[LOGO OF LINCOLN FINANCIAL GROUP
Lincoln National
Bond Fund, Inc.
Semi-Annual Report
June 30, 1999
<PAGE>
Lincoln National Bond Fund, Inc.
Index
Commentary
Statement of Net Assets
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
<PAGE>
Lincoln National Bond Fund, Inc.
Managed by: [LOGO OF LINCOLN FINANCIAL GROUP
The Fund had a return of (2.8)% for the first six months of 1999 while its
benchmark, the Lehman Brothers Government/Corporate Bond Index, returned (2.3)%
for the same period. With a continuation of interest rate increases in the
second quarter as in the first quarter, 1999 remains a difficult year for bonds.
Negative total returns have been achieved by every broad bond index. Bond prices
have gone down in 1999, as the U.S. economy has remained robust, with bond
market participants anticipating tighter Federal Reserve (Fed) policy to slow
economic growth. The Fed did indeed tighten policy in late June with an increase
in the Fed Funds rate by 0.25% to 5%. However, in somewhat of a surprise, the
Fed changed their policy stance (held since May 1999) from a tightening bias to
a neutral bias.
Notwithstanding this change in policy stance, the bond market remains very
divided on the future course of Fed policy and interest rate moves.
Although outperforming Treasuries in the first quarter, corporate bonds suffered
due to heavy supply and buyer apathy in May and June and have now about equal
performance with Treasuries for year-to-date 1999. Credit conditions in 1999,
however, are much tamer than the tumultuous 1998. We expect the credit
environment to be relatively benign, as we see no recession likely over the next
twelve months.
David C. Fischer
Bond Fund 1
<PAGE>
Lincoln National Bond Fund, Inc.
Statement of Net Assets - Unaudited
June 30, 1999
Investments:
Par Market
Long-Term Debt Investments: Amount Value
- ------------------------------------------------------------------------------
U.S. Government & Agency Obligations: 33.5%
- ------------------------------------------------------------------------------
Federal Farm Credit Bank
5.75%, 3/23/05 $13,200,000 $12,841,617
Federal Home Loan Mortgage Corporation
6.39%, 10/15/06 1,971,743 1,957,571
7.30%, 12/1/12 2,911,380 2,946,862
3.50%, 12/15/21 2,000,000 1,732,064
Federal Home Loan Bank
5.84%, 8/19/05 29,015,000 28,320,378
6.00%, 6/11/08 8,700,000 8,448,108
Federal National Mortgage Association
6.80%, 8/1/05 904,894 906,867
7.175%, 10/1/05 2,513,799 2,535,619
6.655%, 11/1/05 965,019 965,000
6.66%, 12/1/05 1,929,094 1,934,457
7.043%, 7/1/06 2,423,278 2,470,229
0.00%, 7/24/06 9,500,000 6,112,850
7.15%, 10/1/15 2,726,767 2,742,528
8.00%, 4/1/17 87,370 90,482
6.50%, 9/25/21 4,096,870 4,082,641
7.00%, 10/1/25 1,631,701 1,622,013
6.50%, 12/1/27 14,291,681 13,831,668
Government National Mortgage Association
9.00%, 5/15/17 70,229 75,409
9.00%, 9/15/19 315,507 338,677
6.50%, 11/15/23 634,774 616,128
U.S. Treasury Bond
12.00%, 8/15/13 500,000 700,136
U.S.Treasury Note
6.50%, 8/31/01 6,275,000 6,386,791
U.S. Treasury Strip
0.00%, 11/15/09 13,000,000 6,893,865
0.00%, 2/15/11 16,500,000 8,114,061
- ------------------------------------------------------------------------------
116,666,021
Collateralized Mortgage Obligations: 2.8%
- ------------------------------------------------------------------------------
CMAT 1999-C1 A1
6.25%, 8/17/06 2,469,054 2,412,728
Household Affinity Credit Card
6.05%, 5/15/01 1,000,000 1,003,136
Mid-State Trust
7.63%, 4/1/22 97,205 98,617
Norwest Asset Sec Corp Ser 99-5
6.25%, 3/25/14 5,028,617 4,938,259
VAND MTG SER99-A CL 1A2 144A
5.97%, 3/7/12 1,300,000 1,281,719
- ------------------------------------------------------------------------------
9,734,459
Automobile & Auto Parts: 0.6%
- ------------------------------------------------------------------------------
Daimler-Chrysler
7.45%, 2/1/2097 1,000,000 996,250
Goodyear Tire & Rubber
6.63%, 12/1/06 1,250,000 1,229,688
- ------------------------------------------------------------------------------
2,225,938
Banking, Finance & Insurance: 33.6%
- ------------------------------------------------------------------------------
Ahmanson, H. F.
8.25%, 10/1/02 2,000,000 2,087,500
Aristar Financial
7.50%, 7/1/99 1,500,000 1,500,000
Bank One
9.88%, 3/1/09 500,000 600,000
Banque Paribas-NY
8.35%, 6/15/07 1,400,000 1,512,000
Barnett Bank
6.90%, 9/1/05 1,500,000 1,501,875
Par Market
Banking, Finance & Insurance (Con't) Amount Value
- ------------------------------------------------------------------------------
Barnett Capital Trust I
8.06%, 12/1/26 $ 1,900,000 $ 1,928,500
Citicorp Notes
6.33%, 1/5/06 1,600,000 1,546,000
Comerica Bank
7.88%, 9/15/26 1,500,000 1,533,750
Dow Capital
9.00%, 5/15/10 3,000,000 3,371,250
Fannie Mae- When Issued
0.00%, 6/1/17 66,500,000 20,739,907
Federal Farm Credit Bank
5.97%, 3/11/05 31,025,000 30,508,961
Finova Capital
6.12%, 5/28/02 1,000,000 991,250
First Bank System
6.88%, 9/15/07 1,000,000 997,500
First of America Capital Trust I
8.12%, 1/31/27 2,000,000 2,032,500
First Security
7.00%, 7/15/05 1,000,000 1,006,250
First Union
8.00%, 8/15/09 2,000,000 2,182,500
Fleet Financial Group
7.25%, 9/1/99 1,000,000 1,002,940
General Motors Acceptance
7.88%, 3/7/01 1,500,000 1,541,250
8.88%, 6/1/10 1,500,000 1,695,000
8.17%, 1/2/20 85,041 87,070
Harris Bankcorp
9.38%, 6/1/01 250,000 262,813
Household Finance
9.63%, 7/15/00 875,000 905,612
Hydro-Quebec
7.20%, 10/5/09 3,000,000 3,414,683
International Lease Finance
8.25%, 1/15/00 2,000,000 2,029,793
John Deere Capital
8.63%, 8/1/19 2,000,000 2,132,500
Lehman Brothers Holdings
8.875%, 3/1/02 1,000,000 1,045,000
Mellon Capital I Notes
7.72%, 12/1/26 1,500,000 1,466,250
Mercantile Bancorp
7.30%, 6/15/07 1,325,000 1,349,844
Midland Bank
5.313%, 9/29/49 1,400,000 1,119,300
Morgan Stanley Group
6.875%, 3/1/07 2,250,000 2,247,188
National Westminister Bank
9.45%, 5/1/01 500,000 522,500
Nynex Capital Funding
7.63%, 10/15/09 3,000,000 3,324,277
PNC Funding
6.875%, 7/15/07 1,187,000 1,184,033
Polymer Group
9.00%, 7/1/07 300,000 294,000
PSE&G 144A
6.25%, 5/15/03 2,500,000 2,440,625
Salomon Brothers
7.25%, 1/15/00 1,000,000 1,010,099
Salomon Smith Barney
7.875%, 10/1/99 3,000,000 3,018,824
Simon DeBartolo Group
7.125%, 6/24/05 520,000 507,650
SouthTrust Bank of Birmingham
7.69%, 5/15/25 2,750,000 2,918,438
Standard Chartered Notes
5.28%, 12/29/49 2,500,000 1,648,250
State Street Capital Series B
8.035%, 3/15/27 1,400,000 1,410,500
Union Bank Switzerland
7.25%, 7/15/06 2,250,000 2,269,688
Wachovia Capital Trust I
7.64%, 1/15/27 1,900,000 1,850,125
- ------------------------------------------------------------------------------
116,737,995
Bond Fund 2
<PAGE>
Par Market
Amount Value
- ------------------------------------------------------------------------------
Building & Materials: 0.7%
- ------------------------------------------------------------------------------
Champion International
7.70%, 12/15/99 $ 1,500,000 $ 1,507,500
Georgia-Pacific
9.95%, 6/15/02 1,000,000 1,082,500
- ------------------------------------------------------------------------------
2,590,000
Cable, Media & Publishing: 1.2%
- ------------------------------------------------------------------------------
Century Communications
0.00%, 1/15/08 300,000 135,000
Charter Communications 144A
8.63%, 4/1/09 300,000 288,750
News America Holdings
8.45%, 8/1/34 1,500,000 1,580,625
Time Warner
9.13%, 1/15/13 2,000,000 2,320,000
- ------------------------------------------------------------------------------
4,324,375
Chemicals: 0.1%
- ------------------------------------------------------------------------------
ISP Holdings
9.00%, 10/15/03 300,000 301,500
Energy: 1.0%
Consumers Energy
6.50%, 6/15/05 500,000 496,875
6.20%, 5/1/08 1,000,000 965,000
Enron
9.50%, 6/15/01 1,000,000 1,056,250
Petro-Canada
8.60%, 10/15/01 1,500,000 1,571,250
- ------------------------------------------------------------------------------
4,089,375
Environmental Services: 0.5%
- ------------------------------------------------------------------------------
Waste Management
6.625%, 7/15/02 1,750,000 1,758,750
- ------------------------------------------------------------------------------
Food, Beverage & Tobacco: 0.2%
- ------------------------------------------------------------------------------
Nabisco
7.55%, 6/15/15 750,000 744,375
Healthcare & Pharmaceuticals: 1.0%
Allegiance
7.30%, 10/15/06 750,000 766,875
Lilly (Eli)
8.38%, 2/7/05 2,250,000 2,411,550
Tenet Healthcare
8.00%, 1/15/05 300,000 294,000
- ------------------------------------------------------------------------------
3,472,425
Leisure, Lodging & Entertainment: 0.4%
- ------------------------------------------------------------------------------
Darden Restaurants
6.38%, 2/1/06 1,500,000 1,419,375
- ------------------------------------------------------------------------------
Metals & Mining: 1.8%
- ------------------------------------------------------------------------------
Alcan Aluminum
8.875%, 1/15/22 500,000 534,375
Cyprus Amax Minerals
7.375%, 5/15/07 2,500,000 2,343,750
Inco
9.60%, 6/15/22 1,000,000 891,250
Newmont Gold
8.91%, 1/5/09 665,276 711,014
Placer Dome
7.37%, 6/3/26 1,000,000 970,000
Placer Dome Series A
7.31%, 1/26/21 1,000,000 871,250
- ------------------------------------------------------------------------------
6,321,639
Miscellaneous: 2.3%
- ------------------------------------------------------------------------------
Buckeye Cellulose
8.50%, 12/15/05 150,000 151,500
Corp Andina
7.75%, 3/1/04 2,000,000 2,025,000
ENSERCH
6.25%, 1/1/03 2,500,000 2,459,375
Par Market
Miscellaneous (Cont.) Amount Value
- ------------------------------------------------------------------------------
ESI TRACTEBEL
7.99%, 12/30/11 $ 300,000 $ 295,125
Manitoba
7.75%, 7/17/16 1,500,000 1,623,750
Republic of Korea
8.875%, 4/15/08 1,500,000 1,593,750
- ------------------------------------------------------------------------------
8,148,500
Paper & Forest Products: 0.7%
- ------------------------------------------------------------------------------
Big Flower Press
8.625%, 12/1/08 300,000 279,000
James River
6.70%, 11/15/03 2,000,000 1,997,500
- ------------------------------------------------------------------------------
2,276,500
Retail: 1.0%
- ------------------------------------------------------------------------------
Sears Roebuck
9.05%, 2/6/12 2,000,000 2,315,000
Service Corp International
7.00%, 6/1/15 1,000,000 995,000
- ------------------------------------------------------------------------------
3,310,000
Telcommunications: 3.3%
- ------------------------------------------------------------------------------
AT&T Capital
7.47%, 5/11/05 2,750,000 2,791,250
Litton Industries
6.98%, 3/15/36 1,000,000 1,006,250
Nynex
7.63%, 10/15/09 1,250,000 1,389,063
Pacificorp
9.15%, 8/9/11 2,000,000 2,355,000
Qwest Communications International
0.00%, 2/1/08 300,000 224,250
Rochester Telephone
9.00%, 7/19/00 2,000,000 2,052,500
U.S. Cellular
7.25%, 8/15/07 1,500,000 1,515,000
- ------------------------------------------------------------------------------
11,333,313
Transporatation & Shipping: 4.5%
- ------------------------------------------------------------------------------
American Airline
10.18%, 1/2/13 1,500,000 1,769,868
Bombardier 144A
6.00%, 1/15/02 3,000,000 2,925,000
Burlington Northern Railroad
6.94%, 1/2/14 454,072 447,782
Chicago & Northwestern Holdings
6.25%, 7/30/12 1,323,702 1,285,646
CSX
7.25%, 5/1/27 1,000,000 1,016,250
Federal Express
7.96%, 3/28/17 1,129,243 1,161,709
Ryder System
6.27%, 7/29/02 3,000,000 2,955,000
United Airlines
9.35%, 4/7/16 1,500,000 1,649,917
US Freightways
6.50%, 5/1/09 2,500,000 2,365,625
- ------------------------------------------------------------------------------
15,576,797
Utilities: 8.3%
- ------------------------------------------------------------------------------
Calpine
7.75%, 4/15/09 300,000 287,250
Colonial Gas Series A
6.81%, 5/19/27 1,500,000 1,522,500
Detriot Edison
6.56%, 5/1/01 2,000,000 2,007,500
Duquesne Light
8.70%, 6/1/16 2,460,000 2,653,725
Great Lakes Power
9.00%, 8/1/04 1,500,000 1,601,250
Houston Light & Power Capital Trust II
8.26%, 2/1/37 1,900,000 1,938,000
MidAmerican Energy
6.50%, 12/15/01 1,250,000 1,248,438
National Rural Utility
7.20%, 10/1/15 1,000,000 1,001,250
Bond Fund 3
<PAGE>
Par Market
Utilities (Cont.) Amount Value
- ------------------------------------------------------------------------------
Nevada Power
7.06%, 5/1/00 $ 1,500,000 $ 1,511,250
New Jersey Bell
7.85%, 11/15/29 1,950,000 2,081,625
Noble Affiliates
7.25%, 10/15/23 600,000 561,000
Old Dominion Electric
8.76%, 12/1/22 1,600,000 1,752,000
Pennsylvania Power & Light
7.70%, 10/1/09 3,000,000 3,210,000
PSI Energy
8.85%, 1/15/22 1,980,000 2,234,925
Public Service
6.375%, 11/1/05 1,500,000 1,468,125
Texas Gas Transmissions
8.625%, 4/1/04 1,000,000 1,080,000
Washington Water Public
8.01%, 12/1701 2,000,000 2,050,000
- ------------------------------------------------------------------------------
28,208,838
Total Long Term Debt Investments: 97.5%
(Cost $342,481,014) 339,240,175
- ------------------------------------------------------------------------------
Money Market Instruments:
Caterpillar
5.20%, 7/1/99 3,900,000 3,900,000
- ------------------------------------------------------------------------------
Total Money Market Instruments: 1.1%
(Cost $3,900,000) 3,900,000
- ------------------------------------------------------------------------------
Total Investments: 98.6%
(Cost $346,381,014) 343,140,175
- ------------------------------------------------------------------------------
Other Assets Over Liabilties: 1.4% 4,859,013
- ------------------------------------------------------------------------------
Net Assets:
(Equivalent to $12.213 per share
based on 28,494,130 shares
issued and outstanding) $347,999,188
- ------------------------------------------------------------------------------
Components of Net Assets at June 30, 1999:
- ------------------------------------------------------------------------------
Common Stock, $.01 par value
50,000,000 authorized shares $ 284,941
Paid in capital in excess of par value of shares issued 343,641,599
Undistributed net investment income 10,430,255
Accumulated net realized loss on investments (3,116,768)
Net unrealized depreciation of investments (3,240,839)
- ------------------------------------------------------------------------------
Total Net Assets $347,999,188
- ------------------------------------------------------------------------------
See accompanying notes to financial statements.
Bond Fund 4
<PAGE>
Lincoln National Bond Fund, Inc.
Statement of Operations - Unaudited
Six months ended June 30, 1999
Investment income:
Interest $ 11,345,550
- -------------------------------------------------------------------------
Total investment income 11,345,550
- -------------------------------------------------------------------------
Expenses:
Management fees 792,822
- -------------------------------------------------------------------------
Accounting fees 83,400
- -------------------------------------------------------------------------
Printing and postage 22,406
- -------------------------------------------------------------------------
Legal fees 9,754
- -------------------------------------------------------------------------
Custody fees 8,695
- -------------------------------------------------------------------------
Directors fees 2,100
- -------------------------------------------------------------------------
Other 432
- -------------------------------------------------------------------------
Less expenses paid indirectly (4,315)
- -------------------------------------------------------------------------
Total expenses 915,294
- -------------------------------------------------------------------------
Net investment income 10,430,256
- -------------------------------------------------------------------------
Net realized and unrealized loss on investments:
Net realized loss on investment transactions (29,831)
- -------------------------------------------------------------------------
Net change in unrealized depreciation
of investments (20,583,765)
- -------------------------------------------------------------------------
Net realized and unrealized loss on investments (20,613,596)
- -------------------------------------------------------------------------
Net decrease in net assets
resulting from operations $(10,183,340)
- -------------------------------------------------------------------------
Statements of Changes in Net Assets
Six months
ended
6/30/99 Year ended
(Unaudited) 12/31/98
--------------------------
Changes from operations:
- -------------------------------------------------------------------------------
Net investment income $ 10,430,256 $ 18,584,772
- -------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions (29,831) 4,018,704
- -------------------------------------------------------------------------------
Net change in unrealized appreciation/
(depreciation) of investments (20,583,765) 5,821,604
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations (10,183,340) 28,425,080
- -------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (3,393,908) (32,304,033)
- -------------------------------------------------------------------------------
Total distributions to shareholders (3,393,908) (32,304,033)
- -------------------------------------------------------------------------------
Net increase/(decrease) in net assets
resulting from capital share transactions (2,231,380) 87,303,598
- -------------------------------------------------------------------------------
Total increase/(decrease) in net assets (15,808,628) 83,424,645
- -------------------------------------------------------------------------------
Net Assets, beginning of period 363,807,816 280,383,171
- -------------------------------------------------------------------------------
Net Assets, end of period $347,999,188 $363,807,816
- -------------------------------------------------------------------------------
See accompanying notes to financial statements.
Bond Fund 5
<PAGE>
Lincoln National Bond Fund, Inc.
Financial Highlights
(Selected data for each capital share outstanding throughout each period)
<TABLE>
<CAPTION>
Six months
ended
6/30/99 Year ended December 31,
(Unaudited) 1998 1997 1996 1995 1994
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.689 $ 12.861 $ 11.766 $ 12.247 $ 10.941 $ 12.693
Income (loss) from investment operations:
Net investment income 0.399 0.662 0.785 0.767 0.803 0.741
Net realized and unrealized gain (loss)
on investments (0.756) 0.494 0.310 (0.481) 1.306 (1.233)
----------------------------------------------------------------------
Total from investment operations (0.357) 1.156 1.095 0.286 2.109 (0.492)
----------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income (0.119) (1.328) - (0.767) (0.803) (0.741)
Distributions from net realized gain on
investment transactions - - - - - (0.519)
----------------------------------------------------------------------
Total dividends and distributions (0.119) (1.328) - (0.767) (0.803) (1.260)
----------------------------------------------------------------------
Net asset value, end of period $ 12.213 $ 12.689 $ 12.861 $ 11.766 $ 12.247 $ 10.941
----------------------------------------------------------------------
Total Return(1) (2.83%) 9.56% 9.30% 2.31% 18.95% (4.18%)
Ratios and supplemental data:
Ratio of expenses to average net assets 0.51%(2) 0.52% 0.53% 0.51% 0.49% 0.50%
Ratio of net investment income
to average net assets 5.85%(2) 5.90% 6.45% 6.56% 6.90% 6.40%
Portfolio Turnover 15.89% 51.33% 56.16% 142.19% 139.61% 213.26%
Net assets, end of period (000 omitted) $347,999 $363,808 $280,383 $253,328 $250,816 $195,010
</TABLE>
(1) 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. 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).
(2) Annualized
See accompanying notes to financial statements.
Bond Fund 6
<PAGE>
Lincoln National Bond Fund, Inc.
Notes to Financial Statements - Unaudited
June 30, 1999
The Fund: Lincoln National Bond Fund, Inc. (the "Fund") is registered as an
open-end, diversified management investment company under the Investment Company
Act of 1940, as amended. The Fund's shares are sold only to The Lincoln National
Life Insurance Company and Lincoln Life & Annuity Company of New York (the
"Companies") for allocation to their variable annuity products and variable
universal life products.
The Fund's investment objective is to maximize current income consistent with a
prudent investment strategy. The Fund invests primarily in medium and long-term
corporate and government bonds.
1. Significant Accounting Policies
Investment Valuation: Portfolio securities which are traded on an exchange 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 mean quotations. 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 Fund's Board of Directors. Money market
instruments having less than 60 days to maturity are stated at amortized cost,
which approximates market value.
Investment Transactions and Investment Income: Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis and includes amortization of any premium and discount. Realized gains or
losses from investment transactions are reported on an identified cost basis.
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 Fund has agreed to waive its custodial fees
when the Fund maintains a prescribed amount of cash on deposit in certain
non-interest bearing accounts. For the six months ended June 30, 1999, the
custodial fees offset agreement amounted to $4,315.
Taxes: The Fund has complied with the special provisions of the Internal Revenue
Code for regulated investment companies. As such, the 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.
2. Management Fees and Other Transactions With Affiliates
Lincoln Investment Management Company (the "Advisor") and its affiliates manage
the Fund's investment portfolio and maintain its accounts and records. 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 assets of the Fund, .40% of the next
$200,000,000, and .30% of the average daily net assets of the Fund in excess of
$400,000,000.
Delaware Service Company ("Delaware"), an affiliate of the Advisor, provides
accounting services and other administration support to the Fund. For these
services, the Fund pays Delaware a monthly fee based on average net assets,
subject to certain minimums. If the aggregate annual expenses of the 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 1.50% of the average daily net
assets of the Fund, the Advisor will reimburse the Fund in the amount of such
excess. No reimbursement was due for the six months ended June 30, 1999.
Certain officers and directors of the Fund are also officers or directors of the
Companies and receive no compensation from the Fund. The compensation of
unaffiliated directors is borne by the Fund.
Bond Fund 7
<PAGE>
Notes to Financial Statements - Unaudited - (Continued)
3. 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, 1999 and the
aggregate gross unrealized appreciation, the aggregate gross unrealized
depreciation and the net unrealized appreciation at June 30, 1999 are as
follows:
<TABLE>
<CAPTION>
Aggregate Aggregate Gross Gross Net
Cost of Proceeds Unrealized Unrealized Unrealized
Purchases From Sales Appreciation Depreciation Depreciation
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$54,051,595 $20,501,450 $5,091,163 $(8,332,002) $(3,240,839)
</TABLE>
4. 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
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Six months ended
June 30, 1999 (unaudited): 1,922,357 $24,002,375 273,597 $ 3,393,908 (2,372,761) $(29,627,663) (176,807) $ (2,231,380)
Year ended
December 31, 1998: 6,299,076 80,781,622 2,614,466 32,304,034 (2,044,330) (25,782,058) 6,869,212 87,303,598
</TABLE>
5. Distributions to Shareholders
The Fund declares and distributes dividends on net investment income, if any,
semi-annually. Distributions of net realized gains, if any, are declared and
distributed annually.
6. Capital Loss Carryforward
As of December 31, 1998, the Fund had $3,108,766 of unused capital loss
carryforward for federal tax purposes. The loss carryforward expires in the year
2004.
Bond Fund 8
