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Exhibit 99.77I(b)
ATTACHMENT FOR CURRENT FILING OF N-SAR
SUB-ITEM 77I(b)
The Registrant has issued the following new class of security described below:
INTERNET TECHNOLOGIES TRUST
Investment Objective
The investment objective of the Internet Technologies Trust is to seek
long-term capital appreciation.
Investment Policies
Munder Capital Management ("Munder") manages the Internet Technologies
Trust. Munder pursues this investment objective by investing the portfolio's
assets primarily in companies engaged in Internet-related business (such
businesses also include Intranet-related businesses).
Under normal market conditions, the Internet Technologies Trust will
invest at least 65% of its total assets in equity securities of companies that
are:
(a) engaged in the research, design, development, manufacturing of
products, processes or services for use with Internet related businesses, or
(b) engaged to a significant extent in the business of distributing
products, processes or services for use with Internet related businesses.
Equity securities include common stocks, preferred stocks and securities
convertible into common stocks.
The Internet is a world-wide network of computers designed to permit
users to share information and transfer data quickly and easily. The World Wide
Web ("WWW"), which is a means of graphically interfacing with the Internet, is a
hyper-text based publishing medium containing text, graphics, interactive
feedback mechanisms and links with WWW documents and to other WWW documents. An
Intranet is the application of WWW tools and concepts to a company's internal
documents and databases.
There is no limit on the market capitalization of the companies the
portfolio may invest in, or in the length of operating history for the
companies. The portfolio may invest without limit in initial public offerings.
The portfolio may also invest up to 25% of its assets in foreign
securities. Foreign securities include investments in non-U.S.
dollar-denominated securities traded outside of the United States and
dollar-denominated securities of foreign issuers traded in the United States.
Foreign securities also include investments such as American Depository Receipts
("ADRs") which are U.S. dollar-denominated receipts representing shares of
foreign-based corporations. ADRs are issued by U.S. banks or trust companies,
and entitle the holder to all dividends and capital gains that are paid out on
the underlying foreign shares.
Temporary Defensive Investing
To meet redemption requests or pending investment of its assets or
during unusual market conditions, the Internet Technologies Trust may invest all
or a portion of its assets in short-term bonds, cash and cash equivalents. To
the extent the portfolio is in a defensive position, the ability to achieve its
investment objective will be limited.
DYNAMIC GROWTH TRUST
Investment Objective
The investment objective of the Dynamic Growth Trust is to seek
long-term growth of capital.
Investment Policies
Janus Capital Corporation ("Janus") manages the Dynamic Growth Trust.
Janus pursues this investment objective by investing the portfolio's assets
primarily in equity securities selected for their growth potential with normally
at least 50% of its equity assets in medium-sized companies. Medium-sized
companies are those whose market capitalization falls within the range of
companies in the S&P Mid Cap 400 Index. Market capitalization is a commonly used
measure of the size and value of a company. The market capitalizations within
the S&P Mid Cap 400 Index will vary, but as of December 31, 1999, they ranged
from approximately $170 million to $37 billion. Equity securities include common
stocks, preferred stocks, warrants and securities convertible into common or
preferred stocks.
The Dynamic Growth Trust may invest in foreign securities. Janus seeks
companies that meet its selection criteria, regardless of where a company is
located. Foreign securities are generally selected on a stock-by-stock basis
without regard to any defined allocation among countries or geographic regions.
However, certain factors such as expected levels of
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inflation, government policies influencing business conditions, the outlook for
currency relationships, and prospects for economic growth among countries,
regions or geographic areas may warrant greater consideration in selecting
foreign securities. There are no limitations on the countries in which the
Dynamic Growth Trust may invest and the portfolio may, at times, have
significant foreign exposure.
Janus generally takes a "bottom up" approach to selecting companies. In
other words, they seek to identify individual companies with earnings growth
potential that may not be recognized by the market at large. They make this
assessment by looking at companies one at a time, regardless of size, country of
organization, place of principal business activity, or other similar selection
criteria. Realization of income is not a significant consideration when choosing
investments for the Dynamic Growth Trust.
The Dynamic Growth Trust may invest in special situations. A special
situation arises when, in the opinion of Janus, the securities of a particular
issuer will be recognized and appreciate in value due to a specific development
with respect to that issuer. Developments creating a special situation might
include, among others, a new product or process, a technological breakthrough, a
management change or other extraordinary corporate event, or a differences in
market supply of and demand for the security. The portfolio's performance could
suffer if the anticipated development in a "special situation" investment does
not occur or does not attract the expected attention.
The Dynamic Growth Trust may also invest to a lesser degree in (a) debt
securities, (b) indexed/structured securities and (c) high yield/high risk bonds
(not to exceed 35% of the portfolio's assets).
Cash Positions
When Janus believes that market conditions are unfavorable for
profitable investing, or when Janus is unable to locate attractive investment
opportunities, the portfolio's cash or similar investments may increase. In
other words, the portfolio does not always stay fully invested in stocks and
bonds. In addition, Janus may also temporarily increase the portfolio's cash
position to protect its assets or maintain liquidity.
TACTICAL ALLOCATION TRUST
Investment Objective
The investment objective of the Tactical Allocation Trust is to seek
total return, consisting of long-term capital appreciation and current income.
Investment Policies
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") manages
the Tactical Allocation Trust. Mitchell Hutchins seeks to achieve this
investment objective by allocating the portfolio's assets between:
- A stock portion that is designed to track the performance of
the S&P 500 Composite Stock Price Index (the "S&P 500 Index")
and
- A fixed income portion that consists of either five-year U.S.
Treasury notes or U.S. Treasury bills with remaining
maturities of 30 days.
The portfolio's subadviser reallocates the portfolio's assets in
accordance with the recommendations of its own Tactical Allocation Model on the
first business day of each month.
The Tactical Allocation Model attempts to track the performance of the
S&P 500 Index in periods of strong market performance. The Model attempts to
take a more defensive posture by reallocating assets to bonds or cash when the
Model signals a potential bear market, prolonged downturn in stock prices or
significant loss in value. The Model can recommend stock allocations of 100%,
75%, 50%, 25% or 0%. By using the Tactical Allocation Model, the portfolio seeks
to achieve total return during all economic and financial markets cycles, with
lower volatility than that of the S&P 500 Index.
If the Tactical Allocation Model recommends a stock allocation of less
than 100%, the Model also recommends a fixed income allocation for the remainder
of the portfolio's assets. The Model uses a bond risk premium determination to
decide whether to recommend five-year U.S. Treasury notes or 30-day U.S.
Treasury bills. This bond risk premium is calculated based on the
yield-to-maturity of the five-year U.S. Treasury note and the one-year U.S.
Treasury bill.
The basic premise of the Tactical Allocation Model is that investors
accept the risk of owning stocks, measured as volatility of return, because they
expect a return advantage. This expected return advantage of owning stocks is
called the equity risk premium ("ERP"). The Model projects the stock market's
expected ERP based on several factors, including the current price of stocks and
their expected future dividends and the yield-to-maturity of the one-year U.S.
Treasury bill. When the stock market's ERP is high, the Model signals the
portfolio to invest 100% in stocks. Conversely, when the ERP decreases below
certain threshold levels, the Model signals the portfolio to reduce its exposure
to stocks.
When the Tactical Allocation Model recommends a fixed income allocation
of more than 50%, the Tactical Allocation Trust must invest in other high
quality bonds or money market instruments to the extent needed to limit the
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portfolio's investments in U.S. Treasury obligations to no more than 55% of its
assets. This limit is imposed by Internal Revenue Code diversification
requirements for segregated asset accounts used to fund variable annuity or
variable life contracts.
The Tactical Allocation Trust deviates from the recommendations of the
Tactical Allocation Model only to the extent necessary to:
- Maintain an amount in cash, not expected to exceed 2%
of its total assets under normal market conditions,
to pay portfolio operating expenses, dividends and
other distributions on its shares and to meet
anticipated redemptions of shares;
- Qualify as a regulated investment company for federal
income tax purposes; and
- Meet the diversification requirements imposed by the
Internal Revenue Code on segregated asset accounts
used to fund variable annuity and/or life insurance
contracts as discussed above.
In its stock portion, Tactical Allocation Trust attempts to duplicate,
before the deduction of operating expenses, the investment results of the S&P
500 Index. Securities in the S&P 500 Index are selected, and may change from
time to time, based on a statistical analysis of such factors as the issuer's
market capitalization (the S&P 500 Index emphasizes large capitalization
stocks), the security's trading activity and its adequacy as a representative of
stocks in a particular industry section. The portfolio's investment results for
its stock portion will not be identical to those of the S&P 500 Index.
Deviations from the performance of the S&P 500 Index may result from purchases
and redemptions of fund shares that may occur daily, as well as from expenses
borne by the portfolio. Instead, the portfolio attempts to achieve a correlation
of at least 0.95 between the performance of the portfolio's stock portion,
before the deduction of operating expenses, and that of the S&P 500 Index (a
correlation of 1.00 would mean that the net asset value of the stock portion
increased or decreased in exactly the same proportion as changes in the S&P 500
Index). The S&P 500 Index can include U.S. dollar-denominated stocks of foreign
issuers, and the portfolio invests in those securities to the extent needed to
track the performance of the S&P 500 Index.
For its bond investments, the Tactical Allocation Trust seeks to invest
in U.S. Treasury notes having five years remaining until maturity at the
beginning of the then-current calendar year. However, if those instruments are
not available at favorable prices, the portfolio may invest in U.S. Treasury
notes that have either remaining maturities as close as possible to five years
or overall durations that are as close as possible to the duration of five year
U.S. Treasury notes. Similarly, for its cash investments, the portfolio seeks to
invest in U.S. Treasury bills with remaining maturities of 30 days. However, if
those instruments are not available at favorable prices, the portfolio may
invest in U.S. Treasury bills that have either remaining maturities as close as
possible to 30 days or overall durations that are as close as possible to the
duration of 30-day U.S. Treasury bills.
In addition to any reallocation of assets directed by the Tactical Allocation
Model on the first business day of the month, any material amounts resulting
from appreciation or receipt of dividends, other distributions, interest
payments and proceeds from securities maturing in each of the asset classes are
reallocated (or "rebalanced") to the extent practicable to establish the Model's
recommended asset mix. Any cash maintained to pay fund operating expenses, pay
dividends and other distributions and to meet share redemptions is invested on a
daily basis.
The portfolio may sell short "against the box" (sale of a security a
portfolio owns or has the right to acquire at no additional cost.)
Temporary Defensive Investing
Other than its investments in U.S. Treasury bills or other high quality
money market instruments as indicated by the Tactical Allocation Model, the
Tactical Allocation Trust may invest to a limited extent in money market
instruments for cash management purposes. To the extent the portfolio is in a
defensive position, the ability to achieve its investment objective will be
limited.
THE INDEX TRUSTS
There are five Index Trusts - Small Cap Index, International Index, Mid
Cap Index, Total Stock Market Index, and 500 Index (the "Index Trusts") - each
with its own investment objective and policy. The Index Trusts differ from the
actively managed portfolios described in this prospectus. Actively managed
portfolios seek to outperform their respective indices through research and
analysis. Over time, their performance may differ significantly from their
respective indices. Index portfolios, however, seek to mirror the performance of
their target indices, minimizing performance differences over time.
An index is an unmanaged group of securities whose overall performance
is used as an investment benchmark. Indices may track broad investment markets,
such as the global equity market, or more narrow investment markets, such as the
U.S. small cap equity market. Each Index Trust attempts to match the performance
of a particular index by: (a) holding all, or a representative sample, of the
securities that comprise the index and/or (b) by holding securities (which may
or may not be included in the index) that MAC believes as a group will behave in
a manner similar to the index. However, an index portfolio
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has operating expenses and transaction costs, while a market index does not.
Therefore, an Index Trust, while it attempts to track its target index closely,
typically will be unable to match the performance of the index exactly.
SMALL CAP INDEX TRUST
INVESTMENT OBJECTIVE
The investment objective of the Small Cap Index Trust is to seek to
approximate the aggregate total return of a small cap U.S. domestic equity
market index.
INVESTMENT STRATEGY
The Small Cap Index Trust seeks to achieve this objective by attempting
to track the performance of the Russell 2000 Index. The Russell 2000 Index is an
unmanaged index composed of the stocks of smaller U.S. companies. The index is
composed of the 2,000 smallest companies out of the 3,000 largest U.S.
companies.
INVESTMENT POLICIES
The Small Cap Index Trust invests primarily in (a) the common stocks
that are included in the Russell 2000 Index and (b) securities (which may or may
not be included in the Russell 2000 Index) that MAC believes as a group will
behave in a manner similar to the index.
The portfolio may also invest in short-term debt securities to maintain
liquidity or cover futures positions or pending investment in stocks or Futures
Contracts.
INTERNATIONAL INDEX TRUST
INVESTMENT OBJECTIVE
The investment objective of the International Index Trust is to seek to
approximate the aggregate total return of a foreign equity market index.
INVESTMENT STRATEGY
The International Index Trust seeks to achieve this objective by
attempting to track the performance of the Morgan Stanley European Australian
Far East Free* Index (the "MSCI EAFE Index"). The MSCI EAFE Index is an
unmanaged index of approximately 1,000 securities traded in non-U.S. markets.
Countries and geographical areas such as Europe, Australia and Japan typically
comprise a greater percentage of the MSCI EAFE Index than other geographical
areas and, therefore, tend to have a greater impact on the performance of the
index.
*The designation "Free" in the name of the index refers to the securities that
the index tracks. Some countries restrict foreign investment in certain
industries, so only stocks that can be bought freely by the portfolio are
traded.
INVESTMENT POLICIES
The International Index Trust invests primarily in (a) the common
stocks that are included in the MSCI EAFE Index and (b) securities (which may or
may not be included in the MSCI EAFE Index) that MAC believes as a group will
behave in a manner similar to the index.
The portfolio may also invest in short-term debt securities to maintain
liquidity or cover futures positions or pending investment in stocks or Futures
Contracts.
MID CAP INDEX TRUST
INVESTMENT OBJECTIVE
The investment objective of the Mid Cap Index Trust is to seek to
approximate the aggregate total return of a mid cap U.S. domestic equity market
index.
INVESTMENT STRATEGY
The Mid Cap Index Trust seeks to achieve this objective by attempting
to track the performance of the S&P Mid Cap-400 Index (the "S&P 400 Index"). The
S&P 400 Index is an unmanaged index composed of the securities of 400 medium
sized U.S. companies.
INVESTMENT POLICIES
The Mid Cap Index Trust invests primarily in (a) the common stocks that
are included in the S&P 400 Index and (b) securities (which may or may not be
included in the S&P 400 Index) that MAC believes as a group will behave in a
manner similar to the index.
The portfolio may also invest in short-term debt securities to maintain
liquidity or cover futures positions or pending investment in stocks or Futures
Contracts.
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TOTAL STOCK MARKET INDEX TRUST
INVESTMENT OBJECTIVE
The investment objective of the Total Stock Market Index Trust is to
seek to approximate the aggregate total return of a broad U.S. domestic equity
market index.
INVESTMENT STRATEGY
The Total Stock Market Index Trust seeks to achieve this objective by
attempting to track the performance of the Wilshire 5000 Equity Index ("Wilshire
5000 Index"). The Wilshire 5000 Index is an unmanaged index composed of more
than 7,000 stocks including all of the U.S. common stocks regularly traded on
the New York and American Stock Exchanges and the Nasdaq over-the-counter
markets.
INVESTMENT POLICIES
The Total Stock Market Index Trust invests primarily in (a) the common
stocks that are included in the Wilshire 5000 Index and (b) securities (which
may or may not be included in the Wilshire 5000 Index) that MAC believes as a
group will behave in a manner similar to the index.
The portfolio may also invest in short-term debt securities to maintain
liquidity or cover futures positions or pending investment in stocks or Futures
Contracts.
500 INDEX TRUST
INVESTMENT OBJECTIVE
The investment objective of the 500 Index Trust is to seek to
approximate the aggregate total return of a broad U.S. domestic equity market
index.
INVESTMENT STRATEGY
The 500 Index Trust seeks to achieve this objective by attempting to
track the performance of the S&P 500 Composite Stock Price Index (the "S&P 500
Index"). The S&P 500 Index is an unmanaged index composed of 500 selected common
stocks, primarily the stocks of large U.S. companies.
INVESTMENT POLICIES
The 500 Index Trust invests primarily in (a) the common stocks that are
included in the S&P 500 Index and (b) securities (which may or may not be
included in the S&P 500 Index) that MAC believes as a group will behave in a
manner similar to the index.
The portfolio may also invest in short-term debt securities to maintain
liquidity or cover futures positions or pending investment in stocks or Standard
& Poor's Stock Index Futures Contracts.
