LINCOLN LIFE Multi Fund(R)
Variable
Annuity
Semiannual
Report 1998
<PAGE>
MULTI FUND(R) 1998 SEMIANNUAL REPORT (UNAUDITED)
INDEX
LINCOLN NATIONAL FUNDS Page
STATEMENT OF NET ASSETS
Lincoln National Aggressive Growth Fund, Inc. 9
-------------------------------------------------------------
Lincoln National Bond Fund, Inc. 10
-------------------------------------------------------------
Lincoln National Capital Appreciation Fund, Inc. 12
-------------------------------------------------------------
Lincoln National Equity-Income Fund, Inc. 13
-------------------------------------------------------------
Lincoln National Global Asset Allocation Fund, Inc. 16
-------------------------------------------------------------
Lincoln National Growth and Income Fund, Inc. 28
-------------------------------------------------------------
Lincoln National International Fund, Inc. 30
-------------------------------------------------------------
Lincoln National Managed Fund, Inc. 31
-------------------------------------------------------------
Lincoln National Money Market Fund, Inc. 35
-------------------------------------------------------------
Lincoln National Social Awareness Fund, Inc. 35
-------------------------------------------------------------
Lincoln National Special Opportunities Fund, Inc. 37
-------------------------------------------------------------
STATEMENT OF OPERATIONS 39
-------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS 41
-------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 43
-------------------------------------------------------------
FINANCIAL HIGHLIGHTS 52
-------------------------------------------------------------
<PAGE>
LINCOLN LIFE
August 1998
Dear Multi Fund(R) contractowner:
This booklet contains the 1998 semiannual report of the Multi-Fund(R) Variable
Annuity's 14 underlying variable investment options. We are pleased to report
that most of the options produced favorable returns for the period ended June
30, 1998.
The stock market continued its remarkable bull rally in the first half of 1998.
The Standard & Poor's 500 Composite Stock Index (S&P 500) returned 17.7% for the
first six months of the year. However, the stock market was extremely volatile
during the second quarter. This volatility is expected to continue. The second
quarter was mixed for the equity markets. Large stocks ended on a positive note;
small stocks declined. The United States economy is currently strong. Low
interest rates and low inflation provide a solid foundation for corporate
earnings growth. However, there are signs of slowing as the U.S. trade deficit
continues to widen.
International equity markets diverged during the first half of 1998. European
stocks returned double-digit gains. Across Europe, interest rates and inflation
are low, with economic activity gradually improving. At the same time, Japan,
other Asian economies and emerging markets continued to languish. Most of the
equity markets in Japan and throughout Asia posted negative returns, largely due
to financial unrest and deteriorating currencies in Asia.
Slower growth prospects in the U.S. and a benign inflation outlook had a
favorable impact on the U.S. bond market during the first half of 1998. The
yield on long-term U.S. bonds hit record low levels in June.
We remain optimistic about the long-term prospects in the various financial
markets. However, we would caution that the types of returns received over the
last couple of years cannot be expected every year. We believe our portfolio
managers' disciplined approach will continue to prevail for those of you willing
to maintain a long-term investment strategy. Commentaries from the portfolio
managers are included in this report. More detailed information about the funds
follows the commentaries.
The following table summarizes the performance results of the Multi-Fund(R)
Variable Annuity contract for the first six months of this year. These figures
vary from those appearing later in this report because they are net of all
charges. Those shown later in this report are before deduction of contractual
fees.
<TABLE>
<CAPTION>
1998 YEAR-TO-DATE PERFORMANCE
JUNE 30, 1998
- ---------------------------------------------------------------------------------------------------------------------------
Equity Balanced Fixed Income
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aggressive Growth Fund 6.3% Global Asset Allocation Fund 9.6% Bond Fund 3.9%
Capital Appreciation Fund 20.1 Managed Fund 8.4 Money Market 2.0
Equity-Income Fund 10.7
Growth and Income Fund 12.5
International Fund 15.1
Social Awareness Fund 15.2
Special Opportunities Fund 10.6
</TABLE>
<PAGE>
The following additional table is provided in accordance with the Securities and
Exchange Commission regulations. It shows results as of the most recently
completed calendar quarter after the deduction of all charges. The charges
include surrender charges that apply to certain premature withdrawals from a
contract. Most contractowners regard Multi Fund(R) as a long-term investment
product, so they rarely contend with these surrender charges.
MULTI FUND(R)
SEC-REQUIRED QUARTERLY PERFORMANCE(1)
JUNE 30, 1998
Ten years
One year Five years or inception
6/30/97 to 6/30/93 to 6/30/88 to
Multi Fund(R) 6/30/98 6/30/98 6/30/98
- ------------------------------------------------------------------------------
Aggressive Growth 13.8% N/A 11.7(2)%
Bond 1.2 4.8% 7.8
Capital Appreciation 19.9 N/A 17.7
Equity-Income 12.2 N/A 19.0(2)
Global Asset Allocation 6.1 12.7 11.8
Growth and Income 15.5 19.0 14.9
International 0.0 10.6 7.8
Managed 9.3 12.5 11.4
Money Market (4.2) 2.8 4.4
Social Awareness 24.9 23.4 18.3(2)
Special Opportunities 16.3 16.5 14.9
We invite you to review the reports provided in this booklet and hope they help
you develop a better understanding of your investment performance. Your sales
representative will help answer any questions you may have, or you may contact a
customer service representative at 800-4LINCOLN (800-454-6265). We appreciate
your continued confidence in Lincoln Life and look forward to helping you meet
your long-term financial goals.
Sincerely,
/s/ Jeffrey K. Dellinger
Jeffrey K. Dellinger
Vice President
(1) In compliance with SEC guidelines, these results show the percent change for
periodic contracts (on an annualized basis) for each of the required periods
with dividends reinvested and include reduction of all recurring expenses (e.g.,
administrative fees) and non-recurring expenses (e.g., surrender charges --
periodic premium: years 1-5 = 8%, 6-10 = 4% and 11+years = 0%; flexible premium:
7%-6%-5%-4%-3%-2%-1%-0%, declining 1% annually.)
(2) Indicates performance since inception.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than the
original cost. Past performance is not indicative of future results.
Small-cap stocks and emerging company stocks may be subject to a higher degree
of risk than securities of more established companies. The illiquidity of the
small-cap market may adversely affect the value of these investments.
An investment in the Money Market Fund is neither insured nor guaranteed by the
U.S. Government and there is no assurance that the subaccount will maintain a
stable $1.00 share price.
The risks associated with investing on a worldwide basis include differences in
regulation of financial data and reporting, currency exchange differences, as
well as economic and political systems which may be different from those in the
United States.
Contracts with the elective Enhanced Guaranteed Minimum Death Benefit rider are
subject to an additional fee. As a result, returns would have been lower.
This material must be preceded or accompanied by a prospectus for the Lincoln
National Life Variable Annuity Account C. Read the prospectus carefully before
you invest or send money.
2
<PAGE>
AGGRESSIVE GROWTH FUND
Managed by: [LYNCH & MAYER LOGO]
The Aggressive Growth Fund has produced a return of 6.8% as of June 30, for the
first half of 1998. The appropriate benchmark comparison is the S&P MidCap 400
Index, which had a return of 8.6%.
Advances earlier this year proved to be built on a shaky foundation as the US
equity markets experienced losses of varying degrees amid renewed fears of the
implications of the Southeast Asia economies. And, the less liquid and less
predictable smaller growth companies took the brunt of the investors' concerns.
Under this backdrop, shares of larger companies withstood their own test of
pressures and finished virtually unscathed.
In the Fund, holdings in the energy-related sector and several other selected
holdings represent the most significant drag on the performance relative to the
S&P MidCap 400 Index. Lynch & Mayers' heavy weighting in energy stocks was
nearly double that of the index. Investors continued to focus on weak energy/oil
prices and let most of these holdings down throughout the year to date. The
Broadcast/Media sector struggled during the second quarter of this year.
As the first six months of 1998 came to a close, there were definite signs that
companies were being rewarded for delivering strong results. Lynch & Mayer
believes that this portfolio is well positioned to take advantage of a
fundamental rally in the market, similar to the conditions at the beginning of
this year.
Ed Petner Kevin Ferguson
BOND FUND
Managed by: [LINCOLN INVESTMENT MANAGEMENT LOGO]
The Bond Fund returned 4.4% for the first six month of 1998 compared to its
benchmark, the Lehman Government/Corporate Index of 4.2%. Corporate bonds have
under-performed Treasuries so far in 1998. Corporates have been weak more from
excessive supply rather than concerns over credit. The two largest months of
corporate issuance in history were achieved in 1998. Additionally, corporate
treasurers have been active locking in the lowest interest rates in nearly two
decades.
The 30-year Treasury bond rallied driving yields down to 5.6%, very close to the
yield on two-year Treasuries. Inflation is expected to remain safely below 2%
for now and we believe that interest rates could still go lower. However, our
outlook is that the Fed is likely to remain "on hold" for quite some time. We
believe that corporates will outperform Treasuries in the second half of the
year. We expect to maintain on over-weighting in corporates to take advantage of
the higher yields of corporates versus Treasuries.
David C. Fischer
3
<PAGE>
Capital Appreciation Fund
Managed by: [JANUS LOGO]
The Capital Appreciation Fund returned 20.8% as of June 30, 1998 versus its
benchmark the S&P 500 Index of 17.7%. Despite continued turmoil in Asia, U.S
equity markets gained ground during the first half of the year led by blue chip
stocks with strong earnings prospects. Thanks to strong gains among our
technology and pharmaceutical stocks, we outpaced our benchmark. Late last year,
we took advantage of the market sell off to build several positions in these
industries, which have since performed extremely well. While we enjoyed broad
based gains across much of the portfolio, we did suffer some disappointments in
the oil and gas services industry, however, we have since liquidated these
positions. We remain generally upbeat about the outlook for domestic equity
markets.
Jim Craig
Equity-Income Fund
Managed by: [FIDELITY INVESTMENTS LOGO]
The Equity-Income Fund returned 11.3% from January 1, 1998 to June 30, 1998. In
comparison, the Funds Benchmark, the S&P 500 Index gained a strong 17.7%.
In the Large-cap arena, growth-oriented styles of investment management
outperformed value-oriented styles, like Equity-Income, by a wide margin.
Sectors with a larger proportion of growth stocks such as consumer non-durables
including health care and retail positions were among the top performers in the
portfolio. The benefited holdings in this portfolio include Wal-Mart,
Schering-Plough and Bristol-Myers Squibb.
Financial positions in the Fund posted absolute gains, but trailed the market.
Banks in particular were mixed following stock mega-merger announcements. Given
the size of the deals, investors questioned whether merger prices are too high
and whether the returns from acquisitions will meet expectations. In this
environment, Fund positions underperforming include Bank of New York and
Washington Mutual.
The Equity-Income Fund will continue with its objective of a Value discipline to
achieve superior returns using fundamental research to identify common stocks
and securities which are undervalued and have above-market-yield.
Stephen R. Petersen
4
<PAGE>
Global Asset Allocation Fund
Managed by: [PUTNAM INVESTMENTS LOGO]
The Global Asset Allocation Fund increased 10.4% for the first half of 1998
versus 11.9% for its benchmark (50% S&P 500; 30% LB Aggregate Bond; 10% EAFE;
10% SB World Gov't Bond(non-US)). Global stock markets have maintained their
solid performance into 1998 after an extremely strong 1997. The U.S. stock
market rose 17.7%, as measured by the S&P 500 Index, while non-U.S. markets, as
measured by the Morgan Stanley International Europe, Australia, Far East (EAFE)
Index rose 16.1%. Non-U.S. stock market returns were rather diverse for the
period with Germany up 36.5%, Italy up 33.2% and Japan down 2.6%.
European stock markets continued to benefit from progress towards European
Monetary Union (EMU) which officially takes effect in January 1999. The coming
elimination of trade barriers and the anticipated reduction of the cost of
capital for European companies has enhanced the value of many firms moving
European equity indexes sharply higher this year.
Economic malaise and financial market volatility continue to characterize
conditions in Asia. Attention is focused on Japan, as the government attempts to
select a new Prime Minister, address a recession, and manage a $600 billion bad
debt problem in the banking system. Japan's difficulties are further aggravating
the economic ills of other Asian economies such as Indonesia, Malaysia, Korea,
Hong Kong, and Taiwan.
Putnam believes the situation in Japan and many emerging market economies will
slowly stabilize and that in coming months most global stock markets will
continue to outperform global bond markets. We will continue to hold an
overweight exposure to stocks versus bonds and maintain our preference for
European markets versus U.S. and Asian markets. We will also maintain
underweight exposure to Japanese stocks. Within global fixed income we favor
U.S. bonds versus international bonds and hold underweight positions in
European and Japanese fixed income markets.
William Landes, PhD
Growth and Income Fund
Managed by: [VANTAGE GLOBAL ADVISORS LOGO]
The Growth and Income Fund gained 13.2% for the first half of 1998 versus a
17.7% gain for its index, the S&P 500. The market continued its remarkable bull
rally in the first half of 1998 with the S&P 500 returning 17.7% for the first
half of the year. The Fund has performed well versus other funds in a difficult
period for actively managed funds. The market return has been dominated by the
largest 20 companies in the S&P 500. This narrow market has made it challenging
to add value as opportunities for excess returns resided in a few very large
companies. Those companies tend to be growth oriented and selling at high
valuations, and were unattractive based on the Fund's investment criteria to
select undervalued stocks with above average earnings prospects.
The economic environment is ripe for continued market growth, despite some fears
that market levels are too high. Interest rates, inflation, and unemployment are
low, providing support for corporate earnings growth and market appreciation.
Anxiety over the Asian economic crisis and fears that earnings may not grow as
expected will likely create significant short-term volatility. The market will
be most sensitive to earnings announcements around companies currently trading
at high valuations
5
<PAGE>
such as the top 20 stocks. The Growth and Income Fund steers clear of
overvalued stocks and is situated well to capture the opportunities presented
in the market going forward.
T. Scott Wittman
International Fund
Managed by: [DELAWARE GROUP LOGO]
The International Fund returned 15.7% for the six months ended June 30, 1998
versus the MSCI EAFE Index return of 16.1%. Delaware International Advisors,
Ltd. assumed responsibility as subadvisor for this Fund on May 1, 1998.
European markets completed a spectacular first half to the year with rises of
40% not uncommon. The emerging markets of the world had a difficult time during
the second quarter after rallying in the first. The Japanese market was
relatively flat for the six month period and Latin American markets declined,
unable to side-step the Asian contagion.
The portfolio's overweight position in the UK and strong performances of Germany
and Belgium failed to offset the effect of our underweight position in Japan and
overweight exposure to the poorly performing New Zealand market relative to the
EAFE.
Our portfolio position and investment strategy going into the third quarter will
be continued low weighting in the overvalued Japanese market, overweight in the
Australasian markets, UK and selected Continental European equity markets.
Clive A. Gilmore Elizabeth A. Desmond
Managed Fund
Managed by: [LINCOLN INVESTMENT MANAGEMENT LOGO]
The Managed Fund returned 9.2 % as of June 30, 1998 versus 11.0% for its
customized benchmark (50% S&P 500 and 50% LB Government Corporate Bond).
The asset allocation as of June 30, 1998 was 58.7% equities, 35.7% fixed-income,
and 5.6% cash. The performance for the equity market during the first half of
the year has been remarkable. Most analysts doubted that the high double-digit
returns posted each of the past three years could be sustained. The first
quarter's excellent performance, as represented by the S&P 500, which was up
13.5%, was quite unexpected. Exposure to small-cap stocks hurt performance
during the second quarter of this year. The bond market had a relatively strong
second quarter. Asia's economic woes continued the flight to quality into U.S.
treasuries. In mid-June 30-year Treasuries recorded its lowest yield since its
inception. From a historical perspective, equity valuations appear to be too
high to be sustained. Fortunately inflation remains under control and
corporations have been able to maintain earnings.
Jay Yentis
6
<PAGE>
Money Market Fund
Managed by: [LINCOLN INVESTMENT MANAGEMENT LOGO]
The Money Market Fund returned 2.5% for the first six months of 1998 compared to
its benchmark, the Salomon Brothers 90-Day Treasury Bill of 2.6%. The first half
of 1998 presented an environment of very stable short-term interest rates. The
Federal Reserve Board has done a good job managing our economy to maintain
growth coupled with subdued inflation. With our current low interest rate
environment, many companies have chosen to issue longer-term debt to lock in
today's attractive borrowing rates. This has reduced some of the supply on the
short end of the curve and has kept spreads very tight for money market
investors. With inflation expected to remain below 2% and the Asian crisis
continuing to impact our economy, we believe the Fed is likely to keep interest
rates "on hold" for quite some time.
Jil Schoeff Lindholm
Social Awareness Fund
Managed by: [VANTAGE GLOBAL ADVISORS LOGO]
The Social Awareness Fund gained 15.8% for the first half of 1998 versus a 17.7%
gain for its index, the S&P 500. The market has continued its impressive run in
the first half of 1998. Social Awareness Fund investors have participated in
this movement while remaining true to the Fund's criteria for social
responsibility. The first half of 1998 has been a difficult market environment
in which to earn excess return, as the stocks that drove market returns were the
largest 20 companies. While the Fund lagged the market over the first six
months, over the past 3 years of this astonishing bull market, the Fund has
outpaced the market, proving socially responsible companies can deliver
exceptional returns.
The Fund's long-term returns have been driven by a combination of keen stock
picking and favorable positioning resulting from the social criteria. The Fund
buys undervalued socially responsible companies that have above average
prospects for earnings growth. The social criteria moves the investment
portfolio away from companies that pollute such as oil companies and toward
cleaner industries such as banks and financial services. Oil companies have
suffered from the current low prices of crude oil while banks and financial
services companies have thrived in a low interest rate environment in which
rapid consolidation is taking place. These factors, along with low inflation and
unemployment, position the market and the Fund well for the foreseeable future.
T. Scott Wittman
7
<PAGE>
Special Opportunities Fund
Managed by: [VANTAGE GLOBAL ADVISORS LOGO]
The Special Opportunities Fund returned 11.3% for the first half of 1998 versus
8.6% for its index, the S&P MidCap 400. The Special Opportunities Fund provides
risk-controlled exposure to undervalued mid-cap companies. Over the first half
of the year, mid-cap stocks have delivered positive returns, but lagged the
returns of larger stocks as represented by the S&P 500. During the quarter, many
of the financial services companies performed well, given the low interest rate
environment and increased merger speculations. Companies that were hurt include
those with sensitivity to the Asian economic crisis and oil prices.
There is strong economic support for continued stock market growth as low
interest rates, inflation, and unemployment will fuel corporate earnings. Within
the overall equity market, there will likely be a reversal in the near term in
which smaller, value-oriented companies thrive. In that case, the Special
Opportunities Fund is well positioned to both take advantage of opportunities
within mid-cap value stocks, but also to rise with the swell of support for
these stocks in general.
T. Scott Wittman
8
<PAGE>
AGGRESSIVE GROWTH FUND
STATEMENT OF NET ASSET
June 30, 1998
(Unaudited)
INVESTMENTS:
Number Market
COMMON STOCKS: of Shares Value
- ----------------------------------------------------------------
AUTOMOBILES & AUTO PARTS: 2.2%
- ----------------------------------------------------------------
Dollar Thrifty Automotive* 218,900 $ 2,900,425
Tower Automotive* 126,200 5,410,825
- ----------------------------------------------------------------
8,311,250
BANKING, FINANCE & INSURANCE: 2.7%
- ----------------------------------------------------------------
Allmerica Financial 52,400 3,406,000
Washington Mutual 158,200 6,866,869
- ----------------------------------------------------------------
10,272,869
BUILDINGS & MATERIALS: 2.1%
- ----------------------------------------------------------------
J. Ray McDermott,S.A.* 196,000 8,134,000
- ----------------------------------------------------------------
CABLE, MEDIA & PUBLISHING: 12.2%
- ----------------------------------------------------------------
Borders Group* 152,000 5,624,000
Chancellor Media-A 175,100 8,694,809
Emmis Broadcasting* 115,700 5,549,984
E.W. Scripps 36,000 1,973,250
Jacor Communications* 116,000 6,851,250
Sinclair Broadcasting Group 346,800 9,948,822
USA Networks 319,800 8,044,969
- ----------------------------------------------------------------
46,687,084
CHEMICALS: 5.2%
- ----------------------------------------------------------------
Crompton & Knowles 269,300 6,782,994
Dial 225,800 5,856,688
W.R. Grace & Company* 422,800 7,214,025
- ----------------------------------------------------------------
19,853,707
COMPUTERS & TECHNOLOGY: 11.6%
- ----------------------------------------------------------------
Adobe Systems 105,700 4,492,250
Autodesk 163,000 6,280,594
Computer Horizons* 164,300 6,094,503
Filenet 216,000 6,210,000
Hyperion Software* 137,800 3,931,606
ITT Educational Services* 169,000 5,450,250
Mercury Interactive* 20,800 926,250
Network Associates 180,750 8,647,758
Scientific-Atlanta 81,100 2,057,913
- ----------------------------------------------------------------
44,091,124
ELECTRONICS & ELECTRICAL: 1.8%
- ----------------------------------------------------------------
Altera* 53,800 1,588,781
General Cable 184,250 5,320,219
- ----------------------------------------------------------------
6,909,000
ENERGY: 3.9%
- ----------------------------------------------------------------
EVI Weatherford* 113,300 4,206,263
Forcenergy* 31,200 555,750
Newpark Resources 158,800 1,766,650
Ocean Energy* 244,166 4,776,497
R & B Falcon* 157,600 3,565,700
- ----------------------------------------------------------------
14,870,860
ENVIRONMENTAL SERVICES: 0.2%
- ----------------------------------------------------------------
Eastern Environmental Services* 19,600 663,338
- ----------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO: 6.9%
- ----------------------------------------------------------------
CKE Restaurants 200,980 8,290,425
Landry's Seafood Restaurants* 108,100 1,955,934
ShowBiz Pizza Time* 246,300 9,928,969
Whitman 272,900 6,259,644
- ----------------------------------------------------------------
26,434,972
Number Market
of Shares Value
- ----------------------------------------------------------------
HEALTHCARE & PHARMACEUTICALS: 5.7%
- ----------------------------------------------------------------
American Oncology Resources* 162,200 $ 1,981,881
Biochem Pharma 243,500 6,429,922
Centocor* 124,700 4,524,272
Clinichem Development* 6,088 34,816
Orthodontic Centers of America* 277,500 5,810,156
Phycor* 169,600 2,803,700
- ----------------------------------------------------------------
21,584,747
INDUSTRIAL MACHINERY: 3.5%
- ----------------------------------------------------------------
Black & Decker 88,200 5,380,200
McDermott International 234,200 8,065,263
- ----------------------------------------------------------------
13,445,463
LEISURE, LODGING & ENTERTAINMENT: 2.6%
- ----------------------------------------------------------------
Bally Total Fitness Holdings* 115,400 4,154,400
International Game Technology 239,900 5,817,575
- ----------------------------------------------------------------
9,971,975
METALS & MINING: 2.1%
- ----------------------------------------------------------------
Outdoor Systems 282,537 7,911,036
- ----------------------------------------------------------------
MISCELLANEOUS: 1.7%
- ----------------------------------------------------------------
Metamor Worldwide* 186,700 6,575,341
- ----------------------------------------------------------------
PAPER & FOREST PRODUCTS: 4.0%
- ----------------------------------------------------------------
Bowater 145,195 6,860,464
Fort James 188,300 8,379,350
- ----------------------------------------------------------------
15,239,814
RETAIL: 9.2%
- ----------------------------------------------------------------
Family Dollar Stores 106,600 1,972,100
Meyer(Fred) 118,700 5,044,750
Pier 1 Imports 278,600 6,651,575
Stage Stores* 46,600 2,108,650
Tandy 201,800 10,708,013
Zale* 266,600 8,481,213
- ----------------------------------------------------------------
34,966,301
TELECOMMUNICATIONS: 7.4%
- ----------------------------------------------------------------
Brightpoint 261,200 3,779,237
ECI Telecommunications 220,500 8,351,438
Intermedia Communications 144,900 6,072,216
Mitel* 207,400 2,838,788
Qualcomm* 35,700 2,007,009
SkyTel Communications* 223,400 5,235,938
- ----------------------------------------------------------------
28,284,626
TEXTILES, APPAREL & FURNITURE: 4.1%
- ----------------------------------------------------------------
Jones Apparel Group 229,400 8,387,438
Lear* 145,000 7,440,313
- ----------------------------------------------------------------
15,827,751
TRANSPORTATION & SHIPPING: 1.5%
- ----------------------------------------------------------------
CNF Transportation 133,000 5,652,500
- ----------------------------------------------------------------
COMMON STOCK: 90.6%
(Cost $ 292,699,849) 345,687,758
- ----------------------------------------------------------------
Maturity
Amount
- ----------------------------------------------------------------
REPURCHASE AGREEMENT:
State Street Bank & Trust Co.
Repurchase Agreement, dated
6/30/98, 5.30%, maturing 7/1/98,
collateralized by U.S. Treasury
Note, 9.875%, 11/15/15 $37,392,000 37,392,000
- ----------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT: 9.8%
(Cost $ 37,392,000) 37,392,000
- ----------------------------------------------------------------
TOTAL INVESTMENTS: 100.4%
(Cost $ 330,091,849) 383,079,758
- ----------------------------------------------------------------
Other Assets Under Liabilities: (0.4)% (1,525,764)
- ----------------------------------------------------------------
9
<PAGE>
Market
Value
- ----------------------------------------------------------------
NET ASSETS: 100%
(Equivalent to $15.223 per share
based on 25,064,684 shares
issued and outstanding) $381,553,994
================================================================
BOND FUND
STATEMENT OF NET ASSETS
June 30,1998
(Unaudited)
INVESTMENTS:
Par Market
LONG-TERM DEBT INVESTMENTS: Amount Value
- ----------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS: 34.3%
- ----------------------------------------------------------------
Federal Home Loan Bank
6.00%, 6/11/08 $ 8,700,000 $ 8,823,104
Federal Home Loan Mortgage Corporation
7.60%, 7/25/05 129,305 128,990
6.3886%,10/15/06 1,997,847 2,024,068
7.30%, 12/01/12 2,938,013 3,012,381
3.50%,12/15/21 2,000,000 1,732,342
Federal National Mortgage Association
6.35%, 8/24/00 4,000,000 4,001,600
6.80%, 8/1/05 920,904 956,442
7.175%, 10/01/05 2,539,516 2,693,156
6.655%, 11/1/05 975,771 1,008,772
6.66%, 12/1/05 1,951,282 1,977,468
5.75%, 6/15/05 29,865,000 29,880,821
7.043%, 7/1/06 2,451,647 2,586,758
7.15%, 10/1/15 2,811,135 2,940,026
8.00%, 4/1/17 212,076 222,150
7.00%, 10/1/25 2,351,638 2,394,997
Federal National Mortgage Association Strip
0.00%, 7/24/06 9,500,000 6,028,509
Government National Mortgage Association
9.00%, 5/15/17 105,328 114,577
9.00%, 9/15/19 521,207 566,976
6.50%, 11/15/23 785,848 790,514
U.S. Treasury Bond
12.00%, 8/15/13 500,000 741,160
6.125%, 11/15/27 11,700,000 12,543,921
U.S.Treasury Notes
6.50%, 8/31/01 3,575,000 3,673,062
U.S.Treasury Strip
0.00%, 5/15/05 9,840,000 6,768,246
0.00%, 2/15/11 16,500,000 8,116,843
- ----------------------------------------------------------------
103,726,883
COLLATERALIZED MORTGAGE OBLIGATIONS: 0.1%
- ----------------------------------------------------------------
Mid-State Trust
7.625%, 4/1/22 170,383 174,291
- ----------------------------------------------------------------
AUTOMOBILE & AUTO EQUIPMENT: 0.8%
- ----------------------------------------------------------------
Chrysler
7.45%, 2/1/2098 1,000,000 1,088,750
Goodyear Tire & Rubber
6.625%, 12/1/06 1,250,000 1,279,688
- ----------------------------------------------------------------
2,368,438
BANKING, FINANCE & INSURANCE: 28.5%
- ----------------------------------------------------------------
Ahmanson, H. F.
8.25%, 10/1/02 2,000,000 2,150,000
Aristar Financial
7.50%, 7/1/99 1,500,000 1,522,500
Banc One
9.875%, 3/1/09 500,000 635,625
Banque Paribas-NY
8.35%, 6/12/2098 1,400,000 1,580,250
Barnett Bank
6.90%, 9/1/05 1,500,000 1,569,375
Par Market
Amount Value
- ----------------------------------------------------------------
Barnett Capital Trust I
8.06%, 12/1/26 $1,900,000 $ 2,147,000
Citicorp Notes
6.33%, 1/5/06 1,600,000 1,616,000
Comerica Bank
7.875%, 9/15/26 1,500,000 1,745,625
Dow Capital
9.00%, 5/15/10 3,000,000 3,656,250
Federal Farm Credit Bank
5.75%, 3/23/05 17,200,000 17,179,188
Finova Capital
6.12%, 5/28/02 1,000,000 1,003,750
First Bank System
6.875%, 9/15/07 1,000,000 1,047,500
First of America Capital Trust I
8.12%, 1/31/27 2,000,000 2,237,500
First Security
7.00%, 7/15/05 1,000,000 1,046,250
First Union
8.00%, 8/15/09 2,000,000 2,245,000
First USA Bank
5.75%, 1/15/99 2,000,000 1,997,500
Fleet Financial Group
7.25%, 9/1/99 1,000,000 1,013,160
General Motors Acceptance
8.17%, 1/02/00 394,544 406,672
7.875%, 3/7/01 1,500,000 1,567,500
8.875%, 6/1/10 1,500,000 1,809,375
Harris Bankcorp
9.375%, 6/1/01 250,000 271,875
Household Affinity Credit Card
6.05%, 5/15/01 1,000,000 1,002,851
Household Finance
9.625%, 7/15/00 875,000 935,156
Hydro-Quebec
7.20%, 10/05/09 3,000,000 3,151,470
International Lease Finance
8.25%, 1/15/00 2,000,000 2,070,000
John Deere Capital
8.625%, 8/1/19 2,000,000 2,207,500
Lehman Brothers Holdings
8.88%, 3/1/02 1,000,000 1,086,250
Mellon Capital I Notes
7.72%, 12/1/26 1,500,000 1,614,375
Mercantile Bancorp
7.30%, 6/15/07 1,325,000 1,421,063
Midland Bank PLC
6.00%, 9/29/49 1,400,000 1,187,830
Morgan Stanley Group
6.875%, 3/1/07 2,250,000 2,340,000
National Westminister Bank
9.45%, 5/1/01 500,000 544,375
Nynex Capital Funding
7.63%, 10/15/09 3,000,000 3,513,480
PNC Funding
6.875%, 7/15/07 1,187,000 1,231,513
Salomon Brothers
7.25%, 1/15/00 1,000,000 1,021,250
Salomon Smith Barney
7.875%, 10/01/99 3,000,000 3,071,010
Simon DeBartolo Group
7.125%, 6/24/05 520,000 533,000
SouthTrust Bank of Birmingham
7.69%, 5/15/25 2,750,000 3,330,938
Standard Chartered PLC Notes
6.15%, 12/29/49 2,500,000 1,591,000
State Street Capital-B
8.035%, 3/15/27 1,400,000 1,569,750
Union Bank Switzerland
7.25%, 7/15/06 2,250,000 2,415,937
Wachovia Capital Trust I
7.64%, 1/15/27 1,900,000 2,037,750
- ----------------------------------------------------------------
86,324,393
10
<PAGE>
Par Market
Amount Value
- ----------------------------------------------------------------
BUILDING & MATERIALS: 0.9%
- ----------------------------------------------------------------
Champion International
7.70%, 12/15/99 $1,500,000 $1,535,625
Georgia-Pacific
9.95%, 6/15/02 1,000,000 1,125,000
- ----------------------------------------------------------------
2,660,625
CABLE, MEDIA, & PUBLISHING: 1.4%
- ----------------------------------------------------------------
News America Holdings
8.45%, 8/1/34 1,500,000 1,768,125
Time Warner
9.125%, 1/15/13 2,000,000 2,460,000
- ----------------------------------------------------------------
4,228,125
ENERGY: 1.1%
- ----------------------------------------------------------------
Commonwealth Edison
9.375%, 2/15/00 500,000 524,375
Enron
9.50%, 6/15/01 1,000,000 1,093,750
Petro-Canada
8.60%, 10/15/01 1,500,000 1,606,875
- ----------------------------------------------------------------
3,225,000
ENVIRONMENTAL SERVICES: 0.6%
- ----------------------------------------------------------------
Waste Management
6.625%, 7/15/02 1,750,000 1,765,313
- ----------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO: 0.2%
- ----------------------------------------------------------------
Nabisco
7.55%, 6/15/15 750,000 783,750
- ----------------------------------------------------------------
HEALTHCARE & PHARMACEUTICALS: 0.3%
- ----------------------------------------------------------------
Allegiance
7.30%, 10/15/06 750,000 795,938
- ----------------------------------------------------------------
LEISURE, LODGING & ENTERTAINMENT: 0.5%
- ----------------------------------------------------------------
Darden Restaurants
6.375%, 2/1/06 1,500,000 1,483,125
- ----------------------------------------------------------------
METALS & MINING: 2.6%
- ----------------------------------------------------------------
Alcan Aluminum
8.875%, 1/15/22 500,000 547,500
Cyprus Amax Minerals
7.375%, 5/15/07 2,500,000 2,653,125
Inco
9.60%, 6/15/22 1,300,000 1,475,500
Newmont Gold
8.91%, 1/5/09 695,959 777,734
Placer Dome
7.37%, 6/03/26 1,000,000 1,063,750
Placer Dome-Series A
7.31%, 1/26/21 1,000,000 1,015,000
Reynolds Metals
9.00%, 8/15/03 250,000 280,313
- ----------------------------------------------------------------
7,812,922
MISCELLANEOUS: 1.9%
- ----------------------------------------------------------------
Lilly Eli & Company
8.375%, 2/7/05 2,250,000 2,512,350
Manitoba (Province of)
7.75%, 7/17/16 1,500,000 1,755,000
Republic of Korea
8.875%, 4/15/08 1,500,000 1,359,375
- ----------------------------------------------------------------
5,626,725
PAPER & FOREST PRODUCTS: 0.6%
- ----------------------------------------------------------------
James River
6.70%, 11/15/03 2,000,000 2,035,000
- ----------------------------------------------------------------
Par Market
Amount Value
- ----------------------------------------------------------------
RETAIL: 1.1%
- ----------------------------------------------------------------
Sears Roebuck
9.05%, 2/6/12 $2,000,000 $ 2,440,000
Service Corp International
7.00%, 6/1/15 1,000,000 1,036,250
- ----------------------------------------------------------------
3,476,250
TELECOMMUNICATIONS: 3.9%
- ----------------------------------------------------------------
AT&T Capital
7.47%, 5/11/05 2,750,000 2,918,438
Litton Industries
6.98%, 3/15/36 1,000,000 1,043,750
Nynex
9.55%, 5/1/10 1,354,960 1,563,285
Pacificorp
9.15%, 8/9/11 2,000,000 2,487,500
Rochester Telephone
9.00%, 7/19/00 2,000,000 2,110,000
U.S. Cellular
7.25%, 8/15/07 1,500,000 1,567,500
- ----------------------------------------------------------------
11,690,473
TRANSPORTATION & SHIPPING: 2.6%
- ----------------------------------------------------------------
American Airline
10.18%, 1/2/13 1,500,000 1,906,756
Burlington Northern Railroad
6.94%, 1/2/14 475,654 494,832
Chicago & Northwestern
6.25%, 4/30/12 1,370,801 1,374,228
CSX
7.25%, 5/1/27 1,000,000 1,072,500
Federal Express
7.96%, 3/28/17 1,129,243 1,222,405
United Airlines
9.35%, 4/7/16 1,500,000 1,809,172
- ----------------------------------------------------------------
7,879,893
UTILITIES: 11.0%
- ----------------------------------------------------------------
Cleveland Electric Illumination
8.26%, 10/30/98 2,500,000 2,512,500
Colonial Gas-Series A
6.81%, 5/19/27 1,500,000 1,548,750
Consumers Energy
6.20%, 5/1/08 1,000,000 1,000,000
Consumers Energy 144A
6.50%, 6/15/05 500,000 498,125
Detriot Edison
6.56%, 5/1/01 2,000,000 2,030,000
DQU II Funding
8.70%, 6/1/16 2,474,000 2,854,378
Great Lakes Power
9.00%, 8/1/04 1,500,000 1,668,750
Houston Light & Power Capital Trust II
8.257%, 2/1/37 1,900,000 2,061,500
MidAmerican Energy
6.50%, 12/15/01 1,250,000 1,268,750
National Rural Utility
7.20%, 10/1/15 1,000,000 1,075,000
Nevada Power
7.06%, 5/1/00 1,500,000 1,528,125
New Jersey Bell
7.85%, 11/15/29 1,950,000 2,332,688
Noble Affiliates
7.25%, 10/15/23 600,000 633,750
Old Dominion Electric
8.76%, 12/1/22 1,600,000 1,868,000
PSI Energy
8.56%, 12/27/11 2,000,000 2,387,500
Pennsylvania Power & Light
7.70%, 10/1/09 3,000,000 3,352,500
Public Service
6.375%, 11/1/05 1,500,000 1,533,750
Texas Gas Transmissions
8.625%, 4/1/04 1,000,000 1,121,250
Washington Water Public
8.01%, 12/17/01 2,000,000 2,115,000
- ----------------------------------------------------------------
33,390,316
11
<PAGE>
Par Market
Amount Value
- ----------------------------------------------------------------
TOTAL LONG TERM DEBT INVESTMENT: 92.4%
(Cost $266,585,215) $279,447,460
- ----------------------------------------------------------------
MONEY MARKET INSTRUMENTS:
Caterpillar
6.00% 7/8/98 $6,500,000 6,500,000
Merrill Lynch & Company
5.5855%, 7/13/98 4,600,000 4,591,260
Norwest
5.5611%, 7/1/98 4,000,000 4,000,000
Volkswagen of America
5.5598%, 7/6/98 4,000,000 3,996,900
- ----------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS: 6.3%
(Cost $19,088,160) 19,088,160
- ----------------------------------------------------------------
TOTAL INVESTMENTS: 98.7%
(Cost $285,673,375) 298,535,620
- ----------------------------------------------------------------
Other Assets Over Liabilities: 1.3% 3,944,663
- ----------------------------------------------------------------
NET ASSETS: 100%
(Equivalent to $12.630 per share
based on 23,949,765 shares
issued and outstanding) $302,480,283
================================================================
CAPITAL APPRECIATION FUND
STATEMENT OF NET ASSETS
June 30, 1998
(Unaudited)
INVESTMENTS:
Number Market
COMMON STOCKS: of Shares Value
- ----------------------------------------------------------------
AUTOMOBILES & AUTO PARTS: 2.0%
- ----------------------------------------------------------------
Federal-Mogul 174,425 $ 11,773,688
- ----------------------------------------------------------------
BANKING, FINANCE & INSURANCE: 16.0%
- ----------------------------------------------------------------
Associates First Capital Class A 98,000 7,533,750
BankAmerica 86,300 7,459,556
Bank of New York 203,525 12,351,423
Citicorp 30,415 4,539,439
Household International 211,125 10,503,469
Lloyds TSB Group plc (United Kingdom) 49,358 689,095
M & T Bank 9,450 5,235,300
Morgan St Dean Witter Discover 139,215 12,720,771
Newcourt Credit Group 260,475 12,812,114
Northern Trust 49,005 3,735,100
Schwab (Charles) 193,400 6,285,500
Schweizerische Lebensversicherungs-
und Rentenanstalt (Switzerland) 3,179 2,686,302
Star Banc 42,100 2,689,137
UBS AG (Switzerland) 15,855 5,884,975
- ----------------------------------------------------------------
95,125,931
CABLE, MEDIA & PUBLISHING: 18.6%
- ----------------------------------------------------------------
Carnival Cruise Lines 118,450 4,693,581
CBS 472,975 15,016,956
Chancellor Media-A* 200,000 9,931,250
Cox Communications-Class A* 114,210 5,532,047
MediaOne Group* 393,550 17,291,603
Meredith 143,480 6,734,592
Tele-communications A* 385,895 14,820,780
Time Warner 197,531 16,876,555
Univision Communications-A* 201,450 7,504,013
Wolters Kluwer NV (Netherlands) 91,052 12,472,326
- ----------------------------------------------------------------
110,873,703
Number Market
of Shares Value
- ----------------------------------------------------------------
CHEMICALS: 7.7%
- ----------------------------------------------------------------
Cytec Industries* 108,000 $ 4,779,000
DuPont(E.I.)deNemours 228,550 17,055,544
Imperial Chemical ADR 50,000 3,225,000
Monsanto 296,845 16,586,214
Solutia 138,410 3,970,637
- ----------------------------------------------------------------
45,616,395
COMPUTERS & TECHNOLOGY: 23.3%
- ----------------------------------------------------------------
America Online 90,200 9,561,200
Cadence Design Systems* 535,000 16,718,750
Cisco Systems* 325,813 30,005,295
Dell Computer* 106,000 9,834,812
Gartner Group Class A* 323,895 11,326,203
Linear Technology 220,700 13,310,969
Microsoft* 290,000 31,437,812
Parametric Technology* 511,150 13,848,970
Wind River Systems* 75,000 2,697,656
- ----------------------------------------------------------------
138,741,667
ELECTRONICS & ELECTRICAL: 4.3%
- ----------------------------------------------------------------
Analog Devices* 7,955 195,395
Applied Materials* 255,830 7,554,980
Maxim Integrated Products* 316,700 10,045,328
Pittway 49,687 3,670,627
Texas Instruments 75,000 4,373,438
- ----------------------------------------------------------------
25,839,768
FOOD, BEVERAGE & TOBACCO: 0.5%
- ----------------------------------------------------------------
U.S. Foodservice* 88,725 3,110,920
- ----------------------------------------------------------------
HEALTHCARE & PHARMACEUTICALS: 10.9%
- ----------------------------------------------------------------
Alza* 100,000 4,325,000
American Home Products 83,335 4,312,586
Omnicare 121,250 4,622,656
Pfizer 117,100 12,727,306
Schering-Plough 48,555 4,448,852
Tyco International 284,770 17,940,514
U.S. Surgical 5,535 252,534
Warner-Lambert 231,825 16,082,859
- ----------------------------------------------------------------
64,712,307
INDUSTRIAL MACHINERY: 1.1%
- ----------------------------------------------------------------
Dionex* 247,500 6,558,750
- ----------------------------------------------------------------
LEISURE, LODGING & ENTERTAINMENT: 0.6%
- ----------------------------------------------------------------
Royal Caribbean Cruises 46,150 3,668,925
- ----------------------------------------------------------------
METALS & MINING: 0.1%
- ----------------------------------------------------------------
Outdoor Systems 25,775 721,700
- ----------------------------------------------------------------
MISCELLANEOUS: 1.9%
- ----------------------------------------------------------------
Meyer (Fred) 28,800 1,224,000
Robert Half International* 104,287 5,827,036
Siebe plc (United Kingdom)* 217,446 4,348,772
- ----------------------------------------------------------------
11,399,808
RETAIL: 1.4%
- ----------------------------------------------------------------
Costco Companies* 129,025 8,140,671
- ----------------------------------------------------------------
TELECOMMUNICATIONS: 5.0%
- ----------------------------------------------------------------
AT & T 50,000 2,856,250
Comcast - Special Class A 555,155 22,535,823
Hyperion Telecommunications* 90,000 1,420,312
U S West 1 40
WorldCom* 62,860 3,038,888
- ----------------------------------------------------------------
29,851,313
TOTAL COMMON STOCK: 93.4%
(Cost $409,153,312) 556,135,546
- ----------------------------------------------------------------
12
<PAGE>
Par Market
Amount Value
- ----------------------------------------------------------------
MONEY MARKET INSTRUMENTS:
- ----------------------------------------------------------------
CIT Group Holding
6.10%, 7/1/98 $20,200,000 $ 20,200,000
Federal National Mortgage Association
5.36%, 7/23/98 20,000,000 19,934,489
- ----------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS: 6.7%
(Cost $40,134,489) 40,134,489
- ----------------------------------------------------------------
TOTAL INVESTMENTS: 100.1%
(Cost $449,287,801) 596,270,035
- ----------------------------------------------------------------
Other Assets Under Liabilities: (0.1%) (586,855)
- ----------------------------------------------------------------
NET ASSETS: 100%
(Equivalent to $19.057 per share based
on 31,258,735 shares issued and outstanding) $595,683,180
================================================================
EQUITY-INCOME FUND
STATEMENT OF NET ASSETS
June 30, 1998
(Unaudited)
INVESTMENTS:
Par Market
LONG TERM-DEBT INVESTMENTS: Amount Value
- ----------------------------------------------------------------
Daimler-Benz Capital (Germany)
4.125%, 7/5/03 $ 830,000 $ 892,893
- ----------------------------------------------------------------
TOTAL LONG-TERM DEBT INVESTMENTS: 0 1%
(Cost $542,255) 892,893
- ----------------------------------------------------------------
CONVERTIBLE BONDS
- ----------------------------------------------------------------
AIR TRANSPORTATION: 0.1%
- ----------------------------------------------------------------
Continental Airlines
6.75%, 04/15/06 320,000 658,000
- ----------------------------------------------------------------
AUTOMOTIVE & AUTO PARTS: 0.1%
- ----------------------------------------------------------------
Volkswagon International
4.875%, 2/15/05 490,000 543,288
- ----------------------------------------------------------------
BANKING, FINANCE & INSURANCE: 0.2%
- ----------------------------------------------------------------
Bell Atlantic Financial Services
5.75%, 4/1/03 1,320,000 1,354,650
Loews
3.125%, 9/15/07 400,000 365,000
- ----------------------------------------------------------------
1,719,650
CABLE, MEDIA & PUBLISHING: 0.4%
- ----------------------------------------------------------------
Jacor Communications
0.00%, 06/12/11 610,000 506,300
0.00%, 2/09/18 310,000 134,850
News America Holdings
0.00%, 3/11/13 5,070,000 3,447,600
- ----------------------------------------------------------------
4,088,750
COMPUTER & TECHNOLOGY: 0.7%
- ----------------------------------------------------------------
ADT Operations Lyons
0.00%, 7/6/10 380,000 641,250
Apple Computer
6.00%, 6/1/01 1,350,000 1,559,250
6.00%, 6/1/01 600,000 693,000
Cirrus Logic
6.00%, 12/15/03 460,000 369,725
Micron Technology
7.00%, 7/1/04 1,160,000 1,081,700
Motorola
0.00%, 9/27/13 1,410,000 1,025,775
Quantum
7.00%, 8/1/04 720,000 684,000
Par Market
Amount** Value
- ----------------------------------------------------------------
Softkey International
5.50%, 11/1/00 $ 770,000 $ 722,838
- ----------------------------------------------------------------
6,777,538
ELECTRONICS & ELECTRICAL: 0.1%
- ----------------------------------------------------------------
Hexcel Corporation
7.00%, 8/1/03 210,000 332,063
Sunbeam
0.00%, 3/25/18 5,180,000 1,191,400
- ----------------------------------------------------------------
1,523,463
INDUSTRIAL MACHINERY: 0.0%
- ----------------------------------------------------------------
Matsushita Electric Industries (Japan)
1.30%, 3/29/02 30,000,000 301,876
1.40%, 3/31/04 15,000,000 151,046
- ----------------------------------------------------------------
452,922
LEISURE, LODGING & ENTERTAINMENT: 0.0%
- ----------------------------------------------------------------
Hilton Hotels
5.00%, 5/15/06 180,000 187,875
- ----------------------------------------------------------------
PETROLEUM & PETROLEUM RELATED: 0.1%
- ----------------------------------------------------------------
Pennzoil
4.75%, 10/1/03 810,000 1,171,463
- ----------------------------------------------------------------
REAL ESTATE: 0.0%
- ----------------------------------------------------------------
Liberty Property Trust
8.00%, 7/1/01 10,000 12,900
- ----------------------------------------------------------------
RETAIL: 0.5%
- ----------------------------------------------------------------
Baker (J.)
7.00%, 6/1/02 260,000 250,900
Charming Shoppes
7.50%, 7/15/06 200,000 193,000
Federated Department Stores
5.00%, 10/1/03 720,000 1,154,700
Home Depot
3.25%, 10/01/01 910,000 1,676,675
Rite-Aid Notes
5.25%, 9/15/02 1,030,000 1,265,613
- ----------------------------------------------------------------
4,540,888
TOTAL CONVERTIBLE BONDS: 2.2%
(Cost $18,528,595) 21,676,737
- ----------------------------------------------------------------
Number
COMMON STOCKS: of Shares
- ----------------------------------------------------------------
AEROSPACE & DEFENSE: 3.0%
- ----------------------------------------------------------------
Allied-Signal 138,600 6,150,375
General Dynamics 32,200 1,497,300
Lockheed Martin 55,900 5,918,413
Loral Space and Communications 24,800 700,600
Northrop 21,300 2,196,563
Textron 96,200 6,896,338
United Technologies 64,300 5,947,750
- ----------------------------------------------------------------
29,307,339
AUTOMOBILES & AUTO PARTS: 2.5%
- ----------------------------------------------------------------
Bayerische Motoren Werke (BMW) AG (Germany) 1,700 1,712,223
Bayerische Motoren Werke (BMW) New (Germany) 340 337,555
Chrysler 146,500 8,258,938
Cooper Industries 18,598 1,021,728
Ford Motor 23,100 1,362,900
General Motors-Class H 21,100 994,338
General Motors 56,600 3,781,588
Meritor Automotive 58,433 1,402,392
TRW 58,900 3,217,413
Volvo AB ADR 10,900 323,594
Volvo AB (Sweden) 80,100 2,378,861
- ----------------------------------------------------------------
24,791,530
13
<PAGE>
Number Market
of Shares Value
- ----------------------------------------------------------------
BANKING, FINANCE & INSURANCE: 25.6%
- ----------------------------------------------------------------
Aetna 20,300 $ 1,545,338
Allstate 137,005 12,544,520
American Express 182,000 20,748,000
AMP Limited (Australia) 76,300 891,271
Associates First Capital Class A 63,854 4,908,789
Banc One 179,500 10,018,344
BankAmerica 135,700 11,729,569
Bank of Boston 53,200 2,959,250
Bank of New York 298,700 18,127,356
Bank of Nova Scotia (Canada) 68,300 1,693,831
Beneficial 27,700 4,243,294
Chase Manhattan 60,000 4,530,000
Cigna 34,500 2,380,500
Citicorp 124,100 18,521,925
Comerica 65,400 4,332,750
CS Holding AG (Swizerland) 20,000 4,442,251
Edperbrascan Class A (Canada) 209,500 3,525,566
Federal National Mortgage 317,700 19,300,275
First Chicago NBD 109,723 9,724,201
First Marathon (Canada) 92,100 1,518,528
Fleet Financial Group 63,700 5,318,950
Fremont General 69,397 3,760,450
General Re Corporation 12,800 3,244,800
Hartford Financial Services 60,200 6,885,375
Highlands Insurance Group* 30,970 572,945
Household International 93,600 4,656,600
Humana* 42,200 1,316,113
Lehman Brothers Holdings 34,080 2,643,330
Marsh & McLennan 18,000 1,087,875
MBIA 7,200 539,100
National Bank of Canada 174,600 3,420,031
NationsBank 169,277 12,949,691
Nationwide Financial Services-A 8,700 443,700
Norwest 120,966 4,521,104
PMI Group 16,500 1,210,688
ReliaStar Financial 102,600 4,924,800
Royal Bank of Canada (Canada) 63,000 3,798,671
Salomon 9,000 503,438
Societe Generale (France) 5,245 1,087,786
Sparbanken Sverige AB,Swedbank-A
Sharesoo (Sweden) 32,200 966,362
Torchmark 62,000 2,836,500
Transamerica 20,500 2,360,063
Travelers Group 25,900 1,570,188
Travelers Property & Casualty Class A 17,500 750,313
U S Bancorp 135,600 5,830,800
United Healthcare 39,600 2,514,600
Washington Mutual 190,763 8,280,285
Wells Fargo 15,400 5,682,600
- ----------------------------------------------------------------
251,362,716
BUILDING & MATERIALS: 0.4%
- ----------------------------------------------------------------
Fluor 18,200 928,200
Foster Wheeler 25,900 555,231
Masco 33,600 2,032,800
- ----------------------------------------------------------------
3,516,231
CABLE, MEDIA, & PUBLISHING: 2.3%
- ----------------------------------------------------------------
CBS 116,585 3,701,574
Dun & Bradstreet 32,400 1,170,450
Harland (John H.) 1,200 20,325
New England Business Service 15,500 499,875
Polaroid 31,200 1,109,550
Readers Digest Association 35,400 960,225
Time Warner 80,483 6,876,281
Viacom Class B* 116,200 6,768,650
Wallace Computer Services 40,100 952,375
- ----------------------------------------------------------------
22,059,305
CHEMICALS: 3.8%
- ----------------------------------------------------------------
Air Products & Chemicals 47,000 1,880,000
Dexter 27,000 858,938
Dial 42,400 1,099,750
DuPont (E.I.) DeNemours 59,500 4,440,188
Great Lakes Chemical 63,800 2,516,113
Number Market
of Shares Value
- ----------------------------------------------------------------
Hanna (M.A.) 56,400 $ 1,032,825
Hercules 71,600 2,944,550
Hoechst AG (Germany) 45,700 2,277,417
IMC Fertilizer Group 33,400 1,006,175
Imperial Chemical ADR 22,100 1,425,450
Lawter International 19,200 208,800
Millenium Chemicals 33,342 1,129,460
Monsanto 88,200 4,928,175
Nalco Chemical 33,300 1,169,663
Octel* 11,200 222,600
Olin 53,700 2,238,619
Solutia 57,400 1,646,663
Union Carbide 71,100 3,794,963
Witco 80,900 2,366,325
- ----------------------------------------------------------------
37,186,674
COMPUTERS & TECHNOLOGY: 2.2%
- ----------------------------------------------------------------
Cognizant 32,400 2,041,200
Compaq Computer 12,002 340,543
Diebold 22,100 638,138
EG&G 34,700 1,041,000
Electronic Data Systems 126,900 5,076,000
First Data 47,100 1,569,019
Gulfstream Aerospace* 10,600 492,900
International Business Machines 39,900 4,581,019
NCR* 32,100 1,043,250
Unisys* 166,518 4,704,133
- ----------------------------------------------------------------
21,527,202
CONSUMER PRODUCTS: 6.7%
- ----------------------------------------------------------------
Avon Products 15,800 1,224,500
Clorox 21,100 2,012,413
Corning 8,200 284,950
General Electric 405,200 36,873,200
Kimberly-Clark 119,200 5,468,300
Maytag 59,600 2,942,750
Minnesota Mining & Manufacturing 68,100 5,596,969
Premark International 28,100 906,225
Rubbermaid 78,300 2,598,581
Unilever NV 24,800 1,957,650
Unilever (United Kingdom) 514,600 5,523,500
Unilever NV-CVA (Netherlands) 1,200 95,023
- ----------------------------------------------------------------
65,484,061
ELECTRONICS & ELECTRICAL: 2.5%
- ----------------------------------------------------------------
AMP 38,200 1,313,125
Cilcorp 14,100 676,800
Eaton 33,100 2,573,525
Motorola 83,400 4,383,713
Nitto Denko (Japan) 18,000 269,748
Omron (Japan) 20,000 304,751
Raytheon-Class A 4,648 267,841
Raytheon-Class B 144,600 8,549,475
Schlumberger Limited 75,200 5,137,100
Sunbeam-Oster 54,800 568,550
Xerox 8,000 813,000
- ----------------------------------------------------------------
24,857,628
ENERGY: 9.7%
- ----------------------------------------------------------------
Amerada Hess 65,600 3,562,900
Amoco 71,400 2,972,025
Anadarko Petroleum 19,700 1,323,594
Atlantic Richfield 73,200 5,718,750
British Petroleum ADR 165,773 14,629,437
Chevron 88,000 7,309,500
Coastal 22,100 1,542,856
Donnelley & Sons 49,700 2,273,775
Dresser Industries 70,900 3,124,031
Duke Energy 35,276 2,090,103
Elf Aquitaine ADR 26,500 1,881,500
Exxon 35,300 2,517,331
Kerr-McGee 15,100 873,913
Mobil 40,900 3,133,963
Occidental Petroleum 218,500 5,899,500
Phillips Petroleum 59,800 2,881,613
Questar 131,700 2,584,613
Royal Dutch Petroleum ADR 154,000 8,441,125
14
<PAGE>
Number Market
of Shares Value
- ----------------------------------------------------------------
Santa Fe Energy Resources* 33,989 $ 365,382
Sempra Energy 105,116 2,916,958
Sonat 28,700 1,108,538
Texaco 5,203 310,554
Total S.A. (France) 53,254 6,906,176
Total S.A. ADR 63,533 4,153,470
Ultramar Diamond Shamrock 29,500 931,094
Unocal 37,300 1,333,475
US Industries 35,580 880,605
USX-Marathon Group 89,800 3,081,263
Valero Energy 22,400 744,800
- ----------------------------------------------------------------
95,492,844
ENVIRONMENTAL SERVICES: 1.4%
- ----------------------------------------------------------------
Browning Ferris 86,087 2,991,523
Burlington Resources 65,200 2,807,675
Halliburton 64,100 2,856,456
Waste Management 137,600 4,816,000
- ----------------------------------------------------------------
13,471,654
FOOD, BEVERAGE & TOBACCO: 4.0%
- ----------------------------------------------------------------
Anheuser Busch 40,400 1,906,375
Bestfoods 59,200 3,437,300
Corn Products* 37,250 1,261,844
DiMon 33,500 376,875
Dole Food 10,100 451,975
Gallaher Group Plc ADR 83,900 1,835,313
General Mills 31,914 2,182,120
Goodman Fielder Limited (Australia) 435,618 632,699
Heinz (H.J.) 37,700 2,115,913
Philip Morris 390,400 15,372,000
Ralston-Purina Group 27,300 3,188,981
RJR Nabisco Holdings 201,460 4,784,675
The Seagram Company Ltd 20,700 847,406
The Seagram Company (Canada) 2,600 106,197
UST 21,500 580,500
- ----------------------------------------------------------------
39,080,173
HEALTHCARE & PHARMACEUTICALS: 6.2%
- ----------------------------------------------------------------
Allegiance 7,920 405,900
American Home Products 167,000 8,642,250
Bausch & Lomb 17,100 857,138
Baxter International 56,800 3,056,550
Bristol-Myers Squibb 72,700 8,355,956
Columbia/HCA Healthcare 217,400 6,331,775
Johnson & Johnson 26,400 1,947,000
Merck & Company 33,400 4,467,250
Novartis (Switzerland) 2,300 3,820,467
Sankyo (Japan) 75,000 1,703,442
Schering-Plough 115,600 10,591,850
Takeda Chemical Industries (Japan) 28,000 742,615
Tyco International 162,834 10,258,542
- ----------------------------------------------------------------
61,180,735
INDUSTRIAL MACHINERY: 1.1%
- ----------------------------------------------------------------
Alstom (France) 38,200 1,254,236
American Standard* 55,800 2,493,563
Cookson Group PLC (United Kingdom) 196,842 676,365
Harnischfeger Industries 33,100 937,144
Ingersoll-Rand 61,250 2,698,828
Pall 23,700 485,850
Parker Hannifin 48,450 1,847,156
- ----------------------------------------------------------------
10,393,142
LEISURE, LODGING & ENTERTAINMENT: 1.9%
- ----------------------------------------------------------------
Brunswick 41,300 1,022,175
Eastman Kodak 18,600 1,358,963
King World Productions* 34,000 867,000
McDonald's 55,800 3,850,200
MGM Grand* 58,200 1,836,938
Mirage Resorts* 43,000 916,438
Starwood Hotels & Resorts Trust 123,934 5,987,561
Viad 83,800 2,325,450
- ----------------------------------------------------------------
18,164,725
METALS & MINING: 1.6%
- ----------------------------------------------------------------
Alcan Aluminum 22,100 610,513
Number Market
of Shares Value
- ----------------------------------------------------------------
Alcan Aluminum (Canada) 44,300 $1,222,381
Alumax 27,300 1,266,037
Aluminum Company of America 59,800 3,943,063
DoFasco (Canada) 71,800 1,171,596
Inland Steel 79,600 2,243,725
Kaiser Aluminum* 39,582 378,503
Newmont Mining 62,000 1,464,750
Noranda (Canada) 20,100 347,839
Pechiney S.A. (France) 12,384 497,534
Phelps Dodge 31,700 1,812,844
USX-U.S. Steel Group 32,400 1,069,200
- ----------------------------------------------------------------
16,027,985
MISCELLANEOUS: 0.9%
- ----------------------------------------------------------------
AC Nielson* 56,500 1,426,625
Block (H&R) 46,000 1,937,750
Manpower 36,800 1,055,700
Navistar International 23,400 675,675
Ogden 47,400 1,312,388
Ryder Systems 67,800 2,139,938
- ----------------------------------------------------------------
8,548,076
PACKAGING & CONTAINERS: 0.1%
- ----------------------------------------------------------------
Domtar 500 3,375
Domtar (Canada) 89,700 601,972
- ----------------------------------------------------------------
605,347
PAPER & FOREST PRODUCTS: 1.0%
- ----------------------------------------------------------------
Boise Cascade 42,700 1,398,425
Champion International 53,400 2,626,613
Georgia-Pacific 47,800 2,817,213
Weyerhaeuser 71,500 3,302,406
- ----------------------------------------------------------------
10,144,657
REAL ESTATE: 0.6%
- ----------------------------------------------------------------
Alexandria R.E. Equities 10,500 314,344
Crescent Real Estate Equities 29,600 995,300
Duke Realty Investments 9,400 222,663
Equity Office Properties Trust 34,600 981,775
Equity Residential Properties 38,500 1,826,344
Macerich 14,700 430,894
Mandamus Fastigheter (Sweden)* 1,610 10,066
Patriot American Hospitality 15,398 368,590
Tornet Fastighets AB (Sweden) 19,520 312,437
Weeks 11,100 351,038
- ----------------------------------------------------------------
5,813,451
RETAIL: 4.5%
- ----------------------------------------------------------------
Charming Shoppes* 50,900 240,979
Dayton Hudson 65,200 3,162,200
Federated Department Stores* 64,800 3,487,050
Footstar* 33,077 1,587,696
Harcourt General 51,600 3,070,200
Harsco 68,600 3,142,738
Hudson's Bay (Canada) 84,800 1,947,035
Intimate Brands 14,300 394,144
Limited 88,822 2,942,229
Penney (J.C.) 16,700 1,207,619
Public Storage 23,700 663,600
Snap-on 2,700 97,875
Tandy 36,600 1,942,088
TJX 219,280 5,290,130
Toys R Us* 27,900 657,394
Tupperware 7,300 205,313
Venator Group 10,100 193,163
Wal-Mart Stores 235,400 14,300,550
- ----------------------------------------------------------------
44,532,003
TELECOMMUNICATIONS: 5.7%
- ----------------------------------------------------------------
Alcatel Alsthom (France) 24,440 4,963,890
Alltel 41,400 1,925,100
Ameritech 128,400 5,761,950
AT & T 177,500 10,139,688
Bell Atlantic 221,576 10,109,405
BellSouth 94,400 6,336,600
GTE 65,000 3,615,625
MCI Communications 20,700 1,202,541
15
<PAGE>
Number Market
of Shares Value
- ----------------------------------------------------------------
Niagara Mohawk Power* 119,100 $ 1,779,056
SBC Communications 123,900 4,956,000
Sprint 27,000 1,903,500
WorldCom 69,407 3,355,386
- ----------------------------------------------------------------
56,048,741
TEXTILES, APPAREL & FURNITURE: 0.8%
- ----------------------------------------------------------------
Abercrombie & Fitch Class A 3 126
Johnson Controls 40,300 2,299,619
Kellwood 40,400 1,444,300
Nike 41,500 2,020,531
Stevens & Stevens 47,300 845,488
Unifi 35,400 1,212,450
- ----------------------------------------------------------------
7,822,514
TRANSPORTATION & SHIPPING: 1.3%
- ----------------------------------------------------------------
Burlington Northern Santa Fe 28,400 2,788,525
CSX 151,500 6,893,250
Norfolk Southern 95,400 2,844,113
- ----------------------------------------------------------------
12,525,888
UTILITIES: 2.6%
- ----------------------------------------------------------------
Allegheny Energy 94,200 2,837,775
American Electric Power 94,500 4,287,938
Central & South West 23,100 620,813
Central Maine Power 48,800 951,600
Cinergy 43,000 1,505,000
Consolidated Edison 45,575 2,099,298
DPL Inc 66,000 1,196,250
Entergy 145,600 4,186,000
FPL Group 18,700 1,178,100
Illinova 18,900 567,000
PacifiCorp 23,200 524,900
PG&E 88,445 2,791,545
Pinnacle West Capital 51,000 2,295,000
- ----------------------------------------------------------------
25,041,219
TOTAL COMMON STOCK: 92.4%
(Cost $630,986,675) 904,985,840
- ----------------------------------------------------------------
PREFERRED STOCKS:
- ----------------------------------------------------------------
Aetna 12,400 931,550
Ahmanson (H.F.)cv. preferred-Series D 6,800 992,800
Airtouch Communications 46,000 2,219,500
Automatic Com Exchange Sec 17,800 427,200
Cendant 26,900 778,419
Chiquita Brands Series A 15,500 711,063
Chiquita Brands Series B 7,300 412,450
Conseco 6,100 988,200
Conseco Finance Trust IV 16,500 874,500
DECS Trust 30,000 412,500
Evergreen Media* 13,800 1,421,400
Hollinger International 47,000 740,250
Houston Industries 25,500 1,899,750
Ingersoll-Rand 49,600 998,200
International Paper 6,100 298,900
Kmart Financing 24,700 1,729,000
Life RE Capital Trust II 3,700 282,125
Loral Space & Communication 28,700 2,206,313
MCN 75,900 1,888,013
MCN Financing 2,400 110,100
MediaOne Group 33,100 2,976,931
Merrill 6.25% IGL -Strypes 11,900 374,850
Occidental Petroleum 14,100 1,113,900
Premier Parks 24,500 1,555,750
Readers Digest Association 43,100 1,109,825
Salomon 16,700 797,425
TJX Companies 1,700 901,000
Tosco* 3,200 179,200
U S West 21,000 1,199,625
Union Pacific Capital Trust 34,500 1,617,188
Wang Laboratories 10,700 596,525
Wang Laboratories-Series B 9,900 551,925
WBK Strypes Trust 25,700 775,819
Williams 3,600 576,900
- ----------------------------------------------------------------
TOTAL PREFERRED STOCKS: 3.5%
(Cost $27,251,447) 34,649,096
- ----------------------------------------------------------------
Maturity Market
REPURCHASE AGREEMENT: Amount Value
- ----------------------------------------------------------------
State Street Bank and Trust Co.
Repurchase Agreement, dated 6/30/98,
5.30%, maturing 7/1/98,
collateralized by U.S. Treasury
Bonds 8.375%, 8/15/08 $16,093,000 $16,093,000
- ----------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT: 1.6%
(Cost $16,093,000) 16,093,000
- ----------------------------------------------------------------
TOTAL INVESTMENTS: 99.8%
(Cost $693,401,972) 978,297,566
- ----------------------------------------------------------------
Other Assets Over Liabilities: 0.2% 1,688,089
- ----------------------------------------------------------------
NET ASSETS: 100%
(Equivalent to $21.705 per share
based on 45,149,682 shares issued
and outstanding) $979,985,655
================================================================
GLOBAL ASSET ALLOCATION FUND
STATEMENT OF NET ASSETS
June 30, 1998
(Unaudited)
INVESTMENTS:
Par Market
LONG-TERM DEBT INVESTMENTS: Amount** Value
- ----------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS: 9.9%
- ----------------------------------------------------------------
Federal Home Loan Mortgage:
7.50%, 11/15/22 $ 685,000 $ 721,408
Federal National Mortgage Association
7.00%, 3/18/02 182,467 185,424
7.50%, 7/1/07 279,056 289,345
5.50%, 2/1/11 280,036 273,209
5.50%, 3/1/11 198,717 193,873
5.50%, 4/1/11 1,356,973 1,323,890
5.50%, 5/1/11 1,148,478 1,120,478
5.50%, 6/1/11 119,159 116,254
5.50%, 12/1/11 415,233 403,552
5.50%, 1/1/12 338,082 328,572
7.00%, 7/15/13 1,600,000 1,628,992
6.25%, 12/25/13 470,103 470,277
8.50%, 10/25/19 755,000 806,718
7.00%, 2/25/23 289,779 298,846
6.978%, 7/1/25 83,425 86,449
7.40%, 5/1/26 663,805 680,605
7.00%, 7/15/28 2,190,000 2,220,791
Federal National Mortgage Association TBA
6.50%, 7/15/28 2,030,000 2,021,738
Federal National Mortgage Association (Australia)
6.38%, 8/15/07 855,000 545,607
Government National Mortgage Association
10.00%, 6/15/13 399,699 437,918
11.00%, 12/15/15 105,702 118,683
7.50%, 1/15/23 176,834 182,912
7.375%, 4/20/23 358,820 365,100
7.375%, 6/20/23 344,550 350,580
7.50%, 8/15/23 737,117 761,759
7.50%, 9/15/23 410,182 423,894
7.00%, 12/15/23 122,597 125,278
7.00%, 2/15/24 472,722 482,914
7.00%, 3/15/24 402,547 411,225
7.00%, 5/15/24 883,706 902,758
7.38%, 5/20/24 294,024 298,435
7.00%, 7/20/24 174,056 177,862
8.00%, 8/15/24 606,105 631,482
7.00%, 10/20/24 435,512 445,037
8.00%, 6/15/25 15,088 15,720
7.00%, 8/15/25 96,037 98,107
8.00%, 8/15/25 945,454 985,040
7.00%, 10/15/25 732,086 747,870
7.00%, 11/15/25 829,846 847,503
8.00%, 4/15/26 371,466 386,440
16
<PAGE>
Par Market
Amount** Value
- ----------------------------------------------------------------
8.00%, 7/15/26 $ 90,436 $ 93,997
7.00%, 10/15/26 274,291 279,861
7.00%, 11/15/26 2,924,305 2,983,698
8.00%, 2/15/27 190,207 197,517
7.50%, 5/16/27 1,100,000 1,162,348
8.00%, 6/15/27 281,369 292,008
7.00%, 7/15/27 629,150 641,928
8.00%, 7/15/27 176,750 183,157
5.50%, 8/20/27 95,788 97,164
7.00%, 9/15/27 49,381 50,246
5.50%, 9/20/27 283,306 287,377
7.00%, 10/15/27 325,324 331,017
7.00%, 11/15/27 94,027 95,642
7.00%, 12/15/27 136,466 138,810
7.00%, 1/15/28 819,257 833,104
5.00%, 2/20/28 692,606 692,170
6.50%, 3/15/28 1,979,315 1,977,608
6.50%, 4/15/28 1,094,637 1,092,919
5.50%, 4/20/28 152,645 153,312
7.00%, 5/15/28 985,050 1,001,363
Government National Mortgage Association II
6.875%, 11/20/21 55,338 56,549
7.125%, 9/20/23 47,247 48,044
7.375%, 6/20/24 86,806 88,108
U.S. Treasury Bill
5.07%, 8/20/98 (+) 5,045,000 5,009,759
U.S. Treasury Bond
6.375%, 8/15/27 375,000 412,440
6.125%, 11/15/27 2,195,000 2,353,325
U.S. Treasury Notes
5.625%, 11/30/99 995,000 996,602
5.50%, 3/31/00 1,350,000 1,350,081
5.50%, 5/31/03 1,010,000 1,009,929
5.625%, 5/15/08 980,000 993,622
- ----------------------------------------------------------------
47,816,250
ASSET BACKED - 2.9%
- ----------------------------------------------------------------
Advanta Mortgage Loan Trust
6.69%, 4/25/17 595,000 601,831
7.05%, 5/25/21 685,000 695,823
6.63%, 1/25/29 615,000 624,508
Amres 97-3A3
6.60%, 1/25/18 400,000 400,936
BHET
6.91%, 1/25/29 190,000 193,621
Capital Equipment Resources Trust
6.28%, 6/15/00 180,000 180,859
Collateralized Mortgage Obligations Trust
9.00%, 11/20/20 1,491,442 1,614,247
Commercial Mortgage Acceptance Corporation
6.57%, 12/15/30 165,000 168,788
First Union
6.65%, 6/18/08 420,000 431,088
GE Capital Management Services
6.00%, 2/25/24 221,062 220,353
General Motors Acceptance Corporation
6.70%, 5/15/30 1,230,000 1,269,200
Green Tree Financial 97-2 A6
7.24%, 4/15/28 540,000 564,975
Green Tree Recreational Series 1998-A A1C
6.18%, 6/15/19 818,559 819,321
Greentree Series 1998-2 A5
6.24%, 3/18/28 870,000 875,159
Greentree 97-3
6.93%, 7/15/28 930,000 949,763
Greentree 97-B A1
6.55%, 7/15/28 721,570 727,653
GS Mortgage Securities II
6.56%, 4/13/31 350,000 357,326
Independent National Mortgage Corporation
8.3229%, 12/25/24 250,857 259,010
Merrill Lynch Mortgage Investors
6.54%, 12/10/29 985,000 1,011,309
6.22%, 2/15/30 985,983 993,989
Morgan Stanley Capital I
7.2241%, 1/16/06 560,000 582,747
Par Market
Amount** Value
- ----------------------------------------------------------------
PNC Mortgage Securities
6.60%, 7/25/27 $ 400,302 $ 401,615
- ----------------------------------------------------------------
13,944,121
AEROSPACE & DEFENSE: 0.2%
- ----------------------------------------------------------------
BE Aerospace
9.875%, 2/1/06 45,000 47,981
8.00%, 3/1/08 125,000 125,000
DERLAN Manufacturing
10.00%, 1/15/07 50,000 52,500
K & F Industries
9.25%, 10/15/07 15,000 15,188
L-3 Communications
10.375%, 5/1/07 20,000 22,150
Lockheed Martin
7.25%, 5/15/06 410,000 436,138
Sequa
9.375%, 12/15/03 5,000 5,219
- ----------------------------------------------------------------
704,176
AUTOMOBILE & AUTO EQUIPMENT: 0.3%
- ----------------------------------------------------------------
Argo-Tech
8.625%, 10/1/07 10,000 10,175
Exide
2.90%, 12/15/05 5,000 3,113
Hertz
7.00%, 1/15/28 815,000 821,113
Lear
9.50%, 7/15/06 100,000 109,750
Motors & Gears
10.75%, 11/15/06 40,000 43,100
Navistar International
7.00%, 2/1/03 200,000 201,000
8.00%, 2/1/08 85,000 85,638
Newcor
9.875%, 3/1/08 100,000 101,250
Talon Automotive
9.625%, 5/1/08 70,000 70,875
- ----------------------------------------------------------------
1,446,014
BANKING, FINANCE & INSURANCE: 2.0%
- ----------------------------------------------------------------
AFC Capital Trust I
8.207%, 2/3/27 425,000 485,031
AT&T Capital
6.25%, 5/15/01 445,000 445,556
Aames Financial
9.125%, 11/1/03 45,000 44,775
Banponce-MTN
7.125%, 5/2/02 350,000 360,500
Bluegreen
10.50%, 4/1/08 10,000 10,025
Central Bank Philippines
6.25%, 12/1/17 106,000 93,280
Chevy Chase Bank
9.25%, 12/1/05 50,000 51,125
Cincinnati Financial
6.90%, 5/15/28 415,000 425,375
Colonial Capital II
8.92%, 1/15/27 35,000 39,419
Delta Financial
9.50%, 8/1/04 50,000 49,500
Dime Capital Trust I
9.33%, 5/6/27 15,000 17,775
Dollar Financial Group
10.875%, 11/15/06 20,000 21,600
Empress River Casino Finance
10.75%, 4/1/02 40,000 43,650
Falcon Holdings PIK
11.00%, 9/15/03 58,025 62,667
First Financial Caribbean
7.84%, 10/10/06 140,000 147,175
First Nationwide Holdings
12.50%, 4/15/03 50,000 57,250
10.625%, 10/1/03 40,000 45,400
Firstar Bank Milwaukee
6.25%, 12/1/02 340,000 340,500
17
<PAGE>
Par Market
Amount** Value
- ----------------------------------------------------------------
General Motors Acceptance Corporation
5.80%, 4/9/01 $ 325,000 $ 323,375
Greenpoint Bank
6.70%, 7/15/02 250,000 253,125
6.70%, 7/15/02 225,000 227,813
Greenpoint Capital Trust I
9.10%, 6/1/27 15,000 16,969
Imperial Credit Capital Trust I
10.25%, 6/14/02 75,000 75,938
Imperial Credit Industries
9.875%, 1/15/07 35,000 35,088
Lehman Brothers Holdings
6.50%, 10/1/02 265,000 267,475
Merita Bank Ltd
6.50%, 1/15/06 565,000 567,119
NationsBank
6.875%, 2/15/05 875,000 910,000
Nationwide Credit
10.25%, 1/15/08 10,000 10,075
North Fork Capital Trust I
8.70%, 12/15/26 10,000 11,125
Ocwen Capital Trust I
10.875%, 8/1/27 10,000 10,925
Ocwen Federal Bank
12.00%, 6/15/05 5,000 5,475
Ocwen Financial
11.875%, 10/1/03 5,000 5,625
Orange Cogen Funding
8.175%, 3/15/22 110,000 121,352
Paine Webber Group
6.55%, 4/15/08 655,000 659,913
Phoenix Home Life Mutual
6.95%, 12/1/06 315,000 325,238
Popular
6.40%, 8/25/00 530,000 534,638
Provident
7.41%, 3/15/38 555,000 574,425
Provident Capital Trust I
8.60%, 12/1/26 35,000 38,500
PRT Funding
11.625%, 4/15/04 40,000 28,500
Salomon Brothers
7.30%, 5/15/02 395,000 411,294
Sampoerna International Finance
8.375%, 6/15/06 475,000 277,875
Southern Investments UK
6.80%, 12/1/06 845,000 866,125
Sovereign Capital Trust
9.00%, 4/1/27 20,000 23,125
TIG Holdings
8.125%, 4/15/05 370,000 403,300
Webster Capital Trust I
9.36%, 1/29/27 5,000 5,725
- ----------------------------------------------------------------
9,730,740
BUILDING & MATERIALS: 0.1%
- ----------------------------------------------------------------
American Architectural
11.75%, 12/1/07 10,000 10,425
Atrium
10.50%, 11/15/06 80,000 85,000
Building Materials
8.625%, 12/15/06 5,000 5,156
Continental Homes Holding
10.00%, 4/15/06 35,000 37,888
MDC Holdings
11.125%, 12/15/03 25,000 27,313
McII Holdings
0.00%, 11/15/02 75,000 70,969
Southdown
10.00%, 3/1/06 25,000 27,750
Williams Scotsman
9.875%, 6/1/07 15,000 15,675
- ----------------------------------------------------------------
280,176
CABLE, MEDIA & PUBLISHING: 0.9%
- ----------------------------------------------------------------
Acme Television
0.00%, 9/30/04 20,000 16,350
Par Market
Amount** Value
- ----------------------------------------------------------------
Adelphia Communications
9.875%, 3/1/07 $ 90,000 $ 97,650
Albritton Communications
9.75%, 11/30/07 100,000 110,250
American Media Operation
11.625%, 11/15/04 50,000 54,250
Cablevision Systems
9.25%, 11/1/05 10,000 10,725
9.875%, 2/15/13 125,000 138,750
Century Communications
9.50%, 3/1/05 25,000 27,125
Chancellor Media
8.125%, 12/15/07 65,000 66,056
Citadel Broadcasting
10.25%, 7/1/07 20,000 22,000
Comcast
9.50%, 1/15/08 25,000 26,750
Commodore Media
7.50%, 5/1/03 90,000 102,488
Diva Systems
0.00%, 3/1/08 120,000 61,800
Dobson Wireline
12.25%, 6/15/08 70,000 68,250
Fox Kids Worldwide
9.25%, 11/1/07 75,000 74,813
0.00%, 11/1/07 55,000 35,544
Fox/Liberty Networks LLC
8.875%, 8/15/07 50,000 50,750
Garden State Newspapers
8.75%, 10/1/09 75,000 76,688
Granite Broadcasting
9.375%, 12/1/05 35,000 36,050
8.875%, 5/15/08 30,000 30,300
Gray Communication System
10.625%, 10/1/06 5,000 5,500
Jones Intercable
10.50%, 3/1/08 50,000 54,625
Knology Holdings
11.875%, 10/15/07 110,000 65,450
Lamar Advertising
9.625%, 12/1/06 85,000 91,163
8.625%, 9/15/07 15,000 15,394
Marcus Cable Operating Notes
0.00%, 8/1/04 50,000 48,625
News America Holdings
7.70%, 10/30/25 590,000 631,300
Outdoor Communications
9.25%, 8/15/07 185,000 190,550
Outdoor Systems
9.375%, 10/15/06 5,000 5,300
8.875%, 6/15/07 125,000 130,000
PSINET
10.00%, 2/15/05 50,000 51,250
PX Escrow
0.00%, 2/1/06 10,000 7,225
Pathnet
12.25%, 4/15/08 65,000 70,525
Pegasus Media
12.50%, 7/1/05 50,000 56,625
Radio One
7.00%, 5/15/04 5,000 5,100
SFX Broadcasting
10.75%, 5/15/06 125,000 139,063
SFX Entertainment
9.125%, 2/1/08 30,000 29,550
Sinclair Broadcast Group
8.75%, 12/15/07 100,000 102,250
Spanish Broadcasting System
7.50%, 6/15/02 100,000 114,500
11.00%, 3/15/04 30,000 32,550
Sullivan Broadcasting
10.25%, 12/15/05 75,000 85,781
TCI Satellite Entertainment
10.88%, 2/15/07 30,000 29,925
0.00%, 2/15/07 10,000 6,775
Time Warner
7.75%, 6/15/05 310,000 334,025
8.875%, 10/1/12 360,000 439,650
18
<PAGE>
Par Market
Amount** Value
- ----------------------------------------------------------------
Tri-State Outdoor Media
11.00%, 5/15/08 $ 15,000 $ 15,188
United International Holdings
0.00%, 2/15/08 80,000 49,400
Viacom
8.00%, 7/7/06 200,000 206,500
Von Hoffman Press
10.375%, 5/15/07 40,000 42,950
- ----------------------------------------------------------------
4,163,328
CHEMICALS: 0.0%
- ----------------------------------------------------------------
ISP Holdings
9.75%, 2/15/02 45,000 47,363
Koppers
9.875%, 12/1/07 10,000 10,400
NL Industries
0.00%, 10/15/05 40,000 41,200
Pioneer Americas Acquisition
9.25%, 6/15/07 15,000 14,775
Sovereign Specialty Chemicals
9.50%, 8/1/07 20,000 20,925
Sterling Chemical Holdings
0.00%, 8/15/08 40,000 23,300
- ----------------------------------------------------------------
157,963
COMPUTER & TECHNOLOGY: 0.5%
- ----------------------------------------------------------------
Amazon.Com
0.00%, 5/1/08 90,000 54,900
Cellnet Data Systems
0.00%, 10/1/07 170,000 97,538
Concentric Network
12.75%, 12/15/07 10 12,200
Dell Computer
7.10%, 4/15/28 490,000 502,250
IPC Information Systems
0.00%, 5/1/08 90,000 65,700
Millipore
7.20%, 4/1/02 285,000 294,263
Unisys
9.75%, 9/15/16 170,000 176,800
WMX Technologies
7.10%, 8/1/26 990,000 1,014,750
Wright Medical Technology
10.75%, 7/1/00 90,000 88,875
- ----------------------------------------------------------------
2,307,276
CONSUMER PRODUCTS: 0.3%
- ----------------------------------------------------------------
Capstar Broadcasting
0.00%, 2/1/09 85,000 64,813
Chattem
8.875%, 4/1/08 20,000 19,950
Color Spot Nurseries
10.50%, 12/15/07 20,000 19,200
French Fragrance
10.375%, 5/15/07 15,000 16,050
Iron Age
9.875%, 5/1/08 75,000 75,188
NBTY
8.625%, 9/15/07 200,000 205,500
Revlon Consumer Products
8.625%, 2/1/08 200,000 201,000
Sassco Fashions
12.75%, 12/31/03 25,000 27,063
Tyco International Group
6.25%, 6/15/03 330,000 329,175
6.375%, 6/15/05 320,000 321,200
United Stationer Supply
12.75%, 5/1/05 7,000 7,945
William Carter
10.375%, 12/1/06 100,000 107,250
William Carter Holdings 144A
12.00%, 10/1/08 25,000 26,750
- ----------------------------------------------------------------
1,421,084
ELECTRONICS/ELECTRICAL EQUIPMENT: 0.3%
- ----------------------------------------------------------------
Delta Electronics
0.50%, 3/6/04 40,000 43,368
Par Market
Amount** Value
- ----------------------------------------------------------------
Echostar Satellite Broadcast
0.00%, 3/15/04 $ 40,000 $ 36,800
Fairchild Semiconductor
10.125%, 3/15/07 65,000 67,113
0.00%, 3/14/08 60,000 68,700
Flextronics International
8.75%, 10/15/07 20,000 20,175
HCC Industries
10.75%, 5/15/07 20,000 21,150
National Semiconductor
6.50%, 10/1/02 10,000 9,175
Pagemart Nationwide
0.00%, 2/1/05 20,000 17,800
Raytheon
6.45%, 8/15/02 815,000 827,225
Rhythms Netconnections
0.00%, 5/15/08 90,000 44,100
Signature Brands USA
13.00%, 8/15/02 100,000 113,375
Sygnet Wireless
11.50%, 10/1/06 15,000 16,706
Wavetek
10.125%, 6/15/07 10,000 10,400
Zilog
9.50%, 3/1/05 65,000 48,750
- ----------------------------------------------------------------
1,344,837
ENERGY: 0.4%
- ----------------------------------------------------------------
Abraxas Petro
11.50%, 11/1/04 30,000 30,900
Benton Oil & Gas
9.375%, 11/1/07 15,000 14,663
COHO Energy
8.875%, 10/15/07 20,000 19,050
Chesapeake Energy
9.125%, 4/15/06 125,000 122,500
Coastal
6.95%, 6/2/28 440,000 443,300
Costilla Energy
10.25%, 10/1/06 50,000 50,625
DII Group
8.50%, 9/15/07 10,000 9,950
Dailey International
9.50%, 2/15/08 30,000 29,550
Global Marine
7.00%, 6/1/28 660,000 671,550
Gothic Production
11.125%, 5/1/05 30,000 28,725
Michael Petroleum
11.50%, 4/1/05 30,000 30,225
Panaco
10.625%, 10/1/04 10,000 10,000
Pride Petroleum Services
9.375%, 5/1/07 20,000 21,125
Seven Seas Petroleum
12.50%, 5/15/05 20,000 20,050
Snyder Oil
8.75%, 6/15/07 15,000 15,113
Transamerican Energy
0.00%, 6/15/02 525,000 430,500
11.50%, 6/15/02 120,000 114,000
Transamerican Refining
16.00%, 6/30/03 40,000 42,600
- ----------------------------------------------------------------
2,104,426
ENVIRONMENTAL SERVICES: 0.2%
- ----------------------------------------------------------------
Allied Waste Industries
0.00%, 6/1/07 60,000 44,250
Allied Waste North America
10.25%, 12/1/06 25,000 27,594
Columbia Gas Systems
7.32%, 11/28/10 500,000 528,750
Petroleum Geo-Services
7.50%, 3/31/07 175,000 186,594
TransTexas Gas
13.75%, 12/31/01 157,000 174,270
- ----------------------------------------------------------------
961,458
19
<PAGE>
Par Market
Amount** Value
- ----------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO: 0.2%
- ----------------------------------------------------------------
Ameriserv Food Distributors
8.875%, 10/15/06 $ 25,000 $ 25,250
10.125%, 7/15/07 15,000 15,675
Aurora Foods
9.875%, 2/15/07 60,000 63,300
Canandaigua Wine
8.75%, 12/15/03 155,000 158,682
Fleming
10.625%, 7/31/07 100,000 105,500
Philip Morris
7.50%, 1/15/02 405,000 421,200
Purina Mills
9.00%, 3/15/10 40,000 41,200
Smithfield Foods
7.625%, 2/15/08 140,000 138,425
Southern Foods,SFG Cap
9.875%, 9/1/07 10,000 10,400
Southland Corp.
5.00%, 12/15/03 50,000 43,625
Windy Hill Pet Food
9.75%, 5/15/07 105,000 111,300
- ----------------------------------------------------------------
1,134,557
HEALTHCARE & PHARMACEUTICALS: 0.8%
- ----------------------------------------------------------------
Alaris Medical Systems
9.75%, 12/1/06 50,000 52,250
Conmed
9.00%, 3/15/08 30,000 30,000
Dade International
11.125%, 5/1/06 50,000 56,625
ExtendiCare Health Services
9.35%, 12/15/07 150,000 154,500
Eye Care Centers of America
9.125%, 5/1/08 30,000 29,700
Fresenius Medical Capital Trust II
7.875%, 2/1/08 50,000 49,000
Fresenius Medical Care
9.00%, 12/1/06 150,000 156,000
Genesis Eldercare
9.00%, 8/1/07 25,000 24,625
Genesis Health Ventures
9.25%, 10/1/06 25,000 25,313
Global Health Sciences
11.00%, 5/1/08 30,000 29,700
Graphic Controls
12.00%, 9/15/05 45,000 50,456
Hudson Respiratory Care
9.13%, 4/15/08 40,000 39,850
ICN Pharmaceuticals
9.25%, 8/15/05 130,000 138,125
9.25%, 8/15/05 20,000 21,250
Icon Fitness
0.00%, 11/15/06 60,000 29,400
Imagyn Medical Technology
12.50%, 4/1/04 30,000 12,000
Integrated Health Services
9.50%, 9/15/07 20,000 21,000
9.25%, 1/15/08 40,000 41,600
MEDIQ
0.00%, 6/1/09 50,000 27,000
Magellan Health Services
9.00%, 2/15/08 70,000 69,475
Manor Care
7.50%, 6/15/06 285,000 304,950
Mediq
11.00%, 6/1/08 60,000 61,800
Medpartners
7.38%, 10/1/06 200,000 179,260
National Health
7.30%, 7/15/07 565,000 596,781
Paracelsus Healthcare
10.00%, 8/15/06 50,000 49,750
Paragon Health
9.50%, 11/1/07 60,000 61,200
Paragon Health Networks
0.00%, 11/1/07 20,000 13,175
Par Market
Amount** Value
- ----------------------------------------------------------------
Pharmerica
8.375%, 4/1/08 $ 30,000 $ 29,925
Philip Morris
7.50%, 4/1/04 1,095,000 1,155,225
Prime Hospitality
9.75%, 4/1/07 40,000 42,900
Tenet Healthcare
8.625%, 1/15/07 125,000 130,000
- ----------------------------------------------------------------
3,682,835
INDUSTRIAL MACHINERY: 0.1%
- ----------------------------------------------------------------
AEP Industries
9.875%, 11/15/07 15,000 15,638
Brand Scaffold Services
10.25%, 2/15/08 20,000 20,450
Coinmach
11.75%, 11/15/05 50,000 55,875
Coinmach
11.75%, 11/15/05 5,000 5,588
Jackson Products
9.50%, 4/15/05 20,000 19,950
Morris Materials Handling
9.50%, 4/1/08 40,000 37,300
POGO Producing
8.75%, 5/15/07 5,000 5,113
Safety Components International
10.125%, 7/15/07 20,000 20,800
Viasystems
9.75%, 6/1/07 15,000 14,738
Waxman Industries
0.00%, 6/1/04 5,000 4,800
- ----------------------------------------------------------------
200,252
LEISURE, LODGING & ENTERTAINMENT: 0.5%
- ----------------------------------------------------------------
AMC Entertainment
9.50%, 3/15/09 40,000 41,050
Argosy Gaming
13.25%, 6/1/04 100,000 112,750
Boyd Gaming
9.50%, 7/15/07 50,000 51,625
Cinemark USA Series C
9.625%, 8/1/08 155,000 160,038
Coast Hotels & Casino
13.00%, 12/15/02 65,000 73,613
Colorado Gaming
12.00%, 6/1/03 79,350 85,698
Empress Entertainment
8.125%, 7/1/06 50,000 50,250
Epic Resorts
13.00%, 6/15/05 30,000 30,000
Fitzgeralds Gaming
12.25%, 12/15/04 70,000 68,075
Hollywood Casino
12.75%, 11/1/03 75,000 82,500
Host Mar Travel Plaza
9.50%, 5/15/05 130,000 138,125
Mohegan Tribal Gaming
13.50%, 11/15/02 45,000 58,106
Premier Parks
12.00%, 8/15/03 50,000 55,500
9.25%, 4/1/06 75,000 77,156
Showboat Marina Casino
13.50%, 3/15/03 50,000 59,500
Silver Cinemas
10.50%, 4/15/05 40,000 40,950
Six Flags Theme Parks
0.00%, 6/15/05 250,000 282,188
Sun International Hotels
8.63%, 12/15/07 75,000 77,344
Time Warner Entertainment
8.38%, 7/15/33 535,000 643,338
United Artists
9.75%, 4/15/08 40,000 39,900
- ----------------------------------------------------------------
2,227,706
METALS & MINING: 0.2%
- ----------------------------------------------------------------
AK Steel
9.125%, 12/15/06 65,000 68,088
20
<PAGE>
Par Market
Amount** Value
- ----------------------------------------------------------------
AmeriSteel
8.75%, 4/15/08 $ 50,000 $ 50,125
Anker Coal Group
9.75%, 10/1/07 215,000 197,800
Continental Global Group
11.00%, 4/1/07 30,000 31,575
Potash Corp Saskatchewan
7.125%, 6/15/07 725,000 752,188
WHX
10.50%, 4/15/05 30,000 30,600
- ----------------------------------------------------------------
1,130,376
MISCELLANEOUS - 0.5%
- ----------------------------------------------------------------
Affinity Group Holding
11.00%, 4/1/07 75,000 79,969
ATC Group Services
12.00%, 1/15/08 15,000 14,100
Banco Nacional de Comm
11.25%, 5/30/06 45,000 49,275
Calair
8.125%, 4/1/08 30,000 30,300
Day International Group
9.50%, 3/15/08 50,000 50,375
Decora Industries
11.00%, 5/1/05 40,000 39,000
Details
10.00%, 11/15/03 15,000 15,188
Focal Communications
0.00%, 2/15/08 80,000 48,700
Glenoit
11.00%, 4/15/07 15,000 16,088
Hedstrom Holdings
0.00%, 6/1/09 5,000 3,156
Home Interiors and Gifts
10.125%, 6/1/08 20,000 20,450
Huntsman
9.0937%, 7/1/07 50,000 50,500
Integrated Device Technology
5.50%, 6/1/02 20,000 16,475
Iron Mountain
10.125%, 10/1/06 150,000 162,750
8.75%, 9/30/09 20,000 20,450
Isle of Capri/Cap
13.00%, 8/31/04 10,000 10,575
Lodestar Holdings
11.50%, 5/15/05 30,000 30,338
Mahindra & Mahindra
5.00%, 7/9/01 35,000 29,575
MCF
6.663%, 1/18/08 655,000 674,237
Newpark Resources
8.625%, 12/15/07 10,000 10,175
OutSourcing Solutions
11.00%, 11/1/06 20,000 21,750
Paragon Corporate Holdings
9.625%, 4/1/08 20,000 18,400
Perry-Judd
10.625%, 12/15/07 75,000 79,125
Players International
10.875%, 4/15/05 25,000 27,125
Polymer Group
9.00%, 7/1/07 20,000 20,400
8.75%, 3/1/08 40,000 40,100
Premium Standard Farms
11.00%, 9/17/03 18,158 19,565
RAB Enterprises
10.50%, 5/1/05 60,000 60,675
Radnor Holdings
10.00%, 12/1/03 10,000 10,450
Solutia
6.72%, 10/15/37 765,000 776,353
Viasystems
9.75%, 6/1/07 75,000 73,688
W.R.Carpenter North America
10.625%, 6/15/07 75,000 79,875
- ----------------------------------------------------------------
2,599,182
Par Market
Amount** Value
- ----------------------------------------------------------------
PACKAGING & CONTAINERS: 0.1%
- ----------------------------------------------------------------
Huntsman Packaging
9.125%, 10/1/07 $ 25,000 $ 24,938
Owens-Illinois
8.10%, 5/15/07 25,000 26,531
Riverwood International
10.25%, 4/1/06 50,000 51,375
10.875%, 4/1/08 85,000 86,275
Stone Container Fin-Can
11.50%, 8/15/06 10,000 10,788
- ----------------------------------------------------------------
199,907
PAPER & FOREST PRODUCTS: 0.0%
- ----------------------------------------------------------------
CEX Holdings
9.625%, 6/1/08 40,000 41,100
Florida Coast Paper LLC
12.75%, 6/1/03 25,000 27,750
MAXXAM Group
12.00%, 8/1/03 10,000 11,200
United Stationers
8.375%, 4/15/08 40,000 40,100
- ----------------------------------------------------------------
120,150
REAL ESTATE: 0.2%
- ----------------------------------------------------------------
Beazer Homes USA
8.875%, 4/1/08 30,000 29,250
Equity Office Property 144A
6.763%, 6/15/07 450,000 450,563
ERP Operating
6.63%, 4/13/05 295,000 296,475
John Q. Hammons Hotels
8.875%, 2/15/04 125,000 126,250
- ----------------------------------------------------------------
902,538
RETAIL: 0.2%
- ----------------------------------------------------------------
Adams Outdoor Advertising
10.75%, 3/15/06 125,000 136,875
Affinity Group
11.50%, 10/15/03 75,000 79,219
Amscan Holdings
9.875%, 12/15/07 10,000 10,400
FRD Acquisition
12.50%, 7/15/04 10,000 11,000
Fleming
10.50%, 12/1/04 30,000 31,050
French Fragrances
10.375%, 5/15/07 10,000 10,700
Jitney-Jungle Stores
12.00%, 3/1/06 50,000 56,500
Kmart
7.95%, 2/1/23 175,000 176,750
Neiman Marcus Group
7.125%, 6/1/28 440,000 449,350
Sealy Mattress
0.00%, 12/15/07 20,000 13,300
Specialty Retailers
8.50%, 7/15/05 5,000 5,163
Stater Brothers Holdings
9.00%, 7/1/04 100,000 102,500
US Office Products
9.75%, 6/15/08 60,000 60,150
Zale
8.50%, 10/1/07 20,000 20,500
- ----------------------------------------------------------------
1,163,457
TELECOMMUNICATIONS: 1.0%
- ----------------------------------------------------------------
Adelphia Communications
9.50%, 2/15/04 475 505
Allegiance Telecom 144A
0.00%, 2/15/08 70,000 37,188
American Cellular
10.50%, 5/15/08 20,000 19,950
BTI Telecom
10.50%, 9/15/07 30,000 30,300
Birch Telecommunications
14.00%, 6/15/08 30,000 30,150
21
<PAGE>
Par Market
Amount** Value
- ----------------------------------------------------------------
Capstar Broadcasting
9.25%, 7/1/07 $ 50,000 $ 52,375
Cencall Communication
0.00%, 1/15/04 5,000 4,925
Centennial Cellular
8.875%, 11/1/01 15,000 15,619
Comcast Cellular
9.50%, 5/1/07 60,000 62,775
DTI Holdings units
0.00%, 3/1/08 200,000 106,500
Dobson Communications
11.75%, 4/15/07 55,000 59,538
Econophone
0.00%, 2/15/08 80,000 45,800
e.spire Communications
0.00%, 11/1/05 80,000 66,400
0.00%, 4/1/06 25,000 19,813
13.75%, 7/15/07 20,000 22,950
FirstWorld Communication
0.00%, 4/15/08 140,000 63,000
GST Telecommunications
0.00%, 5/1/08 170,000 102,000
GST USA
0.00%, 12/15/05 95,000 76,950
Global Crossing Holdings Limited
9.625%, 5/15/08 200,000 208,750
Hyperion Telecommunication
0.00%, 4/15/03 25,000 18,781
12.25%, 9/1/04 35,000 38,150
ICG Services
0.00%, 2/15/08 180,000 109,800
0.00%, 5/1/08 115,000 68,425
IDT
8.75%, 2/15/06 20,000 19,475
ITC Deltacom
11.00%, 6/1/07 35,000 39,463
IXC Communications
9.00%, 4/15/08 50,000 50,000
Intelcom Group USA
0.00%, 5/1/06 60,000 48,300
Intermedia Communication
8.50%, 1/15/08 80,000 80,200
8.60%, 6/1/08 170,000 172,125
Iridium LLC/Capital
14.00%, 7/15/05 45,000 50,175
11.25%, 7/15/05 10,000 10,050
JACOR Communications
9.75%, 12/15/06 5,000 5,463
KMC Telecom Holdings
0.00%, 2/15/08 125,000 75,313
Level 3 Communications
9.125%, 5/1/08 15,000 14,625
8.50%, 5/15/08 30,000 30,188
Long Distance International
12.25%, 4/15/08 90,000 90,450
MCI Communications
6.125%, 4/15/02 785,000 784,019
MGC Communications
13.00%, 10/1/04 10,000 10,000
MJD Communications
9.50%, 5/1/08 20,000 20,525
0.00%, 5/1/08 20,000 20,175
Metrocall
10.375%, 10/1/07 30,000 31,125
9.75%, 11/1/07 20,000 20,250
NTL
0.00%, 4/1/08 450,000 293,625
Nextel Communications
0.00%, 8/15/04 250,000 243,750
0.00%, 9/15/07 380,000 257,450
0.00%, 2/15/08 130,000 83,200
Nextel International
0.00%, 4/15/08 290,000 168,925
Nextlink Communications
0.00%, 4/15/08 160,000 98,400
Onepoint Communications
14.50%, 6/1/08 20,000 19,200
Par Market
Amount** Value
- ----------------------------------------------------------------
Orbital Imaging
11.625%, 3/1/05 $ 40,000 $ 41,000
PowerTel
0.00%, 2/1/06 70,000 54,688
Price Communications Wire
9.125%, 12/15/06 50,000 50,000
Quest Communications International
0.00%, 10/15/07 35,000 26,338
0.00%, 2/1/08 10,000 7,275
RCN
0.00%, 10/15/07 50,000 32,000
0.00%, 2/15/08 130,000 79,300
Sprint Spectrum L P
11.00%, 8/15/06 15,000 17,288
Startec Global Communications
12.00%, 5/15/08 30,000 29,475
12.00%, 5/15/08 10,000 9,825
Telecommunication Techniques
9.75%, 5/15/08 30,000 30,188
Teligent
11.50%, 12/1/07 30,000 30,525
0.00%, 3/1/08 220,000 121,550
Ucar Global Enterprises
12.00%, 1/15/05 30,000 33,638
Winstar Communications
0.00%, 10/15/05 30,000 41,700
15.00%, 3/1/07 40,000 52,800
11.00%, 3/15/08 260,000 258,700
Winstar Equipment
12.50%, 3/15/04 30,000 33,900
- ----------------------------------------------------------------
4,947,305
TEXTILES & FURNITURE: 0.0%
- ----------------------------------------------------------------
Clark-Schwebel
10.50%, 4/15/06 45,000 49,894
GFSI
9.625%, 3/1/07 25,000 26,438
Galey & Lord
9.125%, 3/1/08 70,000 67,900
Guess
9.50%, 8/15/03 5,000 5,138
Westpoint Steven
7.875%, 6/15/08 40,000 40,000
- ----------------------------------------------------------------
189,370
TRANSPORTATION & SHIPPING: 0.7%
- ----------------------------------------------------------------
Aviation Sales
8.125%, 2/15/08 50,000 49,000
CSX Transportation
7.95%, 5/1/27 315,000 362,250
Coach USA
9.375%, 7/1/07 20,000 20,900
Continental Airlines
9.50%, 12/15/01 175,000 186,375
7.42%, 4/1/07 98,153 100,361
6.54%, 9/15/09 580,000 584,350
Johnstown America Industries
11.75%, 8/15/05 75,000 83,531
Kitty Hawk
9.95%, 11/15/04 30,000 31,125
MC Shipping
11.25%, 3/1/08 20,000 20,300
Newport News Shipbuilding
8.625%, 12/1/06 60,000 63,375
Norfolk Southern
6.95%, 5/1/02 400,000 413,500
7.80%, 5/15/07 400,000 464,000
7.05%, 5/1/37 555,000 594,544
Trans World Airlines
11.50%, 12/15/04 65,000 68,900
11.375%, 3/1/06 30,000 29,963
US Air
9.625%, 9/1/03 175,000 190,094
Viking Star Shipping
9.625%, 7/15/03 4,000 4,190
- ----------------------------------------------------------------
3,266,758
22
<PAGE>
Par Market
Amount** Value
- ----------------------------------------------------------------
UTILITIES: 0.4%
- ----------------------------------------------------------------
AES
8.375%, 8/15/07 $ 25,000 $ 25,250
Arizona Public Service
6.75%, 11/15/06 315,000 326,813
CMS Energy
7.00%, 1/15/05 30,000 29,363
Cleveland Electric
9.50%, 5/15/05 30,000 34,763
Connecticut Light & Power
7.875%, 6/1/01 210,000 215,513
El Pase Electric
9.40%, 5/1/11 10,000 11,400
Enersis SA
7.40%, 12/1/16 5,000 4,919
Jersey Central Power & Light
6.85%, 11/27/06 115,000 119,744
KN Energy
6.45%, 3/1/03 425,000 429,250
Long Island Lighting
9.00%, 11/1/22 200,000 229,750
Midland Funding
10.33%, 7/23/02 30,648 32,947
Midland Funding II
11.75%, 7/23/05 80,000 95,000
Niagara Mohawk Power
9.95%, 6/1/00 50,000 50,063
5.875%, 9/1/02 50,000 49,063
7.75%, 10/1/08 60,000 61,650
Northeast Utilities
8.38%, 3/1/05 32,000 32,160
8.58%, 12/1/06 13,374 13,424
Ram Energy
11.50%, 2/15/08 30,000 29,775
Saga Petroleum (Norway)
7.25%, 9/23/27 295,000 307,906
- ----------------------------------------------------------------
2,098,753
FOREIGN GOVERNMENT BONDS: 7.2%
- ----------------------------------------------------------------
Argentina Par Series L (Argentina)
5.50%, 3/31/23 113,000 85,315
BTPS (Italy)
5.75%, 9/15/02 3,335,000,000 1,950,149
Bulgaria-FLIRB Series A
2.25%, 7/28/12 410,000 273,163
Bundesrepublic Deutschland (Germany)
5.625%, 1/4/28 7,450,000 4,277,157
Compania Naviera Perez (Argentina)
9.00%, 1/30/04 35,000 34,300
Ecuador Global Bear - Series 20 YR (Ecuador)
6.625%, 2/27/15 272,604 156,747
France (Govt Of) (France)
6.00%, 10/25/25 9,472,000 1,698,768
France O.A.T (France)
5.50%, 10/25/07 9,750,000 1,686,210
Germany (Federal Republic of) (Germany)
6.00%, 1/4/07 1,320,000 791,854
Government of Australia (Australia)
10.00%, 10/15/07 4,125,000 3,057,099
Government of New Zealand (New Zealand)
8.00%, 4/15/04 1,995,000 1,094,994
Kingdom of Denmark (Denmark)
7.00%, 11/15/07 8,030,000 1,342,706
Kredit Fuer Wiederaufban (Germany)
5.00%, 1/4/09 1,780,000 988,481
Mexico-Par Series W-B (Mexico)
6.25%, 12/31/19 620,000 514,216
Ministry Finance Russia
12.75%, 6/24/28 340,000 302,600
Peru PDI Series 20 Year
4.00%, 3/7/17 240,000 157,200
Poland Global (Poland)
4.00%, 10/27/14 395,000 360,438
Par Market
Amount** Value
- ----------------------------------------------------------------
Republic of Argentina (Argentina)
6.625%, 3/31/05 $ 192,960 $ 170,171
Republic of Korea
8.875%, 4/15/08 165,000 149,531
Republic of Panama
8.875%, 9/30/27 365,000 349,944
South Africa (Republic of) (South Africa)
13.00%, 8/31/10 1,785,000 261,510
Spanish Government (Spain)
5.25%, 1/31/03 131,780,000 882,312
Turkey T-Bill Government (Turkey)
0.00%, 7/29/98 40,760,000,000 141,264
United Kingdom Treasury (United Kingdom)
8.00%, 12/7/00 2,635,000 4,498,879
7.00%, 6/7/02 4,075,000 6,910,739
7.25%, 12/7/07 1,245,000 2,286,922
Vnesheconombank - Russia Series 19 Year
6.625%, 12/15/15 240,000 129,012
- ----------------------------------------------------------------
34,551,681
TOTAL LONG-TERM DEBT INSTRUMENTS: 30.1%
(Cost $ 143,404,593) 144,796,676
- ----------------------------------------------------------------
Number
COMMON STOCKS: of Shares
- ----------------------------------------------------------------
AEROSPACE AND DEFENSE: 0.3%
- ----------------------------------------------------------------
Boeing 19,870 885,457
Career Education 5,400 133,650
Hawker Pacific Aerospace 5,600 63,350
Micrel 1,450 47,578
Remec 7,825 90,232
- ----------------------------------------------------------------
1,220,267
AUTOMOBILES & AUTO PARTS: 1.6%
- ----------------------------------------------------------------
Bayerische Motoren Werke (BMW) AG (Germany) 492 495,538
Bayerische Motoren Werke (BMW) New (Germany) 186 184,807
Bridgestone (Japan) 11,000 259,326
Cooper Industries 18,930 1,039,967
CSX Auto 6,100 154,025
Dana 20,220 1,081,770
Ford Motor 18,700 1,103,300
Goodyear Tire & Rubber 20,215 1,302,604
Honda Motor Ltd. (Japan) 7,000 248,544
Lonrho Africa (South Africa) 11,300 13,129
Meritor Automotive 3,916 93,984
Michelin (France) 11,502 662,311
Penske Motorsports 3,700 108,341
Qingling Motors (Hong Kong) 113,000 31,361
Renault SA (France) 2,130 120,858
Tata Engineering & Locomotive GDR 9,500 30,400
Volkswagen AG (Germany) 461 442,387
Volvo AB (Sweden) 9,329 277,059
- ----------------------------------------------------------------
7,649,711
BANKING, FINANCE & INSURANCE: 13.2%
- ----------------------------------------------------------------
ABN Amro Holdings N.V. (Netherlands) 27,244 636,239
ACSYS 5,900 80,019
Acom (Japan) 1,900 89,995
AGF (Assurances Generales de France)
(France) 4,228 238,644
Ahmanson (H.F.) & Co 1,095 77,745
Allianz AG (Germany) 750 246,820
Allianz AG New (Germany) 22 7,179
Allied Irish Banks (Ireland) 54,815 790,525
Allstate 10,980 1,005,356
Alpha Credit Bank (Greece) 1,100 89,049
American Express 29,175 3,325,950
American General 17,050 1,213,747
American International Group 13,900 2,029,400
Aon 17,215 1,209,354
Associates First Capital Class A 7,800 599,625
Banco Comercial Portugues S.A.
(BCP) (Portugal) 1,151 32,617
Banco Frances Del Rio Plata (Argentina) 10,888 80,038
Banco Frances Rio Plata ADR 4,500 103,219
Bangkok Bank Public Company Limited
(Thailand) 29,600 36,561
Bank Leumi Le-Israel (Israel) 86,600 172,542
Bank of Boston 19,870 1,105,269
23
<PAGE>
Number Market
of Shares Value
- ----------------------------------------------------------------
Bank of Ireland (Ireland) 39,729 $ 811,010
Bank of Nova Scotia (Canada) 27,254 675,906
BankAmerica 31,900 2,757,356
Bankers Trust New York 7,380 856,541
Banque Nationale de Paris (France) 10,857 884,911
Bayerische Vereinsbank AG (Germany) 2,970 252,154
Chase Manhattan 14,500 1,094,750
Cigna 16,425 1,133,325
Cimpor-Cimentos de Portugal (Portugal) 3,500 122,724
Citicorp 12,245 1,827,566
Comerica 17,400 1,152,750
Commercial Bank of Greece (Greece) 1,300 96,301
Commonwealth Bank of Australia (Australia) 19,062 221,959
Conseco 25,100 1,173,425
Credit Commercial de France (France) 1,830 153,685
Crestar Financial 10,215 557,356
Dao Heng Bank Group Ltd (Hong Kong) 25,000 35,498
Deutsche Bank AG (Germany) 9,579 809,818
Development Bank of Singapore (Singapore) 43,100 238,948
Equitable 29,100 2,180,681
Federal Home Loan 30,600 1,440,113
Federal National Mortgage 15,115 918,236
Fifth Third Bancorp 14,350 902,705
Finance Indus Gax et Eaux (France) 11 574
First Chicago NBD 13,545 1,200,426
First Consulting Group 3,800 99,631
Firstar 9,055 344,090
FirstRand Limited (South Africa) 37,800 57,092
Fleet Financial Group 7,620 636,270
G. Accion S.A. ADR 6,700 48,464
Gilman & Ciocia 5,600 101,850
Grupo Financiero Banamex-B (Mexico) 77,000 146,151
Guoco Group (Hong Kong) 18,000 18,936
Haci Omer Sabanci Holdings ADR 13,000 202,475
Hibernia Class A 11,180 225,696
HSBC Holdings (Hong Kong) 26,940 658,982
ING Groep N.V. (Netherlands) 14,033 917,059
INSpire Insurance Solutions 6,900 228,563
Irsa SP GDR 2,332 67,920
Julius Baer Holding AG (Switzerland) 149 465,288
KeyCorp 21,755 775,022
Kookmin Bank (Korea) 1 5
Kredyt Bank GDR 144A 5,600 104,720
Liberty Life Association of Africa
(South Africa) 7,036 134,998
Malaysia Assurance Alliance (Malaysia) 29,000 25,308
MBNA 42,100 1,389,300
Mercantile Bancorporation 9,145 460,679
Merrill Lynch & Company 8,810 812,723
MNI Holdings Berhad (Malaysia) 42,000 40,928
Morgan (J.P.) 12,010 1,406,671
Morgan Stanley Dean Witter 18,800 1,717,850
Muenchener Rueckversicherungs-
Gisellschaftoo (Germany) 523 258,897
National Bank of Greece (Greece) 1,080 138,208
National City 12,195 865,845
National Westminster Bank
(United Kingdom) 21,100 377,640
Nikko Securities Ltd. (Japan) 110,000 454,611
Nordbanken Holdings (Sweden) 22,528 164,798
Norwest 15,000 560,625
PNC Financial Group 19,485 1,048,537
QBE Insurance Group LTD (Australia) 6,898 24,301
R.O.C. Taiwan Fund 18,000 121,500
Reinsurance Group of America 4,600 271,975
Resource America 5,400 158,288
Royal & Sun Alliance Insurance Group
(United Kingdom) 39,535 403,250
Royal Bank of Canada (Canada) 5,498 331,509
Skandinaviska Enskilda Banken (Sweden) 10,400 177,517
Societe Generale (France) 3,464 718,416
SouthTrust 9,150 398,597
Sparbanken Sverige AB, Swedbank-A Shares
(Sweden) 4,500 135,051
State Bank of India GDR 5,200 61,620
Summit Bancorp 7,860 373,350
SunAmerica 18,300 1,051,106
Svenska Handelsbanken (Sweden) 7,001 323,918
Taiwan Fund 8,200 110,188
Number Market
of Shares Value
- ----------------------------------------------------------------
Thai Farmers Bank (Thailand) 30,000 $ 26,544
Travelers Group 70,065 4,247,691
Turkiye Is Bankasi-C (Turkey) 678,500 27,352
UBS AG (Switzerland) 2,880 1,068,983
Unibanco GDR 13,100 386,450
Unidanmark A/S (Denmark) 1,977 177,418
Union Planters 8,790 516,962
United Overseas Bank (Singapore) 12,000 37,355
Washington Mutual 15,847 687,859
Wells Fargo 3,295 1,215,855
Yapi Ve Kredi Bankasi GDR 11,098 270,791
Zurich Versicherungsgesellschaft
(Switzerland) 589 375,223
- ----------------------------------------------------------------
63,323,512
BUILDINGS & MATERIALS: 0.6%
- ----------------------------------------------------------------
Barnett 4,500 90,563
Cemex S.A.-Class B (Mexico) 34,300 151,475
Cemex,S.A. de C V (Mexico) 13,029 48,821
Corporacion Moxctezuma - Series B (Mexico) 68,000 79,625
CRH (Ireland) 53,597 759,517
Gujarat Ambuja Cement GDR 11,000 51,975
IJM - Berhad (Malaysia) 207,000 55,197
Lafarge SA (France) 1,909 196,856
Larsen & Toubro-GDR 4,500 40,838
Larsen & Toubro-GDR 3,600 32,670
Masco 18,800 1,137,400
- ----------------------------------------------------------------
2,644,937
CABLE, MEDIA, & PUBLISHING: 3.3%
- ----------------------------------------------------------------
CBS 49,000 1,555,750
Citadel Communications 1,000 16,000
Carnival Cruise Lines 38,200 1,513,675
Cellular Communications International 2 75
Cunningham Graphics International 4,800 82,800
Dai Nippon Printing (Japan) 22,000 350,248
Gannett 38,500 2,735,906
InterPublic Group 17,700 1,074,169
Jones Intercable 10,500 263,813
Lamar Advertising 6,900 246,244
McGraw-Hill 10,305 840,502
MediaOne Group 27,770 1,220,144
Scandinavian Broadcasting System 4,200 126,394
Sinclair Broadcasting Group 2,800 80,325
Tele-communications A 36,600 1,405,669
Telecommunications-TCI Ventures Group A 58,200 1,165,819
Time Warner 14,000 1,196,125
Times Mirror 'A' 16,705 1,050,327
Viacom Class B 14,675 854,819
- ----------------------------------------------------------------
15,778,804
CHEMICALS: 0.7%
- ----------------------------------------------------------------
AquaPenn Spring Water 5,600 48,300
Bayer AG (Germany) 11,000 566,427
Cheung Kong Infrastructure (Hong Kong) 31,000 58,623
DuPont(E I )deNemours 19,415 1,448,844
Eastman Chemical 12,660 788,085
Witco 21,430 626,828
- ----------------------------------------------------------------
3,537,107
COMPUTERS & TECHNOLOGY: 5.6%
- ----------------------------------------------------------------
Analytical Surveys 3,700 135,281
ASE Test 3,200 98,800
Acer GDR 6,000 35,400
Advanced Communications Systems 3,900 48,628
America Online 7,200 763,200
Analysts International 5,800 164,938
Applied Micro Circuits 2,800 72,712
Aspect Development 1,000 75,563
Asustek Computer 9,850 77,815
BMC Software 38,600 2,005,994
Best Software 6,300 131,906
Black Box 4,700 156,128
BrightStar Information Technology Group 4,800 66,000
Cisco Systems 17,100 1,574,803
Complete Business Solutions 8,800 315,975
Computer Associates International 43,220 2,401,411
Computer Horizons 4,507 167,182
24
<PAGE>
Number Market
of Shares Value
- ----------------------------------------------------------------
Computer Learning Centers 9,000 $ 224,156
Computer Task Group 5,200 174,200
Compuware 17,400 889,031
Condor Technology Solutions 7,100 103,394
Daou Systems 2,700 61,931
Data Dimensions 4,700 80,341
Data Processing Resources 5,100 158,897
Dell Computer 7,800 723,694
Deltek Systems 1,200 29,250
EMC 32,500 1,456,406
Evolving Systems 3,700 41,278
Exodus Communications 3,400 151,938
First Virtual 4,800 57,900
Formula Systems(1985) (Israel) 1,600 55,918
Fundtech 5,400 101,588
Harbinger 8,850 214,613
HBO & Company 50,000 1,764,063
Hewlett-Packard 18,125 1,085,234
IDT 7,100 213,666
Igen International 2,600 106,031
Information Management Resources 5,075 171,757
Integrated Process Equipment 700 7,831
International Business Machine 15,400 1,768,113
Keane 3,000 168,000
Legato Systems 6,900 269,531
Medirisk 3,800 76,238
Metro Information Services 4,300 167,969
Microsoft 33,800 3,664,131
NCR 20,280 659,100
PMT Services 6,400 162,800
Parametric Technology 29,700 804,684
PeopleSoft 19,100 897,103
Peregrine Systems 7,700 219,691
Pinnacle Systems 2,200 70,675
QLogic 3,800 135,494
Renaissance Worldwide 8,660 188,626
SPR 2,500 76,094
Seagate Technology 33,745 803,553
Software AG Systems 6,200 181,350
Summit Design 7,500 110,859
Visual Networks 4,600 168,619
Walker Interactive Systems 6,600 97,763
- ----------------------------------------------------------------
26,855,246
CONSUMER PRODUCTS: 2.4%
- ----------------------------------------------------------------
Bebe Stores 800 10,450
Clorox 15,585 1,486,419
Equity 10,650 255,600
Estee Lauder Class A 14,200 989,563
Fuji Photo Film (Japan) 10,000 347,157
General Electric 38,100 3,467,100
Guangdong Kelon Electric Holding
(Hong Kong) 60,000 47,244
Hedstrom Holdings 303 379
Home Products International 2,800 32,375
Kao (Japan) 33,000 507,583
Kimberly-Clark 19,565 897,544
Minnesota Mining & Manufacturing 11,700 961,594
Procter & Gamble 19,100 1,739,294
Provant 5,097 93,976
RCM Technologies 4,000 81,625
Shiseido (Japan) 16,000 181,240
Weider Nutrition International 15,600 265,200
- ----------------------------------------------------------------
11,364,343
ELECTRONICS & ELECTRICAL: 2.2%
- ----------------------------------------------------------------
Advanced Lighting Technologies 4,600 107,525
ATMI 4,400 66,275
Beiging Datang Power (Hong Kong) 60,000 16,845
Canon (Japan) 14,000 316,970
Dixons Group plc (United Kingdom) 30,000 242,444
Eaton 9,780 760,395
Emerson Electric 14,225 857,945
Flextronics International 600 26,081
Fujitsu (Japan) 44,000 461,726
Harmonic Lightwaves 7,900 121,956
Lumen Technologies 9,900 87,863
Phillips Electronics N V (Netherlands) 9,049 759,170
Number Market
of Shares Value
- ----------------------------------------------------------------
Premier Farnell plc (United Kingdom) 7,600 $ 38,664
Premisys Communications 4,200 104,738
Samsung Electronics (Korea) 2,133 66,025
Siliconware Precision GDR 6,288 50,776
Smiths Industries (United Kingdom) 25,468 355,988
Sony (Japan) 6,400 549,702
ST Microelectronics NV-NY shares 7,491 523,434
Taiwan Semiconductors ADR 7,000 118,125
Texas Instruments 42,470 2,476,532
Vestel Elektronik Sanayi ve Ticaret
(Turkey) 561,100 74,696
Xerox 25,725 2,614,303
- ----------------------------------------------------------------
10,798,178
ENERGY: 3.7%
- ----------------------------------------------------------------
A.O. Taneft-ADR 12,600 98,280
Amoco 26,260 1,093,073
Atlantic Richfield 12,280 959,375
British Petroleum (United Kingdom) 37,794 550,027
British Petroleum ADR 15,278 1,348,284
Burmah Castrol (United Kingdom) 32,499 581,655
Coastal 12,360 862,882
Cooper Cameron 19,890 1,014,390
Duke Energy 14,480 857,940
Elf Aquitaine ADR 15,290 1,085,590
Elf Aquitaine (France) 4,968 696,728
Ente Nazionale Idrocarburi SpA (ENI)
(Italy) 72,797 476,251
Exxon 38,897 2,773,842
Kerr-McGee 19,335 1,119,013
Mobil 12,810 981,566
Petroleo Brasileiro ADR 13,900 257,428
Ramco Energy plc ADR 11,000 118,250
Sonat 18,130 700,271
Tosco 26,015 764,191
Total SA (France) 5,816 754,240
Western Atlas 6,600 560,175
- ----------------------------------------------------------------
17,653,451
ENVIRONMENTAL SERVICES: 0.3%
- ----------------------------------------------------------------
Cia Vale Do Rio Doce ADR 15,100 300,641
Superior Services 7,100 213,666
USA Waste Services 20,800 1,027,000
- ----------------------------------------------------------------
1,541,307
FARMING & AGRICULTURE: 0.0%
- ----------------------------------------------------------------
Pick Szeged Rt. GDR 9,400 110,215
- ----------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO: 3.1%
- ----------------------------------------------------------------
Agribrands International 1 15
B.A.T. Industries plc (United Kingdom) 67,434 673,192
Bass plc (United Kingdom) 38,098 711,736
Celestial Seasonings 3,400 169,150
Coca-Cola Enterprises 35,700 1,401,225
Coca-Cola Femsa S.A. ADR 9,200 159,850
General Mills 12,015 821,526
Greencore Group (Ireland) 46,122 250,639
Hain Food Group 6,400 165,400
Heinz (H.J.) 23,015 1,291,717
Kentucky Fried Chicken Berhad (Malaysia) 27,000 14,399
McDonald's 17,875 1,233,375
Nestle SA (Switzerland) 677 1,446,227
Panamerican Beverages 8,000 251,500
PepsiCo 25,315 1,042,662
Philip Morris 32,900 1,295,438
Quaker Oats 20,040 1,100,947
Sara Lee 30,500 1,706,094
Whitman 51,600 1,183,575
- ----------------------------------------------------------------
14,918,667
HEALTHCARE & PHARMACEUTICALS: 7.9%
- ----------------------------------------------------------------
American Home Products 35,300 1,826,775
American Oncology Resources 9,700 118,522
Amsurg CL A 5,600 42,700
Baxter International 25,755 1,385,941
Bristol-Myers Squibb 39,990 4,596,351
Cardinal Health 11,200 1,050,000
CareMatrix 4,400 118,525
25
<PAGE>
Number Market
of Shares Value
- ----------------------------------------------------------------
Centennial HealthCare 4,900 $ 87,588
Concentra Managed Care 3,839 99,694
Coulter Pharmaceuticals 6,000 181,875
Cyberonics 3,000 31,969
Digene 4,300 42,059
Eli Lilly & Company 22,300 1,473,194
F.Y.I. 2,600 74,263
Glaxo Wellcome plc (United Kingdom) 15,052 452,926
HealthCare Financial Partners 2,400 147,075
Healthsouth 43,000 1,147,563
Horizon Medical Products 4,000 36,625
Impath 3,200 77,700
Johnson & Johnson 13,705 1,010,744
Kendle International 3,700 111,000
McKesson 4,100 333,125
Medicis Pharmaceutical Cl A 6,550 238,256
MedQuist 9,400 271,131
Merck & Company 24,585 3,288,244
Minimed 3,300 173,456
National Surgery Centers 1,175 34,405
Natural Alternatives International 3,500 70,438
NBTY 2,700 49,359
NCS HealthCare 2,700 77,119
Novartis (Switzerland) 350 581,375
Pediatrix Medical Group 900 33,469
Pfizer 21,100 2,293,306
Pharmacia & Upjohn 50,280 2,319,165
Pharmacia & Upjohn (Sweden) 11,021 505,778
Promedco Management 10,000 101,250
Province Healthcare 1,800 48,994
Quintiles Transnational 12,100 594,791
Ranbaxy Laboratories-GDR 4,400 69,740
Renal Care Group 3,350 147,819
Rexall Sundown 8,196 292,495
Sabratek 5,900 133,488
Schein Pharmeceutical 4,682 124,658
Schering-Plough 24,100 2,208,163
Serologicals 2,600 84,500
Simione Central Holdings 9,500 64,422
SONUS Pharmaceuticals 2,500 30,859
Starwood Hotels & Resorts Trust 15,800 763,338
Sterigenics International 5,000 129,375
Trimeris 3,850 27,672
Tyco International 64,000 4,032,000
VA Technologie (Australia) 2,353 292,310
Walgreen 33,700 1,392,231
Warner-Lambert 44,400 3,080,250
Wesley Jessen VisionCare 4,000 92,375
Xomed Surgical Products 5,500 170,156
- ----------------------------------------------------------------
38,262,601
INDUSTRIAL MACHINERY: 1.1%
- ----------------------------------------------------------------
Caterpillar 4,865 257,237
Daewoo Heavy Industries (Korea) 11,000 33,489
Deere & Co 16,255 859,483
Ingersoll-Rand 55,830 2,460,009
Mannesmann AG (Germany) 8,960 907,398
Molins (United Kingdom) 7,262 26,104
Rieter Holdings (Switzerland) 109 75,321
Sandvik (Sweden) 9,271 253,889
Tomkins plc (United Kingdom) 106,184 579,166
- ----------------------------------------------------------------
5,452,096
LEISURE, LODGING & ENTERTAINMENT: 0.9%
- ----------------------------------------------------------------
Ambassadors International 6,500 196,828
Berjaya Sports Toto Berhad (Malaysia) 49,000 73,050
Eastman Kodak 14,985 1,094,842
Hasbro 23,080 907,332
Indian Hotels GDR 4,400 34,100
Granada Group plc (United Kingdom) 19,500 359,087
MemberWorks 3,300 107,044
Marriott International-Class A 19,600 634,550
Morton's Restaurant Group 3,200 77,000
North Face 7,000 168,875
Pegasus Systems 7,400 189,163
Steiner Leisure 4,350 132,131
Travel Services International 4,600 150,938
Vistana 7,400 135,513
- ----------------------------------------------------------------
4,260,453
Number Market
of Shares Value
- ----------------------------------------------------------------
METALS & MINING: 0.2%
- ----------------------------------------------------------------
Billiton plc (South Africa) 30,000 $ 58,257
CIA Siderurgica Nacional ADR 2,300 56,350
Grupo Imsa S.A. ADR 6,000 90,750
Hindalco Industries GDR 800 11,152
Hindalco Industries GDR 2,500 34,850
Madeco S.A. ADR 7,400 65,213
Mol Magyar Olaj-es GDR 144A 4,200 113,264
Pohang Iron & Steel (Korea) 1,380 46,017
Rio Tinto plc (United Kingdom) 36,407 410,210
Sasol Ltd. (South Africa) 21,800 124,287
Siderurgica Venezolana Sivensa ADR 2,333 15,167
- ----------------------------------------------------------------
1,025,517
MISCELLANEOUS: 1.7%
- ----------------------------------------------------------------
AnswerThink Consulting Group 1,600 34,300
Bright Horizons 3,200 90,400
BTR plc - B shares (United Kingdom) 136,891 78,775
BTR plc (United Kingdom) 111,224 315,850
Cendant 74,800 1,561,450
CN Biosciences 2,700 68,850
Cookson Group plc (United Kingdom) 41,100 141,223
Education Management 5,800 191,400
International Paper 13,005 559,215
KTI 5,700 123,619
Lason Incorporated 6,700 363,894
Lonrho (South Africa) 11,300 51,014
Malakoff Berhad (Malaysia) 36,000 66,760
Market Facts 6,600 141,075
Media Arts Group 6,000 116,625
Metamor Worldwide 3,725 131,190
NCO Group 8,550 189,169
On Assignment 8,200 287,256
Outsource International 4,200 38,063
Pitney Bowes 39,165 1,884,816
ProBusiness Services 2,600 122,038
Romac International 4,200 128,100
Securicor (United Kingdom) 56,573 463,326
Siebe plc (United Kingdom) 15,000 299,990
Staff Leasing 7,400 218,763
Strayer Education 7,000 252,656
Valores Industriales S A (Mexico) 4,380 136,768
Vedior NV-CVA (Netherlands) 7,106 200,462
- ----------------------------------------------------------------
8,257,047
PACKAGING & CONTAINERS: 0.4%
- ----------------------------------------------------------------
Cosmos Bottling (Philippines) 581,800 65,575
Owens-Illinois 45,310 2,027,623
- ----------------------------------------------------------------
2,093,198
PAPER & FOREST PRODUCTS: 0.3%
- ----------------------------------------------------------------
Boise Cascade 24,260 794,515
Consolidated Graphics 2,900 171,100
Kimberly Clark De Mexico - A (Mexico) 42,400 147,528
Svenska Cellulosa (Sweden) 16,741 432,289
- ----------------------------------------------------------------
1,545,432
REAL ESTATE: 0.0%
- ----------------------------------------------------------------
Ayala Land (Philippines) 246,600 70,964
Fastighets AB Balder (Sweden) 320 3,182
Mandamus Fastigheter (Sweden) 225 1,407
SM Prime Holdings (Philippines) 339,500 53,734
- ----------------------------------------------------------------
129,287
RETAIL: 4.8%
- ----------------------------------------------------------------
99 Cents Only Stores 3,550 147,325
Action Performance 5,000 161,094
Ameriking 75 3,900
Brasil Distr Pao Acu ADR 13,700 309,963
Cifra S.A. de C.V. (Mexico) 84,850 124,526
Coldwater Creek 2,700 73,913
Colgate-Palmolive 25,350 2,230,800
Cost Plus 3,500 105,000
Costco Companies 36,100 2,277,684
CVS 63,042 2,454,698
Dayton Hudson 36,200 1,755,700
26
<PAGE>
Number Market
of Shares Value
- ----------------------------------------------------------------
Distribucion Y Servicio ADR 4,800 $ 72,000
Guitar Center 5,400 163,013
Hibbett Sporting Goods 4,000 159,500
Home Choice Holdings 7,600 91,437
Home Depot 16,500 1,370,531
Hot Topic 3,400 82,025
K Mart 52,410 1,008,893
Linens N Things 10,200 311,738
Meyer(Fred) 10,400 442,000
Office Depot 16,700 527,094
Penney (J.C.) 13,860 1,002,251
Piercing Pagoda 3,000 107,625
PJ America 2,600 47,288
Rent-Way 10,900 332,450
Ricoh (Japan) 19,000 199,518
Safeway 30,900 1,257,244
Sears,Roebuck 12,585 768,472
Super-Sol Limited - ADR 10,160 167,640
The Men's Wearhouse 6,000 198,187
TJX 59,600 1,437,850
Toys R Us 29,140 686,611
U.S.A. Floral Products 2,400 38,100
Wal-Mart Stores 48,400 2,940,300
- ----------------------------------------------------------------
23,056,370
TELECOMMUNICATIONS: 4.8%
- ----------------------------------------------------------------
Advanced Information Service (Thailand) 10,700 45,748
Alcatel Alsthom (France) 1,200 243,726
Ameritech 22,635 1,015,746
Artesyn Technologies 9,400 149,813
Asia Satellite Telecom Holdings
(Hong Kong) 35,000 57,829
AT & T 51,745 2,955,933
Benpres Holdings (Philippines) 245,000 37,014
China Telecom (Hong Kong) 38,000 65,974
Compania Anonima Nacional Telefonos de
Venezuela ADR 2,700 67,500
Del Global Technologies 7,511 75,345
Deutsche Telekom (Germany) 12,995 350,031
Dycom 7,200 243,000
e.spire Communications 8,100 183,009
Excel Switching 3,100 77,306
GeoTel Communications 5,928 240,454
Grupo Televisa S.A. GDR 8,120 305,515
GTE 17,735 986,509
Heftel Broadcasting 8,000 357,250
Hellenic Telecommunication Organization
SA OTE) 10,666 137,053
Hellenic Telecommunications (Greece) 18,109 463,609
Intermedia Communications 5,400 226,294
ITC DeltaCom 2,400 102,525
Koninklijke PTT NV (Netherlands) 2,827 108,600
Koor Industries GDR 6,800 158,950
Lucent Technologies 31,800 2,645,363
Mahanagar Telephone Nigam GDR 11,350 118,891
Nextel Communications 549 13,639
Nokia Oyj (Finland) 9,088 667,287
Northern Telecom Limited 13,306 755,116
Northern Telecom Limited (Canada) 9,734 553,102
Philippine Long Distance Telephone
(Philippines) 3,160 71,990
Portugal Telecommunication 4,200 222,338
Saga Communications 6,928 96,992
SBC Communications 31,684 1,267,360
SK Telecom (Korea) 95 29,614
Smartone Telecommunications (Hong Kong) 15,000 36,595
Stet Hellas Telecommunications ADR 2,500 103,594
Tadiran (Israel) 2,900 95,589
Telecom Corporation of New Zealand
(New Zealand) 20,400 83,879
Telecom Corporation of New Zealand-IR
(New Zealand) 35,200 75,101
Telecom Italia SpA (Italy) 106,200 780,359
Telecommunicacoes Brasileiras S.A.-ADR 8,686 948,403
Telefonaktiebolaget LM Ericsson (Sweden) 17,924 522,232
Telefonica de Espana (Spain) 18,856 871,052
Telefonica del Peru,S.A.-ADR 4,800 98,100
Tellabs 17,500 1,252,891
U.S. West 22,593 1,061,864
Videsh Sanchar Nigam Ltd GDR 9,000 96,300
Number Market
of Shares Value
- ----------------------------------------------------------------
Vodafone Group plc (United Kingdom) 42,392 $ 538,102
Winstar Communications 5,600 240,625
WorldCom 24,500 1,184,422
- ----------------------------------------------------------------
23,085,533
TEXTILES, APPAREL & FURNITURE: 0.4%
- ----------------------------------------------------------------
Cort Business Services 6,100 192,150
French Fragrances 7,600 117,325
Gucci Group N V 200 10,600
Jones Apparel Group 20,000 731,250
Lear 16,060 824,079
Wolverine World Wide 3,985 86,425
- ----------------------------------------------------------------
1,961,829
TRANSPORTATION & SHIPPING: 0.8%
- ----------------------------------------------------------------
AMR 12,100 1,007,325
Bombardier (Canada) 14,800 403,338
British Airways plc (United Kingdom) 49,434 532,253
Carey International 5,000 140,625
Deutsche Lufthansa AG (Germany) 14,630 366,559
Expeditors International 4,450 195,244
International Container Terminal Services
(Philippines) 486,900 55,462
Jevic Transportation 2,300 25,731
Peninsular and Orient Steam
(United Kingdom) 20,935 301,880
Rental Service 6,000 201,750
TNT Post Group NV (Netherlands) 2,827 72,123
UAL 8,000 624,000
- ----------------------------------------------------------------
3,926,290
UTILITIES: 2.6%
- ----------------------------------------------------------------
AirTouch Communications 17,800 1,040,188
Akzo Nobel (Netherlands) 3,513 779,384
BSES GDR 5,500 56,788
Centrais Elec Bras ADR 18,700 268,345
Centrais Geradoras DO SU ADR 1,870 12,679
Compagnie Generale des Eaux (France) 4,552 969,597
Companhia Energetica de Minas Gerais-ADR 8,077 247,886
EDP - Electricidade de Portugal, S.A.
(Portugal) 18,080 419,448
Electricity Generating Public Company
Limited (Thailand) 21,600 33,606
Engen Limited (South Africa) 34,000 92,548
Iberdrola S.A. (Spain) 13,100 212,529
Korea Electric Power (Korea) 10,700 114,169
Lukoil Holding-ADR 4,000 133,680
Mosenergo - ADR 10,500 52,250
Omron (Japan) 20,000 304,751
Onward Kashiyama (Japan) 8,000 99,763
Perez Companc S A (Argentina) 17,700 88,690
Promise (Japan) 5,880 241,320
PTT Exploration and Production Public
Company Ltd. (Thailand) 7,000 53,207
Rohm (Japan) 3,000 307,266
Sankyo (Japan) 13,000 295,263
Scottish Power (United Kingdom) 99,806 880,660
Sprint 38,435 2,709,668
Telefonica De Argentina 4,500 145,969
Telefonos De Mexico S.A. ADR 8,423 404,830
Texas Utilities 32,615 1,357,599
Tokyo Electron (Japan) 8,000 244,376
Unified Energy System ADR 7,300 96,207
Veba AG (Germany) 8,764 596,223
Vendex NV (Netherlands) 7,201 276,275
YPF Sociedad Anonima-ADR 7,100 220,132
- ----------------------------------------------------------------
12,755,296
TOTAL COMMON STOCKS: 62.9%
(Cost $225,372,989) 303,206,694
- ----------------------------------------------------------------
PREFERRED STOCKS
- ----------------------------------------------------------------
Alfa,S.A. de C.V.-Class A (Mexico) 46,500 190,833
Amalgamated Banks of South Africa
(South Africa) 17,500 107,469
American Radio Systems 5 594
Ameriking 3,515 94,905
Anvil Holdings 19 475
Cablevision System 161 18,676
California Federal 4,000 109,250
Capstar Broadcasting 27 31,388
27
<PAGE>
Number Market
of Shares Value
- ----------------------------------------------------------------
Chesapeake Energy 235 $ 10,134
Chevy Chase Bank 670 36,766
Citadel Broadcasting 681 81,550
Concentric Network 200 20,250
CSC Holdings 478 54,133
Dobson Communications 10 10,900
Intermedia Communications PIK 92 108,560
IXC Communications 31 37,202
Nebco Evans Holding PIK 308 31,874
Nextel Communications Class D 25 27,438
Nextel Communications 144A 226 237,144
Nextlink Communications 629 39,312
Paxon Communications 144A 700 70,000
Public Service New Hampshire 1,583 41,950
Spanish Broadcasting 85 90,100
Von Hoffman 360 11,880
Winstar Communications 50 59,500
- ----------------------------------------------------------------
TOTAL PREFERRED STOCKS: 0.3%
(Cost $1,563,050) 1,522,283
- ----------------------------------------------------------------
WARRANTS/RIGHTS:
- ----------------------------------------------------------------
Allegiance Telecom 1 700
Alpha Credit Bank Rights 1,100 1950
Cellnet Data Systems 1,709 5,000
Equity Office Property 144A 450 3,938
Globalstar Telecom 206 6,750
Hyperion Telecommunications 100 10,000
Knology Holdings Warrants 220
MGC Communication Warrants 81 1,260
Orbital Imaging 350 1,920
PowerTel Warrants 1,280 12,160
Spanish Broadcasting - WT99 35 7,175
- ----------------------------------------------------------------
TOTAL WARRANTS/RIGHTS: 0.0%
(Cost $22,261) 51,073
- ----------------------------------------------------------------
Maturity
REPURCHASE AGREEMENT: Amount
- ----------------------------------------------------------------
J.P. Morgan Repurchase Agreement,
dated 6/30/98, 5.75%, maturing
7/1/98, collateralized by
U.S. Treasury Bond, 8.875%,
8/15/17 $23,861,000 23,861,000
TOTAL REPURCHASE AGREEMENT: 5.0%
(Cost $23,861,000) 23,861,000
- ----------------------------------------------------------------
TOTAL INVESTMENTS: 98.3%
(Cost $394,223,893) 473,437,726
- ----------------------------------------------------------------
Par
Amount
- ----------------------------------------------------------------
SECURITIES SOLD SHORT
Government National Mortgage
Association
7.00%, 7/15/13 $(1,560,916) (1,596,037)
Government National Mortgage
Association II ARM CMT TBA
5.00%, 3/15/28 (700,000) (698,362)
5.50%, 6/01/28 (263,000) (264,110)
- ----------------------------------------------------------------
TOTAL SECURITIES SOLD SHORT: (0.5)%
(Proceeds $2,559,660) (2,558,509)
- ----------------------------------------------------------------
Other Assets Over Liabilites: 2.2% 10,791,632
- ----------------------------------------------------------------
NET ASSETS: 100%
(Equivalent to $15.509 per share based on
31,058,495 shares issued and outstanding) $481,670,849
================================================================
GROWTH AND INCOME FUND
STATEMENT OF NET ASSETS
June 30, 1998
(Unaudited)
INVESTMENTS:
Number Market
COMMON STOCKS: of Shares Value
- ----------------------------------------------------------------
AEROSPACE & DEFENSE: 1.9%
- ----------------------------------------------------------------
General Dynamics 555,600 $ 25,835,400
United Technologies 536,400 49,617,000
- ----------------------------------------------------------------
75,452,400
AUTOMOBILES & AUTO PARTS: 2.8%
- ----------------------------------------------------------------
Cooper Industries 532,500 29,254,219
Ford Motor 1,015,100 59,890,900
General Motors 218,000 14,565,125
Johnson Controls 191,300 10,916,056
- ----------------------------------------------------------------
114,626,300
BANKING, FINANCE & INSURANCE: 18.4%
- ----------------------------------------------------------------
Ahmanson (H.F.) & Company 442,000 31,382,000
Allstate 407,149 37,279,580
Associates First Capital Class A 221,101 16,997,139
Bank of Boston 995,400 55,369,125
Bank of New York 333,600 20,245,350
Bankers Trust New York 420,200 48,769,463
Bear Stearns 702,827 39,973,286
Chase Manhattan 1,099,400 83,004,700
Comerica 564,450 37,394,813
Conseco 984,100 46,006,675
First Chicago NBD 615,943 54,587,948
Marsh & McLennan 805,500 48,682,406
MBIA 236,400 17,700,450
NationsBank 476,200 36,429,300
Paine Webber Group 735,850 31,549,569
SLM Holding 1,069,950 52,427,550
Torchmark 295,500 13,519,125
Travelers Group 1,305,399 79,139,814
- ----------------------------------------------------------------
750,458,293
BUILDINGS & MATERIALS: 1.5%
- ----------------------------------------------------------------
Armstrong World Industries 342,200 23,055,725
Centex 273,400 10,320,850
Masco 247,500 14,973,750
USG Corp* 249,300 13,493,363
- ----------------------------------------------------------------
61,843,688
CABLE, MEDIA & PUBLISHING: 3.6%
- ----------------------------------------------------------------
Dun & Bradstreet 530,400 19,160,700
Gannett 651,400 46,290,113
Knight-Ridder 150,000 8,259,375
McGraw-Hill 333,400 27,192,938
New York Times 321,800 25,502,650
Omnicom Group 254,300 12,683,213
Reynolds & Reynolds Class A 433,200 7,878,825
- ----------------------------------------------------------------
146,967,814
CHEMICALS: 1.8%
- ----------------------------------------------------------------
Dow Chemical 521,400 50,412,863
Lyondell Petrochemicals 517,100 15,739,231
Olin 164,700 6,865,931
- ----------------------------------------------------------------
73,018,025
COMPUTERS & TECHNOLOGY: 8.7%
- ----------------------------------------------------------------
American Power Conversion* 266,200 7,952,725
Apple Computer* 1,758,900 50,513,409
Cadence Design Systems 804,550 25,142,188
Dell Computer 288,400 26,758,112
Deluxe 145,900 5,225,044
HBO & Company 1,038,200 36,628,994
Lexmark International Group A 436,600 26,632,600
Microsoft* 225,400 24,434,769
Network Associates 413,250 19,771,430
PeopleSoft* 138,200 6,491,081
Storage Technology 1,028,800 44,624,200
Sun Microsystems* 1,137,300 49,437,009
28
<PAGE>
Number Market
of Shares Value
- ----------------------------------------------------------------
Symantec* 1,231,400 $ 32,093,363
- ----------------------------------------------------------------
355,704,924
CONSUMER PRODUCTS: 5.8%
- ----------------------------------------------------------------
Clorox 606,800 57,873,550
General Electric 1,211,400 110,237,400
Procter & Gamble 741,000 67,477,313
- ----------------------------------------------------------------
235,588,263
ELECTRONICS & ELECTRICAL: 0.8%
- ----------------------------------------------------------------
Raytheon-Class A 13,901 801,045
Thomas & Betts 214,100 10,544,425
Xerox 223,000 22,662,375
- ----------------------------------------------------------------
34,007,845
ENERGY: 7.8%
- ----------------------------------------------------------------
Ashland 191,400 9,881,025
Atlantic Richfield 238,500 18,632,812
ENSCO International 935,400 16,252,575
Exxon 1,337,900 95,408,994
Helmerich & Payne 552,800 12,299,800
Occidental Petroleum 1,327,400 35,839,800
Oryx Energy* 282,700 6,254,738
Phillips Petroleum 239,400 11,536,087
Royal Dutch Petroleum 590,400 32,361,300
Texaco 778,000 46,436,875
USX-Marathon Group 1,016,900 34,892,381
- ----------------------------------------------------------------
319,796,387
ENVIRONMENTAL SERVICES: 1.3%
- ----------------------------------------------------------------
Honeywell 258,600 21,609,263
Republic Industries 1,251,500 31,287,500
- ----------------------------------------------------------------
52,896,763
FOOD, BEVERAGE & TOBACCO: 7.0%
- ----------------------------------------------------------------
Campbell Soup 140,600 7,469,375
Coca Cola 659,400 56,378,700
ConAgra 309,600 9,810,450
Cracker Barrell Old Country Store 141,500 4,505,891
Heinz (H.J.) 1,071,750 60,151,968
Hershey Foods 378,300 26,102,700
Philip Morris 1,874,300 73,800,563
Quaker Oats 191,200 10,504,050
RJR Nabisco Holdings 1,226,320 29,125,100
Universal Foods 285,200 6,327,875
- ----------------------------------------------------------------
284,176,672
HEALTHCARE & PHARMACEUTICALS: 11.4%
- ----------------------------------------------------------------
Amgen* 868,400 56,798,786
Arterial Vascular Engineering 537,900 19,213,116
Bristol-Myers Squibb 923,800 106,179,263
Health Management Associates Class A 338,500 11,318,594
Johnson & Johnson 533,800 39,367,750
Lincare Holdings 681,600 28,648,500
McKesson 179,000 14,543,750
Merck & Company 722,500 96,634,375
NovaCare* 425,000 4,993,750
Rexall Sundown 134,000 4,782,125
Schering-Plough 901,300 82,581,613
- ----------------------------------------------------------------
465,061,622
INDUSTRIAL MACHINERY: 3.1%
- ----------------------------------------------------------------
Caterpillar 916,500 48,459,937
Deere & Company 742,800 39,275,550
Ingersoll-Rand 911,100 40,145,344
- ----------------------------------------------------------------
127,880,831
LEISURE, LODGING & ENTERTAINMENT: 1.1%
- ----------------------------------------------------------------
Brunswick 511,300 12,654,675
Callaway Golf 750,400 14,773,500
King World Productions 657,800 16,773,900
- ----------------------------------------------------------------
44,202,075
METALS & MINING: 0.9%
- ----------------------------------------------------------------
Bethlehem Steel* 533,300 6,632,919
USX-U.S. Steel Group 864,500 28,528,500
- ----------------------------------------------------------------
35,161,419
Number Market
of Shares Value
- ----------------------------------------------------------------
MISCELLANEOUS: 1.2%
- ----------------------------------------------------------------
Cendant* 654,255 $13,657,573
Navistar International 592,900 17,119,987
Pitney Bowes 330,600 15,910,125
- ----------------------------------------------------------------
46,687,685
PAPER & FOREST PRODUCTS: 0.2%
- ----------------------------------------------------------------
Fort James 208,400 9,273,800
- ----------------------------------------------------------------
RETAIL: 4.7%
- ----------------------------------------------------------------
Fingerhut 223,400 7,372,200
Gap 431,250 26,575,780
General Nutrition* 545,500 17,012,780
Jostens 57,100 1,377,537
Ross Stores 667,800 28,798,875
Safeway 916,200 37,277,888
Staples 726,150 21,035,658
TJX 2,127,000 51,313,875
- ----------------------------------------------------------------
190,764,593
TELECOMMUNICATIONS: 8.4%
- ----------------------------------------------------------------
Ameritech 1,253,800 56,264,275
AT & T 969,900 55,405,537
Bell Atlantic 999,312 45,593,610
BellSouth 573,600 38,502,900
GTE 788,700 43,871,438
SBC Communications 246,132 9,845,280
Tellabs 765,500 54,805,016
U S West 781,300 36,721,100
- ----------------------------------------------------------------
341,009,156
TEXTILES, APPAREL & FURNITURE: 1.0%
- ----------------------------------------------------------------
Miller (Herman) 465,000 11,290,781
Tommy Hilfiger* 481,400 30,087,500
- ----------------------------------------------------------------
41,378,281
TRANSPORTATION & SHIPPING: 1.2%
- ----------------------------------------------------------------
Alaska Air Group* 180,000 9,821,250
AMR 403,000 33,549,750
Northwest Airlines-Class A* 158,500 6,117,109
- ----------------------------------------------------------------
49,488,109
UTILITIES: 2.7%
- ----------------------------------------------------------------
Baltimore Gas & Electric 150,900 4,687,331
Energy East 602,500 25,079,063
General Public Utilities 657,150 24,848,484
Marketspan* 270,336 8,093,184
Texas Utilities 794,200 33,058,575
Unicom 412,800 14,473,800
- ----------------------------------------------------------------
110,240,437
TOTAL COMMON STOCKS: 97.3%
(cost $2,435,303,552) 3,965,685,382
- ----------------------------------------------------------------
Par
MONEY MARKET INSTRUMENTS: Amount
- ----------------------------------------------------------------
American Honda Finance
5.58%, 07/09/98 $10,000,000 9,987,711
Corporate Asset Funding
5.60%, 07/27/98 1,600,000 1,593,529
5.53%, 08/19/98 15,500,000 15,382,278
Daimler-Benz North America
5.58%, 09/09/98 2,800,000 2,770,056
Merrill Lynch & Company
5.55%, 07/01/98 10,300,000 10,300,000
5.58%, 07/06/98 4,800,000 4,796,253
5.58%, 07/24/98 9,100,000 9,067,849
Norwest
5.58%, 07/13/98 2,000,000 1,996,307
5.55%, 07/31/98 7,700,000 7,664,644
Prudential Funding
5.55%, 07/15/98 8,700,000 8,681,290
Salomon Smith Barney Holdings
5.58%, 07/21/98 11,500,000 11,464,989
Times Mirror
5.70%, 07/15/98 1,900,000 1,900,000
29
<PAGE>
Par Market
Amount Value
- ----------------------------------------------------------------
Wilmington Trust
5.52%, 08/10/98 5,000,000 $5,000,000
- ----------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS: 2.2%
(Cost $90,604,906) 90,604,906
- ----------------------------------------------------------------
TOTAL INVESTMENTS: 99.5%
(Cost $2,525,908,458) 4,056,290,288
- ----------------------------------------------------------------
Other Assets Over Liabilities: 0.5% 18,909,262
- ----------------------------------------------------------------
NET ASSETS: 100%
(Equivalent to $44.028 per share
based on 92,558,321 shares
issued and outstanding) $4,075,199,550
================================================================
INTERNATIONAL FUND
STATEMENT OF NET ASSETS
June 30, 1998
(Unaudited)
INVESTMENTS:
Number Market
COMMON STOCKS: of Shares Value
- ----------------------------------------------------------------
ARGENTINA: 0.6%
- ----------------------------------------------------------------
Argentinian Investment* 135,700 $ 2,882,268
- ----------------------------------------------------------------
AUSTRALIA: 11.1%
- ----------------------------------------------------------------
Amcor Limited 2,886,500 12,612,889
CSR Limited 3,395,900 9,780,576
Foster's Brewing Group 6,160,800 14,469,193
National Australia Bank 1,117,500 14,711,290
Orica 903,985 5,335,661
- ----------------------------------------------------------------
56,909,609
BELGIUM: 1.6%
- ----------------------------------------------------------------
Electrabel S.A 28,200 7,978,706
- ----------------------------------------------------------------
FRANCE: 9.2%
- ----------------------------------------------------------------
Alcatel Alsthom 56,200 11,414,510
Compagnie de Saint Gobain 66,100 12,225,594
Elf Aquitaine 81,500 11,429,821
Societe Generale 59,150 12,267,411
- ----------------------------------------------------------------
47,337,336
GERMANY: 10.9%
- ----------------------------------------------------------------
Bayer AG 345,500 17,790,957
Bayerische Vereinsbank AG 127,000 10,782,356
Continental AG 178,600 5,551,615
Rheinisch Westfaelisches Elektric 206,900 12,244,635
Siemens AG 155,900 9,467,821
- ----------------------------------------------------------------
55,837,384
HONG KONG: 2.1%
- ----------------------------------------------------------------
Jardine Matheson Holdings Limited 1,350,000 3,645,000
Peregrine Investment Holdings Limited 2,484,500 3,207
Wharf (Holdings) Limited 7,062,000 6,973,577
- ----------------------------------------------------------------
10,621,784
INDIA: 0.4%
- ----------------------------------------------------------------
The India Magnum Fund-B Shares* 69,385 2,220,320
- ----------------------------------------------------------------
JAPAN: 12.8%
- ----------------------------------------------------------------
Canon 667,000 15,101,339
Eisai Co Limited 746,000 10,133,972
Fujikura 100,000 444,189
Hitachi Limited 1,408,000 9,158,625
Matsushita Electric Industrial 825,000 13,223,240
Number Market
of Shares Value
- ----------------------------------------------------------------
Nichido Fire & Marine 476,000 $ 2,480,413
Nichiei 1,790 121,452
Ryohin Keikaku Limited 22,800 2,179,544
Sony 39,700 3,409,867
Sumitomo Realty and Development 262,000 1,152,476
West Japan Railway 2,271 8,210,398
- ----------------------------------------------------------------
65,615,515
NETHERLANDS: 7.0%
- ----------------------------------------------------------------
Elsevier-CVA 519,900 7,830,703
ING Groep N.V. 160,400 10,482,169
Royal Dutch Petroleum 323,100 17,880,868
- ----------------------------------------------------------------
36,193,740
NEW ZEALAND: 3.7%
- ----------------------------------------------------------------
Carter Holt Harvey Limited 5,390,700 4,689,844
Telecom Corporation of New Zealand 3,467,600 14,257,831
- ----------------------------------------------------------------
18,947,675
SINGAPORE/MALAYSIA: 0.7%
- ----------------------------------------------------------------
Sime Darby Berhad 5,300,000 3,674,444
- ----------------------------------------------------------------
SPAIN: 5.8%
- ----------------------------------------------------------------
Banco Central Hispanoamericano 183,150 5,751,781
Corp. Financiera Reunida S.A.* 20 302
Iberdrola S.A. 840,900 13,642,442
Telefonica de Espana 229,927 10,621,470
- ----------------------------------------------------------------
30,015,995
UNITED KINGDOM: 29.7%
- ----------------------------------------------------------------
ASDA Group 1,236,000 4,262,457
Associated British Food 836,600 7,870,331
Bass plc 863,200 16,125,957
BG plc 2,429,300 14,060,691
Blue Circle Industry 2,160,900 12,146,765
Boots plc 851,100 14,153,759
British Airways plc 723,300 7,787,728
Cable & Wireless plc 1,117,500 13,597,807
Genesis Chile Fund-PTG Share 27,000 803,250
GKN plc 877,000 11,102,925
Glaxo Wellcome plc 458,200 13,787,568
Great Universal Stores 541,800 7,143,926
PowerGen plc 1,214,500 16,814,024
Rio Tinto plc 732,900 8,257,833
Taylor Woodrow plc 1,433,400 4,805,732
- ----------------------------------------------------------------
152,720,753
TOTAL COMMON STOCKS: 95.6%
(Cost $ 484,540,407) 490,955,529
- ----------------------------------------------------------------
Maturity
REPURCHASE AGREEMENT: Amount
- ----------------------------------------------------------------
State Street Bank and Trust Co.
Repurchase Agreement, dated
6/30/98, 5.30%, maturing 7/1/98,
collateralized by U.S. Treasury
Bonds, 8.375% 8/15/08 $8,518,000 8,518,000
- ----------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT: 1.7%
(Cost $ 8,518,000) 8,518,000
- ----------------------------------------------------------------
TOTAL INVESTMENTS: 97.3%
(Cost $ 493,058,407) 499,473,529
- ----------------------------------------------------------------
Other Assets Over Liabilities: 2.7% 13,889,840
- ----------------------------------------------------------------
NET ASSETS: 100%
(Equivalent to $16.255 per share
based on 31,582,707 shares issued
and outstanding) $513,363,369
================================================================
30
<PAGE>
MANAGED FUND
STATEMENT OF NET ASSETS
June 30, 1998
(Unaudited)
INVESTMENTS:
Par Market
LONG-TERM DEBT INVESTMENTS: Amount Value
- ----------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS: 18.8%
- ----------------------------------------------------------------
Federal Farm Credit Bank
5.75%, 3/23/05 $24,000,000 $23,972,005
Federal Home Loan Bank
6.388%, 10/15/06 1,997,847 2,024,058
6.00%, 6/11/08 13,800,000 13,995,132
7.30%, 12/1/12 2,938,013 3,012,374
8.50%, 1/1/17 659,827 700,650
Federal National Mortgage Association
6.35%, 8/24/00 3,500,000 3,501,365
0.00%, 8/07/01 7,000,000 5,901,980
5.75%, 6/15/05 7,750,000 7,754,030
7.60%, 7/25/05 129,305 128,990
6.73%, 8/01/05 2,091,807 2,164,392
7.175%, 10/1/05 3,909,052 4,145,550
6.655%, 10/1/05 975,771 1,008,772
6.66%, 12/1/05 1,951,282 1,977,468
7.043%, 7/1/06 2,451,647 2,586,733
0.00%, 7/24/06 11,500,000 7,297,555
0.00%, 7/5/14 2,500,000 979,250
7.15%, 10/1/15 2,811,135 2,940,026
7.50%, 5/25/20 4,000,000 4,112,120
7.00%, 10/1/25 2,351,638 2,394,979
Government National Mortgage Association
6.50%, 12/15/23 1,077,249 1,083,637
U.S. Treasury Bond
10.75%, 8/15/05 15,000,000 19,514,850
6.125%, 11/15/27 15,100,000 16,189,163
U.S. Treasury Note
6.50%, 8/31/01 13,150,000 13,510,705
6.125%, 12/31/01 13,325,000 13,565,650
U.S. Treasury Strip
0.00%, 5/15/05 15,320,000 10,537,402
0.00%, 2/15/11 24,000,000 11,806,080
- ----------------------------------------------------------------
176,804,916
ASSET BACKED SECURITIES: 0.0%
- ----------------------------------------------------------------
Mid-State Trust
7.6250%, 4/1/22 170,383 174,290
- ----------------------------------------------------------------
AUTOMOBILE & AUTO EQUIPMENT: 0.30%
- ----------------------------------------------------------------
Chrysler
7.45%, 2/1/2097 1,000,000 1,088,750
Goodyear Tire & Rubber
6.625%, 12/1/06 1,250,000 1,279,688
- ----------------------------------------------------------------
2,368,438
BANKING, FINANCE & INSURANCE: 7.7%
- ----------------------------------------------------------------
Ahmanson, H. F.
8.25%, 10/1/02 2,000,000 2,150,000
Aristar Financial
7.50%, 7/1/99 1,500,000 1,522,500
Banc One
9.875%, 3/1/09 500,000 635,625
Banque Paribas-NY
8.35%, 6/15/07 1,600,000 1,806,000
Barnett Bank
6.90%, 9/1/05 1,500,000 1,569,375
Barnett Capital Trust I
8.06%, 12/1/26 1,900,000 2,147,000
Citicorp Notes
6.33%, 1/5/06 1,600,000 1,616,000
Comerica Bank
7.875%, 9/15/26 1,500,000 1,745,625
Dow Capital
9.00%, 5/15/10 3,000,000 3,656,250
Finova Capital
6.12%, 5/28/02 1,000,000 1,003,750
Par Market
Amount Value
- ----------------------------------------------------------------
First of America Capital Trust I
8.12%, 1/31/27 $ 2,000,000 $ 2,237,500
First Union
8.00%, 8/15/09 2,000,000 2,245,000
First USA Bank
5.75%, 1/15/99 2,000,000 1,997,500
Fleet Financial Group
7.25%, 9/1/99 1,000,000 1,013,150
Ford Motor Credit
7.95%, 5/17/99 2,000,000 2,034,300
General Electric Capital
8.30%, 9/20/09 3,000,000 3,506,250
General Motors Acceptance
7.875%, 3/7/01 1,500,000 1,567,500
8.875%, 6/1/10 1,500,000 1,809,375
Household Finance
9.625%, 7/15/00 875,000 935,156
Hydro-Quebec
7.20%, 10/5/09 3,000,000 3,151,470
International Lease Finance
8.25%, 1/15/00 2,000,000 2,070,000
John Deere Capital
8.625%, 8/1/19 2,000,000 2,207,500
Lehman Brothers Holdings
8.875%, 3/1/02 1,000,000 1,086,250
Midland Bank PLC
6.00%, 9/29/49 1,600,000 1,357,520
Mellon Capital I Notes
7.72%, 12/1/26 1,500,000 1,614,375
Mercantile Bancorp
7.30%, 6/15/07 1,325,000 1,421,063
Morgan Stanley Group
6.875%, 3/1/07 2,250,000 2,340,000
National Westminister Bank
9.45%, 5/1/01 500,000 544,375
NationsBank
8.125%, 6/15/02 1,000,000 1,071,250
Nynex Capital Funding
7.63%, 10/15/09 3,000,000 3,513,480
PNC Funding
6.875%, 7/15/07 1,663,000 1,725,363
Salomon Brothers
7.25%, 1/15/00 1,000,000 1,021,250
Salomon Smith Barney
7.875%, 10/1/99 3,000,000 3,070,980
Simon DeBartolo Group
7.125%, 6/24/05 600,000 615,000
SouthTrust Bank of Birmingham
7.69%, 5/15/25 2,750,000 3,330,938
Standard Chartered PLC Notes
6.15%, 12/29/49 3,000,000 1,909,200
State Street Capital-B
8.035%, 3/15/27 1,400,000 1,569,750
Union Bank Switzerland
7.25%, 7/15/06 2,250,000 2,415,938
Wachovia Capital Trust I
7.64%, 1/15/27 1,900,000 2,037,750
- ----------------------------------------------------------------
73,271,308
BUILDING & MATERIALS: 0.2%
- ----------------------------------------------------------------
Champion International
7.70%, 12/15/99 1,500,000 1,535,625
CABLE, MEDIA, & PUBLISHING: 0.5%
- ----------------------------------------------------------------
News America Holdings
8.45%, 8/1/34 1,500,000 1,768,125
Time Warner
9.125%, 1/15/13 2,000,000 2,460,000
- ----------------------------------------------------------------
4,228,125
CONSUMER PRODUCTS: 0.3%
- ----------------------------------------------------------------
Westvaco
8.30%, 8/1/22 2,500,000 2,712,500
ELECTRONICS & ELECTRICAL EQUIPMENT: 0.1%
- ----------------------------------------------------------------
Consumers Energy 144A
6.50%, 6/15/05 1,000,000 996,250
31
<PAGE>
Par Market
Amount Value
- ----------------------------------------------------------------
ENERGY: 0.3%
- ----------------------------------------------------------------
Commonwealth Edison
9.375%, 2/15/00 $ 500,000 $ 524,375
Enron
9.50%, 6/15/01 1,000,000 1,093,750
Petro-Canada
8.60%, 10/15/01 1,500,000 1,606,875
- ----------------------------------------------------------------
3,225,000
ENVIRONMENTAL SERVICES: 0.2%
- ----------------------------------------------------------------
Waste Management
6.625%, 7/15/02 2,000,000 2,017,500
FOOD, BEVERAGE AND TOBACCO: 0.1%
- ----------------------------------------------------------------
Nabisco
7.55%, 6/15/15 750,000 783,750
HEALTHCARE & PHARMACEUTICALS: 0.1%
- ----------------------------------------------------------------
Allegiance
7.30%, 10/15/06 1,000,000 1,061,250
LEISURE, LODGING & ENTERTAINMT: 0.2%
- ----------------------------------------------------------------
Darden Restaurants
6.375%, 2/1/06 1,500,000 1,483,125
METALS & MINING: 0.7%
- ----------------------------------------------------------------
Cyprus Amax Minerals
7.375%, 5/15/07 2,500,000 2,653,125
Inco
9.60%, 6/15/22 1,300,000 1,475,500
Newmont Gold
8.91%, 1/5/09 695,959 777,734
Placer Dome
7.37%, 6/3/26 1,000,000 1,063,750
Placer Dome-Series A
7.31%, 1/26/21 1,000,000 1,015,000
- ----------------------------------------------------------------
6,985,109
MISCELLANEOUS: 0.6%
- ----------------------------------------------------------------
Elli Lilly & Company
8.375%, 2/7/05 2,250,000 2,512,350
Manitoba (Province of)
7.75%, 7/17/16 1,500,000 1,755,000
Republic of Korea
8.875%, 4/15/08 1,600,000 1,450,000
- ----------------------------------------------------------------
5,717,350
RETAIL: 0.4%
- ----------------------------------------------------------------
Sears Roebuck
9.05%, 2/6/12 2,500,000 3,050,000
Service Corp International
7.00%, 6/1/15 1,000,000 1,036,250
- ----------------------------------------------------------------
4,086,250
TELECOMMUNICATIONS: 0.7%
- ----------------------------------------------------------------
Litton Industries
6.98%, 3/15/36 1,000,000 1,043,750
Pacificorp
9.15%, 08/09/11 1,500,000 1,865,625
Southwestern Bell Capital
7.13%, 6/1/05 2,000,000 2,110,000
U.S. Cellular
7.25%, 8/15/07 1,500,000 1,567,500
- ----------------------------------------------------------------
6,586,875
TRANSPORTATION & SHIPPING: 1.2%
- ----------------------------------------------------------------
American Airline
10.18%, 1/2/13 1,500,000 1,906,755
Burlington Northern Railroad
6.94%, 1/2/14 475,654 494,828
Chicago & Northwestern
6.25%, 7/30/12 1,370,801 1,374,228
CSX
7.25%, 5/1/27 1,000,000 1,072,500
Federal Express
7.96%, 3/28/17 1,129,243 1,222,405
General American Transportation
7.50%, 2/28/15 1,441,529 1,535,229
Par Market
Amount Value
- ----------------------------------------------------------------
Norfolk Southern
7.05%, 5/1/37 $ 2,000,000 $ 2,142,500
United Airlines
9.35%, 4/7/16 1,500,000 1,809,165
- ----------------------------------------------------------------
11,557,610
UTILITIES: 3.4%
- ----------------------------------------------------------------
Baltimore Gas & Electric
8.92%, 7/16/98 1,000,000 1,001,250
Colonial Gas-Series A
6.81%, 5/19/27 1,500,000 1,548,750
Detriot Edison
6.56%, 5/1/01 2,000,000 2,030,000
DQU II Funding
8.70%, 6/1/16 2,475,000 2,855,531
Great Lakes Power
9.00%, 8/1/04 1,500,000 1,668,750
Houston Light & Power Capital Trust II
8.257%, 2/1/37 1,900,000 2,061,500
MidAmerican Energy
6.50%, 12/15/01 1,250,000 1,268,750
Neveda Power
7.06%, 5/1/00 1,500,000 1,528,125
Noble Affiliates
7.25%, 10/15/23 600,000 633,750
Old Dominion Electric
7.48%, 12/1/13 1,500,000 1,625,625
Pacific Gas & Electric
6.25%, 8/1/03 2,000,000 2,027,500
Pennsylvania Power & Light
7.70%, 10/1/09 3,000,000 3,352,500
PSI Energy
8.57%, 12/27/11 500,000 597,500
Public Service
6.375%, 11/1/05 1,500,000 1,533,750
South Carolina Electric
9.00%, 7/15/06 2,500,000 2,950,000
Texas Gas Transmissions
8.625%, 4/1/04 2,000,000 2,242,500
Texas Utilities
7.375%, 8/1/01 1,500,000 1,554,375
Washington Water Public
8.01%, 12/17/01 1,000,000 1,057,500
- ----------------------------------------------------------------
31,537,656
TOTAL LONG - TERM DEBT INVESTMENTS: 35.8%
(Cost $322,627,347) 337,132,927
- ----------------------------------------------------------------
Number
COMMON STOCKS: of Shares
- ----------------------------------------------------------------
AEROSPACE AND DEFENSE: 0.9%
- ----------------------------------------------------------------
GenCorp 27,100 684,275
General Dynamics 41,800 1,943,700
United Technologies 67,300 6,225,250
- ----------------------------------------------------------------
8,853,225
AUTOMOBILES & AUTO PARTS: 1.9%
- ----------------------------------------------------------------
Cooper Industries 71,100 3,906,056
Ford Motor 82,800 4,885,200
General Motors 46,900 3,133,506
Goodrich (B.F.) 97,600 4,843,400
Simpson Industries 69,500 953,453
- ----------------------------------------------------------------
17,721,615
BANKING, FINANCE & INSURANCE: 10.1%
- ----------------------------------------------------------------
Ahmanson (H.F.) & Co 23,500 1,668,500
Alfa 42,500 885,859
Allstate 46,410 4,249,416
AmSouth Bancorporation 81,000 3,184,312
Associates First Capital Class A 34,306 2,637,274
BankAmerica 25,000 2,160,938
Bankers Trust New York 41,000 4,758,563
Bank of Boston 123,200 6,853,000
Bear Stearns 109,669 6,237,424
Chase Manhattan 130,200 9,830,100
CNB Bancshares 17,700 849,600
Comerica 66,050 4,375,813
Conseco 123,100 5,754,925
32
<PAGE>
Number Market
of Shares Value
- ----------------------------------------------------------------
First Chicago NBD 75,835 $ 6,720,877
Gallagher (Arthur J.) 19,600 877,100
Marsh & McLennan 104,700 6,327,806
MBIA 7,400 554,075
NationsBank 31,800 2,432,700
Paine Webber Group 106,600 4,570,475
RenaissanceRe Holdings * 16,200 750,263
S&T Bancorp 15,800 872,456
SLM Holding 98,000 4,802,000
Torchmark 84,500 3,865,875
Travelers Group 138,049 8,369,221
United Bankshares 31,000 1,059,813
United Wisconsin Service 25,600 726,400
- ----------------------------------------------------------------
95,374,785
BUILDINGS AND MATERIALS: 1.2%
- ----------------------------------------------------------------
Armstrong World Industries 13,400 902,825
Centex 90,500 3,416,375
Centex Construction Products 22,400 862,400
Champion Enterprises * 31,200 912,600
Kaufman & Broad Home 35,800 1,136,650
Masco 22,000 1,331,000
M.D.C. Holdings 49,100 969,725
USG 28,900 1,564,213
- ----------------------------------------------------------------
11,095,788
CABLE, MEDIA, & PUBLISHING: 1.8%
- ----------------------------------------------------------------
Dun & Bradstreet 91,400 3,301,825
Hollinger International 50,200 853,400
McClatchy Newspapers 24,300 841,388
McGraw-Hill 62,700 5,113,969
Media General-A 18,100 882,375
New York Times 71,900 5,698,075
- ----------------------------------------------------------------
16,691,032
CHEMICALS: 1.3%
- ----------------------------------------------------------------
Dow Chemical 54,500 5,269,469
First Commonwealth Financial 30,700 867,275
Lawter International 74,000 804,750
Lyondell Petrochemicals 79,300 2,413,694
NL Industries 45,400 908,000
Quaker Chemical 45,600 863,550
Wellman 39,000 884,813
- ----------------------------------------------------------------
12,011,551
COMPUTERS & TECHNOLOGY: 5.0%
- ----------------------------------------------------------------
American Power Conversion * 46,200 1,380,225
Apple Computer * 145,100 4,167,091
CHS Electronics 37,100 660,844
Datastream Systems 33,800 643,256
Dell Computer 35,200 3,265,900
Esterline Technologies 43,000 884,188
HBO & Company 171,200 6,040,150
Hyperion Software * 25,400 724,694
Ingram Micro Class A * 22,900 1,013,325
Lexmark International Group A * 51,200 3,123,200
Microsoft* 33,400 3,620,769
NeoMagic * 55,700 861,609
Network Associates 22,650 1,083,661
PeopleSoft* 68,800 3,231,450
Shared Medical Systems 11,400 837,188
Splash Technology Holdings * 44,200 758,306
STB Systems 52,500 652,969
Storage Technology 109,200 4,736,550
Summit Design * 54,800 810,012
Sun Microsystems * 128,400 5,581,387
Symantec * 136,200 3,549,713
- ----------------------------------------------------------------
47,626,487
CONSUMER PRODUCTS: 2.9%
- ----------------------------------------------------------------
Clorox 42,800 4,082,050
General Electric 147,200 13,395,200
Maytag 10,000 493,750
Procter & Gamble 101,800 9,270,163
- ----------------------------------------------------------------
27,241,163
ELECTRONICS & ELECTRICAL: 0.9%
- ----------------------------------------------------------------
CP Clare * 64,900 620,606
Number Market
of Shares Value
- ----------------------------------------------------------------
DSP Group * 41,300 $ 807,931
FirstEnergy 24,200 744,150
Retcoton * 24,400 822,737
Sawtek * 28,200 411,544
Thomas Industries 33,350 814,991
Xerox 41,000 4,166,625
- ----------------------------------------------------------------
8,388,584
ENERGY: 4.0%
- ----------------------------------------------------------------
Ashland 19,600 1,011,850
Atlantic Richfield 75,800 5,921,875
ENSCO International 130,600 2,269,175
Exxon 134,600 9,598,663
Helmerich & Payne 44,600 992,350
Key Energy Group * 52,000 682,500
Occidental Petroleum 98,800 2,667,600
Oryx Energy * 49,300 1,090,763
Pool Energy Services * 42,900 635,456
Royal Dutch Petroleum 94,000 5,152,375
Texaco 103,800 6,195,563
USX-Marathon Group 31,700 1,087,706
- ----------------------------------------------------------------
37,305,876
ENVIRONMENTAL SERVICES: 0.9%
- ----------------------------------------------------------------
Berry Petroleum 59,900 778,700
Honeywell 21,400 1,788,238
Houston Exploration * 36,000 825,750
Republic Industries * 211,400 5,285,000
- ----------------------------------------------------------------
8,677,688
FOOD, BEVERAGE & TOBACCO: 4.5%
- ----------------------------------------------------------------
800-JR Cigar * 43,400 868,000
Beringer Wine Estates-B * 19,300 849,803
Campbell Soup 47,600 2,528,750
Canandaiqua Wine Class A * 15,000 737,813
Coca Cola 81,200 6,942,600
ConAgra 59,100 1,872,731
Cracker Barrell Old Country Store 14,400 458,550
Foodmaker * 47,000 793,125
Heinz (H.J.) 114,150 6,406,669
Hershey Foods 28,000 1,932,000
Philip Morris 231,000 9,095,625
Pilgrims Pride 41,300 826,000
Quaker Oats 61,700 3,389,644
Ralcorp Holdings * 40,800 770,100
RJR Nabisco Holdings 102,580 2,436,275
ShowBiz Pizza Time * 22,200 894,938
Smithfield Foods 31,200 945,750
Sonic Corp. 39,000 870,188
- ----------------------------------------------------------------
42,618,561
HEALTHCARE & PHARMACEUTICALS: 6.4%
- ----------------------------------------------------------------
ADAC Laboratories * 37,500 846,094
Amgen * 80,900 5,291,366
Arterial Vascular Engineering 11,200 400,050
Beverly Enterprises * 90,000 1,243,125
Bristol-Myers Squibb 106,400 12,229,350
Health Management Associates Class A 25,500 852,656
Herbalife International Class A 11,533 283,640
Herbalife International Class B 23,066 474,295
Johnson & Johnson 73,400 5,413,250
Lincare Holdings 131,800 5,539,719
Matria Healthcare * 183,200 635,475
Merck & Company 85,400 11,422,250
Owens & Minor 51,400 514,000
PharMerica * 40,959 494,068
Protein Design Labs * 17,300 416,822
Rexall Sundown 36,200 1,291,888
Safeskin 21,000 864,281
Schering-Plough 112,700 10,326,138
The Cooper Companies * 21,100 768,831
Theragenics 27,800 723,669
Universal Health Services Class B * 16,100 939,838
- ----------------------------------------------------------------
60,970,805
INDUSTRIAL MACHINERY: 1.7%
- ----------------------------------------------------------------
Caterpillar 123,200 6,514,200
Deere & Company 99,500 5,261,063
33
<PAGE>
Number Market
of Shares Value
- ----------------------------------------------------------------
Gleason 25,100 $ 705,938
Ingersoll-Rand 71,700 3,159,281
- ----------------------------------------------------------------
15,640,482
LEISURE, LODGING, & ENTERTAINMENT: 0.5%
- ----------------------------------------------------------------
Callaway Golf 87,600 1,724,625
King World Productions 113,400 2,891,700
- ----------------------------------------------------------------
4,616,325
METALS & MINING: 0.8%
- ----------------------------------------------------------------
Comstock Resources * 72,300 537,731
Hecla Mining * 141,500 751,719
National Steel-Class B 56,100 666,188
Southdown 12,700 906,463
Terex * 30,900 880,650
USX-U S Steel Group 105,000 3,465,000
- ----------------------------------------------------------------
7,207,751
MISCELLANEOUS: 1.8%
- ----------------------------------------------------------------
Advo * 33,800 952,738
Alliant Techsystems * 13,300 841,225
Arch Communications Group * 147,300 575,391
Boole & Babbage 36,900 883,294
Cendant * 84,456 1,763,019
Davox * 41,800 911,763
Intermet 40,000 727,500
International Specialty Products * 47,300 880,963
LeaRonal 36,250 865,469
Nautica Enterprises * 31,600 849,250
Navistar International * 82,100 2,370,638
New Jersey Resources 20,000 713,750
OmniQuip International 34,600 641,181
One Valley Bancorp 23,612 858,886
Pitney Bowes 21,900 1,053,938
Plantronics 19,100 983,650
Republic Group 37,290 783,090
TNP Enterprises 26,300 812,013
- ----------------------------------------------------------------
17,467,758
PAPER & FOREST PRODUCTS: 0.1%
- ----------------------------------------------------------------
Fort James 23,500 1,045,750
- ----------------------------------------------------------------
REAL ESTATE: 0.1%
- ----------------------------------------------------------------
U.S. Home * 18,300 754,875
- ----------------------------------------------------------------
RETAIL: 3.2%
- ----------------------------------------------------------------
Ames Department Stores * 30,300 798,216
Cato-A 49,700 865,091
Family Dollar Stores 288,400 5,335,400
Fingerhut 79,500 2,623,500
Footstar * 19,700 945,600
Gadzooks * 33,000 914,719
General Nutrition * 35,300 1,100,919
Genesco * 52,400 854,775
Goody's Family Clothing * 17,500 957,031
Jostens 84,500 2,038,563
Pier 1 Imports 152,900 3,650,488
Renters Choice * 29,900 852,150
Russ Berrie 33,100 827,500
Safeway 15,800 642,863
The Men's Wearhouse 29,550 976,073
TJX 254,000 6,127,750
U.S. Rentals * 23,100 911,006
- ----------------------------------------------------------------
30,421,644
TELECOMMUNICATIONS: 4.2%
- ----------------------------------------------------------------
Ameritech 179,600 8,059,550
AT & T 87,400 4,992,725
Bell Atlantic 124,628 5,686,153
BellSouth 82,800 5,557,950
CellStar 54,000 695,250
GTE 58,300 3,242,938
Melita International * 60,400 943,750
Tellabs * 50,700 3,629,803
U S West 140,900 6,622,300
- ----------------------------------------------------------------
39,430,419
Number Market
of Shares Value
- ----------------------------------------------------------------
TEXTILES, APPAREL & FURNITURE: 1.2%
- ----------------------------------------------------------------
Dress Barn * 28,300 $ 705,731
Johnson Controls 101,200 5,774,725
Miller (Herman) 58,200 1,413,169
Tommy Hilfiger * 43,100 2,693,750
Williams-Sonoma 31,000 986,188
- ----------------------------------------------------------------
11,573,563
TRANSPORTATION & SHIPPING: 0.9%
- ----------------------------------------------------------------
America West Holdings-Class B * 29,800 851,163
AMR 45,600 3,796,200
Arkansas Best * 84,600 790,481
Brunswick 16,200 400,950
Consolidated Freightways * 49,600 691,300
M.S. Carriers * 26,800 725,275
Northwest Airlines-Class A * 24,100 930,109
- ----------------------------------------------------------------
8,185,478
UTILITIES: 1.7%
- ----------------------------------------------------------------
Black Hills 40,350 928,050
Edison International 104,600 3,092,238
Energy East 70,700 2,942,888
General Public Utilities 40,100 1,516,281
Indiana Energy 25,100 749,863
Laclede Gas 29,400 720,300
MDU Resources Group 24,600 877,913
Texas Utilities 77,200 3,213,450
Unicom 45,400 1,591,838
- ----------------------------------------------------------------
15,632,821
TOTAL COMMON STOCKS: 58.0%
(Cost $352,424,249) 546,554,026
- ----------------------------------------------------------------
WARRANTS:
Baxter International Contigent Value
Rights * 93,900 19,719
- ----------------------------------------------------------------
TOTAL WARRANTS: 0.0%
(Cost $23,475) 19,719
- ----------------------------------------------------------------
Par
MONEY MARKET INSTRUMENTS: Amount
- ----------------------------------------------------------------
Corporate Asset Funding
5.60%, 07/27/98 $9,900,000 9,859,960
5.53%, 08/19/98 4,000,000 3,969,620
Merrill Lynch & Company
5.5846%, 07/06/98 1,200,000 1,199,072
5.5855%, 07/13/98 5,400,000 5,389,974
Norwest
5.6013%, 07/08/98 5,000,000 4,994,565
Salomon Smith Barney
5.5737%, 07/01/98 6,800,000 6,800,000
5.5802%, 07/21/98 6,000,000 5,981,733
Times Mirror
5.64%, 07/09/98 4,000,000 4,000,000
Volkswagen Of America
5.5598%, 07/06/98 4,800,000 4,796,280
5.5598%, 07/14/98 5,800,000 5,788,439
- ----------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS: 5.6%
(Cost $52,779,643) 52,779,643
- ----------------------------------------------------------------
TOTAL INVESTMENTS: 99.4%
(Cost $727,854,714) 936,486,315
- ----------------------------------------------------------------
Other Assets Over Liabilities: 0.6% 6,081,342
- ----------------------------------------------------------------
NET ASSETS: 100%
(Equivalent to $18.853 per share
based on 49,995,287 shares
issued and outstanding) $942,567,657
================================================================
34
<PAGE>
MONEY MARKET FUND
STATEMENT OF NET ASSETS
June 30, 1998
(Unaudited)
INVESTMENTS:
Par Market
MONEY MARKET INSTRUMENTS: Amount Value
- ----------------------------------------------------------------
AUTOMOBILES & PARTS: 9.0%
- ----------------------------------------------------------------
Dalmler-Benz NA
5.58%, 9/9/98 $5,000,000 $ 4,946,527
Volkswagen of America
5.56%, 7/6/98 4,300,000 4,296,697
- ----------------------------------------------------------------
9,243,224
BANKING, FINANCE & INSURANCE: 65.6%
- ----------------------------------------------------------------
American Express Centurion Bank
5.60%, 5/11/99 4,500,000 4,500,000
Associates Corp North America
6.25%, 7/1/98 2,000,000 2,000,000
Avco Financial Services
5.58%, 9/10/98 5,000,000 4,945,764
Corporate Asset Funding
5.57%, 8/21/98 5,000,000 4,960,900
First Bank NA
5.67%, 5/19/99 4,000,000 4,003,269
Federal Home Loan Bank
5.71%, 3/4/99 4,000,000 4,000,000
International Lease Finance
5.59%, 10/6/98 1,000,000 985,181
Mercantile Safe Deposit
5.74%, 12/15/98 4,000,000 4,002,038
Merrill Lynch
5.60%, 1/19/99 4,000,000 4,000,000
Metlife Funding
5.60%, 8/7/98 2,200,000 2,187,406
Nationsbank NA
5.82%, 4/21/99 4,000,000 4,001,708
Norwest
5.55%, 7/31/98 4,700,000 4,678,419
Salomon
6.24%, 2/15/99 3,000,000 3,010,314
Salomon Smith Barney Holdings
5.62%, 11/5/98 1,000,000 980,597
Suntrust Banks
5.57%, 8/20/98 5,000,000 4,961,667
Toyota Motor Credit
5.55%, 8/4/98 5,000,000 4,974,028
UBS Finance (DE)
5.51%, 8/5/98 5,000,000 4,973,215
Wilmington Trust
5.52%, 8/10/98 4,000,000 4,000,000
- ----------------------------------------------------------------
67,164,506
BUILDING & MATERIALS: 3.3%
- ----------------------------------------------------------------
Fluor
5.70%, 7/13/98 3,400,000 3,400,000
- ----------------------------------------------------------------
CHEMICALS: 4.0%
- ----------------------------------------------------------------
Monsanto
5.57%, 7/10/98 4,100,000 4,094,444
- ----------------------------------------------------------------
CONSUMER PRODUCTS & SERVICES: 2.7%
- ----------------------------------------------------------------
Colgate-Palmolive
5.56%, 8/5/98 1,400,000 1,392,487
5.57%, 9/9/98 1,400,000 1,385,028
- ----------------------------------------------------------------
2,777,515
ELECTRICAL & ELECTRONICS: 4.6%
- ----------------------------------------------------------------
General Electric
5.58%, 9/3/98 4,700,000 4,653,877
- ----------------------------------------------------------------
ENERGY: 4.6%
- ----------------------------------------------------------------
Exxon Imperial US
5.53%, 7/20/98 4,700,000 4,686,357
- ----------------------------------------------------------------
Par Market
Amount Value
- ----------------------------------------------------------------
HEALTHCARE & PHARMACEUTICALS: 2.6%
- ----------------------------------------------------------------
Pfizer
5.55%, 8/3/98 $ 2,700,000 $ 2,686,363
- ----------------------------------------------------------------
INDUSTRIAL MACHINERY: 5.1%
- ----------------------------------------------------------------
Caterpillar
6.00%, 7/8/98 5,200,000 5,200,000
- ----------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS: 101.5%
(Cost $103,906,286) 103,906,286
- ----------------------------------------------------------------
Other Assets Under Liabilities: (1.5%) (1,500,262)
- ----------------------------------------------------------------
NET ASSETS: 100%
(Equivalent to $10.000 per share
based on 10,240,602 shares issued
and outstanding) $102,406,024
================================================================
SOCIAL AWARENESS FUND
STATEMENT OF NET ASSETS
June 30, 1998
(Unaudited)
INVESTMENTS:
Number Market
COMMON STOCKS: of Shares Value
- ----------------------------------------------------------------
AUTOMOBILES & AUTO PARTS: 0.2%
- ----------------------------------------------------------------
PACCAR 51,200 $ 2,670,400
BANKING & FINANCE: 19.8%
- ----------------------------------------------------------------
Ahmanson (H.F.) & Co 120,500 8,555,500
AmSouth Bancorporation 393,525 15,470,452
BankAmerica 212,400 18,359,325
Bankers Trust New York 206,600 23,978,513
Bank of Boston 239,400 13,316,625
Bear Stearns 286,694 16,305,721
Chase Manhattan 590,800 44,605,400
City National 329,500 12,170,906
Comerica 295,200 19,557,000
Edwards (A.G.) 467,950 19,975,616
First Chicago NBD 107,311 9,510,437
First Union 573,200 33,388,900
Mellon Bank 323,900 22,551,538
National City 243,060 17,257,260
NationsBank 100,400 7,680,600
Paine Webber Group 428,750 18,382,656
Republic New York 157,800 9,931,538
SLM Holding 358,900 17,586,100
T. Rowe Price Associates 240,000 9,015,000
- ----------------------------------------------------------------
337,599,087
BUILDINGS & MATERIALS: 1.8%
- ----------------------------------------------------------------
Kaufman & Broad Home 370,700 11,769,725
Masco 176,500 10,678,250
Oakwood Homes 290,555 8,716,650
- ----------------------------------------------------------------
31,164,625
CABLE, MEDIA & PUBLISHING: 5.5%
- ----------------------------------------------------------------
Dun & Bradstreet 474,700 17,148,538
Ennis Business Forms 176,800 2,055,300
Gannett 288,200 20,480,213
McGraw-Hill 240,400 19,607,625
New York Times 223,075 17,678,694
Omnicom Group 323,400 16,129,575
- ----------------------------------------------------------------
93,099,945
CHEMICALS: 0.1%
- ----------------------------------------------------------------
Flowserve 13,400 329,975
International Flavors & Fragrances 44,700 1,941,656
- ----------------------------------------------------------------
2,271,631
35
<PAGE>
Number Market
of Shares Value
- ----------------------------------------------------------------
COMPUTERS & TECHNOLOGY: 13.5%
- ----------------------------------------------------------------
American Power Conversion* 655,800 $19,592,025
Apple Computer* 761,500 21,869,328
Cadence Design Systems 272,500 8,515,625
Compaq Computer 606,200 17,200,925
Dell Computer 161,700 15,002,728
Deluxe 218,300 7,817,869
DuPont Photomasks* 83,800 2,901,575
EMC* 158,600 7,107,263
HBO & Co 800,000 28,225,000
Lexmark International GroupA* 356,500 21,746,500
Microsoft* 266,000 28,836,063
PeopleSoft* 285,500 13,409,578
Storage Technology* 498,000 21,600,750
Symantec* 663,500 17,292,469
- ----------------------------------------------------------------
231,117,698
CONSUMER PRODUCTS: 1.9%
- ----------------------------------------------------------------
Avon Products 156,100 12,097,750
Brinker International* 401,200 7,723,100
Clorox 135,200 12,894,700
- ----------------------------------------------------------------
32,715,550
ELECTRONICS & ELECTRICAL: 2.0%
- ----------------------------------------------------------------
Anixter International* 159,300 3,036,656
Solectron 466,400 19,617,950
Xerox 118,300 12,022,238
- ----------------------------------------------------------------
34,676,844
ENERGY: 2.6%
- ----------------------------------------------------------------
Helmerich & Payne 140,000 3,115,000
Oryx Energy* 299,200 6,619,800
Sun 553,800 21,494,363
US Industries 515,300 12,753,675
- ----------------------------------------------------------------
43,982,838
ENVIRONMENTAL SERVICES: 0.8%
- ----------------------------------------------------------------
Republic Industries* 516,000 12,900,000
- ----------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO: 7.3%
- ----------------------------------------------------------------
Agribrands International* 7,260 219,615
Campbell Soup 244,300 12,978,438
Coca Cola 233,000 19,921,500
Flowers Industries 527,450 10,779,759
Hershey Foods 205,500 14,179,500
International Multifoods 74,000 2,035,000
Interstate Bakeries 450,400 14,947,650
McCormick and Company 594,500 21,234,797
Quaker Oats 321,600 17,667,900
Ralston-Purina Group 72,600 8,480,588
Universal Foods 69,000 1,530,938
- ----------------------------------------------------------------
123,975,685
HEALTHCARE & PHARMACEUTICALS: 6.1%
- ----------------------------------------------------------------
Agouron Pharmaceuticals 204,400 6,215,037
Allegiance 600 30,750
Arterial Vascular Engineering 417,000 14,894,715
Bard (C.R) Inc. 190,900 7,266,131
Beverly Enterprises* 605,700 8,366,231
Health Management Associates Class A 415,300 13,886,594
ICN Pharmaceuticals 272,300 12,440,706
Johnson & Johnson 82,175 6,060,406
Lincare Holdings 268,200 11,272,781
McKesson 259,300 21,068,125
PharMerica* 275,654 3,325,076
- ----------------------------------------------------------------
104,826,552
INDUSTRIAL MACHINERY: 2.2%
- ----------------------------------------------------------------
Cincinnati Milacron 121,500 2,953,969
Deere & Company 475,800 25,157,925
Ingersoll-Rand 202,000 8,900,625
- ----------------------------------------------------------------
37,012,519
Number Market
of Shares Value
- ----------------------------------------------------------------
INSURANCE: 9.3%
- ----------------------------------------------------------------
Allstate 345,234 $31,610,488
Cigna 110,100 7,596,900
Conseco 388,200 18,148,350
Marsh & McLennan 313,350 18,938,091
Mercury General 162,600 10,457,213
Mid Ocean 61,000 4,788,500
Old Republic International 336,825 9,873,183
Reliance Group Holdings 649,200 11,361,000
ReliaStar Financial 330,400 15,859,200
Travelers Group 510,199 30,930,814
- ----------------------------------------------------------------
159,563,739
LEISURE, LODGING & ENTERTAINMENT: 0.4%
- ----------------------------------------------------------------
Fleetwood Enterprises 64,000 2,560,000
King World Productions 190,600 4,860,300
- ----------------------------------------------------------------
7,420,300
METALS & MINING: 0.2%
- ----------------------------------------------------------------
Cleveland Cliffs Iron 62,900 3,373,013
- ----------------------------------------------------------------
MISCELLANEOUS: 0.9%
- ----------------------------------------------------------------
Input/Output* 397,100 7,073,344
Twinlab 200,500 8,778,141
- ----------------------------------------------------------------
15,851,485
PACKAGING & CONTAINERS: 0.2%
- ----------------------------------------------------------------
Sealed Air* 99,000 3,638,250
- ----------------------------------------------------------------
RETAIL: 8.2%
- ----------------------------------------------------------------
CVS Corporation 234,200 9,119,163
Federated Department Stores* 254,700 13,706,044
Fingerhut 213,500 7,045,500
Gap 253,500 15,621,938
Jostens 83,300 2,009,613
Pier 1 Imports 707,265 16,885,952
Ross Stores 386,675 16,675,359
Safeway 337,624 13,737,076
Staples 670,600 19,426,444
TJX 990,800 23,903,050
Wal-Mart Stores 27,800 1,688,850
- ----------------------------------------------------------------
139,818,989
TELECOMMUNICATIONS: 10.9%
- ----------------------------------------------------------------
Alltel 463,700 21,562,050
Ameritech 196,700 8,826,910
AT & T 718,700 41,055,738
BellSouth 560,600 37,630,275
SBC Communications 783,064 31,322,560
Tellabs* 265,600 19,015,300
U S West 569,500 26,766,500
- ----------------------------------------------------------------
186,179,333
TEXTILES, APPAREL & FURNITURE: 1.0%
- ----------------------------------------------------------------
Miller (Herman) 236,200 5,735,230
Tommy Hilfiger* 181,000 11,312,500
- ----------------------------------------------------------------
17,047,730
TRANSPORTATION & SHIPPING: 1.4%
- ----------------------------------------------------------------
AMR 249,800 20,795,850
UAL* 38,600 3,010,800
- ----------------------------------------------------------------
23,806,650
TOTAL COMMON STOCK: 96.3%
(Cost $ 1,137,515,785) 1,644,712,863
- ----------------------------------------------------------------
Par Market
MONEY MARKET INSTRUMENTS: Amount Value
- ----------------------------------------------------------------
Corporate Asset Funding
5.65%, 07/15/98 $4,200,000 4,190,772
5.60%, 07/27/98 1,600,000 1,593,529
Merrill Lynch & Company
5.58%, 07/02/98 8,700,000 8,698,652
5.62%, 07/08/98 7,400,000 7,391,987
5.57%, 07/20/98 8,500,000 8,475,012
36
<PAGE>
Par Market
Amount Value
- ----------------------------------------------------------------
Norwest
5.54%, 07/13/98 $10,000,000 $ 9,981,533
5.51%, 07/31/98 4,200,000 4,180,715
Prudential Funding Corp
5.53%, 07/06/98 10,200,000 10,192,166
5.53%, 07/15/98 1,700,000 1,696,344
U.S. Treasury Bill (+)
5.11%, 04/29/99 2,100,000 2,009,978
- ----------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS: 3.4%
(Cost $ 58,410,688) 58,410,688
- ----------------------------------------------------------------
TOTAL INVESTMENTS: 99.7%
(Cost $ 1,195,926,473) 1,703,123,551
- ----------------------------------------------------------------
Other Assets Over Liabilities: 0.3% 5,310,344
- ----------------------------------------------------------------
NET ASSETS: 100%
(Equivalent to $ 39.250 per share
based on 43,526,750 shares issued
and outstanding) $1,708,433,895
================================================================
SPECIAL OPPORTUNITIES FUND
STATEMENT OF NET ASSETS
June 30, 1998
(Unaudited)
INVESTMENTS:
Number Market
COMMON STOCKS: of Shares Value
- ----------------------------------------------------------------
AEROSPACE & DEFENSE: 1.0%
- ----------------------------------------------------------------
General Dynamics 197,100 $ 9,165,150
- ----------------------------------------------------------------
AUTOMOBILES & AUTO PARTS: 1.8%
- ----------------------------------------------------------------
Cooper Industries 146,900 8,070,319
Dana 171,100 9,153,850
- ----------------------------------------------------------------
17,224,169
BANKING, FINANCE & INSURANCE: 13.6%
- ----------------------------------------------------------------
AmSouth Bancorporation 239,100 9,399,619
Bank of Boston 166,000 9,233,750
Bankers Trust New York 75,100 8,716,294
Bear Stearns 168,799 9,600,443
Cigna 127,200 8,776,800
Edwards (A.G.) 217,950 9,303,741
MBIA 124,000 9,284,500
Marsh & McLennan 157,800 9,537,038
Mercury General 150,100 9,653,306
Mid Ocean 128,500 10,087,250
Old Republic International 308,250 9,035,578
SLM Holding 214,050 10,488,450
Star Banc 148,400 9,479,050
Unitrin 127,500 8,829,375
- ----------------------------------------------------------------
131,425,194
BUILDINGS & MATERIALS: 4.8%
- ----------------------------------------------------------------
Carpenter Technology 168,500 8,467,125
Centex 247,200 9,331,800
Lafarge 235,600 9,262,025
Masco 170,000 10,285,000
USG 175,500 9,498,938
- ----------------------------------------------------------------
46,844,888
CABLE, MEDIA & PUBLISHING: 3.7%
- ----------------------------------------------------------------
Central Newspapers-Class A 111,800 7,798,050
Gannett 133,900 9,515,269
New England Business Service 268,300 8,652,675
New York Times 124,200 9,842,850
- ----------------------------------------------------------------
35,808,844
Number Market
of Shares Value
- ----------------------------------------------------------------
CHEMICALS: 5.0%
- ----------------------------------------------------------------
Avery Dennison 180,700 $ 9,712,625
Dexter 241,900 7,695,444
Flowserve 313,500 7,719,938
International Flavors & Fragrances 204,800 8,896,000
Lubrizol 179,400 5,426,850
Lyondell Petrochemicals 280,400 8,534,675
- ----------------------------------------------------------------
47,985,532
COMPUTERS & TECHNOLOGY: 10.0%
- ----------------------------------------------------------------
American Power Conversion * 316,500 9,455,438
BMC Software 184,600 9,593,431
Checkfree Holdings * 305,100 8,990,916
Deluxe 268,200 9,604,913
HBO & Company 290,100 10,235,091
Ingram Micro Class A * 215,600 9,540,300
PeopleSoft 205,200 9,637,987
Storage Technology 217,800 9,447,075
Sun Microsystems * 222,200 9,658,756
Symantec * 386,500 10,073,156
- ----------------------------------------------------------------
96,237,063
CONSUMER PRODUCTS: 3.0%
- ----------------------------------------------------------------
Brinker International * 489,100 9,415,175
Clorox 107,300 10,233,720
Premark International 280,400 9,042,900
- ----------------------------------------------------------------
28,691,795
ELECTRONICS & ELECTRICAL: 1.8%
- ----------------------------------------------------------------
New Century Energies 169,575 7,705,064
SCI Systems 267,500 10,064,688
- ----------------------------------------------------------------
17,769,752
ENERGY: 5.9%
- ----------------------------------------------------------------
National Fuel Gas 167,800 7,309,788
Occidental Petroleum 279,800 7,554,600
Oryx Energy * 304,400 6,734,850
Peoples Energy 212,000 8,188,500
Phillips Petroleum 196,000 9,444,750
Sun 234,500 9,101,531
USX-Marathon Group 262,300 9,000,169
- ----------------------------------------------------------------
57,334,188
FOOD, BEVERAGE & TOBACCO: 6.0%
- ----------------------------------------------------------------
Ball 227,600 9,146,675
Dean Foods 171,200 9,405,300
Fortune Brands 233,500 8,975,156
Gallagher Group Plc 127,200 2,782,500
International Multifoods 310,900 8,549,750
Interstate Bakeries 273,200 9,066,825
Universal 256,800 9,597,900
- ----------------------------------------------------------------
57,524,106
HEALTHCARE & PHARMACEUTICALS: 4.8%
- ----------------------------------------------------------------
Arterial Vascular Engineering 197,800 7,065,169
Beverly Enterprises * 643,400 8,886,963
Health Management Associates Class A 300,850 10,059,672
Lincare Holdings 238,600 10,028,656
PharMerica * 821,709 9,911,865
- ----------------------------------------------------------------
45,952,325
INDUSTRIAL MACHINERY: 3.0%
- ----------------------------------------------------------------
Cincinnati Milacron 305,000 7,415,313
Deere & Co. 184,900 9,776,588
Ingersoll-Rand 209,550 9,233,297
Parker Hannifin 215,850 8,229,281
- ----------------------------------------------------------------
34,654,479
LEISURE, LODGING & ENTERTAINMENT: 2.0%
- ----------------------------------------------------------------
Outback Steakhouse * 243,300 9,481,097
Viad 347,400 9,640,350
- ----------------------------------------------------------------
19,121,447
METALS & MINING: 1.9%
- ----------------------------------------------------------------
Bethlehem Steel * 740,200 9,206,238
USX-U.S. Steel Group 284,000 9,372,000
- ----------------------------------------------------------------
18,578,238
37
<PAGE>
Number Market
of Shares Value
- ----------------------------------------------------------------
MISCELLANEOUS: 3.6%
- ----------------------------------------------------------------
Aeroquip - Vickers 165,700 $ 9,672,738
Input/Output * 402,600 7,171,313
Navistar International * 347,700 10,039,838
Timken 251,100 7,737,019
- ----------------------------------------------------------------
34,620,908
PAPER & FOREST PRODUCTS: 0.9%
- ----------------------------------------------------------------
Fort James 186,600 8,303,700
- ----------------------------------------------------------------
RETAIL: 8.2%
- ----------------------------------------------------------------
CVS 243,000 9,461,813
Dollar Tree Stores 242,100 9,835,313
Liz Claiborne 50,000 2,612,500
Neiman-Marcus Group * 248,000 10,772,500
Pier 1 Imports 405,700 9,686,088
Ross Stores 211,100 9,103,688
Safeway 235,624 9,586,951
Staples 302,862 8,773,534
TJX 366,400 8,839,400
- ----------------------------------------------------------------
78,671,787
TELECOMMUNICATIONS: 1.9%
- ----------------------------------------------------------------
Brightpoint 666,800 9,647,762
Paging Network * 647,500 9,044,766
- ----------------------------------------------------------------
18,692,528
TEXTILES, APPAREL & FURNITURE: 3.5%
- ----------------------------------------------------------------
ASARCO 400,900 8,920,025
Johnson Controls 160,100 9,135,706
Tommy Hilfiger * 157,300 9,831,250
Westpoint Stevens 185,800 6,143,013
- ----------------------------------------------------------------
34,029,994
TRANSPORTATION & SHIPPING: 1.7%
- ----------------------------------------------------------------
AMR 114,000 9,490,500
Northwest Airlines-Class A * 178,100 6,873,547
- ----------------------------------------------------------------
16,364,047
UTILITIES: 5.3%
- ----------------------------------------------------------------
Baltimore Gas & Electric 290,200 9,014,338
General Public Utilities 210,200 7,948,188
Rochester Gas & Electric 294,100 9,392,819
Sierra Pacific Resources 239,900 8,711,369
Texas Utilities 172,900 7,196,963
Unicom 260,500 9,133,781
- ----------------------------------------------------------------
51,397,458
TOTAL COMMON STOCKS: 94.0%
(Cost $655,322,482) 906,397,592
- ----------------------------------------------------------------
Par
MONEY MARKET INSTRUMENTS: Amount
- ----------------------------------------------------------------
Corporate Asset Funding
5.60%, 7/27/98 $10,400,000 10,357,938
Ford Motor Credit Co
5.56%, 7/1/98 2,100,000 2,100,000
Merrill Lynch & Co
5.57%, 7/8/98 12,700,000 12,686,295
5.59%, 7/13/98 2,000,000 1,996,233
Norwest
5.56%, 7/1/98 1,400,000 1,400,000
Saloman Smith Barney Holdings
5.48%, 7/21/98 12,800,000 12,761,030
Times Mirror
5.64%, 7/9/98 4,000,000 4,000,000
United States Treasury Bill (+)
5.11%, 4/29/99 840,000 803,992
Volkswagen of America
5.56%, 7/6/98 9,600,000 9,592,560
Wilmington Trust
5.52%, 8/10/98 3,000,000 3,000,000
- ----------------------------------------------------------------
Par Market
Amount Value
- ----------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS: 6.1%
(Cost $58,698,048) $ 58,698,048
- ----------------------------------------------------------------
TOTAL INVESTMENTS: 100.1%
(Cost $714,020,530) 965,095,640
- ----------------------------------------------------------------
Other Assets Under Liabilities: (0.1%) (1,193,340)
- ----------------------------------------------------------------
NET ASSETS: 100%
(Equivalent to $35.205 per share
based on 27,379,663 shares issued
and outstanding) $963,902,300
================================================================
+ Fully or partially pledged as collateral for Financial Futures
* Non-income producing
** Par amounts for foreign debt are expressed in local currency
See accompanying notes to financial statements
38
<PAGE>
STATEMENT OF OPERATIONS - UNAUDITED
SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Aggressive Capital Equity- Global Asset Growth
Growth Bond Appreciation Income Allocation and Income
Fund Fund Fund Fund Fund Fund
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 882,193 $ 9,624,073 $ 946,101 $ 803,396 $ 5,400,293 $ 3,320,959
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends 652,984 0 1,655,664 9,481,187 2,450,097 32,123,118
- ------------------------------------------------------------------------------------------------------------------------------------
Less: Dividend Tax 0 0 (86,801) (183,994) (54,441) 0
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment income 1,535,177 9,624,073 2,514,964 10,100,589 7,795,949 35,444,077
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Management fees 1,329,231 661,250 2,016,058 3,291,265 1,648,718 6,026,213
- ------------------------------------------------------------------------------------------------------------------------------------
Accounting fees 85,123 68,995 112,246 173,971 154,961 466,800
- ------------------------------------------------------------------------------------------------------------------------------------
Custodial fees 7,214 0 45,186 38,619 134,500 0
- ------------------------------------------------------------------------------------------------------------------------------------
Directors fees 2,100 2,100 2,100 2,100 2,100 2,100
- ------------------------------------------------------------------------------------------------------------------------------------
Printing and Postage 26,000 29,000 28,500 38,000 86,000 115,000
- ------------------------------------------------------------------------------------------------------------------------------------
Other 3,654 4,448 6,200 3,197 9,738 531
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 1,453,322 765,793 2,210,290 3,547,152 2,036,017 6,610,644
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 81,855 8,858,280 304,674 6,553,437 5,759,932 28,833,433
- ------------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS:
Net realized gain(loss) on:
- ------------------------------------------------------------------------------------------------------------------------------------
Investment transactions 24,702,085 2,337,854 13,649,708 26,007,095 18,698,397 75,670,401
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign currency transactions 0 0 (63,576) (66,143) (1,446,496) 0
- ------------------------------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCY RELATED TRANSACTIONS 24,702,085 2,337,854 13,586,132 25,940,952 17,251,901 75,670,401
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
or (depreciation) on:
Investments (1,906,640) 1,340,923 82,586,193 62,546,575 20,673,265 360,116,751
- ------------------------------------------------------------------------------------------------------------------------------------
Translation of assets and
liabilities in foreign currencies 0 0 122,835 (853) 155,860 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation or (depreciation) on investments
and foreign currency related transactions (1,906,640) 1,340,923 82,709,028 62,545,722 20,829,125 360,116,751
- ------------------------------------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS AND
FOREIGN CURRENCY RELATED TRANSACTIONS 22,795,445 3,678,777 96,295,160 88,486,674 38,081,026 435,787,152
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $22,877,300 $12,537,057 $96,599,834 $95,040,111 $43,840,958 $464,620,585
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements
39
<PAGE>
STATEMENT OF OPERATIONS - UNAUDITED (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Money Social Special
International Managed Market Awareness Opportunities
Fund Fund Fund Fund Fund
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 269,142 $12,761,319 $2,657,060 $ 2,112,629 $1,873,213
- -----------------------------------------------------------------------------------------------------------------------------
Dividends 7,345,441 4,158,195 0 9,384,925 6,883,295
- -----------------------------------------------------------------------------------------------------------------------------
Less: Dividend Tax (634,689) 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------
Total investment income 6,979,894 16,919,514 2,657,060 11,497,554 8,756,508
- -----------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Management fees 1,925,247 1,626,356 225,378 2,527,165 1,676,682
- -----------------------------------------------------------------------------------------------------------------------------
Accounting fees 162,154 172,964 32,750 238,262 179,757
- -----------------------------------------------------------------------------------------------------------------------------
Custodial fees 142,081 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------
Directors fees 2,100 2,100 2,100 2,100 2,100
- -----------------------------------------------------------------------------------------------------------------------------
Printing and Postage 32,500 52,500 14,500 48,500 44,000
- -----------------------------------------------------------------------------------------------------------------------------
Other 56 24 4,177 3,102 244
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 2,264,138 1,853,944 278,905 2,819,129 1,902,783
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 4,715,756 15,065,570 2,378,155 8,678,425 6,853,725
- -----------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS:
Net realized gain(loss) on:
- -----------------------------------------------------------------------------------------------------------------------------
Investment transactions 117,931,891 23,188,654 5,060 53,909,417 34,385,532
- -----------------------------------------------------------------------------------------------------------------------------
Foreign currency transactions (381,212) 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY RELATED TRANSACTIONS 117,550,679 23,188,654 5,060 53,909,417 34,385,532
- -----------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
or (depreciation) on:
Investments (52,544,795) 38,396,647 0 149,635,394 55,955,238
- -----------------------------------------------------------------------------------------------------------------------------
Translation of assets and
liabilities in foreign currencies 73,330 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation or (depreciation) on investments
and foreign currency related transactions (52,471,465) 38,396,647 0 149,635,394 55,955,238
- -----------------------------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS
AND FOREIGN CURRENCY RELATED TRANSACTIONS 65,079,214 61,585,301 5,060 203,544,811 90,340,770
- -----------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 69,794,970 $76,650,871 $2,383,215 $212,223,236 $97,194,495
=============================================================================================================================
</TABLE>
See accompanying notes to financial statements
40
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS - UNAUDITED
YEAR ENDED DECEMBER 31, 1997 AND SIX MONTH PERIOD ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Aggressive Capital Equity- Global Asset Growth
Growth Bond Appreciation Income Allocation and Income
Fund Fund Fund Fund Fund Fund
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSETS AT DECEMBER 31, 1996 $242,608,763 $253,327,905 $267,241,857 $457,153,337 $316,051,475 $2,465,223,502
====================================================================================================================================
Changes from operations:
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 473,358 17,113,168 1,290,717 9,232,321 10,728,312 54,773,374
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign
currency related transactions 45,635,441 701,047 47,580,432 17,621,623 33,708,317 209,728,724
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
or (depreciation) on investments and foreign
currency related transactions 14,000,694 5,841,862 28,947,184 137,804,605 21,677,078 535,067,917
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 60,109,493 23,656,077 77,818,333 164,658,549 66,113,707 799,570,015
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends to shareholder from:
Net investment income 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments (11,900,740) 0 (10,296,305) (12,117,083) (26,677,086) (85,813,991)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DIVIDENDS TO SHAREHOLDER (11,900,740) 0 (10,296,305) (12,117,083) (26,677,086) (85,813,991)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE TRANSACTIONS 51,945,184 3,399,189 116,271,782 201,375,033 82,601,799 361,882,619
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 100,153,937 27,055,266 183,793,810 353,916,499 122,038,420 1,075,638,643
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS AT DECEMBER 31, 1997 $342,762,700 $280,383,171 $451,035,667 $811,069,836 $438,089,895 $3,540,862,145
====================================================================================================================================
Changes from operations:
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 81,855 8,858,280 304,674 6,553,437 5,759,932 28,833,433
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign
currency related transactions 24,702,085 2,337,854 13,586,132 25,940,952 17,251,901 75,670,401
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
or (depreciation) on investments and foreign
currency related transactions (1,906,640) 1,340,926 82,709,028 62,545,722 820,829,125 360,116,751
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 22,877,300 12,537,057 96,599,834 95,040,111 43,840,958 464,620,585
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends to shareholder from:
Net investment income (473,358) (17,113,168) (1,290,717) (9,232,321) (10,728,312) (54,773,374)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments (45,635,441) 0 (47,582,501) (17,621,623) (33,708,317) (209,728,724)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DIVIDENDS TO SHAREHOLDER (46,108,799) (17,113,168) (48,873,218) (26,853,944) (44,436,629) (264,502,098)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE TRANSACTIONS 62,022,793 26,673,223 96,920,897 100,729,652 44,176,625 334,218,918
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 38,791,294 22,097,112 144,647,513 168,915,819 43,580,954 534,337,405
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS AT JUNE 30, 1998 $381,553,994 $302,480,283 $595,683,180 $979,985,655 $481,670,849 $4,075,199,550
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
41
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS - UNAUDITED (CONTINUED)
YEAR ENDED DECEMBER 31, 1997 AND SIX MONTH PERIOD ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Money Social Special
International Managed Market Awareness Opportunities
Fund Fund Fund Fund Fund
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSETS AT DECEMBER 31, 1996 $440,374,662 $675,740,417 $90,357,608 $ 636,594,543 $648,591,736
Changes from operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 2,085,136 29,120,567 4,709,338 12,806,273 11,867,899
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and
foreign currency related transactions 18,026,179 62,174,659 (105) 54,631,990 75,795,433
- ---------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
or (depreciation) on investments and foreign
currency related transactions 6,771,330 59,803,118 0 224,321,657 96,003,484
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 26,882,645 151,098,344 4,709,233 291,759,920 183,666,816
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends to shareholder from:
Net investment income 0 0 (4,709,233) 0 0
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments (21,685,866) (18,028,760) 0 (36,341,046) (47,162,977)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DIVIDENDS TO SHAREHOLDER (21,685,866) (18,028,760) (4,709,233) (36,341,046) (47,162,977)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE TRANSACTIONS 20,657,759 41,835,514 (1,130,976) 363,480,930 87,726,664
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 25,854,538 174,905,098 (1,130,976) 618,899,804 224,230,503
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS AT DECEMBER 31, 1997 $466,229,200 $850,645,515 $89,226,632 $1,255,494,347 $872,822,239
=================================================================================================================================
Changes from operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 4,715,756 15,065,570 2,378,155 8,678,425 6,853,725
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign
currency related transactions 117,550,679 23,188,654 5,060 53,909,417 34,385,532
- ---------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
or (depreciation) on investments and foreign
currency related transactions (52,471,465) 38,396,647 0 149,635,394 55,955,238
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 69,794,970 76,650,871 2,383,215 212,223,236 97,194,495
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends to shareholder from:
Net investment income (2,085,136) (29,120,567) (2,383,215) (12,806,273) (11,867,899)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments (18,026,179) (62,174,659) 0 (54,631,990) (75,795,433)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DIVIDENDS TO SHAREHOLDER (20,111,315) (91,295,226) (2,383,215) (67,438,263) (87,663,332)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE TRANSACTIONS (2,549,486) 106,566,497 13,179,392 308,154,575 81,548,898
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 47,134,169 91,922,142 13,179,392 452,939,548 91,080,061
- ---------------------------------------------------------------------------------------------------------------------------------
Net Assets at June 30, 1998 $513,363,369 $942,567,657 $102,406,024 $1,708,433,895 $963,902,300
=================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
42
<PAGE>
NOTES TO FINANCIAL STATEMENTS - UNAUDITED
JUNE 30, 1998
THE FUNDS: Aggressive Growth Fund, Bond Fund, Capital Appreciation Fund,
Equity-Income Fund, Global Asset Allocation Fund, Growth and Income Fund,
International Fund, Managed Fund, Money Market Fund, and Social Awareness Fund
are registered as open-end, diversified management investment companies and
Special Opportunities Fund is registered as an open-end, non-diversified
management investment company under the Investment Company Act of 1940, as
amended. The Funds' shares are sold only to The Lincoln National Life
Insurance Company (the Company) for allocation to its Variable Annuity Account
C, which was established for the purpose of funding variable annuity
contracts, and to its Flexible Premium Variable Life Accounts D, G, and K,
which were established for the purpose of funding variable universal life
contracts.
The Funds' investment objectives are as follows:
FUND INVESTMENT OBJECTIVE
Aggressive Growth Fund The investment objective is to maximize
capital appreciation. The Fund invests in
stocks of smaller, lesser-known companies,
which have a chance to grow significantly in
a short time.
Bond Fund The investment objective is to maximize
current income consistent with prudent
investmentstrategy. The Fund invests
primarily in medium and long-term corporate
and government bonds.
Capital Appreciation Fund The investment objective is to maximize
long-term growth of capital in a manner
consistent with preservation of capital. The
Fund primarily buys stocks in a large number
of companies of all sizes if the companies
are competing well and if their products or
services are in high demand. It may also buy
some money market securities and bonds,
including junk (high-risk) bonds.
Equity-Income Fund The investment objective is to achieve
reasonable income by investing primarily in
income-producing equity securities. The Fund
invests mostly in high-income stocks and some
high-yielding bonds (including junk bonds).
Global Asset Allocation Fund The investment objective is to maximize
long-term total return consistent with
preservation of capital. The Fund allocates
its assets among several categories of equity
and fixed-income securities, both of U.S. and
forein issuers.
Growth and Income Fund The investment objective is to maximize
long-term capital appreciation. The Fund buys
stocks of established companies.
International Fund The investment objective is to maximize
long-term capital appreciation. The Fund
trades in securities issued outside the
United States - mostly stocks, with an
occasional bond or money market security.
Managed Fund The investment objective is to maximize
long-term total return (capital gains plus
income) consistent with prudent investment
strategy. The Fund invests in a mix of
stocks, bonds, and money market securities,
as determined by an investment committee.
Money Market Fund The investment objective is to maximize
current income consistent with the
preservation of capital. The Fund invests in
short-term obligations issued by U.S.
corporations, the U.S. Government, and
federally chartered banks and U.S. branches
of foreign banks.
Social Awareness Fund The investment objective is to maximize
long-term capital appreciation. The Fund buys
stocks of established companies which adhere
to certain specific social criteria.
Special Opportunities Fund The investment objective is to maximize
capital appreciation. The Fund primarily
invests in mid-size companies whose stocks
have significant growth potential. Current
income is a secondary consideration.
43
<PAGE>
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION: Portfolio securities which are traded on stock exchanges
are valued at the last reported sale price on the exchange or market where
primarily traded or listed or, in the absence of recent sales, at the mean
between the last reported bid and asked prices. Long-term debt investments are
valued at their bid quotations. The Funds hedge certain portions of their
exposure to fluctuations in interest, market, and foreign exchange risks by
entering into derivative transactions. These hedges include options, financial
futures, and forward foreign currency contracts. Options traded on exchanges are
valued at the last bid price for options purchased and the last sale price for
options written. Options traded in the over-the-counter market are valued at the
last asked price for options written and the last bid price for options
purchased. Financial futures are valued at the settlement price established each
day by the board of trade or exchange on which they are traded. Forward foreign
currency contracts are valued at the forward exchange rates prevailing on the
day of valuation. Other securities and assets for which market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Funds' Board of Directors. Money market instruments
are stated at amortized cost, which approximates market value.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date and interest income is recorded on the accrual basis. Interest income
includes premium and discount amortization on money market instruments and
mortgage-backed securities; it also includes original issue and market discount
amortization on long-term debt investments. Realized gains or losses from
investment transactions are reported on an identified cost basis. Gains and
losses on premiums from expired options are recognized on the date of
expiration.
SECURITIES SOLD SHORT: Short-selling of securities obligate the Funds to replace
the security borrowed by purchasing it at market value at the replacement date.
The Funds would realize a gain (loss) if the price of the security declines
(increases) between the sale and replacement date.
FOREIGN CURRENCY TRANSACTIONS: The books and records of the Funds are maintained
in U.S. dollars. All assets and liabilities denominated in a foreign currency
are translated into U.S. dollars based upon foreign exchange rates prevailing at
the end of the period. Income and expenses and purchases and sales of
investments are translated into U.S. dollars at the rate of exchange prevailing
on the respective dates of such transactions. The effects of changes in foreign
currency exchange rates on investments in securities are not segregated from the
effects of changes in market prices of those securities, but are included with
the net realized and unrealized gain or loss on investment in securities.
Reported net realized gains and losses on foreign currency transactions arise
from sales and maturities of forward foreign currency contracts, currency gains
and losses between the trade and settlement dates on securities transactions,
and the differences 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 change in unrealized appreciation or
depreciation on translation of assets and liabilities in foreign currencies
arise from changes in the value of other assets and liabilities at the end of
the period resulting from changes in the exchange rates.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results could differ from
those estimates.
EXPENSES: The custodian bank of the Bond Fund, Growth and Income Fund, Managed
Fund, Money Market Fund, Social Awareness Fund and Special Opportunities Fund
has agreed to waive its custodial fees when the Funds maintain a prescribed
amount of cash on deposit in certain non-interest bearing accounts. For the six
months ended June 30, 1998, the custodial fees offset arrangements were not
material to either total expenses or the calculation of the ratio of expenses to
average net assets.
TAXES: Each Fund has complied with the special provisions of the Internal
Revenue Code for regulated investment companies. As such, each Fund is not
subject to U.S. federal income taxes to the extent that it distributes all of
its taxable income for its fiscal year.
Withholding taxes on foreign interest have been provided for in accordance with
the applicable country's tax rates.
44
<PAGE>
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (CONTINUED)
2. OTHER ASSETS OVER (UNDER) LIABILITIES
The statement of net assets accounts "Other Assets Over (Under) Liabilities" at
June 30, 1998 consisted of the following assets (liabilities):
<TABLE>
<CAPTION>
Aggressive Capital Equity- Global Asset Growth
Growth Bond Appreciation Income Allocation and Income
Fund Fund Fund Fund Fund Fund
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash $ 651 $ 110,296 $ 51,894 $ (1,014,664) $ 2,379,941 $11,374,788
- --------------------------------------------------------------------------------------------------------------------------------
Foreign currency - - 1,565,239 181,490 7,421,166 -
- --------------------------------------------------------------------------------------------------------------------------------
Receivable for dividends earned 87,271 - 158,144 1,677,400 656,052 7,035,959
- --------------------------------------------------------------------------------------------------------------------------------
Receivable for interest earned 5,505 3,947,880 - 188,395 1,741,161 110,672
- --------------------------------------------------------------------------------------------------------------------------------
Receivable for securities sold 4,139,127 - 766,316 3,834,045 8,281,262 -
- --------------------------------------------------------------------------------------------------------------------------------
Receivable for cap shares sold 426,835 43,601 1,124,556 531,335 97,598 1,488,239
- --------------------------------------------------------------------------------------------------------------------------------
Payable for securities purchased (5,886,770) - (3,809,836) (3,039,806) (9,428,390) -
- --------------------------------------------------------------------------------------------------------------------------------
Payable for cap shares redeemed (18,858) (409) - - (1,555) (37,772)
- --------------------------------------------------------------------------------------------------------------------------------
Management fees payable (278,928) (156,705) (436,305) (650,564) (413,085) (1,062,624)
- --------------------------------------------------------------------------------------------------------------------------------
Other, net (597) - (6,863) (19,542) 57,482 -
- --------------------------------------------------------------------------------------------------------------------------------
$(1,525,764) $3,944,663 $ (586,855) $ 1,688,089 $10,791,632 $18,909,262
========================================================================================
Money Social Special
International Managed Market Awareness Opportunities
Fund Fund Fund Fund Fund
--------------------------------------------------------------------------
Cash $ 718,710 $ 258,716 $ - $ 394,404 $(2,319,472)
- ------------------------------------------------------------------------------------------------------------------
Foreign currency 9,440,178 - - - -
- ------------------------------------------------------------------------------------------------------------------
Receivable for dividends earned 3,522,649 898,499 - 1,986,916 1,390,019
- ------------------------------------------------------------------------------------------------------------------
Receivable for interest earned 1,254 4,907,518 259,762 - 74,093
- ------------------------------------------------------------------------------------------------------------------
Receivable for securities sold 3,325,822 348,888 - 23,824,974 1,670,152
- ------------------------------------------------------------------------------------------------------------------
Receivable for cap shares sold 27,550 - - 1,434,387 -
- ------------------------------------------------------------------------------------------------------------------
Payable for securities purchased (2,697,836) - - (21,598,334) (1,651,697)
- ------------------------------------------------------------------------------------------------------------------
Payable for cap shares redeemed (10,492) - (1,688,486) - -
- ------------------------------------------------------------------------------------------------------------------
Management fees payable (455,165) (332,279) (71,538) (519,503) (334,685)
- ------------------------------------------------------------------------------------------------------------------
Other, net 17,170 - - (212,500) (21,750)
- ------------------------------------------------------------------------------------------------------------------
$13,889,840 $6,081,342 $(1,500,262) $ 5,310,344 $(1,193,340)
==========================================================================
</TABLE>
3. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Lincoln Investment Management Company (the Advisor) and it's affiliates manage
the Funds' investment portfolios and maintain their accounts and records. In
return for these services, the Advisor receives a management fee at an annual
rate of .48% of the first $200,000,000 of the average daily net asset value of
the Funds, .40% of the next $200,000,000, and .30% of the average daily net
asset value of the Funds in excess of $400,000,000 for all the Funds except
for the Global Asset Allocation Fund, which has management fee annual rates of
.75%, .70%, and .68%, respectively, the International Fund which has
management fee annual rates of .90%, .75%, and .60%, respectively, and the
Aggressive Growth Fund, which has management fee annual rates of .75%, .70%,
and .65%, respectively. The Capital Appreciation Fund and the Equity-Income
Fund have management fees of .75% of the first $500,000,000 of the average
daily net asset value of the Funds and .70% of the average daily net asset
value of the Funds in excess of $500,000,000. In addition, Delaware Service
Company (Delaware), which is an affiliate of the Advisor, provides accounting
services and other administration support to the Funds. In return for these
services, the company receives a minimum fee of $65,000 and $87,000 annually
for the first $100,000,000 of the average daily net asset value of the
Domestic and International Funds respectively, .0375% and .060% of the next
$400,000,000, .035% and .060% of the next $250,000,000, .030% and .060% of the
next $250,000,000, and .020% and .050% of the daily net asset value of the
Funds in excess of $1 billion dollars. (The International funds pricing
arrangement is applied to the Global Asset Allocation and International
funds.)
If the aggregate annual expenses of a Fund, including the management fee, but
excluding taxes, interest, brokerage commissions relating to the purchase or
sale of portfolio securities and extraordinary non-recurring expenses, exceed
1 1/2% of the average daily net asset value of the Fund, the Advisor will
reimburse the Fund in the amount of such excess. No reimbursement was due for
the period ended June 30, 1998.
Certain officers and directors of the Funds are also officers or directors of
the Company and receive no compensation from the Funds. The compensation of
unaffiliated directors of the Funds is borne by the Funds.
45
<PAGE>
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (CONTINUED)
4. ANALYSIS OF NET ASSETS
Net assets at June 30, 1998 consisted of the following:
<TABLE>
<CAPTION>
Aggressive Capital Equity- Global Asset Growth
Growth Bond Appreciation Income Allocation and Income
Fund Fund Fund Fund Fund Fund
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common Stock, par value
$ 01 per share** $ 250,647 $ 239,498 $ 312,587 $ 451,497 $ 310,585 $ 925,583
- -----------------------------------------------------------------------------------------------------------------------------------
Paid in capital in excess of par
value of shares issued 303,531,498 285,288,047 434,511,294 662,147,200 379,972,853 2,439,388,303
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain
(loss) on investments 24,702,085 (4,767,787) 13,584,063 25,940,952 17,251,901 75,670,401
- -----------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income 81,855 8,858,280 304,674 6,553,437 5,759,932 28,833,433
- -----------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
on investments and foreign currency 52,987,909 12,862,245 146,970,562 284,892,569 78,375,578 1,530,381,830
- -----------------------------------------------------------------------------------------------------------------------------------
$381,553,994 $302,480,283 $595,683,180 $ 979,985,655 $481,670,849 $4,075,199,550
==========================================================================================
Money Social Special
International Managed Market Awareness Opportunities
Fund Fund Fund Fund Fund
---------------------------------------------------------------------------
Common Stock, par value
$ 01 per share** $ 315,827 $ 499,953 $ 102,406 $ 435,268 $ 273,797
- --------------------------------------------------------------------------------------------------------------------
Paid in capital in excess of par
value of shares issued 384,376,490 695,181,879 102,303,618 1,137,767,341 671,152,324
- --------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain
on investments 117,550,679 23,188,654 - 53,909,418 34,385,532
- --------------------------------------------------------------------------------------------------------------------
Undistributed net investment income 4,715,756 15,065,570 - 8,678,425 6,853,725
- --------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
on investments and foreign currency 6,404,617 208,631,601 - 507,643,443 251,236,922
- --------------------------------------------------------------------------------------------------------------------
$513,363,369 $942,567,657 $102,406,024 $1,708,433,895 $963,902,300
===========================================================================
</TABLE>
** Each Fund has 50,000,000 authorized shares except for the Growth and Income
Fund, which has 150,000,000, and the Managed, International, and
Equity-Income Funds, which each have 100,000,000 authorized shares.
5. INVESTMENTS
The cost of investments for federal income tax purposes approximates cost for
book purposes. The aggregate cost of investments purchased and the aggregate
proceeds from investments sold for the six months ended June 30, 1998 along
with the aggregate gross unrealized appreciation, the aggregate gross
unrealized depreciation and the net unrealized appreciation at June 30, 1998
are as follows:
<TABLE>
<CAPTION>
Aggregate Aggregate Gross Gross Net
Cost of Proceeds Unrealized Unrealized Unrealized
Purchases From Sales Appreciation Depreciation Appreciation
<S> <C> <C> <C> <C> <C>
Aggressive Growth Fund $182,167,052 $164,599,397 $ 67,203,530 $(14,215,621) $ 52,987,909
Bond Fund 102,844,966 87,918,271 13,653,593 (791,348) 12,862,245
Capital Appreciation Fund 216,995,519 185,256,508 151,402,871 (4,432,309) 146,970,562
Equity Income Fund 173,153,705 102,957,872 303,419,249 (18,526,680) 284,892,569
Global Asset Allocation Fund 297,423,688 291,299,608 87,082,030 (8,706,452) 78,375,578
Growth and Income Fund 610,424,799 479,842,309 1,578,069,628 (47,687,798) 1,530,381,830
International Fund 560,881,604 585,327,023 32,607,434 (26,202,817) 6,404,617
Managed Fund 225,968,735 205,614,340 220,231,607 (11,600,006) 208,631,601
Social Awareness Fund 498,802,127 235,640,571 520,362,911 (12,719,468) 507,643,443
Special Opportunities Fund 188,401,096 183,507,626 265,130,935 (13,894,013) 251,236,922
</TABLE>
46
<PAGE>
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (CONTINUED)
6. SUPPLEMENTAL FINANCIAL INSTRUMENT INFORMATION
OPTIONS: The Funds purchase or write options that are exchange traded to hedge
fluctuation risks in the price of certain securities. When the Funds write a
call or put option, an amount equal to the premium received is reflected as a
liability. The amount of the liability is subsequently "marked-to-market" to
reflect the current market value of the option written. The premium paid by the
Funds for the purchase of a call or put option is recorded as an investment and
subsequently "marked-to-market" to reflect the current market value of the
option purchased. The Funds are subject to the risk of an imperfect correlation
between movement in the price of the instrument and the price of the underlying
security or transaction. Risks may also arise due to illiquid secondary markets
for the instruments. Written call option activity for the period ended June 30,
1998 is summarized as follows:
<TABLE>
<CAPTION>
Global Asset Allocation Fund
----------------------------
Par Premiums
Amount Received
<S> <C> <C>
Options outstanding at December 31, 1997 $ - $ -
Options written 1,008,800,000 498,729
Options exercised - -
Options expired 8,800,000 71,720
Options closed 1,000,000,000 427,009
----------------------------
Options outstanding at June 30, 1998 $ - $ -
============================
</TABLE>
FORWARD FOREIGN CURRENCY CONTRACTS: The Funds may purchase or sell forward
foreign currency contracts to hedge risks of fluctuations in specific
transactions or portfolio positions. Forward foreign currency contracts
obligate the Funds to take or deliver a financial instrument of foreign
currency at a future date at a specified price. The realized and unrealized
gain or loss on the contracts is reflected in the accompanying financial
statements. The Funds are subject to the credit risks that the counter parties
to these contracts will fail to perform; although this risk is minimized by
purchasing such agreements from financial institutions with long standing,
superior performance records. In addition, the Funds are subject to the market
risks associated with unanticipated movements in the value of a foreign
currency relative to the U.S. dollar; however, such changes in the value
generally are offset by changes in the value of the items being hedged by such
contracts. Forward foreign currency contracts that were open at June 30, 1998
were as follows:
<TABLE>
<CAPTION>
Contracts to Foreign U.S. Cost Unrealized
Fund Receive (Deliver) Currency (Proceeds) Settlement Date(s) Gain (Loss)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Appreciation (4,400,000) Great Britain Pound $ (7,267,845) September 1998 $ (38,894)
Fund (12,800,000) Netherlands Guilder (6,316,465) July 1998 27,597
$ (11,297)
Global Asset (5,622,812) Australian Dollar $ (3,479,045) September 1998 $ 234
Allocation Fund 2,853,800 Canadian Dollar 1,964,210 September 1998 (16,862)
4,644,868 German Deutschemark 2,661,345 September 1998 (80,203)
(3,032,424) Danish Kroner (450,349) September 1998 8,552
1,583,700 Finnish Marrka 294,697 September 1998 (5,262)
3,022,300 French Franc 501,657 September 1998 (668)
6,264,700 Great Britain Pound 10,159,464 September 1998 (243,966)
2,952,555,350 Italian Lira 4,526,024 September 1998 (31,593)
878,746,850 Japanese Yen 6,416,864 September 1998 (26,615)
1,271,300 Polish Zloty 323,577 April 1999 3,078
(1,654,530) South African Rand (277,746) September 1998 12,271
113,006,985 Spanish Peseta 753,606 September 1998 (15,223)
8,410,410 Swedish Krona 1,077,649 September 1998 (22,554)
372,450 Swiss Franc 255,804 September 1998 (8,766)
----------
$(427,577)
==========
</TABLE>
47
<PAGE>
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (CONTINUED)
FINANCIAL FUTURES CONTRACTS: The Funds may purchase or sell financial futures
contracts, which are exchange traded, to hedge fluctuation risks of adverse
changes in exchange markets or interest rates. Financial futures contracts
obligate the Funds to take delivery or deliver a financial instrument at a
future date at a specified price. The Funds deposit with its custodian a
specified amount of cash or eligible securities called "initial margin" or
"variation margin". The market value of investments pledged to cover margin
requirements for open positions at June 30, 1998 were $5,009,759 for Global
Asset Allocation Fund, $2,009,978 for Social Awareness Fund, and $803,992 for
the Special Opportunities Fund. The unrealized gain or loss on the contracts
is reflected in the accompanying financial statements. The Funds are subject
to the market risks of unexpected changes in the underlying markets and
interest rates; however, such changes in the value generally are offset by
changes in the value of the items being hedged by such contracts. Financial
futures contracts open at June 30, 1998 were as follows:
<TABLE>
<CAPTION>
Notional Expiration Unrealized
Fund Contracts Cost Amount Date Gain (Loss)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Global Asset (13) S&P 500 contracts $ (3,570,804) September 1998 $ (143,946)
Allocation Fund (49) Nasdaq 100 contracts (5,932,361) September 1998 (702,239)
(23) Russell 2000 contracts (5,168,107) September 1998 (148,918)
185 U S 20 Year Treasury note contracts 22,398,007 September 1998 466,837
(70) Gilt contracts (12,580,678) September 1998 (108,799)
2 Ftse 100 Index contracts 197,111 September 1998 (587)
(32) German 10 Year contracts (4,838,238) September 1998 43,548
334 Australian All Ords Index contracts 12,961,077 September 1998 941,896
(17) Dax Index contracts (5,393,055) September 1998 (131,005)
(85) Nikkei 225 contracts (4,684,012) September 1998 (121,025)
(24) CAC 40 Index contracts (3,285,612) September 1998 (75,077)
118 MIB 30 Index contracts 22,826,060 September 1998 (286,996)
75 Euro DM 3 month life contracts 9,928,734 March 1999 24,944
(75) Euro Lira 3 month life contracts (10,078,480) March 1999 (26,370)
-----------
$ (267,737)
===========
Social Awareness Fund 100 S&P 500 contracts $ 28,128,625 September 1998 $ 446,375
Special Opportunities Fund 145 S&P 400 midcap stock index contracts $ 26,271,680 September 1998 $ 161,828
</TABLE>
REPURCHASE AGREEMENTS: The Funds, through their respective custodians, receive
delivery of the underlying securities, whose market value is required to be at
least 102% of the repurchase price. The advisor is responsible for determining
that the value of the collateral is at least equal to the repurchase price.
Repurchase agreements are subject to the risk of the default or insolvency of
the counterparty.
7. CREDIT AND MARKET RISKS
The Money Market Fund had investments in securities issued by banks, including
foreign banks, foreign branches of domestic banks, and other financial
institutions representing 65.6% of net assets at June 30, 1998. The ability of
these entities to meet their obligations may be affected by economic conditions
related to the industry.
The Capital Appreciation Fund, Equity-Income Fund, Global Asset Allocation
Fund, and International Fund invest in foreign securities. As a result, there
may be additional risks, such as the investments being subject to restrictions
as to repatriation of cash back to the United States and to political or
economic uncertainties. None of these Funds had investments in excess of 5% in
any individual foreign country except the International Fund. Distribution of
investments for the International Fund, by industry, as a percentage of total
investments, consisted of the following at June 30, 1998:
Consumer Products and Services 14.2%
----------------------------------------------
Banking, Finance and Insurance 14.0
----------------------------------------------
Industrial 14.0
----------------------------------------------
Utilities 13.0
----------------------------------------------
Electrical and Electronics 10.5
----------------------------------------------
Healthcare and Pharmaceuticals 8.3
----------------------------------------------
Telecommunications 7.7
----------------------------------------------
Energy 5.9
----------------------------------------------
Others (individually less than 4%) 12.4
----------------------------------------------
100.0%
48
<PAGE>
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (CONTINUED)
8. SUMMARY OF CHANGES FROM CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
Shares Issued Upon Net Increase (Decrease)
Capital Reinvestment of Capital Shares Resulting From Capital
Shares Sold Dividends Redeemed Share Transactions
----------------------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------------------------------------------------------------------------------------------------
Year Ended December 31, 1997:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund 3,320,603 $ 49,037,657 892,895 $ 11,957,816 (648,693) $ (9,050,289) 3,564,805 $ 51,945,184
Bond Fund 1,115,273 14,114,365 1,416,753 16,821,434 (2,261,364) (27,536,610) 270,662 3,399,189
Capital Appreciation Fund 6,645,666 106,951,391 836,415 12,215,979 (178,409) (2,895,588) 7,303,672 116,271,782
Equity-Income Fund 10,211,887 183,197,996 1,183,804 19,052,519 (51,029) (875,482) 11,344,662 201,375,033
Global Asset Allocation Fund 3,478,495 51,199,000 2,577,537 34,962,268 (241,050) (3,559,469) 5,814,982 82,601,799
Growth and Income Fund 6,674,962 251,498,635 3,927,100 134,051,775 (647,180) (23,667,791) 9,954,882 361,882,619
International Fund 2,736,777 40,729,431 1,702,170 23,752,137 (2,918,129) (43,823,809) 1,520,818 20,657,759
Managed Fund 1,267,957 22,772,807 2,677,655 43,933,612 (1,423,434) (24,870,905) 2,522,178 41,835,514
Money Market Fund 7,205,818 72,058,181 909,052 9,090,525 (8,227,968) (82,279,682) (113,098) (1,130,976)
Social Awareness Fund 10,416,924 322,889,993 1,581,459 43,404,427 (92,914) (2,813,490) 11,905,469 363,480,930
Special Opportunities Fund 2,437,238 78,263,255 2,072,674 58,607,959 (1,656,123) (49,144,550) 2,853,789 87,726,664
Six Months Ended June 30, 1998:
Aggressive Growth Fund 1,612,482 25,081,217 3,125,236 46,108,799 (591,815) (9,167,223) 4,145,903 62,022,793
Bond Fund 1,785,617 22,468,397 1,398,503 17,113,168 (1,036,080) (12,908,342) 2,148,040 26,673,223
Capital Appreciation Fund 2,973,057 53,632,591 2,876,629 48,873,218 (319,598) (5,584,912) 5,530,088 96,920,897
Equity-Income Fund 3,858,712 81,368,836 1,334,423 26,853,944 (359,226) (7,493,128) 4,833,909 100,729,652
Global Asset Allocation Fund 1,011,665 15,460,672 3,040,831 44,436,629 (1,026,128) (15,720,676) 3,026,368 44,176,625
Growth and Income Fund 3,036,722 129,151,227 6,529,367 264,502,098 (1,417,490) (59,434,407) 8,148,599 334,218,918
International Fund 1,543,380 24,761,047 1,350,300 20,111,315 (3,086,122) (47,421,848) (192,442) (2,549,486)
Managed Fund 1,518,870 28,274,389 5,116,262 91,295,226 (705,186) (13,003,118) 5,929,946 106,566,497
Money Market Fund 3,709,135 37,091,351 236,884 2,368,841 (2,628,080) (26,280,800) 1,317,939 13,179,392
Social Awareness Fund 6,933,336 259,973,878 1,900,416 67,438,263 (517,470) (19,257,566) 8,316,282 308,154,575
Special Opportunities Fund 1,008,555 35,101,784 2,653,052 87,663,332 (1,179,536) (41,216,218) 2,482,071 81,548,898
</TABLE>
9. DISTRIBUTION TO SHAREHOLDER
All of the Funds except for the Money Market Fund declare and distribute
dividends on net investment income annually. The Money Market Fund declares and
distributes dividends on net investment income daily. Distributions, if any, of
net realized gains are declared and distributed annually.
10. CAPITAL LOSS CARRYFORWARD
As of December 31, 1997, the Lincoln National Bond Fund, Inc. had $7,175,062 of
unused capital loss carryforward for federal tax purposes. The loss carryforward
expires in the years 2002 to 2004.
11. MANAGEMENT FEE ADJUSTMENT
On may 1, 1998 a new management fee agreement took effect between the advisor
and sub-advisor and the Capital Appreciation Fund. Janus (the sub-advisor to the
Fund) agreed to lower their sub-advisory fees to the advisor, Lincoln Investment
Management Inc. (LIM). LIM, likewise has lowered their advisory fee to the
Capital Appreciation Fund from .80% of assets to .75% of the first $500 million
in assets and .70% on assets greater than $500 million.
12. CUSTODIAN CHANGE
Effective April 1, 1998 the custodial responsibility for the Lincoln National
Bond, Growth and Income, Managed, Money Market, Social Awareness and Special
Opportunities Funds moved from Bankers Trust Co. to Chase Bank.
13. PROXY SOLICITATION
In March 1998, Lincoln Life presented various topics to variable contractholders
and policyholders, via proxy solicitation, that required a vote by such
shareholders. Subsequent to the solicitation, a special meeting of the
Stockholder (Lincoln Life) was held on April 13, 1998 to vote the issues
according to contractholder and policyholder proxy solicitation responses. The
following outline identifies the topics included in the solicitation, the Funds
affected by each issue, the number of outstanding shares voted in each Fund and
the results of each vote.
The following table illustrates the number of shares voted in each Fund:
<TABLE>
<CAPTION>
Total Number of Total Number of
Fund Name Shares Outstanding Fund Name Shares Outstanding
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggressive Growth (AG) 24,004,002.729 International (IF) 31,621,405,686
Bond Fund (BF) 23,751,230.211 Managed (MF) 49,521,529.934
Capital Appreciation (CA) 29,013,011.115 Money Market (MM) 9,369,506.913
Equity-Income (EI) 42,704,743.132 Social Awareness (SA) 39,148,790.336
Global Asset Allocation (GAA) 30,652,590.857 Special Opportunities (SO) 27,561,285.753
Growth and Income (GF) 91,368,614.883
</TABLE>
49
<PAGE>
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (CONTINUED)
ISSUES SUMMARY:
1. Election of the following nominees to the Board of Directors for each of
the Lincoln National Mutual Funds; John Borsch, Jr. (Director), Kelly D.
Clevenger (Chairman, President and Director), Barbara S. Kowalczyk
(Director), Nancy L. Frisby, CPA (Director), Kenneth G. Stella (Director).
At the time of the proxy solicitation, Ken Stella was the only nominee who
was currently not serving as a Director to the Funds.
2. Approve or reject amendment to the investment advisory and sub-advisory
agreements between the Equity-Income Fund and Lincoln Investment
Management Inc., and Lincoln Investment Management Inc. and Fidelity
Management Trust Company, respectively, which reduces the amount of the
advisory and sub-advisory fees paid thereunder. The proposed reductions
are as follows: Reduce advisory fee paid by the Fund to Lincoln Investment
Management Inc. from .95% of assets to .75% for the first $500 million of
assets and .70% of assets greater than $500 million. Likewise, reduce the
sub-advisory fee to Fidelity Management Trust Co. from .75% to .48% of
assets.
3. For the International Fund only, approve or reject replacing Clay Finlay,
Inc. with Delaware International Advisor Limited (DIAL) as sub-advisor as
well as approve or reject the investment sub-advisory agreement between
Lincoln Investment Management Inc. and DIAL.
4. For the Bond, Money Market, Managed, Growth and Income, Social Awareness
and Special Opportunities Funds, modify the investment restrictions to
permit investments in certain types of loan participation certificates
(LPCs) as money market securities.
5. Eliminate certain fundamental investment policies of all of the Lincoln
National Funds except for the Aggressive Growth, Capital Appreciation and
the Equity-Income Funds:
a) For the various Funds, eliminate each Fund's fundamental policy
regarding the purchase of securities of an issuer when any Board
member or officer of the Fund or the advisor holds more than 1/2 of 1%
and together they own more than 5% of the securities of the issuer.
b) For the various Funds, eliminate each Fund's fundamental policy
regarding the Fund's investments in oil, gas or other mineral
exploration or development programs.
c) For the various Funds, eliminate each Fund's fundamental policy
regarding the Fund's investments in securities of companies less than
three years old. 6.o Approve the engagement of Ernst & Young LLP as
independent auditors to the Funds for the 1998 fiscal year.
SOLICITATION RESULTS:
AGGRESSIVE GROWTH FUND:
Election of Directors: 99.06%.Voted For
0.94%.Voted Against
Engage Ernst & Young LLP: 97.06%.Voted For
0.74%.Voted Against
1.66%.Abstained
BOND FUND:
Election of Directors: 98.84%.Voted For
1.16%.Voted Against
Modify investment restrictions in LPCs 90.67%.Voted For
as outlined in issues summary: 3.34%.Voted Against
5.99%.Abstained
Eliminate investment restrictions pertaining to:
a) ownership by officers/Directors 91.48%.Voted For
5.46%.Voted Against
3.06%.Abstained
b) oil & gas exploration 92.34%.Voted For
5.20%.Voted Against
2.46%.Abstained
c) companies less than three years old 91.94%.Voted For
5.34%.Voted Against
2.73%.Abstained
Engage Ernst & Young LLP: 97.47%.Voted For
1.00%.Voted Against
1.53%.Abstained
CAPITAL APPRECIATION FUND:
Election of Directors: 99.48%.Voted For
0.52%.Voted Against
Engage Ernst & Young LLP: 98.51%.Voted For
0.61%.Voted Against
0.88%.Abstained
Equity-Income Fund:
Election of Directors: 99.21%.Voted For
0.79%.Voted Against
Reduction in advisory and sub-advisory fees: 83.23% Voted For
0.83%.Voted Against
15.94%.Abstained
Engage Ernst & Young LLP: 97.89%.Voted For
0.65%.Voted Against
1.46%.Abstained
GLOBAL ASSET ALLOCATION FUND:
Election of Directors: 99.33%.Voted For
0.67%.Voted Against
Eliminate investment restrictions pertaining to:
a) ownership by officers/Directors 92.22%.Voted For
4.67%.Voted Against
3.11%.Abstained
b) oil & gas exploration 91.66%.Voted For
5.52%.Voted Against
2.82%.Abstained
Engage Ernst & Young LLP: 98.24%.Voted For
0.60%.Voted Against
1.16%.Abstained
GROWTH AND INCOME FUND:
Election of Directors: 99.19%.Voted For
0.81%.Voted Against
Modify investment restrictions in LPCs 94.05%.Voted For
as outlined in issues summary: 3.10%.Voted Against
2.85%.Abstained
Eliminate investment restrictions pertaining to:
a) ownership by officers/Directors 91.82%.Voted For
5.21%.Voted Against
2.97%.Abstained
b) oil & gas exploration 92.39%.Voted For
5.00%.Voted Against
2.61%.Abstained
c) companies less than three years old 91.83%.Voted For
5.40%.Voted Against
2.77%.Abstained
Engage Ernst & Young LLP: 97.81%.Voted For
0.64%.Voted Against
1.55%.Abstained
50
<PAGE>
INTERNATIONAL FUND:
Election of Directors: 98.82%.Voted For
1.18%.Voted Against
Sub-advisory agreement with Delaware 82.82%.Voted For
International Advisors LTD 1.47%.Voted Against
15.71%.Abstained
Eliminate investment restrictions pertaining to:
a) ownership by officers/Directors 92.20%.Voted For
5.02%.Voted Against
2.78%.Abstained
b) oil & gas exploration 93.25%.Voted For
4.37%.Voted Against
2.38%.Abstained
c) companies less than three years old 92.36%.Voted For
5.08%.Voted Against
2.56%.Abstained
Engage Ernst & Young LLP: 97.61%.Voted For
0.99%.Voted Against
1.40%.Abstained
MANAGED FUND:
Election of Directors: 99.45%.Voted For
0.55%.Voted Against
Modify investment restrictions in LPCs 95.12%.Voted For
International Advisors LTD 2.67%.Voted Against
2.21%.Abstained
Eliminate investment restrictions pertaining to:
a) ownership by officers/Directors 93.03%.Voted For
4.50%.Voted Against
2.47%.Abstained
b) oil & gas exploration 92.95%.Voted For
4.63%.Voted Against
2.42%.Abstained
c) companies less than three years old 92.72%.Voted For
4.58%.Voted Against
2.70%.Abstained
Engage Ernst & Young LLP: 97.93%.Voted For
0.76%.Voted Against
1.31%.Abstained
MONEY MARKET FUND:
Election of Directors: 96.50%.Voted For
3.50%.Voted Against
Modify investment restrictions in LPCs 89.63%.Voted For
International Advisors LTD 7.65%.Voted Against
2.72%.Abstained
Eliminate investment restrictions pertaining to:
a) ownership by officers/Directors 87.59%.Voted For
9.85%.Voted Against
2.56%.Abstained
b) oil & gas exploration 89.10%.Voted For
8.05%.Voted Against
2.85%.Abstained
c) companies less than three years old 85.10%.Voted For
11.84%.Voted Against
3.06%.Abstained
Engage Ernst & Young LLP: 97.14%.Voted For
1.40%.Voted Against
1.46%.Abstained
SOCIAL AWARENESS FUND:
Election of Directors: 98.91%.Voted For
1.09%.Voted Against
Modify investment restrictions in LPCs 92.96%.Voted For
International Advisors LTD 3.45%.Voted Against
3.59%.Abstained
Eliminate investment restrictions pertaining to:
a) ownership by officers/Directors 90.33%.Voted For
5.92%.Voted Against
3.75%.Abstained
b) oil & gas exploration 90.98%.Voted For
5.72%.Voted Against
3.30%.Abstained
c) companies less than three years old 90.07%.Voted For
6.49%.Voted Against
3.44%.Abstained
Engage Ernst & Young LLP: 97.46%.Voted For
0.69%.Voted Against
1.85%.Abstained
SPECIAL OPPORTUNITIES FUND:
Election of Directors: 98.83%.Voted For
1.17%.Voted Against
Modify investment restrictions in LPCs 93.48%.Voted For
International Advisors LTD 3.63%.Voted Against
2.89%.Abstained
Eliminate investment restrictions pertaining to:
a) ownership by officers/Directors 90.41%.Voted For
6.75%.Voted Against
2.84%.Abstained
b) oil & gas exploration 92.21%.Voted For
5.24%.Voted Against
2.55%.Abstained
Engage Ernst & Young LLP: 96.67%.Voted For
1.75%.Voted Against
1.58%.Abstained
51
<PAGE>
FINANCIAL HIGHLIGHTS - UNAUDITED
(SELECTED DATA FOR EACH CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
Income from Investment Operations Less Dividends From:
--------------------------------- --------------------
Net Net Net
Asset Realized and Total Asset Ratio of
Value Net Unrealized From Net Net Realized Value Expenses
Period Beginning Investment Gain(Loss) on Investment Investment Gain on Total End Total To Average
Ended of Period Income(Loss) Investments Operations Income Investment Dividends of Period Return** Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund *
1993 $10.000 $ - $ - $ - $ - $ - $ - $10.000 - -
1994 10.000 0.019 (0.952) (0.933) (0.019) - (0.019) 9.048 (9.37)% 1.11%
1995 9.048 0.007 3.135 3.142 (0.007) - (0.007) 12.183 34.15% 0.94%
1996 12.183 0.004 1.989 1.993 (0.004) (0.192) (0.196) 13.980 17.02% 0.82%
1997 13.980 0.023 3.055 3.078 - (0.673) (0.673) 16.385 23.09% 0.81%
1998+ 16.385 0.003 1.044 1.047 (0.023) (2.186) (2.209) 15.223 6.82% 0.79%
Bond Fund
1988 $11.141 $ 1.053 $(0.131) $ 0.922 $(1.053) $ - $(1.053) $11.010 9.24% 0.57%
1989 11.010 1.027 0.428 1.455 (1.027) - (1.027) 11.438 13.23% 0.53%
1990 11.438 0.998 (0.240) 0.758 (0.998) - (0.998) 11.198 5.45% 0.53%
1991 11.198 0.956 0.990 1.946 (0.956) - (0.956) 12.188 17.96% 0.52%
1992 12.188 0.903 0.052 0.955 (0.903) - (0.903) 12.240 7.68% 0.52%
1993 12.240 0.758 0.703 1.461 (0.758) (0.250) (1.008) 12.693 13.39% 0.50%
1994 12.693 0.741 (1.233) (0.492) (0.741) (0.519) (1.260) 10.941 (5.01)% 0.50%
1995 10.941 0.803 1.306 2.109 (0.803) - (0.803) 12.247 19.59% 0.49%
1996 12.247 0.767 (0.481) 0.286 (0.767) - (0.767) 11.766 1.91% 0.51%
1997 11.766 0.785 0.310 1.095 - - - 12.861 9.30% 0.53%
1998+ 12.861 0.356 0.184 0.540 (0.771) - (0.771) 12.630 4.39% 0.53%
Capital Appreciation Fund *
1993 $10.000 $ - $ - $ - $ - $ - $ - $10.000 - -
1994 10.000 0.134 0.152 0.286 (0.134) - (0.134) 10.152 2.71% 1.18%
1995 10.152 0.116 2.764 2.880 (0.116) - (0.116) 12.916 28.69% 1.07%
1996 12.916 0.135 2.051 2.186 (0.135) (0.463) (0.598) 14.504 18.02% 0.93%
1997 14.504 0.050 3.510 3.560 - (0.534) (0.534) 17.530 25.29% 0.89%
1998+ 17.530 0.009 3.400 3.409 (0.050) (1.832) (1.882) 19.057 20.78% 0.85%
Equity-Income Fund *
1993 $10.000 $ - $ - $ - $ - $ - $ - $10.000 - -
1994 10.000 0.258 0.335 0.593 (0.258) - (0.258) 10.335 5.65% 1.26%
1995 10.335 0.275 3.218 3.493 (0.275) (0.046) (0.321) 13.507 34.74% 1.15%
1996 13.507 0.288 2.451 2.739 (0.288) (0.178) (0.466) 15.780 19.81% 1.08%
1997 15.780 0.229 4.511 4.740 - (0.402) (0.402) 20.118 30.67% 1.02%
1998+ 20.118 0.141 2.100 2.241 (0.225) (0.429) (0.654) 21.705 11.28% 0.78%
Global Asset Allocation Fund
1988 $ 9.027 $ 0.405 $ 0.589 $ 0.994 $(0.405) $ - $(0.405) $ 9.616 10.87% 1.16%
1989 9.616 0.573 1.165 1.738 (0.573) - (0.573) 10.781 17.91% 1.33%
1990 10.781 0.549 (0.516) 0.033 (0.549) (0.279) (0.828) .9.986 .92% 1.14%
1991 9.986 0.426 1.391 1.817 (0.426) (0.138) (0.564) 11.239 18.43% 1.04%
1992 11.239 0.404 0.271 0.675 (0.404) (0.306) (0.710) 11.204 6.43% 1.07%
1993 11.204 0.362 1.522 1.884 (0.362) (0.224) (0.586) 12.502 17.28% 1.05%
1994 12.502 0.349 (0.702) (0.353) (0.349) (0.656) (1.005) 11.144 (1.82)% 1.06%
1995 11.144 0.412 .2.247 2.659 (0.412) - (0.412) 13.391 23.95% 0.92%
1996 13.391 0.392 1.522 1.914 (0.392) (0.687) (1.079) 14.226 15.04% 1.00%
1997 14.226 0.383 2.205 2.588 - (1.186) (1.186) 15.628 19.47% 0.89%
1998+ 15.628 0.190 1.302 1.492 (0.389) (1.222) (1.611) 15.509 10.41% 0.88%
Growth and Income Fund
1988 $19.640 $ 0.540 $ 0.729 $ 1.269 $(0.540) $(2.997) $(3.537) $17.372 8.18% 0.54%
1989 17.372 0.793 2.859 3.652 (0.793) - (0.793) 20.231 20.75% 0.50%
1990 20.231 0.512 (0.539) (0.027) (0.512) (1.068) (1.580) 18.624 0.95% 0.48%
1991 18.624 0.617 5.142 5.759 (0.617) - (0.617) 23.766 30.61% 0.44%
1992 23.766 0.663 (0.336) 0.327 (0.663) (0.503) (1.166) 22.927 1.84% 0.41%
1993 22.927 0.610 2.285 2.895 (0.610) (0.519) (1.129) 24.693 13.12% 0.38%
1994 24.693 0.668 (0.428) 0.240 (0.668) (0.968) (1.636) 23.297 1.32% 0.37%
1995 23.297 0.701 7.680 8.380 (0.701) (1.221) (1.922) 29.756 38.81% 0.35%
1996 29.756 0.683 4.943 5.626 (0.683) (1.589) (2.272) 33.110 18.76% 0.36%
1997 33.110 0.649 9.331 9.980 - (1.141) (1.141) 41.949 30.93% 0.35%
1998+ 41.949 0.309 4.891 5.200 (0.646) (2.475) (3.121) 44.028 13.15% 0.35%
Ratio of Net
Investment Net Assets
Income Portfolio At End
Period To Average Turnover of Period
Ended Net Assets Rate (000's)
- -------------------------------------------
<S> <C> <C> <C>
Aggressive Growth Fund *
1993 - - $ 110
1994 0.21% 100.31% 60,697
1995 0.06% 85.82% 138,471
1996 0.03% 77.51% 242,609
1997 0.16% 105.07% 342,763
1998+ 0.04% 49.27% 381,554
Bond Fund
1988 9.41% 183.79% $ 59,947
1989 9.13% 121.19% 91,152
1990 9.00% 76.67% 103,845
1991 8.32% 72.80% 139,854
1992 7.45% 257.27% 168,636
1993 6.05% 324.90% 226,150
1994 6.40% 213.26% 195,010
1995 6.90% 139.61% 250,816
1996 6.56% 142.19% 253,328
1997 6.45% 56.16% 280,383
1998+ 6.09% 32.34% 302,480
Capital Appreciation Fund *
1993 - - $ 110
1994 1.33% 185.28% 52,904
1995 1.00% 195.63% 127,936
1996 0.99% 92.73% 267,242
1997 0.35% 137.07% 451,036
1998+ 0.12% 37.89% 595,683
Equity-Income Fund *
1993 - - $ 110
1994 2.48% 33.40% 78,861
1995 2.27% 27.81% 238,771
1996 1.99% 22.17% 457,153
1997 1.46% 17.81% 811,070
1998+ 1.45% 11.42% 979,986
Global Asset Allocation Fund
1988 4.36% 136.79% $ 26,885
1989 5.59% 79.11% 44,913
1990 5.49% 56.28% 56,088
1991 4.01% 101.41% 76,269
1992 3.70% 128.53% 95,607
1993 3.04% 208.55% 153,500
1994 3.07% 134.33% 195,697
1995 3.36% 146.49% 248,772
1996 2.93% 167.33% 316,051
1997 2.77% 178.40% 438,090
1998+ 2.49% 67.89% 481,671
Growth and Income Fund
1988 3.08% 179.88% $ 209,513
1989 4.06% 208.98% 295,399
1990 2.79% 59.47% 356,239
1991 2.86% 33.59% 581,297
1992 2.97% 74.50% 765,457
1993 2.58% 60.76% 1,034,105
1994 2.85% 76.34% 1,161,324
1995 2.64% 51.76% 1,833,450
1996 2.23% 46.70% 2,465,224
1997 1.79% 32.09% 3,540,862
1998+ 1.51% 12.86% 4,075,200
</TABLE>
52
<PAGE>
FINANCIAL HIGHLIGHTS - UNAUDITED (CONTINUED)
(SELECTED DATA FOR EACH CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
Income from Investment Operations Less Dividends From:
--------------------------------- --------------------
Net Net Net
Asset Realized and Total Asset Ratio of
Value Net Unrealized From Net Net Realized Value Expenses
Period Beginning Investment Gain(Loss) on Investment Investment Gain on Total End Total To Average
Ended of Period Income(Loss) Investments Operations Income Investment Dividends of Period Return** Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
International Fund *
1991 $10.000 $(0.030) $ 0.047 $ 0.017 $(0.059) $ - $(0.059) $ 9.958 (0.36)% 1.06%
1992 9.958 0.037 (0.867) (0.830) (0.037) - (0.037) 9.091 (7.93)% 1.46%
1993 9.091 0.010 3.551 3.561 (0.010) - (0.010) 12.642 38.90% 1.24%
1994 12.642 0.033 0.385 0.418 (0.033) - (0.033) 13.027 3.28% 1.24%
1995 13.027 0.069 0.892 0.961 (0.069) (0.521) (0.590) 13.398 8.89% 1.27%
1996 13.398 0.071 1.244 1.315 (0.071) (0.086) (0.157) 14.556 9.52% 1.19%
1997 14.556 0.066 0.771 0.837 - (0.720) (0.720) 14.673 6.00% 0.93%
1998+ 14.673 0.151 2.093 2.244 (0.069) (0.593) (0.662) 16.255 15.73% 0.92%
Managed Fund
1988 $12.283 $ 0.666 $ 0.352 $ 1.018 $(0.666) $(1.108) $(1.774) $11.527 9.00% 0.55%
1989 11.527 0.798 1.186 1.984 (0.798) - (0.798) 12.713 16.97% 0.52%
1990 12.713 0.705 (0.334) 0.371 (0.705) (0.438) (1.143) 11.941 3.50% 0.52%
1991 11.941 0.710 1.906 2.616 (0.710) - (0.710) 13.847 21.66% 0.50%
1992 13.847 0.653 (0.158) 0.495 (0.653) (0.036) (0.689) 13.653 3.66% 0.49%
1993 13.653 0.584 0.908 1.492 (0.584) (0.409) (0.993) 14.152 11.53% 0.45%
1994 14.152 0.628 (0.814) (0.186) (0.628) (0.555) (1.183) 12.783 (1.84)% 0.44%
1995 12.783 0.623 3.132 3.755 (0.623) (0.020) (0.643) 15.895 29.29% 0.43%
1996 15.895 0.628 1.291 1.919 (0.628) (0.920) (1.548) 16.266 12.05% 0.43%
1997 16.266 0.661 2.811 3.472 - (0.434) (0.434) 19.304 21.82% 0.42%
1998+ 19.304 0.297 1.311 1.608 (0.657) (1.402) (2.059) 18.853 9.21% 0.41%
Money Market Fund
1988 $10.000 $ 0.744 $ - $ 0.744 $(0.744) $ - $(0.744) $10.000 7.21% 0.55%
1989 10.000 0.909 - 0.909 (0.909) - (0.909) 10.000 9.09% 0.54%
1990 10.000 0.802 - 0.802 (0.802) - (0.802) 10.000 7.94% 0.53%
1991 10.000 0.571 - 0.571 (0.571) - (0.571) 10.000 5.79% 0.53%
1992 10.000 0.354 - 0.354 (0.354) - (0.354) 10.000 3.48% 0.53%
1993 10.000 0.276 - 0.276 (0.276) - (0.276) 10.000 2.76% 0.50%
1994 10.000 0.381 - 0.381 (0.381) - (0.381) 10.000 3.82% 0.52%
1995 10.000 0.570 - 0.570 (0.570) - (0.570) 10.000 5.67% 0.52%
1996 10.000 0.505 - 0.505 (0.505) - (0.505) 10.000 5.07% 0.57%
1997 10.000 0.501 - 0.501 (0.501) - (0.501) 10.000 5.13% 0.59%
1998+ 10.000 0.239 - 0.239 (0.239) - (0.239) 10.000 2.46% 0.59%
Social Awareness Fund *
1988 $10.000 $ 0.032 $ 0.454 $ 0.486 $(0.032) $ - $(0.032) $10.454 4.89% 1.64%
1989 10.454 0.309 2.920 3.229 (0.309) (0.024) (0.333) 13.350 31.18% 0.99%
1990 13.350 0.289 (0.989) (0.700) (0.289) (0.154) (0.443) 12.207 (4.30)% 0.65%
1991 12.207 0.348 4.242 4.590 (0.348) - (0.348) 16.449 37.22% 0.56%
1992 16.449 0.399 0.179 0.578 (0.399) (0.051) (0.450) 16.577 3.60% 0.55%
1993 16.577 0.326 1.792 2.118 (0.326) (0.454) (0.780) 17.915 13.56% 0.51%
1994 17.915 0.377 (0.461) (0.084) (0.377) (0.812) (1.189) 16.642 0.19% 0.53%
1995 16.642 0.432 6.491 6.923 (0.432) (0.543) (0.975) 22.590 42.83% 0.50%
1996 22.590 0.389 5.748 6.137 (0.389) (1.022) (1.411) 27.316 28.94% 0.46%
1997 27.316 0.364 9.447 9.811 - (1.470) (1.470) 35.657 37.53% 0.41%
1998+ 35.657 0.183 5.241 5.424 (0.348) (1.483) (1.831) 39.250 15.80% 0.38%
Special Opportunities Fund
1988 $17.933 $ 0.060 $ 0.327 $ 0.387 $(0.060) $(2.659) $(2.719) $15.601 3.88% 0.59%
1989 15.601 0.276 4.904 5.180 (0.276) - (0.276) 20.505 32.90% 0.55%
1990 20.505 0.236 (1.931) (1.695) (0.236) (1.208) (1.444) 17.366 (7.42)% 0.55%
1991 17.366 0.323 7.195 7.518 (0.323) - (0.323) 24.561 42.83% 0.53%
1992 24.561 0.546 1.106 1.652 (0.546) (0.955) (1.501) 24.712 7.28% 0.53%
1993 24.712 0.530 2.703 3.233 (0.530) (2.937) (3.467) 24.478 18.42% 0.49%
1994 24.478 0.565 (0.942) (0.377) (0.565) (1.372) (1.937) 22.164 (1.00)% 0.48%
1995 22.164 0.616 6.131 6.747 (0.616) (0.912) (1.528) 27.383 31.86% 0.45%
1996 27.383 0.548 3.867 4.414 (0.548) (1.827) 2.374 29.423 16.51% 0.44%
1997 29.423 0.477 7.293 7.770 - (2.137) (2.137) 35.056 28.15% 0.42%
1998+ 35.056 0.247 3.421 3.668 (0.476) (3.043) (3.519) 35.205 11.26% 0.41%
Ratio of Net
Investment Net Assets
Income Portfolio At End
Period To Average Turnover of Period
Ended Net Assets Rate (000's)
- -------------------------------------------
<S> <C> <C> <C>
International Fund *
1991 (0.30)% 25.18% $ 20,935
1992 0.39% 22.86% 45,627
1993 0.09% 61.44% 161,470
1994 0.25% 52.78% 316,350
1995 0.59% 63.15% 358,391
1996 0.51% 68.67% 440,375
1997 0.44% 77.58% 466,229
1998+ 1.89% 117.21% 513,363
Managed Fund
1988 5.71% 166.57% $ 140,135
1989 6.47% 158.73% 182,576
1990 5.96% 93.38% 204,310
1991 5.53% 22.70% 276,899
1992 4.86% 226.66% 343,439
1993 4.24% 235.59% 445,040
1994 4.45% 160.79% 442,140
1995 4.37% 112.52% 589,165
1996 4.05% 108.86% 675,740
1997 3.77% 53.40% 850,646
1998+ 3.35% 24.11% 942,568
Money Market Fund
1988 7.21% - $ 59,160
1989 9.09% - 88,551
1990 7.94% - 102,399
1991 5.79% - 149,555
1992 3.48% - 92,472
1993 2.76% - 81,042
1994 3.82% - 77,177
1995 5.67% - 75,319
1996 5.07% - 90,358
1997 5.01% - 89,227
1998+ 5.07% - 102,406
Social Awareness Fund *
1988 0.30% 10.07% $ 2,067
1989 2.43% 63.37% 9,565
1990 2.34% 29.39% . 24,674
1991 2.33% 45.00% . 52,959
1992 2.50% 84.32% . 89,669
1993 1.90% 84.43% 137,606
1994 2.22% 64.97% 163,514
1995 2.21% 54.02% 297,983
1996 1.58% 45.90% 636,595
1997 1.37% 34.84% 1,255,494
1998+ 1.16% 16.46% 1,708,434
Special Opportunities Fund
1988 0.39% 73.91% $ 63,982
1989 1.50% 92.56% 75,245
1990 1.33% 37.50% 83,762
1991 1.49% 111.60% 132,753
1992 2.35% 128.49% 189,867
1993 2.29% 74.11% 273,998
1994 2.49% 74.63% 318,417
1995 2.39% 90.12% 505,755
1996 2.00% 88.17% 648,592
1997 1.57% 73.74% 872,822
1998+ 1.45% 20.99% 963,902
</TABLE>
* The per share data, total return, ratios and portfolio turnover are
calculated for the period from commencement of investment activity on
August 3, 1987 through December 31, 1987 for the Global Asset Allocation
Fund, May 2, 1998 through December 31, 1988 for the Social Awareness Fund,
and May 1, 1991 through December 31, 1991 for the International Fund.
Accordingly, the total return, ratios, and portfolio turnover have NOTbeen
calculated on an annualized basis.
** Total return percentages in this table are calculated on the basis
prescribed by the Securities and Exchange Commission. These percentages
are based on the underlying mutual fund shares in which Separate Account
C, D, G, and K may invest. The total return percentages in the table are
NOT calculated on the same basis as the performance percentages in the
letter at the front of this booklet (those percentages are based upon the
change in unit value).
+ For the six month period ended June 30, 1998. Total return and portfolio
turnover have NOT been calculated on an annualized basis.
53
<PAGE>
Lincoln National Life Insurance Co.
1300 South Clinton Street
Fort Wayne, IN 46802
[TM] [LINCOLN NATIONAL
LIFE INSURANCE CO. LOGO]
Fort Wayne, Indiana 46801
