITS have reversed course this year. Although still
tepid, approximately $400 million in new capital flowed into REITS during 2000,
after approximately $900 million exited REITS during 1999, a particularly poor
performing year for real estate investors.
The Real Estate Securities Fund's manager lineup was expanded in March with the
addition of Security Capital Global Capital Management Group. This manager
focuses on companies with the ability to generate strong net cash flows, with
effective underlying management strategies, financial flexibility, and sources
of growth. The addition of Security Capital resulted in a change in the
allocation of the Fund's assets. Security Capital's target allocation is 25%
while Cohen and Steers Capital Management's new target allocation is 45%, down
from 70%. AEW Capital Management's 30% allocation remained unchanged.
TOP TEN EQUITY HOLDINGS
(as a percent of Total Investments) October 31, 2000
Equity Office Properties Trust 7.4%
Avalonbay Communities, Inc. 5.0
Starwood Hotels & Resorts Worldwide, Inc. 4.8
Apartment Investment & Management Co. Class A 4.4
Equity Residential Properties Trust 4.4
Boston Properties, Inc. 4.4
Spieker Properties, Inc. 4.3
Vornado Realty Trust 4.2
Arden Realty Group, Inc. 3.3
Mack-Cali Realty Corp. 3.1
PORTFOLIO CHARACTERISTICS
October 31, 2000
Current P/E Ratio 15.6x
Portfolio Price/Book Ratio 1.48x
Market Capitalization - $-Weighted Average 3.02 Bil
Number of Holdings 59
MONEY MANAGERS
AEW Capital Management, L.P.
Cohen & Steers Capital Management, Inc.
Security Capital Global
Capital Management Group Incorporated
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* Real Estate Securities Fund Class S assumes initial investment on November
1, 1990.
** 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.
++ 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.
(S) 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 162
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF NET ASSETS
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
--------- ----------
COMMON STOCKS (B) - 96.5%
APARTMENT - 26.3%
Amli Residential Properties Trust 203,600 4,708
Apartment Investment & Management Co.
Class A 670,215 30,620
Archstone Communities Trust 440,724 10,385
Avalonbay Communities, Inc. 753,130 34,597
Brookfield Properties Corp. 970,200 14,856
Camden Property Trust 185,429 5,308
Equity Residential Properties Trust 646,688 30,435
Essex Property Trust, Inc. 237,500 12,350
Post Properties, Inc. 316,146 11,045
Smith (Charles E.) Residential
Realty, Inc. 434,750 19,129
Summit Properties, Inc. 133,600 3,206
Sun Communities, Inc. 73,600 2,236
United Dominion Realty Trust, Inc. 40,800 428
----------
179,303
----------
HEALTH CARE - 4.4%
Health Care Property Investors, Inc. 493,300 14,491
Manor Care, Inc. (a) 301,300 5,028
Nationwide Health Properties, Inc. 718,200 10,728
----------
30,247
----------
HOTELS/LEISURE - 6.8%
Hospitality Properties Trust 212,600 4,584
Host Marriott Corp. 510,400 5,423
MeriStar Hospitality Corp. 182,900 3,498
Starwood Hotels & Resorts Worldwide,
Inc. 1,115,600 33,050
----------
46,555
----------
LEASING - 0.3%
Franchise Finance Corp. of America 93,000 1,889
----------
OFFICE/INDUSTRIAL - 40.5%
AMB Property Corp. 585,900 13,769
Arden Realty Group, Inc. 947,850 22,748
Boston Properties, Inc. 750,150 30,381
Cabot Industrial Trust 89,400 1,687
CarrAmerica Realty Corp. 145,200 4,292
Cousins Properties, Inc. 119,600 3,110
Crescent Operating, Inc. (a) 26,300 24
Crescent Real Estate Equities, Inc. 419,900 8,450
Duke-Weeks Realty Corp. 336,819 7,978
Equity Office Properties Trust 1,707,387 51,435
First Industrial Realty Trust, Inc. 99,500 3,072
Frontline Capital Group (a) 269,100 3,835
Highwoods Properties, Inc. 253,400 5,480
Kilroy Realty Corp. 182,100 4,746
Liberty Property Trust 457,400 12,093
Mack-Cali Realty Corp. 795,100 21,567
Pacific Gulf Properties, Inc. 117,000 3,108
Prentiss Properties Trust 544,000 13,804
ProLogis Trust 862,118 18,104
Reckson Associates Realty Corp. 440,600 9,969
SL Green Realty Corp. 222,400 5,963
Spieker Properties, Inc. 531,000 29,404
Trizec Hahn Corp. 92,600 1,384
----------
276,403
----------
OUTLET CENTERS - 0.5%
Chelsea GCA Realty, Inc. 104,900 3,383
----------
REGIONAL MALLS - 6.9%
General Growth Properties, Inc. 673,500 19,868
Macerich Co. (The) 265,200 5,205
Rouse Co. (The) 239,100 5,903
Simon Property Group, Inc. 540,450 12,059
Taubman Centers, Inc. 37,100 406
Urban Shopping Centers, Inc. 81,600 3,912
----------
47,353
----------
SELF STORAGE - 2.5%
Public Storage, Inc. 676,056 15,211
Shurgard Storage Centers, Inc.
Class A 79,800 1,810
----------
17,021
----------
SHOPPING CENTER - 8.3%
Federal Realty Investment Trust 443,800 8,543
Kimco Realty Corp. 323,900 13,037
Pan Pacific Retail Properties, Inc. 61,400 1,255
Philips International Realty Corp. 79,600 1,323
Regency Realty Corp. 144,400 3,249
Vornado Realty Trust 831,100 28,933
----------
56,340
----------
TOTAL COMMON STOCKS
(cost $586,028) 658,494
----------
163 Real Estate Securities Fund
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- ----------
SHORT-TERM INVESTMENTS - 4.9%
Frank Russell Investment Company
Money Market Fund,
due on demand (c) 33,152 33,152
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $33,152) 33,152
----------
TOTAL INVESTMENTS - 101.4%
(identified cost $619,180) 691,646
OTHER ASSETS AND LIABILITIES,
NET - (1.4%) (9,630)
----------
NET ASSETS - 100.0% 682,016
==========
(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.
Host Marriott Corp.
Manor Care, Inc.
Rouse Co. (The)
Starwood Hotels & Resorts Worldwide, Inc.
Trizek 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 164
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) October 31, 2000
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $619,180) .......................... $ 691,646
Receivables:
Dividends ................................................................. 599
Investments sold .......................................................... 2,146
Fund shares sold .......................................................... 783
Prepaid expenses ........................................................... 6
---------
Total assets ............................................................ 695,180
LIABILITIES
Payables:
Investments purchased ......................................... $ 11,681
Fund shares redeemed .......................................... 672
Accrued fees to affiliates .................................... 728
Other accrued expenses ........................................ 83
---------
Total liabilities ....................................................... 13,164
---------
NET ASSETS ................................................................. $ 682,016
=========
NET ASSETS CONSIST OF:
Accumulated distributions in excess of net investment income ............... $ (570)
Accumulated net realized gain (loss) ...................................... (32,902)
Unrealized appreciation (depreciation) on investments ...................... 72,466
Shares of beneficial interest .............................................. 260
Additional paid-in capital ................................................. 642,762
---------
NET ASSETS ................................................................. $ 682,016
=========
NET ASSET VALUE, offering and redemption price per share:
Class C ($3,393,235 divided by 130,878 shares of $.01 par value
shares of beneficial interest outstanding) .............................. $ 25.93
=========
Class E ($9,093,863 divided by 348,879 shares of $.01 par value
shares of beneficial interest outstanding) .............................. $ 26.07
=========
Class S ($669,528,433 divided by 25,532,481 shares of $.01 par value
shares of beneficial interest outstanding) .............................. $ 26.22
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
165 Real Estate Securities Fund
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Dividends ................................................................... $ 32,522 $ 38,576
Dividends from Money Market Fund ............................................ 1,479 1,751
Interest .................................................................... -- 2
--------------- ---------------
Total investment income ................................................... 34,001 40,329
--------------- ---------------
EXPENSES
Advisory fees ............................................................... 4,399 4,886
Administrative fees ......................................................... 276 308
Custodian fees .............................................................. 224 250
Distribution fees - Class C ................................................. 16 6
Transfer agent fees ......................................................... 1,252 1,339
Professional fees ........................................................... 62 28
Registration fees ........................................................... 56 123
Shareholder servicing fees - Class C ........................................ 5 2
Shareholder servicing fees - Class E ........................................ 17 11
Trustees' fees .............................................................. 14 7
Miscellaneous ............................................................... 103 71
--------------- ---------------
Expense before reductions .................................................... 6,424 7,031
Expense reductions ........................................................... (4) --
--------------- ---------------
Expenses, net ............................................................. 6,420 7,031
--------------- ---------------
Net investment income ........................................................ 27,581 33,298
--------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investments ...................................... (9,932) (22,242)
Net change in unrealized appreciation (depreciation) on investments .......... 94,886 (10,653)
--------------- ---------------
Net realized and unrealized gain (loss) ..................................... 84,954 (32,895)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ........................ $ 112,535 $ 403
=============== ===============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Real Estate Securities Fund 166
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income ........................................... $ 27,581 $ 33,298 $ 30,253
--------------- --------------- ---------------
Net realized gain (loss) ....................................... (9,932) (22,242) (1,281)
Net change in unrealized appreciation (depreciation) ........... 94,886 (10,653) (137,901)
Net increase (decrease) in net assets from operations ......... 112,535 403 (108,929)
--------------- --------------- ---------------
DISTRIBUTIONS
From net investment income
Class C ....................................................... (78) (67) --
Class E ....................................................... (266) (358) (26)
Class S ....................................................... (21,539) (42,467) (26,915)
From net realized gain
Class E ....................................................... -- -- (7)
Class S ....................................................... -- -- (9,488)
--------------- --------------- ---------------
Net decrease in net assets from distributions ............... (21,883) (42,892) (36,436)
--------------- --------------- ---------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions .. (6,841) 63,525 106,663
--------------- --------------- ---------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ...................... 83,811 21,036 (38,702)
NET ASSETS
Beginning of period ............................................. 598,205 577,169 615,871
--------------- --------------- ---------------
End of period (including accumulated distributions in excess of
net investment income of $570 and $6,282, and undistributed
net investment income of $3,312, respectively) ................ $ 682,016 $ 598,205 $ 577,169
=============== =============== ===============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
167 Real Estate Securities Fund
<PAGE>
REAL ESTATE SECURITIES FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
2000* 1999**
---------- ----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ................... $ 22.69 $ 24.13
---------- ----------
INCOME FROM OPERATIONS
Net investment income (a) ............................ .84 1.08
Net realized and unrealized gain (loss) .............. 3.11 (1.06)
---------- ----------
Total income from operations ........................ 3.95 .02
---------- ----------
DISTRIBUTIONS
From net investment income ............................ (.71) (1.46)
---------- ----------
NET ASSET VALUE, END OF PERIOD ......................... $ 25.93 $ 22.69
========== ==========
TOTAL RETURN (%)(b) ................................... 17.54 .19
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ............. 3,393 1,771
Ratios to average net assets (%)(c):
Operating expenses .................................. 2.16 2.14
Net investment income ............................... 4.06 5.12
Portfolio turnover rate (%) .......................... 53.30 42.69
</TABLE>
* For the ten months ended October 31, 2000.
** 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) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
Real Estate Securities Fund 168
<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,
-----------------------------------------------------
2000* 1999 1998 1997 1996**
---------- ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........ $ 22.76 $ 24.27 $ 31.02 $ 29.18 $ 26.67
---------- ------------ ------------ ---------- ----------
INCOME FROM OPERATIONS
Net investment income (a) .................. .98 1.28 1.26 1.14 .24
Net realized and unrealized gain (loss)..... 3.14 (1.24) (6.12) 3.95 3.85
---------- ------------ ------------ ---------- ----------
Total income from operations ............. 4.12 .04 (4.86) 5.09 4.09
---------- ------------ ------------ ---------- ----------
DISTRIBUTIONS
From net investment income ................. (.81) (1.55) (1.43) (1.04) (.32)
From net realized gain ..................... -- -- (.46) (2.21) (1.26)
---------- ------------ ------------ ---------- ----------
Total distributions ...................... (.81) (1.55) (1.89) (3.25) (1.58)
---------- ------------ ------------ ---------- ----------
NET ASSET VALUE, END OF PERIOD .............. $ 26.07 $ 22.76 $ 24.27 $ 31.02 $ 29.18
========== =========== ============ ========== ==========
TOTAL RETURN (%)(b) ........................ 18.24 .30 (16.25) 18.20 15.75
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ... 9,094 7,134 843 388 101
Ratios to average net assets (%)(c):
Operating expenses ....................... 1.41 1.39 1.47 1.71 1.77
Net investment income .................... 4.78 5.42 4.90 3.94 5.31
Portfolio turnover rate (%) ................ 53.30 42.69 42.58 49.40 51.75
</TABLE>
* For the ten months ended October 31, 2000.
** 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.
169 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,
--------------------------------------------------------------
2000* 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD .............. $ 22.86 $ 24.44 $ 30.86 $ 29.19 $ 23.51 $ 22.53
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM OPERATIONS
Net investment income (a) ....................... 1.04 1.30 1.34 1.36 1.39 1.32
Net realized and unrealized gain (loss) ......... 3.15 (1.20) (6.13) 3.93 6.89 1.03
---------- ---------- ---------- ---------- ---------- ----------
Total income from operations ................... 4.19 .10 (4.79) 5.29 8.28 2.35
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS
From net investment income ....................... (.83) (1.68) (1.17) (1.41) (1.34) (1.35)
From net realized gain .......................... -- -- (.46) (2.21) (1.26) (0.02)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions ............................ (.83) (1.68) (1.63) (3.62) (2.60) (1.37)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD .................... $ 26.22 $ 22.86 $ 24.44 $ 30.86 $ 29.19 $ 23.51
========== ========== ========== ========== ========== ==========
TOTAL RETURN (%)(b) ............................... 18.53 .55 (15.94) 18.99 36.81 10.87
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ........ 669,529 589,300 576,326 615,483 445,619 290,990
Ratios to average net assets (%)(c):
Operating expenses ............................. 1.16 1.14 1.05 1.02 1.04 1.04
Net investment income .......................... 5.00 5.41 4.93 4.57 5.64 6.10
Portfolio turnover rate (%) ..................... 53.30 42.69 42.58 49.40 51.75 23.49
</TABLE>
* For the ten months ended October 31, 2000.
(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.
Real Estate Securities Fund 170
<PAGE>
SHORT-TERM BOND FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
DATES SHORT TERM BOND - CLASS S++ ML 1-2.99 **
<S> <C> <C>
Inception* $ 10,000 $ 10,000
1991 11,176 11,128
1992 11,836 12,039
1993 12,572 12,740
1994 12,704 12,892
1995 13,776 14,045
1996 14,549 14,875
1997 15,434 15,840
1998 16,449 17,060
1999 16,918 17,571
2000 17,946 18,638
---------- -------- --------
Total $153,360 $156,827
========== ======== ========
Yearly periods ended October 31
</TABLE>
<TABLE>
<CAPTION>
SHORT TERM BOND FUND - CLASS S SHORT TERM BOND FUND - CLASS C ++++++
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
----------------------------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $10,608 6.08% 1 Year $10,498 4.98%
5 Years $13,027 5.43%(S) 5 Years $12,805 5.06%(S)
10 Years $17,946 6.02%(S) 10 Years $17,639 5.84%(S)
<CAPTION>
SHORT TERM BOND FUND - CLASS E ++++ MERRILL LYNCH 1-2.99 YEARS TREASURY INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
----------------------------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $10,580 5.80% 1 Year $10,607 6.07%
5 Years $12,967 5.33%(S) 5 Years $13,270 5.82%(S)
10 Years $17,863 5.97%(S) 10 Years $18,638 6.42%(S)
</TABLE>
171 Short-Term Bond Fund
<PAGE>
SHORT-TERM BOND FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the ten months ended October 31, 2000, the Short-Term Bond Fund Class S,
Class E, and Class C shares gained 5.64%, 5.36%, and 4.67%, respectively. This
compared to a 5.72% return for the Merrill Lynch 1-2.99 Years Treasury Index.
The Fund's performance reflected the advantage that US Treasuries held over
corporate securities for most of the fiscal period.
PORTFOLIO HIGHLIGHTS
During the first quarter, bond markets were focused on the Federal Reserve Board
(the Fed), as they waited for a definitive response regarding interest rates.
After the Fed imposed a 50 basis point interest rate hike on May 16, however,
bond investors generally reached a consensus that the Fed would hold rates
steady, and bonds enjoyed a rally. Subsequently, in June economic data provided
bond investors with the first major indications that the US economy could be
slowing, which continued to fuel the rally.
The big story was the inversion of the US Treasury yield curve which occurred
during first quarter 2000. While the 3-month and 2-year rates rose 57 and 25
basis points, respectively, the 10-year and 30-year rates declined 42 and 64
basis points, respectively. This inversion was driven by the US Treasury's debt
buyback program and a declining supply of longer-term Treasury bonds.
Corporate debt generally underperformed during the period, with high-yield
issues being the worst performers during the first quarter, and the
investment-grade corporate sector closely following their pattern. While
corporate issues lagged for most of the year, they did stage a late-period rally
that helped drive further debate regarding the direction of the equities markets
and future growth outlooks.
The Fund's fiscal period performance results generally benefited from the
portfolio's yield advantage. However, Fund returns did experience some setbacks
due to its exposure in the poor performing corporate sector.
TOP TEN ISSUERS
(as a percent of Total Investments) October 31, 2000
Federal National Mortgage Association 5.7%
DaimlerChrysler 4.5
Ford Credit Auto Owner Trust 3.8
Ford Motor Credit Co. 3.4
General Motors Acceptance Corp. 3.3
General Electric Capital Corp. 2.9
CIT Group, Inc. 2.8
United States Treasury 2.8
Federal Home Loan Mortgage Corp. 2.7
Manitoba, Province of 2.5
PORTFOLIO CHARACTERISTICS
October 31, 2000
Weighted Average Quality Diversification AAA
Weighted Average Years-to-Maturity 2.2 Years
Weighted Average Duration 1.5 Years
Current Yield (SEC 30-day standardized)
Class S 6.4%
Class E 6.1%
Class C 5.4%
Number of Issues 232
Number of Issuers 172
MONEY MANAGERS STYLES
BlackRock Financial Management Mortgage/Asset-
Backed Specialist
Standish, Ayer & Wood, Inc. Corporate Specialist
STW Fixed Income Management, Ltd. Sector Rotation
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* Short-Term Bond Fund Class S assumes initial investment on November 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.
++++ 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.
++++++ 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.
(S) 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.
Short-Term Bond Fund 172
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF NET ASSETS
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- -------
LONG-TERM INVESTMENTS - 94.6%
ASSET-BACKED SECURITIES - 31.5%
AFC Home Equity Loan Trust
Series 1993-2 Class A
6.000% due 01/20/13 11 11
American Express Credit Account Master
Trust
Series 1997-1 Class A
6.400% due 04/15/05 7,500 7,460
Banc One Automobile Grantor Trust
Series 1997-A Class A
6.270% due 11/20/03 955 952
Boston Edison Co.
Series 1999-1 Class A2
6.450% due 09/15/05 8,000 7,895
California Infrastructure SCE-1
Series 1997-1 Class A4
6.220% due 03/25/04 5,160 5,123
Captec Franchise Trust
Series 1999-1 Class A1
6.504% due 05/25/05 1,155 1,142
Case Equipment Loan Trust
Series 1997-B Class C
6.410% due 09/15/04 45 44
Chase Manhattan Automobile Owner Trust
Series 1998-B Class A4
5.800% due 02/17/03 2,000 1,982
Chase Manhattan Credit Card
Master Trust
Series 1996-3 Class A
7.040% due 02/15/05 6,000 6,006
Chevy Chase Automobile Receivables
Trust
Series 1997-1 Class A
6.500% due 10/15/03 374 373
Series 1997-2 Class A
6.350% due 01/15/04 128 127
Series 1997-3 Class A
6.200% due 03/20/04 (a) 281 279
Citibank Credit Card Master Trust I
Series 1997-2 Class A
6.550% due 02/15/04 9,500 9,461
Conseco Finance
Securitizations Corp.
Series 2000-2 Class A3
8.070% due 12/01/30 1,150 1,171
Copelco Capital Funding Corp.
Series 1999-A Class A2
5.500% due 03/15/01 29 29
Series 1999-A Class A3
5.665% due 03/15/02 750 746
Series 1999-A Class A5
5.950% due 06/15/04 1,250 1,218
Series 1999-B Class A3
6.610% due 12/18/02 850 849
DaimlerChrysler Automobile Trust
Series 2000-A Class A3
7.090% due 12/06/03 4,300 4,323
Series 2000-B Class A4
7.630% due 06/08/05 5,000 5,113
Delta Funding Home Equity
Loan Trust
Series 1998-1 Class A2A
6.830% due 05/25/30 (a) 132 132
Discover Card Master Trust I
Series 1998-7 Class A
5.600% due 05/16/06 3,500 3,387
Series 1999-1 Class B
5.550% due 08/15/04 650 638
First Security Automobile
Owner Trust
Series 1999-1 Class A3
5.580% due 06/15/03 1,067 1,063
FMAC Loan Receivables Trust
Series 1998-CA Class A1
5.990% due 11/15/04 583 568
Ford Credit Automobile Owner Trust
Series 1997-B Class B
6.400% due 05/15/02 825 821
Series 1999-B Class A4
5.800% due 06/15/02 1,225 1,219
Series 1999-D Class A4
6.400% due 10/15/02 1,100 1,096
Series 2000-A Class A3
6.820% due 06/17/02 3,195 3,195
Series 2000-E Class A3
6.740% due 12/15/02 4,000 3,996
Series 2000-E Class A5
6.770% due 10/15/04 6,000 6,015
Green Tree Financial Corp.
Series 1995-9 Class A5
6.800% due 12/15/25 1,300 1,293
Series 1998-1 Class A3
5.950% due 11/01/29 1,250 1,246
Honda Automobile Receivables
Owner Trust
Series 2000-1 Class A3
6.620% due 07/15/04 1,500 1,499
Honda Automobile Lease Trust
Series 1999-A Class A3
173 Short Term Bond Fund
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
----------- --------
6.100% due 01/15/02 3,461 3,452
Series 1999-A Class A4
6.450% due 09/16/02 1,000 996
IMC Home Equity Loan Trust
Series 1998-1 Class A3
6.410% due 04/20/18 760 752
MBNA Master Credit Card Trust
Series F Class A
6.600% due 11/15/04 10,000 9,994
Mellon Automobile Grantor Trust
Series 2000-1 Class A
7.180% due 10/15/06 1,374 1,382
Navistar Financial Corp. Owner Trust
Series 1999-A Class A3
5.950% due 04/15/03 1,675 1,661
Newcourt Equipment Trust Securities
Series 1998-1 Class A3
5.240% due 12/20/02 571 566
Series 1998-2 Class A3
5.450% due 10/15/02 298 296
Nissan Automobile Lease Trust
Series 2000-A Class A3
7.800% due 05/20/03 1,125 1,141
Nissan Automobile Receivables Owner
Trust
Series 1999-A Class A3
6.470% due 09/15/03 1,025 1,021
Olympic Automobile
Receivables Trust
Series 1996-D Class CTFS
6.125% due 04/15/02 1,450 1,445
PBG Equipment Trust
Series 1A Class A
6.270% due 01/20/12 749 729
Peoplefirst.com Automobile Receivables
Owner Trust
Series 2000-1 Class A4
7.405% due 12/15/06 9,500 9,666
Premier Automobile Trust
Series 1999-1 Class A3
5.690% due 11/08/02 8,257 8,213
Series 1999-3 Class A4
6.430% due 03/08/04 (a) 1,600 1,593
Ryder Vehicle Lease Trust
Series 1998-A Class A
6.100% due 09/15/08 (a) 424 420
Series 1999-A Class A4
6.890% due 04/15/05 1,100 1,102
The Money Store Home Equity Trust
Series 1995-B Class A6
7.500% due 01/15/26 1,000 1,006
The Money Store Small Business
Administration Loan Trust
Series 1996-2 Class A
7.181% due 04/15/24 (a) 616 619
Series 1997-1 Class A
7.126% due 01/15/25 (a) 891 785
Series 1997-1 Class B
7.598% due 01/15/25 (a) 594 527
Toyota Automobile Receivables
Owners Trust
Series 2000-A Class A3
7.180% due 08/15/04 825 832
UCFC Home Equity Loan
Series 1993-B1 Class A-1
6.075% due 07/25/14 31 30
USAA Automobile Loan
Grantor Trust
Series 1999-1 Class A
6.100% due 02/15/06 (a) 1,348 1,338
WFS Financial Owner Trust
Series 2000-A Class A4
7.410% due 09/20/07 3,500 3,554
Series 2000-C Class A4
7.170% due 02/20/08 1,000 1,008
Wilshire Funding Corp.
Series 1998-WFC2 Class A3
7.000% due 12/28/37 635 614
World Omni Automobile
Lease Securitization Trust
Series 1999-A Class A1
6.871% due 02/15/02 (a) 1,472 1,471
----------
136,685
----------
CORPORATE BONDS AND NOTES - 40.1%
Aerofreighter Finance Trust
7.850% due 10/30/09 563 548
Associates Corp. of North America
6.500% due 07/15/02 2,700 2,678
5.750% due 11/01/03 1,825 1,761
AT&T Capital Corp.
6.250% due 05/15/01 1,550 1,536
AT&T Corp.
5.625% due 03/15/04 600 566
Avon Energy Partners Holdings
6.730% due 12/11/02 310 303
Banco Latinoamerica
de Exportaciones, S.A
6.500% due 04/02/01 2,200 2,195
Short Term Bond Fund 174
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- -------
Bank of America Corp.
Series H
7.350% due 04/03/02 9,300 9,371
Bank One Corp.
6.400% due 08/01/02 2,725 2,693
Business Loan Center, Inc.
Series 1998-1A
6.750% due 04/02/05 (a) 1,028 1,028
CIT Group, Inc.
6.500% due 06/14/02 3,800 3,741
7.375% due 03/15/03 8,400 8,413
Comdisco, Inc.
6.000% due 01/30/02 2,000 1,877
Compaq Computer Corp.
7.450% due 08/01/02 1,100 1,098
Conseco, Inc.
6.400% due 06/15/01 (a) 1,850 1,610
Cox Communications, Inc.
7.000% due 08/15/01 2,000 1,995
CSX Corp.
Series C
5.850% due 12/01/03 1,000 958
DaimlerChrysler North America Holding
Corp
7.125% due 03/01/02 400 400
6.960% due 08/23/02 (a) 2,250 2,256
7.750% due 05/27/03 7,300 7,431
Duke Energy Corp.
7.125% due 09/03/02 1,750 1,758
El Paso Energy Corp.
Series B
6.625% due 07/15/01 1,050 1,044
ERAC USA Finance Co.
6.375% due 05/15/03 1,900 1,822
First Bank South Dakota
6.834% due 12/20/00 (a) 500 500
First Union Corp.
6.950% due 11/01/04 1,500 1,478
Firstar Corp.
6.500% due 07/15/02 2,145 2,134
FleetBoston Financial Corp.
7.250% due 09/15/05 1,850 1,860
Ford Motor Credit Co.
7.500% due 06/15/03 7,000 7,049
5.750% due 02/23/04 5,000 4,775
6.700% due 07/16/04 2,870 2,811
Franchise Finance Corp.
7.000% due 11/30/00 1,575 1,573
General Electric Capital Corp.
5.430% due 02/25/02 4,000 3,937
Series A
5.180% due 02/01/02 2,380 2,331
6.520% due 10/08/02 1,025 1,021
5.880% due 05/19/03 5,500 5,394
General Motors Acceptance Corp.
5.350% due 04/16/01 5,500 5,460
7.500% due 06/06/02 6,500 6,543
8.500% due 01/01/03 1,500 1,546
5.750% due 11/10/03 750 724
Household Finance Corp.
6.125% due 07/15/02 (a) 1,000 985
IBM Credit Corp.
6.450% due 11/12/02 1,300 1,295
IMC Global, Inc.
6.625% due 10/15/01 1,550 1,527
International Lease Finance Corp.
5.625% due 05/01/02 1,000 980
Kern River Funding Corp.
Series B
6.720% due 09/30/01 1,125 1,117
Lehman Brothers Holdings, Inc.
6.625% due 04/01/04 450 437
7.750% due 01/15/05 2,000 2,017
Mellon Bank North America
6.750% due 06/01/03 1,900 1,892
Metropolitan Life Insurance Co.
6.300% due 11/01/03 730 714
Morgan Stanley Dean Witter & Co.
5.625% due 01/20/04 1,750 1,683
Nabisco, Inc.
6.000% due 02/15/01 (a) 415 412
National Westminster Bank
9.450% due 05/01/01 1,500 1,516
9.375% due 11/15/03 8,000 8,513
NationsBank Corp.
8.125% due 06/15/02 2,750 2,805
Norwest Financial, Inc.
6.375% due 09/15/02 1,000 990
Osprey Trust/Osprey I
7.797% due 01/15/03 200 200
Panamsat Corp.
6.000% due 01/15/03 1,100 1,052
Paramount Communications, Inc.
7.500% due 01/15/02 875 875
Popular North America, Inc.
Series D
6.875% due 06/15/01 1,100 1,099
175 Short Term Bond Fund
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- -------
Procter & Gamble
9.625% due 01/14/01 6,920 6,944
Qwest Corp.
7.200% due 11/01/04 1,000 994
Salomon Smith Barney
Holdings, Inc.
6.625% due 07/01/02 75 75
6.500% due 10/15/02 300 298
Sears Roebuck Acceptance Corp.
Series II
6.690% due 04/30/01 1,800 1,793
Series III
6.820% due 10/17/02 6,000 5,966
Suntrust Banks, Inc.
8.250% due 07/15/02 1,825 1,848
Textron, Inc.
6.750% due 09/15/02 11,000 10,918
TRW, Inc.
6.500% due 06/01/02 1,725 1,693
US West Capital Funding, Inc.
6.875% due 08/15/01 1,230 1,227
Waste Management, Inc.
7.100% due 08/01/26 1,175 1,139
Wells Fargo Co.
6.500% due 09/03/02 1,500 1,494
WHX Corp.
9.375% due 11/15/03 1,700 1,744
Worldcom, Inc.
7.875% due 05/15/03 1,500 1,524
-------
173,984
-------
EUR ODOLLAR BONDS - 1.5%
American Express Travel
6.410% due 10/24/01 (a) 1,500 1,499
Argentina, Republic of
Series B
Zero Coupon due 04/15/01 1,500 1,452
Deutsche Telekom International
Finance BV
7.750% due 06/15/05 1,250 1,271
Ontario, Province of
7.375% due 01/27/03 1,000 1,014
Telefonica Europe BV
7.350% due 09/15/05 1,275 1,277
-------
6,513
-------
MORTGAGE-BACKED SECURITIES - 12.5%
Asset Securitization Corp.
Series 1997-D5 Class A1A
6.500% due 02/14/41 747 742
Bank One Mortgage-backed
Pass-through Certificate
Series 2000-2 Class 4A
6.673% due 03/15/30 (a) 1,015 1,011
Bayview Financial Acquisition Trust
Series 1998-1 Class A1
7.010% due 05/25/29 798 790
Chase Commercial Mortgage Securities
Corp.
Series 1997-2 Class A1
6.450% due 12/19/04 1,511 1,495
Deutsche Mortgage & Asset Receiving
Corp.
Series 1998-C1 Class A1
6.220% due 09/15/07 2 2
DLJ Mortgage Acceptance Corp.
Series 1995-CF2 Class A1A
6.650% due 12/17/27 240 238
Series 1996-CF2 Class A1A
6.860% due 11/12/21 554 553
Series 1997-CF1 Class A1A
7.400% due 05/15/06 941 951
Federal Home Loan Mortgage Corp.
Participation Certificate
9.000% due 2005 92 93
6.250% due 2007 26 26
6.500% due 2008 1,636 1,602
5.500% due 2009 2,095 2,007
6.000% due 2011 1,718 1,665
7.000% due 2011 1,114 1,111
7.552% due 2022 (a) 1,404 1,419
6.968% due 2027 (a) 1,873 1,865
6.706% due 2029 (a) 1,995 1,967
Federal National Mortgage Association
7.000% due 2004 435 431
8.750% due 2004 13 13
6.500% due 2008 1,334 1,314
5.500% due 2009 8,123 7,691
7.000% due 2009 1,309 1,307
8.000% due 2009 (a) 1,381 1,406
7.000% due 2014 (a) 569 568
7.500% due 2014 1,108 1,122
6.939% due 2018 (a) 1,107 1,098
8.186% due 2022 (a) 829 852
8.280% due 2024 (a) 1,941 1,995
8.190% due 2029 (a) 903 922
7.500% due 2030 1,747 1,744
Series 1998-32 Class TB
6.000% due 05/18/13 775 764
Short Term Bond Fund 176
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- -------
Goldman Sachs Mortgage
Securities Corp.
Series 2000-1 Class A
6.970% due 06/20/24 (a) 1,300 1,302
Government National Mortgage Association
7.250% due 2006 993 999
7.000% due 2007 58 58
6.000% due 2008 724 707
7.000% due 2008 722 725
7.000% due 2009 1,715 1,722
8.250% due 2009 563 574
7.000% due 2011 347 347
7.000% due 2012 349 349
7.500% due 2013 986 1,001
9.500% due 2017 4 4
6.750% due 2022 1,298 1,309
7.375% due 2024 (a) 569 573
6.750% due 2027 411 414
Prudential Home Mortgage Securities
Series 1994-19 Class A2
7.050% due 05/25/24 134 133
Residential Accredited Loans, Inc.
Series 1997-QS7 Class A1
7.500% due 07/25/27 7 7
Series 1999-QS2 Class A3
6.500% due 02/25/29 457 436
Resolution Trust Corp. Mortgage
Pass-thru Certificate
Series 1995-2 Class C1
7.450% due 05/25/29 (a) 308 303
Structured Asset Mortgage
Investments, Inc.
Series 1998-9 Class 2A2
6.125% due 11/25/13 1,185 1,142
Union Planters Mortgage
Finance Corp.
Series 1998-A Class A1
6.350% due 01/25/28 241 241
Series 1999-1 Class A1
6.250% due 04/01/29 451 438
Washington Mutual Step Up Bond
Series 2000-1 Class A1
6.911% due 06/25/24 (a) 2,173 2,170
Wilshire Funding Corporation
Series 1997-WFC1 Class AI
7.250% due 08/25/27 265 264
-------
53,982
-------
MUNICIPAL BONDS - 0.5%
Missouri Higher Education
Loan Authority
Series 97 Class P
6.600% due 07/25/08 (a) 812 804
Philadelphia, Pennsylvania, Authority
for Industrial Development
Series 1997 Class A
6.488% due 06/15/04 1,367 1,353
-------
2,157
-------
UNITED STATES GOVERNMENT AGENCIES - 1.1%
Federal Home Loan Bank
Series 1TO1
5.875% due 08/15/01 1,800 1,790
Federal National Mortgage Association
5.250% due 01/15/03 1,000 976
5.125% due 02/13/04 2,275 2,183
-------
4,949
-------
UNITED STATES GOVERNMENT TREASURIES - 2.8%
United States Treasury Notes
5.500% due 08/31/01 375 372
6.500% due 02/28/02 2,930 2,941
6.625% due 05/31/02 1,565 1,577
6.375% due 06/30/02 1,000 1,005
3.625% due 07/15/02 2,965 2,971
6.125% due 08/31/02 925 927
6.250% due 08/31/02 100 100
3.625% due 01/15/08 1,903 1,872
5.750% due 08/15/10 185 185
-------
11,950
-------
YANKEE BONDS - 4.6%
Edperbrascan Corp.
7.375% due 10/01/02 2,000 1,963
Manitoba, Province of
8.000% due 04/15/02 5,600 5,699
Series CZ
6.750% due 03/01/03 5,200 5,220
Royal Caribbean Cruises, Ltd.
7.125% due 09/18/02 2,150 2,092
Tyco International, Ltd.
6.500% due 11/01/01 3,000 2,971
Westpac Banking, Ltd.
7.875% due 10/15/02 2,006 2,041
-------
19,986
-------
TOTAL LONG-TERM INVESTMENTS
(cost $412,442) 410,206
-------
177 Short Term Bond Fund
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
--------- -------
SHORT-TERM INVESTMENTS - 4.7%
Frank Russell Investment Company Money
Market Fund,
due on demand (b) 18,972 18,972
Merrill Lynch & Co., Inc.
Commercial Paper
6.470% due 11/16/00 (b) 274 274
Phillips Petroleum Co.
Commercial Paper
6.720% due 11/07/00 (b) 975 975
-------
TOTAL SHORT-TERM INVESTMENTS
(cost $20,221) 20,221
-------
TOTAL INVESTMENTS - 99.3%
(identified cost $432,663) 430,427
OTHER ASSETS AND LIABILITIES,
NET - 0.7% 3,027
-------
NET ASSETS - 100.0% 433,454
=======
(a) Adjustable or floating rate security.
(b) At amortized cost, which approximates market.
See accompanying notes which are an integral part of the financial statements.
Short Term Bond Fund 178
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) October 31, 2000
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments at market (identified cost $432,663) ..................................... $ 430,427
Cash .................................................................................. 2,906
Receivables:
Dividends and interest ............................................................... 5,451
Fund shares sold ..................................................................... 275
From Advisor ......................................................................... 152
Prepaid expenses ...................................................................... 4
---------
Total assets ....................................................................... 439,215
LIABILITIES
Payables:
Investments purchased (delayed settlement) ............................ $ 3,637
Fund shares redeemed ................................................... 1,823
Accrued fees to affiliates ............................................. 214
Other accrued expenses ................................................. 87
---------
Total liabilities .................................................................. 5,761
---------
NET ASSETS ............................................................................ $ 433,454
=========
NET ASSETS CONSIST OF:
Undistributed net investment income ................................................... $ 3,075
Accumulated net realized gain (loss) ................................................. (20,902)
Unrealized appreciation (depreciation) on investments ................................. (2,236)
Shares of beneficial interest ......................................................... 238
Additional paid-in capital ............................................................ 453,279
---------
NET ASSETS ............................................................................ $ 433,454
=========
NET ASSET VALUE, offering and redemption price per share:
Class C ($671,500 divided by 36,825 shares of $.01 par value
shares of beneficial interest outstanding) ........................................ $ 18.23
=========
Class E ($9,898,412 divided by 542,647 shares of $.01 par value
shares of beneficial interest outstanding) ........................................ $ 18.24
=========
Class S ($422,884,353 divided by 23,215,442 shares of $.01 par value
shares of beneficial interest outstanding) ........................................ $ 18.22
=========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
179 Short Term Bond Fund
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Interest ........................................................................... $ 24,355 $ 26,239
Dividends from Money Market Fund ................................................... 953 1,092
-------- --------
Total investment income .......................................................... 25,308 27,331
-------- --------
EXPENSES
Advisory fees ...................................................................... 1,700 2,041
Administrative fees ................................................................ 190 229
Custodian fees ..................................................................... 171 334
Distribution fees - Class C ........................................................ 5 4
Transfer agent fees ................................................................ 325 607
Professional fees .................................................................. 58 10
Registration fees .................................................................. 7 159
Shareholder servicing fees - Class C ............................................... 2 1
Shareholder servicing fees - Class E ............................................... 20 15
Trustees' fees ..................................................................... 11 12
Miscellaneous ...................................................................... 53 3
-------- --------
Expenses before reductions ......................................................... 2,542 3,415
Expense reductions ................................................................. (78) --
-------- --------
Expenses, net .................................................................... 2,464 3,415
-------- --------
Net investment income ............................................................... 22,844 23,916
-------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investments ............................................ (2,847) (2,426)
Net change in unrealized appreciation (depreciation) on investments ................ 4,814 (7,220)
-------- --------
Net realized and unrealized gain (loss) ............................................ 1,967 (9,646)
-------- --------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ............................... $ 24,811 $ 14,270
======== ========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Short Term Bond Fund 180
<PAGE>
SHORT TERM BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C> <C>
OPERATIONS
Net investment income ........................................... $ 22,844 $ 23,916 $ 13,185
Net realized gain (loss) ....................................... (2,847) (2,426) 1,126
Net change in unrealized appreciation (depreciation) ........... 4,814 (7,220) 355
--------- --------- ---------
Net increase (decrease) in net assets from operations ......... 24,811 14,270 14,666
--------- --------- ---------
DISTRIBUTIONS
From net investment income
Class C ....................................................... (33) (24) --
Class E ....................................................... (425) (303) --
Class S ....................................................... (19,499) (24,023) (13,149)
--------- --------- ---------
Net decrease in net assets from distributions ............... (19,957) (24,350) (13,149)
--------- --------- ---------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ... (28,484) 206,625 29,552
--------- --------- ---------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ...................... (23,630) 196,545 31,069
NET ASSETS
Beginning of period ............................................. 457,084 260,539 229,470
--------- --------- ---------
End of period (including undistributed net investment income of
$3,075, $168 and $621, respectively) ......................... $ 433,454 $ 457,084 $ 260,539
========= ========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
181 Short Term Bond Fund
<PAGE>
SHORT TERM BOND FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
2000* 1999**
-------- --------
NET ASSET VALUE, BEGINNING OF PERIOD ................... $ 18.13 $ 18.36
-------- --------
INCOME FROM OPERATIONS
Net investment income (a) ............................ .79 .68
Net realized and unrealized gain (loss) .............. .04 (.31)
-------- --------
Total income from operations ........................ .83 .37
-------- --------
DISTRIBUTIONS
From net investment income ............................ (.73) (.60)
-------- --------
NET ASSET VALUE, END OF PERIOD ......................... $ 18.23 $ 18.13
======== ========
TOTAL RETURN (%)(b) ................................... 4.67 2.02
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ............. 672 801
Ratios to average net assets (%)(c):
Operating expenses, net ............................. 1.64 1.72
Operating expenses, gross ........................... 1.66 1.72
Net investment income ............................... 5.01 4.41
Portfolio turnover rate (%) .......................... 92.31 177.08
* For the ten months ended October 31, 2000.
** 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) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
Short Term Bond Fund 182
<PAGE>
SHORT TERM 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.
2000* 1999**
--------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD ................... $ 18.08 $ 18.51
--------- ---------
INCOME FROM OPERATIONS
Net investment income (a) ............................ .88 .80
Net realized and unrealized gain (loss) .............. .07 (.34)
--------- ---------
Total income from operations ........................ .95 .46
--------- ---------
DISTRIBUTIONS
From net investment income ............................ (.79) (.89)
--------- ---------
NET ASSET VALUE, END OF PERIOD ......................... $ 18.24 $ 18.08
========= =========
TOTAL RETURN (%)(b) ................................... 5.36 2.53
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ............. 9,898 8,693
Ratios to average net assets (%)(c):
Operating expenses, net ............................. .89 .97
Operating expenses, gross ........................... .91 .97
Net investment income ............................... 5.77 5.05
Portfolio turnover rate (%) .......................... 92.31 177.08
* For the ten months ended October 31, 2000.
** 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) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
183 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,
----------------------------------------------------------
2000* 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD .............. $ 18.03 $ 18.46 $ 18.35 $ 18.36 $ 18.55 $ 17.98
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM OPERATIONS
Net investment income (a) ........................ .91 .90 .99 1.08 1.04 1.16
Net realized and unrealized gain (loss) ......... .09 (.36) .11 -- (.19) .59
---------- ---------- ---------- ---------- ---------- ----------
Total income from operations ................... 1.00 .54 1.10 1.08 .85 1.75
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS
From net investment income ....................... (.81) (.97) (.99) (1.09) (1.04) (1.18)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD .................... $ 18.22 $ 18.03 $ 18.46 $ 18.35 $ 18.36 $ 18.55
========== ========== ========== ========== ========== ==========
TOTAL RETURN (%)(b)(c) ............................ 5.64 3.03 6.09 6.02 4.76 9.95
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ........ 422,884 447,590 260,539 229,470 222,983 183,577
Ratios to average net assets (%)(c)(d):
Operating expenses, net ........................ .64 .74 .66 .66 .70 .58
Operating expenses, gross ...................... .66 .74 .66 .66 .70 .58
Net investment income .......................... 6.00 5.22 5.37 5.70 5.70 6.41
Portfolio turnover rate (%) ..................... 92.31 177.08 129.85 213.14 264.40 269.31
</TABLE>
* For the ten months ended October 31, 2000.
(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) For periods prior to April 1, 1995, Fund performance, operating expenses
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net of
investment management fees but gross of any investment services fees. See
Note 4.
(d) The ratios for periods less than one year are annualized.
Short Term Bond Fund 184
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 2000
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company") is a series
mutual fund with 29 different investment portfolios referred to as "Funds."
These financial statements report on ten Funds, each of which has distinct
investment objectives and strategies. The Investment Company is registered
under the Investment Company Act of 1940, as amended, as a diversified, open-
end management investment company. It is organized and operates as a
Massachusetts business trust under an amended master trust agreement dated
July 26, 1984. The Investment Company's master trust agreement permits the
Board of Trustees to issue an unlimited number of full and fractional shares
of beneficial interest at a $.01 par value.
The Investment Company's Board of Trustees approved a change in the Funds'
fiscal year end from December 31 to October 31. As a result, this financial
report reflects the ten-month period commencing on January 1, 2000 through
October 31, 2000.
On February 26, 1999, the Fixed Income II Fund acquired all the net assets of
the Volatility Constrained Bond Fund 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 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 NET ACCUMULATED NET ADDITIONAL
INVESTMENT INCOME REALIZED GAIN (LOSS) PAID-IN CAPITAL
----------------- -------------------- ---------------
<S> <C> <C> <C>
Short Term Bond Fund $ 42,226 $ (9,588,387) $ 9,546,161
</TABLE>
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.
185 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
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 or excise tax provision was required for the Funds.
At October 31, 2000, 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>
10/31/01 10/31/02 10/31/03 10/31/04
----------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Equity III $ -- $ -- $ -- $ --
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 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
10/31/05 10/31/06 10/31/07 10/31/08 Totals
----------- ------------ ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Equity III $ -- $ -- $ -- $ 11,660,332 $ 11,660,332
Emerging Markets -- 56,335,865 30,325,300 6,323,823 96,220,969
Real Estate Securities -- 2,695,613 22,984,087 10,831,36 36,511,061
Short Term Bond 574,853 51,911 3,481,990 2,691,693 21,557,985
Fixed Income I -- -- 13,186,769 12,037,900 25,224,669
Fixed Income III -- -- 12,312,539 7,345,284 19,657,823
</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 October 31, 2000 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 $ 1,160,361,589 $ 429,319,180 $ (34,857,840) $ 394,461,340
Equity II 729,999,657 180,048,944 (43,348,750) 136,700,194
Equity III 110,402,188 29,974,087 (3,206,773) 26,767,314
Equity Q 1,018,754,977 454,154,931 (55,649,106) 398,505,825
International 1,069,376,446 191,961,670 (67,365,757) 124,595,913
Emerging Markets 377,294,329 78,668,225 (88,314,722) (9,646,497)
Real Estate Securities 615,254,116 101,517,866 (25,126,228) 76,391,638
Short Term Bond 432,077,359 1,344,497 (2,995,094) (1,650,597)
Fixed Income I 1,217,227,745 12,905,049 (19,351,764) (6,446,715)
Fixed Income III 610,421,690 8,479,584 (13,807,465) (5,327,881)
</TABLE>
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: For all Funds, income dividends and
capital gain distributions, if any, are recorded on the ex-dividend date.
Dividends are generally declared and paid quarterly for the equity Funds,
annually for the International 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.
Notes to Financial Statements 186
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
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 ten
months ended October 31, 2000:
<TABLE>
<CAPTION>
UNDISTRIBUTED NET ACCUMULATED NET ADDITIONAL
INVESTMENT INCOME REALIZED GAIN (LOSS) PAID-IN CAPITAL
-------------------- ---------------------- -----------------
<S> <C> <C> <C>
Equity I $ (609,670) $ 609,670 $ --
Equity II -- 165,516 (165,516)
Equity III -- 48,050 (48,050)
Equity Q 1,181,395 (1,181,395) --
International (15,281,811) 15,100,454 181,357
Fixed Income I 727,942 (727,942) --
Fixed Income III 514,918 (204,999) (309,919)
Emerging Markets 3,559,044 77,767 (3,636,811)
Real Estate Securities 14,056 1,751,583 (1,765,639)
Short Term Bond 20,515 (20,515) --
</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 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 year-end, as a result of changes in the exchange rates.
The Funds do not 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.
187 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
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 October 31, 2000, 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.
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.
Notes to Financial Statements 188
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
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 market 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 market 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 ten months ended October 31, 2000 and the year ended
December 31, 1999, purchases and sales of investment securities (excluding US
Government and Agency obligations, short-term investments, options, futures and
repurchase agreements) were as follows:
<TABLE>
<CAPTION>
OCTOBER 31, 2000 DECEMBER 31, 1999
------------------------------------ ----------------------------------
PURCHASES SALES PURCHASES SALES
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Equity I $ 2,226,509,229 $ 2,270,892,644 Equity I $ 1,582,638,600 $ 1,581,208,716
Equity II 1,078,264,797 1,082,515,372 Equity II 751,200,378 646,512,122
Equity III 150,992,720 187,298,696 Equity III 271,279,157 302,410,046
Equity Q 880,519,951 822,504,566 Equity Q 1,083,478,952 1,178,199,782
International 1,243,607,966 1,227,453,946 International 1,233,268,691 1,227,715,662
Emerging Markets 336,464,626 294,759,768 Emerging Markets 314,913,984 318,289,477
Real Estate Securities 340,288,457 334,983,671 Real Estate Securities 233,099,531 183,072,057
Short Term Bond 221,860,569 244,480,893 Short Term Bond 320,528,572 221,515,031
Fixed Income I 334,259,615 244,399,500 Fixed Income I 390,611,431 357,776,111
Fixed Income III 198,638,791 177,949,685 Fixed Income III 198,968,172 210,148,991
</TABLE>
Purchases and sales of US Government and Agency obligations (excluding
short-term investments, options, futures and repurchase agreements) were as
follows:
<TABLE>
<CAPTION>
OCTOBER 31, 2000 DECEMBER 31, 1999
----------------------------------- ------------------------------------
PURCHASES SALES PURCHASES SALES
--------------- --------------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
Short Term Bond $ 176,953,691 $ 187,592,969 Short Term Bond $ 537,710,748 $ 536,585,617
Fixed Income I 1,013,706,629 1,065,883,192 Fixed Income I 1,214,108,875 1,067,392,214
Fixed Income III 400,764,209 390,764,786 Fixed Income III 543,708,811 496,763,412
</TABLE>
WRITTEN OPTIONS CONTRACTS: Fund transactions in written options contracts for
the ten months ended October 31, 2000 and the year ended December 31, 1999 were
as follows:
<TABLE>
<CAPTION>
FIXED INCOME I FIXED INCOME III
------------------------------- ------------------------------------
NOTIONAL VALUE (1) PREMIUMS NOTIONAL VALUE (1) PREMIUMS
(000) RECEIVED (000) RECEIVED
---------------- -------------- ------------------- ----------------
<S> <C> <C> <C> <C>
Outstanding December 31, 1999 $ 16,435 $ 147,312 $ 23,515 $ 313,644
Opened 78,179 608,665 68,119 798,367
Closed (39,095) (325,084) (38,524) (545,843)
Exercised -- -- (81) (14,362)
Expired (10,019) (163,223) (12,936) (306,096)
-------------- ------------- ------------- ---------------
Outstanding October 31, 2000 $ 45,500 $ 267,670 $ 40,093 $ 245,710
============== ============= ============= ===============
</TABLE>
(1) Each $100,000 notional value represents 1 contract.
189 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
FIXED INCOME I FIXED INCOME III
------------------------------------ ------------------------------------
NOTIONAL VALUE (1) PREMIUMS NOTIONAL VALUE (1) PREMIUMS
(000) RECEIVED (000) RECEIVED
------------------ --------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Outstanding December 31, 1998 $ 19,100 $ 260,000 $ 18,000 $ 205,189
Opened 114,010 891,655 110,850 1,495,189
Closed (61,675) (664,031) (78,988) (847,263)
Exercised (3,500) (79,625) (5,100) (108,177)
Expired (51,500) (260,687) (21,247) (431,294)
------------------ --------------- ------------------ ----------------
Outstanding December 31, 1999 $ 16,435 $ 147,312 $ 23,515 $ 313,644
================== =============== ================== ================
</TABLE>
(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. 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 the
Investment Company not presented herein). As of October 31, 2000,
$400,379,000 of the Money Market Fund's net assets represents investments by
these Funds and $339,345,000 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 total $41,158,438 and $3,412,319, respectively, for the
ten months ended October 31, 2000. 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.
<TABLE>
<CAPTION>
ANNUAL RATE ANNUAL RATE
---------------------------- ------------------------------
ADVISOR ADMINISTRATOR ADVISOR ADMINISTRATOR
---------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Equity I 0.55% 0.05% Emerging Markets 1.15% 0.05%
Equity II 0.70 0.05 Real Estate Securities 0.80 0.05
Equity III 0.55 0.05 Short Term Bond 0.45 0.05
Equity Q 0.55 0.05 Fixed Income I 0.25 0.05
International 0.70 0.05 Fixed Income III 0.50 0.05
</TABLE>
Effective September 29, 2000 the Advisor has contractually agreed to waive up
to the full amount of its 0.50% combined advisory and administrative fees for
the Short Term Bond Fund, and to reimburse the Fund to the extent that fund
level expenses exceed 0.52% of the Fund's average daily net assets for the
month of October and thereafter on an annual basis. The total amount of the
waiver for the month ending October 31, 2000 was $51,875.
In accordance with the special servicing agreement entered into in February
1999 by the Advisor, the Fund of Funds (a group of five Fund of Funds and the
Tax-Managed Global Equity Fund which invest in a combination of Class S
shares of the Investment Company's portfolios) and the Funds listed below,
the "Underlying Funds" in which the Fund of Funds invest, expenses from the
operation of the Fund of Funds are borne by the Underlying Funds based on
each Underlying Fund's proportionate share of assets owned by the Fund of
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 Fund of Fund, the Advisor will reimburse the respective
Underlying Funds.
Notes to Financial Statements 190
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
For the ten months ended October 31, 2000 and year ended December 31, 1999, the
special servicing expense charged to the Underlying Funds amounted to:
OCTOBER 31, 2000 DECEMBER 31, 1999
------------------------------------ ------------------------------------
AMOUNT AMOUNT
UNDERLYING FUND PAID UNDERLYING FUND PAID
----------------------- ------------ ----------------------- ------------
Emerging Markets $ 57,465 Emerging Markets $ 30,586
Short-Term Bond 53,514 Short-Term Bond 35,722
Real Estate Securities 71,715 Real Estate Securities 45,435
CUSTODIAN: The Funds have entered into arrangements with their Custodian
whereby custody credits realized as a result of uninvested cash balances were
used to reduce a portion of the Fund's expenses. During the ten months ended
October 31, 2000, the Fund's custodian fees were reduced by the following
amounts under these arrangements:
OCTOBER 31, 2000
---------------------------------------------------------------------
Equity I $ 13,299 Fixed Income III $ 26,445
Equity II 19,724 Short Term Bond 26,062
Equity III 624 International 7,851
Equity Q 6,938 Emerging Markets 30,556
Fixed Income I 55,488 Real Estate Securities 4,303
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 Advisor. The amounts of this fee for the ten months ended
October 31, 2000 and for the year ended December 31, 1999 were $113,905 and
$155,898, respectively.
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 ten months ended October 31, 2000, and for the year ended December 31,
1999 were $4,777,084 and $5,722,442, respectively. In addition, FRIMCo has
contractually agreed to waive a portion of its transfer agency fees to the
extent that those fees would affect "Other Expenses" of the Fund by one basis
point or more. The total transfer agent fee waiver for the ten months ended
October 31, 2000 were as follows:
TA FEE
FUND WAIVER AMOUNT
------------------------------- ---------------
Equity I $ 13,000
Equity II 13,000
Equity Q 13,000
Fixed Income I 13,000
Fixed Income III 12,300
International 13,000
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 C and Class E shares of the Funds. The shareholder
servicing payments shall not exceed 0.25% of the average daily net assets of a
Fund's Class C and Class E shares on an annual basis.
191 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
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. Amounts retained by Frank Russell Securities, Inc. for the
ten months ended October 31, 2000, and for the year ended December 31, 1999
were as follows:
<TABLE>
<CAPTION>
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
Equity I $ 95,551 $ 211,631
Equity II 68,450 76,428
Equity III 29,315 74,015
Equity Q 38,429 53,090
International 460,984 266,312
Emerging Markets 241,637 55,954
</TABLE>
Additionally, the Funds paid brokerage commissions to non-affiliated brokers
who provided brokerage and research services to the Advisor.
BOARD OF TRUSTEES: The Investment Company pays each of its Trustees not
affiliated with FRIMCo a retainer of $55,000 per year plus out-of-pocket
expenses. Total Trustee expenses for the ten months ended October 31, 2000
were $118,272, and were allocated to each Fund where appropriate, on a pro
rata basis. 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 with a retainer of $30,000 per year.
5. FUND SHARE TRANSACTIONS
Share transactions for the ten months ended October 31, 2000, the years ended
December 31, 1999, and December 31, 1998 were as follows:
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
----------------------------------------------------------------------------------
2000 1999 1998 2000 1999 1998
----------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
EQUITY I
CLASS E (a)
Proceeds from shares sold 292,724 1,354,362 -- $ 10,564 $ 51,240 $ --
Proceeds from reinvestment of distributions 28,057 115,629 -- 959 4,159 --
Payments for shares redeemed (408,715) (155,939) -- (14,560) (5,805) --
----------- ---------- ----------- ----------- ----------- -----------
Net increase (decrease) (87,934) 1,314,052 -- (3,037) 49,594 --
----------- ---------- ----------- ----------- ----------- -----------
CLASS I
Proceeds from shares sold 9,605,512 14,156,753 11,649,184 341,223 524,846 382,855
Proceeds from reinvestment of distributions 922,199 4,034,855 2,804,239 31,556 145,015 91,198
Payments for shares redeemed (12,744,159) (13,888,434) (12,417,244) (456,221) (518,304) (413,664)
----------- ---------- ----------- ----------- ----------- -----------
Net increase (decrease) (2,216,481) 4,303,174 2,036,179 (83,442) 151,557 60,389
----------- ---------- ----------- ----------- ----------- -----------
CLASS Y (b)
Proceeds from shares sold 1,235,053 -- -- 45,543 -- --
Proceeds from reinvestment of distributions 5,910 -- -- 212 -- --
Payments for shares redeemed (187,340) -- -- (6,840) -- --
----------- ---------- ----------- ----------- ----------- -----------
Net increase (decrease) 1,053,623 -- -- 38,915 -- --
----------- ---------- ----------- ----------- ----------- -----------
Total net increase (decrease) (1,250,792) 5,617,226 2,036,179 $ (47,564) $ 201,151 $ 60,389
=========== =========== =========== =========== =========== ===========
</TABLE>
(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 Y are for the period March 30, 2000
(commencement of sale of shares) to October 31, 2000.
Notes to Financial Statements 192
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
--------------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
----------- ------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
EQUITY III
CLASS E (a)
Proceeds from shares sold 50,554 337,230 -- $ 1,226 $ 9,867 $ --
Proceeds from reinvestment of distributions 2,224 22,539 -- 56 577 --
Payments for shares redeemed (115,186) (56,941) -- (2,795) (1,592) --
----------- ------------ ------------ ---------- ---------- ----------
Net increase (decrease) (62,408) 302,828 -- (1,513) 8,852 --
----------- ------------ ------------ ---------- ---------- ----------
CLASS I
Proceeds from shares sold 1,725,589 1,957,585 1,912,599 41,982 55,751 57,633
Proceeds from reinvestment of distributions 41,095 577,930 832,353 1,031 15,142 23,877
Payments for shares redeemed (3,283,293) (3,331,811) (3,641,754) (80,591) (94,786) (106,698)
----------- ------------ ------------ ---------- ---------- ----------
Total net increase (decrease) (1,516,609) (796,296) (896,802) (37,578) (23,893) (25,188)
----------- ------------ ------------ ---------- ---------- ----------
Total net increase (decrease) (1,579,017) (493,468) (896,802) $ (39,091) $ (15,041) $ (25,188)
=========== ============ ============ ========== ========== ==========
EQUITY II
CLASS E (a)
Proceeds from shares sold 300,361 1,114,666 -- $ 11,258 $ 35,655 $ --
Proceeds from reinvestment of distributions 17,907 42,280 -- 654 1,407 --
Payments for shares redeemed (330,935) (218,128) -- (12,420) (7,131) --
----------- ------------ ------------ ---------- ---------- ----------
Net increase redeemed (12,667) 938,818 -- (508) 29,931 --
----------- ------------ ------------ ---------- ---------- ----------
CLASS I
Proceeds from shares sold 4,981,555 8,372,629 6,590,024 186,942 260,038 209,065
Proceeds from reinvestment of distributions 398,533 1,054,369 1,013,507 14,595 34,320 30,141
Payments for shares redeemed (6,397,360) (5,608,745) (4,974,795) (243,582) (177,851) (158,755)
----------- ------------ ------------ ---------- ---------- ----------
Net increase (decrease) (1,017,272) 3,818,253 2,628,736 (42,045) 116,507 80,451
----------- ------------ ------------ ---------- ---------- ----------
CLASS Y (b)
Proceeds from shares sold 1,304,621 -- -- 50,609 -- --
Proceeds from reinvestment of distributions 3,437 -- -- 132 -- --
Payments for shares redeemed (1,366) -- -- (50) -- --
----------- ------------ ------------ ---------- ---------- ----------
Net increase (decrease) 1,306,692 -- -- 50,691 -- --
----------- ------------ ------------ ---------- ---------- ----------
Total net increase (decrease) 276,753 4,757,071 2,628,736 $ 8,138 $ 146,438 $ 80,451
=========== ============ ============ ========== ========== ==========
</TABLE>
193 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
---------------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
EQUITY Q
CLASS E (a)
Proceeds from shares sold 325,867 891,875 -- $ 13,267 $ 38,092 $ --
Proceeds from reinvestment of distributions 18,406 101,824 -- 702 4,077 --
Payments for shares redeemed (464,372) (254,253) -- (18,889) (10,726) --
---------- ---------- ----------- ---------- ---------- ----------
Net increase (decrease) (120,099) 739,446 -- (4,920) 31,443 --
---------- ---------- ----------- ---------- ---------- ----------
CLASS I
Proceeds from shares sold 8,964,765 9,489,238 7,788,647 363,852 402,156 298,739
Proceeds from reinvestment of distributions 740,589 4,403,495 2,920,742 28,430 176,157 109,535
Payments for shares redeemed (9,208,522) (10,314,554) (8,992,387) (377,361) (437,835) (344,894)
---------- ---------- ----------- ---------- ---------- ----------
Total net increase (decrease) 496,832 3,578,179 1,717,002 14,921 140,478 63,380
---------- ---------- ----------- ---------- ---------- ----------
CLASS Y (b)
Proceeds from shares sold 1,112,199 -- -- 46,997 -- --
Proceeds from reinvestment of distributions 5,356 -- -- 221 -- --
Payments for shares redeemed (163,724) -- -- (6,824) -- --
---------- ---------- ----------- ---------- ---------- ----------
Net increase (decrease) 953,831 -- -- 40,394 -- --
---------- ---------- ----------- ---------- ---------- ----------
Total net increase (decrease) 1,330,564 4,317,625 1,717,002 $ 50,395 $ 171,921 $ 63,380
========== ========== =========== ========== ========== ==========
INTERNATIONAL
CLASS E (a)
Proceeds from shares sold 178,343 799,750 -- $ 7,646 $ 31,654 $ --
Proceeds from reinvestment of distributions 18,560 29,732 -- 818 1,314 --
Payments for shares redeemed (193,483) (175,179) -- (8,483) (7,644) --
---------- ---------- ----------- ---------- ---------- ----------
Net increase (decrease) 3,420 654,303 -- (19) 25,324 --
---------- ---------- ----------- ---------- ---------- ----------
CLASS I
Proceeds from shares sold 7,484,295 8,507,370 8,855,148 323,366 342,619 330,798
Proceeds from reinvestment of distributions 807,189 1,496,665 756,486 35,605 64,808 27,770
Payments for shares redeemed (7,478,950) (9,584,595) (11,065,451) (326,652) (389,449) (412,202)
---------- ---------- ----------- ---------- ---------- ----------
Net increase (decrease) 812,534 419,440 (1,453,817) 32,319 17,978 (53,634)
---------- ---------- ----------- ---------- ---------- ----------
CLASS Y (b)
Proceeds from shares sold 2,117,122 -- -- 93,469 -- --
Proceeds from reinvestment of distributions -- -- -- -- -- --
Payments for shares redeemed (145,771) -- -- (6,200) -- --
---------- ---------- ----------- ---------- ---------- ----------
Net increase (decrease) 1,971,351 -- -- 87,269 -- --
---------- ---------- ----------- ---------- ---------- ----------
Total net increase (decrease) 2,787,305 1,073,743 (1,453,817) $ 119,569 $ 43,302 $ (53,634)
=========== =========== =========== ========== ========== ==========
</TABLE>
(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 Y are for the period March 30, 2000
(commencement of sale of shares) to October 31, 2000.
Notes to Financial Statements 194
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
----------------------------------------- ------------------------------------
2000 1999 1998 2000 1999 1998
----------- ------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
EMERGING MARKETS
CLASS C (c)
Proceeds from shares sold 140,959 147,290 -- $ 1,606 $ 1,466 $ --
Proceeds from reinvestment of distributions 228 45 -- 3 -- --
Payments for shares redeemed (28,302) (16,617) -- (319) (167) --
----------- ------------ ------------ ---------- ---------- ----------
Net increase (decrease) 112,885 130,718 -- 1,290 1,299 --
----------- ------------ ------------ ---------- ---------- ----------
CLASS E (d)
Proceeds from shares sold 288,875 852,482 4,558 3,222 8,575 38
Proceeds from reinvestment of distributions 1,435 1,091 -- 19 13 --
Payments for shares redeemed (103,971) (353,467) -- (1,246) (3,674) --
----------- ------------ ------------ ---------- ---------- ----------
Net increase (decrease) 186,339 500,106 4,558 1,995 4,914 38
----------- ------------ ------------ ---------- ---------- ----------
CLASS S
Proceeds from shares sold 13,110,992 14,900,682 22,508,124 150,574 140,982 221,964
Proceeds from reinvestment of distributions 131,179 281,096 188,272 1,688 2,639 2,070
Payments for shares redeemed (8,818,705) (15,483,258) (16,241,312) (100,976) (152,294) (149,675)
----------- ------------ ------------ ---------- ---------- ----------
Net increase (decrease) 4,423,466 (301,480) 6,455,084 51,286 (8,673) 74,359
----------- ------------ ------------ ---------- ---------- ----------
Total net increase (decrease) 4,722,690 329,344 6,459,642 $ 54,571 $ (2,460) $ 74,397
=========== ============ ============ ========== ========== ==========
REAL ESTATE SECURITIES
CLASS C (a)
Proceeds from shares sold 64,749 84,921 -- $ 1,594 $ 2,034 $ --
Proceeds from reinvestment of distributions 3,034 2,678 -- 76 59 --
Payments for shares redeemed (14,954) (9,550) -- (367) (227) --
----------- ------------ ------------ ---------- ---------- ----------
Net increase (decrease) 52,829 78,049 -- 1,303 1,866 --
----------- ------------ ------------ ---------- ---------- ----------
CLASS E (b)
Proceeds from shares sold 142,796 378,070 28,391 3,584 9,451 715
Proceeds from reinvestment of distributions 9,694 13,837 375 243 312 9
Payments for shares redeemed (117,101) (113,177) (6,530) (2,906) (2,588) (183)
----------- ------------ ------------ ---------- ---------- ----------
Total net increase (decrease) 35,389 278,730 22,236 921 7,175 541
----------- ------------ ------------ ---------- ---------- ----------
CLASS S
Proceeds from shares sold 6,443,988 10,307,873 9,286,206 156,960 247,786 254,637
Proceeds from reinvestment of distributions 687,466 1,500,692 1,114,356 17,315 34,444 30,226
Payments for shares redeemed (7,381,200) (9,610,223) (6,759,461) (183,340) (227,746) (178,741)
----------- ------------ ------------ ---------- ---------- ----------
Total net increase (decrease) (249,746) 2,198,342 3,641,101 (9,065) 54,484 106,122
----------- ------------ ------------ ---------- ---------- ----------
Total net increase (decrease) (161,528) 2,555,121 3,663,337 $ (6,841) $ 63,525 $ 106,663
=========== ============ ============ ========== ========== ==========
</TABLE>
(a) Share transactions for Class E are for the period May 14, 1999
(commencement of sales) to December 31, 1999.
(b) Share transactions for Class Y are for the period March 29, 2000
(commencement of sales) to October 31, 2000.
(c) Share transactions for Class C are for the period January 27, 1999
(commencement of sales) to December 31, 1999
(d) Share transactions for Class E are for the period September 22, 1998
(commencement of sales) to December 31, 1998.
195 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
----------------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
SHORT TERM BOND
CLASS C (c)
Proceeds from shares sold 22,477 104,488 -- $ 408 $ 1,907 $ --
Proceeds from reinvestment of distributions 1,599 1,225 -- 29 22 --
Payments for shares redeemed (31,409) (61,555) -- (571) (1,119) --
----------- ----------- ---------- ---------- ---------- ----------
Net increase (decrease) (7,333) 44,158 -- (134) 810 --
----------- ----------- ---------- ---------- ---------- ----------
CLASS E (d)
Proceeds from shares sold 116,497 550,310 -- 2,122 10,084 --
Proceeds from reinvestment of distributions 22,134 14,963 -- 401 271 --
Payments for shares redeemed (76,745) (84,513) -- (1,395) (1,538) --
----------- ----------- ---------- ---------- ---------- ----------
Total net increase (decrease) 61,886 480,760 -- 1,128 8,817 --
----------- ----------- ---------- ---------- ---------- ----------
CLASS S
Proceeds from shares sold 6,650,792 12,497,701 6,088,176 120,544 229,357 112,707
Shares issued in connection with acquisition
of Volatility Constrained Bond Fund -- 8,934,738 -- -- 163,684 --
Proceeds from reinvestment of distributions 866,714 1,023,507 604,269 15,671 18,557 11,141
Payments for shares redeemed (9,120,589) (11,748,485) (5,088,094) (165,693) (214,600) (94,296)
----------- ----------- ---------- ---------- ---------- ----------
Total net increase (decrease) (1,603,083) 10,707,461 1,604,351 (29,478) 196,998 29,552
----------- ----------- ---------- ---------- ---------- ----------
Total net increase (decrease) (1,548,530) 11,232,379 1,604,351 $ (28,484) $ 206,625 $ 29,552
=========== =========== ========== ========== ========== ==========
FIXED INCOME I
CLASS E (a)
Proceeds from shares sold 287,075 2,062,938 -- $ 5,884 $ 43,403 $ --
Proceeds from reinvestment of distributions 73,480 61,886 -- 1,510 1,272 --
Payments for shares redeemed (529,190) (353,494) -- (10,865) (7,315) --
----------- ----------- ---------- ---------- ---------- ----------
Net increase (decrease) (168,635) 1,771,330 -- (3,471) 37,360 --
----------- ----------- ---------- ---------- ---------- ----------
CLASS I
Proceeds from shares sold 13,437,770 18,807,025 18,203,608 275,936 402,034 398,149
Proceeds from reinvestment of distributions 1,813,302 2,614,237 2,497,093 37,248 54,266 54,549
Payments for shares redeemed (23,696,396) (14,519,562) (12,833,370) (487,272) (310,433) (281,502)
----------- ----------- ---------- ---------- ---------- ----------
Total net increase (decrease) (8,445,324) 6,901,700 7,867,331 (174,088) 145,867 171,196
----------- ----------- ---------- ---------- ---------- ----------
CLASS Y (b)
Proceeds from shares sold 8,093,084 -- -- 166,798 -- --
Proceeds from reinvestment of distributions 357,248 -- -- 7,332 -- --
Payments for shares redeemed (1,523,097) -- -- (31,454) -- --
----------- ----------- ---------- ---------- ---------- ----------
Net increase (decrease) 6,927,235 -- -- 142,676 -- --
----------- ----------- ---------- ---------- ---------- ----------
Total net increase (decrease) (1,686,724) 8,673,030 7,867,331 $ (34,883) $ 183,227 $ 171,196
=========== =========== ========== ========== ========== ==========
</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 C are for the period March 3, 1999
(commencement of sale of shares) to December 31, 1999.
(d) Share transactions for Class E are for the period February 18, 1999
(commencement of sale of shares) to December 31, 1999.
Notes to Financial Statements 196
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
------------------------------------------ ----------------------------------
2000 1999 1998 2000 1999 1998
FIXED INCOME III ------------ ------------ ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLASS E (a)
Proceeds from shares sold 302,624 308,301 -- $ 2,938 $ 3,102 $ --
Proceeds from reinvestment of distributions 21,605 10,658 -- 210 104 --
Payments for shares redeemed (21,824) (72,605) -- (211) (709) --
------------ ------------ ------------ --------- --------- ---------
Net increase (decrease) 302,405 246,354 -- 2,937 2,497 --
------------ ------------ ------------ --------- --------- ---------
CLASS I
Proceeds from shares sold 13,341,673 20,354,848 20,310,407 129,017 204,642 212,963
Proceeds from reinvestment of distributions 2,241,863 2,728,636 3,397,977 21,725 26,843 35,268
Payments for shares redeemed (17,594,072) (19,561,642) (15,209,804) (170,578) (196,406) (159,236)
------------ ------------ ------------ --------- --------- ---------
Total net increase (decrease) (2,010,536) 3,521,842 8,498,580 (19,836) 35,079 88,995
------------ ------------ ------------ --------- --------- ---------
CLASS Y (c)
Proceeds from shares sold 2,118,163 -- -- 20,584 -- --
Proceeds from reinvestment of distributions 68,648 -- -- 665 -- --
Payments for shares redeemed -- -- -- -- -- --
------------ ------------ ------------ --------- --------- ---------
Net increase (decrease) 2,186,811 -- -- 21,249 -- --
------------ ------------ ------------ --------- --------- ---------
Total net increase (decrease) 478,680 3,768,196 8,498,580 $ 4,350 $ 37,576 $ 88,995
============ ============ ============ ========= ========= =========
</TABLE>
6. LINE OF CREDIT
The Investment Company 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
Funds may borrow up to a maximum of 10 percent of the value of their net
assets under the agreement. The agreement will expire December 30, 2000.
The Fund did not have any drawdowns for the ten months ended October 31,
2000, and the year ended December 31, 1999.
7. DIVIDENDS
On December 7, 2000, the Fund's declared the following dividends from net
investment income payable on December 12, 2000 to shareholders of record on
December 8, 2000.
DECEMBER 2000
-------------
Fixed Income I - Class E $0.3690
Fixed Income I - Class I 0.3845
Fixed Income I - Class Y 0.3858
Fixed Income III - Class E 0.1764
Fixed Income III - Class I 0.1927
Fixed Income III - Class Y 0.1937
(a) Share transactions for Class E are for the period May 14, 1999
(commencement of sales) to December 31, 1999.
(b) Share transactions for Class Y are for the period March 29, 2000
(commencement of sales) to October 31, 2000.
(c) Share transactions for Class Y are for the period June 8, 2000
(commencement of sales) to October 31, 2000.
197 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
8. BENEFICIAL INTEREST
As of October 31, 2000, 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:
% % % %
------ ------ ------ ------
Equity I - Class E 22.6 -- -- --
Equity I - Class I 11.4 -- -- --
Equity I - Class Y 100.0 -- -- --
Equity II - Class E 40.0 -- -- --
Equity II - Class I 14.5 -- -- --
Equity II - Class Y 100.0 -- -- --
Equity III - Class E 21.3 20.7 10.3 --
Equity Q - Class E 17.2 16.2 10.1 --
Equity Q - Class I 15.8 10.2 -- --
Equity Q - Class Y 100.0 -- -- --
International - Class E 13.8 -- -- --
International - Class I 14.1 -- -- --
International - Class Y 100.0 -- -- --
Emerging Markets - Class C 36.6 -- -- --
Emerging Markets - Class E 14.2 11.0 -- --
Emerging Markets - Class S 10.2 -- -- --
Real Estate Securities - Class C 39.5 -- -- --
Real Estate Securities - Class E 13.8 -- -- --
Real Estate Securities - Class S 16.4 -- -- --
Short Term Bond - Class C 18.9 13.4 -- --
Fixed Income I - Class E 18.8 14.9 13.6 --
Fixed Income I - Class I 11.2 -- -- --
Fixed Income I - Class Y 100.0 -- -- --
Fixed Income III - Class E 15.6 14.8 12.2 11.9
Fixed Income III - Class I 14.0 11.5 -- --
Fixed Income III - Class Y 100.0 -- -- --
Notes to Financial Statements 198
<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, Fixed Income I, Fixed Income III, Emerging Markets,
Real Estate Securities, and Short Term Bond (the "Funds")) at October 31, 2000,
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 accounting principles generally accepted in the United States of America.
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 auditing standards generally accepted in the United States of America,
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 October 31, 2000 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Seattle, Washington
December 15, 2000
199 Report of Independent Accountants
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
TAX INFORMATION
October 31, 2000 (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 October 31, 2000:
TOTAL LONG-TERM
CAPITAL GAINS
---------------
Equity I $ 16,347,876
Equity II 40,276
Equity Q 14,551,781
International 11,134,320
The Emerging Markets Fund and International Fund paid foreign taxes of $621,631
and $2,461,673, and recognized $3,966,698 and $26,166,902 of foreign source
income, respectively, during the taxable year ended October 31, 2000. Pursuant
to Section 853 of the Internal Revenue Code, the Emerging Markets Fund and
International Fund designates $.0156 and $.0807 per share of foreign taxes paid
and $.0998 and $.8575 of gross income earned from foreign sources, respectively,
in the taxable year ended October 31, 2000.
Tax Information 200
<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
Kristianne Blake
Lee C. Gingrich
Eleanor W. Palmer
Raymond P. Tennison, Jr.
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
Marsico Capital Management, LLC, Denver, CO
Peachtree Asset Management, Atlanta, GA
Sanford C. Bernstein & Co., Inc., New York, NY
Strong Capital Management, Inc. Menomonee Falls, WI
Suffolk Capital Management, Inc., New York, NY
Turner Investment Partners, Inc. Berwyn, PA
Westpeak Investment Advisors, L.P., Boulder, CO
EQUITY II FUND
CapitalWorks Investment Partners, LLC, San Diego, CA
David J. Greene and Company, LLC, New York, NY
Delphi Management, Inc., Boston, MA
GlobeFlex Capital, L.P., San Diego, CA
Jacobs Levy Equity Management, Inc., Roseland, NJ
Sirach Capital Management, Inc., Seattle, WA
TimesSquare Capital Management, Inc., New York, NY
Westpeak Investment Advisors, L.P., Boulder, CO
EQUITY III FUND
Barclays Global Investors, San Francisco, CA
Equinox Capital Management, LLC, New York, NY
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
Driehaus Capital Management, Inc., Chicago, IL
Fidelity Management Trust Company, Boston, MA
J.P. Morgan Investment Management, Inc., New York, NY
Marvin & Palmer Associates, Inc., Wilmington, DE
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 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.
201 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
Security Capital Global Capital Management Group Inc., Chicago, IL
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.
Manager, Money Managers and Service Providers 202
<PAGE>
[LOGO OF FRANK RUSSELL INVESTMENT COMPANY]
Frank Russell Investment Company
909 A Street
Tacoma, Washington 98402
253-627-7001
800-787-7354
Fax: 253-591-3495
www.russell.com 36-08-020 (1000)
<PAGE>
------------------
MONEY MARKET FUNDS
------------------
FRANK RUSSELL INVESTMENT COMPANY
2000 ANNUAL REPORT
CLASS S SHARES
MONEY MARKET FUND
US GOVERNMENT MONEY MARKET FUND
TAX FREE MONEY MARKET FUND
OCTOBER 31, 2000
[LOGO OF FRANK RUSSELL INVESTMENT COMPANY]
<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
OCTOBER 31, 2000
TABLE OF CONTENTS
Page
Letter to Our Clients ........................... 2
Money Market Fund ............................... 3
US Government Money Market Fund ................. 11
Tax Free Money Market Fund ...................... 17
Notes to Financial Statements ................... 30
Report of Independent Accountants ............... 33
Tax Information ................................. 34
Manager, Money Managers and Service Providers ... 35
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 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 2000 Annual
Report. This report covers information on three of the Funds and represents our
nineteenth 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 2000, 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 1999 we have implemented changes in our Funds' structure
which we believe will benefit current and potential investors. Class Y shares of
the Institutional Funds were opened for investment, and the LifePoints/(R)/
Funds added Class S shares during 2000. Additionally, the Tax-Managed Global
Equity Fund was opened for investment in January 2000, providing a diversified
asset-allocated product to compliment the existing tax-managed Russell funds.
Thank you for your continued confidence and investment with Frank Russell
Investment Company. We look forward to 2001 and continuing to earn your support.
Sincerely,
/s/ Lynn L. Anderson
Lynn L. Anderson.
Chairman of the Board
Frank Russell Investment Company
<PAGE>
MONEY MARKET FUND
STATEMENT OF NET ASSETS
October 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
--------- ------ --------- -------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES - 22.0%
Chase Manhattan Corp. (a) 5,000 7.002 11/02/00 5,000
FCC National Bank of Wilmington Delaware (a) 50,000 6.832 04/12/01 50,016
Ford Motor Credit 15,000 6.550 01/23/01 15,000
General Electric Capital Corp. 25,000 7.170 05/07/01 25,000
Gien Raven MLS, Inc. (a) 40,000 6.650 05/01/14 40,000
Grantor Trust Series 1996-2 (a) 6,271 6.720 12/23/06 6,270
Grantor Trust Series 1997-11 (a) 30,757 6.673 12/01/04 30,757
Grantor Trust Series 1998-T67 (a) 17,860 6.840 07/01/04 17,860
Gulf States Paper Corp. Series 1998 (a) 40,000 6.620 11/01/18 40,000
Illinois Educational Facilities Authority Revenues (a) 44,300 6.620 07/01/24 44,300
Morganite Industries Series 1998-A (a) 50,000 6.620 07/01/18 50,000
Presbyterian Homes & Services Series B2 (a) 21,955 6.620 12/01/28 21,955
Wal-Mart Stores, Inc. 25,000 5.955 06/01/01 24,798
Warehouse One (a) 221 6.870 11/06/00 221
Warehouse One (a) 312 6.870 11/17/00 312
Warehouse One (a) 1,270 6.870 12/08/00 1,270
Warehouse One (a) 624 6.870 12/11/00 624
Warehouse One (a) 1,613 6.870 12/15/00 1,613
Warehouse One (a) 484 6.870 12/18/00 484
Warehouse One (a) 1,086 6.870 12/19/00 1,086
Warehouse One (a) 6,094 6.870 12/21/00 6,094
Warehouse One (a) 1,479 6.870 12/22/00 1,479
Warehouse One (a) 466 6.870 12/26/00 466
Warehouse One (a) 878 6.870 12/29/00 878
Warehouse One (a) 388 6.870 12/30/00 388
-------
TOTAL CORPORATE BONDS AND NOTES (amortized cost $385,871) 385,871
=======
YANKEE CERTIFICATES OF DEPOSIT - 9.1%
Bank of Nova Scotia 20,000 6.510 01/16/01 19,998
Bank of Nova Scotia 15,000 6.680 02/02/01 14,999
Bank of Nova Scotia 25,000 6.700 02/07/01 25,000
Barclays Bank PLC 10,000 6.685 02/20/01 9,986
Commerzbank AG 15,000 7.150 06/29/01 14,995
Deutsche Bank AG 25,000 6.750 02/22/01 24,996
Royal Bank of Canada Trust Co. 15,000 6.450 01/05/01 14,998
Union Bank of Switzerland AG 15,000 6.820 03/28/01 14,998
Westpac Banking Corp. 20,000 6.720 02/07/01 19,998
-------
TOTAL YANKEE CERTIFICATES OF DEPOSIT (amortized cost $159,968) 159,968
=======
DOMESTIC COMMERCIAL PAPER - 57.0%
Arrow Electronics, Inc. 49,681 6.725 11/01/00 49,681
AT&T Corp. 20,000 7.270 06/14/01 20,000
Atlantis One Funding Corp. 31,357 6.520 02/23/01 30,716
BankAmerica Corp. 20,000 6.550 02/13/01 19,622
Banc One Financial Corp. 25,000 6.510 02/26/01 24,471
Banco Continental de Panama SA 20,000 6.600 11/27/00 19,905
Banco Continental de Panama SA 10,000 6.520 02/26/01 9,788
Banco Continental de Panama SA 10,000 6.470 04/05/01 9,721
</TABLE>
3 Money Market Fund
<PAGE>
MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
--------- ------ ---------- ---------
<S> <C> <C> <C> <C>
Banco del Istmo SA 10,000 6.640 01/08/01 9,875
Banco del Istmo SA 10,000 6.470 04/30/01 9,677
Bavaria TRR Corp. 13,000 6.550 02/16/01 12,747
Bills Securitisation, Ltd. 30,000 6.540 02/12/01 29,439
Bills Securitisation, Ltd. 25,000 6.510 03/12/01 24,408
Bills Securitisation, Ltd. 25,000 6.500 03/21/01 24,369
BTM Capital Corp. 12,000 6.580 12/01/00 11,934
Centric Capital Corp. 3,485 6.580 01/29/01 3,428
Certain Funding Corp. 17,050 6.540 11/13/00 17,013
Commerz Euro 25,000 6.610 01/22/01 24,624
Forrestal Funding Trust 10,000 6.560 01/31/01 9,834
Forrestal Funding Trust 40,000 6.560 02/08/01 39,278
Forrestal Funding Trust 18,000 6.560 02/09/01 17,672
Forrestal Funding Trust 19,000 6.520 02/23/01 18,608
Galicia Funding Corp. 40,000 6.470 03/23/01 38,979
Gotham Funding Corp. 14,013 6.620 11/01/00 14,013
Gotham Funding Corp. 25,000 6.580 11/13/00 24,945
Gotham Funding Corp. 8,680 6.590 11/13/00 8,661
Gotham Funding Corp. 25,000 6.590 11/16/00 24,931
Intrepid Funding Master Trust 19,489 6.540 01/24/01 19,192
Intrepid Funding Master Trust 25,000 6.520 02/12/01 24,534
Irish Permanent Treasury PLC 20,000 6.610 02/05/01 19,647
Jefferson Pilot Corp. 20,000 6.510 03/09/01 19,537
Lexington Parker Capital Corp. 25,000 6.520 03/01/01 24,457
Lexington Parker Capital Corp. 30,000 6.510 03/02/01 29,344
LG - Caltex Oil Corp. 22,000 6.540 11/08/00 21,972
Lone Star Funding 86,230 6.530 11/13/00 86,042
Michigan National Bank 50,000 6.725 11/01/00 50,000
Mitsubishi Motors Credit of America, Inc. 31,000 6.620 11/03/00 30,989
Mitsubishi Motors Credit of America, Inc. 20,000 6.580 11/20/00 19,931
Moat Funding LLC 15,000 6.540 01/24/01 14,771
Stellar Funding Group 17,158 6.620 12/05/00 17,051
Stellar Funding Group 10,981 6.680 12/29/00 10,863
Thames Asset Global Securitization 16,836 6.520 02/28/01 16,473
Westways Funding I Ltd. 12,500 6.550 11/13/00 12,473
Westways Funding I Ltd. 15,000 6.550 11/21/00 14,945
Westways Funding II Ltd. 22,065 6.550 11/28/00 21,957
---------
TOTAL DOMESTIC COMMERCIAL PAPER (amortized cost $1,002,517) 1,002,517
---------
EURODOLLAR TIME DEPOSIT - 7.4%
Banque Nationale de Paris 25,000 6.590 11/01/00 25,000
Canadian Imperial Bank 15,000 6.570 01/29/01 14,999
Canadian Imperial Bank 25,000 6.990 05/02/01 24,999
Canadian Imperial Bank of Commerce 41,936 6.563 11/01/00 41,936
Societe Generale Cayman 24,000 6.563 11/01/00 24,000
---------
TOTAL EURODOLLAR TIME DEPOSITS (amortized cost $130,934) 130,934
---------
</TABLE>
Money Market Fund 4
<PAGE>
MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
--------- ------ --------- -----------
<S> <C> <C> <C> <C>
EURODOLLAR CERTIFICATES OF DEPOSIT - 2.3%
CitiBank AG 20,000 6.750 12/18/00 20,000
CitiBank AG 20,000 6.895 01/22/01 20,000
-----------
TOTAL EURODOLLAR CERTIFICATES OF DEPOSIT (amortized cost $40,000) 40,000
-----------
UNITED STATES GOVERNMENT AGENCIES - 1.4%
Aid to Chile Guaranteed Note (LIBOR Floater)(a) 8,997 6.813 06/01/05 9,002
Aid to INH Portugal Guaranteed Note (LIBOR Floater)(a) 10,938 6.890 12/01/17 11,097
Federal Home Loan Mortgage Corp. 2,000 5.250 01/19/01 1,994
Federal Home Loan Mortgage Corp. 2,000 5.270 01/19/01 1,994
-----------
TOTAL UNITED STATES GOVERNMENT AGENCIES (amortized cost $24,087) 24,087
-----------
TOTAL INVESTMENTS - 99.2% (amortized cost $1,743,377)(b) 1,743,377
OTHER ASSETS AND LIABILITIES, NET - 0.8% 14,053
-----------
NET ASSETS - 100.0% 1,757,430
===========
</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 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.
5 Money Market Fund
<PAGE>
MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) October 31, 2000
<TABLE>
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market ............................. $ 1,743,377
Cash ................................................................................ 1,007
Interest receivable ................................................................. 13,769
-----------
Total assets ..................................................................... 1,758,153
LIABILITIES
Payables:
Dividends ........................................................... $ 325
Accrued fees to affiliates .......................................... 254
Other accrued expenses .............................................. 144
-----------
Total liabilities ................................................................ 723
-----------
NET ASSETS .......................................................................... $ 1,757,430
===========
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) ................................................ $ (116)
Shares of beneficial interest ....................................................... 17,575
Additional paid-in capital .......................................................... 1,739,971
-----------
NET ASSETS .......................................................................... $ 1,757,430
===========
NET ASSET VALUE, offering and redemption price per share:
($1,757,429,950 divided by 1,757,545,025 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
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
------------------ -------------------
<S> <C> <C>
INVESTMENT INCOME
Interest ....................................................... $ 93,770 $ 108,659
--------- ---------
EXPENSES
Advisory fees .................................................. 2,932 4,087
Administrative fees ............................................ 733 1,022
Custodian fees ................................................. 398 588
Transfer agent fees ............................................ 369 612
Professional fees .............................................. 36 20
Registration fees .............................................. 113 123
Trustees' fees ................................................. 11 5
Miscellaneous .................................................. 87 49
--------- ---------
Expenses before reductions ..................................... 4,679 6,506
Expense reductions ............................................. (2,233) (3,065)
--------- ---------
Expenses, net ................................................ 2,446 3,441
--------- ---------
Net investment income ........................................... 91,324 105,218
--------- ---------
NET REALIZED GAIN (LOSS)
Net realized gain (loss) on investments ......................... (95) (18)
--------- ---------
NET INCREASE IN NET ASSETS FROM OPERATIONS ...................... $ 91,229 $ 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>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
------------------ ------------------- -------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income ............................................ $ 91,324 $ 105,218 $ 60,214
Net realized gain (loss) ......................................... (95) (18) (3)
----------- ----------- -----------
Net increase in net assets from operations ..................... 91,229 105,200 60,211
----------- ----------- -----------
DISTRIBUTIONS
From net investment income ....................................... (91,324) (105,218) (60,214)
----------- ----------- -----------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions .... (269,192) 421,709 678,746
----------- ----------- -----------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ....................... (269,287) 421,691 678,743
NET ASSETS
Beginning of period .............................................. 2,026,717 1,605,026 926,283
----------- ----------- -----------
End of period .................................................... $ 1,757,430 $ 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,
--------------------------------------------------------------
2000* 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM OPERATIONS
Net investment income ......................... .0519 .0515 .0553 .0563 .0549 .0601
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS
From net investment income .................... (.0519) (.0515) (.0553) (.0563) (.0549) (.0601)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD ................. $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========== ========== ========== ========== ========== ==========
TOTAL RETURN (%)(a)(c) ......................... 5.32 5.27 5.69 5.79 5.63 6.19
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ...... 1,757,430 2,026,717 1,605,026 926,283 496,932 533,643
Ratios to average net assets (%)(b)(c):
Operating expenses, net (d) ................. .17 .17 .16 .08 .05 .06
Operating expenses, gross (d) ............... .32 .32 .31 .30 .30 .26
Net investment income ....................... 6.23 5.15 5.54 5.65 5.49 6.01
</TABLE>
* For the ten months ended October 31, 2000.
(a) Periods less than one year are not annualized.
(b) The ratios for periods less than one year are annualized.
(c) For periods prior to April 1, 1995, Fund performance, operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net of
investment management fees but gross of any investment services fees. See
Note 3.
(d) See Note 3 for current period amounts.
9 Money Market Fund
<PAGE>
US GOVERNMENT MONEY MARKET FUND
STATEMENT OF NET ASSETS
October 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
UNITED STATES GOVERNMENT AGENCIES - 62.5%
Aid to Chile Guaranteed Note (LIBOR Floater)(a) 4,228 6.813 06/01/05 4,230
Aid to Sri Lanka Guaranteed Note (LIBOR Floater)(a) 3,000 6.890 06/15/12 3,024
Federal Home Loan Bank 1,500 5.175 12/22/00 1,497
Federal Home Loan Mortgage Corporation 1,250 5.125 12/15/00 1,247
Federal Home Loan Mortgage Corporation 1,000 5.250 01/19/01 997
Federal Home Loan Mortgage Corporation 1,595 5.480 02/26/01 1,587
Federal Home Loan Mortgage Corporation 5,000 5.375 03/01/01 4,971
Federal Home Loan Mortgage Corporation Principal Only Zero Coupon 5,000 0.000 05/24/01 4,810
Federal National Mortgage Association 5,000 4.900 11/02/00 5,000
Federal National Mortgage Association 5,500 5.140 11/16/00 5,498
Federal National Mortgage Association 1,000 5.150 12/22/00 998
Federal National Mortgage Association 2,000 5.070 02/02/01 1,991
Federal National Mortgage Association 1,000 5.500 02/02/01 997
Federal National Mortgage Association 3,000 5.360 02/16/01 2,985
Federal National Mortgage Association 5,000 6.470 02/16/01 4,997
Federal National Mortgage Association 3,000 5.375 03/27/01 2,979
Federal National Mortgage Association 1,000 5.380 04/26/01 993
Inter-American Develop Bank 2,000 8.500 05/01/01 2,015
-----------
TOTAL UNITED STATES GOVERNMENT AGENCIES 50,816
-----------
TOTAL INVESTMENTS - 62.5% (amortized cost $50,816) 50,816
-----------
REPURCHASE AGREEMENT - 36.4%
Agreement with ABN AMRO and Netherlands Bank (Tri-Party) of $29,613
acquired October 31, 2000 at 6.600% to be repurchased at $29,613 on November 1, 2000, collateralized by:
$29,613 United States Agency Obligations, valued at $30,209 29,613
-----------
TOTAL REPURCHASE AGREEMENT (identified cost $29,613) 29,613
-----------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENT - 98.9% (cost $80,429)(b) 80,429
OTHER ASSETS AND LIABILITIES, NET - 1.1% 887
-----------
NET ASSETS - 100.0% 81,316
===========
</TABLE>
* The identified interest rate for all securities with a maturity greater
than thirteen months has an automatic reset feature resulting in an
effective maturity of thirteen months or less.
(a) Adjustable or floating rate security.
(b) The identified cost for federal income tax purposes is the same as shown
above.
Abbreviations:
LIBOR - London Interbank Offered Rate
11 US Government Money Market Fund
<PAGE>
US GOVERNMENT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (except per share amounts) October 31, 2000
<TABLE>
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market ............................ $ 50,816
Repurchase agreements (identified cost $29,613) .................................... 29,613
Interest receivable ................................................................ 904
Prepaid expenses ................................................................... 1
----------
Total assets .................................................................... 81,334
LIABILITIES
Payables:
Dividends ............................................................ $ 13
Accrued fees to affiliates ........................................... 1
Other accrued expenses ............................................... 4
----------
Total liabilities ............................................................... 18
----------
NET ASSETS ......................................................................... $ 81,316
==========
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) ............................................... $ (9)
Shares of beneficial interest ...................................................... 813
Additional paid-in capital ......................................................... 80,512
----------
NET ASSETS ......................................................................... $ 81,316
==========
NET ASSET VALUE, offering and redemption price per share:
($81,316,050 divided by 81,325,522 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.
US Government Money Market Fund 12
<PAGE>
US GOVERNMENT MONEY MARKET FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Interest ........................................ $ 5,931 $ 8,069
------- -------
EXPENSES
Advisory fees ................................... 190 314
Administrative fees ............................. 48 79
Custodian fees .................................. 53 61
Transfer agent fees ............................. 138 279
Professional fees ............................... 14 10
Registration fees ............................... 65 81
Trustees' fees .................................. 11 5
Miscellaneous ................................... 31 22
------- -------
Expenses before reductions ...................... 550 851
Expense reductions .............................. (249) (380)
------- -------
Expenses, net ................................. 301 471
------- -------
Net investment income ............................ 5,630 7,598
------- -------
NET REALIZED GAIN (LOSS)
Net realized gain (loss) on investments .......... (4) (5)
------- -------
NET INCREASE IN NET ASSETS FROM OPERATIONS ....... $ 5,626 $ 7,593
======= =======
</TABLE>
See accompanying notes which are an integral part of the financial statements.
13 US Government Money Market Fund
<PAGE>
US GOVERNMENT MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income .............................................. $ 5,630 $ 7,598 $ 7,756
Net realized gain (loss) ........................................... (4) (5) --
--------- --------- ---------
Net increase in net assets from operations ....................... 5,626 7,593 7,756
--------- --------- ---------
DISTRIBUTIONS
From net investment income ......................................... (5,630) (7,598) (7,756)
--------- --------- ---------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ...... (108,830) 23,931 (21,188)
--------- --------- ---------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ......................... (108,834) 23,926 (21,188)
NET ASSETS
Beginning of period ................................................ 190,150 166,224 187,412
--------- --------- ---------
End of period ...................................................... $ 81,316 $ 190,150 $ 166,224
========= ========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
US Government Money Market Fund 14
<PAGE>
US GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS - CLASS T
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,
--------------------------------------------------------------
2000* 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............. $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM OPERATIONS
Net investment income ........................... .0500 .0483 .0520 .0545 .0526 .0580
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS
From net investment income ...................... (.0500) (.0483) (.0520) (.0545) (.0526) (.0580)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD ................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========== ========== ========== ========== ========== ==========
TOTAL RETURN (%)(a)(c) ........................... 5.12 4.93 5.34 5.59 5.40 5.98
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ........ 81,316 190,150 166,224 187,412 239,725 149,941
Ratios to average net assets (%)(b)(c):
Operating expenses, net (d) ................... .32 .30 .32 .20 .25 .32
Operating expenses, gross (d) ................. .58 .54 .55 .41 .50 .51
Net investment income ......................... 5.91 4.83 5.20 5.44 5.27 5.82
</TABLE>
* For the ten months ended October 31, 2000.
(a) Periods less than one year are not annualized.
(b) The ratios for periods less than one year are annualized.
(c) For periods prior to April 1, 1995, Fund performance, operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net of
investment management fees but gross of any investment service fees. See
Note 3.
(d) See Note 3 for current periods amounts.
15 US Government Money Market Fund
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS
October 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
--------- ----- --------- -------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS - 99.2%
ALABAMA - 0.7%
Greystone Municipal Lease Certified Trust Certificates of Participation, Series A,
weekly demand (d) 30 4.500 07/01/05 30
Mobile, Alabama Industrial Development Board Pollution Control Revenue,
weekly demand 1,200 4.525 06/01/04 1,200
-------
1,230
-------
ALASKA - 1.3%
Valdez, Alaska Marine Terminal Revenue, Series B, weekly demand 2,200 4.400 05/01/31 2,200
-------
ARIZONA - 0.3%
Arizona Health Facilities Authority Revenue, Series A, weekly demand 100 4.450 06/01/30 100
Maricopa County, Arizona Industrial Development Authority Revenue, weekly demand 400 4.900 10/01/04 400
-------
500
-------
ARKANSAS - 0.1%
Greystone Tax-Exempt Certificate Trust Revenue, Series 1998-1, weekly demand (e) 186 4.500 05/01/28 186
-------
CALIFORNIA - 0.1%
Greystone Municipal Lease Certified Trust Certificates of Participation, Series A,
weekly demand (d) 181 4.500 07/01/05 181
-------
COLORADO - 1.8%
Denver, Colorado City & County Multi-family Housing Revenue, Series A,
weekly demand 1,400 4.300 04/15/14 1,400
Greystone Municipal Lease Certified Trust Certificates of Participation, Series A,
weekly demand (d) 4 4.500 07/01/05 4
SBC Metropolitan District, Colorado General Obligation, Series 1998,
annual demand 1,670 4.000 12/01/17 1,670
-------
3,074
-------
CONNECTICUT - 0.0%
Greystone Municipal Lease Certified Trust Certificates of Participation, Series A,
weekly demand (d) 4 4.500 07/01/05 4
-------
DELAWARE - 0.7%
Delaware State Economic Development Authority Multi-family Revenue,
weekly demand 650 4.450 12/01/15 650
Delaware State Economic Development Authority Revenue, Series B,
weekly demand 500 4.400 05/01/15 500
-------
1,150
-------
DISTRICT OF COLUMBIA - 0.7%
District of Columbia Revenue, weekly demand 1,110 4.500 12/01/23 1,110
-------
</TABLE>
17 Tax Free Money Market Fund
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
--------- ----- --------- -------
<S> <C> <C> <C> <C>
FLORIDA - 8.5%
Alachua County, Florida Industrial Development Revenue, Series A,
monthly demand 345 4.500 01/01/12 345
Capital Trust Agency, Florida Multi-family Housing Development Revenue,
Series A, weekly demand 5,200 4.480 12/01/32 5,200
Fort Pierce, Florida Health Facility Revenue, weekly demand 400 4.400 10/01/17 400
Greystone Municipal Lease Certified Trust Certificates of Participation, Series A,
weekly demand (d) 95 4.500 07/01/05 95
Greystone Tax-Exempt Certificate Trust Revenue, Series 1998-1,
weekly demand (e) 282 4.500 05/01/28 282
Orange County, Florida Industrial Development Authority Revenue,
monthly demand 1,025 4.500 01/01/11 1,025
Orange County, Florida Industrial Development Authority Revenue, Series A,
semiannual demand 2,855 4.600 10/01/15 2,855
Orange County, Florida Industrial Development Authority Revenue,
weekly demand 4,300 4.400 11/01/12 4,300
-------
14,502
-------
GEORGIA - 1.9%
Fulton County, Georgia Residential Care Facilities Revenue, daily demand 900 4.600 01/01/18 900
Greystone Municipal Lease Certified Trust Certificates of Participation, Series A,
weekly demand (d) 97 4.500 07/01/05 97
Greystone Tax-Exempt Certificate Trust Revenue, Series 1998-1,
weekly demand (e) 942 4.500 05/01/28 942
Gwinnett County, Georgia Development Authority Revenue, weekly demand 90 4.400 03/01/17 90
Macon-Bibb County, Georgia Hospital Authority Revenue, weekly demand 900 4.400 12/01/18 900
Thomasville, Georgia Hospital Authority Revenue, weekly demand 300 4.400 11/01/17 300
-------
3,229
-------
ILLINOIS - 3.6%
Cook County, Illinois Community School District Number 118 Palos
General Obligation 600 4.600 12/01/00 600
De Kalb, Illinois Industrial Development Revenue, Series C, weekly demand 500 4.550 02/01/01 500
East Peoria, Illinois Multi-family Housing Authority, weekly demand 1,560 4.650 06/01/08 1,560
Greystone Municipal Lease Certified Trust Certificates of Participation, Series A,
weekly demand (d) 25 4.500 07/01/05 25
Illinois Development Finance Authority Revenue, quarterly demand 700 4.750 08/01/25 700
Illinois Development Finance Authority Revenue, weekly demand 2,038 4.500 09/01/26 2,038
Troy Grove, Illinois Revenue, weekly demand 750 5.605 05/01/10 750
-------
6,173
-------
INDIANA - 4.3%
Beech Grove, Indiana Tax Anticipation Warrants 1,400 4.500 12/29/00 1,400
Carmel Clay, Indiana Schools Tax Anticipation Warrants 2,000 4.550 12/29/00 2,000
Fort Wayne, Indiana Economic Development Revenue, Series 83, weekly demand 1,000 4.525 12/01/03 1,000
Greystone Municipal Lease Certified Trust Certificates of Participation, Series A,
weekly demand (d) 131 4.500 07/01/05 131
</TABLE>
Tax Free Money Market Fund 18
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
--------- ----- --------- -------
<S> <C> <C> <C> <C>
Indiana State Educational Facilities Authority Revenue, weekly demand 20 4.400 10/01/19 20
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 1,901
-------
7,267
-------
IOWA - 8.1%
Chillicothe, Iowa Pollution Control Revenue, Series A, weekly demand 1,500 4.500 05/01/23 1,500
Chillicothe, Iowa Pollution Control Revenue, weekly demand 4,850 4.500 01/01/23 4,850
Council Bluffs, Iowa Pollution Control Revenue, weekly demand 1,500 4.500 01/01/25 1,500
Iowa Finance Authority Housing & Health Care Revenue, weekly demand 950 4.500 04/01/05 950
Iowa Finance Authority Revenue, daily demand 800 4.650 06/01/27 800
Pella, Iowa Community School District, General Obligation
Anticipatory Warrants 1,200 5.000 08/09/01 1,203
Storm Lake, Iowa Private College Revenue, weekly demand 2,900 4.500 12/01/03 2,900
-------
13,703
-------
KANSAS - 0.1%
Greystone Municipal Lease Certified Trust Certificates of Participation, Series A,
weekly demand (d) 2 4.500 07/01/05 2
Greystone Tax-Exempt Certificate Trust Revenue, Series 1998-1,
weekly demand (e) 140 4.500 05/01/28 140
-------
142
-------
KENTUCKY - 4.7%
Greystone Municipal Lease Certified Trust Certificates of Participation, Series A,
weekly demand (d) 49 4.500 07/01/05 49
Jefferson County, Kentucky Industrial Building Revenue, weekly demand 1,125 4.500 01/01/19 1,125
Jefferson County, Kentucky Retirement Home Revenue, weekly demand 2,000 4.450 10/01/19 2,000
Kentucky Area Development Districts Financing Lease Program Revenue,
Series E2, weekly demand 490 4.650 12/01/31 490
Louisville, Kentucky Industrial Development Revenue, weekly demand 750 4.450 09/01/01 750
McCreary County, Kentucky Industrial Building Revenue, weekly demand 1,555 4.450 04/01/13 1,555
McCreary County, Kentucky Industrial Building Revenue, Series B,
weekly demand 2,005 4.450 04/01/13 2,005
-------
7,974
-------
MAINE - 1.0%
Greystone Municipal Lease Certified Trust Certificates of Participation, Series A,
weekly demand (d) 105 4.500 07/01/05 105
Maine State Health & Higher Educational Facilities Authority Revenue,
Series B, weekly demand (a) 1,600 4.400 12/01/25 1,600
-------
1,705
-------
MARYLAND - 2.4%
Anne Arundel County, Maryland Industrial Development Revenue, Series C,
weekly demand 2,260 4.550 02/01/01 2,260
Maryland State Economic Development Corporation Revenue, weekly demand 800 4.400 09/01/24 800
</TABLE>
19 Tax Free Money Market Fund
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
--------- ----- --------- -------
<S> <C> <C> <C> <C>
Maryland State Health & Higher Educational Facilities Authority Revenue,
weekly demand 100 4.400 09/01/24 100
Montgomery County, Maryland Industrial Development Revenue, monthly demand 930 4.600 04/01/14 930
-------
4,090
-------
MASSACHUSETTS - 0.0%
Greystone Municipal Lease Certified Trust Certificates of Participation, Series A,
weekly demand (d) 17 4.500 07/01/05 17
-------
MICHIGAN - 5.4%
Greystone Municipal Lease Certified Trust Certificates of Participation, Series A,
weekly demand (d) 143 4.500 07/01/05 143
Lansing, Michigan Economic Development Corporation, semiannual demand 1,845 4.300 05/01/15 1,845
Livonia, Michigan Economic Development Corporation, semiannual demand 320 4.500 11/15/04 320
McDonald Tax-Exempt Mortgage Bond Trust, thirteen month demand (f) 94 4.750 01/15/09 94
Meridian, Michigan Economic Development, monthly demand 455 4.300 11/15/14 455
Michigan State Housing Development Authority, Limited Obligation Revenue,
weekly demand 1,000 4.525 06/01/04 1,000
Michigan State Job Development Authority Revenue, monthly demand 1,800 4.200 11/01/14 1,800
Northville Township, Michigan Economic Development Corporation, Limited
Obligation Revenue, Series P, weekly demand 500 4.380 05/01/14 500
Oakland County, Michigan Economic Development Corporation, Limited
Obligation Revenue, semiannual demand 830 4.750 08/01/15 830
Pinckney, Michigan Community Schools General Obligation 1,000 4.900 06/29/01 1,001
Whitehall, Michigan District Schools General Obligation 1,250 4.900 06/30/01 1,252
-------
9,240
-------
MINNESOTA - 4.7%
Burnsville, Minnesota Industrial Development Revenue, Series C, weekly demand 350 4.550 02/01/01 350
Capital Realty Investment Tax-Exempt Fund, Series 96-1, weekly demand 4,335 4.620 12/01/04 4,335
Greystone Municipal Lease Certified Trust Certificates of Participation, Series A,
weekly demand (d) 17 4.500 07/01/05 17
St. Paul, Minnesota Housing & Redevelopment Authority Revenue,
weekly demand 1,300 4.400 08/01/25 1,300
St. Paul, Minnesota Port Authority Industrial Development Revenue, Series 1,
weekly demand 2,000 4.510 06/01/19 2,000
-------
8,002
-------
MISSISSIPPI - 0.2%
DeSoto County, Mississippi Industrial Development Revenue, weekly demand 400 5.605 12/01/08 400
-------
MISSOURI - 6.4%
Clayton, Missouri Industrial Development Authority Revenue, weekly demand 1,000 4.480 01/01/09 1,000
Jackson County, Missouri Industrial Development Authority Recreational
Facilities Revenue, daily demand 650 4.650 11/01/16 650
Kansas City, Missouri Industrial Development Authority Multi-family Housing
Revenue, weekly demand 3,800 4.700 10/01/15 3,800
Missouri State Health & Educational Facilities Authority Revenue, daily demand 1,190 4.700 12/01/24 1,190
Missouri State Health & Educational Facilities Authority Revenue, Series A,
weekly demand 1,000 4.450 08/01/29 1,000
</TABLE>
Tax Free Money Market Fund 20
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
--------- ----- --------- -------
<S> <C> <C> <C> <C>
Missouri State Health & Educational Facilities Authority Revenue, Series B
daily demand 20 4.650 10/01/24 20
St. Charles County, Missouri Industrial Development Authority Revenue,
weekly demand 2,300 4.530 12/01/27 2,300
St. Louis, Missouri Industrial Development Authority Revenue, Series C,
weekly demand 965 4.550 02/01/01 965
-------
10,925
-------
NEW HAMPSHIRE - 0.6%
Greystone Municipal Lease Certified Trust Certificates of Participation, Series A,
weekly demand (d) 74 4.500 07/01/05 74
New Hampshire, State Housing Finance Authority Revenue, Series 1 1,005 6.700 01/01/01 1,009
-------
1,083
-------
NEW JERSEY - 1.5%
Camden, New Jersey General Obligation, Series A 1,000 5.500 06/14/01 1,002
Greystone Municipal Lease Certified Trust Certificates of Participation, Series A,
weekly demand (d) 329 4.500 07/01/05 329
North Hudson, New Jersey Sewer Authority Project Notes, semiannual demand 1,200 5.000 03/30/01 1,200
-------
2,531
-------
NEW MEXICO - 0.7%
Albuquerque, New Mexico Joint Water & Sewer System Revenue, Series A 1,250 5.500 07/01/01 1,259
-------
NEW YORK - 0.9%
Brookhaven, New York South Country Central School District General Obligation
Tax Anticipation Notes 1,000 5.000 06/26/01 1,003
Greystone Municipal Lease Certified Trust Certificates of Participation, Series A,
weekly demand (d) 144 4.500 07/01/05 144
Rensselaer County, New York Industrial Development Agency Senior Housing
Revenue, Series A, daily demand 300 4.700 07/01/29 300
-------
1,447
-------
NORTH CAROLINA - 0.2%
Beaufort County, North Carolina Industrial Facility & Pollution Control Revenue,
Series 85, weekly demand 300 4.500 12/01/00 300
-------
OHIO - 5.8%
American Municipal Power of Ohio, Inc. Bond Anticipation Notes, Series B 3,000 5.000 08/23/01 3,006
Bellevue, Ohio Hospital Facilities Revenue, semiannual demand 320 4.750 03/01/17 320
Buckeye, Ohio Tax-Exempt Mortgage Bond Trust, semiannual demand 180 4.860 02/01/05 180
Clermont County, Ohio Economic Development Revenue, semiannual demand 400 5.000 12/01/09 400
Clermont County, Ohio Economic Development Revenue, semiannual demand 540 4.600 05/01/12 540
Clinton County, Ohio Hospital Revenue, weekly demand 1,000 4.450 06/01/28 1,000
Columbus, Ohio Electric System Revenue, monthly demand 1,200 4.350 09/01/09 1,200
Cuyahoga County, Ohio Health Care Facilities Revenue, weekly demand 100 4.400 11/15/19 100
</TABLE>
21 Tax Free Money Market Fund
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
--------- ----- --------- -------
<S> <C> <C> <C> <C>
Franklin County, Ohio Industrial Development Revenue, semiannual demand 130 4.400 11/01/15 130
Greystone Municipal Lease Certified Trust Certificates of Participation, Series A,
weekly demand (d) 72 4.500 07/01/05 72
McDonald Tax-Exempt Mortgage Bond Trust, thirteen month demand (f) 441 4.750 01/15/09 441
Scioto County, Ohio Health Care Facilities Revenue, semiannual demand 645 4.800 12/01/15 645
Stark County, Ohio Health Care Facilities Revenue, semiannual demand 1,500 4.400 09/15/16 1,500
Trumbull County, Ohio Industrial Development Revenue, Series A,
weekly demand 325 4.450 04/01/04 325
-------
9,859
-------
OKLAHOMA - 1.3%
Greystone Municipal Lease Certified Trust Certificates of Participation, Series A,
weekly demand (d) 4 4.500 07/01/05 4
Tulsa County, Oklahoma Industrial Authority Health Care Revenue,
semiannual demand 1,250 4.500 12/15/08 1,250
Tulsa, Oklahoma Industrial Authority Revenue, weekly demand 1,000 4.480 10/01/32 1,000
-------
2,254
-------
OREGON - 4.0%
Clackamas County, Oregon Hospital Facilities Authority Revenue, Series C,
weekly demand 2,000 4.500 05/15/29 2,000
Hillsboro, Oregon Revenue, weekly demand 1,650 4.400 08/01/11 1,650
Medford, Oregon Hospital Facilities Authority Revenue, weekly demand 3,100 4.500 05/15/27 3,100
-------
6,750
-------
PENNSYLVANIA - 6.5%
Berks County, Pennsylvania Industrial Development Authority, weekly demand 1,350 4.525 12/01/04 1,350
Geisinger, Pennsylvania Health System Authority Revenue, daily demand 5,000 4.600 08/01/28 5,000
Greystone Municipal Lease Certified Trust Certificates of Participation, Series A,
weekly demand (d) 137 4.500 07/01/05 137
McCandless, Pennsylvania Industrial Development Authority Commercial
Revenue, Series A, weekly demand 1,730 4.400 01/01/30 1,730
McDonald Tax-Exempt Mortgage Bond Trust, thirteen month demand (f) 95 4.750 01/15/09 95
Moon, Pennsylvania Industrial Development Authority Revenue, weekly demand 1,000 4.400 11/01/12 1,000
Philadelphia, Pennsylvania Hospitals & Higher Educational Facilities Authority
Revenue, Series B, weekly demand 1,800 4.550 06/01/14 1,800
-------
11,112
-------
SOUTH CAROLINA - 0.1%
Greystone Municipal Lease Certified Trust Certificates of Participation, Series A,
weekly demand (d) 108 4.500 07/01/05 108
-------
TENNESSEE - 8.1%
Cleveland, Tennessee Industrial Development Board Revenue, weekly demand 1,000 4.400 07/01/19 1,000
Franklin County, Tennessee Health & Educational Facilities Revenue,
monthly demand 1,515 4.550 09/01/10 1,515
Greystone Tax-Exempt Certificate Trust Revenue, Series 1998-1,
weekly demand (e) 1,054 4.500 05/01/28 1,054
Knox County, Tennessee Industrial Development Revenue, monthly demand 4,200 5.323 12/01/14 4,200
</TABLE>
Tax Free Money Market Fund 22
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
--------- ----- --------- -------
<S> <C> <C> <C> <C>
Memphis, Tennessee Health, Educational & Housing Facilities Board Revenue,
weekly demand 1,900 4.480 08/01/32 1,900
Sevier County, Tennessee Public Building Authority Revenue, Series B-13,
daily demand 2,000 4.650 06/01/07 2,000
Tusculum, Tennessee Health, Educational & Housing Facilities Revenue,
weekly demand 2,000 4.400 07/01/15 2,000
-------
13,669
-------
TEXAS - 2.0%
Brazos Harbor, Texas Industrial Development Corporation Revenue,
monthly demand 1,600 4.400 12/01/13 1,600
Central Texas College District Building Revenue (a) 1,595 4.500 05/15/01 1,596
Greystone Municipal Lease Certified Trust Certificates of Participation, Series A,
weekly demand (d) 123 4.500 07/01/05 123
-------
3,319
-------
VERMONT - 0.3%
Vermont Educational & Health Buildings Financing Agency Revenue, Series 1,
weekly demand 500 4.450 06/01/22 500
-------
VIRGINIA - 2.2%
Greystone Municipal Lease Certified Trust Certificates of Participation, Series A,
weekly demand (d) 9 4.500 07/01/05 9
Greystone Tax-Exempt Certificate Trust Revenue, Series 1998-1,
weekly demand (e) 496 4.500 05/01/28 496
Norfolk, Virginia Industrial Development Authority Revenue, weekly demand 1,075 4.530 03/01/16 1,075
Roanoke, Virginia Industrial Development Authority Hospital Revenue, Series A,
daily demand 1,900 4.600 07/01/27 1,900
Staunton, Virginia Industrial Development Authority College Facilities Revenue,
Series B (pre-refunded 11/01/00)(b) 210 8.000 11/01/17 217
-------
3,697
-------
WASHINGTON - 3.6%
Seattle, Washington Municipality Metropolitan Seattle Sewer Revenue, Series U
(pre-refunded 01/01/01)(a)(b) 2,600 6.600 01/01/32 2,714
Washington State Housing Finance Commission Nonprofit Housing Revenue,
daily demand 300 4.600 01/01/21 300
Washington State Housing Finance Commission Nonprofit Housing Revenue,
Series A, daily demand 1,275 4.750 01/01/30 1,275
Washington State Housing Finance Commission Nonprofit Housing Revenue,
weekly demand 600 4.350 07/01/11 600
Washington State Housing Finance Commission Nonprofit Housing Revenue,
weekly demand 1,200 4.450 08/01/24 1,200
-------
6,089
-------
WEST VIRGINIA - 0.6%
Marshall County, West Virginia Pollution Control Revenue, weekly demand 1,000 4.500 03/01/26 1,000
-------
</TABLE>
23 Tax Free Money Market Fund
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DATE VALUE
(000) RATE OF (000)
$ % MATURITY* $
--------- ----- --------- -------
<S> <C> <C> <C> <C>
WISCONSIN - 3.8%
Athens, Wisconsin School District Tax & Revenue Anticipation Notes 1,000 4.850 08/24/01 1,001
Seymour, Wisconsin Community School District Tax & Revenue
Anticipation Notes 1,500 4.620 10/03/01 1,500
Somerset, Wisconsin School District Tax & Revenue Anticipation Notes 2,100 4.670 09/24/01 2,101
Two Rivers, Wisconsin Bond Anticipation Notes, Series B 925 5.000 07/01/01 926
Wisconsin State Health & Educational Facilities Authority Revenue, Series A,
weekly demand 1,000 4.400 10/01/29 1,000
-------
6,528
-------
TOTAL INVESTMENTS - 99.2% (amortized cost $168,509)(c) 168,509
OTHER ASSETS AND LIABILITIES, NET - 0.8% 1,299
-------
NET ASSETS - 100.0% 169,808
=======
</TABLE>
* The identified 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) Bond is insured by AMBAC, FGIC, or MBIA.
(b) Pre-refunded: These bonds are collateralized by US 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.
(c) The cost for federal income tax purposes is the same as shown above.
(d) Multi-State bond issue including Alabama, California, Colorado,
Connecticut, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Maine,
Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New York,
Ohio, Oklahoma, Pennsylvania, South Carolina, Texas, and Virginia.
(e) Multi-State bond issue including Arkansas, Florida, Georgia, Kansas,
Tennessee, and Virginia.
(f) Multi-State bond issue including Michigan, Ohio, and Pennsylvania.
Abbreviations:
AMBAC - AMBAC Indemnity Corporation
FGIC - Financial Guaranty Insurance Corporation
MBIA - Municipal Bond Investors Assurance
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
October 31, 2000
QUALITY RATINGS AS A % OF VALUE ++ (Unaudited)
VMIG1 or SP-1 69%
P1 31
------------
100%
============
ECONOMIC SECTOR EMPHASIS AS A % OF VALUE (Unaudited)
Housing Revenue 22%
Healthcare Revenue 20
Industrial Revenue Bonds 20
Education Revenue 18
General Obligation 9
Pollution Control Revenue 6
Utility Revenue 5
------------
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
Investor 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) October 31, 2000
<TABLE>
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market ........................... $ 168,509
Interest receivable ............................................................... 1,380
Prepaid expenses .................................................................. 1
---------
Total assets ................................................................... 169,890
LIABILITIES
Payables:
Dividends ............................................................ $ 21
Accrued fees to affiliates ........................................... 30
Other accrued expenses ............................................... 31
---------
Total liabilities .............................................................. 82
---------
NET ASSETS ........................................................................ $ 169,808
=========
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) ............................................. $ (62)
Shares of beneficial interest ..................................................... 1,699
Additional paid-in capital ........................................................ 168,171
---------
NET ASSETS ........................................................................ $ 169,808
=========
NET ASSET VALUE, offering and redemption price per share:
($169,807,727 divided by 169,869,171 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
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Interest ......................................... $ 7,162 $ 6,855
------- -------
EXPENSES
Advisory fees .................................... 334 393
Administrative fees .............................. 83 98
Custodian fees ................................... 104 18
Transfer agent fees .............................. 117 26
Professional fees ................................ 18 15
Registration fees ................................ 13 47
Trustees' fees ................................... 11 5
Miscellaneous .................................... 59 14
------- -------
Expenses before reductions ....................... 739 616
Expense reductions ............................... (180) (197)
------- -------
Expenses, net .................................. 559 419
------- -------
Net investment income ............................. 6,603 6,436
------- -------
NET REALIZED GAIN (LOSS)
Net realized gain (loss) on investments ........... (69) 12
------- -------
NET INCREASE IN NET ASSETS FROM OPERATIONS ........ $ 6,534 $ 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>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income ........................................... $ 6,603 $ 6,436 $ 5,654
Net realized gain (loss) ........................................ (69) 12 (5)
--------- --------- ---------
Net increase in net assets from operations .................... 6,534 6,448 5,649
--------- --------- ---------
DISTRIBUTIONS
From net investment income ...................................... (6,603) (6,436) (5,654)
--------- --------- ---------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ... (76,818) 52,020 63,943
--------- --------- ---------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ...................... (76,887) 52,032 63,938
NET ASSETS
Beginning of period ............................................. 246,695 194,663 130,725
--------- --------- ---------
End of period ................................................... $ 169,808 $ 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 - CLASS T
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,
-------------------------------------------------------------
2000* 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............. $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.000
---------- ---------- ---------- ---------- ---------- ---------
INCOME FROM OPERATIONS
Net investment income ........................... .0333 .0326 .0331 .0355 .0329 .0370
---------- ---------- ---------- ---------- ---------- ---------
DISTRIBUTIONS
From net investment income ...................... (.0333) (.0326) (.0331) (.0355) (.0329) (.0370)
---------- ---------- ---------- ---------- ---------- ---------
NET ASSET VALUE, END OF PERIOD ................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========== ========== ========== ========== ========== ==========
TOTAL RETURN (%)(a)(c) ........................... 3.38 3.31 3.36 3.61 3.35 3.76
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ........ 169,808 246,695 194,663 130,725 102,207 78,000
Ratios to average net assets (%)(b)(c):
Operating expenses, net (d) ................... .34 .21 .34 .28 .42 .48
Operating expenses, gross (d) ................. .44 .31 .44 .38 .42 .48
Net investment income ......................... 3.96 3.28 3.29 3.55 3.28 3.69
</TABLE>
* For the ten months ended October 31, 2000.
(a) Periods less than one year are not annualized.
(b) The ratios for periods less than one year are annualized.
(c) For periods prior to April 1, 1995, Fund performance, operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net of
investment management fees but gross of any investment service fees. See
Note 3.
(d) See Note 3 for current periods amounts.
29 Tax Free Money Market Fund
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 2000
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company") is a series
mutual fund with 29 different investment portfolios, referred to as
"Funds." These financial statements report on three Funds, each of which
has distinct investment objectives and strategies. The Investment Company
is registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. It is organized and
operates as a Massachusetts business trust under an amended master trust
agreement dated July 26, 1984. The Investment Company's master trust
agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.01 par value.
The Investment Company's Board of Trustees approved a change in the Fund's
fiscal year end from December 31 to October 31. As a result, this financial
report reflects the ten month period commencing on January 1, 2000 through
October 31, 2000.
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, US 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.
At October 31, 2000, 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>
10/31/02 10/31/03 10/31/04 10/31/05 10/31/06 10/31/07 10/31/08 Totals
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market $ -- $ 41,009 $ 814 $ -- $ 3,246 $ 12,599 $ 106,731 $ 164,399
US Government Money Market 1,309 4,913 3,331 1,570 762 1,782 8,484 22,151
Tax Free Money Market -- -- -- -- -- -- 68,310 68,310
</TABLE>
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Money Market, US
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 and excise 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 for a reporting period may differ
significantly from distributions during such period. The differences
between tax regulations and GAAP primarily relate to investments in certain
securities sold at a loss. Accordingly, a Fund may periodically make
reclassifications among certain of its capital accounts without impacting
its net asset value.
EXPENSES: The Funds will pay their own expenses other than those expressly
assumed by 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.
Notes to Financial Statements 30
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
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 October 31, 2000,
approximately $737,161,000 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 total $3,456,427 and $864,107, respectively, for
the ten months ended October 31, 2000 and $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%
US 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 ten months ended October 31, 2000 and the year ended
December 31, 1999 was $2,199,252 and $3,065,144, respectively.
The Advisor has contractually agreed to waive a portion of its combined
advisory and administrative fees for the US Government Money Market Fund,
up to the full amount of those fees, 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 ten months
ended October 31, 2000 and the year ended December 31, 1999 was $238,044
and $379,754, respectively.
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 ten months ended October 31, 2000 and the
year ended December 31, 1999 was $166,828 and $196,504, respectively.
CUSTODIAN: The Funds have entered into arrangements with their Custodian
whereby custody credits realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's expenses. During the ten months
ended October 31, 2000, the Fund's custodian fees were reduced by the
following amounts under these arrangements:
Money Market $ 33,793
US Government Money Market 11,356
Tax Free Money Market 13,085
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. There were no
fees attributed to the Funds contained herein for the ten months ended
October 31, 2000 or year ended December 31, 1999.
31 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
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 ten months ended October 31, 2000 and the year ended December 31,
1999 were $623,650 and $915,998, respectively.
BOARD OF TRUSTEES: The Investment Company pays each of its Trustees not
affiliated with FRIMCo a retainer of $55,000 per year plus out-of-pocket
expenses. Total Trustee expenses for the Funds listed for the ten months
ended October 31, 2000 were $33,716 and were allocated to each Fund, where
appropriate, on a pro rata basis. 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.
4. FUND SHARE TRANSACTIONS
Share transactions for the ten months ended October 31, 2000 and the years
ended December 31, 1999 and December 31, 1998 were as follows:
<TABLE>
<CAPTION>
ON A CONSTANT DOLLAR BASIS (000)
------------------------------------------------
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
MONEY MARKET
Proceeds from shares sold $ 17,137,684 $ 21,077,851 $ 12,024,641
Proceeds from reinvestment
of distributions 38,164 50,168 17,841
Payments for shares redeemed (17,445,040) (20,706,310) (11,363,736)
------------ ------------ ------------
Total net increase (decrease) $ (269,192) $ 421,709 $ 678,746
============ ============ ============
US GOVERNMENT MONEY MARKET
Proceeds from shares sold $ 215,513 $ 539,954 $ 431,194
Proceeds from reinvestment
of distributions 5,136 7,536 6,807
Payments for shares redeemed (329,479) (523,559) (459,189)
------------ ------------ ------------
Total net increase (decrease) $ (108,830) $ 23,931 $ (21,188)
============ ============ ============
TAX FREE MONEY MARKET
Proceeds from shares sold $ 334,498 $ 486,976 $ 367,890
Proceeds from reinvestment
of distributions 4,245 4,433 3,258
Payments for shares redeemed (415,561) (439,389) (307,205)
------------ ------------ ------------
Total net increase (decrease) $ (76,818) $ 52,020 $ 63,943
============ ============ ============
</TABLE>
5. LINE OF CREDIT
The Investment Company 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
Funds may borrow up to a maximum of 10 percent of the value of their net
assets under the agreement. The agreement will expire December 30, 2000.
The Funds did not have any drawdowns during the ten months ended October
31, 2000, or the year ended December 31, 1999.
6. BENEFICIAL INTEREST
As of October 31, 2000, 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 30.2%.
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, US Government
Money Market, and Tax Free Money Market (the "Funds")) at October 31, 2000, 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
accounting principles generally accepted in the United States of America. 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 auditing standards generally accepted in the United States of America,
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 October 31, 2000 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Seattle, Washington
December 15, 2000
33 Report of Independent Accountants
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
TAX INFORMATION
October 31, 2000 (Unaudited)
Of the dividends paid by the Tax Free Money Market Fund from the net investment
income for the taxable year ended October 31, 2000, 100% were exempt interest
dividends which are tax exempt for purposes of regular federal income tax, and
for purposes of the federal alternative minimum tax.
Please consult a tax advisor for any questions about federal or state income tax
laws.
Tax Information 34
<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
Kristianne Blake
Lee C. Gingrich
Eleanor W. Palmer
Raymond P. Tennison, Jr.
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.
35 Manager, Money Managers and Service Providers
<PAGE>
[LOGO OF FRANK RUSSELL INVESTMENT COMPANY]
Frank Russell Investment Company
909 A Street
Tacoma, Washington 98402
253-627-7001
800-787-7354
Fax: 253-591-3495
www.russell.com 36-08-083 (1000)
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
-------------------
LIFEPOINTS(R) FUNDS
-------------------
2000 Annual Report
CLASS C, D, E AND S SHARES
EQUITY AGGRESSIVE STRATEGY FUND
AGGRESSIVE STRATEGY FUND
BALANCED STRATEGY FUND
MODERATE STRATEGY FUND
CONSERVATIVE STRATEGY FUND
OCTOBER 31, 2000
[LOGO OF FRANK RUSSELL INVESTMENT COMPANY]
<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
OCTOBER 31, 2000
TABLE OF CONTENTS
Page
Letter to Our Clients ..................................................... 2
Portfolio Management Discussion ........................................... 4
Equity Aggressive Strategy Fund ........................................... 12
Aggressive Strategy Fund .................................................. 19
Balanced Strategy Fund .................................................... 26
Moderate Strategy Fund .................................................... 33
Conservative Strategy Fund ................................................ 40
Notes to Financial Statements ............................................. 47
Report of Independent Accountants ......................................... 57
Tax Information ........................................................... 58
Manager, Money Managers and Service Providers ............................. 59
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 from Frank Russell Company. It is delivered on
an "as is" basis without warranty. The Russell logo is a trademark and service
mark of Frank Russell Company. Frank Russell Company and Standard & Poor's
Corporation are the owners of the trademarks, service marks, and copyrights
related to their respective indexes. This material must be accompanied or
preceded by a current Frank Russell Investment Company Prospectus containing
complete information concerning the investment objectives and operations of the
Company, charges, and expenses. The Prospectus should be read carefully before
an investment is made. The performance quoted represents past performance and
the investment return and principal value of an investment will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Investments in securities of non-US issuers and foreign currencies involve
investment risks different than those of US issuers; the Prospectus contains
further information and details regarding these risks. Russell Fund
Distributors, Inc., is the distributor of Frank Russell Investment Company.
<PAGE>
TO OUR CLIENTS
We are pleased to present the Frank Russell Investment Company 2000 Annual
Report. This report covers information on five of the Funds and represents our
nineteenth 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 2000, 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 1999 we have implemented changes in our Funds' structure
which we believe will benefit current and potential investors. Class Y shares of
the Institutional Funds were opened for investment, and the LifePoints/(R)/
Funds added Class S shares during 2000. Additionally, the Tax-Managed Global
Equity Fund was opened for investment in January 2000, providing a diversified
asset-allocated product to compliment the existing tax-managed Russell funds.
Thank you for your continued confidence and investment with Frank Russell
Investment Company. We look forward to 2001 and continuing to earn your support.
Sincerely,
/S/ Lynn L. Anderson
Lynn L. Anderson.
Chairman of the Board
Frank Russell Investment Company
<PAGE>
LIFEPOINTS/(R)/ FUNDS
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
For the ten months ended October 31, 2000, the LifePoints/(R)/ Funds met the
challenges presented by a volatile period that began with a narrow focus on the
Technology sector and ended with a value bias and a decidedly unfavorable
climate for technology.
The LifePoints/(R)/ Funds returns for the ten months ended October 31, 2000 are
as follows:
<TABLE>
<CAPTION>
EQUITY AGGRESSIVE STRATEGY FUND AGGRESSIVE STRATEGY FUND BALANCED STRATEGY FUND
---------------------------------- ------------------------------ --------------------------
<S> <C> <C> <C> <C> <C>
Class C (3.37)% Class C (2.15)% Class C 0.43%
Class D (2.90)% Class D (1.72)% Class D 0.84%
Class E (2.75)% Class E (1.50)% Class E 1.04%
Class S (2.36)% Class S (1.32)% Class S 1.28%
MODERATE STRATEGY FUND CONSERVATIVE STRATEGY FUND
---------------------------------- ------------------------------
Class C 2.20% Class C 3.76%
Class D 2.65% Class D 4.20%
Class E 2.81% Class E 4.44%
Class S 2.90% Class S 4.65%
</TABLE>
MARKET HIGHLIGHTS
Investor enthusiasm and speculation dominated the US market during the first
quarter of the year, resulting in spectacular returns from growth stocks,
particularly the technology and Internet-related shares. However, on May 16, a
50 basis point interest rate hike from the Federal Reserve Board (Fed) increased
investor concerns and dealt a particularly harsh blow to technology and
telecommunications stocks. While the interest rate hike was the Fed's final
increase during the period, technology and telecommunications stocks remained
highly volatile and generally performed poorly through the end October.
Mirroring the US markets, both international and emerging markets' Technology,
Media and Telecommunications sectors exceeded all others throughout most of the
first quarter. However, weakness in these sectors began to appear as early as
March and the difficulties continued through the remainder of the period. During
the last three months of the period, overall market weaknesses were attributed
to fears of a global economic slowdown, high oil prices and a downturn in both
sentiment and prospects for technology companies. Investors also registered
their impatience with the progress of economic reforms and political instability
in some countries, including Japan, Indonesia, Turkey, Korea, and Taiwan. This
resulted in a bias towards 'safe' markets that didn't experience these inherent
problems.
As one of the best performing assets classes during the ten month period, the
performance generated by real estate helped stabilize some of the equity market
volatility. The favorable climate for REITS can be attributed to solid earnings
and the relatively defensive nature of the asset, which was perceived as
offering some protection from the technology correction.
The big story for the bond market was the inversion of the US Treasury yield
curve that occurred during the first quarter of the year. While the 3-month and
2-year rates rose 57 and 25 basis points, respectively, the 10-year and 30-year
rates declined 42 and 64 basis points, respectively. This inversion was driven
by the US Treasury's debt buyback program and a declining supply of longer-term
Treasury bonds. Corporate debt generally underperformed during the period,
however, it did stage a late-period rally that helped fuel further debate about
the direction of the equities markets and future growth outlooks.
Generally, asset diversification offered LifePoints/(R)/ investors some
protection from the unpredictability that dominated the financial markets both
domestically and globally. Within the first quarter of the year, US equities
were the top performers, while fixed income markets fared better during the
remaining months of the period. Emerging markets and international issues were
low performers during the ten month period, however, their results were, in
part, mitigated by the performance of the other asset classes. For the ten month
ended October 31, 2000, LifePoints'/(R)/ underlying fund (Class S shares)
returns are as follows: Diversified Equity Fund lost 4.28%, Special Growth Fund
had a total return of 9.76%, Quantitative Equity Fund posted a return of 0.47%,
International Securities Fund posted a loss of 12.40%, Emerging Markets Fund
lost 25.79%, Real Estate Securities Fund gained 18.53%, Multistrategy Bond Fund
had a return of 6.56%, Short Term Bond Fund gained 5.64%, and Diversified Bond
Fund returned 7.40%.
LifePoints(R) Funds 4
<PAGE>
EQUITY AGGRESSIVE STRATEGY FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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/(R)/ Funds seek to maintain different
allocations between classes of domestic equity, international equity, and fixed
income, depending on the LifePoints/(R)/ Fund's investment objective and risk
profile.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
LIFEPOINTS(R) EQUITY AGGRESSIVE EQUITY AGGRESSIVE STRATEGY RUSSELL 1000(R) INDEX SALOMON SB BMI Ex-US
DATES STRATEGY FUND - CLASS E COMPOSITE BENCHMARK++++
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception* $10,000 $10,000 $10,000 $10,000
1997 $ 9,480 $ 9,534 $ 9,676 $ 9,343
1998 $10,114 $10,472 $11,584 $10,001
1999 $12,204 $12,962 $14,547 $12,429
2000 $13,164 $14,016 $15,864 $12,326
Yearly periods ended October 31
</TABLE>
<TABLE>
<CAPTION>
EQUITY AGGRESSIVE STRATEGY FUND - CLASS E EQUITY AGGRESSIVE STRATEGY COMPOSITE BENCHMARK
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
-------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $10,787 7.87% 1 Year $10,813 8.13%
Inception $13,164 9.31%(S) Inception $14,016 11.57%(S)
EQUITY AGGRESSIVE STRATEGY FUND - CLASS D + RUSSELL 1000/(R)/ INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
-------------------------------------------------- --------------------------------------------------
1 Year $10,770 7.70% 1 Year $10,906 9.06%
Inception $13,096 9.13%(S) Inception $15,864 16.15%(S)
SALOMON SMITH BARNEY BROAD MARKET INDEX (BMI)
EQUITY AGGRESSIVE STRATEGY FUND - CLASS C ++ EX-US
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
-------------------------------------------------- --------------------------------------------------
1 Year $10,706 7.06% 1 Year $ 9,917 (0.83)%
Inception $12,985 8.83%(S) Inception $12,326 7.02%(S)
EQUITY AGGRESSIVE STRATEGY FUND - CLASS S +++
PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN
--------------------------------------------------
1 Year $10,830 8.30%
Inception $13,216 9.45%(S)
</TABLE>
5 Equity Aggressive Strategy Fund
<PAGE>
AGGRESSIVE STRATEGY FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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/(R)/ Funds seek to maintain different
allocations between classes of domestic equity, international equity, and fixed
income, depending on the LifePoints/(R)/ Fund's investment objective and risk
profile.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
LIFEPOINTS(R) AGGRESSIVE AGGRESSIVE STRATEGY
DATES STRATEGY FUND - CLASS E COMPOSITE BENCHMARK++++ RUSSELL 1000(R) INDEX SALOMON SB BMI EX-US
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception* $10,000 $10,000 $10,000 $10,000
1997 $ 9,750 $ 9,620 $ 9,676 $ 9,343
1998 $10,293 $10,416 $11,584 $10,001
1999 $12,027 $12,392 $14,547 $12,429
2000 $12,952 $13,405 $15,864 $12,326
Yearly periods ended October 31
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE STRATEGY FUND - CLASS E AGGRESSIVE STRATEGY COMPOSITE BENCHMARK
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
----------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $10,769 7.69% 1 Year $10,818 8.18%
Inception $12,952 8.63%(S) Inception $13,405 9.97%(S)
AGGRESSIVE STRATEGY FUND - CLASS D + RUSSELL 1000/(R)/ INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
----------------------------------------- --------------------------------------------
1 Year $10,743 7.43% 1 Year $10,906 9.06%
Inception $12,873 8.42%(S) Inception $15,864 16.15%(S)
SALOMON SMITH BARNEY BROAD MARKET INDEX
AGGRESSIVE STRATEGY FUND - CLASS C ++ (BMI) EX-US
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
----------------------------------------- --------------------------------------------
1 Year $10,688 6.88% 1 Year $ 9,917 (0.83)%
Inception $12,749 8.08%(S) Inception $12,326 7.02%(S)
AGGRESSIVE STRATEGY FUND - CLASS S +++
PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN
-----------------------------------------
1 Year $10,789 7.89%
Inception $12,976 8.69%(S)
</TABLE>
Aggressive Strategy Fund 6
<PAGE>
BALANCED STRATEGY FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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/(R)/ Funds seek to maintain different
allocations between classes of domestic equity, international equity, and fixed
income, depending on the LifePoints/(R)/ Fund's investment objective and risk
profile.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
LIFEPOINTS(R) BALANCED BALANCED STRATEGY
DATES STRATEGY FUND - CLASS E COMPOSITE BENCHMARK++++ LB AGGREGATE RUSSELL 1000
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception* $10,000 $10,000 $10,000 $10,000
1997 $ 9,870 $ 9,779 $10,145 $ 9,676
1998 $10,619 $10,709 $11,092 $11,584
1999 $11,868 $12,124 $11,151 $14,547
2000 $12,744 $13,077 $11,966 $15,864
Yearly periods ended October 31
</TABLE>
<TABLE>
<CAPTION>
BALANCED STRATEGY FUND - CLASS E BALANCED STRATEGY COMPOSITE BENCHMARK
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
----------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $10,738 7.38% 1 Year $10,786 7.86%
Inception $12,744 8.07%(S) Inception $13,077 9.09%(S)
BALANCED STRATEGY FUND - CLASS D + LEHMAN BROTHERS AGGREGATE BOND INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
----------------------------------------- -----------------------------------------
1 Year $10,714 7.14% 1 Year $10,730 7.30%
Inception $12,687 7.91%(S) Inception $11,966 5.99%(S)
BALANCED STRATEGY FUND - CLASS C ++ RUSSELL 1000/(R)/ INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
----------------------------------------- -----------------------------------------
1 Year $10,661 6.61% 1 Year $10,906 9.06%
Inception $12,557 7.56%(S) Inception $15,864 16.15%(S)
BALANCED STRATEGY FUND - CLASS S +++
PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN
-----------------------------------------
1 Year $10,764 7.64%
Inception $12,775 8.15%(S)
</TABLE>
7 Balanced Strategy Fund
<PAGE>
MODERATE STRATEGY FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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/(R)/ Funds seek to maintain different
allocations between classes of domestic equity, international equity, and fixed
income, depending on the LifePoints/(R)/ Fund's investment objective and risk
profile.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
LIFEPOINTS(R) MODERATE MODERATE STRATEGY MERRILL LYNCH
DATES STRATEGY FUND - CLASS E COMPOSITE BENCHMARK++++ 1-2.99 YR TREASURY LB AGGREGATE
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception* $10,000 $10,000 $10,000 $10,000
1997 $ 9,810 $ 9,878 $10,074 $10,145
1998 $10,585 $10,765 $10,850 $11,092
1999 $11,477 $11,784 $11,175 $11,151
2000 $12,300 $12,651 $11,854 $11,966
Yearly periods ended October 31
</TABLE>
<TABLE>
<CAPTION>
MODERATE STRATEGY FUND - CLASS E MODERATE STRATEGY COMPOSITE BENCHMARK
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
----------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $10,717 7.17% 1 Year $10,736 7.36%
Inception $12,300 6.95%(S) Inception $12,651 7.93%(S)
MODERATE STRATEGY FUND - CLASS D + MERRILL LYNCH 1-2.99 YEARS TREASURY INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
----------------------------------------- --------------------------------------------
1 Year $10,688 6.88% 1 Year $10,607 6.07%
Inception $12,222 6.73%(S) Inception $11,854 5.67%(S)
MODERATE STRATEGY FUND - CLASS C ++ LEHMAN BROTHERS AGGREGATE BOND INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
----------------------------------------- --------------------------------------------
1 Year $10,636 6.36% 1 Year $10,730 7.30%
Inception $12,126 6.45%(S) Inception $11,966 5.99%(S)
MODERATE STRATEGY FUND - CLASS S +++
PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN
-----------------------------------------
1 Year $10,726 7.26%
Inception $12,310 6.98%(S)
</TABLE>
Moderate Strategy Fund 8
<PAGE>
CONSERVATIVE STRATEGY FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (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/(R)/ Funds seek to maintain different
allocations between classes of domestic equity, international equity, and fixed
income, depending on the LifePoints/(R)/ Fund's investment objective and risk
profile.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
LIFEPOINTS(R) CONSERVATIVE CONSERVATIVE STRATEGY MERRILL LYNCH
DATES STRATEGY FUND - CLASS E COMPOSITE BENCHMARK++++ 1-2.99 YR TREASURY LB AGGREGATE
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception* $10,000 $10,000 $10,000 $10,000
1998 $10,686 $10,809 $10,770 $10,934
1999 $11,256 $11,435 $11,093 $10,992
2000 $12,032 $12,224 $11,767 $11,794
Yearly periods ended October 31
</TABLE>
<TABLE>
<CAPTION>
CONSERVATIVE STRATEGY FUND - CLASS E CONSERVATIVE STRATEGY COMPOSITE BENCHMARK
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
-------------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $10,690 6.90% 1 Year $10,691 6.91%
Inception $12,032 6.40%(S) Inception $12,224 6.92%(S)
CONSERVATIVE STRATEGY FUND - CLASS D + MERRILL LYNCH 1-2.99 YEARS TREASURY INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
-------------------------------------------- --------------------------------------------
1 Year $10,659 6.59% 1 Year $10,607 6.07%
Inception $11,937 6.12%(S) Inception $11,767 5.57%(S)
CONSERVATIVE STRATEGY FUND - CLASS C ++ LEHMAN BROTHERS AGGREGATE BOND INDEX
PERIODS ENDED GROWTH OF TOTAL PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN 10/31/00 $10,000 RETURN
-------------------------------------------- --------------------------------------------
1 Year $10,601 6.01% 1 Year $10,730 7.30%
Inception $11,842 5.83%(S) Inception $11,794 5.66%(S)
CONSERVATIVE STRATEGY FUND - CLASS S +++
PERIODS ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN
--------------------------------------------
1 Year $10,711 7.11%
Inception $12,057 6.47%(S)
</TABLE>
9 Conservative Strategy Fund
<PAGE>
LIFEPOINTS/(R)/ FUNDS
BENCHMARK COMPOSITION
October 31, 2000 (Unaudited)
EQUITY AGGRESSIVE STRATEGY FUND
* Equity Aggressive Strategy Fund Class E commenced operations on September
30, 1997. Index comparison began October 1, 1997.
++++ 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.
+ 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.
+++ Equity Aggressive Strategy Fund Class E performance has been linked with
Class S to provide historical perspective. From September 30, 1997 through
January 31, 2000, performance results include shareholder service fees paid
by Class E. Total return would have been higher had these fees not been in
effect during prior reporting periods.
(S) Annualized.
AGGRESSIVE STRATEGY FUND
* Aggressive Strategy Fund Class E commenced operations on September 16,
1997. Index comparison began October 1, 1997.
++++ The Aggressive Strategy Composite Benchmark is comprised of the following
indices: 42% Russell 1000/(R)/ Index, 19% Salomon Smith Barney BMI Ex-US,
18% Lehman Brothers Aggregate Bond Index, 11% Russell 2500/(TM)/ Index, 5%
IFC Investable Composite Index and 5% NAREIT Equity REIT Index.
+ 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.
+++ Aggressive Strategy Fund Class E performance has been linked with Class S
to provide historical perspective. From September 16, 1997 through February
1, 2000, performance results include shareholder service fees paid by Class
E. Total return would have been higher had these fees not been in effect
during prior reporting periods.
(S) Annualized.
BALANCED STRATEGY FUND
* Balanced Strategy Fund Class E commenced operations on September 16, 1997.
Index comparison began October 1, 1997.
++++ The Balanced Strategy Composite Benchmark is comprised of the following
indices: 41% Lehman Brothers Aggregate Bond Index, 32% Russell 1000/(R)/
Index, 14% Salomon Smith Barney BMI Ex-US, 5% Russell 2500/(TM)/ Index, 5%
NAREIT Equity REIT Index and 3% IFC Investable Composite Index.
+ 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.
+++ Balanced Strategy Fund Class E performance has been linked with Class S to
provide historical perspective. From September 16, 1997 through January 31,
2000, performance results include shareholder service fees paid by Class E.
Total return would have been higher had these fees not been in effect
during prior reporting periods.
(S) Annualized.
LifePoints(R) Funds 10
<PAGE>
LIFEPOINTS/(R)/ FUNDS
BENCHMARK COMPOSITION
October 31, 2000 (Unaudited)
MODERATE STRATEGY FUND
* Moderate Strategy Fund Class E commenced operations on October 2, 1997.
Index comparison began October 1, 1997.
++++ 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/(R)/ Index, 9% Salomon Smith Barney
BMI Ex-US, 5% NAREIT Equity REIT Index, 2% Russell 2500/(TM)/ Index and 2%
IFC Investable Composite Index.
+ 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.
+++ Moderate Strategy Fund Class E performance has been linked with Class S to
provide historical perspective. From October 2, 1997 through February 1,
2000, performance results include shareholder service fees paid by Class E.
Total return would have been higher had these fees not been in effect
during prior reporting periods.
(S) Annualized.
CONSERVATIVE STRATEGY FUND
* Conservative Strategy Fund Class E commenced operations on November 7,
1997. Index comparison began October 1, 1997.
++++ 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/(R) /Index, 5% Salomon Smith Barney
BMI Ex-US, 5% NAREIT Equity REIT Index and 1% IFC Investable Composite
Index.
+ 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.
+++ Conservative Strategy Fund Class E performance has been linked with Class S
to provide historical perspective. From November 7, 1997 through February
14, 2000, performance results include shareholder service fees paid by
Class E. Total return would have been higher had these fees not been in
effect during prior reporting periods.
(S) Annualized.
BENCHMARK DESCRIPTIONS
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 $1.6 billion. The
Russell 1000/(R)/ Index represents the universe of stocks from which most active
money managers typically select. The Russell 1000/(R)/ Index return reflects
adjustments for income dividends and capital gains distributions reinvested as
of the ex-dividend dates.
The Salomon Smith Barney Broad 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.
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.
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
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.
11 LifePoints(R) Funds
<PAGE>
EQUITY AGGRESSIVE STRATEGY FUND
STATEMENT OF NET ASSETS
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
INVESTMENTS
Portfolios of the Frank Russell Investment
Company Series Mutual
Fund - Class S Shares
DOMESTIC EQUITIES - 74.3%
Diversified Equity Fund 1,590,155 80,382
Quantitative Equity Fund 1,831,597 81,085
Real Estate Securities Fund 507,193 13,299
Special Growth Fund 513,313 26,959
----------
201,725
----------
INTERNATIONAL EQUITIES - 24.2%
Emerging Markets Fund 1,411,231 13,054
International Securities Fund 830,691 52,757
----------
65,811
----------
SHORT-TERM INVESTMENTS - 1.4%
Money Market Fund
due on demand (a) 3,715,000 3,715
----------
TOTAL INVESTMENTS - 99.9%
(identified cost $258,752) 271,251
----------
OTHER ASSETS AND LIABILITIES
Other assets 461
Liabilities (318)
----------
TOTAL OTHER ASSETS AND LIABILITIES,
NET - 0.1% 143
----------
NET ASSETS - 100.0% 271,394
==========
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) (508)
Unrealized appreciation (depreciation)
on investments 12,499
Shares of beneficial interest 264
Additional paid-in capital 259,139
----------
NET ASSETS 271,394
==========
NET ASSET VALUE, offering and redemption price
per share:
Class C ($43,004,766 divided by 4,199,679
shares of $.01 par value shares of
beneficial interest outstanding) $10.24
Class D ($12,591,722 divided by 1,219,394 ==========
shares of $.01 par value shares of
beneficial interest outstanding) $10.33
Class E ($190,273,175 divided by 18,510,528 ==========
shares of $.01 par value shares of
beneficial interest outstanding) $10.28
Class S ($25,524,008 divided by 2,469,633 ==========
shares of $.01 par value shares of
beneficial interest outstanding) $10.34
==========
(a) At amortized cost, which approximates market.
See accompanying notes which are an integral part of the financial statements.
Equity Aggressive Strategy Fund 12
<PAGE>
EQUITY AGGRESSIVE STRATEGY FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- ------------------
<S> <C> <C>
INVESTMENT INCOME
Income distributions from Underlying Funds ................... $ 1,114 $ 2,013
--------- ---------
EXPENSES
Advisory fees ................................................ 406 323
Administrative fees .......................................... 102 81
Distribution fees - Class C .................................. 187 29
Distribution fees - Class D .................................. 17 11
Shareholder servicing fees - Class C ......................... 62 10
Shareholder servicing fees - Class D ......................... 17 11
Shareholder servicing fees - Class E ......................... 401 382
--------- ---------
Expenses before reductions ................................... 1,192 847
Expense reductions ........................................... (508) (404)
--------- ---------
Expenses, net .............................................. 684 443
--------- ---------
Net investment income ......................................... 430 1,570
--------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments .................................................. (1,278) (350)
Capital gain distributions from Underlying Funds ............. 4,710 16,391
--------- ---------
3,432 16,041
--------- ---------
Net change in unrealized appreciation (depreciation) on
investments................................................. (11,523) 18,491
--------- ---------
Net realized and unrealized gain (loss) ...................... (8,091) 34,532
--------- ---------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS.......... $ (7,661) $ 36,102
========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
13 Equity Aggressive Strategy Fund
<PAGE>
EQUITY AGGRESSIVE STRATEGY FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ------------------ ------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income ..................... $ 430 $ 1,570 $ 161
Net realized gain (loss) ................. 3,432 16,041 2,539
Net change in unrealized
appreciation (depreciation) ............. (11,523) 18,491 5,749
--------- --------- ---------
Net increase (decrease) in net
assets from operations ................ (7,661) 36,102 8,449
--------- --------- ---------
DISTRIBUTIONS
From net investment income
Class C ................................. (278) (291) --
Class D ................................. (54) (93) (14)
Class E ................................. (2,947) (5,762) (1,028)
Class S ................................. (70) -- --
From net realized gain
Class C ................................. (1,227) (38) --
Class D ................................. (205) (76) (24)
Class E ................................. (9,906) (2,126) (430)
Class S ................................. (71) -- --
--------- --------- ---------
Net decrease in net assets
from distributions .................. (14,758) (8,386) (1,496)
--------- --------- ---------
SHARE TRANSACTIONS
Net increase (decrease) in net
assets from share transactions .......... 72,156 97,559 86,444
--------- --------- ---------
TOTAL NET INCREASE (DECREASE) IN
NET ASSETS ................................. 49,737 125,275 93,397
NET ASSETS
Beginning of period ....................... 221,657 96,382 2,985
--------- --------- ---------
End of period (including
undistributed net investment
income of $7 at December 31,
1999 and accumulated
distributions in excess of net
investment income of $1 at
December 31, 1998) ..................... $ 271,394 $ 221,657 $ 96,382
========= ========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Equity Aggressive Strategy Fund 14
<PAGE>
EQUITY AGGRESSIVE STRATEGY FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
2000* 1999**
---------- ----------
NET ASSET VALUE, BEGINNING OF PERIOD ............... $ 11.38 $ 9.80
---------- ----------
INCOME FROM OPERATIONS
Net investment income (loss)(a)(b) ................ (.04) .06
Net realized and unrealized gain (loss) ........... (.35) 1.98
---------- ----------
Total income from operations .................... (.39) 2.04
---------- ----------
DISTRIBUTIONS
From net investment income ........................ (.14) (.30)
From net realized gain ............................ (.61) (.16)
---------- ----------
Total distributions ............................. (.75) (.46)
---------- ----------
NET ASSET VALUE, END OF PERIOD ..................... $ 10.24 $ 11.38
========== ==========
TOTAL RETURN (%)(c) ................................ (3.37) 21.26
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) .......... 43,005 15,860
Ratios to average net assets (%):
Operating expenses, net (d) ..................... 1.00 1.00
Operating expenses, gross (d) ................... 1.25 1.25
Net investment income (loss)(c) ................. (.35) .59
Portfolio turnover rate (%) ....................... 58.41 76.20
* For the ten months ended October 31, 2000.
** 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) 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.
(c) Periods less than one year are not annualized.
(d) The ratios for periods less than one year are annualized.
15 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.
YEARS ENDED DECEMBER 31,
------------------------
2000* 1999 1998**
--------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD .... $ 11.43 $ 9.81 $ 9.92
--------- --------- ---------
INCOME FROM OPERATIONS
Net investment income (a)(b)*** ........ -- .06 .01
Net realized and unrealized gain (loss) (.34) 2.01 .10
--------- --------- ---------
Total income from operations ......... (.34) 2.07 .11
--------- --------- ---------
DISTRIBUTIONS
From net investment income ............. (.15) (.29) (.17)
From net realized gain ................. (.61) (.16) (.05)
--------- --------- ---------
Total distributions .................. (.76) (.45) (.22)
--------- --------- ---------
NET ASSET VALUE, END OF PERIOD .......... $ 10.33 $ 11.43 $ 9.81
========= ========= =========
TOTAL RETURN (%)(c) ..................... (2.90) 21.58 1.17
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period
(in thousands) ....................... 12,592 3,732 4,923
Ratios to average net assets (%):
Operating expenses, net (d) .......... .50 .50 .50
Operating expenses, gross (d) ........ .75 .75 .89
Net investment income (c) ............ .01 .64 .01
Portfolio turnover rate (%) ............ 58.41 76.20 73.95
* For the ten months ended October 31, 2000.
** For the period March 24, 1998 (commencement of sale) to December 31, 1998.
*** Less than $.01 per share for the period ended October 31, 2000.
(a) Average month-end shares outstanding were used for this calculation.
(b) 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.
(c) Periods less than one year are not annualized.
(d) The ratios for periods less than one year are annualized.
Equity Aggressive Strategy Fund 16
<PAGE>
EQUITY AGGRESSIVE STRATEGY FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
2000* 1999 1998 1997**
-------- -------- --------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............. $ 11.39 $ 9.80 $ 8.83 $ 10.00
-------- -------- --------- --------
INCOME FROM OPERATIONS
Net investment income (a)(b) .................... .03 .10 .03 .09
Net realized and unrealized gain (loss) .......... (.35) 2.00 1.18 (.33)
-------- -------- --------- --------
Total income from operations ................... (.32) 2.10 1.21 (.24)
-------- -------- --------- --------
DISTRIBUTIONS
From net investment income ....................... (.18) (.35) (.19) (.33)
From net realized gain ........................... (.61) (.16) (.05) (.60)
-------- -------- --------- --------
Total distributions ............................ (.79) (.51) (.24) (.93)
-------- -------- --------- --------
NET ASSET VALUE, END OF PERIOD .................... $ 10.28 $ 11.39 $ 9.80 $ 8.83
======== ======== ========= ========
TOTAL RETURN (%)(c) .............................. (2.75) 21.96 13.75 (2.42)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ........ 190,273 202,066 91,459 2,985
Ratios to average net assets (%):
Operating expenses, net (d) ................... .25 .25 .25 .25
Operating expenses, gross (d)(e) ............... .50 .50 .62 --
Net investment income (c) ..................... .24 .99 .28 .45
Portfolio turnover rate (%) ..................... 58.41 76.20 73.95 48.30
</TABLE>
* For the ten months ended October 31, 2000.
** For the period September 30, 1997 (commencement of operations) to December
31, 1997.
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) 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.
(c) Periods less than one year are not annualized.
(d) The ratios for periods less than one year are annualized.
(e) The ratio for the period ended December 31, 1997 is not meaningful due to
the Class's short period of operation.
17 Equity Aggressive Strategy Fund
<PAGE>
EQUITY AGGRESSIVE STRATEGY 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.
2000*
----------
NET ASSET VALUE, BEGINNING OF PERIOD ............................. $ 10.91
----------
INCOME FROM OPERATIONS
Net investment income (a)(b) ................................... .04
Net realized and unrealized gain (loss) ........................ .17
----------
Total income from operations .................................. .21
----------
DISTRIBUTIONS
From net investment income ...................................... (.17)
From net realized gain .......................................... (.61)
----------
Total distributions ........................................... (.78)
----------
NET ASSET VALUE, END OF PERIOD ................................... $ 10.34
==========
TOTAL RETURN (%)(c) ............................................. 1.93
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ....................... 25,524
Ratios to average net assets (%):
Operating expenses, net (d) .................................. .00
Operating expenses, gross (d) ................................ .25
Net investment income (c) .................................... .45
Portfolio turnover rate (%) .................................... 58.41
* For the period January 31, 2000 (commencement of sale) to October 31, 2000.
(a) Average month-end shares outstanding were used for this calculation.
(b) 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.
(c) Not annualized.
(d) Annualized.
Equity Aggressive Strategy Fund 18
<PAGE>
AGGRESSIVE STRATEGY FUND
STATEMENT OF NET ASSETS
October 31, 2000
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
INVESTMENTS
Portfolios of the Frank Russell Investment
Company Series Mutual
Fund - Class S Shares
DOMESTIC EQUITIES - 57.9%
Diversified Equity Fund 1,285,498 64,982
Quantitative Equity Fund 1,466,805 64,935
Real Estate Securities Fund 575,488 15,089
Special Growth Fund 642,492 33,744
----------
178,750
----------
INTERNATIONAL EQUITIES - 23.6%
Emerging Markets Fund 1,614,335 14,933
International Securities Fund 910,622 57,833
----------
72,766
----------
BONDS - 17.4%
Multistrategy Bond Fund 5,603,629 53,851
----------
SHORT-TERM INVESTMENTS - 0.3%
Money Market Fund
due on demand (a) 1,068,000 1,068
---------
TOTAL INVESTMENTS - 99.2%
(identified cost $304,171) 306,435
---------
OTHER ASSETS AND LIABILITIES
Other assets 2,610
Liabilities (185)
---------
TOTAL OTHER ASSETS AND LIABILITIES,
NET - 0.8% 2,425
---------
NET ASSETS - 100.0% 308,860
=========
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) (185)
Unrealized appreciation (depreciation)
on investments 2,264
Shares of beneficial interest 298
Additional paid-in capital 306,483
---------
NET ASSETS 308,860
=========
NET ASSET VALUE, offering and redemption price
per share:
Class C ($67,295,597 divided by 6,503,706
shares of $.01 par value shares of
beneficial interest outstanding) $10.35
Class D ($12,627,808 divided by 1,213,241 =========
shares of $.01 par value shares of
beneficial interest outstanding) $10.41
Class E ($193,351,475 divided by 18,634,747 =========
shares of $.01 par value shares of
beneficial interest outstanding) $10.38
Class S ($35,585,160 divided by 3,417,153 =========
shares of $.01 par value shares of
beneficial interest outstanding) $10.41
=========
(a) At amortized cost, which approximates market.
See accompanying notes which are an integral part of the financial statements.
19 Aggressive Strategy Fund
<PAGE>
AGGRESSIVE STRATEGY FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- ------------------
<S> <C> <C>
INVESTMENT INCOME
Income distributions from Underlying Funds ........................ $ 3,318 $ 2,523
---------------- ------------------
EXPENSES
Advisory fees ..................................................... 442 250
Administrative fees ............................................... 111 63
Distribution fees - Class C ....................................... 318 51
Distribution fees - Class D ....................................... 20 10
Shareholder servicing fees - Class C .............................. 106 17
Shareholder servicing fees - Class D .............................. 20 10
Shareholder servicing fees - Class E .............................. 397 286
---------------- ------------------
Expenses before reductions ........................................ 1,414 687
Expense reductions ................................................ (553) (313)
---------------- ------------------
Expenses, net ................................................... 861 374
---------------- ------------------
Net investment income .............................................. 2,457 2,149
---------------- ------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on:
Investments ....................................................... (990) (216)
Capital gain distributions from Underlying Funds .................. 4,387 11,244
---------------- ------------------
3,397 11,028
---------------- ------------------
Net change in unrealized appreciation (depreciation) on investments. (10,444) 11,618
---------------- ------------------
Net realized and unrealized gain (loss) ........................... (7,047) 22,646
---------------- ------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS .............. $ (4,590) $ 24,795
================ ==================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Aggressive Strategy Fund 20
<PAGE>
AGGRESSIVE STRATEGY FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income .............. $ 2,457 $ 2,150 $ 721
Net realized gain (loss) ........... 3,397 11,028 1,160
Net change in unrealized
appreciation (depreciation) ...... (10,444) 11,617 1,403
---------------- ----------------- -----------------
Net increase (decrease) in net
assets from operations ......... (4,590) 24,795 3,284
---------------- ----------------- -----------------
DISTRIBUTIONS
From net investment income
Class C .......................... (753) (503) --
Class D .......................... (151) (143) (54)
Class E .......................... (4,183) (4,608) (969)
Class S .......................... (210) -- --
From net realized gain
Class C .......................... (1,401) (22) --
Class D .......................... (218) (67) (4)
Class E .......................... (6,343) (1,243) (73)
Class S .......................... (86) -- --
---------------- ----------------- -----------------
Net decrease in net assets
from distributions ........... (13,345) (6,586) (1,100)
---------------- ----------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net
assets from share transactions ... 123,657 119,092 58,346
---------------- ----------------- -----------------
TOTAL NET INCREASE (DECREASE) IN
NET ASSETS .......................... 105,722 137,301 60,530
---------------- ----------------- -----------------
NET ASSETS
Beginning of period ................ 203,138 65,837 5,307
---------------- ----------------- -----------------
End of period (including accumulated
distributions in excess of
net investment income of $188 at
December 31, 1999 and
undistributed net investment
income of $3,828
at December 31, 1998) ............ $ 308,860 $ 203,138 $ 65,837
================ ================= =================
</TABLE>
See accompanying notes which are an integral part of the financial statements.
21 Aggressive Strategy Fund
<PAGE>
AGGRESSIVE STRATEGY FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
2000* 1999**
------- -------
NET ASSET VALUE, BEGINNING OF PERIOD ................... $ 11.15 $ 10.11
------- -------
INCOME FROM OPERATIONS
Net investment income (a)(b)........................... .05 .13
Net realized and unrealized gain (loss)................ (.29) 1.36
------- -------
Total income from operations......................... (.24) 1.49
------- -------
DISTRIBUTIONS
From net investment income............................. (.18) (.29)
From net realized gain................................. (.38) (.16)
------- -------
Total distributions.................................. (.56) (.45)
------- -------
NET ASSET VALUE, END OF PERIOD ......................... $ 10.35 $ 11.15
======= =======
TOTAL RETURN (%)(c)..................................... (2.15) 15.21
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)............... 67,296 29,365
Ratios to average net assets (%):
Operating expenses, net (d).......................... 1.00 1.00
Operating expenses, gross (d)........................ 1.25 1.25
Net investment income (c)............................ .43 1.50
Portfolio turnover rate (%)............................ 40.57 71.44
* For the ten months ended October 31, 2000.
** 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) 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.
(c) Periods less than one year are not annualized.
(d) The ratios for periods less than one year are annualized.
Aggressive Strategy Fund 22
<PAGE>
AGGRESSIVE STRATEGY FUND
FINANCIAL HIGHLIGHTS - CLASS D
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
2000* 1999 1998**
------- -------- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ......... $ 11.20 $ 9.95 $ 10.09
------- -------- --------
INCOME FROM OPERATIONS
Net investment income (a)(b)................. .09 .15 .13
Net realized and unrealized gain (loss)...... (.28) 1.57 (.05)
------- -------- --------
Total income from operations............... (.19) 1.72 .08
------- -------- --------
DISTRIBUTIONS
From net investment income................... (.22) (.31) (.21)
From net realized gain....................... (.38) (.16) (.01)
------- -------- --------
Total distributions........................ (.60) (.47) (.22)
------- -------- --------
NET ASSET VALUE, END OF PERIOD ............... $ 10.41 $ 11.20 $ 9.95
======= ======== ========
TOTAL RETURN (%)(c)........................... (1.72) 17.69 .96
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)..... 12,628 6,096 3,649
Ratios to average net assets (%):
Operating expenses, net (d)............... .50 .50 .50
Operating expenses, gross (d)............. .75 .75 .93
Net investment income (c)................. .81 1.48 1.35
Portfolio turnover rate (%)................. 40.57 71.44 93.08
</TABLE>
* For the ten months ended October 31, 2000.
** 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) 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.
(c) Periods less than one year are not annualized.
(d) The ratios for periods less than one year are annualized.
23 Aggressive Strategy Fund
<PAGE>
AGGRESSIVE STRATEGY FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
YEARS ENDED DECEMBER 31,
------------------------------
2000* 1999 1998 1997**
------- -------- -------- ----------
NET ASSET VALUE, BEGINNING OF
PERIOD............................ $ 11.17 $ 9.94 $ 9.14 $ 10.00
------- -------- -------- ----------
INCOME FROM OPERATIONS
Net investment income (a)(b)..... .11 .18 .19 .10
Net realized and unrealized gain
(loss)......................... (.28) 1.56 .87 (.11)
------- -------- -------- ----------
Total income from operations... (.17) 1.74 1.06 (.01)
-------- -------- -------- ----------
DISTRIBUTIONS
From net investment income....... (.24) (.35) (.25) (.31)
From net realized gain........... (.38) (.16) (.01) (.54)
-------- -------- -------- ----------
Total distributions............ (.62) (.51) (.26) (.85)
-------- -------- -------- ----------
NET ASSET VALUE, END OF PERIOD.... $ 10.38 $ 11.17 $ 9.94 $ 9.14
======== ======== ======== ==========
TOTAL RETURN (%)(c)............... (1.50) 17.95 11.69 (.19)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in
thousands)..................... 193,351 167,677 62,188 5,307
Ratios to average net assets (%):
Operating expenses, net (d).... .25 .25 .25 .25
Operating expenses, gross (d)(e) .50 .50 .66 --
Net investment income (c)...... 1.04 1.73 1.88 .97
Portfolio turnover rate (%)...... 40.57 71.44 93.08 56.88
* For the ten months ended October 31, 2000.
** For the period September 16, 1997 (commencement of operations) to December
31, 1997.
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) 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.
(c) Periods less than one year are not annualized.
(d) The ratios for periods less than one year are annualized.
(e) The ratio for the period ended December 31, 1997 is not meaningful due to
the Class's short period of operation.
Aggressive Strategy Fund 24
<PAGE>
AGGRESSIVE STRATEGY 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.
2000*
----------
NET ASSET VALUE, BEGINNING OF PERIOD ............................ $ 10.82
----------
INCOME FROM OPERATIONS
Net investment income (a)(b).................................... .11
Net realized and unrealized gain (loss)......................... .09
----------
Total income from operations.................................. .20
----------
DISTRIBUTIONS
From net investment income...................................... (.23)
From net realized gain.......................................... (.38)
----------
Total distributions........................................... (.61)
----------
NET ASSET VALUE, END OF PERIOD .................................. $ 10.41
==========
TOTAL RETURN (%)(c).............................................. 1.59
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)........................ 35,585
Ratios to average net assets (%):
Operating expenses, net (d)................................... .00
Operating expenses, gross (d)................................. .25
Net investment income (c)..................................... 1.15
Portfolio turnover rate (%)..................................... 40.57
* For the period February 1, 2000 (commencement of sale) to October 31, 2000.
(a) Average month-end shares outstanding were used for this calculation.
(b) 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.
(c) Not annualized.
(d) Annualized.
25 Aggressive Strategy Fund
<PAGE>
BALANCED STRATEGY FUND
STATEMENT OF NET ASSETS
October 31, 2000
NUMBER MARKET
OF VALUE
SHARES $
------------ ------------
INVESTMENTS
Portfolios of the Frank Russell Investment
Company Series Mutual
Fund - Class S Shares
DOMESTIC EQUITIES - 42.3%
Diversified Equity Fund 1,377,157 69,615
Quantitative Equity Fund 1,585,583 70,194
Real Estate Securities Fund 807,416 21,170
Special Growth Fund 412,637 21,672
----------
182,651
----------
INTERNATIONAL EQUITIES - 17.0%
Emerging Markets Fund 1,396,832 12,921
International Securities Fund 953,733 60,572
----------
73,493
----------
BONDS - 40.3%
Diversified Bond Fund 4,736,311 105,667
Multistrategy Bond Fund 7,114,684 68,372
----------
174,039
----------
SHORT-TERM INVESTMENTS - 0.4%
Money Market Fund
due on demand (a) 1,565,000 1,565
----------
TOTAL INVESTMENTS - 100.0%
(identified cost $424,825) 431,748
----------
OTHER ASSETS AND LIABILITIES
Other assets 1,814
Liabilities (1,745)
----------
TOTAL OTHER ASSETS AND LIABILITIES,
NET - 0.0% 69
----------
NET ASSETS - 100.0% 431,817
==========
NET ASSETS CONSIST OF:
Accumulated distributions in excess of
net realized gain (1,303)
Unrealized appreciation (depreciation)
on investments 6,923
Shares of beneficial interest 422
Additional paid-in capital 425,775
----------
NET ASSETS 431,817
==========
NET ASSET VALUE, offering and redemption price
per share:
Class C ($81,187,985 divided by 7,959,054
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.20
Class D ($17,295,507 divided by 1,687,169 ==========
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.25
Class E ($296,435,275 divided by 28,996,926 ==========
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.22
Class S ($36,898,022 divided by 3,598,879 ==========
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.25
==========
(a) At amortized cost, which approximates market.
Balanced Strategy Fund 26
<PAGE>
BALANCED STRATEGY FUND
STATEMENT OF OPERATIONS
Amounts in thousands
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- -----------------
INVESTMENT INCOME
Income distributions from
Underlying Funds........................ $ 8,729 $ 8,286
---------------- -----------------
EXPENSES
Advisory fees............................. 651 520
Administrative fees....................... 163 130
Distribution fees - Class C............... 383 85
Distribution fees - Class D............... 21 10
Shareholder servicing fees - Class C...... 128 28
Shareholder servicing fees - Class D...... 22 10
Shareholder servicing fees - Class E...... 633 612
---------------- -----------------
Expenses before reductions................ 2,001 1,395
Expense reductions........................ (814) (650)
---------------- -----------------
Expenses, net........................... 1,187 745
---------------- -----------------
Net investment income...................... 7,542 7,541
---------------- -----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments............................... (1,761) (426)
Capital gain distributions from Underlying
Funds.................................... 4,757 15,052
---------------- -----------------
2,996 14,626
---------------- -----------------
Net change in unrealized appreciation
(depreciation) on investments.............. (7,255) 10,880
---------------- -----------------
Net realized and unrealized gain (loss).... (4,259) 25,506
---------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS................................. $ 3,283 $ 33,047
---------------- -----------------
See accompanying notes which are an integral part of the financial statements.
27 Balanced Strategy Fund
<PAGE>
BALANCED STRATEGY FUND
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income ............................................... $7,542 $7,541 $3,383
Net realized gain (loss) ............................................ 2,996 14,626 3,765
Net change in unrealized appreciation (depreciation) ................ (7,255) 10,880 3,463
--------- --------- ---------
Net increase (decrease) in net assets from operations ............. 3,283 33,047 10,611
--------- --------- ---------
DISTRIBUTIONS
From net investment income
Class C ........................................................... (1,365) (788) --
Class D ........................................................... (242) (230) (79)
Class E ........................................................... (8,615) (10,742) (4,774)
Class S ........................................................... (379) -- --
From net realized gain
Class C ........................................................... (1,484) (14) --
Class D ........................................................... (288) (55) (16)
Class E ........................................................... (9,187) (2,339) (493)
Class S ........................................................... (49) -- --
--------- --------- ---------
Net decrease in net assets from distributions ................... (21,609) (14,168) (5,362)
--------- --------- ---------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ....... 106,201 159,001 157,258
--------- --------- ---------
TOTAL NET INCREASE (DECREASE) IN
NET ASSETS ........................................................... 87,875 177,880 162,507
NET ASSETS
Beginning of period ................................................. 343,942 166,062 3,555
--------- --------- ---------
End of period (including undistributed net investment income of
$6 at December 31, 1998) .......................................... $431,817 $343,942 $166,062
========= ========= =========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Balanced Strategy Fund 28
<PAGE>
BALANCED STRATEGY FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
2000* 1999**
-------- --------
NET ASSET VALUE, BEGINNING OF PERIOD .................. $ 10.72 $ 10.26
-------- --------
INCOME FROM OPERATIONS
Net investment income (a)(b) ......................... .15 .25
Net realized and unrealized gain (loss) .............. (.11) .70
-------- --------
Total income from operations ....................... .04 .95
-------- --------
DISTRIBUTIONS
From net investment income ........................... (.24) (.37)
From net realized gain ............................... (.32) (.12)
-------- --------
Total distributions ................................ (.56) (.49)
-------- --------
NET ASSET VALUE, END OF PERIOD ........................ $ 10.20 $ 10.72
======== ========
TOTAL RETURN (%)(c) ................................... .43 9.53
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ............. 81,188 39,325
Ratios to average net assets (%):
Operating expenses, net (d) ........................ 1.00 1.00
Operating expenses, gross (d) ...................... 1.25 1.25
Net investment income (c) .......................... 1.43 2.96
Portfolio turnover rate (%) .......................... 31.70 64.63
* For the ten months ended October 31, 2000.
** 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) 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.
(c) Periods less than one year are not annualized.
(d) The ratios for periods less than one year are annualized.
29 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.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
2000* 1999 1998**
--------- --------- ---------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ......... $ 10.77 $ 10.13 $ 10.22
--------- --------- ---------
INCOME FROM OPERATIONS
Net investment income (a)(b) ................ .17 .30 .24
Net realized and unrealized gain (loss) ..... (.09) .84 .07
--------- --------- ---------
Total income from operations .............. .08 1.14 .31
--------- --------- ---------
DISTRIBUTIONS
From net investment income .................. (.28) (.38) (.37)
From net realized gain ...................... (.32) (.12) (.03)
--------- --------- ---------
Total distributions ....................... (.60) (.50) (.40)
--------- --------- ---------
NET ASSET VALUE, END OF PERIOD ............... $ 10.25 $ 10.77 $ 10.13
========= ========= =========
TOTAL RETURN (%)(c) .......................... .84 11.64 3.23
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) .... 17,296 9,075 4,953
Ratios to average net assets (%):
Operating expenses, net (d) ............... .50 .50 .50
Operating expenses, gross (d) ............. .75 .75 .86
Net investment income (c) ................. 1.67 3.07 2.46
Portfolio turnover rate (%) ................. 31.70 64.63 78.85
</TABLE>
* For the ten months ended October 31, 2000.
** 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) 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.
(c) Periods less than one year are not annualized.
(d) The ratios for periods less than one year are annualized.
Balanced Strategy Fund 30
<PAGE>
BALANCED STRATEGY FUND
FINANCIAL HIGHLIGHTS - CLASS E
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
2000* 1999 1998 1997**
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............. $ 10.74 $ 10.12 $ 9.46 $ 10.00
---------- ---------- ---------- ---------
INCOME FROM OPERATIONS
Net investment income (a)(b) .................... .21 .30 .31 .09
Net realized and unrealized gain (loss) ......... (.11) .86 .78 .02
---------- ---------- ---------- ---------
Total income from operations .................. .10 1.16 1.09 .11
---------- ---------- ---------- ---------
DISTRIBUTIONS
From net investment income ...................... (.30) (.42) (.40) (.24)
From net realized gain .......................... (.32) (.12) (.03) (.41)
---------- ---------- ---------- ---------
Total distributions ........................... (.62) (.54) (.43) (.65)
---------- ---------- ---------- ---------
NET ASSET VALUE, END OF PERIOD ................... $ 10.22 $ 10.74 $ 10.12 $ 9.46
========== ========== ========== =========
TOTAL RETURN (%)(c) .............................. 1.04 11.80 11.66 1.04
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ........ 296,435 295,542 161,108 3,554
Ratios to average net assets (%):
Operating expenses, net (d) ................... .25 .25 .25 .25
Operating expenses, gross (d)(e) .............. .50 .50 .61 --
Net investment income (c) ..................... 2.02 2.89 3.05 1.30
Portfolio turnover rate (%) ..................... 31.70 64.63 78.85 29.58
</TABLE>
* For the ten months ended October 31, 2000.
** For the period September 16, 1997 (commencement of operations) to December
31, 1997.
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) 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.
(c) Periods less than one year are not annualized.
(d) The ratios for periods less than one year are annualized.
(e) The ratio for the period ended December 31, 1997 is not meaningful due to
the Class's short period of operation.
31 Balanced Strategy Fund
<PAGE>
BALANCED STRATEGY 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.
2000*
-----------
NET ASSET VALUE, BEGINNING OF PERIOD ............................. $ 10.45
----------
INCOME FROM OPERATIONS
Net investment income (a)(b)..................................... .19
Net realized and unrealized gain (loss).......................... .23
----------
Total income from operations................................... .42
----------
DISTRIBUTIONS
From net investment income....................................... (.30)
From net realized gain........................................... (.32)
----------
Total distributions............................................ (.62)
----------
NET ASSET VALUE, END OF PERIOD ................................... $ 10.25
==========
TOTAL RETURN (%)(c)............................................... 4.09
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)......................... 36,898
Ratios to average net assets (%):
Operating expenses, net (d).................................... .00
Operating expenses, gross (d).................................. .25
Net investment income (c)...................................... 2.05
Portfolio turnover rate (%)...................................... 31.70
* For the period January 31, 2000 (commencement of sale) to October 31, 2000.
(a) Average month-end shares outstanding were used for this calculation.
(b) 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.
(c) Not annualized.
(d) Annualized.
Balanced Strategy Fund 32
<PAGE>
MODERATE STRATEGY FUND
STATEMENT OF NET ASSETS
October 31, 2000
<TABLE>
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
<S> <C> <C>
INVESTMENTS
Portfolios of the Frank Russell Investment
Company Series Mutual
Fund - Class S Shares
DOMESTIC EQUITIES - 29.1%
Diversified Equity Fund 155,400 7,855
Quantitative Equity Fund 178,363 7,896
Real Estate Securities Fund 132,515 3,475
Special Growth Fund 26,742 1,405
----------
20,631
----------
INTERNATIONAL EQUITIES - 11.0%
Emerging Markets Fund 152,992 1,415
International Securities Fund 101,165 6,425
----------
7,840
----------
BONDS - 59.4%
Diversified Bond Fund 849,512 18,953
Short Term Bond Fund 1,273,128 23,196
----------
42,149
----------
SHORT-TERM INVESTMENTS - 0.3%
Money Market Fund
due on demand (a) 217,000 217
----------
TOTAL INVESTMENTS - 99.8%
(identified cost $69,866) 70,837
----------
OTHER ASSETS AND LIABILITIES
Other assets 205
Liabilities (91)
----------
TOTAL OTHER ASSETS AND LIABILITIES,
NET - 0.2% 114
----------
NET ASSETS - 100.0% 70,951
==========
NET ASSETS CONSIST OF:
Accumulated distributions in excess of
net realized gain (528)
Unrealized appreciation (depreciation)
on investments 971
Shares of beneficial interest 70
Additional paid-in capital 70,438
----------
NET ASSETS 70,951
==========
NET ASSET VALUE, offering and redemption price
per share:
Class C ($10,392,420 divided by 1,019,207
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.20
Class D ($3,157,171 divided by 308,333 ==========
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.24
Class E ($49,817,952 divided by 4,886,225 ==========
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.20
Class S ($7,583,429 divided by 742,710 ==========
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.21
==========
</TABLE>
(a) At amortized cost, which approximates market.
See accompanying notes which are an integral part of the financial statements.
33 Moderate Strategy Fund
<PAGE>
MODERATE STRATEGY FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Income distributions from Underlying Funds .......................................... $ 1,840 $ 1,562
------------ ------------
EXPENSES
Advisory fees ....................................................................... 101 76
Administrative fees ................................................................. 26 19
Distribution fees - Class C ......................................................... 47 10
Distribution fees - Class D ......................................................... 5 4
Shareholder servicing fees - Class C ................................................ 16 3
Shareholder servicing fees - Class D ................................................ 4 4
Shareholder servicing fees - Class E ................................................ 100 88
------------ ------------
Expenses before reductions .......................................................... 299 204
Expense reductions .................................................................. (127) (95)
------------ ------------
Expenses, net ..................................................................... 172 109
------------ ------------
Net investment income ................................................................ 1,668 1,453
------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ......................................................................... (281) (112)
Capital gain distributions from Underlying Funds .................................... 451 1,483
------------ ------------
170 1,371
------------ ------------
Net change in unrealized appreciation (depreciation) on investments .................. (242) 656
------------ ------------
Net realized and unrealized gain (loss) .............................................. (72) 2,027
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ................................ $ 1,596 $ 3,480
============ ============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Moderate Strategy Fund 34
<PAGE>
MODERATE STRATEGY FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income ............................................... $ 1,668 $ 1,453 $ 448
Net realized gain (loss) ............................................ 170 1,371 65
Net change in unrealized appreciation (depreciation) ................ (242) 656 571
------------ ------------ ------------
Net increase (decrease) in net assets from operations ............. 1,596 3,480 1,084
------------ ------------ ------------
DISTRIBUTIONS
From net investment income
Class C ........................................................... (211) (86) --
Class D ........................................................... (66) (61) (45)
Class E ........................................................... (1,575) (1,721) (479)
Class S ........................................................... (103) -- --
From net realized gain
Class C ........................................................... (113) (12) --
Class D ........................................................... (30) (14) (1)
Class E ........................................................... (890) (274) (16)
Class S ........................................................... (7) -- --
------------ ------------ ------------
Net decrease in net assets from distributions ................... (2,995) (2,168) (541)
------------ ------------ ------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ....... 21,495 29,190 19,425
------------ ------------ ------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS .......................... 20,096 30,502 19,968
NET ASSETS
Beginning of period ................................................. 50,855 20,353 385
------------ ------------ ------------
End of period (including accumulated distributions in excess of
net investment income of $6 at December 31, 1999 and
undistributed net investment income of $745
at December 31, 1998) ............................................. $ 70,951 $ 50,855 $ 20,353
============ ============ ============
</TABLE>
See accompanying notes which are an integral part of the financial statements.
35 Moderate Strategy Fund
<PAGE>
MODERATE STRATEGY FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
2000* 1999**
--------- --------
NET ASSET VALUE, BEGINNING OF PERIOD .............. $ 10.46 $ 10.15
--------- --------
INCOME FROM OPERATIONS
Net investment income (a)(b) ..................... .24 .32
Net realized and unrealized gain (loss) .......... (.02) .48
--------- --------
Total income from operations ................... .22 .80
--------- --------
DISTRIBUTIONS
From net investment income ....................... (.28) (.40)
From net realized gain ........................... (.20) (.09)
--------- --------
Total distributions ............................ (.48) (.49)
--------- --------
NET ASSET VALUE, END OF PERIOD .................... $ 10.20 $ 10.46
========= ========
TOTAL RETURN (%)(c) ............................... 2.20 8.03
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ......... 10,392 4,139
Ratios to average net assets (%):
Operating expenses, net (d) .................... 1.00 1.00
Operating expenses, gross (d) .................. 1.25 1.25
Net investment income (c) ...................... 2.30 3.35
Portfolio turnover rate (%) ...................... 39.55 120.04
* For the ten months ended October 31, 2000.
** 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) 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.
(c) Periods less than one year are not annualized.
(d) The ratios for periods less than one year are annualized.
Moderate Strategy Fund 36
<PAGE>
MODERATE STRATEGY FUND
FINANCIAL HIGHLIGHTS - CLASS D
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
2000* 1999 1998**
--------- --------- ---------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............... $ 10.49 $ 10.15 $ 10.18
--------- --------- ---------
INCOME FROM OPERATIONS
Net investment income (a)(b) ...................... .28 .33 .26
Net realized and unrealized gain (loss) ........... (.02) .50 .09
--------- --------- ---------
Total income from operations .................... .26 .83 .35
--------- --------- ---------
DISTRIBUTIONS
From net investment income ........................ (.31) (.40) (.37)
From net realized gain ............................ (.20) (.09) (.01)
--------- --------- ---------
Total distributions ............................. (.51) (.49) (.38)
--------- --------- ---------
NET ASSET VALUE, END OF PERIOD ..................... $ 10.24 $ 10.49 $ 10.15
========= ========= =========
TOTAL RETURN (%)(c) ................................ 2.65 8.40 3.57
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) .......... 3,157 1,367 1,780
Ratios to average net assets (%):
Operating expenses, net (d) ..................... .50 .50 .50
Operating expenses, gross (d) ................... .75 .75 1.01
Net investment income (c) ....................... 2.66 3.28 2.65
Portfolio turnover rate (%) ....................... 39.55 120.04 175.58
</TABLE>
* For the ten months ended October 31, 2000.
** 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) 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.
(c) Periods less than one year are not annualized.
(d) The ratios for periods less than one year are annualized.
37 Moderate Strategy Fund
<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,
---------------------------------------
2000* 1999 1998 1997**
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD .............. $ 10.46 $ 10.15 $ 9.61 $ 10.00
---------- ---------- ---------- ---------
INCOME FROM OPERATIONS
Net investment income (a)(b) ..................... .28 .40 .39 .07
Net realized and unrealized gain (loss)*** ....... -- .46 .57 (.08)
---------- ---------- ---------- ---------
Total income from operations ................... .28 .86 .96 (.01)
---------- ---------- ---------- ---------
DISTRIBUTIONS
From net investment income ....................... (.34) (.46) (.41) (.14)
From net realized gain ........................... (.20) (.09) (.01) (.24)
---------- ---------- ---------- ---------
Total distributions ............................ (.54) (.55) (.42) (.38)
---------- ---------- ---------- ---------
NET ASSET VALUE, END OF PERIOD .................... $ 10.20 $ 10.46 $ 10.15 $ 9.61
========== ========== ========== =========
TOTAL RETURN (%)(c) ............................... 2.81 8.65 10.19 (.06)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ......... 49,818 45,350 18,573 385
Ratios to average net assets (%):
Operating expenses, net (d) .................... .25 .25 .25 .25
Operating expenses, gross (d)(e) .............. .50 .50 .94 --
Net investment income (c) ...................... 2.77 3.87 3.71 1.01
Portfolio turnover rate (%) ...................... 39.55 120.04 175.58 9.66
</TABLE>
* For the ten months ended October 31, 2000.
** For the period October 2, 1997 (commencement of operations) to December 31,
1997.
*** Less than $.01 per share for the period ended October 31, 2000.
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) 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.
(c) Periods less than one year are not annualized.
(d) The ratios for periods less than one year are annualized.
(e) The ratio for the period ended December 31, 1997 is not meaningful due to
the Class's short period of operation.
Moderate Strategy Fund 38
<PAGE>
MODERATE STRATEGY 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.
2000*
---------
NET ASSET VALUE, BEGINNING OF PERIOD ............................. $ 10.27
---------
INCOME FROM OPERATIONS
Net investment income (a)(b) .................................... .29
Net realized and unrealized gain (loss) ......................... .19
---------
Total income from operations .................................. .48
---------
DISTRIBUTIONS
From net investment income ...................................... (.34)
From net realized gain .......................................... (.20)
---------
Total distributions ........................................... (.54)
---------
NET ASSET VALUE, END OF PERIOD ................................... $ 10.21
=========
TOTAL RETURN (%)(c) .............................................. 4.09
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ........................ 7,584
Ratios to average net assets (%):
Operating expenses, net (d) ................................... .00
Operating expenses, gross (d) ................................. .25
Net investment income (c) ..................................... 3.12
Portfolio turnover rate (%) ..................................... 39.55
* For the period February 1, 2000 (commencement of sale) to October 31, 2000.
(a) Average month-end shares outstanding were used for this calculation.
(b) 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.
(c) Not annualized.
(d) Annualized.
39 Moderate Strategy Fund
<PAGE>
CONSERVATIVE STRATEGY FUND
STATEMENT OF NET ASSETS
October 31, 2000
<TABLE>
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
-------- --------
<S> <C> <C>
INVESTMENTS
Portfolios of the Frank Russell Investment
Company Series Mutual
Fund - Class S Shares
DOMESTIC EQUITIES - 16.6%
Diversified Equity Fund 20,691 1,046
Quantitative Equity Fund 29,115 1,289
Real Estate Securities Fund 39,573 1,038
--------
3,373
--------
INTERNATIONAL EQUITIES - 6.0%
Emerging Markets Fund 20,725 192
International Securities Fund 16,332 1,037
--------
1,229
--------
BONDS - 78.6%
Diversified Bond Fund 165,485 3,692
Short Term Bond Fund 676,406 12,324
--------
16,016
--------
TOTAL INVESTMENTS - 101.2%
(identified cost $20,375) 20,618
--------
OTHER ASSETS AND LIABILITIES
Other assets 44
Liabilities (281)
--------
TOTAL OTHER ASSETS AND LIABILITIES,
NET - (1.2%) (237)
--------
NET ASSETS - 100.0% 20,381
========
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) (302)
Unrealized appreciation (depreciation)
on investments 243
Shares of beneficial interest 20
Additional paid-in capital 20,420
--------
NET ASSETS 20,381
========
NET ASSET VALUE, offering and redemption price
per share:
Class C ($2,499,846 divided by 245,698
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.17
Class D ($1,161,688 divided by 113,732 ========
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.21
Class E ($14,075,990 divided by 1,381,519 ========
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.19
Class S ($2,643,441 divided by 258,816 ========
shares of $.01 par value shares of
beneficial interest outstanding) $ 10.21
========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Conservative Strategy Fund 40
<PAGE>
CONSERVATIVE STRATEGY FUND
STATEMENT OF OPERATIONS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999
--------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Income distributions from Underlying Funds ...................................... $ 668 $ 724
----- -----
EXPENSES
Advisory fees ................................................................... 30 29
Administrative fees ............................................................. 8 7
Distribution fees - Class C ..................................................... 13 3
Distribution fees - Class D ..................................................... 2 2
Shareholder servicing fees - Class C ............................................ 4 1
Shareholder servicing fees - Class D ............................................ 2 2
Shareholder servicing fees - Class E ............................................ 29 34
----- -----
Expenses before reductions ...................................................... 88 78
Expense reductions .............................................................. (38) (36)
----- -----
Expenses, net ................................................................. 50 42
----- -----
Net investment income ............................................................ 618 682
----- -----
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ..................................................................... (216) (50)
Capital gain distributions from Underlying Funds ................................ 77 286
----- -----
(139) 236
----- -----
Net change in unrealized appreciation (depreciation) on investments .............. 258 (77)
----- -----
Net realized and unrealized gain (loss) .......................................... 119 159
----- -----
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ............................ $ 737 $ 841
===== =====
</TABLE>
See accompanying notes which are an integral part of the financial statements.
41 Conservative Strategy Fund
<PAGE>
CONSERVATIVE STRATEGY FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
TEN MONTHS ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
---------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income ........................................... $ 618 $ 682 $ 112
Net realized gain (loss) ........................................ (139) 236 10
Net change in unrealized
appreciation (depreciation) ..................................... 258 (77) 62
-------- -------- --------
Net increase (decrease) in net assets from operations ......... 737 841 184
-------- -------- --------
DISTRIBUTIONS
From net investment income
Class C ....................................................... (67) (49) --
Class D ....................................................... (30) (54) (18)
Class E ....................................................... (519) (864) (104)
Class S ....................................................... (52) -- --
From net realized gain
Class C ....................................................... -- (4) --
Class D ....................................................... -- (4) --
Class E ....................................................... -- (62) (1)
-------- -------- --------
Net decrease in net assets from distributions ............... (668) (1,037) (123)
-------- -------- --------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ... 739 14,740 4,945
-------- -------- --------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ...................... 808 14,544 5,006
NET ASSETS
Beginning of period ............................................. 19,573 5,029 23
-------- -------- --------
End of period (including undistributed net investment income of
$74 at December 31, 1998) ..................................... $ 20,381 $ 19,573 $ 5,029
======== ======== ========
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Conservative Strategy Fund 42
<PAGE>
CONSERVATIVE STRATEGY FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
2000* 1999**
------- -------
NET ASSET VALUE, BEGINNING OF PERIOD ................ $ 10.12 $ 10.26
------- -------
INCOME FROM OPERATIONS
Net investment income (a)(b) ....................... .31 .43
Net realized and unrealized gain (loss) ............ .07 .04
------- -------
Total income from operations ..................... .38 .47
------- -------
DISTRIBUTIONS
From net investment income ......................... (.33) (.56)
From net realized gain ............................. -- (.05)
------- -------
Total distributions .............................. (.33) (.61)
------- -------
NET ASSET VALUE, END OF PERIOD ...................... $ 10.17 $ 10.12
======= =======
TOTAL RETURN (%)(c) ................................. 3.76 4.67
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ........... 2,500 1,697
Ratios to average net assets (%):
Operating expenses, net (d) ...................... 1.00 1.00
Operating expenses, gross (d) .................... 1.25 1.25
Net investment income (c) ........................ 3.04 4.77
Portfolio turnover rate (%) ........................ 53.89 125.01
* For the ten months ended October 31, 2000.
** 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) 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.
(c) Periods less than one year are not annualized.
(d) The ratios for periods less than one year are annualized.
43 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,
------------------------
2000* 1999 1998**
-------- ------- --------
NET ASSET VALUE, BEGINNING OF PERIOD ....... $ 10.16 $ 10.25 $ 10.20
-------- -------- --------
INCOME FROM OPERATIONS
Net investment income (a)(b) .............. .33 .44 .32
Net realized and unrealized gain (loss) ... .09 .08 .06
-------- -------- --------
Total income from operations ............ .42 .52 .38
-------- -------- --------
DISTRIBUTIONS
From net investment income ................ (.37) (.56) (.33)
From net realized gain .................... -- (.05) --
-------- -------- --------
Total distributions ..................... (.37) (.61) (.33)
-------- -------- --------
NET ASSET VALUE, END OF PERIOD ............. $ 10.21 $ 10.16 $ 10.25
======== ======== ========
TOTAL RETURN (%)(c) ........................ 4.20 5.18 3.77
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) .. 1,162 1,001 618
Ratios to average net assets (%):
Operating expenses, net (d) ............. .50 .50 .50
Operating expenses, gross (d) ........... .75 .75 1.73
Net investment income (c) ............... 3.27 4.24 3.09
Portfolio turnover rate (%) ............... 53.89 125.01 169.79
* For the ten months ended October 31, 2000.
** 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) 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.
(c) Periods less than one year are not annualized.
(d) The ratios for periods less than one year are annualized.
Conservative Strategy Fund 44
<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,
---------------------------------
2000* 1999 1998 1997**
-------- -------- -------- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ......... $ 10.14 $ 10.24 $ 9.88 $ 10.00
-------- -------- -------- -------
INCOME FROM OPERATIONS
Net investment income (a)(b) ................ .34 .49 .46 .07
Net realized and unrealized gain (loss) .10 .06 .29 .07
-------- -------- -------- -------
Total income from operations .............. .44 .55 .75 .14
-------- -------- -------- -------
DISTRIBUTIONS
From net investment income .................. (.39) (.60) (.39) (.10)
From net realized gain ...................... -- (.05) -- (.16)
-------- -------- -------- -------
Total distributions ....................... (.39) (.65) (.39) (.26)
-------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD ............... $ 10.19 $ 10.14 $ 10.24 $ 9.88
======== ======== ======== =======
TOTAL RETURN (%)(c) .......................... 4.44 5.54 7.70 1.36
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) .... 14,076 16,875 4,411 23
Ratios to average net assets (%):
Operating expenses, net (d) ............... .25 .25 .25 .25
Operating expenses, gross (d)(e) ......... .50 .50 2.50 --
Net investment income (c) ................. 3.40 4.76 4.41 .67
Portfolio turnover rate (%) ................. 53.89 125.01 169.79 0.00
</TABLE>
* For the ten months ended October 31, 2000.
** 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) 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.
(c) Periods less than one year are not annualized.
(d) The ratios for periods less than one year are annualized.
(e) The ratio for the period ended December 31, 1997 is not meaningful due to
the Class's short period of operation.
45 Conservative Strategy Fund
<PAGE>
CONSERVATIVE STRATEGY 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.
2000*
--------
NET ASSET VALUE, BEGINNING OF PERIOD .............................. $ 10.09
--------
INCOME FROM OPERATIONS
Net investment income (a)(b) ..................................... .37
Net realized and unrealized gain (loss) .......................... .14
--------
Total income from operations ................................... .51
--------
DISTRIBUTIONS
From net investment income ....................................... (.39)
--------
Total distributions ............................................ (.39)
--------
NET ASSET VALUE, END OF PERIOD .................................... $ 10.21
========
TOTAL RETURN (%)(c) ............................................... 5.17
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ......................... 2,643
Ratios to average net assets (%):
Operating Expenses, net (d) .................................... .00
Operating Expenses, gross (d) .................................. .25
Net investment income (c) ...................................... 3.71
Portfolio turnover rate (%) ...................................... 53.89
* For period February 14, 2000 (commencement of sale) to October 31, 2000.
(a) Average month-end shares outstanding were used for this calculation.
(b) 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.
(c) Not annualized.
(d) Annualized.
Conservative Strategy Fund 46
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS/(R)/ FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 2000
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company") is a series
mutual fund with 29 different investment portfolios, referred to as
"Funds." These financial statements report on five LifePoints/(R)/ Funds,
each of which has distinct investment objectives and strategies. The
Investment Company is registered under the Investment Company Act of 1940,
as amended, as a diversified, open-end management investment company. It is
organized and operates as a Massachusetts business trust under an amended
master trust agreement dated July 26, 1984. The Investment Company's master
trust agreement permits the Board of Trustees to issue an unlimited number
of full and fractional shares of beneficial interest at a $.01 par value.
The Investment Company's Board of Trustees approved a change in the Funds'
fiscal year-end from December 31 to October 31. As a result, this financial
report reflects the ten-month period commencing on January 1, 2000 through
October 31, 2000.
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.
47 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS/(R)/ FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
EMERGING MARKETS FUND: 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 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.
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.
At October 31, 2000, the Conservative Strategy Fund had a net tax basis
capital loss carryforward in the amount of $34,693, expiring on October 31,
2008, which may be applied against any net realized taxable gains in each
succeeding year or until their respective expiration dates, whichever
occurs first.
The aggregate cost of investments and the composition of gross unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of October 31, 2000 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 $261,384,666 $ 10,799,596 $ (933,222) $ 9,866,374
Aggressive Strategy 305,699,668 5,870,807 (5,135,116) 735,691
Balanced Strategy 427,483,785 9,178,477 (4,914,621) 4,263,856
Moderate Strategy 70,507,945 707,805 (378,983) 328,822
Conservative Strategy 20,641,609 316,934 (341,045) (24,111)
</TABLE>
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends are generally
declared and paid quarterly. Capital gain distributions are generally
declared and paid annually. An additional distribution may be paid by the
Funds to avoid imposition of federal income and excise tax on any remaining
undistributed capital gains and net investment income.
Notes to Financial Statements 48
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS/(R)/ FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
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
ten months ended October 31, 2000:
<TABLE>
<CAPTION>
UNDISTRIBUTED NET ACCUMULATED NET ADDITIONAL
INVESTMENT INCOME REALIZED GAIN (LOSS) PAID-IN CAPITAL
-------------------- ---------------------- -----------------
<S> <C> <C> <C>
Equity Aggressive Strategy $ 2,912,297 $(2,911,278) $ (1,019)
Aggressive Strategy 2,840,410 (2,840,368) (42)
Balanced Strategy 3,058,735 (3,058,735) --
Moderate Strategy 288,146 (288,146) --
Conservative Strategy 49,323 (43,860) (5,463)
</TABLE>
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 ten months ended October 31, 2000 and the year ended
December 31, 1999, purchases and sales of the Underlying Funds (excluding
Money Market Fund investments) were as follows:
<TABLE>
<CAPTION>
OCTOBER 31, 2000 DECEMBER 31, 1999
--------------------------- ---------------------------
PURCHASES SALES PURCHASES SALES
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Equity Aggressive Strategy $205,833,401 $142,927,847 Equity Aggressive Strategy $229,597,401 $123,058,841
Aggressive Strategy 222,729,329 107,330,212 Aggressive Strategy 216,509,670 89,465,822
Balanced Strategy 220,562,288 123,489,662 Balanced Strategy 338,927,326 166,926,974
Moderate Strategy 44,164,327 23,992,968 Moderate Strategy 75,665,677 45,245,259
Conservative Strategy 10,674,883 9,944,145 Conservative Strategy 32,802,993 17,819,252
</TABLE>
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 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 October 31, 2000, approximately $6,565,000 of the Money Market Fund's
net assets represents investments by these Funds and $730,596,000
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 ten months ended October 31, 2000 and year ended December
31, 1999, the Advisor contractually agreed to waive both the advisory fee
and the administrative fee.
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. 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.
49 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
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 OCTOBER 31, 2000 WERE AS FOLLOWS:
Equity Aggressive
Strategy $ 81,102
Aggressive Strategy 102,586
Balanced Strategy 137,588
Moderate Strategy 20,531
Conservative Strategy 5,563
---------
$347,370
=========
BOARD OF TRUSTEES: The Investment Company pays each of its Trustees not
affiliated with FRIMCo a retainer of $55,000 per year plus out-of-pocket
expenses. Total Trustee expenses for the ten months ended October 31, 2000
and the year ended December 31, 1999 were paid for by the Underlying Funds
or FRIMCo under the aforementioned Special Servicing Agreements.
Notes to Financial Statements 50
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS/(R)/ FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
5. FUND SHARE TRANSACTIONS
Share transactions for the ten months ended October 31, 2000 and the years
ended December 31, 1999 and December 31, 1998, respectively, were as
follows:
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
------------------------------------------ -----------------------------------------
2000 1999 1998 2000 1999 1998
EQUITY AGGRESSIVE STRATEGY ------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS C (a)
Proceeds from shares sold 2,938,389 1,544,511 -- $ 31,457 $ 16,146 --
Proceeds from reinvestment of distributions 145,885 29,855 -- 1,489 326 --
Payments for shares redeemed (278,373) (180,588) -- (2,909) (1,868) --
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) 2,805,901 1,393,778 -- 30,037 14,604 --
------------ ----------- ----------- ----------- ----------- -----------
CLASS D (b)
Proceeds from shares sold 1,342,216 340,578 502,893 14,116 3,495 4,784
Proceeds from reinvestment of distributions 25,154 15,864 3,888 259 163 37
Payments for shares redeemed (474,474) (531,958) (4,767) (5,081) (5,425) (46)
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) 892,896 (175,516) 502,014 9,294 (1,767) 4,775
------------ ----------- ----------- ----------- ----------- -----------
CLASS E
Proceeds from shares sold 7,093,887 10,976,153 9,545,046 75,655 111,250 86,677
Proceeds from reinvestment of distributions 1,231,740 735,158 150,876 12,601 7,740 1,443
Payments for shares redeemed (7,550,131) (3,307,666) (702,666) (81,962) (34,268) (6,451)
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) 775,496 8,403,645 8,993,256 6,294 84,722 81,669
------------ ----------- ----------- ----------- ----------- -----------
CLASS S (c)
Proceeds from shares sold 3,222,212 -- -- 34,527 -- --
Proceeds from reinvestment of distributions 13,451 -- -- 140 -- --
Payments for shares redeemed (766,030) -- -- (8,136) -- --
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) 2,469,633 -- -- 26,531 -- --
------------ ----------- ----------- ----------- ----------- -----------
Total increase (decrease) 6,943,926 9,621,907 9,495,270 $ 72,156 $ 97,559 $ 86,444
============ =========== =========== =========== =========== ===========
</TABLE>
(a) Fund share transactions are for the period February 11, 1999 (commencement
of sales) to December 31, 1999.
(b) Fund share transactions are for the period March 24, 1998 (commencement of
sales) to December 31, 1998.
(c) Fund share transactions are for the period January 31, 2000 (commencement
of sales) to October 31, 2000.
51 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS/(R)/ FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
----------------------------------------- -------------------------------------------
2000 1999 1998 2000 1999 1998
AGGRESSIVE STRATEGY ------------- ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS C (a)
Proceeds from shares sold 4,063,594 2,762,515 -- $ 43,470 $ 28,710 $ --
Proceeds from reinvestment of distributions 202,491 47,843 -- 2,105 514 --
Payments for shares redeemed (396,917) (175,820) -- (4,201) (1,831) --
------------- ----------- ---------- ----------- ----------- -----------
Net increase (decrease) 3,869,168 2,634,538 -- 41,374 27,393 --
------------- ----------- ---------- ----------- ----------- -----------
CLASS D (b)
Proceeds from shares sold 1,008,295 506,069 450,907 10,633 5,174 4,314
Proceeds from reinvestment of distributions 35,198 18,899 5,923 369 196 57
Payments for shares redeemed (374,713) (347,272) (90,064) (3,974) (3,547) (786)
------------- ----------- ---------- ----------- ----------- -----------
Net increase (decrease) 668,780 177,696 366,766 7,028 1,823 3,585
------------- ----------- ---------- ----------- ----------- -----------
CLASS E
Proceeds from shares sold 7,317,758 10,507,851 6,093,738 78,132 107,829 58,658
Proceeds from reinvestment of distributions 988,247 546,129 99,583 10,303 5,706 955
Payments for shares redeemed (4,683,867) (2,297,816) (517,340) (49,917) (23,659) (4,852)
------------- ----------- ---------- ----------- ----------- -----------
Net increase (decrease) 3,622,138 8,756,164 5,675,981 38,518 89,876 54,761
------------- ----------- ---------- ----------- ----------- -----------
CLASS S (c)
Proceeds from shares sold 3,855,731 -- -- 41,443 -- --
Proceeds from reinvestment of distributions 26,706 -- -- 282 -- --
Payments for shares redeemed (465,284) -- -- (4,988) -- --
------------- ----------- ---------- ----------- ----------- -----------
Net increase (decrease) 3,417,153 -- -- 36,737 -- --
------------- ----------- ---------- ----------- ----------- -----------
Total increase (decrease) 11,577,239 11,568,398 6,042,747 $ 123,657 $ 119,092 $ 58,346
============= =========== ========== =========== =========== ===========
</TABLE>
(a) Fund share transactions are for the period January 29, 1999 (commencement
of sales) to December 31, 1999.
(b) Fund share transactions are for the period March 24, 1998 (commencement of
sales) to December 31, 1998.
(c) Fund share transactions are for the period February 1, 2000 (commencement
of sales) to October 31, 2000.
Notes to Financial Statements 52
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS/(R)/ FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
------------------------------------------ ------------------------------------------
2000 1999 1998 2000 1999 1998
BALANCED STRATEGY ----------- ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS C (a)
Proceeds from shares sold 4,684,787 3,746,798 -- $ 48,662 $ 38,468 $ --
Proceeds from reinvestment of distributions 268,530 74,392 -- 2,739 775 --
Payments for shares redeemed (661,993) (153,460) -- (6,891) (1,579) --
----------- ----------- ------------ ----------- ----------- -----------
Net increase (decrease) 4,291,324 3,667,730 -- 44,510 37,664 --
----------- ----------- ------------ ----------- ----------- -----------
CLASS D (b)
Proceeds from shares sold 2,122,846 744,198 504,049 22,233 7,761 4,926
Proceeds from reinvestment of distributions 51,337 27,083 8,519 525 280 85
Payments for shares redeemed (1,329,990) (417,501) (23,373) (13,954) (4,290) (221)
----------- ----------- ------------ ----------- ----------- -----------
Net increase (decrease) 844,193 353,780 489,195 8,804 3,751 4,790
----------- ----------- ------------ ----------- ----------- -----------
CLASS E
Proceeds from shares sold 7,815,526 15,883,305 17,549,534 81,332 162,202 172,156
Proceeds from reinvestment of distributions 1,694,296 1,237,575 523,953 17,295 12,727 5,173
Payments for shares redeemed (8,022,285) (5,535,963) (2,524,583) (83,336) (57,343) (24,861)
----------- ----------- ------------ ----------- ----------- -----------
Net increase (decrease) 1,487,537 11,584,917 15,548,904 15,291 117,586 152,468
----------- ----------- ------------ ----------- ----------- -----------
CLASS S (c)
Proceeds from shares sold 3,764,341 -- -- 39,340 -- --
Proceeds from reinvestment of distributions 40,325 -- -- 417 -- --
Payments for shares redeemed (205,786) -- -- (2,161) -- --
----------- ----------- ------------ ----------- ----------- -----------
Net increase (decrease) 3,598,880 -- -- 37,596 -- --
----------- ----------- ------------ ----------- ----------- -----------
Total increase (decrease) 10,221,934 15,606,427 16,038,099 $ 106,201 $ 159,001 $ 157,258
=========== =========== ============ =========== =========== ===========
</TABLE>
(a) Fund share transactions are for the period January 29, 1999 (commencement
of sales) to December 31, 1999.
(b) Fund share transactions for the period March 24, 1998 (commencement of
sales) to December 31, 1998.
(c) Fund share transactions are for the period January 31, 2000 (commencement
of sales) to October 31, 2000.
53 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS/(R)/ FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
-------------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
MODERATE STRATEGY ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
CLASS C (a)
Proceeds from shares sold 688,098 442,297 -- $ 7,073 $ 4,516 $ --
Proceeds from reinvestment of distributions 30,869 9,292 -- 314 95 --
Payments for shares redeemed (95,477) (55,873) -- (985) (576) --
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) 623,490 395,716 -- 6,402 4,035 --
---------- ---------- ---------- ---------- ---------- ----------
CLASS D (b)
Proceeds from shares sold 265,608 208,042 195,126 2,739 2,111 1,929
Proceeds from reinvestment of distributions 9,431 7,349 4,649 97 75 46
Payments for shares redeemed (96,968) (260,416) (24,489) (1,005) (2,647) (243)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) 178,071 (45,025) 175,286 1,831 (461) 1,732
---------- ---------- ---------- ---------- ---------- ----------
CLASS E
Proceeds from shares sold 1,621,064 3,290,795 2,231,041 16,649 33,625 22,075
Proceeds from reinvestment of distributions 238,416 189,865 44,242 2,422 1,938 439
Payments for shares redeemed (1,310,485) (973,411) (485,375) (13,489) (9,947) (4,821)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) 548,995 2,507,249 1,789,908 5,582 25,616 17,693
---------- ---------- ---------- ---------- ---------- ----------
CLASS S (c)
Proceeds from shares sold 807,091 -- -- 8,339 -- --
Proceeds from reinvestment of distributions 10,512 -- -- 107 -- --
Payments for shares redeemed (74,893) -- -- (766) -- --
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) 742,710 -- -- 7,680 -- --
---------- ---------- ---------- ---------- ---------- ----------
Total increase (decrease) 2,093,266 2,857,940 1,965,194 $ 21,495 $ 29,190 $ 19,425
========== ========== ========== ========== ========== ==========
</TABLE>
(a) Fund share transactions are for the period February 11, 1999 (commencement
of sales) to December 31, 1999.
(b) Fund share transactions are for the period March 24, 1998 (commencement of
sales) to December 31, 1998.
(c) Fund share transactions are for the period February 1, 2000 (commencement
of sales) to October 31, 2000.
Notes to Financial Statements 54
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY LIFEPOINTS/(R)/ FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
------------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
CONSERVATIVE STRATEGY --------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
CLASS C (a)
Proceeds from shares sold 108,375 169,843 -- $ 1,106 $ 1,729 $ --
Proceeds from reinvestment of distributions 5,651 4,421 -- 58 44 --
Payments for shares redeemed (36,025) (6,567) -- (367) (67) --
--------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) 78,001 167,697 -- 797 1,706 --
--------- ---------- ---------- ---------- ---------- ----------
CLASS D (b)
Proceeds from shares sold 59,777 114,508 71,083 610 1,172 722
Proceeds from reinvestment of distributions 2,945 5,689 1,849 30 58 19
Payments for shares redeemed (47,494) (81,941) (12,685) (482) (834) (128)
--------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) 15,228 38,256 60,247 158 396 613
--------- ---------- ---------- ---------- ---------- ----------
CLASS E
Proceeds from shares sold 630,262 1,647,322 511,083 6,421 16,886 5,169
Proceeds from reinvestment of distributions 51,001 90,532 9,863 517 916 99
Payments for shares redeemed (964,131) (504,166) (92,535) (9,799) (5,164) (936)
--------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) (282,868) 1,233,688 428,411 (2,861) 12,638 4,332
--------- ---------- ---------- ---------- ---------- ----------
CLASS S (c)
Proceeds from shares sold 264,473 -- -- 2,702 -- --
Proceeds from reinvestment of distributions 5,066 -- -- 52 -- --
Payments for shares redeemed (10,723) -- -- (109) -- --
--------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) 258,816 -- -- 2,645 -- --
--------- ---------- ---------- ---------- ---------- ----------
Total increase (decrease) 69,177 1,439,641 488,658 $ 739 $ 14,740 $ 4,945
========= ========== ========== ========== ========== ==========
</TABLE>
(a) Fund share transactions are for the period February 11, 1999 (commencement
of sales) to December 31, 1999.
(b) Fund share transactions are for the period March 24, 1998 (commencement of
sales) to December 31, 1998.
(c) Fund share transactions are for the period February 14, 2000 (commencement
of sales) to October 31, 2000.
6. LINE OF CREDIT
The Investment Company 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
Funds may borrow up to a maximum of 10 percent of the value of their net
assets under the agreement. The agreement will expire December 30, 2000.
The Investment Company did not have any drawdowns during the ten months
ended October 31, 2000 and the year ended December 31, 1999.
55 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS/(R)/ FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
7. BENEFICIAL INTEREST
As of October 31, 2000, the following Funds have one or more shareholders
with shares of beneficial interest of greater than 10% of the total
outstanding shares of each respective Fund or Class:
<TABLE>
<CAPTION>
% % % % %
------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Equity Aggressive Strategy - Class D 31.9 15.5 15.1 12.8 --
Equity Aggressive Strategy - Class E 25.9 11.5 -- -- --
Aggressive Strategy - Class D 30.1 18.4 16.5 13.4 --
Aggressive Strategy - Class E 10.8 10.3 -- -- --
Aggressive Strategy - Class S 11.0 -- -- -- --
Balanced Strategy - Class D 18.6 14.0 -- -- --
Balanced Strategy - Class E 19.7 11.4 -- -- --
Balanced Strategy - Class S 16.7 -- -- -- --
Moderate Strategy - Class D 33.8 30.9 12.1 -- --
Moderate Strategy - Class E 18.1 12.0 10.3 -- --
Moderate Strategy - Class S 36.6 16.8 -- -- --
Conservative Strategy - Class D 58.2 17.8 -- -- --
Conservative Strategy - Class E 16.4 -- -- -- --
Conservative Strategy - Class S 44.7 14.8 12.4 11.1 10.5
</TABLE>
Notes to Financial Statements 56
<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 Aggressive Strategy,
Aggressive Strategy, Balanced Strategy, Moderate Strategy, and Conservative
Strategy (the "Funds")) at October 31, 2000, 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 accounting principles
generally accepted in the United States of America. 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 auditing standards
generally accepted in the United States of America, 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 October
31, 2000 by correspondence with the custodian, provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
Seattle, Washington
December 15, 2000
57 Report of Independent Accountants
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS/(R)/ FUNDS
TAX INFORMATION
October 31, 2000 (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 October 31, 2000:
TOTAL LONG-TERM
CAPITAL GAINS
-------------------
Equity Aggressive Strategy $ 11,344,313
Aggressive Strategy 8,048,540
Balanced Strategy 10,732,794
Moderate Strategy 1,016,345
Tax Information 58
<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
Kristianne Blake
Lee C. Gingrich
Eleanor W. Palmer
Raymond P. Tennison, Jr.
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
Marsico Capital Management, LLC, Denver, CO
Peachtree Asset Management, Atlanta, GA
Sanford C. Bernstein & Co., Inc., New York, NY
Strong Capital Management, Inc., Menomonee Falls, WI
Suffolk Capital Management, Inc., New York,
Turner Investment Partners, Inc. Berwyn, PA
Westpeak Investment Advisors, L.P., Boulder, CO
SPECIAL GROWTH FUND
CapitalWorks Investment Partners, LLC, San Diego, CA
David J. Greene and Company, LLC, New York, NY
Delphi Management, Inc., Boston, MA
GlobeFlex Capital, L.P., San Diego, CA
Jacobs Levy Equity Management, Inc., Roseland, NJ
Sirach Capital Management, Inc., Seattle, WA
TimesSquare Capital Management, Inc., New York, NY
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
Driehaus Capital Management, Inc., Chicago, IL
Fidelity Management Trust Company, Boston, MA
J.P. Morgan Investment Management, Inc., New York, NY
Marvin & Palmer Associates, Inc., Wilmington, DE
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
Security Capital Global Capital Management Group Inc., Chicago, IL
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.
59 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 60
<PAGE>
[LOGO OF FRANK RUSSELL INVESTMENT COMPANY]
Frank Russell Investment Company
909 A Street
Tacoma, Washington, 98402
253-627-7001
800-787-7354
Fax: 253-591-3495
36-08-022 (1000)
www.russell.com
<PAGE>
------------------------------
TAX-MANAGED GLOBAL EQUITY FUND
------------------------------
FRANK RUSSELL INVESTMENT COMPANY
2000 Annual Report
CLASS C AND S SHARES
TAX-MANAGED GLOBAL EQUITY FUND
OCTOBER 31, 2000
[LOGO OF FRANK RUSSELL INVESTMENT COMPANY]
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
Frank Russell Investment Company
is a "series mutual fund" with 29
different investment portfolios.
These financial statements report
on one Fund, 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 GLOBAL EQUITY FUND
ANNUAL REPORT
OCTOBER 31, 2000
TABLE OF CONTENTS
Page
Letter to Our Clients ........................... 2
Portfolio Management Discussion ................. 3
Statement of Net Assets ......................... 5
Statement of Operations ......................... 6
Statement of Changes in Net Assets .............. 7
Financial Highlights - Class C .................. 8
Financial Highlights - Class S .................. 9
Notes to Financial Statements ................... 10
Report of Independent Accountants ............... 14
Manager, Money Managers and Service Providers ... 15
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
the investment return and principal value of an investment will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Investments in securities of non-US issuers and foreign currencies involve
investment risks different than those of US issuers; the Prospectus contains
further information and details regarding these risks. Russell Fund
Distributors, Inc., is the distributor of Frank Russell Investment Company.
<PAGE>
TO OUR CLIENTS
We are pleased to present the Frank Russell Investment Company 2000 Annual
Report. This report covers information on the Tax-Managed Global Equity Fund and
represents our nineteenth 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 2000, 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 1999 we have implemented changes in our Funds' structure
which we believe will benefit current and potential investors. Class Y shares of
the Institutional Funds were opened for investment, and the LifePoints(R) Funds
added Class S shares during 2000. Additionally, the Tax-Managed Global Equity
Fund was opened for investment in January 2000, providing a diversified asset-
allocated product to compliment the existing tax-managed Russell funds.
Thank you for your continued confidence and investment with Frank Russell
Investment Company. We look forward to 2001 and continuing to earn your support.
Sincerely,
/s/ Lynn L. Anderson
Lynn L. Anderson.
Chairman of the Board
Frank Russell Investment Company
<PAGE>
TAX-MANAGED GLOBAL EQUITY FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
OBJECTIVE: Seeks to achieve high long-term capital appreciation on an after-tax
basis, while recognizing the possibility of high fluctuations in year-to-year
markets.
STRATEGY: The Fund allocates its assets by investing in a diversified group of
Underlying Funds. By investing in the multi-managed Underlying Funds, the
Tax-Managed Global Equity Fund seeks to achieve its investment objectives while
minimizing shareholder tax consequences arising from its portfolio management
activities.
[GRAPH]
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
TAX MANAGED TAX MANAGED SALOMON SB
DATES GLOBAL EQUITY - CLASS S GLOBAL EQUITY COMPOSITE ++ S&P 500++++ BMI EX-US++++++
<S> <C> <C> <C> <C>
Inception* $10,000 $10,000 $10,000 $10,000
2000 $ 9,788 $10,002 $10,333 $ 9,421
------- ------- ------- -------
Total $19,788 $20,002 $20,333 $19,421
======= ======= ======= =======
Yearly period ended October 31
</TABLE>
TAX-MANAGED GLOBAL EQUITY FUND - CLASS S
PERIOD ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN
------------------ ----------- ---------------
Inception $ 9,788 (2.12)%
TAX-MANAGED GLOBAL EQUITY FUND - CLASS C
PERIOD ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN
------------------ ----------- ---------------
Inception $ 9,745 (2.55)%
TAX-MANAGED GLOBAL EQUITY COMPOSITE BENCHMARK
PERIOD ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN
------------------ ----------- ---------------
Inception $10,002 0.02%
STANDARD & POORS(R)500 COMPOSITE STOCK PRICE INDEX
PERIOD ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN
------------------ ----------- ---------------
Inception $10,333 3.33%
SALOMON SMITH BARNEY BROAD MARKET
INDEX (BMI) WORLD EX-US
PERIOD ENDED GROWTH OF TOTAL
10/31/00 $10,000 RETURN
------------------ ----------- ---------------
Inception $ 9,421 (5.79)%
3 Tax-Managed Global Equity Fund
<PAGE>
TAX-MANAGED GLOBAL EQUITY FUND
PORTFOLIO MANAGEMENT DISCUSSION
October 31, 2000 (Unaudited)
PERFORMANCE REVIEW
From its January 31, 2000 inception through October 31, 2000, the Tax-Managed
Global Equity Fund Class S and Class C shares lost 2.12% and 2.55%,
respectively. This compared to a gain of 4.34% for the Russell 3000/(R)/ Index
and a loss of 5.79% return for the Salomon Smith Barney BMI World ex-US Index.
The S&P/(R)/ 500 Index gained 3.33% for the same period.
The Fund's fiscal period performance was impacted by volatile world markets that
offered significant challenges, including the tendency toward changing favor
between the growth and value styles. While the underlying Funds' managers
attempted to capitalize where possible on these style switches, there was a
degree of limitation related to this approach. Given the tax efficient nature of
their investment strategies, certain managers generally held their positions
through the volatility in order to better manage tax impacts.
PORTFOLIO HIGHLIGHTS
In the US, as well as in international and emerging markets, performance of the
Technology, Media and Telecommunications sectors exceeded all others during the
first five months of the fiscal year. However, these sectors faced steep
corrections during the second half of the year, when value investing was
generally favored.
In the US market, small-cap and mid-cap issues emerged as stronger alternatives
as compared to their large-cap counterparts during the final months of the
fiscal year. This point was illustrated during the calendar quarter ending in
September, as the performance differential between style and capitalization was
extreme, with the largest capitalization stocks lagging their smaller
counterparts significantly. Within the Russell 1000/(R)/ Growth Index, the
largest capitalization stocks lost 10.40% for the quarter, while the
medium/large-cap tier gained 6.20%.
Within the Russell 1000/(R)/ Value Index, the largest capitalization tier
benefited from the switch to value stocks, returning 6.10%, but still trailed
the value index's medium/large-cap tier, which returned 11.20%.
From an international perspective, currency movements also had a significant
impact on returns. During the first quarter of the fiscal year, a 14% decline in
the Euro muted European gains, while the 11% gain in the Yen boosted returns
from Japan. While Japan's outlook was strong during the first part of the fiscal
period, investors became impatient with the pace of that country's restructuring
effort later in the year and returns suffered as a result.
International markets generally lost ground amidst extreme sector rotation,
heightened volatility and the "tech wreck", which dramatically cut valuations
for technology issues. While Europe held up better than Japan, investors focused
on industries worldwide rather than countries, which caused further sell-off
among Technology, Media and Telecommunications stocks.
Like their counterparts in developed countries, emerging markets' issues in the
Technology, Media and Telecommunications sectors made a strong showing during
the first half of the fiscal year, but were responsible for a sizable portion of
the downturn that followed. Investors also registered their impatience with the
progress of economic reforms and political instability in some countries,
including Indonesia, Turkey, Korea, and Taiwan.
The 2000 fiscal year returns for the Tax-Managed Global Equity underlying funds
(Class S shares) are as follows: Tax-Managed Large Cap Fund gained 5.00%,
International Securities Fund gained 1.38%, Tax-Managed Small Cap Fund returned
11.68%, Diversified Equity Fund gained 3.51%, and Emerging Markets Fund lost
6.38%.
The Fund's fiscal year-end was changed from December 31 to October 31.
Information disclosed in the Performance Review and Portfolio Highlights
narratives reflects Fund performance results for the 10 month period ended
October 31, 2000. The performance results presented on the line graph and the
accompanying tables reflect Fund results for 12 month periods ended October 31.
* The Fund commenced operations on January 31, 2000. Index comparisons
began on January 31, 2000.
++ The Tax-Managed Global Equity Composite Benchmark is comprised of the
following indices: 50% S&P 500/(R)/ Index, 20% Salomon Smith Barney BMI
Ex-US, 15% Russell Small Cap Completeness/(TM)/ Index, 10% Russell
1000/(R)/ Index, and 5% IFC Investable Composite Index.
++++ 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.
++++++ 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.
The Russell Small Cap Completeness(TM) Index measures the performance
of the companies in the Russell 3000/(R)/ Index excluding the companies
in the standard & Poor's/(R)/ 500 Index.
Russell 1000/(R)/ Index includes the 1,000 largest companies in the
Russell 3000/(R)/ Index, the smallest of which is valued at about $1.6
billion. The Russell 1000/(R)/ Index represents the universe of stocks
from which most active money managers typically select. The Russell
1000/(R)/ Index return reflects adjustments for income dividends and
capital gains distributions reinvested as of the ex-dividend dates.
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.
(S) 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 Global Equity Fund 4
<PAGE>
TAX-MANAGED GLOBAL EQUITY FUND
STATEMENT OF NET ASSETS
October 31, 2000
NUMBER MARKET
OF VALUE
SHARES $
---------- ------------
INVESTMENTS
Portfolios of the Frank Russell Investment
Company Series Mutual
Fund - Class S Shares
DOMESTIC EQUITIES - 75.4%
Quantitative Equity Fund 76,457 3,384,763
Tax-Managed Large Cap Fund 816,553 17,041,453
Tax-Managed Small Cap Fund 461,834 5,154,065
-----------
25,580,281
-----------
INTERNATIONAL EQUITIES - 24.6%
Emerging Markets Fund 179,657 1,661,823
International Securities Fund 105,068 6,672,871
-----------
8,334,694
-----------
TOTAL INVESTMENTS - 100.0%
(identified cost $34,668,218) 33,914,975
-----------
OTHER ASSETS AND LIABILITIES
Other assets 149,259
Liabilities (129,164)
-----------
TOTAL OTHER ASSETS AND LIABILITIES,
NET - 0.0% 20,095
-----------
NET ASSETS - 100.0% 33,935,070
===========
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) (179,489)
Unrealized appreciation (depreciation)
on investments (753,243)
Shares of beneficial interest 34,775
Additional paid-in capital 34,833,027
-----------
NET ASSETS 33,935,070
===========
NET ASSET VALUE, offering and redemption price
per share:
Class C ($7,132,746 divided by 733,083
shares of $.01 par value shares of
beneficial interest outstanding) $ 9.73
===========
Class S ($26,802,324 divided by 2,744,454
shares of $.01 par value shares of
beneficial interest outstanding) $ 9.77
===========
See accompanying notes which are an integral part of the financial statements.
5 Tax-Managed Global Equity Fund
<PAGE>
TAX-MANAGED GLOBAL EQUITY FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
JANUARY 31, 2000*
TO OCTOBER 31, 2000
---------------------
<S> <C>
INVESTMENT INCOME
Income distributions from Underlying Funds ......................... $ 11,644
---------
EXPENSES
Advisory fees ...................................................... 29,830
Distribution fees - Class C ........................................ 23,043
Shareholder servicing fees - Class C ............................... 7,685
---------
Expenses before reductions ......................................... 60,558
Expense reductions ................................................. (29,830)
---------
Expenses, net .................................................... 30,728
---------
Net investment income (loss) ....................................... (19,084)
---------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ........................................................ (179,780)
Capital gain distributions from Underlying Funds ................... 15,272
---------
(164,508)
---------
Net change in unrealized appreciation (depreciation) on investments . (753,243)
---------
Net realized and unrealized gain (loss) ............................ (917,751)
---------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ............... $(936,835)
=========
</TABLE>
* Commencement of operations.
See accompanying notes which are an integral part of the financial statements.
Tax-Managed Global Equity Fund 6
<PAGE>
TAX-MANAGED GLOBAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
JANUARY 31, 2000*
TO OCTOBER 31, 2000
---------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) ...................................... $ (19,084)
Net realized gain (loss) .......................................... (164,508)
Net change in unrealized appreciation (depreciation) .............. (753,243)
------------
Net increase (decrease) in net assets from operations ........... (936,835)
------------
DISTRIBUTIONS
From net investment income
Class C ........................................................... (3,469)
Class S ........................................................... (11,854)
------------
Net decrease in net assets from distributions ................... (15,323)
------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ..... 34,887,228
------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ........................ 33,935,070
NET ASSETS
Beginning of period ............................................... --
------------
End of period ..................................................... $ 33,935,070
============
</TABLE>
* Commencement of operations.
See accompanying notes which are an integral part of the financial statements.
7 Tax-Managed Global Equity Fund
<PAGE>
TAX-MANAGED GLOBAL 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.
2000*
----------
NET ASSET VALUE, BEGINNING OF PERIOD ............................ $ 10.00
----------
INCOME FROM OPERATIONS
Net investment income (loss)(a)(b) ............................. (.06)
Net realized and unrealized gain (loss) ........................ (.19)
----------
Total income from operations ................................. (.25)
----------
DISTRIBUTIONS
From net investment income ..................................... (.02)
----------
NET ASSET VALUE, END OF PERIOD .................................. $ 9.73
==========
TOTAL RETURN (%)(c) ............................................. (2.55)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ....................... 7,133
Ratios to average net assets (%):
Operating expenses, net(d) ................................... 1.00
Operating expenses, gross(d) ................................. 1.20
Net investment income (loss)(c) .............................. (.68)
Portfolio turnover rate (%) .................................... 44.04
* For the period January 31, 2000 (commencement of operations) to October 31,
2000.
(a) Average month-end shares outstanding were used for this calculation.
(b) 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.
(c) Not annualized.
(d) Annualized.
Tax-Managed Global Equity Fund 8
<PAGE>
TAX-MANAGED GLOBAL EQUITY 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.
2000*
---------
NET ASSET VALUE, BEGINNING OF PERIOD .............................. $ 10.00
---------
INCOME FROM OPERATIONS
Net investment income (a)(b) ..................................... .01
Net realized and unrealized gain (loss) .......................... (.22)
---------
Total income from operations ................................... (.21)
---------
DISTRIBUTIONS
From net investment income ....................................... (.02)
---------
NET ASSET VALUE, END OF PERIOD .................................... $ 9.77
=========
TOTAL RETURN (%)(c) ............................................... (2.12)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ......................... 26,802
Ratios to average net assets (%):
Operating expenses, net (d) .................................... .00
Operating expenses, gross (d) .................................. .20
Net investment income (c) ...................................... .06
Portfolio turnover rate (%) ...................................... 44.04
* For the period February 1, 2000 (commencement of sale) to October 31, 2000.
(a) Average month-end shares outstanding were used for this calculation.
(b) 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.
(c) Not annualized.
(d) Annualized.
9 Tax-Managed Global Equity Fund
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 2000
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company") is a series
mutual fund with 29 different investment portfolios, referred to as
"Funds." These financial statements report on one Fund, which has a
distinct investment objective and strategy. 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.
The Fund allocates its assets by investing in a combination of Class S
shares of the Investment Company's portfolios (the "Underlying Funds"). The
Fund 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 Fund may deviate
from set limits when, in FRIMCo's opinion, it is necessary to do so to
pursue the Fund's investment objective. The amounts allocated to each
Underlying Fund by the Fund will generally vary within 10% of the
percentages specified below:
ASSET ALLOCATION
ASSET CLASS/UNDERLYING FUNDS RANGES
----------------------------------- ----------------------
Equities
US Equities
Tax-Managed Large Cap 50%
Tax-Managed Small Cap 15
Quantitative Equity 10
International Equities
International Securities 20
Emerging Markets 5
OBJECTIVES OF THE UNDERLYING FUNDS:
TAX-MANAGED LARGE CAP FUND: To provide capital growth on an after-tax basis
by investing principally in equity securities.
TAX-MANAGED SMALL CAP FUND: To provide capital growth on an after-tax basis
by investing principally in equity securities of small capitalization
companies.
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.
INTERNATIONAL SECURITIES FUND: To provide favorable total return and
additional diversification for US investors by investing primarily in
equity securities of non-US companies.
EMERGING MARKETS FUND: 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 primarily in equity securities.
Financial statements of the Underlying Funds can be obtained by calling the
Office of Shareholder Inquiries at (800) RUSSEL4, (800) 787-7354.
Notes to Financial Statements 10
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's 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 Fund 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.
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, the Fund is a
separate corporate taxpayer and determines its net investment income and
capital gains (or losses) and the amounts to be distributed to the Fund's
shareholders without regard to the income and capital gains (or losses) of
the other Funds.
It is the 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 Fund.
The aggregate cost of investments and the composition of gross unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of October 31, 2000 were as follows:
<TABLE>
<CAPTION>
NET
GROSS GROSS UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Tax-Managed Global Equity $ 34,847,707 $ 277,464 $ (1,210,196) $ (932,732)
</TABLE>
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Income dividends are generally
declared and paid quarterly. Capital gain distributions are generally
declared and paid annually. An additional distribution may be paid by the
Fund to avoid imposition of federal income and excise tax on any remaining
undistributed capital gains and net investment income.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from GAAP. As a result, net investment income and net
realized gain (or loss) from investment transactions for a reporting period
may differ significantly from distributions during such period. The
differences between tax regulations and GAAP relate primarily to certain
securities sold at a loss. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting
its net asset value.
The following classifications have been made to reflect activity for the
ten months ended October 31, 2000:
<TABLE>
<CAPTION>
UNDISTRIBUTED NET ACCUMULATED NET ADDITIONAL
INVESTMENT INCOME REALIZED GAIN (LOSS) PAID-IN CAPITAL
----------------- -------------------- ---------------
<S> <C> <C> <C>
Tax-Managed Global Equity $ 34,407 $ (14,980) $ (19,427)
</TABLE>
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
the Fund and do not include any expenses associated with the Underlying
Funds.
3. INVESTMENT TRANSACTIONS
SECURITIES: During the nine months ended October 31, 2000, purchases and
sales of the Underlying Funds (excluding Money Market Fund investments)
were as follows:
PURCHASES SALES
------------- -------------
Tax-Managed Global Equity $ 44,519,955 $ 9,671,957
11 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
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 Frank Russell Company, a wholly owned subsidiary of The Northwestern
Mutual Life Insurance Company.
The Fund is permitted to invest its cash reserves (i.e., monies awaiting
investment in portfolio securities suitable for the Fund's objectives) in
the Frank Russell Investment Company Money Market Fund. As of October 31,
2000, the Fund had no amount invested in the Money Market Fund and
$737,161,000 represents the investments of other affiliated Funds not
presented herein.
The Fund is charged an advisory fee equal to 0.20% of average daily net
assets. For the nine months ended October 31, 2000, the Advisor
contractually agreed to waive the advisory fee. The amount of such waiver
for the nine months ended October 31, 2000 was $29,830.
The Fund will not bear any operating expenses. Operating expenses include
those expenses arising from accounting, administrative custody, auditing,
legal and transfer agent services. They do not include expenses
attributable to advisory fees (which are currently waived by FRIMCo), any
Rule 12b-1 distribution fee, any shareholder service fees, or any
nonrecurring extraordinary expenses. The Fund's operating expenses are
borne either by the Underlying Funds in which the 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 Fund has 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 C and Class S
shares of the Fund.
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 (the "12b-1 Fee") for sales support services provided,
and related expenses incurred which are primarily intended to result in the
sale of 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 the 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 Fund may make payments to the
Distributor or any Servicing Agent for any activities or expenses primarily
intended to assist, support or service the Servicing Agents' clients who
beneficially own Class C shares of the Fund. The shareholder servicing
payments shall not exceed 0.25% of the average daily net assets of a Fund's
Class C shares on an annual basis.
Accrued shareholders servicing and distribution fees payable to affiliates
as of October 31, 2000 were $5,644.
BOARD OF TRUSTEES: The Investment Company pays each of its Trustees not
affiliated with FRIMCo a retainer of $55,000 per year plus out-of-pocket
expenses. Total Trustee expense for the ten months ended October 31, 2000
and the year ended December 31, 1999 was paid by the Underlying Funds of
FRIMCo under the aforementioned Special Servicing Agreements.
Notes to Financial Statements 12
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
October 31, 2000
5. FUND SHARE TRANSACTIONS
Share transactions for the ten months ended October 31, 2000 were as
follows:
SHARES DOLLARS
------------ ------------
2000 2000
------------ ------------
TAX-MANAGED GLOBAL EQUITY
CLASS C (a)
Proceeds from shares sold 733,886 $ 7,346,668
Proceeds from reinvestment of distributions 300 3,118
Payments for shares redeemed (1,103) (11,781)
------------ ------------
Net increase (decrease) 733,083 7,338,005
------------ ------------
CLASS S (b)
Proceeds from shares sold 3,023,662 30,260,392
Proceeds from reinvestment of distributions 1,138 11,801
Payments for shares redeemed (280,346) (2,722,970)
------------ ------------
Net increase (decrease) 2,744,454 27,549,223
------------ ------------
Total increase (decrease) 3,477,537 $ 34,887,228
============ ============
(a) Fund share transactions are for the period January 31, 2000
(commencement of sale of shares) to October 31, 2000.
(b) Fund share transactions are for the period February 1, 2000
(commencement of sale of shares) to October 31, 2000.
6. LINE OF CREDIT
The Investment Company 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 Funds
did not have any drawdowns during the ten months ended October 31, 2000.
7. BENEFICIAL INTEREST
As of October 31, 2000, the Fund has one or more shareholders with shares
of beneficial interest of greater than 10% of the total outstanding shares
of each respective Fund or Class:
%
---------
Tax-Managed Global Equity - Class S 11.5
13 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 statement of assets and liabilities, including
the statement 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 the Frank Russell Investment
Company Tax-Managed Global Equity Fund (the "Fund")) at October 31, 2000, the
results of its operations, the changes in its net assets and the financial
highlights for the period January 31, 2000 (commencement of operations) through
October 31, 2000, in conformity with accounting principles generally accepted in
the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with auditing standards generally
accepted in the United States of America, 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 audit, which included confirmation of securities at October 31,
2000 by correspondence with the custodian, provides a reasonable basis for our
opinion.
/s/ PricewaterhouseCoopers LLP
Seattle, Washington
December 15, 2000
Report of Independent Accountants 14
<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
Kristianne Blake
Lee C. Gingrich
Eleanor W. Palmer
Raymond P. Tennison, Jr.
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
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
TAX-MANAGED LARGE CAP FUND
J.P. Morgan Investment Management, Inc., New York, NY
TAX-MANAGED SMALL CAP FUND
Geewax, Terker & Company, Phoenixville, PA
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
INTERNATIONAL SECURITIES FUND
Delaware International Advisers Ltd., London, England
Driehaus Capital Management, Inc., Chicago, IL
Fidelity Management Trust Company, Boston, MA
J.P. Morgan Investment Management, Inc., New York, NY
Marvin & Palmer Associates, Inc., Wilmington, DE
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
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.
15 Manager, Money Managers and Service Providers
<PAGE>
[LOGO OF FRANK RUSSELL INVESTMENT COMPANY]
Frank Russell Investment Company
909 A Street
Tacoma, Washington 98402
253-627-7001
800-787-7354
Fax: 253-591-3495
www.russell.com 36-08-086 (1000)
