Scudder Variable Life Investment Fund
Annual Report
December 31, 1994
An open-end management investment company that offers shares of beneficial
interest in six types of diversified portfolios.
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Letter from the Fund's President 2
Money Market Portfolio Management Discussion 3
Bond Portfolio Management Discussion 4
Bond Portfolio Summary 5
Balanced Portfolio Management Discussion 6
Balanced Portfolio Summary 7
Growth and Income Portfolio Management Discussion 8
Growth and Income Portfolio Summary 9
Capital Growth Portfolio Management Discussion 10
Capital Growth Portfolio Summary 11
International Portfolio Management Discussion 12
International Portfolio Summary 13
Investment Portfolios, Financial Statements, and Financial
Highlights
Money Market Portfolio 14
Bond Portfolio 20
Balanced Portfolio 27
Growth and Income Portfolio 37
Capital Growth Portfolio 45
International Portfolio 55
Notes to Financial Statements 66
Report of Independent Accountants 69
Tax Information 69
</TABLE>
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
The world's financial markets were shaken repeatedly in 1994 by a
variety of events. Rising global interest rates, losses for investors in
highly leveraged derivatives, and some unsettling economic and political
developments -- including mounting U.S./Chinese tensions and the Mexican
currency crisis -- created a challenging environment for global stock and
bond investors.
We face 1995 with more optimism. In the coming year, we expect a
combination of factors, including the U.S. Federal Reserve's tightening
efforts, to keep the economy and inflation on a moderate course, not only
in the United States but globally as well. Meanwhile, corporate profits
around the world continue to grow, and business investment is at an
all-time high, which should translate into greater economic capacity down
the road. We believe these developments ultimately will be viewed as
positive by the financial markets.
For bond investors, the rise in interest rates in the past year has
meant generally falling prices but also higher income from these
investments at a time when inflation has remained relatively stable.
Although we believe the bulk of interest-rate increases is now behind us,
interest rates and investment income could rise somewhat further in 1995,
as central banks continue in their efforts to stem inflation and as
countries around the world compete for much-needed global investment
capital.
Additional increases in interest rates may spark episodes of difficult
adjustment for financial markets. We encourage you to examine your
portfolio periodically to ensure that your asset allocation and fund
choices remain appropriate for your investment time frame and financial
goals. The past year demonstrated that virtually all investments, whether
conservative or aggressive, can perform poorly, prompting many investors to
move to the sidelines. Conservative investments such as money market
instruments naturally have a place in any well-balanced portfolio.
Experience has shown us that investors who have participated in the stock
and bond markets historically have accumulated far more wealth over time
than those who chose to protect their savings above all else.
Thank you for choosing Scudder Variable Life Investment Fund to help
meet your investment needs. We hope we can continue to merit your
confidence in the year ahead.
Sincerely,
/s/David B. Watts
David B. Watts
President,
Scudder Variable Life Investment Fund
<PAGE>
MONEY MARKET PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Interest rates rose steadily throughout the past year, increasing
borrowing costs for mortgages and credit cards and depressing bond prices,
which move in the opposite direction of interest rates. Despite a shaky
environment for bond and stock investors, the Money Market Portfolio
benefited from rising investment income, while its share price remained
constant at $1.00. Of course, past performance is no guarantee of future
results and the Portfolio's yield may fluctuate.
On December 31, 1994, the Portfolio's 7-day net annualized yield was
5.20%. Factoring in the effect of compounding, the 7-day effective yield
was 5.23%, up sharply from 2.72% a year ago. The Portfolio provided a 3.72%
total return for the year ended December 31, 1994, reflecting reinvested
distributions of $0.037 per share.
(CALLOUT NEXT TO CHART) - The continued rise in short-term interest rates
during 1994 pushed up your Portfolio's yield from 2.72% to 5.23%.
(CHART DATA)
<TABLE>
<CAPTION>
Interest Rates
Commercial Federal 3-Month
Paper Funds Treasury
Bill
<S> <C> <C> <C>
12/93 3.36 2.96 3.08
3/94 3.86 3.34 3.52
6/94 4.57 4.25 4.18
9/94 5.02 4.73 4.64
12/94 6.26 5.45 5.69
</TABLE>
Portfolio Strategy Took Advantage of Rising Interest Rates
We emphasized shorter average maturities throughout the year,
anticipating continued upward pressure on interest rates. By year's end,
the average maturity of the Portfolio was 35 days, down from its 44-day
average a year ago. By holding shorter-maturity money market securities as
rates rise, we can quickly deploy proceeds from maturing investments to
higher-yielding instruments.
Corporate commercial paper remained a significant component of the
Portfolio, and, as always, we continued our high standards of security
selection.
Looking ahead, we believe the Federal Reserve may push short-term
interest rates up a bit further if economic growth remains strong. As a
result, we intend to maintain our current strategy of favoring relatively
shorter-term money market securities. While it's impossible to predict when
interest rates will actually peak, any evidence suggesting that rates could
be ready to decline will prompt us to begin lengthening maturities in order
to achieve a high relative yield.
Thank you for your interest in the Money Market Portfolio.
Sincerely,
Your Portfolio Management Team
/s/Robert T. Neff /s/Nicca B. Alcantara
Robert T. Neff Nicca B. Alcantara
Lead Portfolio Manager
<PAGE>
BOND PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
The Bond Portfolio's performance in 1994 reflected a year in which
interest rates rose persistently across the maturity spectrum. When
interest rates rise, bond prices decline, since existing bonds are deemed
less attractive than newly issued, higher-yielding securities. Rising
interest rates also resulted in a higher income stream for the Portfolio,
but it was not sufficient to offset the drop in share price experienced
during the year. Net asset value per share declined $0.94, from $7.42 at
the beginning of 1994 to $6.48 on December 31, 1994. The Portfolio also
distributed to shareholders income dividends totaling $0.425 per share and
a capital gain distribution of $0.172 per share. Combined, price changes
plus the distributions provided a -4.79% total return for the year ended
December 31, compared with -4.54% for the 24 corporate bond funds tracked
by Lipper Analytical Services, Inc., an independent firm that tracks
performance of variable annuity investment options.
In the first half of the year, the portion of the Portfolio's holdings
in U.S. government obligations was increased from one third to over half
the portfolio in the face of rising interest rates. Later in the year,
however, this portion was decreased in favor of higher-yielding
mortgage-backed securities. Higher interest rates slowed the pace of
mortgage refinancings, which helped increase and stabilize the income
stream from these securities, making them more attractive holdings. We also
continued to focus on short- and long-term bonds. Quickly maturing
short-term bonds allow us to replace them with new higher-yielding debt
obligations, while providing some price stability. Longer-maturity holdings
generally provide higher relative income.
(CALLOUT NEXT TO THE PREVIOUS PARAGRAPH) - We increased our holdings of
mortgage-backed securities in the latter part of the year, while
maintaining our focus on both short- and long-term maturities.
Looking ahead, we believe the Federal Reserve may continue to push
interest rates higher, although the Fed's six rate hikes in 1994 should
represent the bulk of the monetary tightening efforts. Moreover, the
economy is growing at a moderate pace (we believe a slowdown in growth is
possible in the latter half of 1995), and inflation appears under control--a
scenario that should keep interest rates from rising much beyond current
levels. As a result, we believe the Portfolio's mix of short- and long-term
income holdings positions us well for the year ahead.
Sincerely,
Your Portfolio Management Team
/s/Ruth Heisler /s/Renee L. Ross
Ruth Heisler Renee L. Ross
Lead Portfolio Manager
/s/William M. Hutchinson
William M. Hutchinson
<PAGE>
Bond Portfolio
Portfolio Summary as of December 31, 1994
- - -----------------------------------------------------------------
Growth of a $10,000 Investment
- - -----------------------------------------------------------------
Bond Portfolio
- - ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- - --------- ------- ---------- -------
1 Year $ 9,521 -4.79% -4.79%
5 Year $14,552 45.52% 7.79%
Life of
Fund* $20,940 109.40% 8.12%
LB Aggregate Bond Index
- - --------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- - --------- ------- ---------- -------
1 Year $ 9,708 -2.92% -2.92%
5 Year $14,464 44.64% 7.66%
Life of
Fund* $23,376 133.76% 9.43%
*The Fund commenced operations on July 16, 1985.
Index comparisons begin July 31, 1985.
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Yearly periods ended December 31
Bond Portfolio
Year Amount
- - ---------------------
7/31/85* 10000
85 10737
86 12054
87 12201
88 12867
89 14366
90 15524
91 18258
92 19537
93 21956
94 20905
LB Aggregate Bond Index
Year Amount
- - ----------------------
7/31/85* 10000
85 11043
86 12729
87 13080
88 14111
89 16161
90 17610
91 20428
92 21940
93 24079
94 23376
The Lehman Brothers (LB) Aggregate Bond Index is an unmanaged market
value-weighted measure of treasury issues, agency issues, corporate
bond issues and mortgage securities. Index returns assume reinvestment
of dividends and, unlike Fund returns, do not reflect any fees or
expenses.
All performance is historical, assumes reinvestment of all dividends
and capital gains, and is not indicative of future results. Investment
return and principal value will fluctuate, so an investor's shares,
when redeemed, may be worth more or less than when purchased. Total
returns in some periods were higher due to maintenance of the Fund's
expenses. See Financial Highlights for the Bond Portfolio.
- - -------------------------------------------------------------------
ASSET QUALITY
- - -------------------------------------------------------------------
By Quality
- - -------------------
AAA 72%
AA 1%
A 19% As rising interest rates slowed
BBB 4% home-mortgage refinancings,
BB 2% mortgage-backed securities provided
NR 2% more dependable income and thus were
---- more attractive.
100%
====
- - -------------------
Average Quality: AAA
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- - -------------------------------------------------------------------
MATURITY
- - -------------------------------------------------------------------
Less than 1 year 13%
1 < 3 years 31%
3 < 5 years 8%
5 < 10 years 15%
10 years or greater 33%
----
100%
====
Weighted average effective maturity: 8 years
- - -------------------------------------------------------------------
DIVERSIFICATION
- - -------------------------------------------------------------------
U.S. Treasury Obligations 49%
Corporate Bonds 17%
Asset-Backed Securities 13%
U.S. Government Guaranteed
Mortgages 8%
Foreign Bonds 8%
U.S. Government Agency
Pass-Thrus 3%
Collateralized Mortgage
Obligations 2%
----
100%
====
<PAGE>
BALANCED PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
The Balanced Portfolio posted a total return of -2.05% for the year
ended December 31, 1994, compared with a 2.19% return on average for the 18
balanced funds tracked by Lipper Analytical Services, Inc. Lipper is an
independent firm that tracks performance of variable annuity investment
options. The Portfolio's loss reflected a period in which bond prices
declined across all maturities. Stock prices also experienced volatility
through much of the year. Stocks, as measured by the unmanaged S&P 500
Index, returned just 1.32% in 1994, while the unmanaged Lehman Brothers
Aggregate Bond Index declined 2.92%.
(CALLOUT NEXT TO THE PREVIOUS PARAGRAPH) - The Portfolio benefited from
healthcare-related stock holdings and increased exposure to mortgage-backed
securities in the latter part of 1994.
One of the most significant factors affecting the investment markets
in 1994 was the Federal Reserve's repeated increases in the federal funds
rate. These actions accelerated a trend of higher interest rates that had
begun in October 1993, when signs of stronger economic growth began to fuel
fears of rising inflation. Rising interest rates took their toll on bond
prices as inflation-wary investors demanded higher yields from long-term
debt instruments. Stock prices suffered because of the potentially negative
earnings impact of higher corporate borrowing costs and a slower economy.
The Balanced Portfolio seeks to provide a balance of growth and income
by investing in both quality stocks and fixed-income securities. As of
December 31, 62% of the portfolio was invested in stocks, 31% in
fixed-income securities, and the remainder in cash.
Recently, the Portfolio benefited from its healthcare-related stock
holdings, including Schering-Plough, United Healthcare, and Eli Lilly. Many
healthcare companies have improved their competitive positions through
alliances, acquisitions, and restructurings. These actions, plus the fact
that no federal healthcare bill was passed in 1994, helped boost prices of
well-positioned healthcare companies. Meanwhile, as the near-term outlook
for some emerging economies became less certain, we completely sold our
holdings in Compania de Telefonos de Chile, Telefonos de Mexico, and Hong
Kong Telecommunications at a profit.
Bond holdings were adjusted in the latter months of 1994 by increasing
the Portfolio's percentage of mortgage-backed securities. Rising interest
rates slowed home refinancings, which made income from these securities
more stable.
While some slowing in economic growth is likely later in the year, low
inflation and the longer-term expansion of the global economy should
continue to benefit both stocks and bonds.
Importantly, as of January 1995, the Portfolio's management team
consists of Lead Portfolio Manager Bruce F. Beaty along with William F.
Gadsden, Renee L. Ross, and Ruth Heisler. Howard Ward, who had served as
Lead Portfolio Manager, has left Scudder. We thank him for his
contributions and wish him well in the future.
Sincerely,
Your Portfolio Management Team
/s/Bruce F. Beaty /s/Ruth Heisler
Bruce F. Beaty Ruth Heisler
Lead Portfolio Manager
/s/Renee L. Ross /s/William F. Gadsden
Renee L. Ross William F. Gadsden
<PAGE>
Balanced Portfolio
Portfolio Summary as of December 31, 1994
- - -----------------------------------------------------------------
Growth of a $10,000 Investment
- - -----------------------------------------------------------------
Balanced Portfolio
- - ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- - --------- ------- ---------- -------
1 Year $ 9,795 -2.05% -2.05%
5 Year $14,016 40.16% 6.99%
Life of
Fund* $24,677 146.77% 10.02%
S&P 500 Index (60%) and LBAB Index (40%)
- - --------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- - --------- ------- ---------- -------
1 Year $ 9,997 -0.03% -0.03%
5 Year $14,946 49.46% 8.36%
Life of
Fund* $29,132 191.32% 12.02%
*The Fund commenced operations on July 16, 1985.
Index comparisons begin July 31, 1985.
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Yearly periods ended December 31
Balanced Portfolio
Year Amount
- - ---------------------
7/31/85* 10000
85 11318
86 13209
87 12988
88 14833
89 17725
90 17385
91 22067
92 23604
93 25363
94 24843
S&P 500 Index
Year Amount
- - ----------------------
7/31/85* 10000
85 11257
86 13358
87 14059
88 16394
89 21589
90 20919
91 27292
92 29371
93 32331
94 32758
LBAB Index
Year Amount
- - ----------------------
7/31/85* 10000
85 11043
86 12729
87 13080
88 14111
89 16161
90 17610
91 20428
92 21940
93 24079
94 23376
The Standard & Poor's (S&P) 500 Index is an unmanaged capitalization-
weighted measure of 500 widely held common stocks listed on the New
York Stock Exchange, American Stock Exchange, and Over-The-Counter
market and The Lehman Brothers Aggregate Bond (LBAB) Index is an
unmanaged market value-weighted measure of treasury issues, agency
issues, corporate bond issues and mortgage securities. Index returns
assume reinvestment of dividends and, unlike Fund returns, do not
reflect any fees or expenses.
All performance is historical, assumes reinvestment of all dividends
and capital gains, and is not indicative of future results. Investment
return and principal value will fluctuate, so an investor's shares,
when redeemed, may be worth more or less than when purchased. Total
returns in some periods were higher due to maintenance of the Fund's
expenses. See Financial Highlights for the Balanced Portfolio. The
Balanced Portfolio, with its current name and investment objective,
commenced operations on May 1, 1993. Performance figures include the
performance of its predecessor, the Managed Diversified Portfolio.
Since adopting its current objectives, the cumulative and average
annual returns are 4.96% and 2.94%, respectively.
- - -------------------------------------------------------------------
EQUITY HOLDINGS
- - -------------------------------------------------------------------
Sector breakdown of the Five Largest Equity Holdings
Portfolio's equity holdings -----------------------------------
1. General Electric Co.
Consumer Staples 16% Leading producer of electrical
Financial 12% equipment
Health 11% 2. American Telephone & Telegraph Co.
Technology 10% Telecommunication services and
Durables 9% business systems
Media 9% 3. Mellon Bank Corp.
Manufacturing 9% Commercial banking and
Energy 8% financial services
Consumer Discretionary 7% 4. PepsiCo Inc.
Other 9% Soft drinks, snack foods and
---- food services
100% 5. Motorola Inc.
==== Manufacturer of semiconductors
and communication products
- - -------------------------------------------------------------------
FIXED INCOME HOLDINGS
- - -------------------------------------------------------------------
By Asset Type
- - --------------------------------------------
U.S. Treasury Obligations 31%
Corporate Bonds 22%
Cash Equivalents 19%
Asset-Backed Securities 11%
U.S. Gov't Guaranteed Mortgages 6%
U.S. Government Agency Pass-Thrus 5%
Foreign Bonds 4%
Collateralized Mortgage Obligations 2%
----
100%
====
By Quality
- - --------------------------------------------
AAA 69%
AA 3%
A 13%
BBB 12%
BB 2%
NR 1%
----
100%
====
<PAGE>
GROWTH AND INCOME PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Growth and Income Portfolio commenced operations on May 2, 1994. In
the eight months through December 31, 1994, the Portfolio's total return
was 4.91%, outpacing the 3.98% return of the unmanaged Standard & Poor's
500 Index for the same period.
The Portfolio seeks long-term growth of capital, current income, and
growth of income by investing primarily in common stocks, preferred stocks,
and securities convertible into common stocks. Our disciplined investment
approach focuses on stocks that pay higher-than-average dividends (at least
20% above the market average) and have good prospects for earnings and
dividend growth.
(CALLOUT NEXT TO THE PREVIOUS PARAGRAPH) - During the period, Growth and
Income Portfolio took gains in some economically sensitive stocks and
invested the proceeds in select growth stocks such as consumer-staple
companies.
The S&P 500's flat return masked no less than six rallies and
corrections. Much of the volatility reflected investors' alternating views
that the economic expansion would be choked off by persistently rising
interest rates, or, conversely, that higher rates reflected a stronger,
more inflation-prone economy.
The positive return of the Portfolio in this environment resulted from
some gratifying successes. Still, some of the strategies that initially
worked to our advantage began to work against us later in the year. Most
significant was the overweighted position in manufacturing stocks (16% of
the equity portfolio versus 13% of the S&P 500). This group generally
outperformed the market during the first part of the year. However, by the
fourth quarter, manufacturing stocks became the biggest detractors of
portfolio performance, as investor's fears of an imminent economic slowdown
came to the fore.
We expect investment challenges to continue in the new year. However,
we believe well-positioned manufacturing companies will prosper in the
current global growth environment despite their recent underperformance,
while financial stocks are in a position to benefit from eventual stability
or even declines in interest rates. We are also investing in
consumer-staple companies that have embarked upon new strategies to succeed
in an era of intense competition, price cutting, inventory reductions, and
the growth of private labels. Recent additions include Philip Morris,
Heinz, and Tambrands.
Our aim in managing the Portfolio is to participate during periods of
rising equity prices while shielding the Portfolio from turbulent markets.
We believe the Portfolio remains positioned to provide exposure to the
long-term benefits of the equity market, while our emphasis on
high-yielding stocks should help provide a measure of price stability.
Sincerely,
Your Portfolio Management Team
/s/Robert T. Hoffman /s/Kathleen T. Millard
Robert T. Hoffman Kathleen T. Millard
Lead Portfolio Manager
/s/Benjamin W. Thorndike
Benjamin W. Thorndike
<PAGE>
Growth and Income Portfolio
Portfolio Summary as of December 31, 1994
- - -----------------------------------------------------------------
Growth of a $10,000 Investment
- - -----------------------------------------------------------------
Growth and Income Portfolio
- - ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- - --------- ------- ---------- -------
Life of
Fund* $10,491 4.91% --%
S&P 500 Index
- - --------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- - --------- ------- ---------- -------
Life of
Fund* $10,398 3.98% --%
*The Fund commenced operations on May 2, 1994.
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Growth and Income Portfolio
Year Amount
- - ---------------------
5/2/94* 10000
5/94 10250
6/94 10100
7/94 10317
8/94 10883
9/94 10750
10/94 10776
11/94 10340
12/94 10491
S&P 500 Index
Year Amount
- - ----------------------
5/2/94* 10000
5/94 10164
6/94 9915
7/94 10241
8/94 10660
9/94 10400
10/94 10633
11/94 10246
12/94 10398
The Standard & Poor's (S&P) 500 Index is an unmanaged capitalization-
weighted measure of 500 widely held common stocks listed on the New
York Stock Exchange, American Stock Exchange, and Over-The-Counter
market. Index returns assume reinvestment of dividends and, unlike
Fund returns, do not reflect any fees or expenses.
All performance is historical, assumes reinvestment of all dividends
and capital gains, and is not indicative of future results. Investment
return and principal value will fluctuate, so an investor's shares,
when redeemed, may be worth more or less than when purchased. Total
returns were higher due to maintenance of the Fund's expenses. See
Financial Highlights for the Growth and Income Portfolio.
- - -------------------------------------------------------------------
DIVERSIFICATION
- - -------------------------------------------------------------------
Equity Securities 90%
Cash Equivalents 10%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Sector breakdown of the Portfolio's equity holdings
Manufacturing 16%
Financial 14%
Health 13% Growth and Income Portfolio has
Energy 11% increased its focus on consumer-
Consumer Staples 9% staples companies that stand to
Durables 9% benefit despite the industry's
Communications 5% intense competition, price-
Consumer Discretionary 4% cutting, and the growth of private
Utilities 3% labels.
Other 6%
----
90%
====
- - --------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS
- - --------------------------------------------------------------------------
1. United Technologies Corp.
Aerospace, climate control systems and elevators
2. Eli Lilly Co.
Leading pharmaceutical company
3. Baxter International Inc.
Manufacturer and distributor of hospital and laboratory
products and services
4. Alltel Corp.
Telecommunications and data processing services
5. Warner-Lambert Co.
Drugs, toiletries and food products
6. First Bank System Inc.
Commercial banking in Minnesota and the northcentral U.S.
7. Xerox Corp.
Leading manufacturer of copiers and duplicators
8. Boise Cascade Corp.
Manufacturer of forest products
9. Meditrust SBI (REIT)
Owner of health care facilities
10. Murphy Oil Corp.
International integrated oil company
<PAGE>
CAPITAL GROWTH PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Two major trends influenced the stock market during much of 1994:
strong economic activity and persistently rising interest rates, due in
part to monetary tightening by the Federal Reserve. The struggle between
these opposing forces caused considerable unease among investors, and stock
prices were volatile throughout the year. In this environment, Capital
Growth Portfolio's net asset value per share declined to $12.23 on December
31, 1994, from $14.95 on December 31, 1993. However, the price change was
offset somewhat by $0.05 per share in income dividends and $1.31 per share
in capital gains distributions. The Portfolio recorded a -9.67% total
return for the year, compared with 1.32% for the unmanaged Standard &
Poor's 500 Index, and a -1.00% return for the 70 growth funds tracked by
Lipper Analytical Services, Inc. Lipper is an independent firm that tracks
performance of variable annuity investment options.
(CALLOUT NEXT TO THE PREVIOUS PARAGRAPH) - Capital Growth Portfolio is
positioned for 1995 with holdings that include cable, retail,
telecommunications, entertainment, healthcare, and financial stocks.
The Portfolio's performance trailed the Index in part because of its
holdings in the cable and retail industries. Cable stocks dropped due to
renewed FCC regulation of basic cable rates and the collapse of some
high-profile mergers. In addition, some retail holdings suffered in
anticipation of disappointing Christmas sales. Looking forward, the cable
industry should benefit from an improved regulatory environment, new
opportunities from substantially increased channel capacity, and
prospective joint ventures and mergers.
Several major developments influenced the domestic portion of the
Portfolio during the year. ITT proposed the acquisition of Caesar's World,
which we later sold at a substantial profit. We purchased United
Healthcare, U.S. HealthCare, and Baxter International in light of the
improved outlook for the healthcare industry and these companies in
particular. And the Portfolio's financial holdings were increased through
the purchase of AMBAC and MBIA, two municipal-bond insurers.
The Portfolio's investment in foreign stocks increased during the year
in part through the purchase of ENDESA, a leading Spanish utility company.
We also added to our holdings in Nokia, a rapidly growing Finnish
manufacturer of cellular telephones. In late December, all Latin American
stock markets declined sharply following the devaluation of the Mexican
peso. We used this opportunity to purchase two of the largest telephone
companies in Argentina--Telefonica de Argentina and Telecom Argentina--as
well as Telespe, a Brazilian telephone company.
Looking forward, we believe the market's overall valuation remains
reasonable, given 1994's rise in corporate earnings and our expectation for
further earnings gains in 1995. We are also encouraged by the moderate
outlook for U.S. inflation and economic activity in the new year. In view
of these prospects, we believe the Portfolio is well positioned to benefit
shareholders over time.
Sincerely,
Your Portfolio Management Team
/s/William F. Gadsden /s/Steven P. Aronoff
William F. Gadsden Steven P. Aronoff
Lead Portfolio Manager
/s/Julia D. Cox
Julia D. Cox
<PAGE>
Capital Growth Portfolio
Portfolio Summary as of December 31, 1994
- - -----------------------------------------------------------------
Growth of a $10,000 Investment
- - -----------------------------------------------------------------
Capital Growth Portfolio
- - ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- - --------- ------- ---------- -------
1 Year $ 9,033 -9.67% -9.67%
5 Year $15,008 50.08% 8.46%
Life of
Fund* $29,783 197.83% 12.22%
S&P 500 Index
- - --------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- - --------- ------- ---------- -------
1 Year $10,132 1.32% 1.32%
5 Year $15,174 51.74% 8.69%
Life of
Fund* $32,758 227.58% 13.43%
*The Fund commenced operations on July 16, 1985.
Index comparisons begin July 31, 1985.
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Yearly Periods Ended December 31
Capital Growth Portfolio
Year Amount
- - ---------------------
7/31/85* 10000
85 11245
86 13752
87 13492
88 16469
89 20215
90 18708
91 26108
92 27785
93 33587
94 30339
S&P 500 Index
Year Amount
- - ---------------------
7/31/85* 10000
85 11257
86 13358
87 14059
88 16394
89 21589
90 20919
91 27292
92 29371
93 32331
94 32758
The Standard & Poor's (S&P) 500 Index is an unmanaged capitalization-
weighted measure of 500 widely held common stocks listed on the New
York Stock Exchange, American Stock Exchange, and Over-The-Counter
market. Index returns assume reinvestment of dividends and, unlike
Fund returns, do not reflect any fees or expenses.
All performance is historical, assumes reinvestment of all dividends
and capital gains, and is not indicative of future results. Investment
return and principal value will fluctuate, so an investor's shares,
when redeemed, may be worth more or less than when purchased. Total
returns in some periods were higher due to maintenance of the Fund's
expenses. See Financial Highlights for the Capital Growth Portfolio.
- - -------------------------------------------------------------------
DIVERSIFICATION
- - -------------------------------------------------------------------
Equity Securities 95%
Cash Equivalents 5%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Sector breakdown of the Portfolio's equity holdings
Media 18%
Consumer Discretionary 15% A proposed acquisition in the
Communications 12% gaming industry and a major
Technology 10% telecommunications merger benefited
Financial 10% Capital Growth Portfolio.
Health 7%
Durables 7%
Utilities 4%
Energy 4%
Other 8%
----
95%
====
- - --------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS
- - --------------------------------------------------------------------------
1. Time Warner Inc.
Publishing, broadcasting, and video entertainment company
2. Tele-Communications Inc.
Cable TV systems and microwave services
3. Comcast Corp.
Cable TV, sound and telecommunication systems
4. Rogers Communications Inc.
Cable TV and cellular telephones in Canada
5. Intel Corp.
Semiconductor memory circuits
6. Chrysler Corp.
Leading automobile manufacturer
7. American Telephone & Telegraph Co.
Telecommunication services and business systems
8. Century Telephone Enterprises
Telecommunication services
9. Astra AB
Pharmaceutical company
10. Microsoft Corp.
Computer operating systems software
<PAGE>
INTERNATIONAL PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
We are pleased to report relatively strong performance during a
troublesome year for the world's financial markets. For the 12 months ended
December 31, 1994, International Portfolio returned -0.85%. By comparison,
the unmanaged Morgan Stanley Capital International's Europe, Australia, the
Far East and Canada Index returned 7.36%, owing to its large exposure to
Japan compared with that of the Fund. During the year, the Japanese yen
surged against the U.S. dollar, while Japanese stocks also rallied. The
combination produced a U.S. dollar return of 20.7% for Japan, though other
Asian markets fell 16.1% on average. In Mexico, the December devaluation of
the peso caused market declines throughout Latin America, although the
effect on the Portfolio was limited. European and American markets ended
the year little changed.
(CALLOUT NEXT TO THE PREVIOUS PARAGRAPH) - During the year, we invested in
companies benefiting from the global economic expansion, including those
involved in the production and exploration of oil and natural gas.
During the year, we sought and invested in companies benefiting from
heightened economic activity worldwide. In Germany, for example, the
industrial sector has made significant gains in competitiveness and
profitability and now appears to be leading the European economic recovery.
Germany's economic activity thus far has been driven by exports, and recent
additions to the portfolio include such exporters as Henkel, a household
detergent and adhesives producer; BASF, a diversified chemicals
manufacturer; and Volkswagen.
We also maintained our focus on energy-related companies benefiting
from a jump in worldwide demand for oil and other raw materials. In view of
this trend, we added to our positions in oil and gas exploration and
production companies, including Ampol Exploration Ltd. in Australia and
Total SA in France.
Also, we further reduced our holdings of Japanese retailers,
completely eliminating our position in Autobacs Seven Co., Ltd., once one
of our largest holdings. Concerns about sluggish consumer spending and
increased competition have dimmed our enthusiasm for Japanese retail
stocks. Our Japanese holdings now largely represent major exporting firms
like Canon and Hitachi, as well as capital goods companies that we believe
are positioned for global expansion and likely to benefit from a declining
yen.
Given ongoing political and economic uncertainties in many parts of
the world, we will seek to use additional market volatility to our
advantage by purchasing fundamentally strong companies at discounted
prices.
Sincerely,
Your Portfolio Management Team
/s/Carol L. Franklin /s/Nicholas Bratt
Carol L. Franklin Nicholas Bratt
Lead Portfolio Manager
<PAGE>
International Portfolio
Portfolio Summary as of December 31, 1994
- - -----------------------------------------------------------------
Growth of a $10,000 Investment
- - -----------------------------------------------------------------
International Portfolio
- - ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- - --------- ------- ---------- -------
1 Year $ 9,915 -.85% -.85%
5 Year $13,633 36.33% 6.39%
Life of
Fund* $19,595 95.95% 9.18%
MSCI EAFE & Canada Index
- - --------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- - --------- ------- ---------- -------
1 Year $10,736 7.36% 7.36%
5 Year $10,730 7.30% 1.42%
Life of
Fund* $13,915 39.15% 4.45%
*The Fund commenced operations on May 1, 1987.
Index comparisons begin May 31, 1987.
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Yearly Periods Ended December 31
International Portfolio
Year Amount
- - ---------------------
5/31/87* 10000
87 8997
88 10502
89 14470
90 13363
91 14893
92 14433
93 19896
94 19727
MSCI EAFE & Canada Index
Year Amount
- - ---------------------
5/31/87* 10000
87 9138
88 11682
89 12968
90 9980
91 11186
92 9824
93 12961
94 13915
The Morgan Stanley Capital International (MSCI) Europe, Australia,
the Far East (EAFE) & Canada Index is an unmanaged capitalization-
weighted measure of stock markets in Europe, Australia, the Far East
and Canada. Index returns assume dividends reinvested net of
withholding tax and, unlike Fund returns, do not reflect any fees or
expenses.
All performance is historical, assumes reinvestment of all dividends
and capital gains, and is not indicative of future results. Investment
return and principal value will fluctuate, so an investor's shares,
when redeemed, may be worth more or less than when purchased. Total
returns in some periods were higher due to maintenance of the Fund's
expenses. See Financial Highlights for the International Portfolio.
- - -------------------------------------------------------------------
DIVERSIFICATION
- - -------------------------------------------------------------------
By Region (Excluding Cash Equivalents)
- - --------------------------------------
Europe 50%
Japan 28%
Pacific Basin 14%
Latin America 5%
Canada 3%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
By Asset Type
- - --------------------------------------
Equity Holdings 90%
Cash Equivalents 10%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- - --------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS
- - --------------------------------------------------------------------------
1. Autoliv AB
Swedish manufacturer of safety airbags for automobiles
2. SAP AG
German computer software manufacturer
3. Canon Inc.
Leading Japanese producer of visual image and information
equipment
4. NGK Spark Plug Co., Ltd.
Leading Japanese manufacturer of automotive spark plugs
5. Kyocera Corp.
Leading Japanese ceramic packaging manufacturer
6. Sony Corp.
Japanese consumer electronic products manufacturer
7. Hitachi Ltd.
Japanese general electronics manufacturer
8. Hitachi Metals, Ltd.
Major Japanese producer of high-quality specialty steels
9. Outokumpu Oy
Metals and minerals in Finland
10. Schering AG
German pharmaceutical and chemical producer
<PAGE>
<TABLE>
MONEY MARKET PORTFOLIO
INVESTMENT PORTFOLIO as of December 31, 1994
- - ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Value ($)
Portfolio Amount ($) (Note A)
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------
4.5% REPURCHASE AGREEMENT
------------------------------------------------------------------------------------
4,030,000 Repurchase Agreement with Donaldson, Lufkin & Jenrette
dated 12/30/94 at 5.875%, to be repurchased at
$4,032,631 on 1/3/95, collateralized by a $4,074,000
U.S. Treasury Note, 6.25%, 8/31/96 (Cost $4,030,000). . 4,030,000
------------
------------------------------------------------------------------------------------
48.1% COMMERCIAL PAPER
------------------------------------------------------------------------------------
CONSUMER STAPLES 3.3%
Food & Beverage 3,000,000 H.J. Heinz Co., 5.95%, 1/27/95 . . . . . . . . . . . . 2,987,108
------------
COMMUNICATIONS 3.3%
Telephone/
Communications 3,000,000 AT&T Corp., 6.02%, 2/8/95 . . . . . . . . . . . . . . 2,980,937
------------
FINANCIAL 34.7%
Banks 6.7% 3,000,000 Bankers Trust New York Corp., 5.08%, 1/13/95 . . . . . 2,994,920
3,000,000 J.P. Morgan & Co., Inc., 6.05%, 3/1/95 . . . . . . . . 2,970,254
------------
5,965,174
------------
Business Finance 3.3% 3,000,000 Receivables Capital Corp., 5.95%, 1/24/95 . . . . . . 2,988,596
------------
Consumer Finance 7.9% 3,000,000 American Express Credit Corp., 5.88%, 2/2/95 . . . . . 3,000,000
4,000,000 General Electric Capital Corp., 5.78%, 1/31/95 . . . . 4,000,000
------------
7,000,000
------------
Other Financial
Companies 16.8% 3,000,000 American General Finance Corp., 5.81%, 1/27/95 . . . . 3,000,000
3,000,000 Associates Corp. of North America, 5.68%, 1/18/95 . . 3,000,000
3,000,000 Corporate Asset Funding Co., 6.05%, 2/10/95 . . . . . 2,979,833
3,000,000 New Center Asset Trust, 5.65%, 1/13/95 . . . . . . . . 2,994,350
3,000,000 Rincon Securities Inc., 5.75%, 1/17/95 . . . . . . . . 2,992,333
------------
14,966,516
------------
DURABLES 3.4%
Construction/
Agricultural Equipment 3,000,000 John Deere Capital Corp., 5.78%, 1/24/95 . . . . . . . 3,000,000
------------
MANUFACTURING 3.4%
Chemicals 3,000,000 E.I. du Pont de Nemours & Co., 5.9%, 1/24/95 . . . . . 2,988,692
------------
TOTAL COMMERCIAL PAPER (Cost $42,877,023) . . . . . . 42,877,023
------------
------------------------------------------------------------------------------------
11.0% U.S. TREASURY OBLIGATIONS
------------------------------------------------------------------------------------
5,000,000 U.S. Treasury Bill, 4.71%, 1/5/95 . . . . . . . . . . 4,997,383
2,000,000 U.S. Treasury Bill, 3.41%, 1/12/95 . . . . . . . . . . 1,997,916
3,000,000 U.S. Treasury Bill, 6.75%, 12/14/95 . . . . . . . . . 2,804,957
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $9,800,256). . . . . . . . . . . . . . . . . . 9,800,256
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
INVESTMENT PORTFOLIO
- - ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Value ($)
Portfolio Amount ($) (Note A)
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
36.4% U.S. GOVERNMENT AGENCY OBLIGATIONS
---------------------------------------------------------------------------------------
5,000,000 Federal Farm Credit Bank, Discount Note, 5.6%, 1/4/95 . . . 4,997,667
3,000,000 Federal Home Loan Bank, Discount Note, 4.93%, 1/13/95 . . . 2,995,070
5,000,000 Federal Home Loan Mortgage Corp., Discount Note,
5.9%, 1/3/95 . . . . . . . . . . . . . . . . . . . . . . 4,998,361
5,000,000 Federal Home Loan Mortgage Corp., Discount Note,
5.78%, 1/17/95 . . . . . . . . . . . . . . . . . . . . . 4,987,155
5,000,000 Federal Home Loan Mortgage Corp., Discount Note,
5.62%, 1/23/95 . . . . . . . . . . . . . . . . . . . . . 4,982,828
4,500,000 Federal Home Loan Mortgage Corp., Discount Note,
6.17%, 4/4/95 . . . . . . . . . . . . . . . . . . . . . . 4,428,274
5,000,000 Federal National Mortgage Association Discount Note,
5.8%, 1/9/95 . . . . . . . . . . . . . . . . . . . . . . 4,993,556
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $32,382,911) . . . . . . . . . . . . . . . . . . . 32,382,911
-----------
- - ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100% (Cost $89,090,190)(a) . . . . . . . . . 89,090,190
===========
- - ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Cost for federal income tax purposes is $89,090,190.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
- - ------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
<S> <C> <C>
DECEMBER 31, 1994
- - ------------------------------------------------------------------------------------------------
ASSETS
Investments, at value (amortized cost $89,090,190) (Note A) . . . . . $ 89,090,190
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 890
Receivables:
Portfolio shares sold . . . . . . . . . . . . . . . . . . . . . . 1,382,184
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,037
------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . 90,534,301
LIABILITIES
Payables:
Due to Adviser (Note B) . . . . . . . . . . . . . . . . . . . . . $ 30,056
Accrued expenses (Note B) . . . . . . . . . . . . . . . . . . . . 6,333
---------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 36,389
------------
Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . $ 90,497,912
============
NET ASSETS
Net assets consist of:
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . 90,497,912
------------
Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . $ 90,497,912
============
NET ASSET VALUE, offering and redemption price per share
($90,497,912 -:- 90,497,912 outstanding shares of beneficial
interest, no par value, unlimited number of shares authorized) . . $1.00
=====
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- - ------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1994
- - ------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,175,974
Expenses (Note A):
Management fee (Note B) . . . . . . . . . . . . . . . . . . $269,963
Administrative fees (Note B) . . . . . . . . . . . . . . . 40,297
Accounting fees (Note B) . . . . . . . . . . . . . . . . . 17,630
Trustees' fees (Note B) . . . . . . . . . . . . . . . . . . 9,886
Custodian fees . . . . . . . . . . . . . . . . . . . . . . 21,111
Federal registration . . . . . . . . . . . . . . . . . . . 18,186
Legal . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,785
Auditing . . . . . . . . . . . . . . . . . . . . . . . . . 9,984
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,641 407,483
-------- -----------
Net investment income . . . . . . . . . . . . . . . . . . . . 2,768,491
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . $ 2,768,491
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
MONEY MARKET PORTFOLIO
- - --------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- - --------------------------------------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
INCREASE (DECREASE) IN NET ASSETS 1994 1993
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income and net increase in net assets
resulting from operations . . . . . . . . . . . . . . . . . $ 2,768,491 $ 899,874
------------- -------------
Distributions to shareholders from net investment income
($.037 and $.025 per share, respectively . . . . . . . . . . . (2,768,491) (899,874)
------------- -------------
Portfolio share transactions at net asset value of $1.00 per share:
Proceeds from shares sold . . . . . . . . . . . . . . . . . . 186,827,297 98,111,621
Net asset value of shares issued to shareholders in
reinvestment of distributions from net investment income . 2,768,491 899,874
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . (147,877,533) (83,950,201)
------------- -------------
Net increase in net assets from Portfolio share transactions . 41,718,255 15,061,294
------------- -------------
INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . 41,718,255 15,061,294
Net assets at beginning of period . . . . . . . . . . . . . . . . 48,779,657 33,718,363
------------- -------------
NET ASSETS AT END OF PERIOD . . . . . . . . . . . . . . . . . . . $ 90,497,912 $ 48,779,657
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS.
<CAPTION>
SIX FOR THE PERIOD
MONTHS JULY 16, 1985
ENDED (COMMENCEMENT)
YEARS ENDED DECEMBER 31, DECEMBER OF OPERATIONS)
------------------------------------------------------------- 31, TO JUNE 30,
1994 1993 1992 1991 1990 1989 1988 1987 1986(e) 1986
------------------------------------------------------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period. . . . $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000(b)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income (a) . . . . . . . .037 .025 .033 .057 .076 .088 .068 .060 .026 .064
Less distributions from
net investment income . . (.037) (.025) (.033) (.057) (.076) (.088) (.068) (.060) (.026) (.064)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period . . . . . . $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%) . . . . . 3.72 2.54 3.33 5.81 7.83 8.84 7.08 5.95 2.59(d) 6.59(d)
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period ($ millions). . . . 90 49 34 28 32 15 11 8 3 --
Ratio of operating
expenses, net to
average daily net
assets (%) (a) . . . . . .56 .66 .64 .67 .69 .72 .75 .75 .75(c) .60(c)
Ratio of net investment
income to average
daily net assets (%) . . . 3.80 2.55 3.26 5.67 7.57 8.53 6.99 6.06 5.10(c) 6.75(c)
(a) Portion of expenses
reimbursed
(Note B) . . . . . . . $ -- $ -- $ -- $ -- $ -- $ .001 $ .003 $ .006 $ .022 $ .133
<FN>
(b) Original capital
(c) Annualized
(d) Not annualized
(e) On August 22, 1986, the Trustees voted to change the year end of the Fund from June 30 to December 31.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
BOND PORTFOLIO
INVESTMENT PORTFOLIO as of December 31, 1994
- - ----------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- - ----------------------------------------------------------------------------------------------
<S> <C> <C>
48.7% U.S. TREASURY OBLIGATIONS
------------------------------------------------------------------------------------
3,230,000 U.S. Treasury Bill, 5.78%, 5/18/95 . . . . . . . . . 3,156,582
4,200,000 U.S. Treasury Bond, 7.25%, 5/15/16 . . . . . . . . . 3,883,698
4,520,000 U.S. Treasury Bond, 7.875%, 2/15/21 . . . . . . . . 4,463,500
4,360,000 U.S. Treasury Note, 3.875%, 10/31/95 . . . . . . . . 4,245,550
13,555,000 U.S. Treasury Note, 4%, 1/31/96 . . . . . . . . . . 13,086,946
9,110,000 U.S. Treasury Note, 5.125%, 3/31/96 . . . . . . . . 8,855,193
8,510,000 U.S. Treasury Note, 6%, 6/30/96 . . . . . . . . . . 8,326,524
6,905,000 U.S. Treasury Note, 6.875%, 7/31/99 . . . . . . . . 6,646,063
3,200,000 U.S. Treasury Note, 7.25%, 5/15/04 . . . . . . . . . 3,072,992
8,100,000 U.S. Treasury Separate Trading Registered Interest
and Principal Securities, 11/15/09 (8.04**) . . . . 2,507,841
12,700,000 U.S. Treasury Separate Trading Registered Interest
and Principal Securities, 11/15/10 (8.05**) . . . . 3,628,263
18,740,000 U.S. Treasury Separate Trading Registered Interest
and Principal Securities, 2/15/12 (8.07**) . . . . . 4,837,918
8,050,000 U.S. Treasury Separate Trading Registered Interest
and Principal Securities, 5/15/15 (8.09**) . . . . . 1,600,984
-----------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $70,751,577) . 68,312,054
-----------
------------------------------------------------------------------------------------
8.3% U.S. GOV'T GUARANTEED MORTGAGES
------------------------------------------------------------------------------------
9,077,233 Government National Mortgage Association, 8%, 7/15/24* . . 8,677,199
3,266,168 Government National Mortgage Association, 6.5%, 8/15/08* . 2,984,461
-----------
TOTAL U.S. GOV'T GUARANTEED MORTGAGES
(Cost $12,203,049) . . . . . . . . . . . . . . . . . . 11,661,660
-----------
------------------------------------------------------------------------------------
3.3% U.S. GOVERNMENT AGENCY PASS-THRUS
------------------------------------------------------------------------------------
4,976,332 Federal National Mortgage Association, 7.5%, 10/1/24*
(Cost $4,731,404) . . . . . . . . . . . . . . . . . . . 4,646,651
----------
------------------------------------------------------------------------------------
1.7% COLLATERALIZED MORTGAGE OBLIGATIONS
------------------------------------------------------------------------------------
2,000,000 Federal Home Loan Mortgage Corp., REMIC, 7%, 7/15/06 . . . 1,835,620
272,776 Federal National Mortgage Association, REMIC,
8.5%, 4/25/18 . . . . . . . . . . . . . . . . . . . . . 273,883
220,406 Resolution Trust Corp., Series 1992-7, Class A-2B,
8.35%, 6/25/29 . . . . . . . . . . . . . . . . . . . . . 219,821
----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $2,321,803) . . . . . . . . . . . . . . . . . . . . . 2,329,324
----------
-----------------------------------------------------------------------------------
8.2% FOREIGN BONDS - U.S. $ DENOMINATED
-----------------------------------------------------------------------------------
1,000,000 ABN-AMRO Bank NV, 7.75%, 5/15/23 . . . . . . . . . . . . . 891,990
1,500,000 Banco Nacional de Comercio Exterior SNC, 9.875%, 6/24/96 . 1,462,500
750,000 Fomento Economico Mexicano S.A., 9.5%, 7/22/97 . . . . . . 671,250
1,000,000 Government of Malaysia, 9.875%, 9/27/00 . . . . . . . . . 1,058,350
1,000,000 Gruma SA de C.V., 9.75%, 3/9/98 . . . . . . . . . . . . . 915,000
2,000,000 Kingdom of Thailand, 8.25%, 3/15/02 . . . . . . . . . . . 1,963,240
2,000,000 Korea Development Bank, 9.6%, 12/1/00 . . . . . . . . . 2,070,620
450,000 Nacional Financiera SNC, 6%, 12/19/96 . . . . . . . . . . 409,500
400,000 Nacional Financiera SNC, 9.375%, 7/15/02 . . . . . . . . . 338,000
1,000,000 Nippon Telegraph & Telephone Corp., 9.5%, 7/27/98 . . . . 1,038,660
750,000 Petroleos Mexicanos, 8.25%, 2/4/98 . . . . . . . . . . . . 680,625
----------
TOTAL FOREIGN BONDS - U.S. $ DENOMINATED
(Cost $11,930,619) . . . . . . . . . . . . . . . . . . . 11,499,735
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- - -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- - -----------------------------------------------------------------------------------------------------------------------
13.0% ASSET-BACKED SECURITIES
---------------------------------------------------------------------------------
<S> <C> <C> <C>
AUTOMOBILE RECEIVABLES 0.7% 1,000,000 Premier Auto Trust, Series 1994-3, 6.8%, 12/2/99 . . . 972,500
----------
CREDIT CARD RECEIVABLES 9.2% 1,500,000 Chase Manhattan Credit Card Trust, 1991 "A", 7.65%,
11/15/98 . . . . . . . . . . . . . . . . . . . . . . . 1,497,645
3,000,000 Discover Credit Card Trust, Series 1992-A, 5.5%,
5/16/98 . . . . . . . . . . . . . . . . . . . . . . . 2,941,860
1,000,000 First Chicago Master Trust, Series 1991-D, 8.4%, 6/15/98 1,003,120
3,500,000 First USA Credit Corp., Series 1992-A, 5.2%, 6/15/98 . . 3,387,335
2,500,000 Standard Credit Card Trust, Series 1990-3B, 9.85%,
7/10/97 . . . . .. . . . . . . . . . . . . . . . . . . 2,575,000
1,500,000 Standard Credit Card Trust, Series 1990-6B, 9.625%,
9/10/97 . . . . . . . . . . . . . . . . . . . . . . . 1,540,770
----------
12,945,730
----------
HOME EQUITY LOANS 1.9% 2,000,000 Contimortgage Home Equity Loan Trust, Series 1994-5 A1,
9.07%, 5/15/06 . . . . . . . . . . . . . . . . . . . . 2,011,250
668,573 United Companies Financial Corp., Home Loan Trust,
Series 1993 B1, 6.075%, 7/25/14* . . . . . . . . . . 617,803
----------
2,629,053
----------
MANUFACTURED HOUSING
RECEIVABLES 1.2% 1,757,845 Green Tree Financial Corp., Securitized Series 1994B,
7.85%, 7/15/04* . . . . . . . . . . . . . . . . . . 1,713,899
----------
TOTAL ASSET-BACKED SECURITIES (Cost $18,967,489) . . . 18,261,182
----------
---------------------------------------------------------------------------------
16.8% CORPORATE BONDS
---------------------------------------------------------------------------------
CONSUMER DISCRETIONARY 1.4% 2,000,000 Dayton Hudson Corp., 8.6%, 1/15/12 . . . . . . . . . . 1,979,160
----------
CONSUMER STAPLES 0.7% 1,000,000 Seagram & Sons Inc., 9%, 8/15/21 . . . . . . . . . . . 1,020,450
----------
FINANCIAL 3.5% 1,000,000 Banc One Corp., 8.74%, 9/15/03 . . . . . . . . . . . . 1,012,830
1,000,000 BankAmerica Corp., 7.75%, 7/15/02 . . . . . . . . . . 949,950
1,000,000 Golden West Financial Corp., 6%, 10/1/03 . . . . . . . 843,890
1,000,000 Grand Metropolitan Investment Corp., 8.625%, 8/15/01 . . 1,006,640
1,000,000 Household Finance Corp., 9.25%, 2/15/95 . . . . . . . 1,003,080
----------
4,816,390
----------
MEDIA 1.3% 2,000,000 Time Warner Inc., 9.125%, 1/15/13 . . . . . . . . . . . 1,801,880
----------
DURABLES 2.1% 750,000 Caterpillar Inc., 9.75%, 6/1/19 . . . . . . . . . . . . 792,105
5,000,000 General Motors Acceptance Corp., Zero Coupon, 12/1/12. . 1,095,450
1,000,000 Lockheed Corp., 9%, 1/15/22 . . . . . . . . . . . . . . 1,023,790
----------
2,911,345
----------
MANUFACTURING 2.2% 1,000,000 ARCO Chemical Co., 9.375%, 12/15/05 . . . . . . . . . . 1,045,140
1,000,000 Dow Chemical Co., 9%, 5/15/10 . . . . . . . . . . . . 1,014,920
1,000,000 Monsanto Co., 8.7%, 10/15/21 . . . . . . . . . . . . . . 1,006,170
----------
3,066,230
----------
TECHNOLOGY 1.3% 2,000,000 Loral Corp., 8.375%, 6/15/24 . . . . . . . . . . . . . 1,848,560
----------
ENERGY 3.6% 2,000,000 Atlantic Richfield Co., 8.25%, 2/1/22 . . . . . . . . . 1,925,000
2,000,000 Atlantic Richfield Co., 9.125%, 8/1/31 . . . . . . . . 2,070,860
1,000,000 Enron Corp., 10%, 6/1/98 . . . . . . . . . . . . . . . 1,037,900
----------
5,033,760
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
BOND PORTFOLIO
- - ----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
METALS AND MINERALS 0.7% 1,000,000 Alcan Aluminum Ltd., 9.4%, 6/1/95 . . . . . . 1,009,380
-----------
TOTAL CORPORATE BONDS (Cost $24,059,681) . . . 23,487,155
-----------
- - ----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $144,965,622)(a) . . . . . . . . . . . 140,197,761
===========
- - ----------------------------------------------------------------------------------------------------------------
<FN>
* Effective maturities will be shorter due to amortization and prepayments.
** Yield; bond equivalent yield to maturity; not a coupon rate (unaudited).
(a) At December 31, 1994, the net unrealized depreciation on investments based on cost for federal
income tax purposes of $145,233,462 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an excess
of market value over tax cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 311,092
Aggregate gross unrealized depreciation for all investments in which there is an excess
of tax cost over market value . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,346,793)
------------
Net unrealized depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (5,035,701)
============
- - -------------------------------------------------------------------------------------------------------------
At December 31, 1994, the Bond Portfolio had a net tax basis capital loss carryforward of approximately
$4,153,327, which may be applied against any realized net taxable capital gains of each succeeding year
until fully utilized or until December 31, 2002, whichever occurs first.
- - -------------------------------------------------------------------------------------------------------------
From November 1, 1994 through December 31, 1994, the Bond Portfolio incurred approximately $934,894 of
net realized capital losses which the Portfolio intends to elect to defer and treat as arising in the
fiscal year ended December 31, 1995.
- - -------------------------------------------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short-term investments and U.S. Government
securities), for the year ended December 31, 1994, aggregated $26,330,691 and $28,463,557,
respectively. Purchases and sales of U.S. Government securities for the year ended December 31, 1994,
aggregated $127,013,697 and $98,526,029, respectively.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- - ------------------------------------------------------------------------------------------------
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
- - ------------------------------------------------------------------------------------------------
DECEMBER 31, 1994
- - ------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $144,965,622) (Note A) . . $140,197,761
Receivables:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,288,634
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . 716,464
Portfolio shares sold . . . . . . . . . . . . . . . . . . . . . 49,355
------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . 143,252,214
LIABILITIES
Payables:
Due to custodian bank . . . . . . . . . . . . . . . . . . . . . $ 2,424
Investments purchased . . . . . . . . . . . . . . . . . . . . . 736,188
Portfolio shares redeemed . . . . . . . . . . . . . . . . . . . 29,285
Due to Adviser (Note B) . . . . . . . . . . . . . . . . . . . . 60,086
Accrued expenses (Note B) . . . . . . . . . . . . . . . . . . . 19,619
--------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . 847,602
------------
Net assets, at market value . . . . . . . . . . . . . . . . . . . . $142,404,612
============
NET ASSETS
Net assets consist of:
Undistributed net investment income . . . . . . . . . . . . . . $ 2,188,157
Net unrealized depreciation on investments . . . . . . . . . . . (4,767,861)
Accumulated net realized loss . . . . . . . . . . . . . . . . . (5,356,061)
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 150,340,377
------------
Net assets, at market value . . . . . . . . . . . . . . . . . . . . $142,404,612
============
NET ASSET VALUE, offering and redemption price per share
($142,404,612 -:- 21,973,579 outstanding shares of beneficial
interest, no par value, unlimited number of shares authorized) . $6.48
=====
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
BOND PORTFOLIO
- - ---------------------------------------------------------------------------------------------------
<CAPTION>
STATEMENT OF OPERATIONS
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1994
- - ---------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,603,254
Expenses (Note A):
Management fee (Note B) . . . . . . . . . . . . . . . . . . $ 650,361
Administrative fees (Note B) . . . . . . . . . . . . . . . 40,238
Accounting fees (Note B) . . . . . . . . . . . . . . . . . 22,187
Trustees' fees (Note B) . . . . . . . . . . . . . . . . . . 10,111
Custodian fees . . . . . . . . . . . . . . . . . . . . . . 32,442
Auditing . . . . . . . . . . . . . . . . . . . . . . . . . 14,153
Legal . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,717
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,757 796,966
---------- ------------
Net investment income . . . . . . . . . . . . . . . . . . . . 8,806,288
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized loss from:
Investments . . . . . . . . . . . . . . . . . . . . . . . . (5,510,934)
Foreign currency related transactions . . . . . . . . . . . (96,214) (5,607,148)
----------
Net unrealized appreciation (depreciation) during the period on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . (9,676,517)
Foreign currency related transactions . . . . . . . . . . . 3,936 (9,672,581)
---------- ------------
Net loss on investment transactions . . . . . . . . . . . . . (15,279,729)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . $ (6,473,441)
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- - ----------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- - ----------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
----------------------------------
INCREASE (DECREASE) IN NET ASSETS 1994 1993
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,806,288 $ 7,642,963
Net realized gain (loss) from investment transactions . . . . . . . . . . (5,607,148) 3,118,124
Net unrealized appreciation (depreciation) on investment
transactions during the period . . . . . . . . . . . . . . . . . . . . (9,672,581) 2,512,942
------------- -------------
Net increase (decrease) in net assets resulting from operations . . . . . . . (6,473,441) 13,274,029
------------- -------------
Distributions to shareholders from:
Net investment income ($.43 and $.48 per share, respectively) . . . . . . (8,525,294) (7,359,412)
------------- -------------
Net realized gain from investment transactions
($.17 and $.15 per share, respectively) . . . . . . . . . . . . . . . . (3,161,229) (2,268,442)
------------- -------------
Portfolio share transactions:
Proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . 86,578,280 60,028,541
Net asset value of shares issued to shareholders in
reinvestment of distributions . . . . . . . . . . . . . . . . . . . . . 11,686,523 9,627,854
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . (66,398,542) (57,355,192)
------------- -------------
Net increase in net assets from Portfolio share transactions . . . . . . . . 31,866,261 12,301,203
------------- -------------
INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,706,297 15,947,378
Net assets at beginning of period . . . . . . . . . . . . . . . . . . . . . . 128,698,315 112,750,937
------------- -------------
NET ASSETS AT END OF PERIOD (including undistributed net investment
income of $2,188,157 and $2,203,911, respectively) . . . . . . . . . . . . $ 142,404,612 $ 128,698,315
============= =============
OTHER INFORMATION
INCREASE (DECREASE) IN PORTFOLIO SHARES
Shares outstanding at beginning of period . . . . . . . . . . . . . . . . . 17,350,092 15,685,339
------------- -------------
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,843,292 8,119,378
Shares issued to shareholders in reinvestment of distributions . . . . . . 1,713,654 1,324,202
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,933,459) (7,778,827)
------------- -------------
Net increase in Portfolio shares . . . . . . . . . . . . . . . . . . . . . 4,623,487 1,664,753
------------- -------------
Shares outstanding at end of period . . . . . . . . . . . . . . . . . . . . . 21,973,579 17,350,092
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
- - -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER
PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS.
SIX FOR THE PERIOD
MONTHS JULY 16, 1985
ENDED (COMMENCEMENT
YEARS ENDED DECEMBER 31, (E) DECEMBER OF OPERATIONS
----------------------------------------------------------------------- 31, TO JUNE 30,
1994 1993 1992 1991 1990 1989 1988 1987 1986(e)(f) 1986
--------------------------------------------------------------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period . . . $ 7.42 $ 7.19 $ 7.37 $ 6.73 $ 6.72 $ 6.39 $ 6.47 $ 6.67 $ 6.56 $ 6.00(b)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income (a) . . . . . . .43 .48 .49 .52 .53 .54 .54 .49 .23 .45
Net realized and
unrealized gain
(loss) on
investment
transactions . . . . . . (.77) .38 (.02) .61 (.02) .18 (.19) (.40) .08 .44
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations . . . . . . . . (.34) .86 .47 1.13 .51 .72 .35 .09 .31 .89
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions from:
Net investment income . . . (.43) (.48) (.46) (.47) (.50) (.39) (.43) (.29) (.17) (.33)
Net realized gains on
on investment
transactions . . . . . . (.17) (.15) (.19) (.02) -- -- -- -- (.03) --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions . . . . (.60) (.63) (.65) (.49) (.50) (.39) (.43) (.29) (.20) (.33)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period . . . . . . $ 6.48 $ 7.42 $ 7.19 $ 7.37 $ 6.73 $ 6.72 $ 6.39 $ 6.47 $ 6.67 $ 6.56
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%) . . . . . . (4.79) 12.38 7.01 17.61 8.06 11.65 5.46 1.22 4.90(d) 15.11(d)
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period ($ millions) . . . . 142 129 113 74 42 22 3 3 1 --
Ratio of operating
expenses, net to
average net
assets (%) (a) . . . . . . .58 .61 .63 .69 .73 .75 .75 .75 .75(c) .60(c)
Ratio of net investment
income to average
net assets (%) . . . . . . 6.43 6.59 6.89 7.51 8.05 8.04 7.86 7.53 6.88(c) 7.48(c)
Portfolio turnover
rate (%) . . . . . . . . . 96.55 125.15 87.00 115.86 71.02 103.41 245.23 186.05 23.82(c) 6.27(c)
<FN>
(a) Portion of expenses
reimbursed (Note B) . . . $ -- $ -- $ -- $ -- $ -- $ .01 $ .04 $ .08 $ .21 $ .80
(b) Original capital
(c) Annualized
(d) Not annualized
(e) Per share amounts, for each of the periods identified, have been calculated using the monthly average shares outstanding
during the period method.
(f) On August 22, 1986, the Trustees voted to change the year end of the Fund from June 30 to December 31.
</FN>
</TABLE>
<PAGE>
<TABLE>
BALANCED PORTFOLIO
INVESTMENT PORTFOLIO as of December 31, 1994
- - -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3.9% REPURCHASE AGREEMENT
---------------------------------------------------------------------------------------
1,810,000 Repurchase Agreement with Donaldson, Lufkin &
Jenrette dated 12/30/94 at 5.875%, to be repurchased
at $1,811,182 on 1/3/95, collateralized by a $1,871,000
U.S. Treasury Note, 4.25%, 11/30/95 (Cost $1,810,000) . . . . 1,810,000
----------
---------------------------------------------------------------------------------------
3.3% COMMERCIAL PAPER
---------------------------------------------------------------------------------------
1,500,000 American Express Credit Corp., 5.755%, 1/3/95
(Cost $1,500,000) . . . . . . . . . . . . . . . . . . . . . 1,500,000
----------
---------------------------------------------------------------------------------------
11.7% U.S. TREASURY OBLIGATIONS
---------------------------------------------------------------------------------------
700,000 U.S. Treasury Bill, 5.78%, 5/18/95 . . . . . . . . . . . . 684,089
340,000 U.S. Treasury Bond, 7.875%, 2/15/21 . . . . . . . . . . . . 335,750
300,000 U.S. Treasury Bond, 8.125%, 5/15/21 . . . . . . . . . . . . 304,782
300,000 U.S. Treasury Note, 4.125%, 6/30/95 . . . . . . . . . . . . 296,484
550,000 U.S. Treasury Note, 5.125%, 3/31/96 . . . . . . . . . . . . 534,616
300,000 U.S. Treasury Note, 6%, 6/30/96 . . . . . . . . . . . . . . 293,532
900,000 U.S. Treasury Note, 5.25%, 7/31/98 . . . . . . . . . . . . . 828,000
600,000 U.S. Treasury Note, 5.875%, 3/31/99 . . . . . . . . . . . . 557,436
500,000 U.S. Treasury Note, 7.25%, 5/15/04 . . . . . . . . . . . . . 480,155
940,000 U.S. Treasury Separate Trading Registered Interest and
Principal Securities, 11/15/09 (8.04**) . . . . . . . . . . 291,033
1,300,000 U.S. Treasury Separate Trading Registered Interest and
Principal Securities, 11/15/10 (8.05**) . . . . . . . . . . 371,397
1,460,000 U.S. Treasury Separate Trading Registered Interest and
Principal Securities, 2/15/12 (8.07**) . . . . . . . . . . 376,914
----------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $5,549,036) . . . . . 5,354,188
----------
---------------------------------------------------------------------------------------
2.2% U.S. GOV'T GUARANTEED MORTGAGES
---------------------------------------------------------------------------------------
504,253 Government National Mortgage Association, 8%, 10/15/24(a) . . 482,030
535,899 Government National Mortgage Association, 8.75%,
12/15/24(a) . . . . . . . . . . . . . . . . . . . . . . . . 523,841
----------
TOTAL U.S. GOV'T GUARANTEED MORTGAGES (Cost $999,135) . . . 1,005,871
----------
---------------------------------------------------------------------------------------
2.1% U.S. GOVERNMENT AGENCY PASS-THRUS
---------------------------------------------------------------------------------------
497,633 Federal National Mortgage Association, 7.5%, 10/1/24(a) . . . 464,665
494,944 Federal National Mortgage Association, 9%, 10/1/24(a) . . . . 497,419
----------
TOTAL U.S. GOVERNMENT AGENCY PASS-THRUS
(Cost $976,204) . . . . . . . . . . . . . . . . . . . . . . 962,084
----------
---------------------------------------------------------------------------------------
0.7% COLLATERALIZED MORTGAGE OBLIGATIONS
---------------------------------------------------------------------------------------
272,776 Federal National Mortgage Association, REMIC,
8.5%, 4/25/18 . . . . . . . . . . . . . . . . . . . . . . . 273,883
55,101 Resolution Trust Corp., Series 1992-7, Class A-2B,
8.35%, 6/25/29 . . . . . . . . . . . . . . . . . . . . . . 54,955
----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $319,229) . . 328,838
----------
---------------------------------------------------------------------------------------
1.5% FOREIGN BONDS - U.S. $ DENOMINATED
---------------------------------------------------------------------------------------
250,000 ABN-AMRO Bank NV, 7.75%, 5/15/23 . . . . . . . . . . . . . . 222,997
250,000 Fomento Economico Mexicano S.A., 9.5%, 7/22/97 . . . . . . . 223,750
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
BALANCED PORTFOLIO
- - -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
265,000 Petroleos Mexicanos, 8.25%, 2/4/98 . . . . . . . . . . . . . . 240,487
----------
TOTAL FOREIGN BONDS - U.S. $ DENOMINATED
(Cost $750,280) . . . . . . . . . . . . . . . . . . . . . . . 687,234
----------
---------------------------------------------------------------------------------------
4.1% ASSET-BACKED SECURITIES
---------------------------------------------------------------------------------------
AUTOMOBILE RECEIVABLES 0.5%
250,000 Premier Auto Trust, Series 1994-3, 6.8%, 12/2/99 . . . . . . . 243,125
----------
CREDIT CARD RECEIVABLES 2.7%
250,000 Chase Manhattan Credit Card Trust, 1991 "A",
7.65%, 11/15/98 . . . . . . . . . . . . . . . . . . . . . . . 249,607
250,000 Discover Credit Card Trust, Series 1992-A, 5.5%, 5/16/98 . . . 245,155
250,000 First Chicago Master Trust, Series 1991-D, 8.4%, 6/15/98 . . . 250,780
250,000 First USA Credit Corp., Series 1992-A, 5.2%, 6/15/98 . . . . . 241,952
250,000 Standard Credit Card Trust, Series 1990-6B, 9.625%, 9/10/97 . . 256,795
----------
1,244,289
----------
HOME EQUITY LOANS 0.9%
250,000 Contimortgage Home Equity Loan Trust, Series 1994-5 A1,
9.07%, 5/15/06 . . . . . . . . . . . . . . . . . . . . . . . 251,406
167,143 United Companies Financial Corp., Home Loan Trust,
Series 1993 B1, 6.075%, 7/25/14(a) . . . . . . . . . . . . . 154,451
----------
405,857
----------
TOTAL ASSET-BACKED SECURITIES (Cost $1,946,600) . . . . . . . . 1,893,271
----------
---------------------------------------------------------------------------------------
8.3% CORPORATE BONDS
---------------------------------------------------------------------------------------
CONSUMER STAPLES 0.4%
250,000 Seagram Ltd., 6.875%, 9/1/23 . . . . . . . . . . . . . . . . . 200,600
----------
MEDIA 2.0%
500,000 News America Holdings Inc., 9.25%, 2/1/13 . . . . . . . . . . 486,385
500,000 Time Warner Inc., 9.125%, 1/15/13 . . . . . . . . . . . . . . 450,470
----------
936,855
----------
DURABLES 1.6%
500,000 Caterpillar Inc., 8%, 2/15/23 . . . . . . . . . . . . . . . . 465,920
250,000 Lockheed Corp., 9%, 1/15/22 . . . . . . . . . . . . . . . . . 255,947
----------
721,867
----------
MANUFACTURING 0.6%
250,000 Corning Inc., 8.75%, 7/15/99 . . . . . . . . . . . . . . . . . 250,892
----------
TECHNOLOGY 1.0%
500,000 Loral Corp., 8.375%, 6/15/24 . . . . . . . . . . . . . . . . . 462,140
----------
ENERGY 1.6%
500,000 Atlantic Richfield Co., 8.25%, 2/1/22 . . . . . . . . . . . . 481,250
250,000 Enron Corp., 10%, 6/1/98 . . . . . . . . . . . . . . . . . . . 259,475
----------
740,725
----------
METALS AND MINERALS 0.6%
250,000 Alcan Aluminum Ltd., 9.4%, 6/1/95 . . . . . . . . . . . . . . 252,345
----------
UTILITIES 0.5%
250,000 Commonwealth Edison Co., 9.05%, 10/15/99 . . . . . . . . . . . 244,942
----------
TOTAL CORPORATE BONDS (Cost $4,011,595) . . . . . . . . . . . 3,810,366
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- - -----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
62.2% COMMON STOCKS
- - -----------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY 4.1%
Department &
Chain Stores 2.9% 12,466 Home Depot, Inc. . . . . . . . . . . . . . . . 573,436
3,300 J.C. Penney Inc. . . . . . . . . . . . . . . . 147,263
16,000 Wal-Mart Stores Inc. . . . . . . . . . . . . . 340,000
6,500 Walgreen Co. . . . . . . . . . . . . . . . . . 284,375
----------
1,345,074
----------
Restaurants 0.8% 13,000 McDonald's Corp. . . . . . . . . . . . . . . . 380,250
----------
Specialty Retail 0.4% 5,900 Toys "R" Us Inc.* . . . . . . . . . . . . . . . 179,950
----------
CONSUMER STAPLES 9.8%
Consumer Electronic &
Photographic Products 0.8% 4,200 Duracell International Inc. . . . . . . . . . 182,175
4,100 Whirlpool Corp. . . . . . . . . . . . . . . . 206,025
----------
388,200
----------
Food & Beverage 6.6% 8,800 Albertson's Inc. . . . . . . . . . . . . . . . 255,200
8,500 CPC International Inc. . . . . . . . . . . . . 452,625
11,000 ConAgra Inc. . . . . . . . . . . . . . . . . . 343,750
9,100 General Mills, Inc. . . . . . . . . . . . . . 518,700
5,000 Kellogg Co. . . . . . . . . . . . . . . . . . 290,625
19,500 PepsiCo Inc. . . . . . . . . . . . . . . . . . 706,875
17,600 Sara Lee Corp. . . . . . . . . . . . . . . . . 444,400
----------
3,012,175
----------
Package Goods/
Cosmetics 2.4% 5,000 Colgate-Palmolive Co. . . . . . . . . . . . . 316,875
3,000 Gillette Co. . . . . . . . . . . . . . . . . 224,250
9,100 Procter & Gamble Co. . . . . . . . . . . . . 564,200
----------
1,105,325
----------
HEALTH 7.0%
Health Industry Services 0.7% 3,000 U.S. HealthCare, Inc. . . . . . . . . . . . . 123,750
3,700 United Healthcare Corp. . . . . . . . . . . . 166,963
----------
290,713
----------
Hospital Management 1.1% 14,000 Columbia/HCA Healthcare Corp. . . . . . . . . . 511,000
----------
Pharmaceuticals 5.2% 6,600 Abbott Laboratories . . . . . . . . . . . . . . 215,325
9,500 Baxter International Inc. . . . . . . . . . . . 268,375
9,200 Eli Lilly Co. . . . . . . . . . . . . . . . . . 603,750
2,900 Johnson & Johnson . . . . . . . . . . . . . . . 158,775
8,000 Schering-Plough Corp. . . . . . . . . . . . . . 592,000
7,200 Warner-Lambert Co. . . . . . . . . . . . . . 554,400
----------
2,392,625
----------
COMMUNICATIONS 2.0%
Cellular Telephone 0.3% 4,300 AirTouch Communications, Inc.* . . . . . . . . 125,237
----------
Telephone/
Communications 1.7% 15,500 American Telephone & Telegraph Co. . . . . . . 778,875
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
BALANCED PORTFOLIO
- - -----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL 7.4%
Banks 3.9% 8,830 Banc One Corp. . . . . . . . . . . . . . . . . 224,061
24,450 Mellon Bank Corp. . . . . . . . . . . . . . . 748,781
17,300 Norwest Corp. . . . . . . . . . . . . . . . . 404,388
15,100 State Street Boston Corp. . . . . . . . . . . 432,238
----------
1,809,468
----------
Insurance 2.4% 5,500 American International Group, Inc. . . . . . . 539,000
6,000 EXEL, Ltd. . . . . . . . . . . . . . . . . . . 237,000
5,700 MBIA Inc. . . . . . . . . . . . . . . . . . . 319,913
----------
1,095,913
----------
Other Financial
Companies 1.1% 7,000 Federal National Mortgage Association . . . . . 510,125
----------
MEDIA 5.6%
Advertising 0.7% 9,500 Interpublic Group of Companies Inc. . . . . . 305,188
----------
Broadcasting &
Entertainment 3.8% 5,300 CBS Inc. . . . . . . . . . . . . . . . . . . . 293,487
3,600 Capital Cities/ABC Inc. . . . . . . . . . . . 306,900
9,000 Time Warner Inc. . . . . . . . . . . . . . . . 316,125
8,400 Turner Broadcasting System Inc. "B" . . . . . 137,550
7,000 Viacom Inc. "B"* . . . . . . . . . . . . . . . 284,375
9,100 Walt Disney Co. . . . . . . . . . . . . . . . 419,737
----------
1,758,174
----------
Cable Television 0.8% 7,000 Comcast Corp. "A" . . . . . . . . . . . . . . . 109,812
12,000 Tele-Communications Inc. "A"* . . . . . . . . 261,000
----------
370,812
----------
Print Media 0.3% 2,800 News Corp. Ltd. (ADR) . . . . . . . . . . . . . 38,850
5,600 News Corp. Ltd. (ADR) (New(b)) . . . . . . . . 87,500
----------
126,350
----------
SERVICE INDUSTRIES 2.1%
EDP Services 1.5% 6,000 Automatic Data Processing, Inc. . . . . . . . 351,000
3,500 First Data Corp. . . . . . . . . . . . . . . . 165,813
4,400 General Motors Corp. "E" . . . . . . . . . . . 169,400
----------
686,213
----------
Miscellaneous
Commercial Services 0.4% 6,800 Sysco Corp. . . . . . . . . . . . . . . . . . . 175,100
----------
Printing/Publishing 0.2% 2,300 Reuters Holdings PLC "B" (ADR) . . . . . . . . 100,913
----------
DURABLES 5.6%
Aerospace 0.6% 5,500 Boeing Co. . . . . . . . . . . . . . . . . . . 257,125
----------
Automobiles 1.8% 7,000 Chrysler Corp. . . . . . . . . . . . . . . . . 343,000
10,400 Ford Motor Co. . . . . . . . . . . . . . . . . 291,200
5,400 Magna International, Inc. "A" . . . . . . . . 207,225
----------
841,425
----------
Construction/
Agricultural Equipment 1.3% 6,200 Caterpillar Inc. . . . . . . . . . . . . . . . 341,775
4,000 Deere & Co. . . . . . . . . . . . . . . . . . 265,000
----------
606,775
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- - -----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Telecommunications
Equipment 1.5% 5,700 L.M. Ericsson Telephone Co. "B" (ADR) . . . . . 314,213
5,300 Nokia AB Oy (ADR) . . . . . . . . . . . . . . 397,500
----------
711,713
----------
Tires 0.4% 7,300 Cooper Tire & Rubber Co. . . . . . . . . . . . 172,462
----------
MANUFACTURING 5.6%
Diversified
Manufacturing 3.7% 4,300 Dover Corp. . . . . . . . . . . . . . . . . 221,988
17,200 General Electric Co. . . . . . . . . . . . . . 877,200
8,500 Minnesota Mining & Manufacturing Co. . . . . . 453,688
2,000 TRW Inc. . . . . . . . . . . . . . . . . . . . 132,000
----------
1,684,876
----------
Electrical Products 1.2% 4,200 ASEA AB (ADR) . . . . . . . . . . . . . . . . . 302,925
4,000 Emerson Electric Co. . . . . . . . . . . . . . 250,000
----------
552,925
----------
Machinery/Components/
Controls 0.7% 7,000 Parker-Hannifin Group . . . . . . . . . . . . . 318,500
----------
TECHNOLOGY 6.3%
Computer Software 0.9% 3,600 Microsoft Corp.* . . . . . . . . . . . . . . . 220,050
2,300 Oracle Systems Corp.* . . . . . . . . . . . . 101,488
2,200 Sybase Inc.* . . . . . . . . . . . . . . . . . 114,400
----------
435,938
----------
Diverse Electronic
Products 2.4% 13,200 General Motors Corp. "H" . . . . . . . . . . . 460,350
11,500 Motorola Inc. . . . . . . . . . . . . . . . . 665,563
----------
1,125,913
----------
Electronic Components/
Distributors 0.2% 2,500 Molex Inc. Class A . . . . . . . . . . . . . . 77,500
----------
Electronic Data
Processing 1.4% 6,000 Compaq Computers Corp.* . . . . . . . . . . . . 237,000
3,900 Hewlett-Packard Co. . . . . . . . . . . . . . 389,513
----------
626,513
----------
Office/Plant
Automation 0.3% 3,600 Cisco Systems, Inc.* . . . . . . . . . . . . . 126,450
----------
Semiconductors 1.1% 3,100 Intel Corp. . . . . . . . . . . . . . . . . . 198,013
3,800 Texas Instruments Inc. . . . . . . . . . . . . 284,525
----------
482,538
----------
ENERGY 5.1%
Engineering 1.4% 8,800 Fluor Corp. . . . . . . . . . . . . . . . . . 379,500
9,500 Foster Wheeler Corp. . . . . . . . . . . . . . 282,625
----------
662,125
----------
Oil Companies 2.5% 4,300 Chevron Corp. . . . . . . . . . . . . . . . . 191,887
2,700 Exxon Corp. . . . . . . . . . . . . . . . . . 164,025
4,000 Mobil Corp. . . . . . . . . . . . . . . . . . 337,000
2,200 Royal Dutch Petroleum Co. (New York shares) . . 236,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
BALANCED PORTFOLIO
- - ----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
7,500 Unocal Corp. . . . . . . . . . . . . . . . . . . 204,375
----------
1,133,787
----------
Oil/Gas Transmission 1.2% 17,900 Enron Corp. . . . . . . . . . . . . . . . . . . 545,950
----------
METALS AND MINERALS 1.1%
Steel & Metals 8,000 Allegheny Ludlum Corp. . . . . . . . . . . . . . 150,000
6,500 Nucor Corp. . . . . . . . . . . . . . . . . . . 360,750
----------
510,750
----------
CONSTRUCTION 0.5%
Forest Products 8,500 Louisiana-Pacific Corp. . . . . . . . . . . . . 231,625
----------
TOTAL COMMON STOCKS (Cost $28,280,262) . . . . . 28,552,570
----------
- - ----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $46,142,341)(c) . . . . . . . . . . . . 45,904,422
==========
- - ----------------------------------------------------------------------------------------------------------------
<FN>
* Non-income producing security.
** Yield; bond equivalent yield to maturity; not a coupon rate (unaudited).
(a) Effective maturities will be shorter due to amortization and prepayments.
(b) New shares issued in 1994, eligible for a pro rata share of 1994 dividends.
(c) At December 31, 1994, the net unrealized depreciation on investments based on cost for
federal income tax purposes of $46,262,282 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an
excess of market value over tax cost . . . . . . . . . . . . . . . . . . . . . . . $ 1,587,277
Aggregate gross unrealized depreciation for all investments in which there is an
excess of tax cost over market value . . . . . . . . . . . . . . . . . . . . . . . (1,945,137)
-----------
Net unrealized depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (357,860)
===========
- - ------------------------------------------------------------------------------------------------------------------
From November 1, 1994 through December 31, 1994, the Balanced Portfolio incurred approximately $275,417
of net realized capital losses which the Portfolio intends to elect to defer and treat as arising in the
fiscal year ended December 31, 1995.
- - ------------------------------------------------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short-term investments and U.S. Government
securities), for the year ended December 31, 1994, aggregated $39,687,868 and $39,382,956, respectively.
Purchases and sales of U.S. Government securities for the year ended December 31, 1994, aggregated
$6,419,661 and $5,027,416, respectively.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- - ------------------------------------------------------------------------------------------------
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
- - ------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $46,142,341) (Note A) . . . . $ 45,904,422
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . 301,078
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . 238,822
Portfolio shares sold . . . . . . . . . . . . . . . . . . . . . . 15,771
------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . 46,460,093
LIABILITIES
Payables:
Due to custodian bank . . . . . . . . . . . . . . . . . . . . . . $ 4,397
Investments purchased . . . . . . . . . . . . . . . . . . . . . . 332,064
Portfolio shares redeemed . . . . . . . . . . . . . . . . . . . . 536,788
Due to Adviser (Note B) . . . . . . . . . . . . . . . . . . . . . 49,281
Accrued expenses (Note B) . . . . . . . . . . . . . . . . . . . . 12,988
-----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 935,518
------------
Net assets, at market value . . . . . . . . . . . . . . . . . . . . . $ 45,524,575
============
NET ASSETS
Net assets consist of:
Undistributed net investment income . . . . . . . . . . . . . , . $ 392,285
Unrealized depreciation on investments . . . . . . . . . . . . . . (237,919)
Accumulated net realized loss . . . . . . . . . . . . . . . . . . (103,434)
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . 45,473,643
------------
Net assets, at market value . . . . . . . . . . . . . . . . . . . . . $ 45,524,575
============
NET ASSET VALUE, offering and redemption price per share
($45,524,575 -:- 5,076,236 outstanding shares of beneficial
interest, no par value, unlimited number of shares authorized) . . $8.97
=====
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
BALANCED PORTFOLIO
- - ------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
- - ------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,163,654
Dividends (net of foreign taxes withheld of $4,976) . . . . 646,047
-----------
1,809,701
Expenses (Note A):
Management fee (Note B) . . . . . . . . . . . . . . . . . . $ 218,621
Administrative fees (net of $7,119 not imposed) (Note B) . 38,204
Accounting fees (Note B) . . . . . . . . . . . . . . . . . 20,005
Trustees' fees (Note B) . . . . . . . . . . . . . . . . . . 9,645
Custodian fees . . . . . . . . . . . . . . . . . . . . . . 36,314
Auditing . . . . . . . . . . . . . . . . . . . . . . . . . 8,241
Legal . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,419
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,928 345,377
----------- -----------
Net investment income . . . . . . . . . . . . . . . . . . . . 1,464,324
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized loss from:
Investments . . . . . . . . . . . . . . . . . . . . . . . . (56,422)
Foreign currency related transactions . . . . . . . . . . . (14,258) (70,680)
-----------
Net unrealized appreciation (depreciation) during the period on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . (2,374,851)
Foreign currency related transactions . . . . . . . . . . . 741 (2,374,110)
----------- -----------
Net loss on investment transactions . . . . . . . . . . . . . (2,444,790)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . $ (980,466)
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- - ---------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- - ---------------------------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
INCREASE (DECREASE) IN NET ASSETS 1994 1993
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . $ 1,464,324 $ 1,256,776
Net realized gain (loss) from investment transactions . . . . . . (70,680) 3,496,626
Net unrealized depreciation on investment transactions
during the period . . . . . . . . . . . . . . . . . . . . . . . (2,374,110) (1,774,580)
------------ ------------
Net increase (decrease) in net assets resulting from operations . . . (980,466) 2,978,822
------------ ------------
Distributions to shareholders from:
Net investment income ($.30 and $.28 per share, respectively) . . (1,442,472) (1,153,730)
------------ ------------
Net realized gains from investment transactions
($.77 and $.23 per share, respectively) . . . . . . . . . . . . (3,525,834) (897,228)
------------ ------------
Portfolio share transactions:
Proceeds from shares sold . . . . . . . . . . . . . . . . . . . . 14,384,876 12,283,985
Net asset value of shares issued to shareholders in
reinvestment of distributions . . . . . . . . . . . . . . . . . 4,968,306 2,050,958
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . (12,950,121) (7,234,223)
------------ ------------
Net increase in net assets from Portfolio share transactions . . . . 6,403,061 7,100,720
------------ ------------
INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . 454,289 8,028,584
Net assets at beginning of period . . . . . . . . . . . . . . . . . . 45,070,286 37,041,702
------------ ------------
NET ASSETS AT END OF PERIOD (including undistributed net
investment income of $392,285 and $366,737, respectively) . . . . $ 45,524,575 $ 45,070,286
============ ============
OTHER INFORMATION
INCREASE (DECREASE) IN PORTFOLIO SHARES
Shares outstanding at beginning of period . . . . . . . . . . . . . . 4,407,727 3,695,913
------------ ------------
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,539,383 1,226,706
Shares issued to shareholders in reinvestment of distributions . . 532,133 207,183
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . (1,403,007) (722,075)
------------ ------------
Net increase in Portfolio shares . . . . . . . . . . . . . . . . . 668,509 711,814
------------ ------------
Shares outstanding at end of period . . . . . . . . . . . . . . . . . 5,076,236 4,407,727
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER
PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS.
<CAPTION>
SIX FOR THE PERIOD
MONTHS JULY 16, 1985
ENDED (COMMENCEMENT
YEARS ENDED DECEMBER 31, (e) DECEMBER OF OPERATIONS
---------------------------------------------------------------------- 31, TO JUNE 30,
1994 1993 1992 1991 1990 1989 1988 1987 1986(e)(f) 1986
--------------------------------------------------------------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period. . . $10.23 $10.02 $ 9.85 $ 8.10 $ 8.75 $ 7.62 $ 6.88 $ 7.35 $ 7.58 $ 6.00(b)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income (a) . . . . . . .29 .30 .29 .35 .42 .40 .33 .34 .15 .31
Net realized and
unrealized gain (loss)
on investment
transactions . . . . . (.48) .42 .36 1.77 (.59) 1.06 .64 (.45) (.11) 1.50
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations . . . . . . (.19) .72 .65 2.12 (.17) 1.46 .97 (.11) .04 1.81
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions from:
Net investment
income . . . . . . . . (.30) (.28) (.29) (.37) (.43) (.33) (.23) (.23) (.18) (.23)
Net realized gains
on investment
transactions . . . . . (.77) (.23) (.19) -- (.05) -- -- (.13) (.09) --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions . . . (1.07) (.51) (.48) (.37) (.48) (.33) (.23) (.36) (.27) (.23)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period . . . . . $ 8.97 $10.23 $10.02 $ 9.85 $ 8.10 $ 8.75 $ 7.62 $ 6.88 $ 7.35 $ 7.58
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%) . . . . (2.05) 7.45 6.96 26.93 (1.91) 19.50 14.21 (1.68) .46(d) 30.60(d)
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period ($ millions). . . 46 45 37 25 16 18 11 12 1 --
Ratio of operating
expenses, net to
average net
assets (%) (a) . . . . .75 .75 .75 .75 .75 .75 .75 .75 .75(c) .60(c)
Ratio of net investment
income to average
net assets (%) . . . . 3.19 3.01 3.01 4.00 5.15 4.74 4.48 4.42 4.20(c) 4.87(c)
Portfolio turnover
rate (%) . . . . . . . 101.64 133.95* 51.66 62.03 49.03 77.98 109.95 111.00 28.86(c) 64.12(c)
<FN>
(a) Portion of expenses
reimbursed (Note B) $ -- $ -- $ -- $ .01 $ -- $ .01 $ .03 $ .03 $ .17 $ .80
(b) Original capital
(c) Annualized
(d) Not annualized
(e) Per share amounts, for each of the periods identified, have been calculated using the monthly average shares outstanding
during the period method.
(f) On August 22, 1986, the Trustees voted to change the year end of the Fund from June 30 to December 31.
* On May 1, 1993, the Portfolio adopted its present name and investment objective which is a balance of growth and income
from a diversified portfolio of equity and fixed income securities. Prior to that date, the Portfolio was known as the
Managed Diversified Portfolio and its investment objective was to realize a high level of long-term total rate of
return consistent with prudent investment risk. The portfolio turnover rate increased due to implementing the present
investment objective. Financial highlights for the nine periods ended December 31, 1993 should not be considered
representative of the present Portfolio.
</TABLE>
<PAGE>
<TABLE>
GROWTH AND INCOME PORTFOLIO
INVESTMENT PORTFOLIO as of December 31, 1994
- - ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
2.9% REPURCHASE AGREEMENT
-----------------------------------------------------------------------------
598,000 Repurchase Agreement with Donaldson, Lufkin &
Jenrette dated 12/30/94 at 5.875%, to be
repurchased at $598,390 on 1/3/95, collateralized
by a $557,000 U.S. Treasury Bond, 9.125%, 5/15/09
(Cost $598,000) . .. . . . . . . . . . . . . . . . . 598,000
---------
-----------------------------------------------------------------------------
7.3% COMMERCIAL PAPER
-----------------------------------------------------------------------------
1,000,000 American Express Credit Corp., 5.755%, 1/3/95 . . . 1,000,000
500,000 General Electric Capital Corp., 5.005%, 1/6/95 . . 500,000
---------
TOTAL COMMERCIAL PAPER (Cost $1,500,000) . . . . . 1,500,000
---------
-----------------------------------------------------------------------------
0.5% CONVERTIBLE BONDS
-----------------------------------------------------------------------------
FINANCIAL
Banks 0.2% 25,000 Credit Suisse, 4.875%, 11/19/02 . . . . . . . . . . 33,125
---------
Other Financial
Companies 0.3% 40,000 First Financial Management, 5%, 12/15/99 . . . . . 42,200
21,000 Jardine Strategic Holdings, 7.5%, 5/7/49 . . . . . 23,940
---------
66,140
---------
TOTAL CONVERTIBLE BONDS (Cost $96,350) . . . . . . 99,265
---------
-----------------------------------------------------------------------------
4.3% CONVERTIBLE PREFERRED STOCKS
-----------------------------------------------------------------------------
Shares
-----------------------------------------------------------------------------
HEALTH 1.3%
Health Industry Services 11,300 FHP International Corp., Series A, 5% . . . . . . . 276,850
---------
SERVICE INDUSTRIES 1.3%
EDP Services 4,700 General Motors Corp., Series C, Cum. $3.25
(convertible into GM "E") . . . . . . . . . . . . . 269,662
---------
DURABLES 0.9%
Automobiles 2,100 Ford Motor Co., Series A, Cum. $4.20 . . . . . . . 193,200
---------
MANUFACTURING 0.8%
Containers & Paper 0.7% 5,000 Boise Cascade Corp. "E", Cum. $1.79 . . . . . . . . 133,125
---------
Industrial Specialty 0.1% 500 Corning Inc., 6% . . . . . . . . . . . . . . . . . 23,375
---------
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $920,649) . 896,212
---------
-----------------------------------------------------------------------------
85.0% COMMON STOCKS
-----------------------------------------------------------------------------
CONSUMER DISCRETIONARY 3.6%
Department &
Chain Stores 6,800 Edison Brothers Stores, Inc. . . . . . . . . . . . 125,800
3,800 J.C. Penney Inc. . . . . . . . . . . . . . . . . . 169,575
10,300 Rite Aid Corp. . . . . . . . . . . . . . . . . . . 240,763
4,500 Sears, Roebuck & Co. . . . . . . . . . . . . . . . . 207,000
---------
743,138
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
GROWTH AND INCOME PORTFOLIO
- - ----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONSUMER STAPLES 9.3%
Alcohol & Tobacco 2.8% 3,500 American Brands Inc. . . . . . . . . . . . . 131,250
4,500 Anheuser Busch Companies, Inc. . . . . . . . . 228,937
3,800 Philip Morris Companies Inc. . . . . . . . . . 218,500
----------
578,687
----------
Food & Beverage 3.6% 4,800 General Mills, Inc. . . . . . . . . . . . . . 273,600
7,900 H.J. Heinz Co. . . . . . . . . . . . . . . . . 290,325
6,000 Quaker Oats Co. . . . . . . . . . . . . . . . 184,500
----------
748,425
----------
Package Goods/
Cosmetics 2.9% 4,600 Avon Products . . . . . . . . . . . . . . . . 274,850
1,400 Clorox Co. . . . . . . . . . . . . . . . . . . 82,425
6,400 Tambrands Inc. . . . . . . . . . . . . . . . . 247,200
----------
604,475
----------
HEALTH 11.5%
Health Industry
Services 0.5% 3,000 McKesson Corp. . . . . . . . . . . . . . . . 97,875
----------
Pharmaceuticals 11.0% 4,000 American Home Products Corp. . . . . . . . . 251,000
14,700 Baxter International Inc. . . . . . . . . . . 415,275
3,600 Bristol-Myers Squibb Co. . . . . . . . . . . . 208,350
4,700 Carter-Wallace Inc. . . . . . . . . . . . . . 61,100
7,500 Eli Lilly Co. . . . . . . . . . . . . . . . . 492,188
4,000 Schering-Plough Corp. . . . . . . . . . . . . 296,000
3,400 Smithkline-Beecham PLC (ADR) . . . . . . . . . 116,450
4,700 Warner-Lambert Co. . . . . . . . . . . . . . . 361,900
5,600 Zeneca Group PLC . . . . . . . . . . . . . . . 76,989
----------
2,279,252
----------
COMMUNICATIONS 4.7%
Telephone/ 12,900 Alltel Corp. . . . . . . . . . . . . . . . . 388,612
Communications 3,600 Compania Telefonica Nacional de Espana SA (ADR) 126,450
2,300 Compania de Telefonos de Chile, SA (ADR) . . . 181,125
9,300 Hong Kong Telecommunications Ltd. (ADR) . . . 177,862
800 Telecom Argentina S.A. "B" (ADR) . . . . . . . 41,400
900 Telefonica de Argentina (ADR) . . . . . . . . 47,700
----------
963,149
----------
FINANCIAL 13.9%
Banks 5.5% 6,400 Chemical Banking Corp. . . . . . . . . . . . 229,600
11,400 CoreStates Financial Corp. . . . . . . . . . . 296,400
10,800 First Bank System Inc. . . . . . . . . . . . . 359,100
4,400 J.P. Morgan & Co., Inc. . . . . . . . . . . . 246,400
----------
1,131,500
----------
Insurance 2.0% 5,200 EXEL, Ltd. . . . . . . . . . . . . . . . . . 205,400
6,200 Lincoln National Corp. . . . . . . . . . . . . 217,000
----------
422,400
----------
Other Financial
Companies 1.9% 13,100 Great Western Financial Corp. . . . . . . . . 209,600
5,500 Student Loan Marketing Association . . . . . . 178,750
----------
388,350
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- - --------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Real Estate 4.5% 9,100 Health Care Property Investment Inc. (REIT) . 274,137
6,800 McArthur/Glen Realty Corp. (REIT) . . . . . . 112,200
9,900 Meditrust SBI (REIT) . . . . . . . . . . . . . 299,475
7,000 Nationwide Health Properties Inc. (REIT) . . . 250,250
---------
936,062
---------
SERVICE INDUSTRIES 1.4%
Miscellaneous
Commercial Services 0.5% 4,200 Fleming Companies Inc. . . . . . . . . . . . 97,650
---------
Miscellaneous
Consumer Services 0.4% 2,600 H & R Block Inc. . . . . . . . . . . . . . . 96,525
---------
Printing/Publishing 0.5% 3,900 Deluxe Corp. . . . . . . . . . . . . . . . . 103,350
---------
DURABLES 7.7%
Aerospace 6.4% 2,600 AAR Corp. . . . . . . . . . . . . . . . . . . 34,775
3,400 Lockheed Corp. . . . . . . . . . . . . . . . . 246,925
7,000 Rockwell International Corp. . . . . . . . . . 250,250
10,000 Thiokol Corp. . . . . . . . . . . . . . . . . 278,750
8,100 United Technologies Corp. . . . . . . . . . . 509,288
---------
1,319,988
---------
Automobiles 1.3% 7,200 Dana Corp. . . . . . . . . . . . . . . . . . 168,300
1,900 Eaton Corp. . . . . . . . . . . . . . . . . . 94,050
---------
262,350
---------
MANUFACTURING 15.3%
Chemicals 3.5% 2,700 Dow Chemical Co. . . . . . . . . . . . . . . 181,575
5,200 E.I. du Pont de Nemours & Co. . . . . . . . . 292,500
10,000 Lyondell Petrochemical Co. . . . . . . . . . . 258,750
---------
732,825
---------
Containers & Paper 3.4% 7,400 Boise Cascade Corp. . . . . . . . . . . . . . 197,950
7,000 Federal Paper Board Co., Inc. . . . . . . . . 203,000
3,000 Kimberly Clark de Mexico S.A. "A" (ADR) . . . 69,750
4,800 Kimberly-Clark Corp. . . . . . . . . . . . . . 242,400
---------
713,100
Diversified ---------
Manufacturing 1.9% 5,100 Dresser Industries Inc. . . . . . . . . . . . 96,262
4,400 TRW Inc. . . . . . . . . . . . . . . . . . . . 290,400
---------
386,662
---------
Electrical Products 0.8% 2,500 Thomas & Betts Corp. . . . . . . . . . . . . 167,813
---------
Machinery/
Components/Controls 1.9% 4,300 Parker-Hannifin Group . . . . . . . . . . . . 195,650
5,700 Timken Co. . . . . . . . . . . . . . . . . . . 200,925
---------
396,575
---------
Office Equipment/
Supplies 1.7% 3,500 Xerox Corp. . . . . . . . . . . . . . . . . . 346,500
---------
Specialty Chemicals 2.1% 6,200 Betz Laboratories Inc. . . . . . . . . . . . 274,350
6,200 Witco Corp. . . . . . . . . . . . . . . . . . 152,675
---------
427,025
---------
TECHNOLOGY 0.4%
Military Electronics 2,100 E-Systems, Inc. . . . . . . . . . . . . . . . 87,412
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
GROWTH AND INCOME PORTFOLIO
- - -------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ENERGY 11.4%
Engineering 1.4% 11,300 McDermott International Inc. . . . . . . . . 279,675
----------
Oil & Gas Production 0.6% 3,400 Louisiana Land & Exploration Co. . . . . . . . 123,675
----------
Oil Companies 7.9% 200 Amoco Corp. . . . . . . . . . . . . . . . . . 11,825
3,600 Exxon Corp. . . . . . . . . . . . . . . . . . 218,700
7,000 Murphy Oil Corp. . . . . . . . . . . . . . . . 297,500
4,700 Pennzoil Co. . . . . . . . . . . . . . . . . . 207,388
3,200 Repsol SA (ADR) . . . . . . . . . . . . . . . 87,200
2,100 Royal Dutch Petroleum Co. (New York shares). . 225,750
5,548 Societe Nationale Elf Aquitaine (ADR) . . . . 195,567
7,100 Total SA (ADR) . . . . . . . . . . . . . . . . 209,450
8,600 YPF SA "D" (ADR) . . . . . . . . . . . . . . . 183,825
----------
1,637,205
----------
Oil/Gas Transmission 0.4% 2,900 El Paso Natural Gas Co. . . . . . . . . . . . 88,450
----------
Oilfield Services/
Equipment 1.1% 6,700 Halliburton Co. . . . . . . . . . . . . . . . 221,937
----------
METALS AND MINERALS 2.3%
Steel & Metals 12,000 Freeport McMoRan Copper & Gold, Inc. "A" . . . 255,000
13,500 Oregon Steel Mills Inc. . . . . . . . . . . . 210,938
----------
465,938
----------
TRANSPORTATION 0.4%
Marine Transportation 3,300 Alexander & Baldwin Inc. . . . . . . . . . . 73,425
----------
UTILITIES 3.1%
Electric Utilities 6,000 CINergy Corp. . . . . . . . . . . . . . . . . 140,250
2,000 CMS Energy Corp. . . . . . . . . . . . . . . . 45,750
8,200 Centerior Energy Corp. . . . . . . . . . . . . 72,775
2,100 Empresa Nacional de Electricidad SA (ADR) . . 85,050
900 PacifiCorp. . . . . . . . . . . . . . . . . . 16,313
3,900 Pacific Gas & Electric Co. . . . . . . . . . . 95,063
100 Southern Company . . . . . . . . . . . . . . . 2,000
7,900 Unicom Corp. . . . . . . . . . . . . . . . . . 189,600
----------
646,801
----------
TOTAL COMMON STOCKS (Cost $17,874,439) . . . 17,568,194
----------
- - -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $20,989,438)(a) . . . . . . . . . . . . 20,661,671
==========
- - -------------------------------------------------------------------------------------------------------------------
<FN>
(a) At December 31, 1994, the net unrealized depreciation on investments based on cost
for federal income tax purposes of $21,010,030 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an
excess of market value over tax cost . . . . . . . . . . . . . . . . . . . . . . . . $ 365,754
Aggregate gross unrealized depreciation for all investments in which there is an
excess of tax cost over market value . . . . . . . . . . . . . . . . . . . . . . . . (714,113)
----------
Net unrealized depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (348,359)
==========
- - -------------------------------------------------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short-term investments), for the
period May 2, 1994 (commencement of operations) to December 31, 1994, aggregated
$20,678,084 and $1,912,191, respectively.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- - ----------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
- - ----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $20,989,438) (Note A) . . $20,661,671
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609
Receivables:
Investments sold . . . . . . . . . . . . . . . . . . . . . . . 126,754
Dividends and interest . . . . . . . . . . . . . . . . . . . . 66,596
Portfolio shares sold . . . . . . . . . . . . . . . . . . . . 38,675
-----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . 20,894,305
LIABILITIES
Payables:
Investments purchased . . . . . . . . . . . . . . . . . . . . $793,868
Due to Adviser (Note B) . . . . . . . . . . . . . . . . . . . 12,027
Accrued expenses (Note B) . . . . . . . . . . . . . . . . . . 13,568
--------
Total liabilities . . . . . . . . . . . . . . . . . . . . . 819,463
-----------
Net assets, at market value . . . . . . . . . . . . . . . . . . . $20,074,842
===========
NET ASSETS
Net assets consist of:
Undistributed net investment income . . . . . . . . . . . . . $ 164,132
Unrealized depreciation on investments . . . . . . . . . . . . (327,767)
Accumulated net realized gain . . . . . . . . . . . . . . . . 125,538
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . 20,112,939
-----------
Net assets, at market value . . . . . . . . . . . . . . . . . . . $20,074,842
===========
NET ASSET VALUE, offering and redemption price per share
($20,074,842 -:- 3,204,882 outstanding shares of beneficial
interest, no par value, unlimited number of shares authorized) $6.26
=====
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
GROWTH AND INCOME PORTFOLIO
- - -------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- - -------------------------------------------------------------------------------------------------
FOR THE PERIOD MAY 2, 1994
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1994
- - -------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $3,279) . . . . $ 242,508
Interest . . . . . . . . . . . . . . . . . . . . . . . . . 60,432
------------
302,940
Expenses (Note A):
Management fee (Note B) . . . . . . . . . . . . . . . . . . $ 32,724
Administrative fees (Note B) . . . . . . . . . . . . . . . 25,179
Accounting fees (Note B) . . . . . . . . . . . . . . . . . 14,437
Trustees' fees (Note B) . . . . . . . . . . . . . . . . . . 4,498
Custodian fees . . . . . . . . . . . . . . . . . . . . . . 19,912
Auditing . . . . . . . . . . . . . . . . . . . . . . . . . 3,918
Legal . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
Federal registration . . . . . . . . . . . . . . . . . . . 6,976
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,429
-----------
Total expenses before waivers . . . . . . . . . . . . . . . 112,235
Waived expenses by the Adviser (Note B) . . . . . . . . . . (60,313)
-----------
Expenses, net . . . . . . . . . . . . . . . . . . . . . . . 51,922
------------
Net investment income . . . . . . . . . . . . . . . . . . . . 251,018
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments . . . . . . . . . . . . . . . . . . . . . . . . 125,538
Foreign currency related transactions . . . . . . . . . . . (773) 124,765
-----------
Net unrealized depreciation on investments during the period . (327,767)
------------
Net loss on investment transactions . . . . . . . . . . . . . (203,002)
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . $ 48,016
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- - -------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD
MAY 2, 1994
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS 1994
- - -------------------------------------------------------------------------------------------------------------
<S> <C>
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 251,018
Net realized gain from investment transactions . . . . . . . . . . . . . . . . . . . . . . 124,765
Net unrealized depreciation on investment transactions during the period . . . . . . . . . (327,767)
-------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . 48,016
-------------
Distributions to shareholders from net investment income ($0.04 per share) . . . . . . . . . (86,114)
-------------
Portfolio share transactions:
Proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,441,709
Net asset value of shares issued to shareholders in reinvestment of distributions . . . . 86,114
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,415,483)
-------------
Net increase in net assets from Portfolio share transactions . . . . . . . . . . . . . . . . 20,112,340
-------------
INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,074,242
Net assets at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600
-------------
NET ASSETS AT END OF PERIOD (including undistributed net investment income of $164,132) . . . $ 20,074,842
=============
OTHER INFORMATION
INCREASE (DECREASE) IN PORTFOLIO SHARES
Shares outstanding at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . 100
-------------
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,576,097
Shares issued to shareholders in reinvestment of distributions . . . . . . . . . . . . . . 13,561
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (384,876)
-------------
Net increase in Portfolio shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,204,782
-------------
Shares outstanding at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,204,882
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
GROWTH AND INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD (E) AND OTHER PERFORMANCE
INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS.
<CAPTION>
For the Period
May 2, 1994
(commencement
of operations)
to December 31,
1994
---------------
<S> <C>
Net asset value, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6.00(b)
------
Income from investment operations:
Net investment income (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Net realized and unrealized gain (loss) on investment transactions . . . . . . . . . . . . .17(f)
------
Total from investment operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
------
Less distributions from net investment income . . . . . . . . . . . . . . . . . . . . . . . . (.04)
------
Net asset value, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6.26
======
TOTAL RETURN (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.91(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Ratio of operating expenses, net to average net assets (%) (a) . . . . . . . . . . . . . . . .75(c)
Ratio of net investment income to average net assets (%) . . . . . . . . . . . . . . . . . . 3.63(c)
Portfolio turnover rate (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.41(c)
<FN>
(a) Portion of expenses waived (Note B) . . . . . . . . . . . . . . . . . . . . . . . . . . $ .03
(b) Original capital
(c) Annualized
(d) Not annualized
(e) Per share amounts have been calculated using the monthly average shares outstanding during the period method.
(f) The amount shown for a share outstanding throughout the period does not accord with the change in the aggregate gains and
losses in the portfolio securities during the period because of the timing of sales and purchases of Portfolio shares in
relation to fluctuating market values during the period.
</TABLE>
<PAGE>
<TABLE>
CAPITAL GROWTH PORTFOLIO
INVESTMENT PORTFOLIO as of December 31, 1994
- - ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------------------------------------
4.8% REPURCHASE AGREEMENT
------------------------------------------------------------------------------------
12,504,000 Repurchase Agreement with Donaldson, Lufkin & Jenrette
dated 12/30/94 at 5.875%, to be repurchased at
$12,512,162 on 1/3/95, collateralized by a $12,740,000
U.S. Treasury Note, 6.875%, 7/31/99 (Cost $12,504,000) 12,504,000
----------
------------------------------------------------------------------------------------
0.3% CONVERTIBLE BONDS
------------------------------------------------------------------------------------
FINANCIAL
Banks 1,000,000 Banco Nacional de Mexico, 7%, 12/15/99
(Cost $1,226,250) . . . . . . . . . . . . . . . . . . . 795,000
----------
------------------------------------------------------------------------------------
2.2% CONVERTIBLE PREFERRED STOCKS
------------------------------------------------------------------------------------
Shares
------------------------------------------------------------------------------------
DURABLES
Automobiles 43,000 Chrysler Corp., $4.625 (Cost $5,490,623) . . . . . . . . 5,901,750
-----------
------------------------------------------------------------------------------------
0.3% PREFERRED STOCKS
------------------------------------------------------------------------------------
FINANCIAL
Banks 8,000 First Nationwide Bank, non-cum. 11.5% (Cost $808,000). . . 783,000
-----------
------------------------------------------------------------------------------------
90.9% COMMON STOCKS
------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY 14.6%
Apparel & Shoes 0.6% 46,200 Jones Apparel Group, Inc.* . . . . . . . . . . . . . . . 1,189,650
15,600 Luxottica Group SpA (ADR) . . . . . . . . . . . . . . . . 532,350
----------
1,722,000
----------
Department &
Chain Stores 2.8% 241,500 Charming Shoppes Inc. . . . . . . . . . . . . . . . . . . 1,599,937
55,200 Consolidated Stores Corp.* . . . . . . . . . . . . . . . . 1,028,100
144,000 Filene's Basement Corp.* . . . . . . . . . . . . . . . . . 666,000
55,600 Fred Meyer Inc.* . . . . . . . . . . . . . . . . . . . . . 1,709,700
40,000 Limited Inc. . . . . . . . . . . . . . . . . . . . . . . . 725,000
71,700 Wal-Mart Stores Inc. . . . . . . . . . . . . . . . . . . . 1,523,625
----------
7,252,362
----------
Hotels & Casinos 5.3% 108,000 Carnival Corp., Class A . . . . . . . . . . . . . . . . . 2,295,000
122,100 Circus Circus Enterprises Inc.* . . . . . . . . . . . . . 2,838,825
5,000 Club Mediterranee* . . . . . . . . . . . . . . . . . . . . 418,461
146,750 Mirage Resorts Inc.* . . . . . . . . . . . . . . . . . . . 3,008,375
58,500 President Riverboat Casinos* . . . . . . . . . . . . . . . 519,188
55,200 Promus Companies Inc.* . . . . . . . . . . . . . . . . . . 1,711,200
88,200 Royal Caribbean Cruises Ltd. . . . . . . . . . . . . . . . 2,513,700
40,400 Station Casinos Inc.* . . . . . . . . . . . . . . . . . . 525,200
----------
13,829,949
----------
Recreational Products 2.8% 112,000 Acclaim Entertainment Inc.* . . . . . . . . . . . . . . . 1,610,000
38,200 Bally Gaming International Inc.* . . . . . . . . . . . . 405,875
111,800 Electronic Arts Inc.* . . . . . . . . . . . . . . . . . . 2,152,150
202,800 International Game Technology Inc. . . . . . . . . . . . . 3,143,400
----------
7,311,425
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
CAPITAL GROWTH PORTFOLIO
- - -----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Specialty Retail 3.1% 196,800 Fingerhut Companies, Inc. . . . . . . . . . . 3,050,400
95,000 Home Shopping Network Inc.* . . . . . . . . . 950,000
104,300 Intelligent Electronics, Inc. . . . . . . . . 834,400
40,000 Spiegel Inc. "A" . . . . . . . . . . . . . . . 405,000
96,000 Toys "R" Us Inc.* . . . . . . . . . . . . . . 2,928,000
----------
8,167,800
----------
CONSUMER STAPLES 1.2%
Food & Beverage 0.9% 72,000 Panamerican Beverages Inc. "A" . . . . . . . . 2,277,000
----------
Package Goods/
Cosmetics 0.3% 56,600 American Safety Razor Co.* . . . . . . . . . . 778,250
----------
HEALTH 7.3%
Biotechnology 0.7% 44,000 Biogen Inc.* . . . . . . . . . . . . . . . . 1,837,000
----------
Health Industry
Services 1.6% 52,000 Beverly Enterprises Inc.* . . . . . . . . . . 747,500
40,000 U.S. HealthCare, Inc. . . . . . . . . . . . . 1,650,000
40,000 United Healthcare Corp. . . . . . . . . . . . 1,805,000
----------
4,202,500
----------
Hospital Management 0.6% 40,000 Columbia/HCA Healthcare Corp. . . . . . . . . 1,460,000
----------
Medical Supply &
Specialty 0.0% 3,500 Sunrise Medical, Inc.* . . . . . . . . . . . . 96,688
----------
Pharmaceuticals 4.4% 7,500 Astra AB "A" (Free) . . . . . . . . . . . . . 193,795
171,050 Astra AB "B" (Free) . . . . . . . . . . . . . 4,362,258
55,000 Baxter International Inc. . . . . . . . . . . 1,553,750
80,000 Carter-Wallace Inc. . . . . . . . . . . . . . 1,040,000
1,300 Schering AG . . . . . . . . . . . . . . . . . 853,215
27,000 Schering-Plough Corp. . . . . . . . . . . . . 1,998,000
20,000 Warner-Lambert Co. . . . . . . . . . . . . . . 1,540,000
----------
11,541,018
----------
COMMUNICATIONS 12.5%
Cellular Telephone 2.3% 63,000 AirTouch Communications, Inc.* . . . . . . . 1,834,875
52,175 Associated Group, Inc. "A"* . . . . . . . . . 1,226,112
52,175 Associated Group, Inc. "B"* . . . . . . . . . 1,226,112
27,500 Grupo Iusacell S.A. de CV "L" (ADR)* . . . . . 512,187
84,000 NEXTEL Communications Inc. "A"* . . . . . . . 1,207,500
----------
6,006,786
----------
Telephone/
Communications 10.2% 110,800 American Telephone & Telegraph Co. . . . . . 5,567,700
186,900 Century Telephone Enterprises . . . . . . . . 5,513,550
7,900 Indonesia Satellite Corp. (ADR)* . . . . . . . 282,425
60,000 Mobile Telecommunications Technology Corp.* . 1,170,000
305 Nippon Telegraph & Telephone Corp. . . . . . . 2,697,029
75,132 Southwestern Bell Corp. . . . . . . . . . . . 3,033,455
31,800 Telecom Argentina S.A. "B" (ADR) . . . . . . . 1,645,650
3,402,000 Telecomunicacoes de Sao Paulo S.A. (pfd.) . . 483,992
36,000 Telefonica de Argentina (ADR) . . . . . . . . 1,908,000
96,000 Telephone & Data Systems, Inc. . . . . . . . . 4,428,000
----------
26,729,801
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- - -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCIAL 9.6%
Banks 2.8% 40,000 Chemical Banking Corp. . . . . . . . . . . . . 1,435,000
40,000 Citicorp . . . . . . . . . . . . . . . . . . . 1,655,000
16,875 First Commerce Corp. . . . . . . . . . . . . . 371,250
2,000 First Empire State Corp. . . . . . . . . . . . 272,000
40,000 GP Financial Corp. . . . . . . . . . . . . . . 825,000
103,000 MBNA Corp. . . . . . . . . . . . . . . . . . . 2,407,625
9,000 Mercantile Bancorporation Inc. . . . . . . . . 281,250
-----------
7,247,125
-----------
Insurance 4.8% 36,000 AMBAC Inc. . . . . . . . . . . . . . . . . . . 1,341,000
60,000 EXEL, Ltd. . . . . . . . . . . . . . . . . . . 2,370,000
31,300 General Re Corp. . . . . . . . . . . . . . . . 3,873,375
37,800 Liberty Corp. . . . . . . . . . . . . . . . . 959,175
20,000 MBIA Inc. . . . . . . . . . . . . . . . . . . 1,122,500
52,500 Mid Ocean Limited* . . . . . . . . . . . . . . 1,430,625
125,000 Western National Corp. . . . . . . . . . . . . 1,609,375
-----------
12,706,050
-----------
Other Financial
Companies 1.4% 44,000 Federal National Mortgage Association . . . . 3,206,500
9,000 Nichiei Co., Ltd. . . . . . . . . . . . . . . 578,139
-----------
3,784,639
-----------
Real Estate 0.6% 115,000 Price Enterprises, Inc.* . . . . . . . . . . . 1,480,625
-----------
MEDIA 17.7%
Broadcasting &
Entertainment 6.6% 52,000 BET Holdings Inc. "A"* . . . . . . . . . . . . 786,500
32,800 Jacor Communications, Inc. "A"* . . . . . . . 434,600
23,500 Savoy Pictures Entertainment Inc.* . . . . . . 152,750
368,700 Time Warner Inc. . . . . . . . . . . . . . . . 12,950,588
4,000 Viacom Inc. "A"* . . . . . . . . . . . . . . . 166,500
69,207 Viacom Inc. "B"* . . . . . . . . . . . . . . . 2,811,534
50,000 Viacom Inc. Rights* . . . . . . . . . . . . . 56,250
-----------
17,358,722
-----------
Cable Television 10.8% 622,850 Comcast Corp. (Special) "A" . . . . . . . . . 9,770,959
535,000 Rogers Communications Inc. "B"* . . . . . . . 7,151,132
518,307 Tele-Communications Inc. "A"* . . . . . . . . 11,273,177
-----------
28,195,268
-----------
Print Media 0.3% 14,300 Scholastic Corp.* . . . . . . . . . . . . . . . 729,300
-----------
SERVICE INDUSTRIES 0.6%
Investment 42,000 Franklin Resources Inc. . . . . . . . . . . . 1,496,250
-----------
DURABLES 4.5%
Automobiles 2.4% 44,000 Autoliv AB (Free)* . . . . . . . . . . . . . 1,693,549
60,000 Collins & Aikman Corp.* . . . . . . . . . . . 510,000
151,200 Ford Motor Co. . . . . . . . . . . . . . . . . 4,233,600
-----------
6,437,149
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
CAPITAL GROWTH PORTFOLIO
- - ----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Telecommunications
Equipment 1.9% 40,000 DSC Communications Corp.* . . . . . . . . . . 1,435,000
22,000 Nokia AB Oy (ADR) . . . . . . . . . . . . . . 1,650,000
12,600 Nokia AB Oy (Preference)* . . . . . . . . . . 1,856,696
---------
4,941,696
---------
Tires 0.2% 20,000 Cooper Tire & Rubber Co. . . . . . . . . . . 472,500
---------
MANUFACTURING 2.3%
Containers & Paper 0.6% 92,000 Stone Container Corp.* . . . . . . . . . . . 1,587,000
---------
Diversified
Manufacturing 0.4% 60,000 Canadian Pacific Ltd. . . . . . . . . . . . . 900,000
---------
Electrical Products 1.1% 100,000 Philips NV (New York shares) . . . . . . . . 2,937,500
---------
Machinery/
Components/Controls 0.2% 35,000 Daewoo Heavy Industries Ltd.* . . . . . . . . 545,213
700 Daewoo Heavy Industries Ltd. (New(b))* . . . . 10,993
---------
556,206
---------
TECHNOLOGY 9.1%
Computer Software 2.7% 52,600 Informix Corp.* . . . . . . . . . . . . . . . 1,689,775
74,150 Microsoft Corp.* . . . . . . . . . . . . . . . 4,532,419
1,400 SAP AG . . . . . . . . . . . . . . . . . . . . 926,075
---------
7,148,269
---------
Diverse Electronic
Products 1.0% 46,000 Motorola Inc. . . . . . . . . . . . . . . . . 2,662,250
---------
EDP Peripherals 0.6% 60,000 Adaptec Inc.* . . . . . . . . . . . . . . . . 1,417,500
---------
Electronic Components/
Distributors 1.5% 41,000 Kyocera Corp. . . . . . . . . . . . . . . . . 3,041,152
2,000 Kyocera Corp. (ADR) . . . . . . . . . . . . . 298,000
371 Samsung Electronics Co., Ltd. (GDS) . . . . . 22,770
4,202 Samsung Electronics Co., Ltd.(a) . . . . . . . 620,668
174 Samsung Electronics Co., Ltd. (New(b))(a) . . 25,347
---------
4,007,937
---------
Electronic Data
Processing 0.6% 20,000 International Business Machines Corp. . . . . 1,470,000
---------
Office/Plant
Automation 1.1% 80,000 Cisco Systems, Inc.* . . . . . . . . . . . . 2,810,000
---------
Semiconductors 1.6% 40,000 Advanced Micro Devices Inc.* . . . . . . . . 995,000
50,000 Intel Corp. . . . . . . . . . . . . . . . . . 3,193,750
---------
4,188,750
---------
ENERGY 4.3%
Oil & Gas Production 2.0% 20,000 Anadarko Petroleum Corp. . . . . . . . . . . 770,000
40,000 Apache Corp. . . . . . . . . . . . . . . . . . 1,000,000
82,500 Perez Companc S.A. "B" . . . . . . . . . . . . 339,883
59,000 Perez Companc S.A. "B" (ADR) . . . . . . . . . 486,750
78,800 Triton Energy Corp.* . . . . . . . . . . . . . 2,679,200
---------
5,275,833
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- - --------------------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value ($)
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Oil Companies 2.0% 40,000 Chevron Corp . . . . . . . . . . . . . . . . 1,785,000
160,000 YPF SA "D" (ADR) . . . . . . . . . . . . . . 3,420,000
-----------
5,205,000
-----------
Oilfield Services/
Equipment 0.3% 168,800 Global Marine Inc.* . . . . . . . . . . . . 611,900
-----------
METALS AND MINERALS 1.4%
Steel & Metals 43,200 Allegheny Ludlum Corp. . . . . . . . . . . . 810,000
7,400 Oregon Steel Mills Inc. . . . . . . . . . . 115,625
25,000 Pohang Iron & Steel Co., Ltd. . . . . . . . . 731,250
148,000 Usinas Siderurgicas de Minas Gerais
S/A (pfd.) (ADR) . . . . . . . . . . . . . 1,961,000
-----------
3,617,875
-----------
CONSTRUCTION 1.6%
Building Materials 0.7% 6,400 Mannesmann AG (Bearer) . . . . . . . . . . . 1,742,958
-----------
Building Products 0.3% 40,000 USG Corp.* . . . . . . . . . . . . . . . . . 780,000
-----------
Homebuilding 0.6% 99,000 Hovnanian Enterprises Inc. "A"* . . . . . . . 532,125
69,900 Kaufman & Broad Home Corp. . . . . . . . . . . 899,963
20,000 Toll Brothers Inc.* . . . . . . . . . . . . . 197,500
-----------
1,629,588
-----------
UTILITIES 4.2%
Electric Utilities 20,000 CMS Energy Corp. . . . . . . . . . . . . . . 457,500
30,000 Centerior Energy Corp. . . . . . . . . . . . . 266,250
10,000 Central Costanera SA (ADR) . . . . . . . . . . 265,000
7,156,000 Companhia Energetica de Minas Gerais (pfd.) . 650,545
69,900 Destec Energy Inc.* . . . . . . . . . . . . . 742,687
50,000 Empresa Nacional de Electricidad SA (ADR) . . 2,025,000
30,000 Illinova Corp. . . . . . . . . . . . . . . . . 652,500
25,000 Korea Electric Power Co. . . . . . . . . . . . 861,196
58,000 Midlands Electricity PLC . . . . . . . . . . . 739,750
50,000 National Power PLC . . . . . . . . . . . . . . 383,412
99,000 Public Service Co. of New Mexico* . . . . . . 1,287,000
25,000 Shandong Huaneng Power Co. (ADR)* . . . . . . 240,625
50,000 Southern Electric PLC . . . . . . . . . . . . 630,477
30,000 TNP Enterprises Inc. . . . . . . . . . . . . . 446,250
60,000 Unicom Corp. . . . . . . . . . . . . . . . . . 1,440,000
-----------
11,088,192
-----------
TOTAL COMMON STOCKS (Cost $240,313,574) . . . 237,698,661
-----------
------------------------------------------------------------------------
1.5% WARRANTS
------------------------------------------------------------------------
TECHNOLOGY
Semiconductors 284,600 Intel Corp. Warrants (expire 3/14/98)*
(Cost $3,317,369) . . . . . . . . . . . . 3,948,825
-----------
- - --------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $263,659,816)(c) . . . . . . . . . . 261,631,236
===========
- - --------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
CAPITAL GROWTH PORTFOLIO
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
* Non-income producing security.
(a) Security valued in good faith by the Valuation Committee of the Trustees.
The cost and market value of this security at December 31, 1994
aggregated $260,462 and $646,015 (.25% of net assets), respectively.
(b) New shares issued during 1994, eligible for a pro rata share of 1994
dividends.
(c) At December 31, 1994, the net unrealized depreciation on investments based
on cost for federal income tax purposes of $263,612,803 was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of market value
over tax cost . . . . . . . . . . . . . . . . . . . . . . . $ 18,361,493
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost
over market value . . . . . . . . . . . . . . . . . . . . . (20,343,060)
-------------
Net unrealized depreciation. . . . . . . . . . . . . . . . . $ (1,981,567)
=============
- - --------------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short-term
investments), for the year ended December 31, 1994, aggregated
$190,827,357 and $162,561,433, respectively.
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- - ---------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $263,659,816) (Note A) . . . $261,631,236
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,276
Receivables:
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . 2,981,543
Portfolio shares sold . . . . . . . . . . . . . . . . . . . . . . 561,600
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . 282,241
------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . 265,506,896
LIABILITIES
Payables:
Investments purchased . . . . . . . . . . . . . . . . . . . . . . $8,801,508
Portfolio shares redeemed . . . . . . . . . . . . . . . . . . . . 25,873
Due to Adviser (Note B) . . . . . . . . . . . . . . . . . . . . . 104,624
Accrued expenses (Note B) . . . . . . . . . . . . . . . . . . . . 44,136
----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 8,976,141
------------
Net assets, at market value . . . . . . . . . . . . . . . . . . . . . $256,530,755
============
NET ASSETS
Net assets consist of:
Undistributed net investment income . . . . . . . . . . . . . . . $ 507,243
Unrealized depreciation on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . (2,028,580)
Foreign currency related transactions . . . . . . . . . . . . . (4,400)
Accumulated net realized gain . . . . . . . . . . . . . . . . . . 8,707,226
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . 249,349,266
------------
Net assets, at market value . . . . . . . . . . . . . . . . . . . . . $256,530,755
============
NET ASSET VALUE, offering and redemption price per share
($256,530,755 -:- 20,979,934 outstanding shares of beneficial
interest, no par value, unlimited number of shares authorized) . . $12.23
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
CAPITAL GROWTH PORTFOLIO
- - ------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
- - ------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $37,041) . . . $ 2,191,376
Interest . . . . . . . . . . . . . . . . . . . . . . . . . 460,519
------------
2,651,895
Expenses (Note A):
Management fee (Note B) . . . . . . . . . . . . . . . . . . $ 1,199,585
Administrative fees (Note B) . . . . . . . . . . . . . . . 45,253
Accounting fees (Note B) . . . . . . . . . . . . . . . . . 31,685
Trustees' fees (Note B) . . . . . . . . . . . . . . . . . . 11,212
Custodian fees . . . . . . . . . . . . . . . . . . . . . . 98,462
Auditing . . . . . . . . . . . . . . . . . . . . . . . . . 25,795
Legal . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,798
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,731 1,456,521
------------ ------------
Net investment income . . . . . . . . . . . . . . . . . . . . 1,195,374
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments . . . . . . . . . . . . . . . . . . . . . . . . 8,768,082
Foreign currency related transactions . . . . . . . . . . . (26,177) 8,741,905
------------
Net unrealized depreciation during the period on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . (35,951,742)
Foreign currency related transactions . . . . . . . . . . . (46) (35,951,788)
------------ ------------
Net loss on investment transactions . . . . . . . . . . . . . (27,209,883)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . (26,014,509)
============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- - --------------------------------------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
INCREASE (DECREASE) IN NET ASSETS 1994 1993
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . $ 1,195,374 $ 933,809
Net realized gain from investment transactions . . . . . . . . . . . 8,741,905 23,896,099
Net unrealized appreciation (depreciation) on investment
transactions during the period . . . . . . . . . . . . . . . . . (35,951,788) 13,526,410
------------- ------------
Net increase (decrease) in net assets resulting from operations (26,014,509) 38,356,318
------------- ------------
Distributions to shareholders from:
Net investment income ($0.05 and $0.07 per share, respectively). . . (889,382) (1,052,879)
------------- ------------
Net realized gain from investment transactions
($1.31 and $0.27 per share, respectively) . . . . . . . . . . . . (23,981,060) (3,623,212)
------------- ------------
Portfolio share transactions:
Proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . 157,574,508 137,863,548
Net asset value of shares issued to shareholders in
reinvestment of distributions . . . . . . . . . . . . . . . . . . 24,870,442 4,676,091
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . (131,982,527) (86,357,046)
------------- ------------
Net increase in net assets from Portfolio share transactions . . . . . 50,462,423 56,182,593
------------- ------------
INCREASE (DECREASE) IN NET ASSETS . . . . . . . . . . . . . . . . . . . (422,528) 89,862,820
Net assets at beginning of period . . . . . . . . . . . . . . . . . . . 256,953,283 167,090,463
============= ============
NET ASSETS AT END OF PERIOD (including undistributed net
investment income of $507,243 and $238,541, respectively). . . . . . $256,530,755 $256,953,283
------------- ------------
OTHER INFORMATION
INCREASE (DECREASE) IN PORTFOLIO SHARES
Shares outstanding at beginning of period . . . . . . . . . . . . . . . 17,184,932 13,146,981
------------- ------------
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,319,350 10,095,666
Shares issued to shareholders in reinvestment of distributions . . . 1,905,054 375,250
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . (10,429,402) (6,432,965)
------------- ------------
Net increase in Portfolio shares . . . . . . . . . . . . . . . . . . 3,795,002 4,037,951
------------- ------------
Shares outstanding at end of period . . . . . . . . . . . . . . . . . . 20,979,934 17,184,932
============= ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
CAPITAL GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
- - ----------------------------------------------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER
PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS.
<CAPTION>
Six For the Period
Months July 16, 1985
Ended (commencement
Years Ended December 31, (e) December of operations)
---------------------------------------------------------------- 31, to June 30,
1994 1993 1992 1991 1990 1989 1988 1987 1986(e)(f) 1986
---------------------------------------------------------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $14.95 $12.71 $12.28 $8.99 $10.21 $8.53 $ 7.06 $ 7.67 $ 7.93 $ 6.00(b)
------ ------ ------ ----- ------ ----- ------ ------- ------ -------
Income from investment
operations:
Net investment
income (a) . . . . .06 .06 .11 .16 .25 .35 .16 .15 .09 .19
Net realized and
unrealized gain
(loss) on investment
transactions . . . (1.42) 2.52 .66 3.35 (1.00) 1.58 1.40 (.28) (.07) 1.87
------ ------ ------ ----- ------ ----- ------ ------- ------ -------
Total from investment
operations . . . . (1.36) 2.58 .77 3.51 (.75) 1.93 1.56 (.13) .02 2.06
------ ------ ------ ----- ------ ----- ------ ------- ------ -------
Less distributions from:
Net investment
income . . . . . . (.05) (.07) (.11) (.22) (.24) (.25) (.09) (.09) (.07) (.13)
Net realized gains
on investment
transactions . . . (1.31) (.27) (.23) -- (.23) -- -- (.39) (.21) --
------ ------ ------ ----- ------ ----- ------ ------- ------ -------
Total distributions . (1.36) (.34) (.34) (.22) (.47) (.25) (.09) (.48) (.28) (.13)
------ ------ ------ ----- ------ ----- ------ ------- ------ -------
Net asset value,
end of period . . . $12.23 $14.95 $12.71 $12.28 $ 8.99 $10.21 $ 8.53 $ 7.06 $ 7.67 $ 7.93
====== ====== ====== ===== ===== ===== ====== ===== ===== =====
TOTAL RETURN (%) . . (9.67) 20.88 6.42 39.56 (7.45) 22.75 22.07 (1.88) .26(d) 34.66(d)
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period ($ millions) 257 257 167 108 45 45 17 10 1 --
Ratio of operating
expenses, net to
average net
assets (%) (a) . . .58 .60 .63 .71 .72 .75 .75 .75 .75(c) .60(c)
Ratio of net investment
income to average
net assets (%) . . .47 .46 .95 1.49 2.71 3.51 2.17 1.68 2.21(c) 2.95(c)
Portfolio turnover
rate (%) . . . . . 66.44 95.31 56.29 58.88 61.39 63.96 129.75 113.34 38.78(c) 86.22(c)
<FN>
(a) Portion of expenses
reimbursed (Note B) $ -- $ -- $ -- $ -- $ -- $ .01 $ .01 $ .04 $ .20 $ .81
(b) Original capital
(c) Annualized
(d) Not annualized
(e) Per share amounts, for each of the periods identified, have been calculated
using the monthly average shares outstanding during the
period method.
(f) On August 22, 1986, the Trustees voted to change the year end of the Fund
from June 30 to December 31.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INTERNATIONAL PORTFOLIO
INVESTMENT PORTFOLIO as of December 31, 1994
- - ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount Value ($)
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
3.9% REPURCHASE AGREEMENT
------------------------------------------------------------------------------------------
U.S.$ 18,230,000 Repurchase Agreement with Donaldson, Lufkin &
Jenrette, dated 12/30/94 at 5.875%, to be
repurchased at $18,241,900 on 1/3/95,
collateralized by a $17,463,000
U.S. Treasury Note, 8.5%, 7/15/97 (Cost $18,230,000) . . 18,230,000
-----------
1.9% COMMERCIAL PAPER
------------------------------------------------------------------------------------------
U.S.$ 5,000,000 General Electric Capital Corp., 5.78%, 1/31/95 . . . . . . 5,000,000
U.S.$ 1,110,000 J.P. Morgan & Co., Inc., 6.05%, 3/1/95 . . . . . . . . . 1,098,994
U.S.$ 3,000,000 Rincon Securities Inc., 6.08%, 1/9/95 . . . . . . . . . . 2,995,947
-----------
TOTAL COMMERCIAL PAPER (Cost $9,094,941) . . . . . . . . . 9,094,941
-----------
3.9% SHORT-TERM NOTES
------------------------------------------------------------------------------------------
U.S.$ 6,390,000 Federal Home Loan Mortgage Corp., Discount Note,
5.76%, 1/24/95 . . . . . . . . . . . . . . . . . . . . . 6,366,485
U.S.$ 12,000,000 Federal National Mortgage Association, Discount Note,
5.8%, 1/9/95 . . . . . . . . . . . . . . . . . . . . . . 11,984,533
-----------
TOTAL SHORT-TERM NOTES (Cost $18,351,018) . . . . . . . . 18,351,018
-----------
0.1% BONDS
------------------------------------------------------------------------------------------
DM 350,000 Deutsche Bank AG, 8%, 4/11/00 . . . . . . . . . . . . . . 230,389
DM 23,000 Deutsche Bank AG (PC), 9%, 12/31/02 . . . . . . . . . . . . 16,105
DM 33,000 Deutsche Bank AG (PC), 8.75%, 12/31/03 . . . . . . . . . . 22,777
-----------
TOTAL BONDS (Cost $220,601) . . . . . . . . . . . . . . . . 269,271
-----------
0.6% CONVERTIBLE BONDS
------------------------------------------------------------------------------------------
U.S.$ 1,900,000 Henderson Land Development Co., Ltd., 4%, 10/27/96
(Property developer) . . . . . . . . . . . . . . . . . . . 1,805,000
U.S.$ 1,050,000 Ssangyong Oil Refining Co., Ltd., 3.75%, 12/31/08
(Major oil refiner) . . . . . . . . . . . . . . . . . . . 1,115,625
-----------
TOTAL CONVERTIBLE BONDS (Cost $2,955,694) . . . . . . . . 2,920,625
-----------
2.1% PREFERRED STOCKS
------------------------------------------------------------------------------------------
Shares
GERMANY 1.8%
8,000 Henkel KGAA (Household detergent and adhesives producer). . 2,922,139
10,000 SAP AG (Computer software manufacturer) . . . . . . . . . . 5,666,161
-----------
8,588,300
-----------
ITALY 0.3%
700,000 Fiat SpA (Multi-industry, automobiles)* . . . . . . . . . 1,609,741
-----------
TOTAL PREFERRED STOCKS (Cost $6,985,179) . . . . . . . . . 10,198,041
-----------
87.5% COMMON STOCKS
------------------------------------------------------------------------------------------
ARGENTINA 1.1%
200,000 Perez Companc S.A. "B" (ADR) (Industrial conglomerate). . . 1,650,000
170,000 YPF SA "D" (ADR) (Petroleum company) . . . . . . . . . . . 3,633,750
-----------
5,283,750
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INTERNATIONAL PORTFOLIO
- - ------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AUSTRALIA 3.8%
1,556,504 Ampol Exploration Ltd. (Oil and gas
exploration company) . . . . . . . . . . . . . . . . 4,199,267
290,319 Broken Hill Proprietary Co. Ltd. (Petroleum,
minerals and steel) . . . . . . . . . . . . . . . . 4,411,390
240,000 CRA Ltd. (Mining, manufacturing and development) . . . 3,311,885
383,759 Coca Cola Amatil Ltd. (Soft drink bottler
and distributor) . . . . . . . . . . . . . . . . . 2,439,587
2,090,535 M.I.M. Holdings Ltd. (Nonferrous metals and coal) . . 3,484,495
------------
17,846,624
------------
BELGIUM 0.3%
3,200 Solvay & Cie. SA (Chemical producer) . . . . . . . . . 1,524,049
------------
BRAZIL 3.0%
5,178,870 Centrais Eletricas Brasileiras S/A "B"
(pfd.) (Electric utility) . . . . . . . . . . . . . 1,797,624
3,077,425 Companhia Cervejaria Brahma (pfd.) (Leading beer
producer and distributor) . . . . . . . . . . . 1,013,152
19,421,000 Companhia Vale do Rio Doce (pfd.) (Diverse mining and
industrial complex) . . . . . . . . . . . . . . . 3,691,595
26,360,657 Lojas Americanas S.A. (pfd.) (Discount department
store chain) . . . . . . . . . . . . . . . . . . . 778,060
12,000,000 Petroleo Brasileiro S/A (pfd.) (Petroleum company) . . 1,515,797
40,040,000 Telecomunicacoes Brasileiras S.A. (pfd.)
(Telecommunication services) . . . . . . . . 1,791,636
2,600,000,000 Usinas Siderurgicas de Minas Gerais S/A (pfd.)
(Non-coated flat products and electrolytic
galvanized products) . . . . . . . . . . . . . . . . 3,530,106
------------
14,117,970
------------
CANADA 2.4%
200,445 Canadian Pacific Ltd. (Transportation and natural
resource conglomerate) . . . . . . . . . . . . . . . 2,982,919
100,000 Imperial Oil Ltd.(Producer and refiner of natural gas
and petroleum products in Canada) . . . . . . . . . 3,297,095
71,800 Magna International, Inc. "A" (Manufacturer of
automotive parts) . . . . . . . . . . . . . . . . . 2,755,325
159,000 Rogers Communications Inc. "B" (Cable TV and
cellular telephones in Canada)* . . . . . . . . . . 2,125,290
------------
11,160,629
------------
DENMARK 0.3%
35,000 Unidanmark A/S "A" (Bank holding company)*. . . . . . 1,346,309
------------
FINLAND 2.6%
78,000 Metsa-Serla Oy "B" (Tissue paper producer) . . . . . 3,425,097
29,000 Nokia AB Oy (Preference) (Leading manufacturer of
cellular telephones) . . . . . . . . . . . . . . 4,273,349
247,000 Outokumpu Oy "A" (Metals and minerals)* . . . . . . 4,536,607
94,000 Outokumpu Oy Warrants (expire 6/28/96)* . . . . . . 83,347
------------
12,318,400
------------
FRANCE 5.9%
9,300 Carrefour (Hypermarket and food retailing) . . . . . 3,851,638
14,138 Castorama-Dubois Investissements (Retailer,
wholesaler and distributor) . . . . . . . . . . . 1,765,596
10,736 Cetelem (Consumer finance company) . . . . . . . . 1,919,655
10,000 Continentale d'Equipement Electrique (Protection
equipment for electrical networks) . . . . . . . 820,071
19,300 ECIA - Equipements et Composants pour l'Industrie
Automobile (Manufacturer of automobile parts and
accessories) . . . . . . . . . . . . . . . . . . . 2,507,807
88,000 Michelin "B" (Leading tire manufacturer)* . . . . . 3,201,348
12,226 S.A.G.A. (Major freight forwarding, logistics
and cargo handling operator) . . . . . . . . . . 1,052,979
2,980 Salomon S.A. (Manufacturer of sports equipment) 1,191,219
34,952 Elf Aquitaine (Petroleum company) . . . . . . . . 2,459,924
15,420 Elf Aquitaine (ADR) . . . . . . . . . . . . . . . 543,555
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- - ----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
20,000 Television Francaise (Television broadcasting).......... 1,813,144
70,473 Total SA "B" (International oil and gas exploration,
development and production) .......................... 4,093,002
54,687 Valeo SA (Automobile and truck components) ............. 2,722,575
----------
27,942,513
----------
GERMANY 6.8%
20,000 BASF AG (Diversified manufacturer of chemicals for
industrial use) ..................................... 4,123,778
6,000 Daimler-Benz AG (Automobile and truck manufacturer) .... 2,950,534
8,698 Deutsche Bank AG (Bank) ............................... 4,041,535
46 Deutsche Bank AG Warrants (expire 6/30/95)* ............ 4,987
330 Deutsche Bank AG Warrants (expire 6/30/97)* ............ 8,455
18,500 Hoechst AG (Chemical producer) ......................... 4,023,426
14,860 Mannesmann AG (Bearer) (Diversified construction
and technology company) .............................. 4,046,930
6,900 Schering AG (Pharmaceutical and chemical producer) ..... 4,528,605
3,027 Siemens AG (Bearer) (Manufacturer of electrical and
electronic equipment) ................................ 1,267,802
12,720 VEBA AG (Electric utility, distributor of oil and
chemicals) ......................................... 4,432,771
10,000 Volkswagen AG (Leading automobile manufacturer) ........ 2,749,185
----------
32,178,008
----------
HONG KONG 2.4%
266,000 Cheung Kong Holdings Ltd. (Real estate company) ........ 1,082,908
288,000 China Light & Power Co., Ltd. (Electric utility) ....... 1,232,026
209,787 HSBC Holdings Ltd. (Bank) ............................. 2,263,937
288,000 Hong Kong & China Gas Co., Ltd. (Gas utility) .......... 465,267
24,000 Hong Kong & China Gas Co., Ltd. Warrants
(expire 12/31/95)* .................................. 4,560
330,000 Hong Kong Electric Holdings, Ltd.
(Electric utility and real estate) ................... 902,036
732,000 Hutchison Whampoa, Ltd. (Container terminal and real
estate company) ...................................... 2,989,493
435,000 Hysan Development Co. (Real estate developer)........... 862,973
620,000 Johnson Electric Holdings Ltd. (Designer and
manufacturer of micrometers for domestic and
commercial uses) .................................... 1,422,294
----------
11,225,494
----------
INDONESIA 0.8%
200,000 Indocement Tunggal (Foreign registered)
(Cement producer) .................................... 575,523
50,400 Indonesia Satellite Corp. (ADR) (International
telecommunication services)* ......................... 1,801,800
402,000 Kalbe Farma (Foreign registered) (Pharmaceutical
producer and distributor) ............................ 1,655,186
----------
4,032,509
----------
ITALY 3.6%
71,170 Assicurazioni Generali SpA (Life and property
insurance company) .................................. 1,673,943
350,000 Istituto Mobiliare Italiano SpA (Banking and financial
services) ............................................ 2,151,356
2,500,000 Istituto Nazionale delle Assicurazione (Insurance
company)* ............................................ 3,321,517
670,000 La Rinascente SpA di Risparmio (Department store chain) 1,891,862
134,000 La Rinascente SpA di Risparmio Warrants
(expire 12/31/99)* .................................. 41,307
134,000 La Rinascente SpA Warrants (expire 12/31/99)* .......... 105,746
65,000 Luxottica Group SpA (ADR) (Manufacturer and marketer
of eyeglasses) ....................................... 2,218,125
964,000 Societa Finanziaria Telefonica Torino SpA (Telephone
utility and telecommunication equipment manufacturer) 2,840,888
1,130,000 Telecom Italia SpA (Telecommunication services) ........ 2,939,951
----------
17,184,695
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INTERNATIONAL PORTFOLIO
- - ------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
JAPAN 25.8%
1,000 Amano Corp. (Time-management systems) . . . . . . . . . 14,855
125,000 Bridgestone Corp. (Leading automobile tire
manufacturer) . . . . . . . . . . . . . . . . . . . . 1,957,242
318,000 Canon Inc. (Leading producer of visual image and
information equipment) . . . . . . . . . . . . . . . 5,394,158
65,000 Cox Co., Ltd. (Men's and ladies' wear chain
store operator) . . . . . . . . . . . . . . . . . . 1,285,255
490 DDI Corp. (Long distance telephone and
cellular operator). . . . . . . . . . . . . . . . . . 4,229,650
400,000 Fujitsu Ltd. (Leading manufacturer of computers) . . . 4,055,003
190,000 Hitachi Construction Machinery Co., Ltd. (Leading
maker of hydraulic shovels) . . . . . . . . . . . . . 2,498,243
477,000 Hitachi Ltd. (General electronics manufacturer) . . . . 4,735,050
380,000 Hitachi Metals, Ltd. (Major producer of high-quality
specialty steels) . . . . . . . . . . . . . . . . . . 4,653,217
88,000 Horipro Inc. (Growing entertainment production company) 2,172,840
74,000 Ito-Yokado Co., Ltd. (Leading supermarket operator) . . 3,958,848
465,000 Itochu Corp. (Leading general trading company). . . . . 3,313,761
20,000 Japan Associated Finance Co. (Venture capital company). 3,111,513
87,000 Japan Radio Co., Ltd. (Manufacturer of wireless
telecommunication equipment) . . . . . . . . . . . . 1,292,382
550,000 Kawasaki Steel Corp. (Major integrated steelmaker)* . 2,302,017
29,000 Keyence Corp. (Specialized manufacturer of sensors) . 3,289,170
68,000 Kyocera Corp. (Leading ceramic packaging manufacturer). 5,043,862
45,000 Mabuchi Motor Co., Ltd. (Manufacturer of DC motors) . . 3,387,534
210,000 Matsushita Electrical Industrial Co., Ltd. (Consumer
electronic products manufacturer) . . . . . . . . . . 3,456,790
395,000 NGK Spark Plug Co., Ltd. (Leading manufacturer of
automotive spark plugs) . . . . . . . . . . . . . . . 5,193,717
540,000 NSK Ltd. (Leading manufacturer of bearings and other
machinery parts) . . . . . . . . . . . . . . . . . . 4,281,843
49,000 Nichiei Co., Ltd. (Finance company for small and
medium size firms) . . . . . . . . . . . . . . . . . 3,147,646
210,000 Nippon Shokubai Corp., Ltd. (Specialty chemical
producer) . . . . . . . . . . . . . . . . . . . . . . 2,044,565
600,000 Nisshin Steel Co., Ltd. (Blast furnace steelmaker) . . 3,023,186
90,000 Pioneer Electronics Corp. (Leading manufacturer of
audio equipment) . . . . . . . . . . . . . . . . . . 2,168,022
50,000 SMC Corp. (Leading maker of pneumatic equipment) . . . 2,845,528
56,000 Secom Co., Ltd. (Electronic security system operator) . 3,484,894
40,000 Seven-Eleven Japan Co., Ltd. (Leading convenience
store operator) . . . . . . . . . . . . . . . . . . . 3,215,899
250,000 ShinMaywa Industries, Ltd. (Leading maker of dump
trucks and other specialty vehicles) . . . . . . . . 2,559,470
84,000 Sony Corp. (Consumer electronic products manufacturer). 4,763,625
400,000 Sumitomo Corp. (Leading general trading company, with
offices, subsidiaries and affiliates throughout
the world) . . . . . . . . . . . . . . . . . . . . . 4,095,152
21,000 Sumitomo Electric Industries, Ltd. (ADR) (Leading
maker of electric wires and cables) . . . . . . . . . 2,992,500
197,000 Sumitomo Forestry Co., Ltd. (Forestry and house building) 3,163,706
850,000 Sumitomo Metal Industries, Ltd. (Leading integrated
crude steel producer)* . . . . . . . . . . . . . . . 2,755,696
315,000 Suzuki Motor Corp. (Leading minicar and motorcycle
producer) . . . . . . . . . . . . . . . . . . . . . . 3,699,187
94,000 Takuma Co., Ltd. (Leading maker of boilers, garbage
incinerators and water treatment plants) . . . . . . 1,698,284
555,000 Toshiba Corp. (General electronics manufacturer) . . . 4,027,552
32,000 Tsutsumi Jewelry Co., Ltd. (Manufacturer, wholesaler
and retailer of jewelry) . . . . . . . . . . . . . . 2,922,814
-----------
122,234,676
-----------
KOREA 0.6%
2,000 Korea International Trust IDR (Investment company)(a)* 117,000
22,000 Samsung Electronics Co., Ltd. (GDS) (Major electronics
manufacturer) . . . . . . . . . . . . . . . . . . . . 1,072,500
33,000 Samsung Electronics Co., Ltd. (GDS) (New(b)) . . . . . 1,485,000
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- - -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2,278 Samsung Electronics Co., Ltd. (GDS) (New(b)) . . . . . . . . . 139,812
----------
2,814,312
----------
MALAYSIA 2.0%
294,000 Aokam Perdana Bhd. (Forest products company) . . . . . . . . . 1,819,150
315,000 Malayan Banking Bhd. (Leading banking and financial
services group) . . . . . . . . . . . . . . . . . . . . . . . 1,899,745
870,000 Technology Resources Industries (Mobile telephone
operator)* . . . . . . . . . . . . . . . . . . . . . . . . . 2,776,777
194,000 Telekom Malaysia Bhd. (Telecommunication services) . . . . . . 1,314,353
250,000 Westmont Bhd. (Investment holding company) . . . . . . . . . . 1,556,687
----------
9,366,712
----------
MEXICO 0.5%
100,000 Grupo Carso, S.A. de CV (ADR) (Diversified industrial
group)* . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500,000
32,000 Panamerican Beverages Inc. "A" (Soft drink bottler) . . . . . 1,012,000
----------
2,512,000
----------
NETHERLANDS 4.1%
30,000 AEGON Insurance Group NV (Insurance company) . . . . . . . . . 1,918,313
24,000 Akzo-Nobel NV (Chemical producer) . . . . . . . . . . . . . . 2,770,666
204,870 Elsevier NV (International publisher of scientific,
professional, business, and consumer information books) . . . 2,136,152
69,106 Getronics NV (Computer and software distributor) . . . . . . . 2,519,966
16,000 Heineken Holdings NV "A" (Brewery) . . . . . . . . . . . . . . 2,163,258
50,448 Internationale-Nederlanden Groep CVA (Banking
and insurance holding company) . . . . . . . . . . . . . . . 2,383,050
122,000 Philips N.V. (Leading manufacturer of electrical equipment). . 3,612,420
26,935 Wolters Kluwer CVA (Publisher) . . . . . . . . . . . . . . . . 1,992,312
----------
19,496,137
----------
NORWAY 0.6%
271,889 Saga Petroleum "A" (Free) (Oil and gas producer) . . . . . . . 2,955,097
----------
PHILIPPINES 0.8%
10,115 Philippine Long Distance Telephone Co.
(Telecommunication services) . . . . . . . . . . . . . . . . 557,589
600,000 San Miguel Corp. "B" (Brewery) . . . . . . . . . . . . . . . . 3,124,491
----------
3,682,080
----------
PORTUGAL 0.3%
30,192 Jeronimo Martins (Food producer and retailer) . . . . . . . . 1,293,590
----------
SINGAPORE 0.3%
195,000 Sembawang Corp. (Ship repair and maritime
services group) . . . . . . . . . . . . . . . . . . . . . . . 1,458,319
----------
SPAIN 2.2%
37,400 Acerinox, S.A. (Stainless steel producer). . . . . . . . . . . 3,906,933
21,800 Banco Santander, S.A. (Leading regional bank). . . . . . . . . 834,735
7,266 Banco Santander, S.A. (New(b)) . . . . . . . . . . . . . . . . 269,387
160,000 Compania Telefonica Nacional de Espana S.A.
(Telecommunication services) . . . . . . . . . . . . . . . . 1,890,218
133,000 Repsol SA (Integrated oil company) . . . . . . . . . . . . . . 3,607,293
----------
10,508,566
----------
SWEDEN 4.0%
99,000 Astra AB "A" (Free) (Pharmaceutical company) . . . . . . . . . 2,558,088
600 Astra AB "B" (Free) . . . . . . . . . . . . . . . . . . . . . 15,302
155,000 Autoliv AB (Free) (Manufacturer of safety airbags for
automobiles)* . . . . . . . . . . . . . . . . . . . . . . . 5,965,911
35,000 L.M. Ericsson Telephone Co. "B" (ADR) (Leading
manufacturer of cellular telephone equipment) . . . . . . . . 1,929,375
65,000 Mo och Domsjo AB "B" (Free) (Manufacturer of newsprint,
paperboard, and various sawn timber products)* . . . . . . . 3,026,694
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INTERNATIONAL PORTFOLIO
- - -------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
144,000 S.K.F. AB "B" (Free) (Manufacturer of
roller bearings)* . . . . . . . . . . . . . . . 2,373,983
175,000 Volvo AB "B" (Free) (Automobile manufacturer). . . 3,297,199
------------
19,166,552
------------
SWITZERLAND 4.4%
7,000 Alusuisse-Lonza Holdings AG (Registered)
(Manufacturer of aluminum, chemicals, and paper
packaging products) . . . . . . . . . . . . . . 3,501,737
5,180 Brown, Boveri & Cie. AG (Bearer) (Manufacturer of
electrical equipment) . . . . . . . . . . . . . 4,458,594
5 Brown, Boveri & Cie. AG (Registered) . . . . . . 825
3,335 CS Holdings (Bearer) (Bank) . . . . . . . . . . . 1,426,357
5 CS Holdings (Bearer) Warrants (expire 12/16/94)* . 35
3,623 Holderbank Financiere Glaris AG (Bearer)
(Cement company) . . . . . . . . . . . . . . . 2,742,119
2,514 Nestle SA (Registered) (Food manufacturer) . . . 2,394,286
1,710 SGS Holdings SA (Bearer) (Trade inspection
company) . . . . . . . . . . . . . . . . . . 2,363,845
4,000 Sulzer Brothers Ltd. (Registered) (Multi-industry
company) . . . . . . . . . . . . . . . . . . . 2,767,786
5,038 Swiss Bank Corp. (Bearer) (Switzerland's second
largest universal bank) . . . . . . . . . . . . 1,392,871
65 Swiss Bank Corp. Warrants (expire 6/30/95)* . . . 782
143 Swiss Bank Corp. Warrants (expire 6/30/98)* . . . 1,693
100 Swiss Reinsurance (Registered) (Life,
accident and health insurance company) . . . . 60,259
-----------
21,111,189
-----------
THAILAND 1.1%
15,500 American Standard Sanitaryware (Foreign
registered)(Manufacturer of bathroom fixtures). 209,918
716,000 Sinpinyo Fund #4 (Foreign registered)
(Investment company)* . . . . . . . . . . . . . 855,606
525,220 Thai Farmers Bank (Foreign registered)
(Commercial bank) . . . . . . . . . . . . . . . 4,267,870
-----------
5,333,394
-----------
TURKEY 0.3%
670,000 Migros Turkey (Retailer) . . . . . . . . . . . . 1,281,137
-----------
UNITED KINGDOM 7.5%
192,000 BAA PLC (Owner and operator of U.S. and
U.K. airports) . . . . . . . . . . . . . . . . 1,421,221
600,000 British Gas PLC (Integrated gas utility) . . . . 2,938,967
300,000 British Petroleum PLC (Major integrated world
oil company) . . . . . . . . . . . . . . . . . 1,997,653
278,310 Cable and Wireless PLC (International
telecommunication services in the United
Kingdom and Hong Kong) . . . . . . . . . . . . 1,641,985
110,175 Cadbury Schweppes PLC (Candy, soft drinks and
other food products) . . . . . . . . . . . . . 744,845
236,000 Carlton Communications PLC (Television post
production products and services) . . . . . . . 3,312,864
310,400 Cookson Group PLC (Industrial materials
manufacturer) . . . . . . . . . . . . . . . . 1,117,246
710,218 Hanson PLC (Industrial management company) . . . 2,567,455
1,320,427 Lasmo PLC (Oil production and exploration)* . . 3,058,266
170,000 Midlands Electricity PLC (Electric companies) . . 2,168,307
255,000 PowerGen PLC (Electric utility) . . . . . . . . 2,138,967
304,628 RTZ Corp. PLC (Mining and finance company) . . . 3,947,292
439,200 Reuters Holdings PLC (International
news agency) . . . . . . . . . . . . . . . . . 3,216,676
449,140 SmithKline Beecham "A" (Manufacturer of ethical
drugs and healthcare products) . . . . . . . . 3,187,559
389,000 Waste Management International PLC (Waste
collection and disposal services)* . . . . . . 2,179,374
-----------
35,638,677
-----------
TOTAL COMMON STOCKS (Cost $393,294,522) . . . . 415,013,388
-----------
- - -------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $449,131,955)(c) . . . . . . . . . . . . 474,077,284
===========
- - -------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- - ------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------
<S> <C>
* Non-income producing security.
(a) 1000 shares = 1 IDR unit for Korea International Trust.
(b) New shares issued during 1994, eligible for a pro rata share of 1994 dividends.
(c) At December 31, 1994, the net unrealized appreciation on investments based on
cost for federal income tax purposes of $450,408,637 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is
an excess of market value over tax cost .................................. $ 44,572,806
Aggregate gross unrealized depreciation for all investments in which there is
an excess of tax cost over market value .................................. (20,904,159)
------------
Net unrealized appreciation .................................................. $ 23,668,647
============
<FN>
- - ------------------------------------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short-term investments), for the year
ended December 31, 1994, aggregated $339,886,045 and $119,463,911, respectively.
</TABLE>
<TABLE>
- - -------------------------------------------------------------------------------------
At December 31, 1994, sector diversification of the International Portfolio's
equity holdings was as follows:
<CAPTION>
SECTOR DIVERSIFICATION EQUITY HOLDINGS MARKET VALUE
---------------------- --------------- ------------
<S> <C> <C>
Manufacturing 20% $ 85,601,911
Metals and Minerals 11 47,139,503
Durables 11 45,968,873
Financial 10 43,726,124
Energy 8 34,126,324
Service Industries 6 27,823,821
Consumer Discretionary 6 24,507,581
Consumer Staples 6 24,038,995
Communications 5 21,784,847
Technology 5 19,982,304
Other 12 53,431,771
----- ------------
TOTAL EQUITY HOLDINGS 100% $428,132,054
===== ============
- - -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
COMMITMENTS:
As of December 31, 1994, the International Portfolio entered into the following
forward foreign currency exchange contracts resulting in net unrealized depreciation of $1,493,469.
<CAPTION>
NET UNREALIZED
APPRECIATION/
SETTLETLEMENT DEPRECIATION
CONTRACTS TO DELIVER IN EXCHANGE FOR DATE (U.S.$)
---------------------------- ----------------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
U.S. Dollars 859,643 Swiss Francs 1,141,175 1/4/95 11,916
U.S. Dollars 2,026,217 British Pound 1,310,874 1/12/95 25,228
Japanese Yen 34,195,236 U.S. Dollars 340,639 1/4/95 (2,583)
Japanese Yen 30,231,846 U.S. Dollars 303,171 1/5/95 (270)
Swiss Francs 1,513,105 U.S. Dollars 1,140,245 1/5/95 (15,370)
Japanese Yen 25,040,429 U.S. Dollars 251,194 1/6/95 (141)
British Pounds 234,529 U.S. Dollars 361,644 1/12/95 (5,381)
Japanese Yen 768,110,000 U.S. Dollars 7,000,000 1/24/95 (731,369)
Japanese Yen 757,890,000 U.S. Dollars 7,000,000 1/25/95 (629,394)
Japanese Yen 2 208,822,000 U.S. Dollars 22,000,000 4/28/95 (490,002)
Japanese Yen 1, 911,000,000 U.S. Dollars 20,000,000 7/10/95 343,897
---------
(1,493,469)
=========
- - ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
Transactions in written put option contracts during the year ended December 31, 1994 were:
<CAPTION>
PREMIUMS
NUMBER OF CONTRACTS RECEIVED ($)
---------------------------------------------
<S> <C> <C>
Outstanding at December 31, 1993........................... -- --
Contracts written .................................... 920 79,336
Contracts expired .................................... (920) (79,336)
---------------------------------------------
Outstanding at December 31, 1994 .......................... -- --
====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INTERNATIONAL PORTFOLIO
FINANCIAL STATEMENTS
- - -----------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
- - -----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $449,131,955) (Note A) . . . $474,077,284
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,912
Forward foreign currency exchange contracts to buy, at market
(contract cost $2,885,860) (Note A) . . . . . . . . . . . . . . . 2,923,004
Receivable on forward foreign currency exchange contracts to sell
(Note A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,396,893
Other receivables:
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . 2,420,638
Portfolio shares sold . . . . . . . . . . . . . . . . . . . . . . 1,413,511
Foreign taxes recoverable . . . . . . . . . . . . . . . . . . . . 416,034
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . 205,882
------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . 539,979,158
LIABILITIES
Payables:
Investments purchased . . . . . . . . . . . . . . . . . . . . . . $ 4,596,407
Portfolio shares redeemed . . . . . . . . . . . . . . . . . . . . 52,950
Due to Adviser (Note B) . . . . . . . . . . . . . . . . . . . . . 357,742
Accrued expenses (Note B) . . . . . . . . . . . . . . . . . . . . 122,094
Forward foreign currency exchange contracts to buy
(Note A) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,885,860
Forward foreign currency exchange contracts to sell,
at market (contract cost $58,396,893) (Note A) . . . . . . . . 59,927,506
-----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 67,942,559
------------
Net assets, at market value . . . . . . . . . . . . . . . . . . . . . $472,036,599
============
NET ASSETS
Net assets consist of:
Undistributed net investment income . . . . . . . . . . . . . . . $ 722,015
Unrealized appreciation (depreciation) on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 24,945,329
Foreign currency related transactions . . . . . . . . . . . . . (1,505,831)
Accumulated net realized gain . . . . . . . . . . . . . . . . . . 1,548,747
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . 446,326,339
------------
Net assets, at market value . . . . . . . . . . . . . . . . . . . . . $472,036,599
============
NET ASSET VALUE, offering and redemption price per share
($472,036,599 -:- 44,139,826 outstanding shares of beneficial
interest, no par value, unlimited number of shares authorized) . . $10.69
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $909,141) . . . $ 4,589,934
Interest (net of foreign taxes withheld of $52,996) . . . . 1,791,616
-----------
6,381,550
Expenses (Note A):
Management fee (Note B) . . . . . . . . . . . . . . . . . . $ 3,363,597
Administrative fees (Note B) . . . . . . . . . . . . . . . 45,272
Accounting fees (Note B) . . . . . . . . . . . . . . . . . 96,548
Trustees' fees (Note B) . . . . . . . . . . . . . . . . . . 13,121
Custodian fees . . . . . . . . . . . . . . . . . . . . . . 469,330
Auditing . . . . . . . . . . . . . . . . . . . . . . . . . 50,810
Legal . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,064
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,281 4,171,023
----------- -----------
Net investment income . . . . . . . . . . . . . . . . . . . . 2,210,527
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments . . . . . . . . . . . . . . . . . . . . . . . . 4,033,919
Options . . . . . . . . . . . . . . . . . . . . . . . . . . 28,258
Foreign currency related transactions . . . . . . . . . . . (391,175) 3,671,002
-----------
Net unrealized depreciation during the period on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . (13,368,706)
Foreign currency related transactions . . . . . . . . . . . (1,498,201) (14,866,907)
----------- -----------
Net loss on investment transactions . . . . . . . . . . . . . (11,195,905)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . $(8,985,378)
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INTERNATIONAL PORTFOLIO
- - ---------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- - ---------------------------------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
Increase (Decrease) in Net Assets 1994 1993
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . $ 2,210,527 $ 1,092,953
Net realized gain from investment transactions . . . . . . . . . . . 3,671,002 823,463
Net unrealized appreciation (depreciation) on investment
transactions during the period . . . . . . . . . . . . . . . . . (14,866,907) 37,190,760
------------- -------------
Net increase (decrease) in net assets resulting from operations . . . . (8,985,378) 39,107,176
------------- -------------
Distributions to shareholders:
From net investment income ($.07 and $.14 per share, respectively) . (1,958,854) (1,135,018)
------------- -------------
In excess of net investment income ($.12 per share) . . . . . . . . -- (914,392)
------------- -------------
Portfolio share transactions:
Proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . 313,276,872 150,601,515
Net asset value of shares issued to shareholders in
reinvestment of distributions . . . . . . . . . . . . . . . . . . 1,958,854 2,049,410
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . (70,378,561) (16,376,694)
------------- -------------
Net increase in net assets from Portfolio share transactions . . . . . 244,857,165 136,274,231
------------- -------------
INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 233,912,933 173,331,997
Net assets at beginning of period . . . . . . . . . . . . . . . . . . . 238,123,666 64,791,669
------------- -------------
NET ASSETS AT END OF PERIOD (including undistributed net investment
income of $722,015 and $1,007,330, respectively) . . . . . . . . . . $472,036,599 $238,123,666
============= =============
OTHER INFORMATION
INCREASE (DECREASE) IN PORTFOLIO SHARES
Shares outstanding at beginning of period . . . . . . . . . . . . . . . 21,943,195 7,975,250
------------- -------------
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,463,330 15,488,679
Shares issued to shareholders in reinvestment of distributions . . . 177,916 252,390
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . (6,444,615) (1,773,124)
------------- -------------
Net increase in Portfolio shares . . . . . . . . . . . . . . . . . . 22,196,631 13,967,945
------------- -------------
Shares outstanding at end of period . . . . . . . . . . . . . . . . . . 44,139,826 21,943,195
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS.
<CAPTION>
FOR THE PERIOD
MAY 1, 1987
(COMMENCEMENT
Years Ended December 31, OF OPERATIONS) TO
------------------------------------------------------------ DECEMBER 31,
1994(e) 1993(e) 1992(e) 1991(e) 1990(e) 1989(e) 1988 1987
------------------------------------------------------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period . . . . . . . $10.85 $ 8.12 $ 8.47 $ 7.78 $ 8.46 $ 6.14 $ 5.26 $ 6.00(b)
------ ------ ------ ------ ------ ------ ------ -------
Income from investment
operations:
Net investment income (a) . . . . .06 .09 .10 .12 .25 .10 .09 --
Net realized and unrealized
gain (loss) on investment
transactions . . . . . . . . . . (.15) 2.90 (.36) .77 (.89) 2.22(f) .79 (.64)
------ ----- ----- ----- ----- ----- ----- -----
Total from investment
operations . . . . . . . . . . . (.09) 2.99 (.26) .89 (.64) 2.32 .88 (.64)
------ ----- ----- ----- ----- ----- ----- -----
Less distributions:
From net investment income . . . (.07) (.14) (.09) (.20) (.04) -- -- --
In excess of net investment income -- (.12) -- -- -- -- -- --
From net realized gains on
investment transactions . . . . -- -- -- -- -- -- -- (.10)
------ ----- ----- ----- ----- ----- ----- -----
Total distributions . . . . . . . . (.07) (.26) (.09) (.20) (.04) -- -- (.10)
------ ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period . . $10.69 $10.85 $ 8.12 $ 8.47 $ 7.78 $ 8.46 $ 6.14 $5.26
====== ====== ====== ====== ====== ====== ====== =====
TOTAL RETURN (%) . . . . . . . . . (.85) 37.82 (3.08) 11.45 (7.65) 37.79 16.73 (10.64)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
($ millions) . . . . . . . . . . . 472 238 65 41 35 17 3 2
Ratio of operating expenses,
net to average net assets (%) (a) 1.08 1.20 1.31 1.39 1.38 1.50 1.50 1.50(c)
Ratio of net investment income
to average net assets (%) . . . . .57 .91 1.23 1.43 2.89 1.30 1.59 .02(c)
Portfolio turnover rate (%) . . . . 33.52 20.36 34.42 45.01 26.67 57.69 110.42 146.08(c)
(a) Portion of expenses
reimbursed (Note B) . . . . . . $ -- $ -- $ -- $ -- $ -- $ .02 $ .14 $ .07
<FN>
(b) Original capital
(c) Annualized
(d) Not annualized
(e) Per share amounts, for each of the periods identified, have been calculated
using the monthly average shares outstanding during the
period method.
(f) Includes provision for federal income tax of $.03 per share.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
SCUDDER VARIABLE LIFE INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS
- - ----------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- - ----------------------------------------------------------------------------
Scudder Variable Life Investment Fund (the "Fund") is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended, as an open-end, diversified management investment company.
Its shares of beneficial interest are divided into six separate diversified
series, called "Portfolios." The Portfolios are comprised of the Money Market
Portfolio, Bond Portfolio, Balanced Portfolio, Growth and Income Portfolio
(which commenced operations on May 2, 1994), Capital Growth Portfolio, and
International Portfolio.
The Fund is intended to be the funding vehicle for variable annuity contracts
and variable life insurance policies to be offered by the separate accounts of
certain life insurance companies ("Participating Insurance Companies"). As of
December 31, 1994, ownership breakdown of the Portfolios by each Participating
Insurance Company is as follows:
<TABLE>
<CAPTION>
PORTFOLIOS
GROWTH
PARTICIPATING MONEY AND CAPITAL INTERNA-
INSURANCE COMPANIES MARKET BOND BALANCED INCOME GROWTH TIONAL
- - ------------------------------------ -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aetna Life Insurance & Annuity Co. ..... --% --% --% --% --% 40.4%
American Skandia Life Assurance Co...... -- 37.7 0.1 -- 0.1 0.3
AUSA Life Insurance Co. ................ -- -- -- -- -- 0.3
Banner Life Insurance Co................ 0.2 0.3 6.8 -- 1.1 0.4
Charter National Life Insurance Co...... 66.5 11.7 80.5 87.9 27.3 19.8
Fortis Benefits Insurance Co............ -- -- -- -- -- 0.2
Intramerica Life Insurance Co........... 4.9 1.3 5.7 12.1 2.4 1.8
Lincoln Benefit Life Co................. -- 0.1 1.2 -- -- --
Mutual of America Life Insurance Co..... -- 47.4 -- -- 65.0 29.6
Paragon Life Insurance Co............... -- -- 0.2 -- 0.1 --
Providentmutual Life and Annuity Co
of America.............................. -- 1.5 -- -- -- --
Safeco Life Insurance Co................ -- -- 5.5 -- -- 1.7
Union Central Life Insurance Co. ....... 28.3 -- -- -- 4.0 5.5
United of Omaha Life Insurance Co. ..... 0.1 -- -- -- -- --
-------------------------------------------------------------------
100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
======= ======= ======= ======= ======= =======
</TABLE>
The policies described below are followed consistently by the Fund in the
preparation of the financial statements for its Portfolios in conformity with
generally accepted accounting principles.
SECURITY VALUATION. The Money Market Portfolio values all securities utilizing
the amortized cost method permitted in accordance with Rule 2a-7 under the
Investment Company Act of 1940, as amended, and pursuant to which the Portfolio
must adhere to certain conditions. Under this method, which does not take into
account unrealized gains or losses on securities, an instrument is initially
valued at its cost and thereafter assumes a constant accretion/amortization to
maturity of any discount/premium.
Securities in each of the remaining Portfolios are valued in the following
manner:
Portfolio securities which are traded on U.S. or foreign stock exchanges are
valued at the most recent sale price reported on the exchange on which the
security is traded most extensively. If no sale occurred, the security is then
valued at the calculated mean between the most recent bid and asked quotations.
If there are no such bid and asked quotations, the most recent bid quotation is
used. Securities quoted on the National Association of Securities Dealers
Automatic Quotation ("NASDAQ") System, for which there have been sales, are
valued at the most recent sale price reported on such system. If there are no
such sales, the value is the high or "inside" bid quotation. Securities which
are not quoted on the NASDAQ System but are traded in another over-the-counter
market are valued at the most recent sale price on such market. If no sale
occurred, the security is then valued at the calculated mean between the most
recent bid and asked quotations. If there are no such bid and asked quotations,
the most recent bid quotation shall be used.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
Portfolio debt securities with remaining maturities greater than sixty days are
valued by pricing agents approved by the officers of the Fund, which quotations
reflect broker/dealer-supplied valuations and electronic data processing
techniques. If the pricing agents are unable to provide such quotations, the
most recent bid quotation supplied by a bona fide market maker shall be used.
Short-term investments having a maturity of sixty days or less are valued at
amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Trustees.
OPTIONS. The International Portfolio may purchase and write (sell)
exchange-listed and over-the-counter call and put options on securities and
other financial instruments. Exchange traded options are valued at the last
sale price or, in the absence of a sale, the mean between the closing bid and
asked quotations or at the most recent asked quotation (if written) or the most
recent bid quotation (if purchased) if no bid and asked quotations are
available. Over-the-counter options are valued at the most recent asked
quotation (if written) or the most recent bid quotation (if purchased).
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Portfolios are
maintained in U.S. dollars. Foreign currency transactions are translated into
U.S. dollars on the following basis:
(i) market value of investment securities, other assets and liabilities
at the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange prevailing on
the respective dates of such transactions.
The Portfolios do not isolate that portion of gains and losses on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included
with the net realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the
non-money market Portfolios may enter into forward foreign currency exchange
contracts ("contracts"). During the period, to hedge a portion of the
International Portfolio's Japanese Yen currency exposure, the International
Portfolio entered into Japanese Yen forward exchange contracts. Contracts are
recorded at market value. Certain risks may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms of
their contracts. Realized and unrealized gains and losses arising from such
transactions are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
REPURCHASE AGREEMENTS. The Fund on behalf of each Portfolio may enter into
repurchase agreements with U.S. and foreign banks and broker/dealers whereby
the Fund, through its custodian, receives delivery of the underlying
securities, the amount of which at the time of purchase and each subsequent
business day is required to be maintained at such a level that the market
value, depending on the maturity of the repurchase agreement and the underlying
collateral, is equal to at least 100.5% of the resale price.
FEDERAL INCOME TAXES. Each Portfolio is treated as a single corporate taxpayer
as provided for in the Internal Revenue Code of 1986, as amended. It is each
Portfolio's policy to comply with the requirements of the Internal Revenue Code
which are applicable to regulated investment companies and to distribute all of
its investment company taxable income to the separate accounts of the
Participating Insurance Companies which hold its shares. Accordingly, the
Portfolios paid no federal income taxes and no provision for federal income
taxes was required.
DISTRIBUTION OF INCOME AND GAINS. All of the net investment income of the Money
Market Portfolio is declared as a dividend to shareholders of record as of the
close of business each day and is paid to shareholders monthly. Dividends from
the Bond Portfolio, Balanced Portfolio, Growth and Income Portfolio, and the
Capital Growth Portfolio are declared and paid quarterly in April, July,
October and January. All of the net investment income of the International
Portfolio normally will be declared and distributed as a dividend annually.
During any particular year, net realized gains from investment
<PAGE>
SCUDDER VARIABLE LIFE INVESTMENT FUND
- - --------------------------------------------------------------------------------
transactions for each Portfolio, in excess of available capital loss
carryforwards, would be taxable to the Portfolio if not distributed and,
therefore, will be distributed to the Participating Insurance Companies.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations which may differ from generally accepted accounting principles. The
differences primarily relate to investments in forward contracts, passive
foreign investment companies, post October loss deferral, non-taxable
distributions, and certain securities sold at a loss. As a result, net
investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
during such period. Accordingly, the Portfolios may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of each Portfolio. The Portfolios use the specific
identification method for determining realized gain or loss on investments for
both financial and federal income tax reporting purposes.
EXPENSES. Each Portfolio is charged for those expenses which are directly
attributable to it, such as management fees and custodian fees, while other
expenses (reports to shareholders, legal and audit fees) are allocated based on
relative net asset value among the Portfolios.
OTHER. Investment security transactions are accounted for on a trade date
basis. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. All
original issue discounts are accreted for both tax and financial reporting
purposes.
B. RELATED PARTIES
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Under the Fund's Investment Advisory Agreement (the "Agreement") with Scudder,
Stevens and Clark, Inc. (the "Adviser"), the Fund agrees to pay the Adviser a
fee, based on average daily net assets, equal to an annual rate of 0.37% for
the Money Market Portfolio, 0.475% for the Bond Portfolio, 0.475% for the
Balanced Portfolio, 0.475% for the Growth and Income Portfolio, 0.475% for the
Capital Growth Portfolio, and 0.875% for the International Portfolio.
The Trustees authorized the Fund to pay the Adviser and Scudder Investor
Services, Inc. ("Investor Services"), a wholly-owned subsidiary of the Adviser,
for certain administrative expenses of the Fund in accordance with the
Agreement. Effective October 1, 1994, the Trustees authorized the elimination
of these administrative expenses.
The Trustees authorized the Fund on behalf of each Portfolio to pay Investor
Services for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. Effective October 1,
1994, under a new agreement, the Trustees authorized the Fund to pay Scudder
Fund Accounting Corp., a wholly-owned subsidiary of the Adviser, for such
services.
Related fees for such services are detailed in each Portfolio's statement of
operations.
For a period of five years from the date of execution of a Participation
Agreement with the Fund, and from year to year thereafter as agreed by the Fund
and the Participating Insurance Companies, each of the Participating Insurance
Companies has agreed to reimburse the Fund to the extent that the annual
operating expenses of any Portfolio of the Fund, other than the International
Portfolio, exceed three-quarters of one percent (0.75 of 1%) of that
Portfolio's average annual net assets. The Participating Insurance Companies
have agreed to reimburse the Fund to the extent that such expenses of the
International Portfolio exceed one and one-half percent (1.50 of 1%) of the
Portfolio's average annual net assets. The Adviser may advance some or all of
such reimbursement to the Fund prior to receiving payment therefore from a
Participating Insurance Company, but it is under no obligation to do so. If the
Adviser does advance such reimbursement to the Fund and does not receive
payment therefore, it will be entitled to be repaid such amounts by the Fund.
The amount due to the Adviser represents unpaid management fee, administrative
fees and accounting fees. In addition to the reimbursement by Participating
Insurance Companies noted above, until April 30, 1996, the Adviser has agreed
to waive part or all of its fees for the Growth and Income Portfolio to the
extent that the Portfolio's expenses will be maintained at 0.75%.
The Fund pays each Trustee not affiliated with the Adviser and not a Trustee of
other Scudder affiliated funds $7,500 annually plus specified amounts for
attended board and committee meetings. The Fund pays each Trustee not
affiliated with the Adviser and who is a Trustee of other Scudder affiliated
funds $5,000 annually plus specified amounts for attended board and committee
meetings. Allocated Trustees' fees for each Portfolio for the year ended
December 31, 1994 are detailed in each Portfolio's statement of operations.
<PAGE>
SCUDDER VARIABLE LIFE INVESTMENT FUND
REPORT OF INDEPENDENT ACCOUNTANTS
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TO THE TRUSTEES AND SHAREHOLDERS OF SCUDDER VARIABLE LIFE INVESTMENT FUND:
We have audited the accompanying statements of assets and liabilities of
Scudder Variable Life Investment Fund (comprised of the six Portfolios
identified in Note A), including the investment portfolios, as of December 31,
1994, and the related statements of operations, the statements of changes in
net assets, and the financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Variable Life Investment Fund (comprised of the six Portfolios
identified in Note A) as of December 31, 1994, the results of their operations,
the changes in their net assets, and their financial highlights for each of the
periods indicated therein in conformity with generally accepted accounting
principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
February 3, 1995
<PAGE>
SCUDDER VARIABLE LIFE INVESTMENT FUND
TAX INFORMATION
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Pursuant to section 852 of the Internal Revenue Code, the Balanced Portfolio,
Capital Growth Portfolio, and International Portfolio designate $292,083,
$5,511,650, and $1,548,747, respectively, as capital gain dividends for the
year ended December 31, 1994.
<PAGE>
Celebrating 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven
Clark, Scudder, Stevens & Clark was the first independent investment
counsel firm in the United States. Since its birth, Scudder's pioneering
spirit and commitment to professional long-term investment management have
helped shape the investment industry. In 1928, we introduced the nation's
first no-load mutual fund. Today we offer 36 pure no load(tm) funds,
including the first international mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication
to research and fundamental investment disciplines have helped Scudder
become one of the largest and most respected investment managers in the
world. Though times have changed since our beginnings, we remain committed
to our long-standing principles: managing money with integrity and
distinction; keeping the interests of our clients first; providing access
to investments and markets that may not be easily available to individuals;
and making investing as simple and convenient as possible through friendly,
comprehensive service.
An investment in the Money Market Portfolio is neither insured nor
guaranteed by the United States Government and there can be no assurance
that the Portfolio will be able to maintain a stable net asset value of
$1.00 per share.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
