SCUDDER
Scudder Variable Life
Investment Fund
Semiannual Report
June 30, 1999
An open-end management investment company that offers shares of beneficial
interest in nine types of diversified portfolios.
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SCUDDER VARIABLE LIVE INVESTMENT FUND
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Contents
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 Performance Update ....................................... 9
Growth and Income Portfolio Summary ........................................ 10
Capital Growth Portfolio Management Discussion ............................. 11
Capital Growth Performance Update .......................................... 12
Capital Growth Portfolio Summary ........................................... 13
Large Company Growth Portfolio Management Discussion ....................... 14
Large Company Growth Portfolio Summary ..................................... 15
Small Company Growth Portfolio Management Discussion ....................... 16
Small Company Growth Portfolio Summary ..................................... 17
Global Discovery Portfolio Management Discussion ........................... 18
Global Discovery Performance Update ........................................ 19
Global Discovery Portfolio Summary ......................................... 20
International Portfolio Management Discussion .............................. 21
International Performance Update .......................................... 22
International Portfolio Summary ............................................ 23
Investment Portfolios, Financial Statements, and Financial Highlights
Money Market Portfolio ............................................ 24
Bond Portfolio .................................................... 29
Balanced Portfolio ................................................ 36
Growth and Income Portfolio ....................................... 45
Capital Growth Portfolio .......................................... 54
Large Company Growth Portfolio .................................... 63
Small Company Growth Portfolio .................................... 71
Global Discovery Portfolio ........................................ 80
International Portfolio ........................................... 89
Notes to Financial Statements .............................................. 98
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SCUDDER VARIABLE LIFE INVESTMENT FUND
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
We are pleased to present the results of the Scudder Variable Life
Investment Fund for the six-month period ended June 30, 1999. The first half of
the year was characterized by continued economic strength in the United States
and the possible early stages of a revival overseas. Stocks responded positively
to this environment with participation broadening out to include sectors that
had underperformed for several quarters; namely, value stocks and smaller
companies. Overseas regions that had been lagging for some time, such as Japan
and the emerging markets, also came to life. Bonds posted a much weaker
performance, however, on fears of higher interest rates. We are pleased to
report that the Variable Life Investment Fund was well-positioned to prosper in
this environment. During the period, five of the seven portfolios that were in
existence for the full six months outperformed the median fund in their
category, according to Lipper Analytical Services. We believe that this
favorable showing is consistent with the Portfolios' strong long-term track
records.
In light of the recent gains in the global stock markets, now may be a
good time to evaluate your current investment allocations to ensure that they
are in line with your long-term objectives. In our view, diversification across
many asset classes can provide opportunities for long-term growth and at the
same time reduce overall portfolio risk. We feel that the Fund's nine distinct
portfolios offer you the opportunity to effectively allocate your assets to
match your particular situation even when the markets are exceptionally
volatile.
Most recently, we have added two new investment choices, the Large
Company Growth Portfolio and the Small Company Growth Portfolio. Both provide
long-term investors with the chance to participate in two dynamic sectors of the
market, and to increase the diversification of their portfolios.
On the following pages, you will find summaries of each Portfolio's
performance and investment strategy over the six-month period. Thank you for
your continued investment in Scudder Variable Life Investment Fund.
Sincerely,
/s/William M. Thomas
William M. Thomas
President,
Scudder Variable Life Investment Fund
2
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MONEY MARKET PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
The Money Market Portfolio provided shareholders with a stable $1.00
share price and a competitive yield during its most recent semiannual period
ended June 30, 1999. The Portfolio's 30-day net annualized yield was 4.59% as of
June 30. For the six months ended June 30, 1999, the Portfolio posted a 2.31%
total return. This performance surpassed the 1.81% average return for funds in
the Variable Life Money Market Category for the same period, according to Lipper
Analytical Services, Inc. [Among its peers, the Portfolio ranked in the top 5%
of 710 funds in its Lipper category.]
The U.S. economy has continued to grow beyond all expectations, with a
strong start in 1999 that seemed to assure at least 4% GDP growth this year.
Reflecting a healthy economy and investor expectations for continued growth, the
Dow Jones average reached 10,970 by the close of the period. At the same time,
the Federal Reserve nudged interest rates higher (after the bond market had
already done so) at the end of June in an effort to head off any inflationary
pressures. Over the six months ended June 30, we took a "neutral" stance, and
refrained from extending the Fund's average maturity because money market yields
at the longer end of our acceptable maturity range did not offer attractive
value. The Portfolio's average maturity stood at 26 days as of June 30, 1999,
versus 28 days as of December 31, 1998.
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CALLOUT NEXT TO PRECEDING PARAGRAPH:
We maintained an
overweight position in
commercial paper during
the period because it
offered some of the highest
money market yields
available.
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Over the period, the Fund maintained investments in a variety of money
market instruments, including commercial paper, variable- and floating-rate
securities, U.S. government agency obligations, certificates of deposit, and
repurchase agreements. We maintained an overweight position in commercial paper
during the period because we believe it offered the most attractive value and
some of the highest money market yields available. As of May 31, commercial
paper represented 65% of the Fund's assets. The Fund's second largest position,
variable- and floating-rate securities (35%), was attractive because of these
securities' longer maturities, their high correlation with short-term interest
rates, and their indexing features.
In light of increases in short-term interest rates, a long-predicted
slowdown in U.S. economic activity seems more likely to occur in 1999. At the
same time, we expect that inflation will remain restrained, which should place
an upper limit on short-term rate increases. Though we plan to extend the Fund's
average maturity when the market offers sufficient value, we will maintain a
cautious approach during the coming months. The Portfolio's management team will
continue to collect and analyze economic data and carefully monitor the
investment climate as we position the Money Market Portfolio for current income,
and stability and liquidity of capital.
Sincerely,
Your Portfolio Management Team
/s/Frank J. Rachwalski, Jr. /s/Geoffrey A. Gibbs
Frank J. Rachwalski, Jr. Geoffrey A. Gibbs
Lead Portfolio Manager
3
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BOND PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
The recent upsurge in the global economy has proven beneficial for
businesses, consumers, and stock market investors. Bonds, unfortunately, have
not fared quite as well. At the beginning of the year, low yield levels
reflected the ongoing uncertainty over the long-term impact of the 1998
financial crisis. As it became apparent that the domestic economy was still
robust, yields began to creep up (as prices fell). By the second quarter,
however, the combination of a series of strong economic reports in the U.S. and
growing evidence of a revival overseas sparked a broad-based selloff across all
sectors of the bond market. The yield on the 30-year U.S. Treasury bond closed
at 5.96% on June 30, well above its level of 5.095% on December 31, 1998.
Corporate bonds suffered the worst damage, as record levels of issuance caused
excess supply to flood the market at a time when demand was on the wane. Since
the markets had already priced in the possibility of a rate hike, the Fed's
announcement of a quarter-point increase at the end of the period proved
anticlimactic. However, its adoption of a "neutral" bias toward further changes
in interest rates was a positive surprise that allowed the second quarter to
close on an upbeat note. In this environment, the Portfolio posted a total
return of -1.25%, slightly ahead of the -1.38% return of its unmanaged
benchmark, the Lehman Brothers Aggregate Bond Index.
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CALLOUT NEXT TO PRECEDING PARAGRAPH:
Concerns over renewed
strength in the global
economy dampened bond
performance in the first
half of the year.
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The Portfolio held an overweight position in corporate bonds for most
of the period. Believing that corporates offered significant value in relation
to government bonds early in the year, we built a substantial position in bonds
issued by large, stable companies with reliable cash flows. In order to minimize
the impact of economic fluctuations, we focused on consumer nondurables,
telecommunications, and media issues. After maintaining a large position in
corporates during the first quarter, we began to trim the position in April and
May in anticipation of weakness ahead of the Fed's rate hike. We redeployed
about 5-6% of our position into Treasuries during this phase, but stopped
selling in mid-June once the yields on corporates rose to levels that we
believed to be attractive. Portfolio performance was helped by our decision to
maintain a duration level below that of the benchmark, but our moderately
aggressive posture with respect to credit quality proved to be a slight
negative.
In the wake of their recent slump, corporate bonds appear to be a good
source of incremental yield versus Treasuries. Not only have the risks of
inflation been fully priced into the market, but the continued strength in the
U.S. economy should have positive implications for corporate balance sheets.
Looking ahead, we will continue to emphasize value and quality, and will strive
to provide the optimal balance of yield and risk exposure.
Sincerely,
Your Portfolio Management Team
/s/Stephen A. Wohler /s/Kelly D. Babson
Stephen A. Wohler Kelly D. Babson
Lead Portfolio Manager
/s/Robert S. Cessine
Robert S. Cessine
4
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BOND PORTFOLIO
PORTFOLIO SUMMARY as of June 30, 1999
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GROWTH OF A $10,000 INVESTMENT
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Bond Portfolio
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Total Return
Period ----------------
Ended Growth of Average
6/30/99 $10,000 Cumulative Annual
--------------------------------------
1 Year $ 10,167 1.67% 1.67%
5 Year $ 14,078 40.78% 7.08%
10 Year $ 21,105 111.05% 7.76%
LBAB Index
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Total Return
Period ----------------
Ended Growth of Average
6/30/99 $10,000 Cumulative Annual
--------------------------------------
1 Year $ 10,313 3.13% 3.13%
5 Year $ 14,572 45.72% 7.82%
10 Year $ 21,884 118.84% 8.14%
A chart in the form of a line graph appears here,
illustrating the following data points:
Yearly periods ended June 30
Year LBAB Index Bond Portfolio
---- ---------- --------------
'89 10000 10000
'90 10783 10638
'91 11936 11704
'92 13614 13442
'93 15218 15345
'94 15018 14991
'95 16903 16703
'96 17750 17490
'97 19198 18950
'98 21220 20758
'99 21884 21105
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 Portfolio 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 during the 10 year period were higher
due to maintenance of the Portfolio's expenses.
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ASSET QUALITY
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U.S. Government & Agencies 22%
AAA* 17%
AA 11%
A 16%
BBB 15%
BB 15%
B 4%
------
100%
======
Average Quality: A
*Category includes cash equivalents
A chart in the form of a pie chart appears here,
illustrating the exact data points in the above table.
We maintained a focus on
the corporate sector,
which offers high relative
yields and attractive
valuations.
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EFFECTIVE MATURITY
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Less than 1 year 3%
1 - 5 years 35%
5 - 8 years 20%
8 - 15 years 26%
15 years or greater 16%
-----
100%
=====
Weighted average effective maturity: 8.8 years
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DIVERSIFICATION
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Corporate Bonds 59%
U.S. Treasuries 16%
U.S. Government Agency Pass-Thrus 7%
Asset-Backed Securities 6%
National Mortgage Assoc. 4%
Collateralized Mortgage Obligations 3%
Short Term Investments 3%
Foreign Bonds - U.S.$ Denominated 2%
-----
100%
=====
5
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BALANCED PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Continued robust growth in the U.S. economy proved beneficial to stocks
during the first half of the year, but the bond market was spooked by fears of
rising inflation. The fixed income portion of the Portfolio posted negative
performance in the period, with the most significant weakness occurring in May
and June ahead of the Fed's rate hike. Equities posted better overall
performance since the concerns over higher rates played out in the form of a
sector rotation rather than a broad-based sell-off. For the six months ended
June 30, the Balanced Portfolio returned 5.73%, slightly behind the 6.75% return
of its unmanaged benchmark, which is a combination of the S&P 500 (60%) and the
Lehman Brothers Aggregate Bond Index (40%).
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CALLOUT NEXT TO PRECEDING PARAGRAPH:
Strong stock selection,
particularly in the
technology sector,
outweighed the
poor performance of the bond
market.
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Performance in the equity portion of the Portfolio, which stood at
63.5% of total assets at the end of the period, was lifted by the strength of
our holdings in the technology sector. Among the most noteworthy contributors
were Linear Technology, Applied Materials, and Cisco Systems, as well as
producers of durables, such as Lucent and Nokia. Our holdings in the media
sector rose strongly throughout the period, offsetting weakness in consumer
staples and pharmaceuticals.
In the Portfolio's fixed income position, a focus on corporate bonds
weighed on performance when the sector was hit hard in the spring. Early in the
period we benefited from an overweight position in corporates, which we had
established at the beginning of the year to take advantage of their large yield
advantage over Treasuries. Once this spread shrank to unattractively narrow
levels early in the second quarter, we positioned the Fund for the eventual
sell-off by paring back on the position in favor of Treasuries. Our low duration
exposure relative to the benchmark also proved helpful in riding out the poor
market performance during this phase. We chose to stop trimming our position in
mid-June on the belief that corporates had fallen to sufficiently attractive
levels, and are once again prospecting for value in the sector.
Despite ongoing fears of inflation and the relatively high valuations
of domestic large-cap stocks, we remain optimistic on the outlook for the rest
of the year. We believe that the Fed's shift to a neutral bias will take
pressure off bonds and growth stocks alike. Consequently, we intend to remain
focused on stocks that we believe are likely to produce steady earnings growth
over the long term, and continue to use a value-oriented approach to unearth
opportunities in the bond market.
Sincerely,
Your Portfolio Management Team
/s/Valerie F. Malter /s/George Fraise
Valerie F. Malter George Fraise
Lead Portfolio Manager
/s/Kelly D. Babson /s/Stephen A. Wohler
Kelly D. Babson Stephen A. Wohler
/s/Robert S. Cessine
Robert S. Cessine
6
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BALANCED PORTFOLIO
PORTFOLIO SUMMARY as of June 30, 1999
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GROWTH OF A $10,000 INVESTMENT
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Balanced Portfolio
--------------------------------------
Total Return
Period ----------------
Ended Growth of Average
6/30/99 $10,000 Cumulative Annual
--------------------------------------
1 Year $ 11,486 14.86% 14.86%
5 Year $ 23,696 136.96% 18.83%
10 Year $ 33,648 236.48% 12.90%
S&P 500 Index (60%)
and LBAB Index (40%)
--------------------------------------
Total Return
Period ----------------
Ended Growth of Average
6/30/99 $10,000 Cumulative Annual
--------------------------------------
1 Year $ 11,521 15.21% 15.21%
5 Year $ 24,598 145.98% 19.71%
10 Year $ 39,154 291.54% 14.62%
A chart in the form of a line graph appears here,
illustrating the following data points:
Yearly periods ended June 30
Year S&P 500 Index LBAB Index Balanced Portfolio
---- ------------- ---------- ------------------
'89 10000 10000 10000
'90 11650 10783 10715
'91 12509 11936 10957
'92 14190 13614 12820
'93 16125 15218 14242
'94 16352 15018 14200
'95 20613 16903 16911
'96 25971 17750 19715
'97 34987 19198 23858
'98 45542 21220 29296
'99 55909 21884 33648
The Standard & Poor's 500 Index is a capitalization-weighted index of 500
stocks. The index is designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks representing
all major industries. 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 Portfolio 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 during the 10 Year period were higher
due to maintenance of the Portfolio's expenses.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 140.64% and 15.30%, respectively.
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EQUITY HOLDINGS
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- -------------------------------------
Sector breakdown of the
Portfolio's equity holdings
- -------------------------------------
Technology 23%
Health 16%
Consumer Discretionary 15%
Consumer Staples 11%
Manufacturing 9%
Media 7%
Financials 6%
Durables 5%
Communications 5%
Service Industries 3%
------
100%
======
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Five Largest Equity Holdings
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1.Microsoft Corp. Developer of computer software
2.Cisco Systems, Inc. Manufacturer of computer
network products
3.General Electric Co. Producer of electrical
equipment
4.Lucent Technologies, Inc. Developer of
communication systems software and products
5.Home Depot, Inc. Building materials and home
improvement stores
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FIXED INCOME HOLDINGS
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By Asset Type
--------------------------------------------
Corporate Bonds 47%
U.S. Treasuries 22%
U.S. Gov't Agency Pass-Thrus 14%
Asset-Backed Securities 8%
Gov't National Mortgage Assoc. 4%
Collateralized Mortgage 3%
Obligations
Foreign Bonds - U.S.$ Denominated 2%
-------
100%
=======
By Quality
------------------------------------------------
U.S. Government & Agencies 27%
AAA* 27%
AA 9%
A 21%
BBB 13%
BB 3%
------
100%
======
*Category includes cash equivalents
7
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GROWTH AND INCOME PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Toward the end of the six-month period investor sentiment shifted away
from a handful of large-cap growth stocks into value stocks. The change had a
positive effect on many of the Portfolio's holdings of value stocks and
contributed to its outperformance during the final three months of the six-month
reporting period. As of June 30, 1999, Class A shares returned 11.78%, nearly in
keeping with the 12.39% return of the unmanaged S&P 500 Index.
- --------------------------------------------------------------------------------
CALLOUT NEXT TO PRECEDING PARAGRAPH:
Value stocks returned to
favor, contributing the
Portfolio's outperformance
in the second quarter.
- --------------------------------------------------------------------------------
A powerful rally among cyclical stocks took the lead from large growth
and technology stocks, which had dominated market performance from 1998 through
the first three months of this year. High-flying Internet stocks were
particularly hard hit as investors sold the most expensive, momentum-oriented
stocks in favor of companies with improving fundamentals and compelling
valuations that were expected to benefit from the recovering global economy.
The biggest contributors to performance were our "industrial cyclical
holdings," an area we were clearly early in last year. Top performers included
Freeport McMoRan, Dow Chemical, Oregon Steel, Georgia Pacific, and Phelps Dodge.
While we used the sector's early strength to eliminate Boise Cascade and ICI,
our decision to stick with our overall valuation discipline paid off. Two other
stocks were standouts: Meritor, an auto parts manufacturer that was spun off
from Rockwell in late '97, and Lyondell, a chemical company that is highly
leveraged to the price of ethylene.
We have talked about the information superhighway "toll takers," i.e.,
the telephone companies that will benefit as more business is transacted through
the Internet. Ameritech, BellAtlantic, GTE, SBC Communications, BellSouth, and
Frontier all contributed to performance as industry consolidation, and a
slightly clearer regulatory picture helped investors focus on their cheap
multiples versus their growth rates.
A significant detractor to performance was the absence of traditional
technology holdings. We have remained underweighted in this area due to the high
valuations of many technology issues. We will continue to monitor this area for
stocks that are out of favor or with valuations that do not fully reflect their
fundamental prospects.
In this environment, our sense is that the Portfolio will perform more
in line with the overall market for the balance of the year, with returns driven
more by the fundamentals of individual stocks. In managing the Portfolio we will
continue to focus, as we have in the past, on undervalued stocks where positive
fundamentals relative to low expectations drive stock prices higher.
Sincerely,
Your Portfolio Management Team
/s/Robert T. Hoffman /s/Lori J. Ensinger
Robert T. Hoffman Lori J. Ensinger
Lead Portfolio Manager
/s/Benjamin W. Thorndike /s/Kathleen T. Millard
Benjamin W. Thorndike Kathleen T. Millard
8
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GROWTH AND INCOME PORTFOLIO
PERFORMANCE UPDATE as of June 30, 1999
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
- --------
CLASS A*
- --------
Growth and Income Portfolio
--------------------------------------
Total Return
Period ----------------
Ended Growth of Average
6/30/99 $10,000 Cumulative Annual
--------------------------------------
1 Year $ 10,887 8.87% 8.87%
5 Year $ 26,131 161.31% 21.18%
Life of
Fund* $ 26,393 163.93% 20.67%
S&P 500 Index
--------------------------------------
Total Return
Period ----------------
Ended Growth of Average
6/30/99 $10,000 Cumulative Annual
--------------------------------------
1 Year $ 12,276 22.76% 22.76%
5 Year $ 34,191 241.91% 27.86%
Life of
Fund* $ 33,900 239.00% 26.64%
* The Fund commenced operations on May 2, 1994. On May 1, 1997, existing
shares were designated as Class A shares.
A chart in the form of a line graph appears here,
illustrating the following data points:
S&P 500 Index+ Growth and Income Portfolio
-------------- ---------------------------
5/94* 10000 10000
6/94 9915 10100
6/95 12498 12113
6/96 15747 15011
6/97 21214 20016
6/98 27614 24242
6/99 33900 26393
- -------
CLASS B
- -------
Growth and Income Portfolio
--------------------------------------
Total Return
Period ----------------
Ended Growth of Average
6/30/99 $10,000 Cumulative Annual
--------------------------------------
1 Year $ 10,860 8.60% 8.60%
Life of
Fund** $ 14,662 46.62% 19.34%
S&P 500 Index
--------------------------------------
Total Return
Period ----------------
Ended Growth of Average
6/30/99 $10,000 Cumulative Annual
--------------------------------------
1 Year $ 12,276 22.76% 22.76%
Life of
Fund** $ 17,714 77.14% 30.19%
** The Fund commenced selling Class B shares on May 1, 1997.
A chart in the form of a line graph appears here,
illustrating the following data points:
S&P 500 Index Growth and Income Portfolio
------------- ---------------------------
5/1/97** 10000 10000
6/97 11085 11165
9/97 11916 12180
12/97 12258 12289
3/98 13968 13852
6/98 14430 13501
9/98 12993 11794
12/98 15762 13143
3/99 16547 13122
6/99 17714 14663
+The Standard & Poor's 500 Index is a capitalization-weighted index of 500
stocks. The index is designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks representing
all major industries. Index returns assume reinvestment of dividends and, unlike
Portfolio 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 for the life of the Fund for Class A
were higher due to maintenance of the Portfolio's expenses. See Financial
Highlights for the Growth and Income Class A Portfolio.
9
<PAGE>
GROWTH AND INCOME PORTFOLIO
PORTFOLIO SUMMARY as of June 30, 1999
DIVERSIFICATION
- ---------------
Equity Securities 96%
Cash Equivalents 4%
----
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
------------------------------------
Financial 19%
Communications 18%
Manufacturing 17%
Energy 10%
Durables 8%
Health 7%
Consumer Staples 5%
Transportation 4%
Construction 4%
Other 8%
----
100%
====
The strongest contributors to
performance included the
energy, communications, and
construction sectors, while a
lack of growth-oriented
technology stocks and finance
holdings detracted from
performance.
- --------------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS (28% of Portfolio)
- --------------------------------------------------------------------------------
1. Corning Inc. Specialty glass manufacturer
2. Bell Atlantic Corp. Telecommunication services
3. Xerox Corp. Manufacturer of copiers and duplicators
4. American Home Products Corp. Diversified pharmaceutical company
5. Bank of America Corp. Bank
6. Avon Products, Inc. Manufacturer and retailer of cosmetics, jewelry
and gift products
7. Sprint Corp. Telecommunication services
8. GTE Corp. Telecommunication services
9. Ford Motor Co. Automobile manufacturer
10. Bellsouth Corp. Telecommunication services
10
<PAGE>
CAPITAL GROWTH PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
The popularity of growth stocks has ebbed and flowed during the last
six months, but the Portfolio's emphasis on finding "growth at a reasonable
price" has enabled it to ride out the market's fluctuations over the period. For
the six months ended June 30, 1999, the Portfolio's Class A shares returned
11.05% compared with the 12.39% return of its unmanaged benchmark, the S&P 500.
- --------------------------------------------------------------------------------
CALLOUT NEXT TO PRECEDING PARAGRAPH:
An investment strategy
that emphasizes bottom-up
research, diversification,
and valuatin enabled the
Portfolio to perform well in
a volatile period.
- --------------------------------------------------------------------------------
Growth stocks performed exceptionally well in the first quarter, as low
interest rates and ongoing concerns about the health of the U.S. economy
prompted investors to focus on the stocks perceived to have the most reliable
earnings growth. This longstanding trend reversed with lightening speed in
April, when increasing evidence of a global recovery sparked a rotation from
growth stocks to smaller companies and value names. During the final two months
of the period, the growth and value sectors took turns leading the market,
creating opportunities for stockpickers to capitalize on the volatility.
Overall, our disciplined approach and emphasis on diversification
proved to be an effective strategy. While we select holdings using intensive
bottom-up analysis, one theme that has emerged across the portfolio is a focus
on companies at the forefront of the convergence of communications and
technology. As corporations put more data on networks and transfer more business
to the Internet, the voice, data, networking, and storage functions have begun
to come together at a rapid pace. Companies that are positioned to benefit from
this trend, such as Corning, Applied Materials, IBM, Cisco Systems, and Worldcom
were significant contributors to performance over the period. In addition, the
Portfolio benefited from its holdings in energy stocks and cyclically-oriented
growth names, which helped balance the weakness in traditional growth names
early in the second quarter. Royal Dutch Shell, Parker Hannifin, and Tyco
International were standouts in this category. Performance was also boosted by
our holdings in the media sector, which also held up well even when growth
stocks were out of favor. On the down side, we were hurt by our holdings in the
pharmaceutical sector, which unraveled in the latter part of the period.
Looking ahead, it is difficult to say whether the renewed interest in
value stocks represents the beginning of a shift away from growth, or if it is
merely the harbinger of broader participation in the stock market's rally. While
we would continue to recommend caution with the market at its current levels, we
will not stray from our strategy of investing in reasonably valued companies
with consistent earnings growth. Believing that such companies will outperform
the market over time, we will continue to take advantage of volatility to add
high-quality growth stocks to the Portfolio.
Sincerely,
Your Portfolio Management Team
/s/William F. Gadsden /s/Bruce F. Beaty
William F. Gadsden Bruce F. Beaty
Co-Lead Portfolio Manager Co-Lead Portfolio Manager
11
<PAGE>
CAPITAL GROWTH PORTFOLIO
PERFORMANCE UPDATE as of June 30, 1999
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
- --------
CLASS A*
- --------
Capital Growth Portfolio
--------------------------------------
Total Return
Period ----------------
Ended Growth of Average
6/30/99 $10,000 Cumulative Annual
--------------------------------------
1 Year $ 11,808 18.08% 18.08%
5 Year $ 29,653 196.53% 24.28%
10 Year $ 45,660 356.60% 16.40%
S&P 500 Index
--------------------------------------
Total Return
Period ----------------
Ended Growth of Average
6/30/99 $10,000 Cumulative Annual
--------------------------------------
1 Year $ 12,276 22.76% 22.76%
5 Year $ 34,191 241.91% 27.86%
10 Year $ 55,909 459.09% 18.77%
* On May 12, 1997, existing shares were designated as Class A shares.
A chart in the form of a line graph appears here,
illustrating the following data points:
Yearly periods ended June 30
Year S&P 500 Index + Capital Growth Portfolio
---- --------------- ------------------------
'89 10000 10000
'90 11650 10803
'91 12509 11101
'92 14190 13151
'93 16125 15535
'94 16352 15398
'95 20613 18525
'96 25971 22320
'97 34987 30482
'98 45542 38670
'99 55909 45660
- -------
CLASS B
- -------
Capital Growth Portfolio
--------------------------------------
Total Return
Period ----------------
Ended Growth of Average
6/30/99 $10,000 Cumulative Annual
--------------------------------------
1 Year $ 11,781 17.81% 17.81%
Life of
Fund* $ 16,091 60.91% 24.97%
S&P 500 Index
--------------------------------------
Total Return
Period ----------------
Ended Growth of Average
6/30/99 $10,000 Cumulative Annual
--------------------------------------
1 Year $ 12,276 22.76% 22.76%
Life of
Fund** $ 16,697 66.97% 27.92%
** The Fund commenced selling Class B shares on May 12, 1997. Index
comparisons began on May 31, 1997.
A chart in the form of a line graph appears here,
illustrating the following data points:
S&P 500 Index + Capital Growth Portfolio
--------------- ------------------------
5/97** 10000 10000
6/97 10449 10581
9/97 11232 11739
12/97 11554 11569
3/98 13166 13079
6/98 13601 13391
9/98 12247 11310
12/98 14857 14222
3/99 15597 14746
6/99 16697 15776
+The Standard & Poor's 500 Index is a capitalization-weighted index of 500
stocks. The index is designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks representing
all major industries. Index returns assume reinvestment of dividends and, unlike
Portfolio 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 for the 10 year period for Class A
were higher due to maintenance of the Portfolio's expenses.
12
<PAGE>
CAPITAL GROWTH PORTFOLIO
PORTFOLIO SUMMARY as of June 30, 1999
- --------------------------------------------------------------------------------
DIVERSIFICATION
- --------------------------------------------------------------------------------
Equity Securities 97%
Cash Equivalents 3%
----
100%
====
A graph in the form of a pie chart apears here, illustrating the exact data
points in the above table.
------------------------------------
Sector breakdown of the
Portfolio's equity holdings
------------------------------------
Technology 19%
Consumer Discretionary 14%
Health 13%
Financial 11%
Manufacturing 9%
Media 9%
Consumer Staples 7%
Durables 5%
Energy 5%
Other 8%
------
100%
======
The Portfolio's top holdings
reflect a focus on companies at
the forefront of the
convergence of
communications and
technology.
- --------------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS (27% of Portfolio)
- --------------------------------------------------------------------------------
1. Microsoft Corp. Developer of computer software
2. Intel Corp. Producer of semiconductor memory circuits
3. AT&T Corp -- Liberty Media Group Holding company of entertainment networks
4. Home Depot, Inc. Building materials and home improvement stores
5. MCI WorldCom, Inc. Provider of local, long distance, international, and
Internet services
6. American International Group, Inc. Major international insurance holding
company
7. Dayton Hudson Corp. Owner and operator of department and specialty
stores
8. International Business Machines Corp. Manufacturer of computers and
servicer of information processing units
9. Federal National Mortgage Association Insurer and holder of mortgage loans
10. Sun Microsystems, Inc. Producer of high-performance workstations, servers,
and networking software
13
<PAGE>
LARGE COMPANY GROWTH PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
The Large Company Growth Portfolio, one of two new offerings in the
Scudder Variable Life Investment Fund, returned 7.97% in its first month of
operation since its inception. While this figure represents an unusually high
return for such a short time period, we are encouraged by the strong initial
performance of the Portfolio.
Our approach in managing the Portfolio is to establish long-term
positions in the companies that we believe to be the best in each sector of our
growth stock universe. We utilize a bottom-up approach to identify the factors
most likely to indicate strong future performance, and avoid companies with
deteriorating fundamentals. Each investment candidate must demonstrate a strong
brand franchise, growing sales volume, rising market share, outstanding
management, and consistent earnings growth. One of the most important aspects of
this strategy is that it is designed to keep the portfolio from being
"torpedoed" by earnings disappointments. Valuation is also a consideration, but
is a lower priority than these criteria.
- --------------------------------------------------------------------------------
CALLOUT NEXT TO PRECEDING PARAGRAPH:
Management uses a
bottom-up, research driven
approach to identify
companies with favorable
fundamentals and steady
earnings growth.
- --------------------------------------------------------------------------------
Consistent with the long-term focus of our strategy, we do not try to
time the market, make large sector bets, or evaluate global economic trends. To
mitigate the uncertainty associated with these factors, we strive to keep the
Fund's sector weightings in line with those of the large-cap universe, i.e.,
within 5% of the sector weightings in the Russell 1000 Growth Index. In so
doing, we are free to focus on the area in which we believe we can add the most
value -- individual stock selection.
During the abbreviated period, the Portfolio benefited from its
holdings in the technology sector, particularly Applied Materials, Cisco
Systems, EMC, Intel, Linear Technology, Sun Microsystems, and Lucent
Technologies. Performance was also helped by a rebound in some of the Fund's
health care names, such as Merck and Warner Lambert, as well as the strength of
companies in the media sector, such as Liberty Media, Infinity Broadcasting, and
Univision.
Going forward, we will be relentless in our commitment to owning the
best large-cap growth stocks available, and will adhere to our management style
no matter what direction the stock market may take. While we recognize that
certain Portfolio holdings are selling at lofty valuations, we also believe that
those companies exhibit the strongest fundamentals in their respective
industries which will produce superior results over time.
Sincerely,
/s/Valerie F. Malter /s/George Fraise
Valerie F. Malter George Fraise
Lead Portfolio Manager
14
<PAGE>
LARGE COMPANY GROWTH PORTFOLIO
PORTFOLIO SUMMARY as of June 30, 1999
- --------------------------------------------------------------------------------
DIVERSIFICATION
- --------------------------------------------------------------------------------
------------------------------------------------
Equity Securities 75%
Cash Equivalents 25%
----
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
------------------------------------
Technology 23%
Health 18%
Consumer Discretionary 15%
Consumer Staples 11%
Manufacturing 8%
Media 7%
Financial 5%
Service Industries 5%
Durables 5%
Communications 3%
------
100%
======
The Portfolio's focus on high
quality companies with strong
earnings growth led
management to establish large
positions in the technology and
health care sectors.
- --------------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS (28% of Portfolio)
- --------------------------------------------------------------------------------
1. Microsoft Corp. Developer of computer software
2. Cisco Systems, Inc. Manufacturer of computer network products
3. General Electric Co. Producer of electrical equipment
4. Lucent Technologies Inc. Developer of communication systems software and
products
5. Intel Corp. Producer of semiconductor memory circuits
6. Home Depot, Inc. Building materials and home improvement stores
7. Pfizer, Inc. International pharmaceutical company
8. Medtronic Inc. Manufacturer of cardiac pacemakers
9. America Online Inc. Provider of online computer services
10. Merck & Co., Inc. Leading drug manufacturer
15
<PAGE>
SMALL COMPANY GROWTH PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
We'd like to welcome new shareholders of the Small Company Growth
Portfolio, which commenced operations on May 3, 1999. Though the Portfolio is a
new investment vehicle, it is similar to Scudder 21st Century Growth Fund, which
we have managed since its inception in September 1996. For the abbreviated
period that began with the Small Company Growth Portfolio's inception on May 3,
1999, and ended June 30, 1999, its Class A shares returned 11.67%.
The Small Company Growth Portfolio seeks long-term growth by investing
primarily in the securities of emerging growth companies. The Portfolio offers
significant opportunity for capital appreciation through its investments in
companies providing innovative products or services that we believe will have a
profound and positive impact on the lives of consumers and businesses in
tomorrow's economy. We look for companies that are unique, those that have a
leadership position in the marketplace, and those that appear to be moving into
a leadership position by posting significant market share gains.
- --------------------------------------------------------------------------------
CALLOUT NEXT TO PRECEDING PARAGRAPH:
The Portfolio invests in
companies providing
innovative products or
services that we believe
will have a profound and
positive impact on the lives
of consumers and
businesses in tomorrow's
economy.
- --------------------------------------------------------------------------------
We believe that small-cap growth stocks, which have underperformed
large-cap stocks over the past three years, are gradually catching up to
large-cap stocks. Over the past three years, the Russell 1000 Growth (large cap)
Index rose 119.62%, while the Russell 2000 Growth (small cap) Index posted a
28.23% gain. Year to date through June 30, 1999, the Russell 1000 Growth Index
rose 10.45%, while the Russell 2000 Growth Index increased by 12.82%.
In addition, a look at three of our initial purchases demonstrates the
Portfolio's broad diversification: One example is Trex, which manufactures a
unique mixture of plastic and recycled wood for outdoor decking. Unlike other
decking materials, the product is maintenance-free. Trex's product is selling
briskly, and has extremely strong market penetration potential. In the health
care area, the Portfolio has invested in VISX, the leader in LASIK vision
correction surgery -- a booming industry. VISX's share price has risen 50% since
the Portfolio's inception. And in communications, the Portfolio has purchased
Research in Motion, which distributes innovative wireless devices for the mobile
communications market. Research in Motion's stock price doubled during the
Portfolio's initial period.
Because small-cap stocks have underperformed for so long, and seem to
be staging a comeback, and because we are excited about the future for these
small growth companies, we are optimistic concerning the Portfolio's prospects
over the coming months. We believe the Small Company Growth Portfolio is an
appropriate vehicle for investors seeking exposure to this dynamic segment of
the U.S. economy.
Sincerely,
Your Portfolio Management Team
/s/Peter Chin /s/Roy C. McKay
Peter Chin Roy C. McKay
16
<PAGE>
SMALL COMPANY GROWTH PORTFOLIO
PORTFOLIO SUMMARY as of June 30, 1999
- --------------------------------------------------------------------------------
DIVERSIFICATION
- --------------------------------------------------------------------------------
------------------------------------------------
Equity Securities 89%
Cash Equivalents 11%
----
100%
====
------------------------------------
Sector breakdown of the
Portfolio's equity holdings
------------------------------------
Technology 31%
Service Industries 18%
Health 11%
Consumer Discretionary 10%
Manufacturing 5%
Communications 5%
Energy 4%
Financial 4%
Construction 3%
Other 9%
------
100%
======
Despite its strong emphasis on
technology, the Portfolio is
heavily diversified, with
investments in 12 investment
sectors and over 35
sub-sectors.
- --------------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS (25% of Portfolio)
- --------------------------------------------------------------------------------
1. Pinnacle Systems, Inc. Manufacturer of video post-production workstations
2 VISX Inc. Developer of laser technologies and systems for vision correction
3. Vitesse Semiconductor Corp. Manufacturer of digital integrated circuits
4. Realty Information Group Inc. Provider of building-specific information to
the U.S. commercial real estate industry
5. TSI International Software Ltd. Provider of software and related services
to businesses
6. Whittman-Hart, Inc. Information technology consulting and system
integration services
7. Mercury Interactive Corp. Producer of automated software testing tools
8. Abacus Direct Corp. Providers information products and marketing research
services
9. MedQuist, Inc. Electronic document transcription and management services
10. Trex Company, Inc. Manufacturer of non-wood decking alternative products
17
<PAGE>
GLOBAL DISCOVERY PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
The six-month period marked a significant change in investor sentiment
as the dominance of U.S. large-cap growth stocks in the first quarter gave way
to a powerful rally in small- and mid-cap stocks in the second quarter ended
June 30, 1999. In Japan, the equity markets staged a powerful rally in the first
quarter, with small-cap stocks leading the way. In contrast, returns from Europe
languished as a sinking Euro turned positive stock gains into negative total
returns for the six months. Overall, the Portfolio benefited significantly from
the excellent performance of its U.S. holdings, which were responsible for
nearly all of the Portfolio's positive return for the period.
- --------------------------------------------------------------------------------
CALLOUT NEXT TO PRECEDING PARAGRAPH:
Marking reversals in
market sentiment, U.S. and
Japanese small-cap stocks
rallied strongly.
- --------------------------------------------------------------------------------
This contributed to the Portfolio's 10.76% Class A share return, which
surpassed the 8.13% return of its benchmark, the unmanaged Salomon Brothers
World Equity Index-Extended Market Index. Among the funds in the Variable Life
Global category tracked by Lipper Analytical Services, Inc., which includes both
small- and large-cap global portfolios, Class A shares ranked 197th out of 361
funds for the six-month period ended June 30th.
In the U.S. portion of the Portfolio, our top holding -- VISX --
provided outstanding results. This U.S.-based company manufactures lasers used
in vision correction surgery and holds a patent that allows it to collect $250
per eyeball corrected. The firm's dominant market position and large potential
customer base are two reasons for the stock's strong showing. In the
specialty-retailing sector, Tiffany & Co. has been benefiting from the strong
U.S. economy and rising disposable incomes of its well-to-do clients. Other
strong U.S. performers include familiar holdings Vitesse Semiconductor
(superfast gallium arsenide chips for communications devices) and Network
Appliance (dedicated, superfast file servers for networks).
Outside the U.S., our U.K. holdings performed well, led by outsourcing
company Serco and discount retailer Matalan, which has been expanding its stores
strategically along highways. In Japan, our existing holding of Fujitsu Support,
a provider of information support for computer networks, was a notable performer
as were new additions Benesse (home tutoring) and Jafco (venture capital).
Of course, there were a few holdings that did not add to performance,
especially our positions in Europe that are tied to the Euro, which declined
more than 12% over the six months. Even though many European markets were up in
local currency terms, the weak European economy and higher U.S. interest rates
contributed to a weak Euro. While the currency's decline was disappointing, the
lower euro has increased the attractiveness of many European companies and their
ability to compete in the world markets.
Sincerely,
Your Portfolio Management Team
/s/Gerald J. Moran /s/Sewall F. Hodges
Gerald J. Moran Sewall F. Hodges
Lead Portfolio Manager Portfolio Manager
18
<PAGE>
GLOBAL DISCOVERY PORTFOLIO
PERFORMANCE UPDATE as of June 30, 1999
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
- -------
CLASS A
- -------
Global Discovery Portfolio
--------------------------------------
Total Return
Period ----------------
Ended Growth of Average
6/30/99 $10,000 Cumulative Annual
--------------------------------------
1 Year $ 11,048 10.48% 10.48%
Life of
Fund* $ 15,291 52.91% 14.36%
Salomon Brothers World Equity
EMI Index
--------------------------------------
Total Return
Period ----------------
Ended Growth of Average
6/30/99 $10,000 Cumulative Annual
--------------------------------------
1 Year $ 10,375 3.75% 3.75%
Life of
Fund* $ 12,660 26.60% 7.73%
* The Fund commenced operations on May 1, 1996.
On May 2, 1997, existing shares were
designated as Class A shares.
A chart in the form of a line graph appears here,
illustrating the following data points:
Salomon Brothers World
Equity EMI Index + Global Discovery Portfolio
------------------ --------------------------
5/96* 10000 10000
6/96 9946 10167
12/96 10197 10550
6/97 11010 11605
12/97 11052 11857
6/98 12202 13841
12/98 11708 13806
6/99 12660 15291
- -------
CLASS B
- -------
Global Discovery Portfolio
--------------------------------------
Total Return
Period ----------------
Ended Growth of Average
12/31/98 $10,000 Cumulative Annual
--------------------------------------
1 Year $ 11,013 10.13% 10.13%
Life of
Fund** $ 14,645 46.45% 19.30%
Salomon Brothers World Equity
EMI Index
--------------------------------------
Total Return
Period ----------------
Ended Growth of Average
12/31/98 $10,000 Cumulative Annual
--------------------------------------
1 Year $ 10,593 5.93% 5.93%
1 Year $ 10,375 3.75% 3.75%
Life of
Fund** $ 12,825 28.25% 12.17%
** The Fund commenced selling Class B shares
on May 2, 1997.
A chart in the form of a line graph appears here,
illustrating the following data points:
Salomon Brothers World
Equity EMI Index + Global Discovery Portfolio
------------------ --------------------------
5/2/97** 10000 10000
6/97 11153 11177
12/97 11196 11403
6/98 12361 13298
12/98 11861 13248
6/99 12825 14645
+The Salomon Brothers World Equity Extended Market Index is an unmanaged small
capitalization stock universe of 22 countries. Index returns assume reinvestment
of dividends and, unlike Portfolio 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 during all periods were higher due to
maintenance of the Portfolio's expenses. See Financial Highlights for the Global
Discovery Portfolio.
19
<PAGE>
GLOBAL DISCOVERY PORTFOLIO
PORTFOLIO SUMMARY as of June 30, 1999
- --------------------------------------------------------------------------------
DIVERSIFICATION
- --------------------------------------------------------------------------------
By Region
(Excluding 9% Cash Equivalents)
--------------------------------------------------
U.S. & Canada 53%
Europe 40%
Japan 5%
Other 2%
------
100%
======
A graph in the form of a pie chart appears here, illustrating the exact data
points in the above table.
Excellent performance from the Portfolio's
U.S. holdings was responsible for nearly
all of its positive return for the period.
By Sector
(Excluding 9% Cash Equivalents)
----------------------------------------------------
Service Industries 22%
Technology 21%
Health 18%
Consumer Discretionary 10%
Financial 7%
Communications 5%
Transportation 5%
Consumer Staples 3%
Energy 3%
Other 6%
------
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 (37% of Portfolio)
- --------------------------------------------------------------------------------
1. VISX Inc. Developer of laser technologies and systems for vision correction
in the United States
2. Vitesse Semiconductor Corp. Manufacturer of digital
integrated circuits in the United States 3.Network Appliance, Inc. Designer
and manufacturer of network data storage devices in the United
States
4. Serco Group PLC Facilities management company in the United Kingdom
5. Tiffany & Co. Retailer of jewelry and gift items in the United States
6. Sterling Commerce, Inc. Producer of electronic data interchange products
and services in the United States
7. S&P Mid-Cap 400 Depository Receipts U.S. security that represents ownership
in the Mid-Cap SPDR Trust
8. Altran Technologies SA Provider of engineering and consulting services in
France
9. Fujitsu Support and Service Inc. Provider of information services in
Japan
10. Fiserv Inc. Data processing services in the United States
20
<PAGE>
INTERNATIONAL PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
International equities generally performed well in the first half of
1999, led by strong rallies in Japan and the emerging markets. Japan benefited
from strong inflows of foreign capital as market participants were attracted by
the improving macroeconomic outlook for the country. On the corporate level,
numerous restructuring initiatives at major Japanese companies suggested a
greater focus on profitability and shareholder interest than in the past. In
contrast, the European markets were restrained by incoherent political
leadership, disappointing prospects for economic growth, and unrealistically
high expectations for the benefits of the monetary union. Against this backdrop,
the Portfolio rose 10.00%, well ahead of the 4.51% return of its unmanaged
benchmark, the MSCI EAFE Index. Stock selection was the critical factor that
helped the Portfolio outperform both the benchmark and its peers.
- --------------------------------------------------------------------------------
CALLOUT NEXT TO PRECEDING PARAGRAPH:
Superior stock selection
enabled the Portfolio
to post strong performance
during the period.
- --------------------------------------------------------------------------------
In managing the portfolio, we made significant changes early in the
first quarter, then let our strategy play out through the final three months of
the period. As it became increasingly obvious that the financial crisis of 1998
would not cause a slowdown in the global economy, we abandoned a defensive
positioning in favor of a higher level of sensitivity to the global economy.
Most notably, we raised our weighting in Japan to a level on par with the
benchmark after holding an underweight position for several years. Our search
for companies undergoing positive change led us to emphasize three categories of
companies within the Japanese market: global technology stocks, restructuring
candidates in the manufacturing and financial sectors, and companies leveraged
to domestic growth. Our early move into Japan proved to be highly beneficial to
performance when the market staged an explosive rally. In Europe, we maintained
a focus on companies involved in restructuring and consolidation activity, which
led us to build a substantial position in cyclicals.
Going forward, we remain optimistic on the outlook for overseas
equities. We expect stronger economic growth in both Europe and Japan, and we
believe that the quest for greater efficiency on the corporate level will
continue to drive earnings growth. In addition, it is likely that merger and
acquisition activity will continue to boost market performance in both regions.
We believe that the confluence of these factors will make the next several years
an exciting time to search for opportunities in the international markets.
Sincerely,
Your Portfolio Management Team
/s/Irene T. Cheng /s/Carol L. Franklin
Irene T. Cheng Carol L. Franklin
Lead Portfolio Manager
/s/Nicholas Bratt /s/Sheridan Reilly
Nicholas Bratt Sheridan Reilly
/s/Deborah A. Chaplin
Deborah A. Chaplin
21
<PAGE>
INTERNATIONAL PORTFOLIO
PERFORMANCE UPDATE as of June 30, 1999
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
- --------
CLASS A*
- --------
International Portfolio
--------------------------------------
Total Return
Period ----------------
Ended Growth of Average
6/30/99 $10,000 Cumulative Annual
--------------------------------------
1 Year $ 10,799 7.99% 7.99%
5 Year $ 17,845 78.45% 12.28%
10 Year $ 29,993 199.93% 11.61%
MSCI EAFE & Candada Index
--------------------------------------
Total Return
Period ----------------
Ended Growth of Average
6/30/99 $10,000 Cumulative Annual
--------------------------------------
1 Year $ 10,737 7.37% 7.37%
5 Year $ 15,015 50.15% 8.46%
10 Year $ 19,003 90.03% 6.63%
* On May 8, 1997, existing shares were
designated as Class A shares.
A chart in the form of a line graph appears here,
illustrating the following data points:
Yearly periods ended June 30
Year MSCI EAFE & Canada Index + International Portfolio
---- -------------------------- -----------------------
'89 10000 10000
'90 10314 12995
'91 9187 11681
'92 9116 12718
'93 10894 13871
'94 12656 16807
'95 12943 17247
'96 14670 20081
'97 16653 24073
'98 17699 27773
'99 19003 29993
- -------
CLASS B
- -------
International Portfolio
--------------------------------------
Total Return
Period ----------------
Ended Growth of Average
12/31/98 $10,000 Cumulative Annual
--------------------------------------
1 Year $ 10,773 7.73% 7.73%
Life of
Fund** $ 13,299 32.99% 14.21%
MSCI EAFE & Canada Index
--------------------------------------
Total Return
Period ----------------
Ended Growth of Average
12/31/98 $10,000 Cumulative Annual
--------------------------------------
1 Year $ 10,737 7.37% 7.37%
Life of
Fund** $ 12,021 20.21% 9.24%
** The Fund commenced selling Class B shares on May 8, 1997. Index
comparisons began on May 31, 1997.
A chart in the form of a line graph appears here,
illustrating the following data points:
MSCI EAFE &
Canada Index + International Portfolio
-------------- -----------------------
5/97** 10000 10000
6/97 10513 10534
9/97 10649 10495
12/97 10036 9686
3/98 11428 11109
6/98 12107 11196
9/98 10315 9549
12/98 11870 11503
3/98 12140 11683
6/98 13043 12021
+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
reinvestment of dividends net of withholding tax and, unlike Portfolio 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 during the 10 year period of Class A
were higher due to maintenance of the Portfolio's expenses.
22
<PAGE>
INTERNATIONAL PORTFOLIO
PORTFOLIO SUMMARY as of June 30, 1999
- --------------------------------------------------------------------------------
DIVERSIFICATION
- --------------------------------------------------------------------------------
By Region
(Excluding 5% Cash Equivalents)
----------------------------------------------------
Europe 65%
Japan 23%
Pacific Basin 11%
U.S. & Canada 1%
------
100%
======
A graph in the form of a pie chart appears here, illustrating the exact data
points in the above table.
Management raised the Portfolio's weighting
in Japan to take advantage of compelling
valuations early in the period.
By Sector
(Excluding 5% Cash Equivalents)
----------------------------------------------------
Manufacturing 18%
Financial 16%
Technology 11%
Communications 11%
Service Industries 7%
Consumer Staples 7%
Energy 6%
Consumer Discretionary 5%
Media 4%
Other 15%
------
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 (16% of Portfolio)
- --------------------------------------------------------------------------------
1. Telecom Italia SpA Provider of telecommunications, electronics, and network
construction in Italy
2. Elf Aquitaine SA Petroleum company in France
3. Nokia Oyj Manufacturer of telecommunication networks and equipment in
Finland
4. Reuters Group PLC International news agency in the United Kingdom
5. Rio Tinto PLC Mining company in the United Kingdom
6. BOC Group PLC Producer of industrial gases in the United Kingdom
7. Canadian National Railway Co. Railroad operator in Canada
8. Mannesmann AG Diversified construction and technology company in Germany
9. Rhone-Poulenc SA Medical, agricultural, and consumer chemicals in France
10. Shell Transport & Trading PLC Petroleum company in the United Kingdom
23
<PAGE>
MONEY MARKET PORTFOLIO
INVESTMENT PORTFOLIO as of June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
- ---------------------------------------------------------------------------------------
COMMERCIAL PAPER 65.2%
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Ace Overseas Corp., 4.85%, 7/8/1999* ...................... 6,150,000 6,144,200
Alpine Securization Corp., 4.82%, 7/8/1999* ............... 8,000,000 7,992,502
Asset Portfolio Funding, 4.92%, 7/12/1999* ................ 8,000,000 7,987,973
Associates First Capital Corp., 5.07%, 7/8/1999* .......... 3,200,000 3,196,845
Banque National de Paris, 4.93%, 10/5/1999* ............... 4,500,000 4,440,840
CSW Credit, Inc., 5.82%, 7/1/1999* ........................ 2,836,000 2,836,000
Duke Capital Corp., 4.92%, 7/14/1999* ..................... 6,196,000 6,184,992
FINOVA Capital Corp., 4.98%, 8/20/1999* ................... 3,529,000 3,504,591
Heller Financial Inc., 4.90%, 7/14/1999* .................. 2,992,000 2,986,663
Lexington Parker Capital Corp., 4.89%, 8/24/1999* ......... 8,000,000 7,941,320
Merita North America Corp., 4.90%, 8/10/1999* ............. 7,900,000 7,856,989
Moat Funding LLC, 5.00%, 7/13/1999* ....................... 5,171,000 5,162,382
Mont Blanc Capital Corp., 4.93%, 7/19/1999* ............... 5,900,000 5,885,457
Quincy Capital Corp., 4.92%, 7/20/1999* ................... 8,000,000 7,979,227
Royal Bank of Canada, 4.92%, 11/17/1999* .................. 8,000,000 7,848,027
Receivables Capital Corp., 4.93%, 7/13/1999* .............. 8,000,000 7,986,853
Sheffield Receivables Corp., 4.95%, 7/9/1999* ............. 3,000,000 2,996,700
Twin Towers Inc., 4.92%, 7/8/1999* ........................ 3,500,000 3,496,652
Windmill Funding Corp., 4.82%, 7/8/1999* .................. 7,000,000 6,993,439
-----------
Total Commercial Paper (Cost $109,421,652) ................ 109,421,652
-----------
SHORT-TERM NOTES 34.8%
- ---------------------------------------------------------------------------------------
American Express Centurion Bank, 4.9975%, 3/22/2000** ..... 8,000,000 8,000,000
Comerica Bank, 4.911%, 7/23/1999** ........................ 7,500,000 7,499,645
Countrywide Home Loan, 5.25%, 10/15/1999** ................ 8,000,000 8,000,000
Credit Suisse First Boston Corp., 4.97%, 6/9/2000** ....... 5,000,000 5,000,000
Harris Trust & Savings Bank, 4.91%, 4/6/2000** ............ 8,000,000 7,997,594
Heller Financial Inc., 5.22%, 7/7/2000** .................. 5,000,000 5,005,788
MBNA American Bank, 5.25%, 10/18/1999** ................... 1,000,000 999,863
MBNA Bank, 5.25%, 6/23/2000** ............................. 4,000,000 3,995,696
NationsBank Corp., 4.83%, 7/21/1999** ..................... 5,000,000 4,999,892
Toronto-Dominion Bank, 4.834%, 8/13/1999** ................ 7,000,000 6,999,348
-----------
Total Short-Term Notes (Cost $58,497,826) ................. 58,497,826
-----------
- ---------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $167,919,478) (a) 167,919,478
===========
- ---------------------------------------------------------------------------------------
</TABLE>
* Annualized yield at time of purchase; not a coupon rate. (Unaudited)
** Floating rate notes are securities whose interest rates vary with a
designated market index or market rate, such as the coupon-equivalent
of the U.S. Treasury Bill rate. These securities are shown at their
rate as of June 30, 1999.
(a) Cost for federal income tax purposes is $167,919,478.
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
- ----------------------------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------------------
Assets
<S> <C>
Investments (cost $167,919,478) ................................... $167,919,478
Interest receivable ............................................... 427,514
Other assets ...................................................... 1,140
------------
Total assets ...................................................... 168,348,132
Liabilities
Due to custodian bank ............................................. 132
Accrued management fee ............................................ 49,923
Other payables and accrued expenses ............................... 18,782
------------
Total liabilities ................................................. 68,837
------------
Net assets, at value .............................................. $168,279,295
============
Net Assets
Net assets consist of:
Paid-in capital ................................................... 168,279,295
------------
Net assets, at value .............................................. $168,279,295
============
Net asset value offering and redemption price per share
($168,279,295 / 168,279,295 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares authorized) $ 1.00
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
- ----------------------------------------------------------------------------------------------------
Six Months Ended June 30, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------------------
Investment Income
<S> <C>
Interest ........................................... $4,170,375
----------
Expenses:
Management fee ..................................... 305,688
Custodian fees ..................................... 5,771
Accounting fees .................................... 19,445
Trustees' fees and expenses ........................ 9,189
Legal .............................................. 2,243
Auditing ........................................... 5,430
Shareholder reports and other ...................... 5,244
----------
353,010
----------
Net investment income .............................. 3,817,365
----------
Net increase in net assets resulting from operations $3,817,365
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
Six Months
Ended Year Ended
June 30, 1999 December 31,
Increase (Decrease) in Net Assets (Unaudited) 1998
- ----------------------------------------------------------------------------------------------------
Operations:
<S> <C> <C>
Net investment income ............................................. $ 3,817,365 $ 6,799,480
------------- -------------
Net increase in net assets resulting from operations .............. 3,817,365 6,799,480
------------- -------------
Distributions to shareholders from net investment income .......... (3,817,365) (6,799,480)
------------- -------------
Portfolio share transactions at net asset value of $1.00 per share:
Proceeds from shares sold ......................................... 244,767,454 376,936,553
Net asset value of shares issued to shareholders in
reinvestment of distributions .................................. 3,817,365 6,799,315
Cost of shares redeemed ........................................... (228,457,953) (338,159,816)
------------- -------------
Net increase (decrease) in net assets from Portfolio share
transactions ................................................... 20,126,866 45,576,052
------------- -------------
Increase (decrease) in net assets ................................. 20,126,866 45,576,052
Net assets at beginning of period ................................. 148,152,429 102,576,377
------------- -------------
Net assets at end of period ....................................... $ 168,279,295 $ 148,152,429
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
MONEY MARKET 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.
<TABLE>
<CAPTION>
Six Months Ended Years Ended December 31,
June 30, 1999 ---------------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- ------- ------- -------
Income from investment operations:
Net investment income ....................... .023 .052 .051 .050 .055 .037
Less distributions from net investment income (.023) (.052) (.051) (.050) (.055) (.037)
-------- -------- -------- ------- ------- -------
Net asset value, end of period .............. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======= ======= =======
Total Return (%) ............................ 2.31** 5.29 5.25 5.09 5.65 3.72
Ratios and Supplemental Data
Net assets, end of period ($ millions) ...... 168 148 103 98 80 90
Ratio of operating expenses to average daily
net assets (%) ............................ .43* .44 .46 .46 .50 .56
Ratio of net investment income to
average daily net assets (%) .............. 4.62* 5.17 5.15 4.98 5.51 3.80
</TABLE>
* Annualized
** Not annualized
28
<PAGE>
BOND PORTFOLIO
INVESTMENT PORTFOLIO as of June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ----------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT 2.6%
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with State Street Bank and Trust Company dated 6/30/1999 at 4.75%
to be repurchased at $2,703,357 on 7/1/1999, collateralized by a $2,585,000 U.S. Treasury
Note, 8.75%, 8/15/2000 (Cost $2,703,000) ................................................ 2,703,000 2,703,000
----------
U.S. TREASURIES 16.5%
- ----------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond, 7.25%, 5/15/2016 ....................................................... 2,500,000 2,749,600
U.S. Treasury Bond, 6.25%, 8/15/2023 ....................................................... 1,550,000 1,557,270
U.S. Treasury Bond, 3.676%, 4/15/2028 ...................................................... 2,000,000 1,939,246
U.S. Treasury Note, 5.875%, 11/30/2001 ..................................................... 500,000 503,125
U.S. Treasury Note, 5.5%, 5/31/2003 ........................................................ 1,500,000 1,488,510
U.S. Treasury Note, 10.75%, 8/15/2005 ...................................................... 2,500,000 3,107,800
U.S. Treasury Note, 6.5%, 10/15/2006 ....................................................... 2,500,000 2,581,250
U.S. Treasury Note, 4.75%, 11/15/2008 ...................................................... 1,000,000 918,280
U.S. Treasury Note, 3.875%, 1/15/2009 ...................................................... 2,000,000 2,036,755
----------
Total U.S. Treasuries (Cost $17,699,896) ................................................... 16,881,836
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION 4.3%
- ----------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association Pass-thru, 7.5%, 7/15/2026 (a) .................... 1,465,443 1,479,174
Government National Mortgage Association Pass-thru, 7.0%, 3/15/2028 (a) .................... 2,997,666 2,964,879
----------
Total Government National Mortgage Association (Cost $4,533,605) ........................... 4,444,053
----------
U.S. GOVERNMENT AGENCY PASS-THRUS 7.3%
- ----------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 8.0%, 4/1/2008 (a) ....................................... 268,924 274,138
Federal National Mortgage Association, 8.0%, with various maturities to 12/1/2012 (a) ...... 2,472,439 2,540,709
Federal National Mortgage Association, 6.5%, 3/1/2028 (a) .................................. 4,869,588 4,711,326
----------
Total U. S. Government Agency Pass-thrus (Cost $7,731,053) ................................. 7,526,173
----------
COLLATERALIZED MORTGAGE OBLIGATIONS 2.9%
- ----------------------------------------------------------------------------------------------------------------------
Residential Accredit Loans, Inc., 7.25%, 11/25/2027 ........................................ 1,511,959 1,507,234
Residential Asset Securitization Trust Series 1997-A6, 7.25%, 9/25/2012 .................... 1,500,000 1,503,750
----------
Total Collateralized Mortgage Obligations (Cost $3,060,207) ................................ 3,010,984
----------
FOREIGN BONDS -- U.S. DOLLAR DENOMINATED 1.5%
- ----------------------------------------------------------------------------------------------------------------------
Norsk Hydro AS, 7.75%, 6/15/2023 (Cost $1,611,150) ......................................... 1,500,000 1,495,875
----------
ASSET BACKED 6.1%
- ----------------------------------------------------------------------------------------------------------------------
Automobile Receivables 1.8%
First Security Auto Owner Trust, 6%, 10/15/2003 ............................................ 1,000,000 998,750
Premier Auto Trust Asset Backed Certificate, Series 1996-3 A4, 6.75%, 11/6/2000 ............ 842,873 846,295
----------
1,845,045
----------
Credit Card Receivables 1.4%
MBNA Master Credit Card Trust, 5.8%, 12/15/2005 ............................................ 1,500,000 1,466,250
----------
Equipment Lease Receivables 1.5%
PBG Equipment Trust Series 1A, 6.27%, 1/20/2012 ............................................ 1,567,750 1,552,496
----------
Manufactured Housing Receivables 1.4%
Green Tree Financial Corp. Series 1997-1 B2, 7.76%, 3/15/2028 .............................. 650,000 494,202
Green Tree Financial Corp., Series 1997-2 B1, 7.56%, 6/15/2028 ............................. 1,000,000 929,370
----------
1,423,572
----------
Total Asset Backed (Cost $6,564,310) ....................................................... 6,287,363
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
BOND PORTFOLIO
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ----------------------------------------------------------------------------------------------------------------------
Corporate Bonds 58.8%
- ----------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 1.0%
<S> <C> <C>
Westpoint Stevens, Inc., 7.875%, 6/15/2005 ......................... 1,000,000 977,500
----------
Consumer Staples 4.0%
Bass America Inc., 6.625%, 3/1/2003 ................................ 1,000,000 998,010
Kellogg Co., 5.75%, 2/2/2001 ....................................... 1,000,000 995,500
PepsiCo, Inc., 5.625%, 2/17/2009 ................................... 1,250,000 1,153,613
Safeway Inc., 6.05%, 11/15/2003 .................................... 1,000,000 978,550
----------
4,125,673
----------
Communications 7.5%
AT&T Corp., 6%, 3/15/2009 .......................................... 1,000,000 939,790
Qwest Communications International, 7.5%, 11/1/2008 ................ 2,000,000 1,999,760
Sprint Capital Corp., 6.125%, 11/15/2008 ........................... 2,000,000 1,845,780
Sprint Capital Corp., 6.375%, 5/1/2009 ............................. 1,000,000 950,000
WorldCom, Inc., 6.4%, 8/15/2005 .................................... 2,000,000 1,956,600
----------
7,691,930
----------
Financial 14.2%
Associates Corp. of North America, 6.625%, 5/15/2001 ............... 2,000,000 2,016,460
BankAmerica Corp., 7.125%, 5/1/2006 ................................ 1,000,000 1,009,820
Capital One Bank, 6.57%, 1/27/2003 ................................. 1,000,000 979,900
First USA Bank, 5.85%, 2/22/2001 ................................... 1,500,000 1,493,865
First Union Institutional Capital II, 7.85%, 1/1/2027 .............. 1,750,000 1,715,420
Ford Motor Credit Co., 6.125%, 4/28/2003 ........................... 1,500,000 1,478,130
GS Escrow Corp., 7%, 8/1/2003 ...................................... 1,000,000 966,875
General Electric Capital Corp., 6.02%, 5/4/2001 .................... 1,500,000 1,494,375
Home Savings of America, 6%, 11/1/2000 ............................. 1,250,000 1,246,388
Merrill Lynch & Co., Inc., 6%, 2/17/2009 ........................... 1,000,000 923,800
Prudential Insurance Co., 6.375%, 7/23/2006 ........................ 1,250,000 1,217,950
----------
14,542,983
----------
Media 7.3%
Cablevision Systems Corp., 7.875%, 2/15/2018 ....................... 1,000,000 951,860
Chancellor Media Corp., 8%, 11/1/2008 .............................. 1,000,000 980,000
Charter Communication Holdings LLC, 8.25%, 4/1/2007 ................ 1,000,000 952,500
News America Holdings Inc., 9.25%, 2/1/2013 ........................ 1,000,000 1,124,130
Outdoor Systems, Inc., 8.875%, 6/15/2007 ........................... 1,000,000 1,043,750
TCI-Communications, Inc., 8%, 8/1/2005 ............................. 1,250,000 1,314,888
Time Warner Inc., 9.125%, 1/15/2013 ................................ 1,000,000 1,132,060
----------
7,499,188
----------
Service Industries 0.5%
Allied Waste North America, 7.375%, 1/1/2004 ....................... 500,000 470,000
----------
Durables 3.7%
BE Aerospace, Inc., 8%, 3/1/2008 ................................... 850,000 794,750
Lear Corp., 7.96%, 5/15/2005 ....................................... 1,000,000 969,980
Martin Marietta Corp., 6.5%, 4/15/2003 ............................. 1,000,000 987,540
McDonnell Douglas Finance Corp., Medium Term Note, 6.75%, 12/23/2003 1,000,000 1,012,370
----------
3,764,640
----------
Manufacturing 0.7%
Graham Packaging Co., 8.75%, 1/15/2008 ............................. 750,000 712,500
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
BOND PORTFOLIO
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ----------------------------------------------------------------------------------------------------------------------
Technology 2.7%
<S> <C> <C>
Raytheon Co., 6%, 12/15/2010 ................................. 1,500,000 1,371,960
Xerox Corp., 5.5%, 11/15/2003 ................................ 1,500,000 1,428,990
-----------
2,800,950
-----------
Energy 9.4%
Anadarko Petroleum Corp., 7%, 11/15/2027 ..................... 2,000,000 1,827,400
Barrett Resources Corp., 7.55%, 2/1/2007 ..................... 750,000 723,750
Conoco, Inc., 6.35%, 4/15/2009 ............................... 1,000,000 959,810
Louis Dreyfus Natural Gas Corp., Senior Note, 9.25%, 6/15/2004 1,575,000 1,673,438
Louisiana Land & Exploration Co., 7.65%, 12/1/2023 ........... 1,250,000 1,238,400
Petroleum Geo-Services, 6.625%, 3/30/2008 .................... 1,000,000 941,330
Pioneer Natural Resources Co., 7.2%, 1/15/2028 ............... 1,500,000 1,155,000
Texas Eastern Transmission Corp., 10%, 8/15/2001 ............. 1,000,000 1,073,780
-----------
9,592,908
-----------
Construction 0.5%
Nortek, Inc., 9.125%, 9/1/2007 ............................... 500,000 498,750
-----------
Transportation 2.5%
Allied Holdings Inc., 8.625%, 10/1/2007 ...................... 700,000 665,000
Continental Airlines Inc., 6.795%, 8/2/2018 .................. 1,500,000 1,432,500
Newport News Shipbuilding Co., 8.625%, 12/1/2006 ............. 500,000 512,500
-----------
2,610,000
-----------
Utilities 4.8%
Houston Light & Power Capital Trust II, 8.257%, 2/1/2037 ..... 500,000 481,250
Niagara Mohawk Power Corp., 7.375%, 7/1/2003 ................. 2,500,000 2,542,800
PacifiCorp, 6.15%, 1/15/2008 ................................. 1,000,000 952,010
Public Service Co. of Colorado, 6%, 4/15/2003 ................ 1,000,000 982,360
-----------
4,958,420
-----------
Total Corporate Bonds (Cost $62,277,341) ..................... 60,245,442
-----------
- ------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $106,180,562) (b) . 102,594,726
===========
- ------------------------------------------------------------------------------------------
</TABLE>
(a) Effective maturities will be shorter due to prepayments.
(b) At June 30, 1999, the net unrealized depreciation on investments based on
cost for federal income tax purposes of $106,189,312 was as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized appreciation for all investments in which there is an
excess of market value over tax cost............................................. $ 392,689
Aggregate gross unrealized depreciation for all investments in which there is an
excess of tax cost over market value.............................................. 3,987,275
------------
Net unrealized depreciation....................................................... $ 3,594,586
============
</TABLE>
- --------------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short-term investments
and direct U.S. Government obligations), for the six months ended June 30, 1999,
aggregated $33,392,308 and $26,621,662, respectively. Purchases and sales of
direct U.S. Government obligations for the six months ended June 30, 1999
aggregated $21,332,703 and $26,712,773, respectively.
- --------------------------------------------------------------------------------
From November 1 through December 31, 1998, the Bond Portfolio incurred
approximately $170,000 of net realized capital losses. As permitted by tax
regulations, the portfolio intends to elect to defer these losses and treat them
as arising in the fiscal year ended December 31, 1999.
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
BOND PORTFOLIO
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
- ----------------------------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------------------
Assets
<S> <C>
Investments, at market (identified cost $106,180,562) ........... $ 102,594,726
Interest receivable ............................................. 1,555,883
Receivable for Portfolio shares sold ............................ 27,153
Other assets .................................................... 1,151
-------------
Total assets .................................................... 104,178,913
Liabilities
Payable for Portfolio shares redeemed ........................... 310,476
Accrued management fee .......................................... 39,156
Other payables and accrued expenses ............................. 14,075
-------------
Total liabilities ............................................... 363,707
-------------
Net assets, at market value ..................................... $ 103,815,206
=============
Net Assets
Net assets consist of:
Undistributed net investment income (loss) ...................... 1,661,551
Net unrealized appreciation (depreciation) on investments ....... (3,585,836)
Accumulated net realized gain (loss) ............................ (858,539)
Paid-in capital ................................................. 106,598,030
-------------
Net assets, at market value ..................................... $ 103,815,206
=============
Net asset value offering and redemption price per share
($103,815,206 / 16,055,738 outstanding shares of beneficial
interest, no par value, unlimited number of shares authorized) $ 6.47
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
BOND PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
- ----------------------------------------------------------------------------------------------------
Six Months Ended June 30, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------------------
Investment Income
<S> <C>
Interest ......................................................... $ 3,610,286
-----------
Expenses:
Management fee ................................................... 250,912
Custodian fees ................................................... 552
Accounting fees .................................................. 23,053
Trustees' fees and expenses ...................................... 9,189
Auditing ......................................................... 3,620
Legal ............................................................ 1,498
Shareholder reports and other .................................... 3,924
-----------
292,748
-----------
Net investment income ............................................ 3,317,538
-----------
Net realized and unrealized gain (loss) on investment transactions
Net realized gain (loss) from investments ........................ (519,810)
-----------
Net unrealized appreciation (depreciation) during the period on
investments ................................................... (4,236,810)
-----------
Net gain (loss) on investment transactions ....................... (4,756,620)
-----------
Net increase (decrease) in net assets resulting from operations .. $(1,439,082)
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
BOND PORTFOLIO
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets Six Months
Ended Year Ended
June 30, 1999 December 31,
(Unaudited) 1998
- ------------------------------------------------------------------------------------------------------
Operations:
<S> <C> <C>
Net investment income ......................................... $ 3,317,538 $ 5,872,849
Net realized gain (loss) from investment transactions ......... (519,810) 1,549,350
Net unrealized appreciation (depreciation) on investment
transactions during the period ............................. (4,236,810) (1,599,146)
------------- -------------
Net increase (decrease) in net assets resulting from operations (1,439,082) 5,823,053
------------- -------------
Distributions to shareholders from:
Net investment income ......................................... (3,437,261) (5,348,241)
------------- -------------
Net realized gains from investment transactions ............... (1,738,743) (295,455)
------------- -------------
Portfolio share transactions:
Proceeds from shares sold ..................................... 17,276,315 51,946,542
Net asset value of shares issued to shareholders in
reinvestment of distributions .............................. 5,176,004 5,643,696
Cost of shares redeemed ....................................... (18,446,618) (32,732,036)
------------- -------------
Net increase (decrease) in net assets from Portfolio share
transactions ............................................... 4,005,701 24,858,202
------------- -------------
Increase (decrease) in net assets ............................. (2,609,385) 25,037,559
Net assets at beginning of period ............................. 106,424,591 81,387,032
------------- -------------
Net assets at end of period (including undistributed net
investment income of $1,661,551 and $1,781,274,
respectively) .............................................. $ 103,815,206 $ 106,424,591
============= =============
Other Information
Increase (decrease) in Portfolio shares
Shares outstanding at beginning of period ..................... 15,463,236 11,852,430
------------- -------------
Shares sold ................................................... 2,569,807 7,558,444
Shares issued to shareholders in reinvestment of distributions 776,741 831,464
Shares redeemed ............................................... (2,754,046) (4,779,102)
------------- -------------
Net increase (decrease) in Portfolio shares ................... 592,502 3,610,806
------------- -------------
Shares outstanding at end of period ........................... 16,055,738 15,463,236
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share
outstanding (a) throughout each period and other performance
information derived from the financial statements.
<TABLE>
<CAPTION>
Years Ended December 31,
Six Months Ended ---------------------------------------------------
June 30, 1999
(Unaudited) 1998 1997 1996 1995 1994
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 6.88 $ 6.87 $ 6.73 $ 7.16 $ 6.48 $ 7.42
------- ------- ------ ------ ------- -------
Income from investment operations:
Net investment income .................... .21 .43 .44 .41 .44 .43
Net realized and unrealized gain (loss) on
investment transactions ................ (.29) .01 .15 (.22) .69 (.77)
------- ------- ------ ------ ------- -------
Total from investment operations ......... (.08) .44 .59 .19 1.13 (.34)
------- ------- ------ ------ ------- -------
Less distributions from:
Net investment income .................... (.22) (.40) (.43) (.62) (.45) (.43)
Net realized gains on investment
transactions ........................... (.11) (.03) (.02) -- -- (.17)
------- ------- ------ ------ ------- -------
Total distributions ...................... (.33) (.43) (.45) (.62) (.45) (.60)
------- ------- ------ ------ ------- -------
Net asset value, end of period ........... $ 6.47 $ 6.88 $ 6.87 $ 6.73 $ 7.16 $ 6.48
======= ======= ====== ====== ======= =======
Total Return (%) ......................... (1.25)** 6.57 9.10 2.82 18.17 (4.79)
Ratios and Supplemental Data
Net assets, end of period ($ millions) ... 104 106 81 66 73 142
Ratio of operating expenses to average
daily net assets (%) ................... .55* .57 .62 .61 .56 .58
Ratio of net investment income to average
daily net assets (%) ................... 6.28* 6.34 6.55 6.20 6.29 6.43
Portfolio turnover rate (%) .............. 103.67* 115.14 56.07 85.11 177.21 96.55
</TABLE>
(a) Based on monthly average shares outstanding during the period.
* Annualized
** Not annualized
35
<PAGE>
BALANCED PORTFOLIO
INVESTMENT PORTFOLIO as of June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -------------------------------------------------------------------------------------------
Repurchase Agreement 3.1%
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with State Street Bank and Trust Company
dated 6/30/1999 at 4.75% to be repurchased at $5,634,743 on
7/1/1999, collateralized by a $5,390,000 U.S. Treasury Note,
8.75%, 8/15/2000 (Cost $5,634,000) ............................ 5,634,000 5,634,000
----------
U.S. Treasuries 7.2%
- -------------------------------------------------------------------------------------------
U.S. Treasury Bond, 9.38%, 2/15/2006 ............................ 500,000 592,580
U.S. Treasury Bond, 7.25%, 5/15/2016 ............................ 5,750,000 6,324,080
U.S. Treasury Bond, 6.25%, 8/15/2023 ............................ 1,000,000 1,004,690
U.S. Treasury Bond, 3.676%, 4/15/2028 ........................... 1,250,000 1,212,029
U.S. Treasury Note, 5.875%, 11/30/2001 .......................... 1,000,000 1,006,250
U.S. Treasury Note, 6.5%, 10/15/2006 ............................ 2,000,000 2,065,000
U.S. Treasury Note, 3.875%, 1/15/2009 ........................... 1,000,000 1,018,378
----------
Total U.S. Treasuries (Cost $13,826,016) ........................ 13,223,007
----------
Government National Mortgage Association 1.4%
- -------------------------------------------------------------------------------------------
Government National Mortgage Association Pass-thru, 8.75%,
12/15/2024 (a) ................................................ 516,499 538,451
Government National Mortgage Association Pass-thru, 7.0%,
4/1/2029 (a) .................................................. 1,998,147 1,976,292
----------
Total Government National Mortgage Association (Cost $ 2,514,909) 2,514,743
----------
U.S. Government Agency Pass-thrus 4.6%
- -------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5.75%, 7/15/2003 (a) .......... 2,500,000 2,468,350
Federal Home Loan Mortgage Corp., 8.0% with various maturities
to 4/1/2008 (a) ............................................... 448,205 456,896
Federal National Mortgage Association, 8.0% with various
maturities to 2/1/2013 (a) .................................... 826,282 849,165
Federal National Mortgage Association, 6.5% with various
maturities to 3/1/2028 (a) .................................... 4,772,780 4,615,655
----------
Total U.S. Government Agency Pass-thrus (Cost $8,600,120) ....... 8,390,066
----------
Collateralized Mortgage Obligations 0.9%
- -------------------------------------------------------------------------------------------
General Electric Capital Mortgage Services, Inc. Series
1992-2F, 7%, 6/25/2007 ........................................ 33,954 33,742
Prudential Home Mortgage Securities Co. Series 1993-43-A1,
5.4%, 10/25/2023 .............................................. 186,462 185,587
Residential Accredit Loans, Inc., 7.25%, 11/25/2027 ............. 984,990 981,911
Residential Asset Securitization Trust Series 1997-A6, 7.25%,
9/25/2012 ..................................................... 500,000 501,250
----------
Total Collateralized Mortgage Obligations (Cost $1,727,766) ..... 1,702,490
----------
Foreign Bonds -- U.S. Dollar Denominated 0.5%
- -------------------------------------------------------------------------------------------
Norsk Hydro AS, 7.75%, 6/15/2023 (Cost $1,074,100) .............. 1,000,000 997,250
----------
Asset Backed 2.8%
- -------------------------------------------------------------------------------------------
Automobile Receivables 0.5%
First Security Auto Owner Trust, Series 1999-2 A3, 6%, 1/1/2002 . 1,000,000 998,750
----------
Credit Card Receivables 1.4%
Citibank Credit Card Master Trust I, Series 1999-1 A, 5.5%,
2/15/2006 ..................................................... 1,000,000 960,930
MBNA Master Credit Card Trust, 5.8%, 12/15/2005 ................. 1,000,000 977,500
Proffitt's, Inc. Credit Card Master Trust, 6%, 9/15/2004 ........ 500,000 497,656
----------
2,436,086
----------
Equipment Lease Receivables 0.4%
PBG Equipment Trust Series 1A, 6.27%, 1/20/2012 ................. 783,875 776,248
----------
Home Equity Loans 0.5%
First Plus Home Loan Trust, Series 1998, 6.25%, 11/10/2016 ...... 1,000,000 987,188
----------
Total Asset Backed (Cost $5,278,718) ............................ 5,198,272
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ---------------------------------------------------------------------------------
Corporate Bonds 16.0%
- ---------------------------------------------------------------------------------
Consumer Staples 1.3%
<S> <C> <C>
Bass America Inc., 6.625%, 3/1/2003 ..................... 750,000 748,508
Kellogg Co., 5.75%, 2/2/2001 ............................ 1,000,000 995,500
PepsiCo, Inc., 5.625%, 2/17/2009 ........................ 750,000 692,168
----------
2,436,176
----------
Communications 1.5%
AT&T Corp., 6%, 3/15/2009 ............................... 600,000 563,874
Lucent Technologies Inc., 6.9%, 7/15/2001 ............... 750,000 762,660
Sprint Capital Corp., 6.125%, 11/15/2008 ................ 500,000 461,445
Sprint Capital Corp., 6.375%, 5/1/2009 .................. 500,000 475,000
WorldCom, Inc., 6.4%, 8/15/2005 ......................... 500,000 489,150
----------
2,752,129
----------
Financial 4.9%
Associates Corp. of North America, 6.625%, 5/15/2001 .... 750,000 756,173
Capital One Bank, 6.57%, 1/27/2003 ...................... 500,000 489,950
First USA Bank, 5.85%, 2/22/2001 ........................ 1,000,000 995,910
First Union Corp., 8.125%, 6/24/2002 .................... 500,000 523,550
Fleet Financial Group, 6.875%, 1/15/2028 ................ 1,000,000 915,940
Ford Motor Credit Co., 6.125%, 4/28/2003 ................ 750,000 739,065
General Electric Capital Corp., 6.02%, 5/4/2001 ......... 500,000 498,125
Home Savings of America, 6%, 11/1/2000 .................. 750,000 747,833
McDonnell Douglas Finance Corp., Medium Term Note, 6.75%,
12/23/2003 ............................................ 500,000 506,185
Merrill Lynch & Co., Inc., 6%, 2/17/2009 ................ 500,000 461,900
Prudential Insurance Co., 6.375%, 7/23/2006 ............. 750,000 730,770
Southern National Corp., 7.05%, 5/23/2003 ............... 1,000,000 1,007,710
Wells Fargo & Co., 6.875%, 4/1/2006 ..................... 500,000 502,305
----------
8,875,416
----------
Media 1.7%
Cablevision Systems Corp., 7.875%, 2/15/2018 ............ 500,000 475,930
News America Holdings Inc., 9.25%, 2/1/2013 ............. 500,000 562,065
Primedia, Inc., 7.625%, 4/1/2008 ........................ 500,000 470,000
TCI-Communications, Inc., 8%, 8/1/2005 .................. 500,000 525,955
Time Warner Inc., 9.125%, 1/15/2013 ..................... 1,000,000 1,132,060
----------
3,166,010
----------
Durables 0.2%
Martin Marietta Corp., 6.5%, 4/15/2003 .................. 400,000 395,016
----------
Manufacturing 0.1%
Corning Inc., 8.75%, 7/15/1999 .......................... 250,000 250,223
----------
Technology 0.8%
IBM Corp., 5.1%, 11/10/2003 ............................. 1,000,000 954,200
Raytheon Co., 6%, 12/15/2010 ............................ 500,000 457,320
----------
1,411,520
----------
Energy 2.5%
Anadarko Petroleum Corp., 5.875%, 10/15/2003 ............ 1,000,000 961,080
Atlantic Richfield Co., 8.25%, 2/1/2022 ................. 500,000 558,470
Conoco Inc., 5.9%, 4/15/2004 ............................ 750,000 731,835
Louisiana Land & Exploration Co., 7.65%, 12/1/2023 ...... 1,000,000 990,720
Petroleum Geo-Services, 6.625%, 3/30/2008 ............... 1,000,000 941,330
Transocean Offshore, Inc., 8%, 4/15/2027 ................ 400,000 416,232
----------
4,599,667
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- --------------------------------------------------------------------------
Transportation 1.0%
<S> <C> <C>
Continental Airlines Inc., 6.795%, 8/2/2018 .... 1,000,000 955,000
Newport News Shipbuilding Co., 8.625%, 12/1/2006 375,000 384,375
Northwest Airlines Corp., 7.875%, 3/15/2008 .... 500,000 435,005
-----------
1,774,380
-----------
Utilities 2.0%
Commonwealth Edison Co., 9.05%, 10/15/1999 ..... 250,000 252,263
Niagara Mohawk Power Corp., 7.375%, 7/1/2003 ... 1,500,000 1,525,680
PacifiCorp, 6.15%, 1/15/2008 ................... 1,500,000 1,428,015
Public Service Co. of Colorado, 6%, 4/15/2003 .. 500,000 491,180
-----------
3,697,138
-----------
Total Corporate Bonds (Cost $30,195,102) ....... 29,357,675
-----------
Common Stocks 63.5%
- --------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------
Consumer Discretionary 9.8%
Department & Chain Stores 7.6%
Consolidated Stores Corp.* ..................... 79,100 2,135,700
Costco Companies, Inc.* ........................ 21,200 1,697,325
Dayton Hudson Corp. ............................ 26,000 1,690,000
Gap Inc. ....................................... 30,450 1,533,919
Home Depot, Inc. ............................... 63,700 4,104,669
Wal-Mart Stores, Inc. .......................... 58,600 2,827,450
-----------
13,989,063
-----------
Recreational Products 1.3%
Electronic Arts, Inc.* ......................... 24,700 1,339,975
Hasbro, Inc. ................................... 36,900 1,030,894
-----------
2,370,869
-----------
Restaurants 0.9%
McDonald's Corp. ............................... 40,900 1,689,681
-----------
Consumer Staples 7.0%
Alcohol & Tobacco 0.9%
Philip Morris Companies, Inc. .................. 39,100 1,571,331
-----------
Food & Beverage 2.7%
Coca-Cola Co., Inc. ............................ 36,600 2,287,500
Kroger Co. ..................................... 53,000 1,480,688
PepsiCo, Inc. .................................. 30,300 1,172,231
-----------
4,940,419
-----------
Package Goods/Cosmetics 3.4%
Colgate-Palmolive Co. .......................... 21,200 2,093,500
Estee Lauder Companies "A" ..................... 40,200 2,015,025
Procter & Gamble Co. ........................... 23,900 2,133,075
-----------
6,241,600
-----------
Health 10.4%
Health Industry Services 0.5%
IMS Health Inc. ................................ 30,900 965,625
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
38
<PAGE>
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------
<S> <C> <C>
Medical Supply & Specialty 1.7%
Medtronic Inc. ......................... 39,774 3,097,400
----------
Pharmaceuticals 8.2%
Eli Lilly & Co. ........................ 25,116 1,798,934
Johnson & Johnson ...................... 14,600 1,430,800
Merck & Co., Inc. ...................... 39,800 2,945,200
Pfizer, Inc. ........................... 35,800 3,929,050
Schering-Plough Corp. .................. 26,200 1,388,600
SmithKline Beecham PLC (ADR) ........... 24,700 1,631,745
Warner-Lambert Co. ..................... 26,300 1,824,563
----------
14,948,892
----------
Communications 1.9%
Telephone/Communications
Frontier Corp. ......................... 23,000 1,357,000
MCI WorldCom, Inc.* .................... 24,000 2,070,000
----------
3,427,000
----------
Financial 3.6%
Insurance 1.4%
American International Group, Inc. ..... 22,012 2,576,780
----------
Other Financial Companies 2.2%
Federal Home Loan Mortgage Corp. ....... 19,500 1,131,000
Federal National Mortgage Association .. 23,700 1,620,488
Morgan Stanley, Dean Witter Discover Co. 12,400 1,271,000
----------
4,022,488
----------
Media 4.7%
Advertising 1.3%
Omnicom Group, Inc. .................... 22,400 1,792,000
Outdoor Systems, Inc.* ................. 18,425 672,513
----------
2,464,513
----------
Broadcasting & Entertainment 2.8%
Clear Channel Communications, Inc.* .... 37,600 2,592,050
Infinity Broadcasting Corp.* ........... 39,100 1,163,225
Univision Communication, Inc.* ......... 20,900 1,379,400
----------
5,134,675
----------
Cable Television 0.6%
AT&T Corp -- Liberty Media Group* ...... 30,800 1,131,900
----------
Service Industries 3.0%
EDP Services 1.6%
America Online, Inc. ................... 27,000 2,983,500
----------
Investment 0.8%
Charles Schwab Corp. ................... 13,200 1,450,350
----------
Miscellaneous Commercial Services 0.6%
Galileo International, Inc. ............ 20,400 1,090,125
----------
Durables 3.0%
Lucent Technologies Inc. ............... 63,700 4,295,769
</TABLE>
The accompanying notes are an integral part of the financial statements.
39
<PAGE>
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
Shares Value ($)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Nokia AB Oy "A" (ADR) ..................................... 14,300 1,309,344
-----------
5,605,113
-----------
Manufacturing 5.7%
Diversified Manufacturing 5.1%
General Electric Co. ...................................... 43,800 4,949,400
Textron, Inc. ............................................. 26,600 2,189,513
Tyco International Ltd. (New) ............................. 22,900 2,169,775
-----------
9,308,688
-----------
Industrial Specialty 0.6%
QUALCOMM Inc. ............................................. 8,600 1,234,100
-----------
Technology 14.4%
Computer Software 3.5%
Microsoft Corp.* .......................................... 72,000 6,493,492
-----------
Diverse Electronic Products 1.5%
Applied Materials, Inc.* .................................. 20,300 1,499,663
Motorola, Inc. ............................................ 12,500 1,184,375
-----------
2,684,038
-----------
EDP Peripherals 0.9%
EMC Corp.* ................................................ 30,800 1,694,000
-----------
Electronic Data Processing 2.7%
International Business Machines Corp. ..................... 18,400 2,378,227
Sun Microsystems, Inc.* ................................... 36,400 2,507,050
-----------
4,885,277
-----------
Semiconductors 2.9%
Intel Corp. ............................................... 68,100 4,051,950
Linear Technology Corp. ................................... 17,900 1,203,775
-----------
5,255,725
-----------
Telecommunications Equipment 2.9%
Cisco Systems, Inc.* ...................................... 81,500 5,256,750
-----------
Total Common Stocks (Cost $77,325,967) .................... 116,513,394
-----------
- ---------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $146,176,698) (b) 183,530,897
===========
- ---------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) Effective maturities will be shorter due to prepayments.
(b) At June 30, 1999, the net unrealized appreciation
on investments based on cost for federal income tax
purposes of $146,178,367 was as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized appreciation for all investments
in which there is an excess of market value over tax cost ...... $40,371,980
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over market value ....... 3,019,450
-----------
Net unrealized appreciation ...................................... $37,352,530
============
- ---------------------------------------------------------------------------------------
</TABLE>
Purchases and sales of investment securities (excluding short-term
investments and direct U.S. Government obligations), for the six months
ended June 30, 1999, aggregated $57,481,555 and $42,347,012,
respectively. Purchases and sales of direct U.S. Government obligations
for the six months ended June 30, 1999, aggregated $13,637,501 and
$12,418,242, respectively.
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
BALANCED PORTFOLIO
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Assets
<S> <C>
Investments, at market (identified cost $146,176,698) ........... $183,530,897
Receivable for investments sold ................................. 1,846,493
Dividends and interest receivable ............................... 973,689
Other assets .................................................... 1,292
------------
Total assets .................................................... 186,352,371
Liabilities
Due to custodian bank ........................................... 150,972
Payable for investments purchased ............................... 1,178,229
Accrued management fee .......................................... 66,780
Other payables and accrued expenses ............................. 16,562
------------
Total liabilities ............................................... 1,412,543
------------
Net assets, at market value ..................................... $184,939,828
============
Net Assets
Net assets consist of:
Undistributed net investment income (loss) ...................... 1,042,170
Net unrealized appreciation (depreciation) on investments ....... 37,354,199
Accumulated net realized gain ................................... 5,972,566
Paid-in capital ................................................. 140,570,893
------------
Net assets, at market value ..................................... $184,939,828
============
Net asset value, offering and redemption price per share
($184,939,828 / 12,522,968 outstanding shares of beneficial
interest, no par value, unlimited number of shares authorized) $ 14.77
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
41
<PAGE>
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
Six Months Ended June 30, 1999 (Unaudited)
- -------------------------------------------------------------------------------
Investment Income
<S> <C>
Dividends (net of foreign taxes withheld of $1,254) .............. $ 293,106
Interest ......................................................... 2,217,891
----------
2,510,997
----------
Expenses:
Management fee ................................................... 408,817
Custodian fees ................................................... 6,446
Accounting fees .................................................. 33,241
Trustees' fees and expenses ...................................... 9,189
Auditing ......................................................... 5,047
Legal ............................................................ 2,288
Shareholder reports and other .................................... 4,787
----------
469,815
----------
Net investment income ............................................ 2,041,182
----------
Net realized and unrealized gain (loss) on investment transactions
Net realized gain (loss) from investments ........................ 6,019,421
----------
Net unrealized appreciation (depreciation) during the period on
investments ................................................... 1,551,935
----------
Net gain (loss) on investment transactions ....................... 7,571,356
----------
Net increase (decrease) in net assets resulting from operations .. $9,612,538
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------
Six Months Year Ended
Ended June 30, December 31,
1999 1998
Increase (Decrease) in Net Assets (Unaudited)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ........................................ $ 2,041,182 $ 3,706,213
Net realized gain (loss) from investment transactions ........ 6,019,421 12,882,748
Net unrealized appreciation (depreciation) on investment
transactions during the period ............................ 1,551,935 12,183,268
------------- -------------
Net increase in net assets resulting from operations ......... 9,612,538 28,772,229
------------- -------------
Distributions to shareholders from:
Net investment income ........................................ (2,004,275) (3,532,592)
------------- -------------
Net realized gains from investment transactions .............. (12,845,342) (6,021,605)
------------- -------------
Portfolio share transactions:
Proceeds from shares sold .................................... 35,870,711 36,814,365
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................. 14,849,617 9,554,198
Cost of shares redeemed ...................................... (22,175,370) (22,327,861)
------------- -------------
Net increase (decrease) in net assets from Portfolio share
transactions .............................................. 28,544,958 24,040,702
------------- -------------
Increase (decrease) in net assets ............................ 23,307,879 43,258,734
Net assets at beginning of period ............................ 161,631,949 118,373,215
------------- -------------
Net assets at end of period (including undistributed net
investment income of $1,042,170 and $1,005,263,
respectively) ............................................. $ 184,939,828 $ 161,631,949
============= =============
Other Information
Increase (decrease) in Portfolio shares
Shares outstanding at beginning of period .................... 10,629,925 8,902,042
------------- -------------
Shares sold .................................................. 2,359,478 2,658,358
Shares issued to shareholders in reinvestment of distributions 1,012,436 711,195
Shares redeemed .............................................. (1,478,871) (1,641,670)
------------- -------------
Net increase (decrease) in Portfolio shares .................. 1,893,043 1,727,883
------------- -------------
Shares outstanding at end of period .......................... 12,522,968 10,629,925
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
43
<PAGE>
BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share
outstanding (a) throughout each period and other performance
information derived from the financial statements.
<TABLE>
<CAPTION>
Six Months Ended Years Ended December 31,
June 30, 1999 -----------------------------------------
(Unaudited) 1998 1997 1996 1995 1994
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .......... $ 15.21 $ 13.30 $ 11.61 $10.95 $ 8.97 $ 10.23
------- ------- ------- ------ ------ -------
Income from investment operations:
Net investment income ......................... .18 .37 .34 .31 .30 .29
Net realized and unrealized gain (loss) on
investment transactions ..................... .68 2.56 2.32 .95 2.04 (.48)
------- ------- ------- ------ ------ -------
Total from investment operations .............. .86 2.93 2.66 1.26 2.34 (.19)
------- ------- ------- ------ ------ -------
Less distributions from:
Net investment income ......................... (.18) (.36) (.33) (.30) (.30) (.30)
Net realized gains on investment transactions . (1.12) (.66) (.64) (.30) (.06) (.77)
------- ------- ------- ------ ------ -------
Total distributions ........................... (1.30) (1.02) (.97) (.60) (.36) (1.07)
------- ------- ------- ------ ------ -------
Net asset value, end of period ................ $ 14.77 $ 15.21 $ 13.30 $ 11.61 $ 10.95 $ 8.97
======= ======= ======= ====== ====== =======
Total Return (%) .............................. 5.73** 23.19 24.21 11.89 26.67 (2.05)
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........ 185 162 118 88 68 46
Ratio of operating expenses to average daily
net assets (%) .............................. .55* .56 .57 .60 .65 .75
Ratio of net investment income to average daily
net assets (%) .............................. 2.37* 2.71 2.73 2.82 3.01 3.19
Portfolio turnover rate (%) ................... 66.36* 74.08 43.10 67.56 87.98 101.64
</TABLE>
(a) Based on monthly average shares outstanding during the period.
* Annualized
** Not annualized
44
<PAGE>
GROWTH AND INCOME PORTFOLIO
INVESTMENT PORTFOLIO as of June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ---------------------------------------------------------------------------------------
REPURCHASE AGREEMENT 4.0%
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with State Street Bank and Trust Company
dated 6/30/1999 at 4.75% to be repurchased at $8,598,134 on
7/1/1999, collateralized by a $9,220,000 U.S. Treasury
Bond, 3.625%, 4/15/2028 (Cost $8,597,000) ................. 8,597,000 8,597,000
-----------
Convertible Preferred Stocks 0.6%
- ---------------------------------------------------------------------------------------
Shares
- ---------------------------------------------------------------------------------------
Health
Biotechnology
Monsanto Co., 6.5% (Cost $1,240,065) ........................ 30,000 1,203,750
-----------
Common Stocks 95.4%
- ---------------------------------------------------------------------------------------
Consumer Discretionary 1.3%
Department & Chain Stores
Rite Aid Corp. .............................................. 117,800 2,900,825
-----------
Consumer Staples 5.0%
Alcohol & Tobacco 1.1%
Philip Morris Companies, Inc. ............................... 56,600 2,274,613
-----------
Food & Beverage 1.4%
Albertson's Inc. ............................................ 7,378 380,428
H.J. Heinz Co. .............................................. 54,200 2,716,775
-----------
3,097,203
-----------
Package Goods/Cosmetics 2.5%
Avon Products, Inc. ......................................... 95,500 5,300,250
-----------
Health 5.9%
Pharmaceuticals
American Home Products Corp. ................................ 107,300 6,169,750
Bristol-Myers Squibb Co. .................................... 40,600 2,859,763
Glaxo Wellcome PLC (ADR) .................................... 31,700 1,795,013
SmithKline Beecham PLC (ADR) ................................ 30,200 1,995,088
-----------
12,819,614
-----------
Communications 17.4%
Telephone/Communications
Alltel Corp. ................................................ 51,100 3,653,650
Ameritech Corp. ............................................. 30,000 2,205,000
Bell Atlantic Corp. ......................................... 113,750 7,436,406
BellSouth Corp. ............................................. 97,100 4,551,563
Frontier Corp. .............................................. 64,700 3,817,300
GTE Corp. ................................................... 64,400 4,878,300
SBC Communications, Inc. .................................... 78,000 4,524,000
Sprint Corp. ................................................ 93,200 4,922,125
Telesp Participacoes S.A. (ADR)* ............................ 67,400 1,541,775
-----------
37,530,119
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
45
<PAGE>
GROWTH AND INCOME PORTFOLIO
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------
<S> <C> <C>
Financial 18.5%
Banks 9.7%
BANC ONE CORP .......................... 36,900 2,197,856
Bank of America Corp. .................. 74,700 5,476,444
Chase Manhattan Corp. .................. 50,200 4,348,575
First Union Corp. ...................... 46,408 2,181,176
Fleet Financial Group Inc. ............. 55,900 2,480,563
J.P. Morgan & Co., Inc. ................ 7,100 997,550
KeyCorp ................................ 55,100 1,770,088
US Bancorp ............................. 41,600 1,414,400
-----------
20,866,652
-----------
Insurance 4.5%
Lincoln National Corp. ................. 21,800 1,140,413
Marsh & McLennan Companies, Inc. ....... 14,600 1,102,300
Safeco Corp. ........................... 27,500 1,213,438
St. Paul Companies, Inc. ............... 74,700 2,376,394
XL Capital Ltd. "A" .................... 68,742 3,883,923
-----------
9,716,468
-----------
Other Financial Companies 1.7%
Federal National Mortgage Association .. 55,800 3,815,325
-----------
Real Estate 2.6%
Arden Realty Group, Inc. ............... 31,800 783,075
Boston Properties, Inc. (REIT) ......... 38,300 1,374,013
Equity Office Properties Trust (REIT) .. 54,400 1,394,000
General Growth Properties, Inc. (REIT) . 10,200 362,100
ProLogis Trust (REIT) .................. 80,944 1,639,116
-----------
5,552,304
-----------
Service Industries 0.5%
Printing/Publishing
McGraw-Hill Inc. ....................... 19,500 1,051,781
-----------
Durables 8.1%
Aerospace 4.0%
Lockheed Martin Corp. .................. 100,176 3,731,556
Northrop Grumman Corp. ................. 28,200 1,870,013
Rockwell International Corp. ........... 48,200 2,928,150
-----------
8,529,719
-----------
Automobiles 2.7%
Ford Motor Co. ......................... 82,200 4,639,163
Meritor Automotive, Inc. ............... 49,033 1,250,342
-----------
5,889,505
-----------
Construction/Agricultural Equipment 1.4%
Caterpillar Inc. ....................... 23,300 1,398,000
PACCAR, Inc. ........................... 30,700 1,638,613
-----------
3,036,613
-----------
Manufacturing 16.7%
Chemicals 4.5%
Akzo Nobel N.V. (ADR) .................. 45,400 1,923,825
Dow Chemical Co. ....................... 19,100 2,423,313
E.I. du Pont de Nemours & Co. .......... 32,300 2,206,494
</TABLE>
The accompanying notes are an integral part of the financial statements.
46
<PAGE>
GROWTH AND INCOME PORTFOLIO
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ---------------------------------------------------------------------
<S> <C> <C>
Eastman Chemical Co. ...................... 18,200 941,850
Lyondell Petrochemical Co. ................ 104,468 2,154,653
-----------
9,650,135
-----------
Containers & Paper 0.9%
Temple-Inland Inc. ........................ 30,300 2,067,975
-----------
Diversified Manufacturing 0.7%
Canadian Pacific Ltd. (Ord.) .............. 63,500 1,516,237
-----------
Electrical Products 1.4%
Emerson Electric Co. ...................... 23,000 1,446,125
Thomas & Betts Corp. 2,958,125 ............ 32,000 1,512,000
-----------
2,958,125
-----------
Industrial Specialty 4.5%
Corning Inc. .............................. 140,200 9,831,514
-----------
Machinery/Components/Controls 1.4%
Parker-Hannifin Corp. ..................... 64,400 2,946,300
-----------
Office Equipment/Supplies 3.3%
Xerox Corp. ............................... 119,200 7,040,250
-----------
Energy 9.7%
Oil & Gas Production 2.0%
Conoco Inc. "A" ........................... 68,900 1,920,588
Total Fina SA (ADR) ....................... 36,066 2,324,003
-----------
4,244,591
-----------
Oil Companies 6.3%
BP Amoco Plc (ADR) ........................ 24,506 2,658,901
Mobil Corp. ............................... 22,200 2,197,800
Royal Dutch Petroleum Co. (New York shares) 36,400 2,193,100
Societe Nationale Elf Aquitaine (ADR) ..... 44,156 3,248,226
Texaco Inc. ............................... 52,600 3,287,500
-----------
13,585,527
-----------
Oil/Gas Transmission 1.4%
Williams Cos., Inc. ....................... 74,100 3,153,881
-----------
Metals & Minerals 2.0%
Precious Metals 0.3%
Freeport McMoRan Copper & Gold, Inc. "A" .. 35,000 586,250
-----------
Steel & Metals 1.7%
Allegheny Teledyne Inc. ................... 126,252 2,856,452
Oregon Steel Mills, Inc. .................. 13,500 179,719
Phelps Dodge Corp. ........................ 5,400 334,463
Reynolds Metals Co. ....................... 6,200 365,800
-----------
3,736,434
-----------
Construction 3.5%
Building Products 1.5%
Georgia Pacific Group ..................... 67,000 3,174,125
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
47
<PAGE>
GROWTH AND INCOME PORTFOLIO
<TABLE>
Market
Shares Value ($)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Forest Products 2.0%
Georgia Pacific Timber Group .............................. 27,200 686,800
Weyerhaeuser Co. .......................................... 52,600 3,616,250
-----------
4,303,050
-----------
Transportation 3.6%
Railroads
CSX Corp. ................................................. 92,900 4,209,531
Canadian National Railway Co. ............................. 28,800 1,943,185
Norfolk Southern Corp. .................................... 51,000 1,536,375
-----------
7,689,091
-----------
Utilities 3.2%
Electric Utilities
CINergy Corp. ............................................. 60,900 1,948,800
PacifiCorp ................................................ 119,600 2,197,650
Unicom Corp. .............................................. 69,800 2,691,663
-----------
6,838,113
-----------
Total Common Stocks (Cost $161,475,163) ................... 205,702,589
-----------
- ---------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $171,312,228) (a) 215,503,339
===========
- ---------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) At June 30, 1999, the net unrealized appreciation on investments
based on cost for federal income tax purposes of $171,321,117
was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of market value over tax cost . $47,641,519
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over market value . 3,459,297
-----------
Net unrealized appreciation ............................... $44,182,222
============
-------------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short-term
investments), for the six months ended June 30, 1999, $33,563,196 and
$39,062,219, respectively.
The accompanying notes are an integral part of the financial statements.
48
<PAGE>
GROWTH AND INCOME PORTFOLIO
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------
June 30, 1999 (Unaudited)
- ------------------------------------------------------------------------
<S> <C>
Assets
Investments, at market (identified cost $171,312,228) ........... $215,503,339
Receivable for investments sold ................................. 347,123
Dividends and interest receivable ............................... 379,535
Foreign taxes recoverable ....................................... 37,702
Receivable for Portfolio shares sold ............................ 246,213
Other assets .................................................... 143
------------
Total assets .................................................... 216,514,055
Liabilities
Payable for investments purchased ............................... 100,163
Payable for Portfolio shares redeemed ........................... 94,573
Accrued management fee .......................................... 78,193
Other payables and accrued expenses ............................. 68,014
------------
Total liabilities ............................................... 340,943
------------
Net assets, at market value ..................................... $216,173,112
============
Net Assets
Net assets consist of:
Undistributed net investment income (loss) ...................... 1,094,259
Net unrealized appreciation (depreciation) on:
Investments ..................................................... 44,191,111
Foreign currency related transactions ........................... 21
Accumulated net realized gain (loss) ............................ 1,071,282
Paid-in capital ................................................. 169,816,439
------------
Net assets, at market value ..................................... $216,173,112
============
Class A
Net asset value, offering and redemption price per share
($200,809,205 / 17,337,985 outstanding shares of beneficial
interest, no par value, unlimited number of shares authorized) $ 11.58
============
Class B
Net asset value, offering and redemption price per share
($15,363,907 / 1,328,670 outstanding shares of beneficial
interest, no par value, unlimited number of shares authorized) $ 11.56
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
49
<PAGE>
GROWTH AND INCOME PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
- ----------------------------------------------------------------------------------------------------
Six Months Ended June 30, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------------------
<S> <C>
Investment Income
Income:
Dividends (net of foreign taxes withheld of $68,238) ............. $ 2,493,785
Interest ......................................................... 123,149
------------
2,616,934
------------
Expenses:
Management fee ................................................... 468,399
Accounting fees .................................................. 47,996
Trustees' fees and expenses ...................................... 9,189
Distribution fees (Class B) ...................................... 17,991
Custodian fees ................................................... 9,740
Auditing ......................................................... 6,646
Legal ............................................................ 3,464
Shareholder reports and other .................................... 5,886
------------
569,311
------------
Net investment income ............................................ 2,047,623
------------
Net realized and unrealized gain (loss) on investment transactions
Net realized gain (loss) from:
Investments ...................................................... 1,280,399
Foreign currency related transactions ............................ (1,098)
------------
1,279,301
------------
Net unrealized appreciation (depreciation) during the period on:
Investments ...................................................... 18,855,125
Foreign currency related transactions ............................ (45)
------------
18,855,080
------------
Net gain (loss) on investment transactions ....................... 20,134,381
------------
Net increase (decrease) in net assets resulting from operations .. $ 22,182,004
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
50
<PAGE>
GROWTH AND INCOME PORTFOLIO
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------
Six Months Year Ended
Ended December 31,
June 30, 1999 1998
Increase (Decrease) in Net Assets (Unaudited)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income .......................................... $ 2,047,623 $ 4,408,892
Net realized gain (loss) from investment transactions .......... 1,279,301 14,139,726
Net unrealized appreciation (depreciation) on investment
transactions during the period .............................. 18,855,080 (7,231,709)
------------- -------------
Net increase (decrease) in net assets resulting from operations 22,182,004 11,316,909
------------- -------------
Distributions to shareholders from:
Net investment income (Class A) ................................ (2,084,300) (3,753,510)
------------- -------------
Net investment income (Class B) ................................ (145,438) (233,817)
------------- -------------
Net realized gains from investment transactions (Class A) ...... (13,310,859) (10,931,939)
------------- -------------
Net realized gains from investment transactions (Class B) ...... (1,061,031) (570,394)
------------- -------------
Portfolio share transactions:
Class A
Proceeds from shares sold ...................................... 44,117,467 75,991,394
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................... 15,395,159 14,685,449
Cost of shares redeemed ........................................ (48,342,620) (59,210,902)
------------- -------------
Net increase (decrease) in net assets from Class A share
transactions ................................................ 11,170,006 31,465,941
------------- -------------
Class B*
Proceeds from shares sold ...................................... 1,223,924 9,860,282
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................... 1,206,469 804,210
Cost of shares redeemed ........................................ (1,735,661) (2,833,290)
------------- -------------
Net increase (decrease) in net assets from Class B share
transactions ................................................ 694,732 7,831,202
------------- -------------
Increase (decrease) in net assets .............................. 17,445,114 35,124,392
Net assets at beginning of period .............................. 198,727,998 163,603,606
------------- -------------
Net assets at end of period (including undistributed net
investment income of $1,094,259 and $1,276,374, respectively) $ 216,173,112 $ 198,727,998
============= =============
Other Information
Increase (decrease) in Portfolio shares
Class A
Shares outstanding at beginning of period ...................... 16,394,977 13,656,612
------------- -------------
Shares sold .................................................... 3,881,708 6,776,744
Shares issued to shareholders in reinvestment of distributions . 1,356,967 1,299,618
Shares redeemed ................................................ (4,295,667) (5,337,997)
------------- -------------
Net increase (decrease) in Portfolio shares .................... 943,008 2,738,365
------------- -------------
Shares outstanding at end of period ............................ 17,337,985 16,394,977
============= =============
Class B
Shares outstanding at beginning of period ...................... 1,267,444 593,475
------------- -------------
Shares sold .................................................... 108,750 859,390
Shares issued to shareholders in reinvestment of distributions . 106,495 71,382
Shares redeemed ................................................ (154,019) (256,803)
------------- -------------
Net increase (decrease) in Portfolio shares .................... 61,226 673,969
------------- -------------
Shares outstanding at end of period ............................ 1,328,670 1,267,444
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
51
<PAGE>
GROWTH AND INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share
outstanding (a) throughout each period and other performance
information derived from the financial statements.
<TABLE>
<CAPTION>
Class A (c)
- -------------------------- For the Period
May 2, 1994
(commencement
Six Months Ended Years Ended December 31, of operations)
June 30, 1999 ----------------------------------- to December 31,
(Unaudited) 1998 1997 1996 1995 1994
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 11.25 $ 11.48 $ 9.37 $ 7.98 $ 6.26 $ 6.00(b)
------- ------- ------- ------ ------ ------
Income from investment operations:
Net investment income .................... .12 .27 .27 .27 .23 .13
Net realized and unrealized gain (loss) on
investment transactions ................ 1.18 .54 2.47 1.46 1.72 .17
------- ------- ------- ------ ------ ------
Total from investment operations ......... 1.30 .81 2.74 1.73 1.95 .30
------- ------- ------- ------ ------ ------
Less distributions from:
Net investment income .................... (.13) (.25) (.26) (.23) (.19) (.04)
Net realized gains on investment
transactions ........................... (.84) (.79) (.37) (.11) (.04) --
------- ------- ------- ------ ------ ------
Total distributions ...................... (.97) (1.04) (.63) (.34) (.23) (.04)
------- ------- ------- ------ ------ ------
Net asset value, end of period ........... $ 11.58 $ 11.25 $ 11.48 $ 9.37 $ 7.98 $ 6.26
======= ======= ======= ====== ====== ======
Total Return (%) ......................... 11.78** 7.18 30.47 22.17 31.74 4.91**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ... 201 184 157 91 52 20
Ratio of operating expenses, net to
average daily net assets (%) ........... .56* .56 .58 .66 .75 .75*
Ratio of operating expenses, before
reductions, to average daily net assets .56* .56 .58 .66 .75 1.62*
Ratio of net investment income to average
daily net assets (%) ................... 2.09* 2.41 2.54 3.14 3.18 3.63*
Portfolio turnover rate (%) .............. 34.57* 38.70 28.41 32.18 24.33 28.41*
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Original capital.
(c) On May 1, 1997 existing shares were designated as Class A shares.
* Annualized
** Not annualized
52
<PAGE>
GROWTH AND INCOME PORTFOLIO
The following table includes selected data for a share
outstanding (a) throughout the period and other performance
information derived from the financial statements.
<TABLE>
<CAPTION>
Class B
- --------------------------- For the Period
May 1, 1997
Six Months (commencement of
Ended sale of Class B
June 30, Year Ended shares) to
1999 December 31, December 31,
(Unaudited) 1998 1997
----------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period ......................... $11.24 $11.47 $ 9.44
------ ------ ------
Income from investment operations:
Net investment income ........................................ .10 .25 .14
Net realized and unrealized gain (loss) on investment
transactions ............................................... 1.18 .54 2.02
------ ------ ------
Total from investment operations ............................. 1.28 .79 2.16
------ ------ ------
Less distributions from:
Net investment income ........................................ (.12) (.23) (.13)
Net realized gains on investment transactions ................ (.84) (.79) --
------ ------ ------
(.96) (1.02) (.13)
------ ------ ------
Net asset value, end of period ............................... $11.56 $11.24 $11.47
====== ====== ======
Total Return (%) ............................................. 11.56** 6.95 22.89**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ....................... 15 14 7
Ratio of operating expenses to average daily net assets (%) .. .81* .79 .80*
Ratio of net investment income to average daily net assets (%) 1.84* 2.20 2.13*
Portfolio turnover rate (%) .................................. 34.57* 38.70 28.41
</TABLE>
(a) Based on monthly average shares outstanding during the period.
* Annualized
** Not annualized
53
<PAGE>
CAPITAL GROWTH PORTFOLIO
INVESTMENT PORTFOLIO as of June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ----------------------------------------------------------------------------------------
REPURCHASE AGREEMENT 2.5%
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated
6/30/1999 at 4.8% to be repurchased at $26,058,474 on
7/1/1999, collateralized by a $21,533,000 U.S. Treasury
Bond, 8.125%, 8/15/2019 (Cost $26,055,000) .............. 26,055,000 26,055,000
-----------
Common Stocks 97.5%
- ----------------------------------------------------------------------------------------
Shares
- ----------------------------------------------------------------------------------------
Consumer Discretionary 13.2%
Department & Chain Stores 9.9%
Dayton Hudson Corp. ........................................ 404,500 26,292,500
Gap Inc. ................................................... 295,800 14,900,925
Home Depot, Inc. ........................................... 474,000 30,543,375
Wal-Mart Stores Inc. ....................................... 422,200 20,371,150
Walgreen Co. ............................................... 314,200 9,229,625
-----------
101,337,575
-----------
Hotels & Casinos 0.7%
Carnival Corp. "A" ......................................... 145,600 7,061,600
-----------
Recreational Products 0.6%
Electronic Arts Inc.* ...................................... 111,400 6,043,450
-----------
Restaurants 1.2%
McDonald's Corp. ........................................... 297,100 12,273,944
-----------
Specialty Retail 0.8%
Office Depot Inc.* ......................................... 382,200 8,432,288
-----------
Consumer Staples 7.2%
Alcohol & Tobacco 2.7%
Anheuser-Busch Companies, Inc. ............................. 222,600 15,790,688
Philip Morris Companies, Inc. .............................. 304,200 12,225,038
-----------
28,015,726
-----------
Food & Beverage 2.9%
Albertson's Inc. ........................................... 260,700 13,442,344
PepsiCo Inc. ............................................... 412,400 15,954,725
-----------
29,397,069
-----------
Package Goods / Cosmetics 1.6%
Procter & Gamble Co. ....................................... 180,300 16,091,775
-----------
Health 12.8%
Biotechnology 1.7%
Amgen Inc.* ................................................ 144,000 8,766,000
MedImmune, Inc.* ........................................... 124,100 8,407,775
-----------
17,173,775
-----------
Health Industry Services 0.5%
IMS Health Inc. ............................................ 176,800 5,525,000
-----------
Pharmaceuticals 10.6%
American Home Products Corp. ............................... 262,900 15,116,750
Baxter International Inc. .................................. 267,200 16,199,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
54
<PAGE>
CAPITAL GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------
<S> <C> <C>
Bristol-Myers Squibb Co. ............. 304,800 21,469,350
Pfizer, Inc. ......................... 182,000 19,974,500
Schering-Plough Corp. ................ 321,650 17,047,450
Warner-Lambert Co. ................... 262,300 18,197,063
------------
108,004,113
------------
Communications 4.2%
Telephone / Communications
Bell Atlantic Corp. .................. 234,800 15,350,050
MCI WorldCom, Inc.* .................. 324,750 28,009,688
------------
43,359,738
------------
Financial 10.4%
Banks 1.0%
Bank of America Corp. ................ 133,982 9,822,555
------------
Insurance 2.6%
American International Group, Inc. ... 230,175 26,944,861
------------
Consumer Finance 4.5%
American Express Credit Corp. ........ 133,000 17,306,625
Associates First Capital Corp. ....... 251,900 11,162,319
Citigroup Inc. ....................... 390,975 18,571,313
------------
47,040,257
------------
Other Financial Companies 2.3%
Federal National Mortgage Association 338,100 23,117,588
------------
Media 8.6%
Advertising 1.6%
Omnicom Group, Inc. .................. 200,000 16,000,000
------------
Broadcasting & Entertainment 1.7%
Infinity Broadcasting Corp.* ......... 268,700 7,993,825
Viacom Inc. "B"* ..................... 221,200 9,732,800
------------
17,726,625
------------
Cable Television 3.8%
AT&T Corp - Liberty Media Group* ..... 878,300 32,277,525
Comcast Corp. "A" .................... 185,600 7,134,000
------------
39,411,525
------------
Print Media 1.5%
Tribune Co. .......................... 173,700 15,133,613
------------
Service Industries 4.3%
EDP Services 2.3%
America Online Inc. .................. 97,100 10,729,550
Automatic Data Processing, Inc. ...... 292,700 12,878,800
------------
23,608,350
------------
Environmental Services 1.5%
Waste Management, Inc. ............... 292,300 15,711,125
------------
Miscellaneous Commercial Services 0.5%
Galileo International, Inc. .......... 102,500 5,477,344
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
55
<PAGE>
CAPITAL GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ---------------------------------------------------------------------
<S> <C> <C>
Durables 4.4%
Aerospace 1.8%
United Technologies Corp. ................. 260,600 18,681,763
------------
Telecommunications Equipment 2.6%
Lucent Technologies Inc. .................. 152,700 10,297,699
Nokia AB Oy "A" (ADR) ..................... 179,600 16,444,625
------------
26,742,324
------------
Manufacturing 8.7%
Diversified Manufacturing 5.1%
General Electric Co. ...................... 181,200 20,475,600
Textron, Inc. ............................. 119,400 9,828,113
Tyco International Ltd. (New) ............. 233,200 22,095,700
------------
52,399,413
------------
Electrical Products 1.0%
Emerson Electric Co. ...................... 159,350 10,019,131
------------
Industrial Specialty 1.9%
Corning Inc. .............................. 281,800 19,761,225
------------
Machinery / Components / Controls 0.7%
Parker-Hannifin Corp. ..................... 148,150 6,777,863
------------
Technology 18.9%
Computer Software 4.6%
Microsoft Corp.* .......................... 396,200 35,732,288
Oracle Systems Corp.* ..................... 295,350 10,964,869
------------
46,697,157
------------
Diverse Electronic Products 1.5%
Applied Materials, Inc.* .................. 210,200 15,528,525
------------
EDP Peripherals 1.8%
EMC Corp.* ................................ 328,000 18,040,000
------------
Electronic Data Processing 5.9%
Compaq Computer Corp. ..................... 199,800 4,732,763
Hewlett-Packard Co. ....................... 99,400 9,989,700
International Business Machines Corp. ..... 181,800 23,497,650
Sun Microsystems, Inc.* ................... 321,000 22,108,875
------------
60,328,988
------------
Semiconductors 3.2%
Intel Corp. ............................... 550,000 32,725,000
------------
Telecommunications Equipment 1.9%
Cisco Systems, Inc.* ...................... 299,400 19,311,300
------------
Energy 4.8%
Oil & Gas Production 1.9%
Royal Dutch Petroleum Co. (New York shares) 330,000 19,882,500
------------
Oil Companies 1.4%
Mobil Corp. ............................... 139,300 13,790,700
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
56
<PAGE>
CAPITAL GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Oilfield Services / Equipment 1.5%
Schlumberger Ltd. ......................................... 241,400 15,374,163
-------------
Total Common Stocks (Cost $705,709,405) ................... 998,769,948
-------------
- -------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $731,764,405) (a) 1,024,824,948
=============
- -------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) At June 30, 1999, the net unrealized appreciation on investments
based on cost for federal income tax purposes of $731,780,094 was
as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized appreciation for all investments in
which there is an excess of market value over tax cost ....... $302,287,953
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over market value ....... 9,243,099
------------
Net unrealized appreciation .................................. $293,044,854
============
</TABLE>
- --------------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short-term
investments), for the six months ended June 30, 1999, aggregated
$325,514,335 and $292,394,350, respectively.
- --------------------------------------------------------------------------------
From November 1, 1998 through December 31, 1998, the Capital Growth
Portfolio incurred approximately $1,300,000 of net realized capital
losses. As permitted by tax regulations, the portfolio intends to elect
to defer and treat as arising in the fiscal year ended December 31,
1999.
The accompanying notes are an integral part of the financial statements.
57
<PAGE>
CAPITAL GROWTH PORTFOLIO
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
- ----------------------------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------------------
Assets
<S> <C>
Investments, at market (identified cost $731,764,405) ............ $1,024,824,948
Receivable for investments sold .................................. 12,129,326
Dividends and interest receivable ................................ 497,904
Receivable for Portfolio shares sold ............................. 676,406
Other assets ..................................................... 709
--------------
Total assets ..................................................... 1,038,129,293
Liabilities
Payable for investments purchased ................................ 10,094,570
Payable for Portfolio shares redeemed ............................ 233,537
Accrued management fee ........................................... 355,648
Other payables and accrued expenses .............................. 58,508
--------------
Total liabilities ................................................ 10,742,263
--------------
Net assets, at market value ...................................... $1,027,387,030
==============
Net Assets
Net assets consist of:
Undistributed net investment income (loss) ....................... 1,294,356
Net unrealized appreciation (depreciation) on investments ........ 293,060,543
Accumulated net realized gain (loss) ............................. 54,732,859
Paid-in capital .................................................. 678,299,272
--------------
Net assets, at market value ...................................... $1,027,387,030
==============
Class A
Net asset value, offering and redemption price per share
($1,026,375,852 / 42,900,852 outstanding shares of beneficial
interest, no par value, unlimited number of shares authorized) $ 23.92
==============
Class B
Net asset value, offering and redemption price per share
($1,011,178 / 45,463 outstanding shares of beneficial interest,
no par value, unlimited number of shares authorized) .......... $ 22.24
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
58
<PAGE>
CAPITAL GROWTH PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
- ----------------------------------------------------------------------------------
Six Months Ended June 30, 1999 (Unaudited)
- ----------------------------------------------------------------------------------
<S> <C>
Investment Income
Income:
Dividends (net of foreign taxes withheld of $57,794) ............. $ 4,249,677
Interest ......................................................... 748,238
-------------
4,997,915
-------------
Expenses:
Management fee ................................................... 2,172,787
Custodian fees ................................................... 21,234
Accounting fees .................................................. 74,420
Trustees' fees and expenses ...................................... 8,931
Distribution fees (Class B) ...................................... 1,111
Auditing ......................................................... 28,126
Legal ............................................................ 15,393
Shareholder reports and other .................................... 14,094
-------------
2,336,096
-------------
Net investment income ............................................ 2,661,819
-------------
Net realized and unrealized gain (loss) on investment transactions
Net realized gain (loss) from:
Investments ...................................................... 56,566,349
Foreign currency related transactions ............................ 329
-------------
56,566,678
-------------
Net unrealized appreciation (depreciation) during the period on:
Investments ...................................................... 41,957,779
Foreign currency related transactions ............................ (288)
-------------
41,957,491
-------------
Net gain (loss) on investment transactions ....................... 98,524,169
-------------
Net increase (decrease) in net assets resulting from operations .. $ 101,185,988
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
59
<PAGE>
CAPITAL GROWTH PORTFOLIO
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended Year Ended
June 30, 1999 December 31,
Increase (Decrease) in Net Assets (Unaudited) 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................................... $ 2,661,819 $ 5,827,536
Net realized gain (loss) from investment transactions ............... 56,566,678 94,147,425
Net unrealized appreciation (depreciation) on investment
transactions during the period ................................... 41,957,491 60,345,461
--------------- ---------------
Net increase (decrease) in net assets resulting from operations ..... 101,185,988 160,320,422
--------------- ---------------
Distributions to shareholders from:
Net investment income (Class A) ..................................... (2,669,192) (5,931,987)
--------------- ---------------
Net investment income (Class B) ..................................... (1,420) (3,769)
--------------- ---------------
Net realized gain from investment transactions (Class A) ............ (95,714,159) (37,496,910)
--------------- ---------------
Net realized gain from investment transactions (Class B) ............ (90,868) (31,248)
--------------- ---------------
Portfolio share transactions:
Class A
Proceeds from shares sold ........................................... 118,304,027 221,448,528
Net asset value of shares issued to shareholders in
reinvestment of distributions .................................... 98,383,351 43,428,896
Cost of shares redeemed ............................................. (93,527,435) (156,849,029)
--------------- ---------------
Net increase (decrease) in net assets from Class A share transactions 123,159,943 108,028,395
--------------- ---------------
Class B
Proceeds from shares sold ........................................... 95,101 449,018
Net asset value of shares issued to shareholders in
reinvestment of distributions .................................... 92,288 35,017
Cost of shares redeemed ............................................. (9,158) (348,013)
--------------- ---------------
Net increase (decrease) in net assets from Class B share
transactions ..................................................... 178,231 136,022
--------------- ---------------
Increase (decrease) in net assets ................................... 126,048,523 225,020,925
Net assets at beginning of period ................................... 901,338,507 676,317,582
--------------- ---------------
Net assets at end of period (including undistributed net investment
income of $1,294,356 and $1,303,149, respectively) ............... $ 1,027,387,030 $ 901,338,507
=============== ===============
Other Information
Increase (decrease) in Portfolio shares
Class A
Shares outstanding at beginning of period ........................... 37,591,894 32,750,652
--------------- ---------------
Shares sold ......................................................... 4,955,952 10,227,932
Shares issued to shareholders in reinvestment of distributions ...... 4,293,111 2,045,403
Shares redeemed ..................................................... (3,940,105) (7,432,093)
--------------- ---------------
Net increase (decrease) in Portfolio shares ......................... 5,308,958 4,841,242
--------------- ---------------
Shares outstanding at end of period ................................. 42,900,852 37,591,894
=============== ===============
Class B
Shares outstanding at beginning of period ........................... 34,617 26,545
--------------- ---------------
Shares sold ......................................................... 7,201 22,532
Shares issued to shareholders in reinvestment of distributions ...... 4,032 1,651
Shares redeemed ..................................................... (387) (16,111)
--------------- ---------------
Net increase (decrease) in Portfolio shares ......................... 10,846 8,072
--------------- ---------------
Shares outstanding at end of period ................................. 45,463 34,617
=============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
60
<PAGE>
CAPITAL GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share
outstanding (a) throughout the period and other performance
information derived from the financial statements.
<TABLE>
<CAPTION>
Class A (b)
- ---------------------------
Six Months Ended Years Ended December 31,
June 30, 1999 ---------------------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period . $ 23.95 $ 20.63 $ 16.50 $ 15.08 $ 12.23 $ 14.95
--------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income ................ .07 .16 .18 .19 .14 .06
Net realized and unrealized gain
(loss) on investment transactions .. 2.46 4.46 5.39 2.68 3.25 (1.42)
--------- ------- ------- ------- ------- -------
Total from investment operations ..... 2.53 4.62 5.57 2.87 3.39 (1.36)
--------- ------- ------- ------- ------- -------
Less distributions from:
Net investment income ................ (.07) (.17) (.19) (.19) (.11) (.05)
Net realized gains on investment
transactions ....................... (2.49) (1.13) (1.25) (1.26) (.43) (1.31)
--------- ------- ------- ------- ------- -------
Total distributions .................. (2.56) (1.30) (1.44) (1.45) (.54) (1.36)
--------- ------- ------- ------- ------- -------
Net asset value, end of period ....... $ 23.92 $ 23.95 $ 20.63 $ 16.50 $ 15.08 $ 12.23
========= ======= ======= ======= ======= =======
Total Return (%) ..................... 11.05** 23.23 35.76 20.13 28.65 (9.67)
Ratios and Supplemental Data
Net assets, end of period ($ millions) 1,026 901 676 440 338 257
Ratio of operating expenses to average .50* .50 .51 .53 .57 .58
daily net assets (%)
Ratio of net investment income to .... .57* .75 .96 1.27 1.06 .47
average daily net assets (%)
Portfolio turnover rate (%) .......... 63.74* 54.73 41.77 65.56 119.41 66.44
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) On May 12, 1997 existing shares were designated as Class A shares.
* Annualized
** Not annualized
61
<PAGE>
CAPITAL GROWTH PORTFOLIO
The following table includes selected data for a share
outstanding (a) throughout the period and other performance
information derived from the financial statements.
<TABLE>
<CAPTION>
Class B
- --------------------------- For the Period
Six Months May 12, 1997
Ended (commencement of
June 30, Year Ended sale of Class B
1999 December 31, shares) to
(Unaudited) 1998 December 31, 1997
---------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period .......... $23.92 $20.61 $17.54
------ ------ ------
Income from investment operations:
Net investment income ......................... .04 .11 .08
Net realized and unrealized gain (loss) on
investment transactions ...................... .81 4.45 3.08
------ ------ ------
Total from investment operations .............. .85 4.56 3.16
------ ------ ------
Less distributions from:
Net investment income ......................... (.04) (.12) (.09)
Net realized gains on investment transactions . (2.49) (1.13) --
------ ------ ------
Total distributions ........................... (2.53) (1.25) (.09)
------ ------ ------
Net asset value, end of period ................ $22.24 $23.92 $20.61
====== ====== ======
Total Return (%) .............................. 10.92** 22.94 18.00**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........ 1 .83 .55
Ratio of operating expenses to average daily
net assets (%) .............................. .75* .75 .75*
Ratio of net investment income to average daily
net assets (%) .............................. .32* .49 .64*
Portfolio turnover rate (%) ................... 63.74* 54.73 41.77
</TABLE>
(a) Based on monthly average shares outstanding during the period.
* Annualized
** Not annualized
62
<PAGE>
LARGE COMPANY GROWTH PORTFOLIO
INVESTMENT PORTFOLIO as of June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------
U.S. Government & Agencies 25.5%
- ------------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Bank Discount Note, 4.47%**,
7/1/1999 (Cost $892,000) ................... 892,000 892,000
---------
Common Stocks 74.5%
- ------------------------------------------------------------------
Shares
- ------------------------------------------------------------------
Consumer Discretionary 11.1%
Department & Chain Stores 8.3%
Consolidated Stores Corp.* ................... 1,750 47,250
Costco Companies, Inc.* ...................... 450 36,028
Dayton Hudson Corp. .......................... 450 29,250
Gap Inc. ..................................... 575 28,966
Home Depot, Inc. ............................. 1,400 90,213
Wal-Mart Stores Inc. ......................... 1,250 60,313
---------
292,020
---------
Recreational Products 1.7%
Electronic Arts Inc.* ........................ 650 35,263
Hasbro, Inc. ................................. 800 22,350
---------
57,613
---------
Restaurants 1.1%
McDonald's Corp. ............................. 950 39,247
---------
Consumer Staples 8.1%
Alcohol & Tobacco 1.0%
Philip Morris Companies, Inc. ................ 800 32,150
---------
Food & Beverage 3.0%
Coca-Cola Co., Inc. .......................... 800 50,000
Kroger Co.* .................................. 1,300 36,319
PepsiCo Inc. ................................. 500 19,344
---------
105,663
---------
Package Goods/Cosmetics 4.1%
Colgate-Palmolive Co. ........................ 400 39,500
Estee Lauder Companies "A" ................... 950 47,619
Procter & Gamble Co. ......................... 650 58,013
---------
145,132
---------
Health 13.1%
Health Industry Services 0.6%
IMS Health Inc. .............................. 650 20,313
---------
Medical Supply & Specialty 2.1%
Medtronic Inc. ............................... 950 73,981
---------
Pharmaceuticals 10.4%
Eli Lilly & Co. .............................. 650 46,556
Johnson & Johnson ............................ 300 29,400
Merck & Co., Inc. ............................ 950 70,300
Pfizer, Inc. ................................. 800 87,800
Schering-Plough Corp. ........................ 800 42,400
SmithKline Beecham PLC (ADR) ................. 650 42,941
Warner-Lambert Co. ........................... 650 45,094
---------
364,491
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
63
<PAGE>
LARGE COMPANY GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------
Communications 2.1%
<S> <C> <C>
Telephone/Communications
Frontier Corp. ......................... 450 26,550
MCI WorldCom, Inc.* .................... 550 47,438
--------
73,988
--------
Financial 4.0%
Insurance 1.5%
American International Group, Inc. ..... 450 52,678
--------
Other Financial Companies 2.5%
Federal Home Loan Mortgage Corp. ....... 450 26,100
Federal National Mortgage Association .. 450 30,769
Morgan Stanley, Dean Witter Discover Co. 300 30,750
--------
87,619
--------
Media 5.2%
Advertising 1.4%
Omnicom Group, Inc. .................... 450 36,000
Outdoor Systems, Inc.* ................. 400 14,600
--------
50,600
--------
Broadcasting & Entertainment 3.5%
Clear Channel Communications, Inc.* .... 950 65,491
Infinity Broadcasting Corp.* ........... 950 28,263
Univision Communication Inc.* .......... 450 29,700
--------
123,454
--------
Cable Television 0.3%
AT&T Corp-- Liberty Media Group* ....... 300 11,025
--------
Service Industries 3.7%
EDP Services 2.1%
America Online Inc. .................... 650 71,825
--------
Investment 0.9%
Charles Schwab Corp. ................... 300 32,963
--------
Miscellaneous Commercial Services 0.7%
Galileo International, Inc. ............ 450 24,047
--------
Durables 3.8%
Telecommunications Equipment
Lucent Technologies Inc. ............... 1,560 105,203
Nokia AB Oy "A" (ADR) .................. 280 25,638
--------
130,841
--------
Manufacturing 5.9%
Diversified Manufacturing 5.3%
General Electric Co. ................... 950 107,350
Textron, Inc. .......................... 450 37,041
Tyco International Ltd. (New) .......... 450 42,638
--------
187,029
--------
</TABLE>
The accompanying notes are an integral part of the financial statements.
64
<PAGE>
LARGE COMPANY GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ---------------------------------------------------------------------------------
<S> <C> <C>
Industrial Specialty 0.6%
QUALCOMM Inc. ........................................... 150 21,525
---------
Technology 17.5%
Computer Software 4.5%
Microsoft Corp.* ........................................ 1,750 157,819
---------
Diverse Electronic Products 1.7%
Applied Materials, Inc.* ................................ 410 30,289
Motorola Inc. ........................................... 300 28,425
---------
58,714
---------
EDP Peripherals 1.2%
EMC Corp.* .............................................. 750 41,250
---------
Electronic Data Processing 3.3%
International Business Machines Corp. ................... 410 52,993
Sun Microsystems, Inc.* ................................. 910 62,676
---------
115,669
---------
Semiconductors 3.4%
Intel Corp. ............................................. 1,560 92,820
Linear Technology Corp. ................................. 410 27,573
---------
120,393
---------
Telecommunications Equipment 3.4%
Cisco Systems, Inc.* .................................... 1,860 119,970
---------
Total Common Stocks (Cost $2,448,865) ................... 2,612,019
=========
- ---------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $3,340,865) (a) 3,504,019
=========
- ---------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
** Discount yield at time of purchase; not an interest rate.
(a) At June 30, 1999, the net unrealized appreciation on investments
based on cost for federal income tax purposes of $3,340,865 was
as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized appreciation for all investments in which there is an
excess of market value over tax cos ............................................ $180,414
Aggregate gross unrealized depreciation for all investments in which there is an
excess of tax cost over market value ........................................... 17,260
--------
Net unrealized appreciation .................................................... $163,154
========
- --------------------------------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short-term investments), for
the six months ended June 30, 1999, aggregated $3,038,192 and $589,293, respectively.
</TABLE>
The accompanying notes are an integral part of the financial statements.
65
<PAGE>
LARGE COMPANY GROWTH PORTFOLIO
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
- -------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
- -------------------------------------------------------------------------------
Assets
<S> <C>
Investments, at market (identified cost $3,340,865) ............. $ 3,504,019
Cash ............................................................ 61,797
Receivable for investments sold ................................. 25,583
Dividends and interest receivable ............................... 946
Receivable for Portfolio shares sold ............................ 118,586
-----------
Total assets .................................................... 3,710,931
Liabilities
Payable for investments purchased ............................... 927,100
Other payables and accrued expenses ............................. 3,731
-----------
Total liabilities ............................................... 930,831
-----------
Net assets, at market value ..................................... $ 2,780,100
===========
Net Assets
Net assets consist of:
Undistributed net investment income (loss) ...................... 3,043
Net unrealized appreciation (depreciation) on investments ....... 163,154
Accumulated net realized gain (loss) ............................ (32)
Paid-in capital ................................................. 2,613,935
-----------
Net assets, at market value ..................................... $ 2,780,100
===========
Class A
Net asset value, offering and redemption price per share
($2,779,451 / 427,428 outstanding shares of beneficial
interest, no par value, unlimited number of shares authorized) $ 6.50
===========
Class B .........................................................
Net asset value, offering and redemption price per share
($649 / 100 outstanding shares of beneficial interest,
no par value, unlimited number of shares authorized) ......... $ 6.49
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
66
<PAGE>
LARGE COMPANY GROWTH PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
- ----------------------------------------------------------------------------------------------------
For the period May 3, 1999 (commencement of operations) to June 30, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------------------
<S> <C>
Investment Income
Income:
Dividends ........................................................ $ 1,183
Interest ......................................................... 5,591
---------
6,774
Expenses:
Management fee ................................................... 1,865
Custodian fees ................................................... 1,566
Accounting fees .................................................. 7,888
Trustees' fees and expenses ...................................... 4,350
Auditing ......................................................... 1,508
Legal ............................................................ 1,276
Shareholder reports and other .................................... 1,682
---------
Total expenses before reductions ................................. 20,135
Expense reductions ............................................... (16,404)
---------
Expenses, net .................................................... 3,731
---------
Net investment income ............................................ 3,043
---------
Net realized and unrealized gain (loss) on investment transactions
Net realized gain (loss) from investments ........................ (32)
---------
Net unrealized appreciation (depreciation) during the period on
investments ................................................... 163,154
---------
Net gain on investment transactions .............................. 163,122
---------
Net increase (decrease) in net assets resulting from operations .. $ 166,165
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
67
<PAGE>
LARGE COMPANY GROWTH PORTFOLIO
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Period
May 3, 1999
(commencement of
operations) to
June 30, 1999
Increase (Decrease) in Net Assets (Unaudited)
- -------------------------------------------------------------------------------------------------------------
<S> <C>
Operations:
Net investment income ............................................... $ 3,043
Net realized gain (loss) from investment transactions ............... (32)
Net unrealized appreciation (depreciation) on investment transactions
during the period ................................................ 163,154
-----------
Net increase (decrease) in net assets resulting from operations ..... 166,165
-----------
Portfolio share transactions:
Class A
Proceeds from shares sold ........................................... 3,131,072
Cost of shares redeemed ............................................. (1,517,137)
-----------
Net increase (decrease) in net assets from Class A share transactions 1,613,935
-----------
Class B
Net increase (decrease) in net assets from Class B share transactions --
-----------
Increase (decrease) in net assets ................................... 1,780,100
Net assets at beginning of period ................................... 1,000,000
-----------
Net assets at end of period (including undistributed net investment
income of $3,043) ................................................ $ 2,780,100
===========
Other Information
Increase (decrease) in Portfolio shares
Class A
Shares outstanding at beginning of period ........................... 166,567
-----------
Shares sold ......................................................... 508,182
Shares redeemed ..................................................... (247,321)
-----------
Net increase (decrease) in Portfolio shares ......................... 260,861
-----------
Shares outstanding at end of period ................................. 427,428
===========
Class B
Shares outstanding at beginning of period ........................... 100
-----------
Net increase (decrease) in Portfolio shares ......................... --
-----------
Shares outstanding at end of period ................................. 100
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
68
<PAGE>
LARGE COMPANY GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share
outstanding (a) throughout the period and other performance
information derived from the financial statements.
<TABLE>
<CAPTION>
Class A
- ----------------------------
For the Period
May 3, 1999
(commencement of
operations) to
June 30, 1999
(Unaudited)
------------------
<S> <C>
Net asset value, beginning of period .......................................... $ 6.00(c)
-------
Income from investment operations:
Net investment income ......................................................... .01
Net realized and unrealized gain (loss) on investment transactions ............ .49
-------
Total from investment operations .............................................. .50
-------
Net asset value, end of period ................................................ $ 6.50
=======
Total Return (%) (b) .......................................................... 8.33**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........................................ 3
Ratio of operating expenses, net to average daily net assets (%) .............. 1.25*
Ratio of operating expenses, before reductions, to average daily net assets (%) 6.75*
Ratio of net investment income to average daily net assets (%) ................ 1.02*
Portfolio turnover rate (%) ................................................... 152.39*
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been reduced.
(c) Original capital.
* Annualized
** Not annualized
69
<PAGE>
LARGE COMPANY GROWTH PORTFOLIO
The following table includes selected data for a share
outstanding (a) throughout the period and other performance
information derived from the financial statements.
<TABLE>
<CAPTION>
Class B
- --------------------------
For the Period
May 3, 1999
(commencement of
operations) to
June 30, 1999
(Unaudited)
------------------
<S> <C>
Net asset value, beginning of period .......................................... $ 6.00(c)
-------
Income from investment operations:
Net investment income ......................................................... .01
Net realized and unrealized gain (loss) on investment transactions ............ .48
-------
Total from investment operations .............................................. .49
-------
Net asset value, end of period ................................................ $ 6.49
=======
Total Return (%) (b) .......................................................... 8.17**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........................................ 0
Ratio of operating expenses, net to average daily net assets (%) .............. 1.50*
Ratio of operating expenses, before reductions, to average daily net assets (%) 7.23*
Ratio of net investment income to average daily net assets (%) ................ .77*
Portfolio turnover rate (%) ................................................... 152.39*
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been reduced.
(c) Original capital.
* Annualized
** Not annualized
70
<PAGE>
SMALL COMPANY GROWTH PORTFOLIO
INVESTMENT PORTFOLIO as of June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ----------------------------------------------------------------------------------
REPURCHASE AGREEMENT 11.0%
- ----------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated
6/30/1999 at 4.5% to be repurchased at $471,062 on 7/1/1999,
collateralized by a $370,000 U.S. Treasury Note, 8.75%,
8/15/2000 (Cost $471,000) .................................. 471,000 471,000
---------
Common Stocks 89.0%
- ----------------------------------------------------------------------------------
Shares
- ----------------------------------------------------------------------------------
Consumer Discretionary 8.9%
Department & Chain Stores 2.2%
Pacific Sunwear of California* ............................... 1,500 36,563
Rent-A-Center, Inc.* ......................................... 2,400 57,600
---------
94,163
---------
Recreational Products 0.3%
THQ, Inc. .................................................... 400 11,500
---------
Restaurants 3.0%
Dave & Buster's, Inc.* ....................................... 1,200 34,800
Il Fornaio America Corp.* .................................... 1,200 17,925
The Cheesecake Factory Inc.* ................................. 2,500 76,250
---------
128,975
---------
Specialty Retail 3.4%
Action Performance Companies, Inc.* .......................... 1,000 33,000
David's Bridal, Inc.* ........................................ 2,300 35,794
Gildan Activewear Inc.* ...................................... 1,600 27,000
Urban Outfitters, Inc.* ...................................... 2,000 50,250
---------
146,044
---------
Consumer Staples 2.7%
Farming 0.4%
Hines Horticulture, Inc.* .................................... 1,600 16,000
---------
Food & Beverage 2.3%
Hain Food Group, Inc.* ....................................... 1,900 39,188
Horizon Organic Holding Corp* ................................ 3,900 57,038
---------
96,226
---------
Health 9.9%
Biotechnology 1.4%
CryoLife, Inc.* .............................................. 4,800 58,800
---------
Health Industry Services 2.4%
IDX Systems Corp.* ........................................... 1,000 22,563
MedQuist, Inc.* .............................................. 1,900 83,125
---------
105,688
---------
Hospital Management 0.5%
Sunrise Assisted Living, Inc.* ............................... 600 20,925
---------
Medical Supply & Specialty 3.9%
Fusion Medical Technologies, Inc.* ........................... 2,900 21,931
Perclose, Inc.* .............................................. 200 9,613
VISX Inc.* ................................................... 1,700 134,619
---------
166,163
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
71
<PAGE>
SMALL COMPANY GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------
<S> <C> <C>
Pharmaceuticals 1.7%
Alexion Pharmaceuticals, Inc.* ........ 2,000 17,750
Coulter Pharmaceutical, Inc.* ......... 2,500 56,406
--------
74,156
--------
Communications 4.8%
Cellular Telephone 1.1%
Research in Motion Ltd.* .............. 2,300 46,367
--------
Telephone/Communications 2.0%
AudioCodes Ltd.* ...................... 300 8,100
IXC Communications, Inc.* ............. 1,100 43,244
Terayon Communication Systems, Inc.* .. 600 33,525
--------
84,869
--------
Telecommunications Equipment 1.7%
Polycom, Inc.* ........................ 1,900 74,100
--------
Financial 3.6%
Banks 1.0%
Astoria Financial Corp. ............... 1,000 43,938
--------
Real Estate 2.6%
Realty Information Group Inc.* ........ 2,600 113,100
--------
Media 2.6%
Advertising 1.7%
AdForce, Inc.* ........................ 1,500 35,250
Speedway Motorsports, Inc.* ........... 1,000 39,313
--------
74,563
--------
Broadcasting & Entertainment 0.9%
Source Media, Inc.* ................... 2,300 39,100
--------
Service Industries 15.9%
EDP Services 2.9%
Pegasus Systems, Inc.* ................ 1,400 52,413
Sapient Corp.* ........................ 800 45,300
Ultimate Software Group, Inc.* ........ 4,800 25,050
--------
122,763
--------
Miscellaneous Commercial Services 10.4%
Abacus Direct Corp.* .................. 1,000 91,500
Cornell Corrections, Inc.* ............ 1,900 31,231
Digital River, Inc.* .................. 1,700 56,525
Eagle USA Airfreight, Inc.* ........... 1,600 67,900
Korn/Ferry International* ............. 2,400 40,800
Modis Professional Services, Inc.* .... 2,000 27,500
Newgen Results Corp.* ................. 2,000 24,000
Whittman-Hart, Inc.* .................. 3,300 104,775
--------
444,231
--------
Miscellaneous Consumer Services 1.5%
Complete Business Solutions, Inc.* .... 1,900 34,081
Steiner Leisure Ltd.* ................. 1,000 30,313
--------
64,394
--------
</TABLE>
The accompanying notes are an integral part of the financial statements.
72
<PAGE>
SMALL COMPANY GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------
<S> <C> <C>
Printing/Publishing 1.1%
Consolidated Graphics, Inc.* ..... 1,000 50,000
--------
Manufacturing 4.4%
Chemicals 1.0%
Albany Molecular Research, Inc.* . 1,400 41,650
--------
Machinery/Components/Controls 0.5%
Astec Industries* ................ 500 20,375
--------
Wholesale Distributors 1.8%
Daisytek International Corp.* .... 2,300 37,519
WESCO International, Inc.* ....... 1,900 38,950
--------
76,469
--------
Miscellaneous 1.1%
Jakks Pacific, Inc.* ............. 1,600 47,700
--------
Technology 27.6%
Computer Software 5.6%
Advent Software, Inc.* ........... 1,000 67,000
MAPICS, Inc.* .................... 2,300 24,294
Pilot Network Services, Inc.* .... 3,900 38,269
SalesLogix Corp.* ................ 100 1,488
TSI International Software Ltd.* . 3,800 107,825
--------
238,876
--------
Diverse Electronic Products 1.3%
InterVU, Inc.* ................... 1,400 53,638
--------
EDP Peripherals 5.3%
AboveNet Communications Inc.* .... 1,000 40,375
CAIS Internet, Inc.* ............. 1,400 25,725
Mercury Interactive Corp.* ....... 2,600 91,975
Network Appliance, Inc.* ......... 1,200 67,050
--------
225,125
--------
Office/Plant Automation 4.9%
Mercury Computer Systems, Inc.* .. 2,300 74,175
Pinnacle Systems, Inc.* .......... 4,100 137,854
--------
212,029
--------
Semiconductors 7.4%
PLX Technology, Inc.* ............ 1,600 75,800
PMC-Sierra, Inc.* ................ 1,000 58,938
Transwitch Corp.* ................ 1,400 66,325
Vitesse Semiconductor Corp.* ..... 1,700 114,644
--------
315,707
--------
Miscellaneous 3.1%
Ask Jeeves, Inc.* ................ 100 1,400
MEDE AMERICA Corp.* .............. 1,400 52,850
National Computer Corp. .......... 1,200 40,500
SonoSite, Inc.* .................. 2,300 39,100
--------
133,850
--------
</TABLE>
The accompanying notes are an integral part of the financial statements.
73
<PAGE>
SMALL COMPANY GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ---------------------------------------------------------------------------------
<S> <C> <C>
Energy 3.7%
Oil & Gas Production 2.2%
Key Production Co., Inc.* ............................... 3,800 34,913
Swift Energy Co.* ....................................... 5,400 57,713
---------
92,626
---------
Oil Companies 0.8%
Stone Energy Corporation* ............................... 800 33,900
---------
Oilfield Services/Equipment 0.7%
National-Oilwell, Inc.* ................................. 2,500 31,719
---------
Construction 2.7%
Building Materials 0.8%
Simpson Manufacturing Co., Inc.* ........................ 700 33,250
---------
Building Products 1.9%
Trex Company, Inc.* ..................................... 3,200 81,200
---------
Transportation 2.2%
Airlines 1.1%
America West Holdings Corp. "B"* ........................ 2,500 47,188
---------
Railroads 1.1%
Wisconsin Central Transportation Co.* ................... 2,500 47,188
---------
Total Common Stocks (Cost $3,424,609) ................... 3,808,555
---------
- ---------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $3,895,609) (a) 4,279,555
=========
- ---------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) At June 30, 1999, the net unrealized appreciation on investments based on
cost for federal income tax purposes of $3,895,609 was as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized appreciation for all investments in which there is an
excess of market value over tax cost ........................................... $506,045
Aggregate gross unrealized depreciation for all investments in which there is an
excess of tax cost over market value ........................................... 122,099
--------
Net unrealized appreciation .................................................... $383,946
========
- --------------------------------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short-term investments), for
the six months ended June 30,1999 aggregated $3,629,723 and $229,119, respectively.
</TABLE>
The accompanying notes are an integral part of the financial statements.
74
<PAGE>
SMALL COMPANY GROWTH PORTFOLIO
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
- ----------------------------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------------------
<S> <C>
Assets
Investments, at market (identified cost $3,895,609) ............. $ 4,279,555
Cash ............................................................ 229
Receivable for investments sold ................................. 34,479
Dividends and interest receivable ............................... 62
Receivable for Portfolio shares sold ............................ 18,148
-----------
Total assets .................................................... 4,332,473
Liabilities
Payable for investments purchased ............................... 43,655
Other payables and accrued expenses ............................. 7,166
-----------
Total liabilities ............................................... 50,821
-----------
Net assets, at market value ..................................... $ 4,281,652
===========
Net Assets
Net assets consist of:
Undistributed net investment income (loss) ...................... (2,997)
Net unrealized appreciation (depreciation) on investments ....... 383,946
Accumulated net realized gain (loss) ............................ 24,005
Paid-in capital ................................................. 3,876,698
-----------
Net assets, at market value ..................................... $ 4,281,652
===========
Class A
Net asset value, offering and redemption price per share
($4,280,983 / 638,797 outstanding shares of beneficial
interest, no par value, unlimited number of shares authorized) $ 6.70
===========
Class B
Net asset value, offering and redemption price per share
($669 / 100 outstanding shares of beneficial interest,
no par value, unlimited number of shares authorized) ......... $ 6.69
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
75
<PAGE>
SMALL COMPANY GROWTH PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
- -----------------------------------------------------------------------------------------
For the period May 3, 1999 (commencement of operations) to June 30, 1999 (Unaudited)
- -----------------------------------------------------------------------------------------
<S> <C>
Investment Income (Loss)
Income:
Dividends ........................................................ $ 184
Interest ......................................................... 3,985
---------
4,169
---------
Expenses:
Management fee ................................................... 4,180
Custodian fees ................................................... 1,044
Accounting fees .................................................. 7,888
Trustees' fees and expenses ...................................... 4,350
Auditing ......................................................... 986
Legal ............................................................ 812
Shareholder reports and other .................................... 1,508
---------
Total expenses before reductions ................................. 20,768
Expense reductions ............................................... (13,602)
---------
Expense, net ..................................................... 7,166
---------
Net investment income (loss) ..................................... (2,997)
---------
Net realized and unrealized gain (loss) on investment transactions
Net realized gain (loss) from investments ........................ 24,005
---------
Net unrealized appreciation (depreciation) during the period on
investments ................................................... 383,946
---------
Net gain (loss) on investment transactions ....................... 407,951
---------
Net increase (decrease) in net assets resulting from operations .. $ 404,954
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
76
<PAGE>
SMALL COMPANY GROWTH PORTFOLIO
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------------------
For the Period
May 3, 1999
(commencement of
operations) to
June 30, 1999
Increase (Decrease) in Net Assets (Unaudited)
- -------------------------------------------------------------------------------------------------------------
<S> <C>
Operations:
Net investment income (loss) ...................................................... $ (2,997)
Net realized gain (loss) from investment transactions ............................. 24,005
Net unrealized appreciation (depreciation) on investment transactions
during the period .............................................................. 383,946
-----------
Net increase (decrease) in net assets resulting from operations ................... 404,954
-----------
Portfolio share transactions:
Class A
Proceeds from shares sold ......................................................... 2,433,904
Cost of shares redeemed ........................................................... (557,206)
-----------
Net increase (decrease) in net assets from Class A share transactions ............. 1,876,698
-----------
Class B
Net increase (decrease) in net assets from Class B share transactions ............. --
-----------
Increase (decrease) in net assets ................................................. 2,281,652
-----------
Net assets at beginning of period ................................................. 2,000,000
-----------
Net assets at end of period (including undistributed net investment loss of $2,997) $ 4,281,652
===========
Other Information
Increase (decrease) in Portfolio shares
Class A
Shares outstanding at beginning of period ......................................... 333,233
-----------
Shares sold ....................................................................... 395,208
Shares redeemed ................................................................... (89,644)
-----------
Net increase (decrease) in Portfolio shares ....................................... 305,564
-----------
Shares outstanding at end of period ............................................... 638,797
===========
Class B
Shares outstanding at beginning of period ......................................... 100
-----------
Net increase (decrease) in Portfolio shares ....................................... --
-----------
Shares outstanding at end of period ............................................... 100
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
77
<PAGE>
SMALL COMPANY GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share
outstanding (a) throughout the period and other performance
information derived from the financial statements.
<TABLE>
<CAPTION>
Class A
- ---------------------------
For the Period
May 3, 1999
(commencement of
operations) to
June 30, 1999
(Unaudited)
------------------
<S> <C>
Net asset value, beginning of period .......................................... $ 6.00(c)
------
Income from investment operations:
Net investment income (loss) .................................................. (.01)
Net realized and unrealized gain (loss) on investment transactions ............ .71
------
Total from investment operations .............................................. .70
------
Net asset value, end of period ................................................ $ 6.70
======
Total Return (%) (b) .......................................................... 11.67**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........................................ 4
Ratio of operating expenses, net to average daily net assets (%) .............. 1.50*
Ratio of operating expenses, before reductions, to average daily net assets (%) 4.35*
Ratio of net investment income (loss) to average daily net assets (%) ......... (.63)*
Portfolio turnover rate (%) ................................................... 41.44*
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been reduced.
(c) Original capital.
* Annualized
** Not annualized
78
<PAGE>
SMALL COMPANY GROWTH PORTFOLIO
The following table includes selected data for a share
outstanding (a) throughout the period and other performance
information derived from the financial statements.
<TABLE>
<CAPTION>
Class B
- --------------------------
For the Period
May 3, 1999
(commencement of
operations) to
June 30, 1999
(Unaudited)
------------------
<S> <C>
Net asset value, beginning of period .......................................... $ 6.00(c)
------
Income from investment operations:
Net investment income (loss) .................................................. (.01)
Net realized and unrealized gain (loss) on investment transactions ............ .70
------
Total from investment operations .............................................. .69
------
Net asset value, end of period ................................................ $ 6.69
======
Total Return (%) (b) .......................................................... 11.50**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........................................ 0
Ratio of operating expenses, net to average daily net assets (%) .............. 1.75*
Ratio of operating expenses, before reductions, to average daily net assets (%) 4.13*
Ratio of net investment income (loss) to average daily net assets (%) ......... (.88)*
Portfolio turnover rate (%) ................................................... 42.73*
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been reduced.
(c) Original capital.
* Annualized
** Not annualized
79
<PAGE>
GLOBAL DISCOVERY PORTFOLIO
INVESTMENT PORTFOLIO as of June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ----------------------------------------------------------------------------------------
Repurchase Agreements 8.5%
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated
6/30/1999 at 4.8% to be repurchased at $3,041,405 on
7/1/1999, collateralized by a $2,354,000 U.S. Treasury
Bond, 8.875%, 2/15/2019 (Cost $3,041,000) .................... 3,041,000 3,041,000
----------
- ----------------------------------------------------------------------------------------
Convertible Bonds 0.7%
- ----------------------------------------------------------------------------------------
France
Transiciel SA (Developer of software for public services,
finance and industry) (Cost $243,911) ........................ 2,174 231,759
----------
- ----------------------------------------------------------------------------------------
Shares
- ----------------------------------------------------------------------------------------
Common Stocks 90.8%
- ----------------------------------------------------------------------------------------
Australia 0.2%
CI Technologies Group, Ltd. (Developer of process monitoring
and industrial automation software) .......................... 18,500 69,588
----------
Austria 0.4%
Schoeller Bleckmann Oilfield Equipment AG (Manufacturer of
components for oil and gas drilling equipment) ............... 1,526 63,176
Topcall International AG (Manufacturer of electronic messaging
systems)* .................................................... 3,136 91,206
----------
154,382
----------
Canada 0.5%
QLT Phototherapeutics Inc. (Developer of pharmaceutical
products)* ................................................... 3,100 169,191
----------
Croatia 0.6%
Pliva D.D. (GDR) (Pharmaceutical company) ...................... 13,420 201,971
----------
Finland 0.8%
JOT Automation Group Oyj (Developer and manufacturer of high
technology production automation systems and equipment) ...... 6,700 272,526
Perlos Oyj (Manufacturer of injection moulds,
electromechanical connectors and assembly equipment)* ........ 1,400 20,576
----------
293,102
----------
France 3.1%
Altran Technologies SA (Engineering and consulting services) (c) 3,209 850,256
Dassault Systemes SA (Computer aided design, manufacturing and
engineering software) ........................................ 3,608 119,684
GFI Informatique (Provider of computer consulting and systems
integration services) ........................................ 549 35,508
Leon de Bruxelles SA (Operator of low cost family restaurants) . 2,168 100,975
----------
1,106,423
----------
Germany 2.2%
Hawesko Holding AG (Marketer of wines and liqueurs and related
products) .................................................... 3,661 125,041
Marscholflek Lautenschlaeger (pfd) (Independent life insurance
company) ..................................................... 801 383,014
Medion AG (Marketer and distributor of multimedia products and
various consumer appliances)* ................................ 195 55,502
Pfeiffer Vacuum Technology AG (ADR) (Manufacturer of various
pumps and vacuum systems) .................................... 3,772 124,005
PrimaCom AG (Developer, manager and operator of broadband
cable networks)* ............................................. 1,019 46,405
W.E.T. Automotive Systems AG (Manufacturer of heating, wiring,
and cable components)* ....................................... 1,528 62,468
----------
796,435
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
80
<PAGE>
GLOBAL DISCOVERY PORTFOLIO
<TABLE>
<CAPTION>
Market
Shares Value ($)
- --------------------------------------------------------------------------------------
<S> <C> <C>
Greece 0.3%
STET Hellas Telecom SA (ADR) (Mobile telecommunication
services)* ................................................. 4,900 109,638
---------
Hungary 0.2%
OTP Bank Rt (Savings and commercial bank) .................... 100 4,179
OTP Bank Rt (GDR) ............................................ 1,850 76,775
---------
80,954
---------
Ireland 7.7%
Anglo Irish Bank Corp. PLC (Provider of financial services for
business and private sectors) .............................. 230,450 570,044
ESAT Telecom Group PLC (ADR) (Provider of telecommunication
services)* ................................................. 9,500 416,813
Elan Corp. "A" Warrants (expire 12/31/2001) (Developer of
controlled-absorption drug delivery systems)* .............. 13,200 415,800
Green Property PLC (Conducts operations in property
development, investment and trading) ....................... 30,083 162,795
Irish Continental Group PLC (Transporter of passengers,
freight and containers between Ireland the U.K. and
the continent) ............................................ 17,951 230,383
Irish Life & Permanent PLC (Retail financial services group)* 38,036 403,514
Jury's Hotel Group PLC (Hotel operator) ...................... 52,116 415,338
Ryan Hotels PLC (Owner and operator of hotel chain) (b) ...... 162,604 144,734
---------
2,759,421
---------
Israel 1.2%
Check Point Software Technologies Ltd. (Developer, marketer
and supporter of management solutions for active networks) . 8,100 434,363
---------
Italy 1.5%
Bulgari SpA (Manufacturer and retailer of fine jewelry, luxury
watches and perfumes) ...................................... 37,666 254,178
Safilo SpA (Manufacturer of frames for glasses) .............. 43,843 265,458
---------
519,636
---------
Japan 4.3%
Benesse Corp. (Provider of educational services) ............. 4,000 434,711
Fujitsu Support and Service Inc. (Provider of information
services and support for computer network systems) ......... 5,000 757,025
Jafco Co., Ltd. (Venture capital company) .................... 3,000 198,347
York-Benimaru Co., Ltd. (Operator of supermarket chain) ...... 4,300 162,405
---------
1,552,488
---------
Luxembourg 1.0%
Millicom International Cellular SA (Developer and operator of
cellular telephone networks) ............................... 10,800 340,200
---------
Netherlands 2.2%
De Telegraaf Holding NV (Leading publisher of newspapers,
magazines and books) ....................................... 5,918 116,990
IHC Caland NV (Dredging and offshore services) ............... 15,160 596,243
United Pan-Europe Communications NV (Provider of television
and telecommunication services)* ........................... 1,350 73,495
---------
786,728
---------
Philippines 0.4%
International Container Terminal Services, Inc. (Containerized
cargo handling firm) ....................................... 1,216,935 158,313
---------
Portugal 2.6%
Jeronimo Martins SGPS, SA (Food producer and retailer) ....... 12,791 424,035
Telecel-Comunicacoes Pessoais, SA (Cellular communication
services) .................................................. 3,950 511,031
---------
935,066
---------
Spain 0.7%
TelePizza, SA (Operator of fast food restaurants)* ........... 37,812 196,460
Telefonica Publicidad e Informacion, S.A. (Publisher of
telephone directories)* .................................... 3,281 65,709
---------
262,169
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
81
<PAGE>
GLOBAL DISCOVERY PORTFOLIO
<TABLE>
<CAPTION>
Market
Shares Value ($)
- --------------------------------------------------------------------------------------
<S> <C> <C>
Sweden 0.3%
Framtidsfabriken AB (Internet consulting company)* ........... 601 11,934
Kinnevik AB "B" (Diversified holding company) ................ 4,535 85,761
---------
97,695
---------
Switzerland 0.4%
Kuoni Reisen AG (Travel agency)* ............................. 42 154,294
---------
United Kingdom 12.2%
ARM Holdings PLC (Producer of RISC microprocessors technology
and software)* ............................................. 28,808 335,424
Aegis Group PLC (Independent media services group) ........... 82,443 182,098
Bodycote International PLC (Diversified holding company) ..... 51,665 323,195
Expro International Group PLC (Provider of oilfield services) 37,141 198,059
Games Workshop Group PLC (Manufacturer of table top war game
systems and miniatures) .................................... 13,751 80,922
Guardian IT PLC (Provider of business continuity and disaster
recovery services) ......................................... 7,110 62,257
ICON PLC (ADR) (Pharmaceutical and biotechnological research
and development services)* ................................. 3,800 74,575
Matalan PLC (Clothing retailer) .............................. 21,712 301,444
PizzaExpress PLC (Operator of pizza restaurants) ............. 22,077 320,444
Provident Financial PLC (Personal finance group)* ............ 32,533 447,574
RM PLC (Information technology solutions to educational
markets) ................................................... 57,642 454,709
Regent Inns PLC (Owner and operator of hotels and restaurants) 52,199 160,591
Serco Group PLC (Facilities management company)* ............. 60,131 1,356,622
Taylor Nelson Sofres PLC (Market research company) ........... 25,332 63,147
---------
4,361,061
---------
United States 48.0%
America West Holdings Corp. "B" (Passenger airline) .......... 17,200 324,650
American Axle & Manufacturing Holdings, Inc. (Designer and
manufacturer of automobile parts) .......................... 500 7,000
Anadarko Petroleum Corp. (Oil and gas exploration and
production) ................................................ 4,800 176,700
Aptargroup, Inc. (Manufacturer of packaging equipment
components) ................................................ 10,000 300,000
Audiovox Corporation "A" (Supplier of automotive accessories)* 100 1,138
Axogen Ltd. Units (Developer of therapeutic products for
treatment of neurological disorders) ....................... 9,000 282,375
Barrett Resources Corp. (Oil and gas exploration and
production)* ............................................... 5,700 218,738
Billing Concepts Corp. (Billing and information management
services)* ................................................. 45,500 509,031
Black Box Corp. (Manufacturer of wide area networking
products, direct marketer of computer products)* ........... 3,300 165,413
CNF Transportation, Inc. (Trucking, air freight) ............. 8,100 310,838
Concentra Managed Care, Inc. (Provider of integrated
nonrisk-bearing workers' compensation managed care)* ....... 12,500 185,156
Concord EFS, Inc. (Electronic transaction authorization,
processing, settlement and transfer services)* ............. 15,000 634,688
Cumulus Media Inc. "A" (Radio broadcasting company)* ......... 1,800 36,430
Diamond Offshore Drilling, Inc. (Offshore oil and gas well
drilling) .................................................. 9,000 255,375
Eagle USA Airfreight, Inc. (Provider of airfreight forwarding
services)* ................................................. 1,200 50,925
El Paso Electric Co. (Electricity generator and distributor)* 3,900 34,856
Fiserv Inc. (Provider of data processing services)* .......... 23,800 745,238
G & K Services, Inc. "A" (Uniform rentals) ................... 4,400 230,450
Hain Food Group, Inc. (Provider of specialty food products)* . 1,700 35,063
IDX Systems Corp. (Provider of health care information systems
to physician groups and academic medical centers)* ......... 14,466 326,389
Keane, Inc. (Provider of computer software project management
and design development services)* .......................... 5,200 117,650
MIH Ltd. (Provider of pay-TV services) ....................... 5,600 148,400
Mercury Computer Systems, Inc. (Manufacturer of digital signal
processing computer systems)* .............................. 6,700 216,075
Network Appliance, Inc. (Designer and manufacturer of network
data storage devices)* ..................................... 26,100 1,458,338
Newpark Resources, Inc. (Environmental management and oilfield
construction services)* .................................... 3,400 30,175
Performance Food Group Co. (Food distributor)* ............... 1,300 35,344
</TABLE>
The accompanying notes are an integral part of the financial statements.
82
<PAGE>
GLOBAL DISCOVERY PORTFOLIO
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
S & P Mid-Cap 400 Depository Receipts (Security that
represents ownership in the Mid-Cap SPDR Trust) ............ 11,000 862,125
Sola International, Inc. (Manufacturer of plastic eyeglass
lenses)* ................................................... 17,800 345,988
Sterling Commerce, Inc. (Producer of electronic data
interchange products and services)* ........................ 26,025 949,913
Symbol Technologies Inc. (Manufacturer of bar code laser
scanners) .................................................. 14,175 522,703
TSI International Software Ltd. (Provider of software and
related services to businesses)* ........................... 1,400 39,725
Taubman Centers, Inc. (Real estate investment trust company) . 2,600 34,288
The Cheesecake Factory Incorporated (Operator of casual dining
restaurants)* .............................................. 1,200 36,600
Tiffany & Co. (Retailer of jewelry and gift items) ........... 12,900 1,244,850
Total Renal Care Holdings, Inc. (Dialysis services for
treatment of chronic kidney failure)* ...................... 28,766 447,671
VISX Inc. (Developer of laser technologies and systems for
vision correction)* ........................................ 43,600 3,452,575
Vitesse Semiconductor Corp. (Manufacturer of digital
integrated circuits)* ...................................... 22,600 1,524,088
Wesley Jessen VisionCare, Inc. (Manufacturer of soft contact
lenses)* ................................................... 7,200 233,100
Wisconsin Central Transportation Co. (Operator of regional
freight railroad)* ......................................... 32,700 617,213
----------
17,147,274
----------
Total Common Stocks (Cost $24,154,852) ....................... 32,490,392
----------
- ----------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $27,439,763) (a) .. 35,763,151
==========
- ----------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) At June 30, 1999, the net unrealized appreciation on investments based on
cost for federal income tax purposes of $27,656,348 was as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized appreciation for all investments in which there is an
excess of market value over tax cost ......................................... $10,122,458
Aggregate gross unrealized depreciation for all investments in which there is an
excess of tax cost over market value ......................................... 2,015,655
-----------
Net unrealized appreciation ..................................................... $ 8,106,803
===========
(b) When-issued or forward delivery security.
(c) At June 30, 1999, this security, in part or in whole, has been segregated to cover
a when-issued or forward delivery security.
- -------------------------------------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short-term investments),
for the six months ended June 30, 1999, aggregated $10,090,950 and $7,891,895,
respectively.
</TABLE>
The accompanying notes are an integral part of the financial statements.
83
<PAGE>
GLOBAL DISCOVERY PORTFOLIO
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
- ----------------------------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------------------
<S> <C>
Assets
Investments, at market (identified cost $27,439,763) ................. $ 35,763,151
Cash ................................................................. 2,745
Receivable for investments sold ...................................... 190,502
Foreign taxes recoverable ............................................ 6,128
Dividends and interest receivable .................................... 18,331
Receivable for Portfolio shares sold ................................. 223,997
Other assets ......................................................... 220
------------
Total assets ......................................................... 36,205,074
Liabilities
Payable for investments purchased .................................... 714,165
Payable for when-issued and forward delivery securities .............. 3,920
Payable for Portfolio shares redeemed ................................ 1,936
Accrued management fee ............................................... 27,059
Other payables and accrued expenses .................................. 57,113
------------
Total liabilities .................................................... 804,193
------------
Net assets, at market value .......................................... $ 35,400,881
============
Net Assets
Net assets consist of:
Undistributed net investment income (loss) ........................... (88,491)
Net unrealized appreciation (depreciation) on:
Investments .......................................................... 8,323,387
Foreign currency related transactions ................................ (1,175)
Accumulated net realized gain (loss) ................................. 421,711
Paid-in capital ...................................................... 26,745,449
------------
Net assets, at market value .......................................... $ 35,400,881
============
Class A
Net asset value, offering and redemption price per share
($31,828,193 / 3,618,446 outstanding shares of beneficial interest,
no par value, unlimited number of shares authorized) .............. $ 8.80
============
Class B
Net asset value, offering and redemption price per share
($3,572,688 / 408,102 outstanding shares of beneficial interest,
no par value, unlimited number of shares authorized) .............. $ 8.75
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
84
<PAGE>
GLOBAL DISCOVERY PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
- ----------------------------------------------------------------------------------------------------
Six Months Ended June 30, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------------------
<S> <C>
Investment Income
Income:
Dividends (net of foreign taxes withheld of $13,242) ............. $ 121,450
Interest ......................................................... 60,821
-----------
182,271
-----------
Expenses:
Management fee ................................................... 150,993
Trustees' fees and expenses ...................................... 9,189
Accounting fees .................................................. 36,086
Services to shareholders ......................................... 263
Custodian fees ................................................... 65,403
Distribution fees (Class B) ...................................... 4,698
Auditing ......................................................... 1,062
Legal ............................................................ 96
Shareholder reports and other .................................... 3,871
-----------
271,661
-----------
Net investment income (loss) ..................................... (89,390)
-----------
Net realized and unrealized gain (loss) on investment transactions
Net realized gain (loss) from:
Investments ...................................................... 677,013
Foreign currency related transactions ............................ (2,255)
-----------
674,758
-----------
Net unrealized appreciation (depreciation) during the period on:
Investments ...................................................... 2,577,795
Foreign currency related transactions ............................ (1,709)
-----------
2,576,086
-----------
Net gain (loss) on investment transactions ....................... 3,250,844
-----------
Net increase (decrease) in net assets resulting from operations .. $ 3,161,454
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
85
<PAGE>
GLOBAL DISCOVERY PORTFOLIO
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
June 30, 1999 December 31,
Increase (Decrease) in Net Assets (Unaudited) 1998
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) .................................. $ (89,390) $ (106,011)
Net realized gain (loss) from investment transactions ......... 674,758 514,766
Net unrealized appreciation (depreciation) on investment
transactions during the period ............................. 2,576,086 3,279,878
------------ ------------
Net increase (decrease) in net assets resulting from operations 3,161,454 3,688,633
------------ ------------
Distributions to shareholders from:
Net investment income (Class A) ............................... -- (312,453)
------------ ------------
Net investment income (Class B) ............................... -- (41,745)
------------ ------------
Net realized gains from investment transactions (Class A) ..... (336,073) (182,265)
------------ ------------
Net realized gains from investment transactions (Class B) ..... (38,073) (24,351)
------------ ------------
Portfolio share transactions:
Class A
Proceeds from shares sold ..................................... 14,373,698 18,978,160
Net asset value of shares issued to shareholders in
reinvestment of distributions .............................. 336,073 494,718
Cost of shares redeemed ....................................... (10,827,287) (14,676,750)
------------ ------------
Net increase (decrease) in net assets from Class A share
transactions ............................................... 3,882,484 4,796,128
------------ ------------
Class B*
Proceeds from shares sold ..................................... 565,224 2,431,156
Net asset value of shares issued to shareholders in
reinvestment of distributions .............................. 38,073 66,096
Cost of shares redeemed ....................................... (1,375,237) (1,033,311)
------------ ------------
Net increase (decrease) in net assets from Class B share
transactions ............................................... (771,940) 1,463,941
------------ ------------
Increase (decrease) in net assets ............................. 5,897,852 9,387,888
Net assets at beginning of period ............................. 29,503,029 20,115,141
------------ ------------
Net assets at end of period (including undistributed net
investment income (loss) of $(88,491) and $899,
respectively) .............................................. $ 35,400,881 $ 29,503,029
============ ============
Other Information
Increase (decrease) in Portfolio shares
Class A
Shares outstanding at beginning of period ..................... 3,172,540 2,526,754
------------ ------------
Shares sold ................................................... 1,725,765 2,524,146
Shares issued to shareholders in reinvestment of distributions 40,056 66,139
Shares redeemed ............................................... (1,319,915) (1,944,499)
------------ ------------
Net increase (decrease) in Portfolio shares ................... 445,906 645,786
------------ ------------
Shares outstanding at end of period ........................... 3,618,446 3,172,540
============ ============
Class B
Shares outstanding at beginning of period ..................... 500,409 314,140
------------ ------------
Shares sold ................................................... 68,033 312,746
Shares issued to shareholders in reinvestment of distributions 4,560 8,848
Shares redeemed ............................................... (164,900) (135,325)
------------ ------------
Net increase (decrease) in Portfolio shares ................... (92,307) 186,269
------------ ------------
Shares outstanding at end of period ........................... 408,102 500,409
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
86
<PAGE>
GLOBAL DISCOVERY PORTFOLIO
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share
outstanding (a) throughout each period and other performance
information derived from the financial statements.
<TABLE>
<CAPTION>
Class A (c)
- -------------------------- For the Period
May 1, 1996
Six Months Years Ended (commencement of
Ended December 31, operations) to
June 30, 1999 December 31,
(Unaudited) 1998 1997 1996
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............ $ 8.04 $ 7.08 $ 6.33 $ 6.00(b)
------ ------ ------ ------
Income from investment operations:
Net investment income (loss) .................... (.02) (.03) (.03) (.01)
Net realized and unrealized gain (loss) on
investment transactions ...................... .88 1.18 .81 .34
------ ------ ------ ------
Total from investment operations ................ .86 1.15 .78 .33
------ ------ ------ ------
Less distributions from:
Net investment income ........................... -- (.12) (.02) --
Net realized gains on investment transactions ... (.10) (.07) (.01) --
------ ------ ------ ------
Total distributions ............................. (.10) (.19) (.03) --
------ ------ ------ ------
Net asset value, end of period .................. $ 8.80 $ 8.04 $ 7.08 $ 6.33
====== ====== ====== ======
Total Return (%) ................................ 10.76** 16.44(d) 12.38(d) 5.50(d)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) .......... 32 25 18 17
Ratio of operating expenses, net to average daily
net assets (%) ................................ 1.72* 1.72 1.50 1.50*
Ratio of operating expenses before expense
reductions, to average daily net assets (%) ... 1.72* 1.79 1.79 2.32*
Ratio of net investment income (loss) to average
daily net assets (%) .......................... (.55)* (.40) (.44) (.13)*
Portfolio turnover rate (%) ..................... 54.56* 54.37 83.16 50.31*
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Original capital.
(c) On May 2, 1997 existing shares were designated as Class A shares.
(d) Total returns would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
87
<PAGE>
GLOBAL DISCOVERY PORTFOLIO
The following table includes selected data for a share
outstanding (a) throughout each period and other performance
information derived from the financial statements.
<TABLE>
<CAPTION>
Class B
- -------------------------- For the Period
May 2, 1997
(commencement of
Six Months Ended Year Ended sale of Class B
June 30, 1999 December 31, shares) to
(Unaudited) 1998 December 31, 1997
----------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period ....................... $ 8.01 $ 7.07 $ 6.20
------ ------ ------
Income from investment operations:
Net investment loss ........................................ (.03) (.05) (.04)
Net realized and unrealized gain (loss) on investment
transactions ............................................. .87 1.18 .91
------ ------ ------
Total from investment operations ........................... .84 1.13 .87
------ ------ ------
Less distributions from:
Net investment income ...................................... -- (.12) --
Net realized gains on investment transactions .............. (.10) (.07) --
------ ------ ------
Total distributions ........................................ (.10) (.19) --
------ ------ ------
Net asset value, end of period ............................. $ 8.75 $ 8.01 $ 7.07
====== ====== ======
Total Return (%) ........................................... 10.55** 16.18(b) 14.03(b)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ..................... 4 4 2
Ratio of operating expenses, net to average daily net assets
(%) ...................................................... 1.97* 1.98 1.75
Ratio of operating expenses, before reductions, to average
daily net assets (%) ..................................... 1.97* 2.04 2.00*
Ratio of net investment loss to average daily net assets (%) (.81)* (.69) (.89)*
Portfolio turnover rate (%) ................................ 54.56* 54.37 83.16
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
88
<PAGE>
INTERNATIONAL PORTFOLIO
INVESTMENT PORTFOLIO as of June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ----------------------------------------------------------------------------------------
REPURCHASE AGREEMENT 4.5%
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated
6/30/1999 at 4.8% to be repurchased at $25,779,437 on
7/1/1999, collateralized by a $25,486,000 U.S. Treasury
Note, 6.125%, 9/30/2000 (Cost $25,776,000) ................. 25,776,000 25,776,000
-----------
- ----------------------------------------------------------------------------------------
Convertible Bonds 0.4%
- ----------------------------------------------------------------------------------------
Luxembourg
Eurotunnel Finance Ltd., 4/30/2040 (Cost $2,218,612) ......... 1,700 2,392,919
-----------
- ----------------------------------------------------------------------------------------
Shares
- ----------------------------------------------------------------------------------------
Common Stocks 95.1%
- ----------------------------------------------------------------------------------------
Australia 1.9%
Broken Hill Proprietary Co. Ltd. (Petroleum, minerals, and
steel) ..................................................... 473,400 5,515,407
WMC Ltd. (Mineral exploration and production) ................ 826,283 3,570,136
Woodside Petroleum Ltd. (Major oil and gas producer) ......... 298,500 2,032,971
-----------
11,118,514
-----------
Canada 1.4%
Canadian National Railway Co. (Railroad operator) ............ 120,800 8,150,580
-----------
China 0.3%
Anhui Expressway Co., Ltd. "H" (Developer and manager of toll
highways in Anhui Province) ................................ 2,434,900 332,658
GZI Transport Ltd. (Developer and operator of toll highways in
Guangdong Province) ........................................ 556,400 121,912
Jiangsu Expressway Co., Ltd. "H" (Builder and manager of the
Shanghai-Nanjing expressway) ............................... 1,932,300 418,403
Shenzhen Expressway Co. "H" (Highway developer) .............. 1,947,400 411,633
Sichuan Expressway Co. "H" (Developer of toll roads, bridges
and tunnels) ............................................... 1,382,000 144,279
Zhejiang Expressway Co., Ltd. "H" (Road construction and
management) ................................................ 1,304,700 258,966
-----------
1,687,851
-----------
Finland 1.9%
Nokia Oyj (Manufacturer of telecommunication networks and
equipment) ................................................. 122,200 10,750,540
-----------
France 14.6%
AXA SA (Insurance group providing insurance, finance and real
estate services) ........................................... 29,191 3,574,159
Accor SA (Provider of catering, hotel and travel services) ... 23,597 5,946,972
Alstom* (Designer and manufacturer of infrastructure systems
and components) ............................................ 52,888 1,669,541
Carrefour SA (Hypermarket operator and food retailer) ........ 20,196 2,978,656
Christian Dior (Leading fashion house) ....................... 34,001 5,560,181
Club Mediterranee SA* (Operator of vacation resorts) ......... 10,521 1,120,502
Elf Aquitaine SA (Petroleum company) ......................... 76,020 11,196,259
Etablissements Economiques du Casino Guichard-Perrachon SA
(Operator of supermarkets and convenience stores) .......... 75,020 4,122,985
Eurotunnel SA* (Bearer) (Channel Tunnel consortium) .......... 3,693,064 5,465,917
LVMH (Louis Vuitton Moet Hennessy) (Producer of wines, spirits
and luxury products) ....................................... 10,134 2,977,738
LVMH (Louis Vuitton Moet Hennessy) (Rights) .................. 10,134 297,354
Lagardere S.C.A. (Holding company with interests in
publishing, defense, audiovisual production and services,
telecommunications and media) .............................. 132,004 4,932,129
Pinault-Printemps-Redoute SA (Operator of department stores) . 15,900 2,738,360
Renault SA (Manufacturer of automobiles, buses, industrial and
agricultural vehicles) ..................................... 63,721 2,783,141
Rhone-Poulenc SA "A" (Medical, agricultural and consumer
chemicals) ................................................. 160,641 7,367,130
STMicroelectronics NV (Manufacturer of semiconductor
integrated circuits) ....................................... 60,474 4,043,350
</TABLE>
The accompanying notes are an integral part of the financial statements.
89
<PAGE>
INTERNATIONAL PORTFOLIO
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Societe BIC SA (Manufacturer of office supplies) .............. 105,719 5,596,788
Suez Lyonnaise des Eaux SA (Water and electric utility) ....... 31,345 5,674,116
Total SA "B"* (International oil and gas exploration,
development and production) ................................... 20,077 2,599,539
Union des Assurances Federales (Insurance group) .............. 23,173 2,758,165
-----------
83,402,982
-----------
Germany 9.9%
Basf AG (Leading international chemical producer) ............. 142,023 6,298,682
Bayerische Vereinsbank AG (Commercial bank) ................... 44,053 2,872,475
Heidelberger Druckmaschinen AG (Manufacturer of commercial
printing presses) ........................................... 20,125 1,151,864
Hoechst AG (Chemical producer) ................................ 160,999 7,315,228
Karstadt AG (Operator of department store chain) .............. 7,189 3,467,325
Mannesmann AG (Diversified construction and technology company) 54,380 8,144,190
Metro AG (Operator of building, clothing, department,
electronic and food stores) ................................. 90,062 5,611,491
SAP AG (pfd.) (Computer software manufacturer) ................ 13,655 5,476,506
Siemens AG (Leading electrical engineering and electronics
company) .................................................... 85,724 6,636,578
VEBA AG (Electric utility, distributor of oil and chemicals) .. 110,880 6,541,363
VIAG AG (Provider of electrical power and natural gas
services, aluminum products, chemicals, ceramics and glass) . 7,239 3,431,502
-----------
56,947,204
-----------
Hong Kong 3.3%
Cheung Kong Holdings Ltd. (Real estate company) ............... 535,700 4,764,110
Citic Pacific Ltd. (Diversified holding company) .............. 1,506,200 4,804,729
Dao Heng Bank Group Ltd. (Commercial bank holding company) .... 47,000 210,809
Hong Kong & China Gas Co., Ltd. (Gas utility) ................. 650 942
Hong Kong & China Gas Co., Ltd.* Warrants (expire 9/30/1999) .. 26 4
Kerry Properties, Ltd. (Real estate company) .................. 1,129,251 1,491,851
New World Development Co., Ltd. (Property investment and
development, construction and engineering, hotels and
restaurants, telecommunications) ............................ 1,379,436 4,133,668
New World Infrastructure Ltd.* (Investment and operation of
infrastructure projects) .................................... 715,600 1,346,586
Sun Hung Kai Properties Ltd. (Real estate developer and
finance company) ............................................ 241,000 2,197,630
-----------
18,950,329
-----------
Italy 6.8%
Arnoldo Mondadori Editore SpA (Book publisher) ................ 125,000 2,173,499
Assicurazioni Generali (Life and property insurance company) .. 57,000 1,982,231
Banca Nazionale del Lavoro* (Universal bank) .................. 485,700 1,533,233
Class Editori SpA (Publishing house) .......................... 146,200 1,172,706
Finmeccanica SpA* (Designer and developer of commercial and
military aircraft, space systems and air defense systems) ... 3,851,500 3,559,767
Gruppo Editoriale L'Espresso (Publisher) ...................... 101,900 1,655,823
Gucci Group (New York Shares) (Designer and producer of
personal luxury accessories and apparel) .................... 82,600 5,782,000
Istituto Nazionale delle Assicurazione (Insurance company) .... 301,100 701,186
La Rinascente SpA (Department store chain) .................... 158,200 1,201,829
Mediaset SpA (Broadcasting and television networks) ........... 304,400 2,715,764
Seat Pagine Gialle SpA (Publisher of telecommunication
directories and provider of advertising services) ........... 3,787,400 5,193,943
Telecom Italia SpA (Provider of telecommunications,
electronics and network construction) ....................... 1,081,000 11,277,852
-----------
38,949,833
-----------
Japan 21.6%
Advantest Corp. (Producer of measuring instruments and
semiconductor testing devices) .............................. 26,100 2,868,843
Asahi Glass Co., Ltd. (Manufacturer of glass products) ........ 388,000 2,517,190
Benesse Corp. (Provider of educational services) .............. 28,900 3,140,785
Canon Inc. (Leading producer of visual image and information
equipment) .................................................. 78,000 2,243,306
Daiwa Securities Co., Ltd. (Brokerage and other financial
services) ................................................... 927,000 6,128,926
Fuji Bank, Ltd. (Commercial bank) ............................. 602,000 4,199,074
Fujitsu Ltd. (Manufacturer of computers) ...................... 314,000 6,318,926
Hitachi, Ltd. (General electronics manufacturer) .............. 361,000 3,386,240
</TABLE>
The accompanying notes are an integral part of the financial statements.
90
<PAGE>
INTERNATIONAL PORTFOLIO
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Komatsu Ltd. (Manufacturer of construction machinery) ......... 303,000 1,935,694
Matsushita Electric Industrial Co., Ltd. (Manufacturer of
consumer electronic products) ............................... 267,000 5,185,537
Mitsubishi Estate Co., Ltd. (Real estate company) ............. 250,000 2,440,083
Mitsui Fudosan Co., Ltd. (Real estate company) ................ 263,000 2,130,083
Murata Manufacturing Co., Ltd. (Leading maker of ceramic
capacitors and filters) ..................................... 75,000 4,933,884
NEC Corp. (Manufacturer of telecommunication and computer
equipment) .................................................. 426,000 5,298,595
NSK Ltd. (Leading manufacturer of bearings and motor vehicle
machine parts) .............................................. 550,000 3,018,182
NTT Mobile Communications Network, Inc. (Provider of various
telecommunication services and equipment) ................... 124 1,680,661
NTT Mobile Communications Network, Inc. (New Shares) .......... 496 6,640,661
Nikko Securities Co., Ltd. (Securities broker and dealer) ..... 1,043,000 6,732,091
Nippon Telegraph & Telephone Corp. (Telecommunication services) 573 6,677,107
Nissan Motor Co., Ltd. (Manufacturer of motor vehicles) ....... 644,000 3,076,298
Sakura Bank, Ltd. (Provider of banking services) .............. 1,085,000 4,115,826
Sanwa Bank, Ltd. (Bank) ....................................... 386,000 3,799,388
Shin-Etsu Chemical Co., Ltd. (Producer and distributor of
synthetic resins and chemicals) ............................. 113,000 3,782,231
Sony Corp. (Consumer electronic products manufacturer) ........ 45,100 4,864,091
Sony Corp. (ADR) .............................................. 11,800 1,302,425
Sumitomo Trust & Banking Co., Ltd. (Commercial Bank) .......... 865,000 4,160,579
TDK Corp. (Manufacturer of magnetic tapes and floppy discs) ... 34,000 3,110,579
Teijin Ltd. (Manufacturer of polyester products) .............. 629,000 2,547,190
Tokyo Electron Ltd. (Leading semiconductor production
equipment manufacturer) ..................................... 87,000 5,903,058
Toshiba Corp. (General electronics manufacturer) .............. 902,000 6,433,273
Yamanouchi Pharmaceutical Co., Ltd. (Leading manufacturer of
ethical drugs) .............................................. 88,000 3,367,273
-----------
123,938,079
-----------
Korea 0.6%
Samsung Electronics Co., Ltd. (Electronics manufacturer) ...... 31,320 3,436,406
-----------
Netherlands 5.1%
AEGON Insurance Group NV (Insurance company) .................. 42,112 3,066,268
Akzo Nobel NV (Producer and marketer of healthcare products,
coatings, chemicals and fibers) ............................. 90,320 3,814,031
DSM NV (Plastics producer) .................................... 17,890 1,925,679
Elsevier NV (International publisher of scientific,
professional, business, and consumer information books) ..... 282,990 3,295,063
Equant NV* (Provider of international data network services) .. 59,225 5,480,028
Heineken Holding NV "A" (Producer and distributor of beers,
spirits, wines and soft drinks) ............................. 113,377 4,283,098
Koninklijke Ahold NV (International food retailer) ............ 75,561 2,612,067
United Pan-Europe Communications NV (Provider of television
and telecommunication services) ............................. 36,380 1,980,563
VNU NV (International publishing company) ..................... 65,360 2,621,343
-----------
29,078,140
-----------
Singapore 0.5%
Development Bank of Singapore (Foreign Registered) (Banking
and financial services) ..................................... 133,000 1,626,816
Oversea-Chinese Banking Corp., Ltd. (Foreign Registered)
(Commercial bank) ........................................... 153,000 1,277,624
-----------
2,904,440
-----------
Spain 0.7%
Compania Telefonica Nacional de Espana SA* (Telecommunication
services) ................................................... 73,623 3,568,435
Telefonica Publicidad e Informacion, SA* (Publisher of
telephone directories) ...................................... 16,210 324,642
-----------
3,893,077
-----------
Switzerland 3.6%
Nestle SA (Registered) (Food manufacturer) .................... 3,038 5,498,829
Novartis AG (Registered) (Pharmaceutical company) ............. 2,438 3,576,258
Roche Holdings AG (PC) (Producer of drugs and medicines) ...... 291 3,004,963
Swisscom AG (Operator of telecommunication networks and
network application services) ............................... 10,615 4,012,779
UBS AG (Registered) (Provider of banking and asset management
services) ................................................... 14,847 4,451,701
-----------
20,544,530
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
91
<PAGE>
INTERNATIONAL PORTFOLIO
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Taiwan 3.7%
China Motor Company Ltd. (Manufacturer of trucks and
automobiles) ............................................... 1,258,000 1,986,316
China Trust Commercial Bank* (Bank) .......................... 1,841,000 2,211,480
Compal Electronics Inc. (Manufacturer and marketer of notebook
computers and color monitors) .............................. 899,137 3,535,306
Far East Textile Ltd. (Manufacturer of natural and synthetic
textile products) .......................................... 1,499,000 2,227,616
Hon Hai Precision Industry Co., Ltd.* (Manufacturer of
electronic connectors, cable assemblies and memory chips) .. 318,000 2,874,799
Siliconware Precision Industries Co.* (Manufacturer of
packaging for integrated circuits) ......................... 1,590,390 3,028,142
Taiwan Semiconductor Manufacturing Co.* (Manufacturer of
integrated circuits) ....................................... 896,670 3,428,444
Yang Ming Marine Transport* (Marine transportation) .......... 3,036,000 1,973,870
-----------
21,265,973
-----------
United Kingdom 19.2%
BOC Group PLC (Producer of industrial gases) ................. 447,872 8,776,068
BP Amoco PLC (Major integrated world oil company) ............ 356,050 6,381,368
Barclays PLC (Commercial and investment banking, insurance and
other financial services) .................................. 112,097 3,262,984
Carlton Communications PLC (Television post production
products and services) ..................................... 400,568 3,324,195
Enterprise Oil PLC (Oil and gas exploration and production) .. 264,967 1,692,512
General Electric Co., PLC (Manufacturer of power,
communications, and defense equipment and other various
electrical components) ..................................... 671,893 6,831,994
Glaxo Wellcome PLC (Pharmaceutical company) .................. 129,546 3,603,303
J Sainsbury PLC (Retail distributor of food through
supermarkets) .............................................. 293,089 1,849,626
LASMO PLC (Oil production and exploration) ................... 887,010 2,001,193
Marks & Spencer, PLC (Retailer of consumer goods and foods) .. 1,156,941 6,680,620
Orange PLC (Operator of digital mobile telephone network) .... 482,301 7,084,224
Pearson PLC (Diversified media and entertainment holding
company) ................................................... 188,846 3,840,477
Prudential Corporation PLC (Provider of broad range of
financial services) ........................................ 376,601 5,555,428
Reed International PLC (Publisher of scientific, professional
and business to business materials) ........................ 486,891 3,241,669
Rentokil Intitial PLC (Environmental services company) ....... 555,741 2,156,910
Reuters Group PLC (International news agency) ................ 741,518 9,762,758
Rio Tinto PLC (Mining company) ............................... 558,917 9,373,571
Royal & Sun Alliance Insurance Group PLC (Insurance company) . 425,763 3,818,764
Select Appointments Holdings PLC* (Recruitment services
company) ................................................... 185,670 2,217,492
Shell Transport & Trading PLC (Petroleum company) ............ 979,752 7,357,793
SmithKline Beecham PLC (Manufacturer of ethical drugs and
healthcare products) ....................................... 289,666 3,770,300
United News & Media PLC (Information and publication services
group) ..................................................... 224,967 2,165,076
Vodafone Group PLC (Telecommunication services) .............. 266,779 5,252,798
-----------
110,001,123
-----------
Total Common Stocks (Cost $448,015,855) ...................... 545,019,601
-----------
- ------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $476,010,467) (a) . 573,188,520
===========
- ------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) At June 30, 1999, the net unrealized appreciation on investments based
on cost for federal income tax purposes of $476,069,516 was as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized appreciation for all investments in which
there is an excess of market value over tax cost ................... $113,975,797
Aggregate gross unrealized depreciation for all investments in which
there is an excess of tax cost over market value ................... 16,856,793
------------
Net unrealized appreciation ........................................ $ 97,119,004
============
- --------------------------------------------------------------------------------------------
</TABLE>
Purchases and sales of investment securities (excluding short-term
investments), for the six months ended June 30, 1999, aggregated
$260,308,894 and $248,699,953, respectively.
The accompanying notes are an integral part of the financial statements.
92
<PAGE>
INTERNATIONAL PORTFOLIO
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
- ----------------------------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------------------
<S> <C>
Assets
Investments, at market (identified cost $476,010,467) ........... $573,188,520
Cash ............................................................ 871
Foreign currency, at market (cost $2,615,079) ................... 2,626,215
Receivable for investments sold ................................. 10,255,628
Foreign taxes recoverable ....................................... 718,115
Dividend and interest receivable ................................ 550,327
Receivable for Portfolio shares sold ............................ 21,432,873
Unrealized appreciation on forward currency exchange contracts .. 391,474
Other assets .................................................... 39
------------
Total assets .................................................... 609,164,062
Liabilities
Payable for investments purchased ............................... 7,695,699
Payable for Portfolio shares purchased .......................... 452,700
Accrued management fee .......................................... 384,797
Other payables and accrued expenses ............................. 224,832
------------
Total liabilities ............................................... 8,758,028
------------
Net assets, at market value ..................................... $600,406,034
============
Net Assets
Net assets consist of:
Undistributed net investment income (loss) ...................... 6,101,365
Net unrealized appreciation (depreciation) on:
Investments ..................................................... 97,178,053
Foreign currency related transactions ........................... 389,057
Accumulated net realized gain ................................... 41,466,107
Paid-in capital ................................................. 455,271,452
------------
Net assets, at market value ..................................... $600,406,034
============
Class A
Net asset value, offering and redemption price per share
($599,942,457 / 41,428,999 outstanding shares of beneficial
interest, no par value, unlimited number of shares authorized) $ 14.48
============
Class B
Net asset value, offering and redemption price per share
($463,577 / 32,132 outstanding shares of beneficial interest,
no par value, unlimited number of shares authorized) ......... $ 14.43
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
93
<PAGE>
INTERNATIONAL PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
- ----------------------------------------------------------------------------------------------------
Six Months Ended June 30, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------------------
<S> <C>
Investment Income
Income:
Dividends (net of foreign taxes withheld of $418,890) ............ $ 6,489,116
Interest ......................................................... 395,382
------------
6,884,498
------------
Expenses:
Management fee ................................................... 2,279,971
Custodian fees ................................................... 210,816
Accounting fees .................................................. 207,784
Distribution fees (Class B) ...................................... 510
Trustees' fees and expenses ...................................... 9,219
Auditing ......................................................... 15,395
Legal ............................................................ 10,944
Shareholder reports and other .................................... 30,973
------------
2,765,612
------------
Net investment income ............................................ 4,118,886
------------
Net realized and unrealized gain (loss) on investment transactions
Net realized gain (loss) from:
Investments ...................................................... 44,539,592
Foreign currency related transactions ............................ (1,621,310)
------------
42,918,282
------------
Net unrealized appreciation (depreciation) during the period on:
Investments ...................................................... 5,698,207
Foreign currency related transactions ............................ 2,673,723
------------
8,371,930
------------
Net gain on investment transactions .............................. 51,290,212
------------
Net increase (decrease) in net assets resulting from operations .. $ 55,409,098
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
94
<PAGE>
INTERNATIONAL PORTFOLIO
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
June 30, 1999 December 31,
Increase (Decrease) in Net Assets (Unaudited) 1998
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ........................................ $ 4,118,886 $ 4,317,414
Net realized gain (loss) from investment transactions ........ 42,918,282 51,917,934
Net unrealized appreciation (depreciation) on investment
transactions during the period ............................ 8,371,930 24,787,072
------------- -------------
Net increase in net assets resulting from operations ......... 55,409,098 81,022,420
------------- -------------
Distributions to shareholders from:
Net investment income (Class A) .............................. (722,598) (7,697,972)
------------- -------------
Net investment income (Class B) .............................. -- (6,202)
------------- -------------
Net realized gains from investment transactions (Class A) .... (53,833,552) (50,628,971)
------------- -------------
Net realized gains from investment transactions (Class B) .... (42,651) (42,421)
------------- -------------
Portfolio share transactions:
Class A
Proceeds from shares sold .................................... 817,867,370 821,855,468
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................. 54,556,150 58,326,944
Cost of shares redeemed ...................................... (782,116,808) (820,883,462)
------------- -------------
Net increase (decrease) in net assets from Class A share
transactions .............................................. 90,306,712 59,298,950
------------- -------------
Class B*
Proceeds from shares sold .................................... 72,303 34,594
Net asset value of shares issued to shareholders in
reinvestment of dividends ................................. 42,651 48,623
Cost of shares redeemed ...................................... (17,447) (75,383)
------------- -------------
Net increase (decrease) in net assets from Class B share
transactions .............................................. 97,507 7,834
------------- -------------
Increase (decrease) in net assets ............................ 91,214,516 81,953,638
Net assets at beginning of period ............................ 509,191,518 427,237,880
------------- -------------
Net assets at end of period (including undistributed net
investment income of $6,101,365 and $2,705,077,
respectively) ............................................. $ 600,406,034 $ 509,191,518
============= =============
Other Information
Increase (decrease) in Portfolio shares
Class A
Shares outstanding at beginning of period .................... 34,950,563 30,264,570
------------- -------------
Shares sold .................................................. 56,452,996 59,000,919
Shares issued to shareholders in reinvestment of distributions 3,831,190 4,388,784
Shares redeemed .............................................. (53,805,750) (58,703,710)
------------- -------------
Net increase (decrease) in Portfolio shares .................. 6,478,436 4,685,993
------------- -------------
Shares outstanding at end of period .......................... 41,428,999 34,950,563
============= =============
Class B
Shares outstanding at beginning of period .................... 25,342 24,670
------------- -------------
Shares sold .................................................. 4,931 2,526
Shares issued to shareholders in reinvestment of distributions 3,004 3,664
Shares redeemed .............................................. (1,145) (5,518)
------------- -------------
Net increase (decrease) in Portfolio shares .................. 6,790 672
------------- -------------
Shares outstanding at end of period .......................... 32,132 25,342
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
95
<PAGE>
INTERNATIONAL PORTFOLIO
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share
outstanding (a) throughout each period and other performance
information derived from the financial statements.
<TABLE>
<CAPTION>
Class A (b)
- ----------------------------
Six Months Ended Years Ended December 31,
June 30, 1999 -------------------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....... $ 14.56 $ 14.11 $ 13.25 $ 11.82 $ 10.69 $ 10.85
------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income ...................... .11 .13 .14 .12 .11 .06
Net realized and unrealized gain (loss) on
investment transactions .................. 1.32 2.29 1.04 1.60 1.07 (.15)
------- ------- ------- ------- ------- -------
Total from investment operations ........... 1.43 2.42 1.18 1.72 1.18 (.09)
------- ------- ------- ------- ------- -------
Less distributions:
From net investment income ................. (.02) (.26) (.21) (.29) (.01) (.07)
From net realized gains on investment
transactions ............................. (1.49) (1.71) (.11) -- (.04) --
------- ------- ------- ------- ------- -------
Total distributions ........................ (1.51) (1.97) (.32) (.29) (.05) (.07)
------- ------- ------- ------- ------- -------
Net asset value, end of period ............. $ 14.48 $ 14.56 $ 14.11 $ 13.25 $ 11.82 $ 10.69
======= ======= ======= ======= ======= =======
Total Return (%) ........................... 10.00** 18.49 9.07 14.78 11.11 (.85)
Ratios and Supplemental Data
Net assets, end of period ($ millions) ..... 600 509 427 726 548 472
Ratio of operating expenses to average daily
net assets (%) ........................... 1.05* 1.04 1.00 1.05 1.08 1.08
Ratio of net investment income to average ..
daily net assets (%) ..................... 1.56* .90 .94 .95 .95 .57
Portfolio turnover rate (%) ................ 96.73* 70.65 61.35 32.63 45.76 33.52
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) On May 8, 1997, existing shares were designated as Class A shares.
* Annualized
** Not annualized
96
<PAGE>
INTERNATIONAL PORTFOLIO
The following table includes selected data for a share
outstanding (a) throughout each period and other performance
information derived from the financial statements.
<TABLE>
<CAPTION>
Class B
-------------------------- For the Period
May 8, 1997
(commencement of
sale of
Six Months Ended Year Ended Class B shares)
June 30, 1999 December 31, to December 31,
(Unaudited) 1998 1997
-----------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period ......................... $14.51 $14.08 $13.76
------ ------ ------
Income from investment operations:
Net investment income (loss) ................................. .10 .10 (.00)(b)
Net realized and unrealized gain (loss) on investment
transactions ............................................... 1.31 2.29 .32
------ ------ ------
Total from investment operations ............................. 1.41 2.39 .32
------ ------ ------
Less distributions:
From net investment income ................................... -- (.25) --
From net realized gains on investment transactions ........... (1.49) (1.71) --
------ ------ ------
Total distributions .......................................... (1.49) (1.96) --
------ ------ ------
Net asset value, end of period ............................... $14.43 $14.51 $14.08
====== ====== ======
Total Return (%) ............................................. 9.88* 18.28 2.33**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ....................... .46 .37 .35
Ratio of operating expenses to average daily net assets (%) .. 1.30* 1.28 1.24*
Ratio of net investment income to average daily net assets (%) 1.39* .69 (.00)(b)*
Portfolio turnover rate (%) .................................. 96.73* 70.65 61.35**
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Amount shown is less than one half of .005.
* Annualized
** Not annualized
97
<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 are divided into nine separate diversified series, called
"Portfolios." The Portfolios are comprised of the Money Market Portfolio, Bond
Portfolio, Balanced Portfolio, Growth and Income Portfolio, Capital Growth
Portfolio, Large Company Growth Portfolio (which commenced operations on May 3,
1999), Small Company Growth Portfolio (which commenced operations on May 3,
1999), Global Discovery 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").
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of the financial statements for its Portfolios.
Multiple Classes of Shares of Beneficial Interest. The Fund offers one class of
shares for the Money Market Portfolio and two classes of shares (Class A shares
and Class B shares) for each of the other Portfolios. Class B shares are subject
to a Rule 12b-1 fee under the Investment Company Act of 1940, as amended, equal
to an annual rate of up to 0.25% of the average daily net asset value of the
Class B shares of the applicable Portfolio. Class A shares are not subject to
such fees. Expenses are borne pro-rata on the basis of relative net assets by
the holders of all classes of shares except that each class bears expenses
unique to that class (including the applicable 12b-1 fee). In accordance with
the Master Distribution Plan, the 12b-1 fees are remitted to the Participating
Insurance Companies for various costs incurred or paid by the Participating
Insurance Companies in connection with the distribution of Class B shares.
Security Valuation. The Money Market Portfolio values all portfolio securities
utilizing the amortized cost method permitted in accordance with Rule 2a-7 under
the 1940 Act 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:
Investments are stated at value determined as of the close of regular trading on
the New York Stock Exchange. 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 Nasdaq Stock Market
("Nasdaq"), for which there have been sales, are valued at the most recent sale
price reported. If there are no such sales, the value is the most recent bid
quotation. Securities which are not quoted on Nasdaq but are traded in another
over-the-counter market are valued at the most recent sale price, or if no sale
occurred, at the calculated mean between the most recent bid and asked
quotations on such market. If there are no such bid and asked quotations, the
most recent bid quotation shall be used.
Portfolio debt securities purchased with an original maturity greater than sixty
days are valued by pricing agents approved by the officers of the Fund, whose
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. Money market instruments purchased with an original 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 Board of Trustees.
Foreign Currency Translations. The books and records of the Portfolios are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S. dollars
at the prevailing exchange rates at period end. Purchases and sales of
investment securities, income and expenses are translated into U.S. dollars at
the prevailing exchange rates on the respective dates of the transactions.
98
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Net realized and unrealized gains and losses on foreign currency transactions
represent net gains and losses between trade and settlement dates on securities
transactions, the disposition of forward foreign currency exchange contracts and
foreign currencies, and the difference between the amount of net investment
income accrued and the U.S. dollar amount actually received. That portion of
both realized and unrealized gains and losses on investments that results from
fluctuations in foreign currency exchange rates is not separately disclosed but
is included with net realized and unrealized gains and losses on investment
securities.
Repurchase Agreements. Each of the Portfolios may enter into repurchase
agreements with certain banks and broker/dealers whereby the Portfolio, through
its custodian or sub-custodian bank, 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
is equal to at least the principal amount of the repurchase price plus accrued
interest.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
International Portfolio utilized forward contracts as a hedge against changes in
the exchange rates relating to foreign currency denominated assets.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Sales and
purchases of forward contracts having the same settlement date and broker are
offset and any gain (loss) is realized on the date of offset; otherwise, gain
(loss) is realized on settlement date. Realized and unrealized gains and losses
which represent the difference between the value of a forward contract to buy
and a forward contract to sell are included in net realized and unrealized gain
(loss) from foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Portfolio gives up the
opportunity to profit from favorable exchange rate movements during the term of
the contract.
When Issued/Delayed Delivery Securities. Each Portfolio may purchase securities
with delivery or payment to occur at a later date beyond the normal settlement
period. At the time a Portfolio enters into a commitment to purchase a security,
the transaction is recorded and the value of the security is reflected in the
net asset value. The value of the security may vary with market fluctuations. No
interest accrues to the Portfolio until payment takes place. At the time the
Portfolio enters into this type of transaction it is required to segregate cash
or other liquid assets at least equal to the amount of the commitment.
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 is to comply with the requirements of the Internal Revenue
Code, which are applicable to regulated investment companies, and to distribute
all of its 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 federal income tax provision was required.
Distribution of Income and Gains. All of the net investment income of the Money
Market Portfolio is declared as a daily dividend and is distributed to
shareholders monthly. All other Portfolios will declare and distribute dividends
from their net investment income, if any, in April, although an additional
distribution may be made if necessary. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to each Portfolio if not distributed, and, therefore, will be
distributed to shareholders at least annually.
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. These
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, each Portfolio may periodically make reclassifications
among certain of its capital accounts without impacting the net asset value of
the Portfolio.
99
<PAGE>
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date. Certain dividends
from foreign securities may be recorded subsequent to the ex-dividend date as
soon as the Portfolio is informed of such dividends. Realized gains and losses
from investment transactions are recorded on an identified cost basis.
Original issue discounts are accreted for both tax and financial 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.
B. Ownership of the Portfolios
- --------------------------------------------------------------------------------
At the end of the period, the beneficial ownership in the Portfolios was as
follows:
Money Market Portfolio: Two Participating Insurance Companies were owners of
record of 10% or more of the total outstanding shares of the Portfolio, each
owning 42% and 46%, respectively.
Bond Portfolio: Three Participating Insurance Companies were owners of record of
10% or more of the total outstanding shares of the Portfolio, each owning 24%,
36%, and 12%, respectively.
Balanced Portfolio: Three Participating Insurance Companies were owners of
record of 10% or more of the total outstanding shares of the Portfolio, each
owning 43%, 11%, and 35%, respectively.
Growth and Income Portfolio: Three Participating Insurance Companies were owners
of record of 10% or more of the total outstanding Class A shares of the
Portfolio, each owning 15%, 55%, and 14%, respectively. One Participating
Insurance Company was owner of record of 97% of the total outstanding Class B
shares of the Portfolio.
Capital Growth Portfolio: Two Participating Insurance Companies were owners of
record of 10% or more of the total outstanding Class A shares of the Portfolio,
each owning 55% and 19%, respectively. One Participating Insurance Company was
owner of record of 100% of the total outstanding Class B shares of the
Portfolio.
Large Company Growth Portfolio: Two participating Insurance Companies were
owners of record of 10% or more of the total outstanding Class A shares of the
Portfolio, each owning 60% and 39%, respectively. One participating Insurance
Company was owner of record of 100% of the total outstanding Class B shares of
the Portfolio.
Small Company Growth Portfolio: Two participating Insurance Companies were
owners of record of 10% or more of the total outstanding Class A shares of the
Portfolio, each owning 47% and 52% respectively. One participating Insurance
Company was owner of record of 100% of the total outstanding Class B shares of
the Portfolio.
Global Discovery Portfolio: Two Participating Insurance Companies were owners of
record of 10% or more of the total outstanding Class A shares of the Portfolio,
each owning 61% and 24%, respectively. One Participating Insurance Company was
owner of record of 99% of the total outstanding Class B shares of the Portfolio.
International Portfolio: Three Participating Insurance Companies were owners of
record of 10% or more of the total outstanding Class A shares of the Portfolio,
each owning 37%, 16%, and 17%, respectively. One Participating Insurance Company
was owner of record of 90% of the total outstanding Class B shares of the
Portfolio.
C. Related Parties
- --------------------------------------------------------------------------------
Under the Fund's Investment Management Agreement (the "Agreement") with Scudder
Kemper Investments, Inc. (the "Adviser"), the Fund agrees to pay the Adviser a
fee, based on average daily net assets, equal to an annual rate of .370% for the
Money Market Portfolio, .475% for the Bond Portfolio, .475% for the Balanced
Portfolio, .475% for the Growth and Income Portfolio, .975% for the Global
Discovery Portfolio, .625% for the Large Company Growth Portfolio, .875% for the
Small Company Growth Portfolio, .475% for the first $500,000,000, .450% for the
next $500,000,000, and .425% over $1,000,000,000 for the Capital Growth
Portfolio, and .875% for the first $500,000,000, .725% over $500,000,000 for the
International Portfolio, computed and accrued daily and payable monthly. As
100
<PAGE>
manager of the assets of each Portfolio, the Adviser directs the investments of
the Portfolios in accordance with their respective investment objectives,
policies, and restrictions. The Adviser determines the securities, instruments,
and other contracts relating to investments to be purchased, sold or entered
into by the Portfolios. In addition to portfolio management services, the
Adviser provides certain administrative services in accordance with the
Agreement.
The Trustees authorized the Fund on behalf of each Portfolio to pay Scudder Fund
Accounting Corp., a subsidiary of the Adviser, for determining the daily net
asset value per share and maintaining the portfolio and general accounting
records of the Fund.
Related fees for such services are detailed in each Portfolio's statement of
operations.
Until April 30, 2000, the Adviser has agreed to waive all or part of its fees
for the Large Company Growth Portfolio and the Small Company Growth Portfolio,
excluding 12b-1 fees, to the extent necessary so that the Portfolios' expenses
are maintained at 1.25% and 1.50% of average daily net assets, respectively.
The Fund pays each Trustee not affiliated with the Adviser an annual retainer
plus specified amounts for attended board and committee meetings. Allocated
Trustees' fees and expenses for each Portfolio for the six months ended June 30,
1999 are detailed in each Portfolio's statement of operations.
D. Commitments
- --------------------------------------------------------------------------------
As of June 30, 1999, the International Portfolio had entered into the following
forward currency exchange contract resulting in net unrealized appreciation of
$391,474.
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Contracts to Depreciation)
Deliver In Exchange for Settlement Date (U.S.$)
----------------------- ---------------------- ---------------- ------------------------
<S> <C> <C> <C> <C>
JPY 1,651,637,840 USD 14,177,149 9/7/1999 391,474
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E. Lines of Credit
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The Fund and several other Scudder Funds (the "Participants") share in a $850
million revolving credit facility for temporary or emergency purposes, including
the meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated pro rata based on net assets among each of the Participants.
Interest is calculated based on the market rates at the time of the borrowing.
Each Portfolio may borrow up to a maximum of 33 percent of its net assets under
the agreement.
101
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About the Fund's Adviser
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Scudder Kemper Investments, Inc. is one of
the largest and most experienced investment
management organizations worldwide, managing
more than $280 billion in assets globally for
mutual fund investors, retirement and pension
plans, institutional and corporate clients,
insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich
heritage of innovation, integrity, and
client-focused service. In 1997, Scudder,
Stevens & Clark, Inc., founded 80 years ago as
one of the nation's first investment counsel
organizations, joined the Zurich Financial
Services Group. As a result, Zurich's
subsidiary, Zurich Kemper Investments, Inc.,
with 50 years of mutual fund and investment
management experience, was combined with
Scudder. Headquartered in New York, Scudder
Kemper Investments offers a full range of
investment counsel and asset management
capabilities, based on a combination of
proprietary research and disciplined,
long-term investment strategies. With its
global investment resources and perspective,
the firm seeks opportunities in markets
throughout the world to meet the needs of
investors.
Scudder Kemper Investments, Inc., the
global asset management firm, is a member of
the Zurich Financial Services Group. The
Zurich Financial Services Group is an
internationally recognized leader in financial
services, including property/casualty and life
insurance, reinsurance, and asset management.
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.
SCUDDER
