Scudder Variable Life
Investment Fund
Semiannual Report
June 30, 1995
An open-end management investment company that offers shares of beneficial
interest in six types of diversified portfolios,
five of which are offered herein.
<PAGE>
Scudder Variable Life Investment Fund
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
Capital Growth Portfolio Management Discussion ............................ 8
Capital Growth Portfolio Summary .......................................... 9
International Portfolio Management Discussion ............................. 10
International Portfolio Summary ........................................... 11
Investment Portfolios, Financial Statements, and Financial Highlights
Money Market Portfolio ........................................... 12
Bond Portfolio ................................................... 18
Balanced Portfolio ............................................... 25
Capital Growth Portfolio ......................................... 35
International Portfolio .......................................... 44
Notes to Financial Statements ............................................. 54
<PAGE>
SCUDDER VARIABLE LIFE INVESTMENT FUND
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
Stock and bond prices worldwide improved dramatically in the first half
of this year as concerns about inflationary economic growth all but disappeared.
Economic growth in the United States and Europe has shown signs of weakening in
recent months, allowing stock investors to focus on the strong corporate
earnings increases that have characterized the past few years. Bond investors,
believing that inflation is no longer a current concern, have pushed prices
higher and interest rates lower. In the United States, the Federal Reserve
assured investors that this was the case with a quarter of a percentage point
reduction in the federal funds rate in early July.
While growth in capital markets is always welcome, rapid increases in
asset prices often warn of excess. A 20% rise in the U.S. stock market in six
months, for example, is not reflective of an economy late in its expansionary
cycle. Indeed, the recent surge in mergers and acquisitions suggests that
corporations have exhausted the benefits of downsizing and are looking to other
means of generating profits. At a minimum, we think it will be difficult for the
markets to repeat in the next six months their performance in the first half of
this year, and caution investors not to be surprised by any near-term
corrections.
Longer term, however, we believe that investment prospects around the
world are fundamentally positive. In our view, the driver of capital market
returns over the next five years will be disinflationary growth, dominated by
such forces as technological innovation, deregulation, and monetary restraint.
While both stock and bond markets will offer opportunity, those industries and
companies that flexibly accommodate change should offer above-average returns.
However, emerging markets and industries that truly emerge are likely to produce
the highest returns of all. A global disinflationary growth environment runs
counter to much of our previous economic experience. With an approach to
investment management grounded in innovative independent research, Scudder's
portfolio managers and analysts will continually assess the changing economic
landscape to try to identify those investment opportunities that provide
financial reward for shareholders with an appropriate level of risk.
In closing, I am pleased to announce that Stephen L. Akers has joined
the Money Market Portfolio's management team and that Bruce F. Beaty has joined
the Capital Growth Portfolio's management team, replacing Steven P. Aronoff and
Julia D. Cox. Stephen joined Scudder in 1984 and is the Director of Scudder's
Reserve Asset Management Group, managing several portfolios. Bruce joined
Scudder in 1991 as a member of Scudder's Global Equity Group, concentrating on
research and investment in U.S. equities, and has 15 years' experience in stock
analysis and investing.
Thank you for choosing Scudder Variable Life Investment Fund to help
meet your investment needs.
Sincerely,
/s/David B. Watts
David B. Watts
President,
Scudder Variable Life Investment Fund
2
<PAGE>
MONEY MARKET PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
We are pleased to report that Money Market Portfolio provided investors
with a stable $1.00 share price during the first half of 1995 and a 5.55% 7-day
net annualized yield as of June 30. The Portfolio also returned a competitive
2.83% for the same period, compared with 2.73% for the 85 money market funds
tracked by Lipper Analytical Services. While money markets generally offer
higher yields than insured bank savings accounts, it is important to keep in
mind that the Portfolio's yield will continue to fluctuate with prevailing
interest rates.
After rising for much of 1994, long-term interest rates have declined
thus far in 1995. The Federal Reserve's series of rate hikes last year reassured
investors that inflation was under control. Shortly after the close of the June
30 semiannual period, the Fed reduced short-term interest rates by 1/4 of a
percentage point, providing further evidence that inflation is not currently a
threat to the economy. Given this year's interest rate environment, Money Market
Portfolio has extended its average maturity to 52 days at the close of the
six-month period, in contrast with 35 days six months earlier. Additional
interest rate declines will be the impetus for further adjustments of the
Portfolio's average maturity as we strive to provide both competitive yields and
price stability for shareholders.
Corporate commercial paper constituted a significant portion of the
Portfolio throughout the period. These securities, which provide companies with
short-term funds at a lower rate than is typically offered by banks, continue to
provide attractive relative yields. At the end of the period, commercial paper
accounted for approximately 60% of the Portfolio.
If, in the coming months, the economy continues to slow and inflation
remains under control, we intend to favor longer-term money market securities to
"lock in" higher interest rates. As always, our focus will remain on quality as
we select short-term money market investments to maintain Money Market
Portfolio's stable share price and competitive yield.
Sincerely,
Your Portfolio Management Team
/s/Robert T. Neff /s/Stephen L. Akers
Robert T. Neff Stephen L. Akers
Lead Portfolio Manager
/s/Nicca B. Alcantara
Nicca B. Alcantara
3
<PAGE>
BOND PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
The unmanaged Lehman Brothers Aggregate Bond Index provided a total
return of 11.44% for the six months ended June 30, the strongest first-half
return since the index was created in the early 1970s. The dramatic rally in
bonds so far this year reflects a much more benign interest rate environment
than existed last year. Indeed, the recent easing of interest rates by the
Federal Reserve, coming after a series of rate hikes in 1994, testifies to their
confidence in the current trend of slow economic growth and low inflation. While
interest rates have eased in many parts of the globe, the U.S. market provided
stronger overall returns (as measured by ten-year bonds) than those of its G-7
partners Canada, France, Germany, Italy, Japan, and the United Kingdom.
The Bond Portfolio returned 10.40% during the period and provided a
6.89% 30-day net annualized SEC yield as of June 30. Performance, while strong,
reflects the fact that managed bond portfolios typically underperform the market
averages in periods of strong price appreciation. Unlike the indexes, bond
portfolios need to maintain some cash reserves at all times, which acts as a
drag on performance during market rallies.
As the interest rate environment improved starting late last year, we
began to increase the Portfolio's duration. As of June 30, 1995, the average
duration stood at 5.22 years, compared with 5.09 years on December 31, 1994. The
longer duration allows the Portfolio to participate more fully in the bond price
rally while capturing higher relative yields. We also de-emphasized our position
in mortgage-backed securities during the period, which aided overall Portfolio
performance. These securities tend to underperform other types of bonds during
periods of strong price appreciation, because as yields decline the risk of
mortgage prepayment increases. Another contributor to performance was our
corporate bond holdings, where strong security selection resulted in solid price
appreciation during the period.
Our current outlook calls for the possibility of further interest rate
declines over the next year to year-and-a-half. Evidence now suggests that
weaker economic growth and low inflation exists in most of the industrialized
world, which makes the global environment more conducive to easier monetary
policy and lower rates. Even so, after such unusually strong bond market returns
in the first half, we will be watching for periods of price corrections, which
could result from profit-taking or a spate of higher growth later this year. In
the coming months, we intend to maintain or slightly increase duration, and
focus more on intermediate-term securities, which currently offer solid values
in our opinion. We view the Portfolio's current positioning, with its emphasis
on both competitive yields and price appreciation, as appropriate in the current
environment.
Sincerely,
Your Portfolio Management Team
/s/Ruth Heisler /s/Renee L. Ross
Ruth Heisler Renee L. Ross
Lead Portfolio Manager
/s/William M. Hutchinson
William M. Hutchinson
4
<PAGE>
Bond Portfolio
Portfolio Summary as of June 30, 1995
-----------------------------------------------------------------
Growth of a $10,000 Investment
-----------------------------------------------------------------
Bond Portfolio
----------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
--------- ------- ---------- -------
1 Year $11,142 11.42% 11.42%
5 Year $15,701 57.01% 9.44%
Life of
Fund* $23,117 131.17% 8.78%
LB Aggregate Bond Index
--------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
--------- ------- ---------- -------
1 Year $11,255 12.55% 12.55%
5 Year $15,676 56.76% 9.40%
Life of
Fund* $26,052 160.52% 10.14%
*The Fund commenced operations on July 16, 1985.
Index comparisons begin July 31, 1985.
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Yearly periods ended June 30
Bond Portfolio
Year Amount
---------------------
7/31/85* 10000
86 11492
87 11935
88 12656
89 13817
90 14699
91 16171
92 18573
93 21202
94 20713
95 23079
LB Aggregate Bond Index
Year Amount
----------------------
7/31/85* 10000
86 12043
87 12708
88 13731
89 15409
90 16619
91 18397
92 20980
93 23453
94 26052
The Lehman Brothers (LB) Aggregate Bond Index is an unmanaged market
value-weighted measure of treasury issues, agency issues, corporate
bond issues and mortgage securities. Index returns assume reinvestment
of dividends and, unlike Fund returns, do not reflect any fees or
expenses.
All performance is historical, assumes reinvestment of all dividends
and capital gains, and is not indicative of future results. Investment
return and principal value will fluctuate, so an investor's shares,
when redeemed, may be worth more or less than when purchased. Total
returns in some periods were higher due to maintenance of the Fund's
expenses. See Financial Highlights for the Bond Portfolio.
-------------------------------------------------------------------
ASSET QUALITY
-------------------------------------------------------------------
By Quality
-------------------
AAA 74%
AA 3% Despite the period's various changes
A 14% in asset allocation, Bond Portfolio
BBB 8% has maintained its high overall credit
NR 1% quality, with over 90% of its holdings
---- rated A or higher.
100%
====
-------------------
Average Quality: AAA
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
-------------------------------------------------------------------
EFFECTIVE MATURITY
-------------------------------------------------------------------
Less than 1 year 15%
1 < 3 years 22%
3 < 8 years 22%
8 < 10 years 11%
10 years or greater 30%
----
100%
====
Weighted average effective maturity: 9 years
-------------------------------------------------------------------
DIVERSIFICATION
-------------------------------------------------------------------
U.S. Treasury Obligations 52%
Corporate Bonds 19%
Foreign Bonds 8%
Asset-Backed Securities 8%
U.S. Government Guaranteed
Mortgages 7%
U.S. Government Agency
Pass-Thrus 4%
Collateralized Mortgage
Obligations 2%
----
100%
====
5
<PAGE>
BALANCED PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
A combination of positive factors--including strong corporate earnings,
moderate inflation, declining interest rates, and strong flows into mutual
funds--drove overall market results in the year's first two quarters. The
unmanaged S&P 500 Index returned 20.21% while the bond market, as measured by
the unmanaged Lehman Brothers Aggregate Bond Index, returned 11.44% in the first
half of the year. The Balanced Portfolio provided a total return of 15.22% for
the semiannual period ended June 30, 1995. The Portfolio's performance compares
well with the 13.30% average total return for the 26 balanced funds tracked by
Lipper Analytical Services.
Our strategy in the stock portion of the Portfolio continues to focus
on the purchase of large- and medium-capitalization growth stocks with
attractively valued growth of earnings relative to the market and industry
peers. Portfolio concentration in the first half of the year has remained in
financial service, consumer staples, healthcare, and technology issues. These
groups posted strong performance for the period, with financial holdings
benefiting from declining interest rates, healthcare holdings reaping the
rewards of restructuring, and technology companies enjoying strong product
demand. Despite significant gains in several holdings--including Nokia,
Ericsson, Motorola, Intel, and Texas Instruments--we are mindful that demand for
computers and related technology is unpredictable, and that heightened
performance expectations are vulnerable to disappointment. Fortunately, the
long-term outlook for further earnings growth in this sector remains positive.
As for the income portion of the Portfolio, we have focused on a
slightly longer duration (4.85 years as of June 30 versus 4.77 years at
year-end) to take advantage of the price increases and yield declines that have
accompanied the current environment of falling interest rates. Other shifts
reflective of the trend toward lower rates include a de-emphasis of
mortgage-backed securities and an increase in intermediate-term holdings, the
latter of which we expect to continue to implement over the next few months.
Mortgage-backed securities typically underperform during periods of falling
interest rates, due to the higher risk of prepayment. Our focus on
intermediate-term maturities stems from their attractive yields and price
appreciation potential. Looking ahead, we believe that the Portfolio's
well-balanced equity and bond strategies are positioned to provide solid
absolute and relative performance over time.
Sincerely,
Your Portfolio Management Team
/s/Bruce F. Beaty /s/Ruth Heisler
Bruce F. Beaty Ruth Heisler
Lead Portfolio Manager
/s/Renee L. Ross /s/William F. Gadsden
Renee L. Ross William F. Gadsden
6
<PAGE>
Balanced Portfolio
Portfolio Summary as of June 30, 1995
-----------------------------------------------------------------
Growth of a $10,000 Investment
-----------------------------------------------------------------
Balanced Portfolio
----------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
--------- ------- ---------- -------
1 Year $11,909 19.09% 19.09%
5 Year $15,783 57.83% 9.56%
Life of
Fund* $28,434 184.34% 11.06%
S&P 500 Index (60%) and LBAB Index (40%)
--------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
--------- ------- ---------- -------
1 Year $12,160 21.60% 21.60%
5 Year $17,024 70.24% 11.22%
Life of
Fund* $34,055 240.55% 13.03%
*The Fund commenced operations on July 16, 1985.
Index comparisons begin July 31, 1985.
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Yearly periods ended June 30
Balanced Portfolio
Year Amount
---------------------
7/31/85* 10000
86 13147
87 14545
88 14579
89 16925
90 18136
91 18546
92 21701
93 24108
94 24036
95 28625
S&P 500 Index
Year Amount
----------------------
7/31/85* 10000
86 13602
87 17024
88 15850
89 19106
90 22257
91 23902
92 27108
93 30803
94 31236
95 39379
LBAB Index
Year Amount
----------------------
7/31/85* 10000
86 12043
87 12708
88 13731
89 15409
90 16619
91 18397
92 20980
93 23453
94 23147
95 26052
The Standard & Poor's (S&P) 500 Index is an unmanaged capitalization-
weighted measure of 500 widely held common stocks listed on the New
York Stock Exchange, American Stock Exchange, and Over-The-Counter
market and The Lehman Brothers Aggregate Bond (LBAB) Index is an
unmanaged market value-weighted measure of treasury issues, agency
issues, corporate bond issues and mortgage securities. Index returns
assume reinvestment of dividends and, unlike Fund returns, do not
reflect any fees or expenses.
All performance is historical, assumes reinvestment of all dividends
and capital gains, and is not indicative of future results. Investment
return and principal value will fluctuate, so an investor's shares,
when redeemed, may be worth more or less than when purchased. Total
returns in some periods were higher due to maintenance of the Fund's
expenses. See Financial Highlights for the Balanced Portfolio. The
Balanced Portfolio, with its current name and investment objective,
commenced operations on May 1, 1993. Performance figures include the
performance of its predecessor, the Managed Diversified Portfolio.
Since adopting its current objectives, the cumulative and average
annual returns are 20.94% and 9.17%, respectively.
-------------------------------------------------------------------
EQUITY HOLDINGS
-------------------------------------------------------------------
Sector breakdown of the Five Largest Equity Holdings
Portfolio's equity holdings -----------------------------------
---------------------------
Technology 15% 1. Federal National Mortgage Association
Financial 14% Insurer and holder of mortgage loans
Consumer Staples 14% 2. Columbia/HCA Healthcare Corp.
Health 12% Leading hospital management company
Consumer Discretionary 8% 3. American International Group, Inc.
Energy 8% Major international insurance holding
Durables 7% 4. Eli Lilly Co.
Media 7% Leading pharmaceutical company
Manufacturing 7% 5. Motorola Inc.
Other 8% Manufacturer of semiconductors and
---- communication products
100%
====
-------------------------------------------------------------------
FIXED INCOME HOLDINGS
-------------------------------------------------------------------
By Asset Type
--------------------------------------------
U.S. Treasury Obligations 44%
Cash Equivalents 19%
Corporate Bonds 17%
U.S. Gov't Guaranteed Mortgages 6%
Asset-Backed Securities 6%
Foreign Bonds 5%
U.S. Government Agency Pass-Thrus 2%
Collateralized Mortgage Obligations 1%
----
100%
====
By Quality
--------------------------------------------
AAA 77%
AA 2%
A 9%
BBB 12%
----
100%
====
7
<PAGE>
CAPITAL GROWTH PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Strong corporate earnings and declining interest rates pushed stock
prices to record highs in the first half of 1995. Capital Growth Portfolio's net
asset value rose $1.49 per share to $13.72 on June 30. In addition, the
Portfolio distributed $0.035 per share in income and $0.425 per share in capital
gains to shareholders, contributing to a total return of 16.48% for the period.
The positive forces influencing stock market activity in recent months
will continue, in our opinion, to drive share prices for the balance of 1995. In
recent months, the Portfolio has benefited from significant appreciation in its
cable and technology holdings, with the strongest performance coming from such
semiconductor stocks as Intel, up 98% for the period. Intel was the Portfolio's
largest holding on June 30. Another important contributor to performance during
the period was the financial services sector, which benefited from a greatly
improved interest rate environment. Portfolio positions were added in American
International Group, PMI Group, and Fannie Mae.
Alternatively, the Portfolio's historically high concentrations in
media and communications companies have been reduced. While we believe that the
long-term outlook for these companies remains quite positive, near-term
regulatory and competitive concerns no longer justify significant overweighting.
Similarly, in the gaming sector, which has continued to disappoint due to legal
difficulties and increased competition, we reduced or sold holdings in Bally
Gaming, Circus Circus, Mirage Resorts, and President Casinos. We continue to
favor the technology sector. But within the context of this large area we have
and will continue to adjust the Portfolio's mix of investments. Selling into the
recent rally, we took profits in such companies as Informix and Advanced Micro
Devices, and purchased Hewlett-Packard. Overall, the technology, financial, and
healthcare sectors continue to be areas of focus for the Portfolio.
In the coming months, we expect a general slowing of economic growth
around the world and therefore have emphasized those industries and companies
where we believe earnings growth is sustainable. Fortunately, we are encouraged
by the relative health of U.S. corporations and the benign inflationary
environment. We believe Capital Growth Portfolio is well-positioned to benefit
shareholders over time.
Sincerely,
Your Portfolio Management Team
/s/William F. Gadsden /s/Bruce F. Beaty
William F. Gadsden Bruce F. Beaty
Lead Portfolio Manager
8
<PAGE>
Capital Growth Portfolio
Portfolio Summary as of June 30, 1995
-----------------------------------------------------------------
Growth of a $10,000 Investment
-----------------------------------------------------------------
Capital Growth Portfolio
----------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
--------- ------- ---------- -------
1 Year $12,031 20.31% 20.31%
5 Year $17,148 71.48% 11.39%
Life of
Fund* $34,692 246.92% 13.30%
S&P 500 Index
--------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
--------- ------- ---------- -------
1 Year $12,607 26.07% 26.07%
5 Year $17,693 76.93% 12.08%
Life of
Fund* $39,379 293.79% 14.83%
*The Fund commenced operations on July 16, 1985.
Index comparisons begin July 31, 1985.
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Yearly Periods Ended June 30
Capital Growth Portfolio
Year Amount
---------------------
7/31/85* 10000
86 13718
87 17198
88 16314
89 19072
90 20609
91 21176
92 25087
93 29636
94 29374
95 35340
S&P 500 Index
Year Amount
---------------------
7/31/85* 10000
86 13602
87 17024
88 15850
89 19106
90 22257
91 23902
92 27108
93 30803
94 31236
95 39379
The Standard & Poor's (S&P) 500 Index is an unmanaged capitalization-
weighted measure of 500 widely held common stocks listed on the New
York Stock Exchange, American Stock Exchange, and Over-The-Counter
market. Index returns assume reinvestment of dividends and, unlike
Fund returns, do not reflect any fees or expenses.
All performance is historical, assumes reinvestment of all dividends
and capital gains, and is not indicative of future results. Investment
return and principal value will fluctuate, so an investor's shares,
when redeemed, may be worth more or less than when purchased. Total
returns in some periods were higher due to maintenance of the Fund's
expenses. See Financial Highlights for the Capital Growth Portfolio.
-------------------------------------------------------------------
DIVERSIFICATION
-------------------------------------------------------------------
Equity Securities 94%
Cash Equivalents 6%
----
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 19%
Financial 14% The Portfolio's historically high
Health 11% concentrations in media and communications
Media 11% companies have beenr reduced, since
Energy 8% current valuations and fundamental
Consumer Discretionary 6% prospects no longer justify a substantial
Durables 5% overweighting in our opinion.
Communications 5%
Service Industries 4%
Other 11%
----
94%
====
--------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS
--------------------------------------------------------------------------
1. Intel Corp.
Semiconductor memory circuits
2. Time Warner Inc.
Publishing, broadcasting, and video entertainment company
3. Columbia/HCA Healthcare Corp.
Leading hospital management company
4. Federal National Mortgage Association
Insurer and holder of mortgage loans
5. Hewlett-Packard Co.
Measurement and test instruments, computer systems
6. Texas Instruments Inc.
Semiconductors and electronic equipment
7. Tele-Communications Inc.
Cable TV systems and microwave services
8. American International Group, Inc.
Major international insurance holding company
9. Capital Cities/ABC Inc.
TV and radio broadcasting, cable programming and publishing
10. Amoco Corp.
International oil company
9
<PAGE>
INTERNATIONAL PORTFOLIO
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
A noticeably more positive investment environment in recent months and
the strong performance of several portfolio holdings combined to provide a 4.25%
total return for International Portfolio in the six months ended June 30, 1995.
The Portfolio's return compares favorably with the 2.95% return of the unmanaged
Morgan Stanley Capital International Europe, Australia, and Far East plus Canada
Index, as well as with the 3.58% average return of the 58 international funds
tracked by Lipper Analytical Services.
Throughout the six-month period, we continued to enhance investments in
European markets while trimming the Portfolio's exposure to Japan. This strategy
served the Portfolio well, as Finland, Sweden, and Switzerland were among the
best-performing stock markets in the world, returning 30.0%, 16.7%, and 23.2%,
respectively. Meanwhile, Japan returned -8.2% during the period, beset by the
strong yen, a deflationary spiral, trade conflict with the United States, and
ineffectual government policy. Despite the many excellent companies in Japan, we
intend to maintain a cautious approach to Japanese investments until the
Japanese government pursues meaningful policies to address its economic
difficulties. Also, as the likelihood of a weakening yen increased, we increased
our currency hedges on the Portfolio's remaining Japanese investments. Roughly
25% of the Portfolio's Japanese holdings was hedged back to the dollar as of
June 30.
With the proceeds from our sales in Japan we invested in several
European companies that are enjoying the benefits of strong earnings and
negligible inflation, including stocks of financial companies. Central banks in
Europe and elsewhere have shifted from an anti-inflation policy, which included
rising interest rates, to a more neutral wait-and-see stance. Additions during
the period include Compagnie Bancaire SA and Societe Generale in France, and
AEGON Insurance Group NV in the Netherlands.
In the coming months, we intend to remain focused on what we consider
the key global growth themes, identifying those companies that have established
successful market niches in a world economy characterized by slow overall growth
and low inflation.
Sincerely,
Your Portfolio Management Team
/s/Carol L. Franklin /s/Nicholas Bratt
Carol L. Franklin Nicholas Bratt
Lead Portfolio Manager
/s/Joan R. Gregory
Joan R. Gregory
10
<PAGE>
International Portfolio
Portfolio Summary as of June 30, 1995
-----------------------------------------------------------------
Growth of a $10,000 Investment
-----------------------------------------------------------------
International Portfolio
----------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
--------- ------- ---------- -------
1 Year $10,262 2.62% 2.62%
5 Year $13,275 32.75% 5.83%
Life of
Fund* $20,428 104.28% 9.15%
MSCI EAFE & Canada Index
--------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
--------- ------- ---------- -------
1 Year $10,227 2.27% 2.27%
5 Year $12,552 25.52% 4.65%
Life of
Fund* $14,325 43.25% 4.55%
*The Fund commenced operations on May 1, 1987.
Index comparisons begin May 31, 1987.
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Yearly Periods Ended June 30
International Portfolio
Year Amount
---------------------
5/31/87* 10000
87 10688
88 9972
89 11921
90 15492
91 13925
92 15162
93 16540
94 20041
95 20566
MSCI EAFE & Canada Index
Year Amount
---------------------
5/31/87* 10000
87 9706
88 10092
89 11065
90 11413
91 10167
92 10088
93 12057
94 14007
95 14325
The Morgan Stanley Capital International (MSCI) Europe, Australia,
the Far East (EAFE) & Canada Index is an unmanaged capitalization-
weighted measure of stock markets in Europe, Australia, the Far East
and Canada. Index returns assume dividends reinvested net of
withholding tax and, unlike Fund returns, do not reflect any fees or
expenses.
All performance is historical, assumes reinvestment of all dividends
and capital gains, and is not indicative of future results. Investment
return and principal value will fluctuate, so an investor's shares,
when redeemed, may be worth more or less than when purchased. Total
returns in some periods were higher due to maintenance of the Fund's
expenses. See Financial Highlights for the International Portfolio.
-------------------------------------------------------------------
DIVERSIFICATION
-------------------------------------------------------------------
By Region (Excluding Cash Equivalents)
--------------------------------------
Europe 63%
Japan 18%
Pacific Basin 11%
Latin America 5%
Canada 3%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
By Sector (Equity Holdings)
-------------------------------------
Manufacturing 18%
Financial 12%
Metals and Minerals 10%
Durables 10%
Energy 9%
Utilities 6%
Technology 6%
Service Industries 6%
Consumer Staples 5%
Other 18%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
--------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS
--------------------------------------------------------------------------
1. SAP AG
German computer software manufacturer
2. Autoliv AB
Swedish manufacturer of safety airbags for automobiles
3. Nokia AB Oy
Leading manufacturer of cellular telephones in Finland
4. L.M. Ericsson Telephone Co.
Leading manufacturer of cellular telephone equipment in Sweden
5. SMC Corp.
Leading maker of pneumatic equipment in Japan
6. Heineken Holdings N.V.
Brewery in the Netherlands
7. Philips Electronics N.V.
Leading manufacturer of electrical equipment in the Netherlands
8. Hutchison Whampoa, Ltd.
Container terminal and real estate company in Hong Kong
9. Reuters Holdings PLC
International news agency in the United Kingdom
10. Brown, Boveri & Cie. AG
Swiss manufacturer of electrical equipment
11
<PAGE>
<TABLE>
MONEY MARKET PORTFOLIO
INVESTMENT PORTFOLIO as of June 30, 1995 (Unaudited)
-------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Value ($)
Portfolio Amount ($) (Note A)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
--------------------------------------------------------------------------------------
13.7% REPURCHASE AGREEMENT
--------------------------------------------------------------------------------------
11,293,000 Repurchase Agreement with Nesbitt Burns Securities
Inc. dated 6/30/95 at 6.125%, to be repurchased at
$11,298,764 on 7/3/95, collateralized by a $11,140,000
U.S. Treasury Note, 6.25%, 8/31/96 (Cost $11,293,000)...... 11,293,000
----------
--------------------------------------------------------------------------------------
59.8% COMMERCIAL PAPER
--------------------------------------------------------------------------------------
HEALTH 7.2%
Pharmaceuticals 3,000,000 Eli Lilly & Co., 5.82%, 9/20/95............................. 2,960,715
3,000,000 Warner Lambert Co., 5.55%, 12/18/95......................... 2,921,375
----------
5,882,090
----------
COMMUNICATIONS 7.2%
Telephone/
Communications 3,000,000 AT&T Corp., 5.97%, 7/26/95.................................. 2,987,562
3,000,000 BellSouth Telecommunications Inc., 6.02%, 9/22/95........... 2,958,362
----------
5,945,924
----------
FINANCIAL 36.4%
Banks 7.3% 3,000,000 Deutsche Bank Financial Inc., 5.85%, 7/6/95................. 2,997,562
3,000,000 Prudential Funding Corp., 6%, 7/14/95....................... 3,000,000
----------
5,997,562
----------
Consumer Finance 10.9% 3,000,000 American Express Credit Corp., 5.99%, 8/8/95................ 3,000,000
3,000,000 Ford Motor Credit Corp., 5.97%, 7/7/95...................... 2,997,015
3,000,000 General Electric Capital Corp., 5.99%, 7/24/95.............. 3,000,000
----------
8,997,015
----------
Other Financial
Companies 18.2% 3,000,000 Associated Corp. of North America, 5.96%, 7/10/95........... 3,000,000
3,000,000 Ciesco L.P., 5.85%, 9/12/95................................. 2,964,412
3,000,000 Corporate Asset Funding Corp., 5.9%, 8/23/95................ 2,973,942
3,000,000 New Center Asset Trust, 5.94%, 7/5/95....................... 2,998,020
3,075,000 Rincon Securities Inc., 5.97%, 7/26/95...................... 3,062,252
----------
14,998,626
----------
MANUFACTURING 3.6%
Machinery/
Components/Controls 3,000,000 Pitney Bowes Credit Corp., 6.17%, 9/6/95.................... 2,965,551
-----------
ENERGY 5.4%
Oil Companies 1,500,000 Chevron Oil Finance Co., 5.93%, 7/12/95..................... 1,497,282
3,000,000 Shell Oil Credit Co., 5.95%, 8/1/95......................... 2,984,629
-----------
4,481,911
-----------
TOTAL COMMERCIAL PAPER (Cost $49,268,679)................... 49,268,679
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
--------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Value ($)
Portfolio Amount ($) (Note A)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
13.2% ---------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS
---------------------------------------------------------------------------------------
5,000,000 U.S. Treasury Bill, 6.32%, 7/6/95............................. 4,995,615
3,000,000 U.S. Treasury Bill, 6.19%, 7/13/95............................ 2,993,815
3,000,000 U.S. Treasury Bill, 6.75%, 12/14/95........................... 2,906,694
----------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $10,896,124)........................ 10,896,124
----------
---------------------------------------------------------------------------------------
3.6% U.S. GOVERNMENT AGENCY OBLIGATIONS
---------------------------------------------------------------------------------------
3,000,000 Federal National Mortgage Association, Discount Note,
5.53%, 11/29/95 (Cost $2,930,414)............................ 2,930,414
----------
---------------------------------------------------------------------------------------
9.7% SHORT-TERM NOTES
---------------------------------------------------------------------------------------
3,000,000 Fifth Third Bank, 6.2%, 10/26/95.............................. 3,000,000
3,000,000 Harris Trust and Savings Bank, 6.1%, 7/18/95.................. 3,000,000
2,000,000 Morgan Bank Delaware, 6.5%, 5/6/96............................ 2,007,463
----------
TOTAL SHORT-TERM NOTES (Cost $8,007,463)...................... 8,007,463
----------
==========================================================================================================================
TOTAL INVESTMENT PORTFOLIO - 100.0 - (Cost $82,395,680)(a).... 82,395,680
==========
(a) Cost for federal income tax purposes is $82,395,680.
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
------------------------------------------------------------------------------------
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
------------------------------------------------------------------------------------
JUNE 30, 1995 (UNAUDITED)
------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Investments, at value (amortized cost $82,395,680)......
(Note A)............................................. $82,395,680
Cash 66
Receivables:
Portfolio shares sold................................ 1,400,985
Interest............................................. 186,535
-----------
Total assets................................ 83,983,266
LIABILITIES
Payables:
Portfolio shares redeemed............................ $ 1,893
Accrued management fee (Note B)...................... 23,513
Other accrued expenses (Note B)...................... 9,301
-------
Total liabilities............................ 34,707
-----------
Net assets, at value.................................... $83,948,559
===========
NET ASSETS
Net assets consist of:
Paid-in capital...................................... 83,948,559
-----------
Net assets, at value.................................... $83,948,559
===========
NET ASSET VALUE, offering and redemption price per
share ($83,948,559 divided by 83,948,559
outstanding shares of beneficial interest,
no par value, unlimited number of shares
authorized).......................................... $1.00
=====
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
<CAPTION>
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest.............................................. $2,563,701
Expenses (Note A):....................................
Management fee (Note B)............................... $154,582
Accounting fees (Note B).............................. 15,023
Trustees' fees (Note B)............................... 7,562
Legal................................................. 12,998
Custodian fees........................................ 9,268
Auditing.............................................. 7,382
Other................................................. 3,907 210,722
------- ----------
Net investment income................................. 2,352,979
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.. $2,352,979
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
<TABLE>
MONEY MARKET PORTFOLIO
-----------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
-----------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED YEAR
JUNE 30, ENDED
1995 DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1994
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income and net increase in net
assets resulting from operations.............................................. $ 2,352,979 $ 2,768,491
------------ -------------
Distributions to shareholders from net investment income
($.028 and $.037 per share, respectively)..................................... (2,352,979) (2,768,491)
Portfolio share transactions at net asset value of $1.00 per share: ------------ -------------
Proceeds from shares sold..................................................... 64,134,282 186,827,297
Net asset value of shares issued to shareholders in
reinvestment of distributions from net investment income................... 2,352,979 2,768,491
Cost of shares redeemed....................................................... (73,036,614) (147,877,533)
------------ -------------
Net increase (decrease) in net assets from Portfolio share transactions....... (6,549,353) 41,718,255
------------ -------------
INCREASE (DECREASE) IN NET ASSETS............................................... (6,549,353) 41,718,255
Net assets at beginning of period............................................... 90,497,912 48,779,657
------------ -------------
NET ASSETS AT END OF PERIOD..................................................... $ 83,948,559 $ 90,497,912
============ =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
----------------------------------------------------------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED
FROM THE FINANCIAL STATEMENTS.
<CAPTION>
SIX SIX
MONTHS MONTHS
ENDED ENDED
JUNE 30, YEARS ENDED DECEMBER 31, DECEMBER
1995 --------------------------------------------------------------------- 31,
(UNAUDITED) 1994 1993 1992 1991 1990 1989 1988 1987 1986(E)
----------- --------------------------------------------------------------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
Income from investment......... ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
operations:
Net investment
income (a)................... .028 .037 .025 .033 .057 .076 .088 .068 .060 .026
Less distributions from
net investment income......... (.028) (.037) (.025) (.033) (.057) (.076) (.088) (.068) (.060) (.026)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period................. $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%)............... 2.83(d) 3.72 2.54 3.33 5.81 7.83 8.84 7.08 5.95 2.59(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of
period ($ millions)........... 84 90 49 34 28 32 15 11 8 3
Ratio of operating
expenses, net to
average daily net
assets (%) (a)................ .50(c) .56 .66 .64 .67 .69 .72 .75 .75 .75(c)
Ratio of net investment
income to average
daily net assets (%).......... 5.63(c) 3.80 2.55 3.26 5.67 7.57 8.53 6.99 6.06 5.10(c)
<FN>
(a) Portion of expenses
reimbursed
(Note B).................. $ - $ - $ - $ - $ - $ - $ .001 $ .003 $ .006 $ .022
(b) Original capital
(c) Annualized
(d) Not annualized
(e) On August 22, 1986, the Trustees voted to change the year end of the Fund from June 30 to December 31.
</FN>
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 16, 1985
(COMMENCEMENT
OF OPERATIONS)
TO JUNE 30,
1986
--------------
<S> <C>
Net asset value,
beginning of period $1.000(b)
Income from investment......... ------
operations:
Net investment
income (a)................... .064
Less distributions from
net investment income......... (.064)
------
Net asset value,
end of period................. $1.000
======
TOTAL RETURN (%)............... 6.59(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of
period ($ millions)........... -
Ratio of operating
expenses, net to
average daily net
assets (%) (a)................ .60(c)
Ratio of net investment
income to average
daily net assets (%).......... 6.75(c)
<FN>
(a) Portion of expenses
reimbursed
(Note B).................. $ .133
(b) Original capital
(c) Annualized
(d) Not annualized
(e) On August 22, 1986, the Trustees voted to change the year end of the Fund from June 30 to December 31.
</FN>
</TABLE>
17
<PAGE>
<TABLE>
BOND PORTFOLIO
INVESTMENT PORTFOLIO as of June 30, 1995 (Unaudited)
-------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
--------------------------------------------------------------------------------------
51.8% U.S. TREASURY OBLIGATIONS
--------------------------------------------------------------------------------------
2,735,000 U.S. Treasury Bill, 5.5%, 8/3/95............................ 2,722,638
13,210,000 U.S. Treasury Bond, 7.25%, 5/15/16.......................... 14,000,486
1,520,000 U.S. Treasury Bond, 7.875%, 2/15/21......................... 1,728,529
12,655,000 U.S. Treasury Note, 4%, 1/31/96............................. 12,532,373
11,875,000 U.S. Treasury Note, 6%, 6/30/96............................. 11,904,687
6,400,000 U.S. Treasury Note, 5.5%, 7/31/97........................... 6,356,992
1,190,000 U.S. Treasury Note, 6.375%, 7/15/99......................... 1,205,803
7,190,000 U.S. Treasury Note, 6%, 10/15/99............................ 7,195,608
6,910,000 U.S. Treasury Note, 6.375%, 8/15/02......................... 6,992,022
3,670,000 U.S. Treasury Note, 5.875%, 2/15/04......................... 3,579,975
12,700,000 U.S. Treasury Separate Trading Registered Interest
and Principal Securities, 11/15/10 (6.78**)............... 4,555,109
5,340,000 U.S. Treasury Separate Trading Registered Interest
and Principal Securities, 2/15/12 (6.84**)................ 1,744,898
----------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $72,297,430).......... 74,519,120
----------
--------------------------------------------------------------------------------------
7.3% U.S. GOV'T GUARANTEED MORTGAGES
--------------------------------------------------------------------------------------
3,183,519 Government National Mortgage Association,
6.5%, 8/15/08*............................................. 3,147,704
6,806,378 Government National Mortgage Association,
10%, 8/15/20*.............................................. 7,408,267
----------
TOTAL U.S. GOV'T GUARANTEED MORTGAGES
(Cost $10,609,861)......................................... 10,555,971
----------
--------------------------------------------------------------------------------------
4.2% U.S. GOVERNMENT AGENCY PASS-THRUS
--------------------------------------------------------------------------------------
5,729,457 Federal Home Loan Mortgage Corp., 9.5%, 3/1/25*
(Cost $ 6,003,397)......................................... 6,012,321
----------
--------------------------------------------------------------------------------------
1.6% COLLATERALIZED MORTGAGE OBLIGATIONS
--------------------------------------------------------------------------------------
2,000,000 Federal Home Loan Mortgage Corp., REMIC, 7%, 7/15/06........ 2,002,500
231,929 Federal National Mortgage Association, REMIC, 8.5%,
4/25/18.................................................... 235,842
----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $2,054,250).......................................... 2,238,342
----------
--------------------------------------------------------------------------------------
3.0% FOREIGN BONDS - U.S. $ DENOMINATED
--------------------------------------------------------------------------------------
1,000,000 ABN-AMRO Bank NV, 7.75%, 5/15/23............................ 1,018,730
2,000,000 Korea Development Bank, 9.6%, 12/1/00....................... 2,256,520
1,000,000 Nippon Telegraph & Telephone Corp., 9.5%, 7/27/98........... 1,092,770
----------
TOTAL FOREIGN BONDS - U.S. $ DENOMINATED
(Cost $4,177,789).......................................... 4,368,020
----------
--------------------------------------------------------------------------------------
5.4% FOREIGN BONDS - NON U.S. $ DENOMINATED
--------------------------------------------------------------------------------------
DM 5,300,000 Federal Republic of Germany, 6.5%, 7/15/03.................. 3,713,469
FFr 19,500,000 Government of France OAT, 7.5%, 4/25/05..................... 3,982,200
----------
TOTAL FOREIGN BONDS - NON U.S. $ DENOMINATED
(Cost $7,703,350).......................................... 7,695,669
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
-------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
--------------------------------------------------------------------------------------
7.6% ASSET-BACKED SECURITIES
--------------------------------------------------------------------------------------
Automobile Receivables 0.6% 898,739 Premier Auto Trust Asset Backed Certificate
Series 1994-3, 6.8%, 12/2/99*............................. 903,512
----------
Credit Card Receivables 4.5% 1,125,000 Chase Manhattan Credit Card Trust, 1991 "A",
7.65%, 11/15/98........................................... 1,128,859
1,000,000 First Chicago Master Trust, Series 1991-D, 8.4%, 6/15/98... 1,018,750
2,500,000 Standard Credit Card Trust, Series 1990-3B, 9.85%,
7/10/97................................................... 2,651,550
1,500,000 Standard Credit Card Trust, Series 1990-6B, 9.625%,
9/10/97................................................... 1,587,180
----------
6,386,339
----------
Home Equity Loans 1.5% 1,578,067 Contimortgage Home Equity Loan Trust, Series 1994-5 A1,
9.07%, 5/15/06*........................................... 1,592,614
569,384 United Companies Financial Corp., Home Loan Trust,
Series 1993 B1, 6.075%, 7/25/14*.......................... 552,124
----------
2,144,738
----------
Manufactured Housing
Receivables 1.0% 1,493,629 Green Tree Financial Corp., Securitized NIM
Series 1994B, 7.85%, 7/15/04*............................. 1,497,363
----------
TOTAL ASSET-BACKED SECURITIES (Cost $11,245,316)........... 10,931,952
----------
--------------------------------------------------------------------------------------
19.1% CORPORATE BONDS
--------------------------------------------------------------------------------------
Consumer Discretionary 3.6% 2,000,000 Dayton Hudson Corp., 8.6%, 1/15/12......................... 2,195,540
3,000,000 Price/Costco Inc., 7.125%, 6/15/05......................... 3,013,980
----------
5,209,520
----------
Consumer Staples 0.8% 1,000,000 Seagram & Sons Inc., 9%, 8/15/21........................... 1,130,570
----------
Financial 2.2% 1,000,000 Banc One Corp., 8.74%, 9/15/03............................. 1,109,300
1,000,000 Golden West Financial Corp., 6%, 10/1/03................... 941,670
1,000,000 Grand Metropolitan Investment Corp., 8.625%, 8/15/01....... 1,093,510
----------
3,144,480
----------
Media 2.9% 4,000,000 Time Warner Inc., 9.125%, 1/15/13.......................... 4,157,160
----------
Durables 1.8% 5,000,000 General Motors Acceptance Corp., Zero Coupon, 12/1/12...... 1,353,850
1,000,000 Lockheed Corp., 9%, 1/15/22................................ 1,181,220
----------
2,535,070
----------
Manufacturing 1.6% 1,000,000 ARCO Chemical Co., 9.375%, 12/15/05........................ 1,164,580
1,000,000 Monsanto Co., 8.7%, 10/15/21............................... 1,149,640
----------
2,314,220
----------
Technology 1.5% 2,000,000 Loral Corp., 8.375%, 6/15/24............................... 2,127,800
----------
Energy 3.9% 2,000,000 Atlantic Richfield Co., 8.25%, 2/1/22...................... 2,174,900
2,000,000 Atlantic Richfield Co., 9.125%, 8/1/31..................... 2,406,040
1,000,000 Enron Corp., 10%, 6/1/98................................... 1,082,350
----------
5,663,290
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
<TABLE>
BOND PORTFOLIO
-------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Transportation 0.8% 575,000 American Airlines, 8.39%, 7/2/17 575,575
600,000 American Airlines, 8.8%, 9/16/15 623,970
----------
1,199,545
----------
TOTAL CORPORATE BONDS (Cost $25,582,170) 27,481,655
----------
=========================================================================================================================
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $139,673,563)(a) 143,803,050
===========
<FN>
* Effective maturities will be shorter due to amortization and prepayments.
** Yield; bond equivalent yield to maturity; not a coupon rate (unaudited).
(a) At June 30, 1995, the net unrealized appreciation on investments based on cost for
federal income tax purposes of $139,766,334 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an
excess of market value over tax cost........................................................... $4,707,448
Aggregate gross unrealized depreciation for all investments in which there is an
excess of tax cost over market value........................................................... (670,732)
----------
Net unrealized appreciation...................................................................... $4,036,716
==========
--------------------------------------------------------------------------------------------------------------------------
At December 31, 1994, the Bond Portfolio had a net tax basis capital loss carryforward of approximately $4,153,327, which
may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until December
31, 2002, whichever occurs first.
--------------------------------------------------------------------------------------------------------------------------
From November 1, 1994 through December 31, 1994, the Bond Portfolio incurred approximately $934,894 of net realized capital
losses which the Portfolio intends to elect to defer and treat as arising in the fiscal year ended December 31, 1995.
--------------------------------------------------------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short-term investments and U.S. Government securities), for the six
months ended June 30, 1995, aggregated $40,857,557 and $48,304,344, respectively. Purchases and sales of U.S. Government
securities for the six months ended June 30, 1995, aggregated $69,417,915 and $67,599,030, respectively.
--------------------------------------------------------------------------------------------------------------------------
COMMITMENTS:
As of June 30, 1995, the Bond Portfolio entered into the following forward foreign currency exchange contracts resulting in
net unrealized appreciation of $119,533.
</FN>
</TABLE>
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/
SETTLEMENT DEPRECIATION
CONTRACTS TO DELIVER IN EXCHANGE FOR DATE (U.S.$)
---------------------------- ------------------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Deutschemarks 5,380,751 U.S. Dollars 4,010,219 10/23/95 102,109
French Francs 18,975,450 U.S. Dollars 3,917,714 10/23/95 17,424
-------
119,533
=======
The accompanying notes are an integral part of the financial statements.
</TABLE>
20
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
----------------------------------------------------------------------------------------------------------------
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
----------------------------------------------------------------------------------------------------------------
JUNE 30, 1995 (UNAUDITED)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $139,673,563) (Note A)................ $143,803,050
Cash.......................................................................... 664
Unrealized appreciation on forward currency exchange contracts (Note A)....... 119,533
Receivables:
Interest.................................................................... 2,147,165
Portfolio shares sold....................................................... 116,483
------------
Total assets.............................................................. 146,186,895
LIABILITIES
Payables:
Portfolio shares redeemed................................................... $ 491,227
Accrued management fee (Note B)............................................. 59,844
Other accrued expenses (Note B)............................................. 16,157
----------
Total liabilities......................................................... 567,228
------------
Net assets, at market value................................................... $145,619,667
============
NET ASSETS
Net assets consist of:
Undistributed net investment income......................................... $ 2,403,397
Net unrealized appreciation on:
Investments............................................................... 4,129,487
Foreign currency related transactions..................................... 117,367
Accumulated net realized loss............................................... (5,037,416)
Paid-in capital............................................................. 144,006,832
------------
Net assets, at market value................................................... $145,619,667
============
NET ASSET VALUE, offering and redemption price per share
($145,619,667 divided by 21,008,272 outstanding shares of beneficial
interest, no par value, unlimited number of shares authorized)........ $6.93
=====
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
<TABLE>
BOND PORTFOLIO
------------------------------------------------------------------------------------------------------
<CAPTION>
STATEMENT OF OPERATIONS
------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest............................................................... $ 4,927,305
Expenses (Note A):
Management fee (Note B).............................................. $ 336,348
Accounting fees (Note B)............................................. 21,673
Trustees' fees (Note B).............................................. 8,414
Custodian fees....................................................... 9,437
Auditing............................................................. 8,876
Legal................................................................ 3,852
Other................................................................ 3,475 392,075
---------- -----------
Net investment income.................................................. 4,535,230
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments.......................................................... 343,683
Foreign currency related transactions................................ (25,038) 318,645
----------
Net unrealized appreciation during the period on:
Investments.......................................................... 8,897,348
Foreign currency related transactions................................ 117,367 9,014,715
---------- -----------
Net gain on investment transactions.................................... 9,333,360
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $13,868,590
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
--------------------------------------------------------------------------------------------------------------
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR
JUNE 30, ENDED
1995 DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1994
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income..................................................... $ 4,535,230 $ 8,806,288
Net realized gain (loss) from investment transactions..................... 318,645 (5,607,148)
Net unrealized appreciation (depreciation) on investment
transactions during the period.......................................... 9,014,715 (9,672,581)
------------ ------------
Net increase (decrease) in net assets resulting from operations............. 13,868,590 (6,473,441)
------------ ------------
Distributions to shareholders from:
Net investment income ($.21 and $.43 per share, respectively)............. (4,319,990) (8,525,294)
------------ ------------
Net realized gain from investment transactions ($.17 per share)........... - (3,161,229)
------------ ------------
Portfolio share transactions:
Proceeds from shares sold................................................. 30,873,203 86,578,280
Net asset value of shares issued to shareholders in
reinvestment of distributions........................................... 4,319,990 11,686,523
Cost of shares redeemed................................................... (41,526,738) (66,398,542)
------------ ------------
Net increase (decrease) in net assets from Portfolio share transactions..... (6,333,545) 31,866,261
------------ ------------
INCREASE IN NET ASSETS...................................................... 3,215,055 13,706,297
Net assets at beginning of period........................................... 142,404,612 128,698,315
------------ ------------
NET ASSETS AT END OF PERIOD (including undistributed net investment
income of $2,403,397 and $2,188,157, respectively).................. $145,619,667 $142,404,612
============ ============
OTHER INFORMATION
INCREASE (DECREASE) IN PORTFOLIO SHARES
Shares outstanding at beginning of period................................... 21,973,579 17,350,092
------------ ------------
Shares sold............................................................... 4,615,281 12,843,292
Shares issued to shareholders in reinvestment of distributions............ 659,112 1,713,654
Shares redeemed........................................................... (6,239,700) (9,933,459)
------------ ------------
Net increase (decrease) in Portfolio shares............................... (965,307) 4,623,487
------------ ------------
Shares outstanding at end of period......................................... 21,008,272 21,973,579
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
<TABLE>
BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout each period and other performance information derived
from the financial statements.
<CAPTION>
SIX
SIX MONTHS MONTHS
ENDED ENDED
JUNE 30, YEARS ENDED DECEMBER 31, (E) DECEMBER
1995(E) -------------------------------------------------------------------------- 31,
(UNAUDITED) 1994 1993 1992 1991 1990 1989 1988 1987 1986(E)(F)
----------- -------------------------------------------------------------------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period..... $ 6.48 $ 7.42 $ 7.19 $ 7.37 $ 6.73 $ 6.72 $ 6.39 $ 6.47 $ 6.67 $ 6.56
------- ------ ------- ------ ------- ------ ------- ------- ------- ------
Income from investment
operations:
Net investment
income (a).......... .21 .43 .48 .49 .52 .53 .54 .54 .49 .23
Net realized and
unrealized gain
(loss) on
investment
transactions........ .45 (.77) .38 (.02) .61 (.02) .18 (.19) (.40) .08
------- ------ ------- ------ ------- ------ ------- ------- ------- ------
Total from investment
operations.............. .66 (.34) .86 .47 1.13 .51 .72 .35 .09 .31
------- ------ ------- ------ ------- ------ ------- ------- ------- ------
Less distributions from:
Net investment income... (.21) (.43) (.48) (.46) (.47) (.50) (.39) (.43) (.29) (.17)
Net realized gains on
on investment
transactions.......... - (.17) (.15) (.19) (.02) - - - - (.03)
------- ------ ------- ------ ------- ------ ------- ------- ------- ------
Total distributions....... (.21) (.60) (.63) (.65) (.49) (.50) (.39) (.43) (.29) (.20)
------- ------ ------- ------ ------- ------ ------- ------- ------- ------
Net asset value,
end of period........... $ 6.93 $ 6.48 $ 7.42 $ 7.19 $ 7.37 $ 6.73 $ 6.72 $ 6.39 $ 6.47 $ 6.67
======= ====== ======= ====== ======= ====== ======= ======= ======= ======
TOTAL RETURN (%).......... 10.40(d) (4.79) 12.38 7.01 17.61 8.06 11.65 5.46 1.22 4.90(d)
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period ($ millions)..... 146 142 129 113 74 42 22 3 3 1
Ratio of operating
expenses, net to
average net
assets (%) (a).......... .56(c) .58 .61 .63 .69 .73 .75 .75 .75 .75(c)
Ratio of net investment
income to average
net assets (%).......... 6.45(c) 6.43 6.59 6.89 7.51 8.05 8.04 7.86 7.53 6.88(c)
Portfolio turnover
rate (%)................ 157.99(c) 96.55 125.15 87.00 115.86 71.02 103.41 245.23 186.05 23.82(c)
<FN>
(a) Portion of expenses
reimbursed (Note B)... $ - $ - $ - $ - $ - $ - $ .01 $ .04 $ .08 $ .21
(b) Original capital
(c) Annualized
(d) Not annualized
(e) Per share amounts, for each of the periods identified, have been calculated using the monthly average shares outstanding during
the period method.
(f) On August 22, 1986, the Trustees voted to change the year end of the Fund from June 30 to December 31.
</FN>
</TABLE>
<TABLE>
BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout each period and other performance information derived
from the financial statements.
<CAPTION>
FOR THE PERIOD
JULY 16, 1985
(COMMENCEMENT
OF OPERATIONS)
TO JUNE 30,
1986
--------------
<S> <C>
Net asset value,
beginning of period..... $ 6.00(b)
------
Income from investment
operations:
Net investment
income (a).......... .45
Net realized and
unrealized gain
(loss) on
investment
transactions........ .44
------
Total from investment
operations.............. .89
------
Less distributions from:
Net investment income... (.33)
Net realized gains on
on investment
transactions.......... -
------
Total distributions....... (.33)
------
Net asset value,
end of period........... $ 6.56
======
TOTAL RETURN (%).......... 15.11(d)
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period ($ millions)..... -
Ratio of operating
expenses, net to
average net
assets (%) (a).......... .60(c)
Ratio of net investment
income to average
net assets (%).......... 7.48(c)
Portfolio turnover
rate (%)................ 6.27(c)
<FN>
(a) Portion of expenses
reimbursed (Note B)... $ .80
(b) Original capital
(c) Annualized
(d) Not annualized
(e) Per share amounts, for each of the periods identified, have been calculated using the monthly average shares outstanding during
the period method.
(f) On August 22, 1986, the Trustees voted to change the year end of the Fund from June 30 to December 31.
</FN>
</TABLE>
24
<PAGE>
<TABLE>
BALANCED PORTFOLIO
INVESTMENT PORTFOLIO as of June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------------------
<CAPTION>
% OF PRINCIPAL MARKET
PORTFOLIO AMOUNT ($) VALUE ($)
--------------------------------------------------------------------------------------------
<S> <C> <C>
7.5% REPURCHASE AGREEMENT
---------------------------------------------------------------------------------
4,285,000 Repurchase Agreement with Donaldson, Lufkin &
Jenrette dated 6/30/95 at 6.07%, to be repurchased
at $4,287,167 on 7/3/95, collateralized by a $4,286,000
U.S. Treasury Note, 6.125%, 5/31/97 (Cost $4,285,000).... 4,285,000
----------
17.6% U.S. TREASURY OBLIGATIONS
---------------------------------------------------------------------------------
700,000 U.S. Treasury Bill, 5.56%, 8/3/95........................ 696,836
1,000,000 U.S. Treasury Bond, 7.25%, 5/15/16....................... 1,059,840
500,000 U.S. Treasury Bond, 7.5%, 11/15/16....................... 544,375
340,000 U.S. Treasury Bond, 7.875%, 2/15/21...................... 386,645
300,000 U.S. Treasury Bond, 8.125%, 5/15/21...................... 350,391
300,000 U.S. Treasury Note, 4.25%, 7/31/95....................... 299,673
1,170,000 U.S. Treasury Note, 5.125%, 3/31/96...................... 1,164,875
2,000,000 U.S. Treasury Note, 6%, 6/30/96.......................... 2,005,000
500,000 U.S. Treasury Note, 5.5%, 7/31/97........................ 496,640
900,000 U.S. Treasury Note, 5.25%, 7/31/98....................... 882,981
200,000 U.S. Treasury Note, 5.875%, 3/31/99...................... 199,344
550,000 U.S. Treasury Note, 6%, 10/15/99......................... 550,429
250,000 U.S. Treasury Note, 6.375%, 8/15/02...................... 252,967
500,000 U.S. Treasury Note, 5.875%, 2/15/04...................... 487,735
800,000 U.S. Treasury Separate Trading Registered Interest
and Principal Securities, 11/15/10 (6.78**)............ 286,936
1,460,000 U.S. Treasury Separate Trading Registered Interest
and Principal Securities, 2/15/12 (6.84**)............. 477,070
----------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $9,890,948)........ 10,141,737
----------
2.4% U.S. GOV'T GUARANTEED MORTGAGES
---------------------------------------------------------------------------------
777,872 Government National Mortgage Association, 10%,
8/15/20 (a)............................................ 846,659
534,109 Government National Mortgage Association, 8.75%,
12/15/24 (a)........................................... 551,799
----------
TOTAL U.S. GOV'T GUARANTEED MORTGAGES (Cost $1,343,920).. 1,398,458
----------
0.9% U.S. GOVERNMENT AGENCY PASS-THRUS
---------------------------------------------------------------------------------
481,964 Federal Home Loan Mortgage Corp., 9.5%, 3/1/25 (a)
(Cost $505,008)........................................ 505,758
----------
0.4% COLLATERALIZED MORTGAGE OBLIGATIONS
---------------------------------------------------------------------------------
231,929 Federal National Mortgage Association, REMIC, 8.5%,
4/25/18 (Cost $222,797)................................ 235,842
----------
0.5% FOREIGN BONDS - U.S. $ DENOMINATED
---------------------------------------------------------------------------------
250,000 ABN-AMRO Bank NV, 7.75%, 5/15/23 (Cost $247,031)......... 254,682
----------
1.6% FOREIGN BONDS - NON U.S. $ DENOMINATED
---------------------------------------------------------------------------------
DM 650,000 Federal Republic of Germany, 6.5%, 7/15/03............... 455,425
FFr 2,400,000 Government of France OAT, 7.5%, 4/25/05.................. 490,117
----------
TOTAL FOREIGN BONDS - NON U.S. $ DENOMINATED
(Cost $946,463)........................................ 945,542
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
<TABLE>
BALANCED PORTFOLIO
---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% OF PRINCIPAL MARKET
PORTFOLIO AMOUNT ($) VALUE ($)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
---------------------------------------------------------------------------------------
2.2% ASSET-BACKED SECURITIES
---------------------------------------------------------------------------------------
AUTOMOBILE RECEIVABLES 0.4%
224,685 Premier Auto Trust Asset Backed Certificate
Series 1994-3, 6.8%, 12/2/99 (a).............................. 225,878
---------
CREDIT CARD RECEIVABLES 1.2%
187,500 Chase Manhattan Credit Card Trust, 1991 "A", 7.65%,
11/15/98 (a) 188,143
250,000 First Chicago Master Trust, Series 1991-D, 8.4%, 6/15/98........ 254,687
250,000 Standard Credit Card Trust, Series 1990-6B, 9.625%, 9/10/97..... 264,530
---------
707,360
---------
HOME EQUITY LOANS 0.6%
197,258 Contimortgage Home Equity Loan Trust, Series 1994-5 A1,
9.07%, 5/15/06 (a)............................................ 199,077
142,346 United Companies Financial Corp., Home Loan Trust,
Series 1993 B1, 6.075%, 7/25/14 (a)........................... 138,031
---------
337,108
---------
TOTAL ASSET-BACKED SECURITIES (Cost $1,285,115)................. 1,270,346
---------
---------------------------------------------------------------------------------------
6.8% CORPORATE BONDS
---------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY 0.4%
250,000 Price/Costco Inc., 7.125%, 6/15/05.............................. 251,165
---------
CONSUMER STAPLES 0.4%
250,000 Seagram Ltd., 6.875%, 9/1/23.................................... 225,037
---------
MEDIA 1.8%
1,000,000 Time Warner Inc., 9.125%, 1/15/13............................... 1,039,290
---------
DURABLES 0.5%
250,000 Lockheed Corp., 9%, 1/15/22..................................... 295,305
---------
MANUFACTURING 0.5%
250,000 Corning Inc., 8.75%, 7/15/99.................................... 266,842
---------
TECHNOLOGY 0.9%
500,000 Loral Corp., 8.375%, 6/15/24.................................... 531,950
---------
ENERGY 1.4%
500,000 Atlantic Richfield Co., 8.25%, 2/1/22........................... 543,725
250,000 Enron Corp., 10%, 6/1/98........................................ 270,587
---------
814,312
---------
TRANSPORTATION 0.4%
100,000 American Airlines, 8.39%, 7/2/17................................ 100,100
100,000 American Airlines, 8.8%, 9/16/15................................ 103,995
---------
204,095
---------
UTILITIES 0.5%
250,000 Commonwealth Edison Co., 9.05%, 10/15/99........................ 262,007
---------
TOTAL CORPORATE BONDS (Cost $3,699,546)......................... 3,890,003
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
---------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------
60.1% COMMON STOCKS
------------------------------------------------------------------------------
CONSUMER DISCRETIONARY 4.7%
Department &
Chain Stores 3.1% 14,966 Home Depot, Inc................................. 607,994
2,400 J.C. Penney Inc................................. 115,200
7,600 May Department Stores........................... 316,350
16,000 Wal-Mart Stores Inc............................. 428,000
6,500 Walgreen Co..................................... 325,813
-----------
1,793,357
-----------
Hotels & Casinos 0.7% 16,500 Carnival Corp., Class A......................... 385,687
-----------
Restaurants 0.4% 4,900 McDonald's Corp................................. 191,713
-----------
Specialty Retail 0.5% 11,200 Pep Boys - Manny, Moe & Jack.................... 299,600
-----------
CONSUMER STAPLES 8.3%
Alcohol & Tobacco 0.6% 4,900 Philip Morris Companies Inc..................... 364,438
-----------
Consumer Electronic &
Photographic Products 0.3% 4,200 Duracell International Inc...................... 181,650
-----------
Food & Beverage 5.1% 22,000 Albertson's Inc................................. 654,500
2,600 CPC International Inc........................... 160,550
14,000 ConAgra Inc..................................... 488,250
3,500 General Mills, Inc.............................. 179,813
17,500 PepsiCo Inc..................................... 798,438
22,100 Sara Lee Corp................................... 629,850
-----------
2,911,401
-----------
Package Goods/
Cosmetics 2.3% 2,700 Clorox Co....................................... 176,175
4,800 Colgate-Palmolive Co............................ 351,000
6,800 Gillette Co..................................... 303,450
6,500 Procter & Gamble Co............................. 467,188
-----------
1,297,813
-----------
HEALTH 7.2%
Biotechnology 0.1% 1,900 Biogen Inc.*.................................... 84,550
-----------
Hospital Management 1.8% 23,500 Columbia/HCA Healthcare Corp.................... 1,016,375
-----------
Pharmaceuticals 5.3% 6,600 Abbott Laboratories............................. 267,300
4,500 American Home Products Corp..................... 348,187
11,200 Eli Lilly Co.................................... 879,200
4,900 Johnson & Johnson............................... 331,363
11,400 Merck & Co. Inc................................. 558,600
5,300 Sandoz Ltd. AG (ADR)............................ 182,850
11,000 Schering-Plough Corp............................ 485,375
-----------
3,052,875
-----------
COMMUNICATIONS 1.6%
Cellular Telephone 0.5% 3,700 AirTouch Communications, Inc.*.................. 105,450
4,800 Vodafone Group PLC (ADR)........................ 181,800
-----------
287,250
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
<TABLE>
BALANCED PORTFOLIO
---------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Telephone/
Communications 1.1% 11,300 American Telephone & Telegraph Co............... 600,312
-----------
FINANCIAL 8.5%
Banks 2.9% 10,330 Banc One Corp................................... 333,142
13,850 Mellon Bank Corp................................ 576,506
7,300 Norwest Corp.................................... 209,875
15,300 State Street Boston Corp........................ 564,188
-----------
1,683,711
-----------
Insurance 3.8% 8,700 American International Group, Inc............... 991,800
6,000 EXEL, Ltd....................................... 312,000
1,700 General Re Corp................................. 227,588
7,700 MBIA Inc........................................ 512,050
3,000 PMI Group, Inc.................................. 130,125
-----------
2,173,563
-----------
Other Financial
Companies 1.8% 10,800 Federal National Mortgage Association........... 1,019,250
-----------
MEDIA 4.4%
Advertising 0.6% 9,500 Interpublic Group of Companies Inc.............. 356,250
-----------
Broadcasting &
Entertainment 3.1% 6,500 Capital Cities/ABC Inc.......................... 702,000
9,000 Time Warner Inc................................. 370,125
4,600 Viacom Inc. "B"*................................ 213,325
9,100 Walt Disney Co.................................. 506,187
-----------
1,791,637
-----------
Cable Television 0.7% 17,200 Tele-Communications Inc. "A"*................... 403,125
-----------
SERVICE INDUSTRIES 2.6%
EDP Services 1.2% 2,800 Automatic Data Processing, Inc.................. 176,050
3,500 First Data Corp................................. 199,063
7,100 General Motors Corp. "E"........................ 308,850
-----------
683,963
-----------
Miscellaneous
Commercial Services 0.5% 1,700 Flightsafety International Inc.................. 82,875
6,800 Sysco Corp...................................... 200,600
-----------
283,475
-----------
Miscellaneous
Consumer Services 0.2% 2,300 H & R Block Inc................................. 94,587
-----------
Printing/Publishing 0.7% 8,600 Reuters Holdings PLC "B" (ADR).................. 431,075
-----------
DURABLES 4.5%
Automobiles 0.1% 2,700 Echlin, Inc..................................... 93,825
-----------
Telecommunications
Equipment 3.6% 9,200 DSC Communications Corp.*....................... 427,800
15,700 General Instrument Corp.*....................... 602,488
26,400 L.M. Ericsson Telephone Co. "B" (ADR)........... 528,000
5,800 Nokia AB Oy (ADR)............................... 345,825
1,300 U.S. Robotics Corp.............................. 141,700
-----------
2,045,813
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
---------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tires 0.8% 19,400 Cooper Tire & Rubber Co......................... 472,875
-----------
MANUFACTURING 4.0%
Diversified
Manufacturing 2.7% 5,100 Dover Corp...................................... 371,025
6,500 General Electric Co............................. 366,438
7,900 Minnesota Mining & Manufacturing Co............. 452,275
3,400 TRW Inc......................................... 271,575
2,250 Thermo Electron Corp.*.......................... 90,563
-----------
1,551,876
-----------
Electrical Products 1.3% 4,200 ASEA AB (ADR)................................... 359,100
5,700 Emerson Electric Co............................. 407,550
-----------
766,650
-----------
TECHNOLOGY 9.2%
Computer Software 1.1% 3,600 Microsoft Corp.*................................ 325,350
7,450 Oracle Systems Corp.*........................... 287,756
-----------
613,106
-----------
Diverse Electronic
Products 2.3% 1,200 Applied Materials, Inc.*........................ 103,950
9,700 General Motors Corp. "H"........................ 383,150
12,900 Motorola Inc.................................... 865,913
-----------
1,353,013
-----------
Electronic Data
Processing 1.7% 7,600 Ceridian Corp.*................................. 280,250
8,000 Hewlett-Packard Co.............................. 596,000
2,200 Silicon Graphics Inc.*.......................... 87,725
-----------
963,975
-----------
Military Electronics 1.0% 10,600 Loral Corp...................................... 548,550
-----------
Office/Plant
Automation 1.4% 2,600 3Com Corp.*..................................... 174,200
6,500 Cabletron Systems Inc.*......................... 346,125
6,000 Cisco Systems, Inc.*............................ 303,375
-----------
823,700
-----------
Semiconductors 1.7% 10,600 Intel Corp...................................... 671,113
2,500 Texas Instruments Inc........................... 334,688
-----------
1,005,801
-----------
ENERGY 4.5%
Engineering 0.8% 8,800 Fluor Corp...................................... 457,600
-----------
Oil Companies 2.6% 5,900 Amoco Corp...................................... 393,087
8,500 Chevron Corp.................................... 396,312
2,700 Exxon Corp...................................... 190,687
2,900 Mobil Corp...................................... 278,400
2,200 Royal Dutch Petroleum Co. (New York shares)..... 268,125
-----------
1,526,611
-----------
Oil/Gas Transmission 1.1% 17,900 Enron Corp...................................... 628,737
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
<TABLE>
BALANCED PORTFOLIO
---------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
METALS AND MINERALS 0.6%
Steel & Metals 6,500 Nucor Corp...................................... 347,750
-----------
TOTAL COMMON STOCKS (Cost $29,222,949).......... 34,587,539
-----------
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $51,648,777)(b).......................... 57,514,907
===========
<FN>
* Non-income producing security.
** Yield; bond equivalent yield to maturity; not a coupon rate (unaudited).
(a) Effective maturities will be shorter due to amortization and prepayments.
(b) At June 30, 1995, the net unrealized appreciation on investments based on cost for federal income tax purposes
of $51,733,807 was as follows:
Aggregate gross unrealized appreciation for all investments in which there
is an excess of market value over tax cost..................................................... $ 6,085,600
Aggregate gross unrealized depreciation for all investments in which there
is an excess of tax cost over market value..................................................... (304,500)
-----------
Net unrealized appreciation.................................................................... $ 5,781,100
===========
</FN>
</TABLE>
--------------------------------------------------------------------------------
From November 1, 1994 through December 31, 1994, the Balanced Portfolio
incurred approximately $275,417 of net realized capital losses which the
Portfolio intends to elect to defer and treat as arising in the fiscal year
ended December 31, 1995.
--------------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short#term
investments and U.S. Government securities), for the six months ended June
30, 1995, aggregated $18,831,651 and $18,977,054, respectively. Purchases
and sales of U.S. Government securities for the six months ended June 30,
1995, aggregated $6,963,426 and $2,745,576, respectively.
--------------------------------------------------------------------------------
COMMITMENTS:
As of June 30, 1995, the Balanced Portfolio entered into the following
forward foreign currency exchange contracts resulting in net unrealized
appreciation of $14,667.
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/
SETTLEMENT DEPRECIATION
CONTRACTS TO DELIVER IN EXCHANGE FOR DATE (U.S.$)
--------------------------- -------------------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Deutschemarks 659,903 U.S. Dollars 491,819 10/23/95 12,523
French Francs 2,335,440 U.S. Dollars 482,180 10/23/95 2,144
--------
14,667
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
----------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
----------------------------------------------------------------------------------------------------------------
June 30, 1995 (Unaudited)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $51,648,777) (Note A) .............. $ 57,514,907
Cash ....................................................................... 460
Unrealized appreciation on forward currency exchange contacts (Note A) ..... 14,667
Receivables:
Dividends and interest .................................................. 318,166
Portfolio shares sold ................................................... 43,445
Total assets .......................................................... 57,891,645
------------
LIABILITIES
Payables:
Investments purchased .................................................... $111,714
Portfolio shares redeemed ................................................ 13,033
Accrued management fee (Note B) .......................................... 22,491
Other accrued expenses (Note B) .......................................... 15,657
--------
Total liabilities ..................................................... 162,895
------------
Net assets, at market value ................................................ $ 57,728,750
============
NET ASSETS
Net assets consist of:
Undistributed net investment income ...................................... $ 457,532
Net unrealized appreciation on:
Investments ........................................................... 5,866,130
Foreign currency related transactions ................................. 14,405
Accumulated net realized loss ............................................ (13,583)
Paid-in capital .......................................................... 51,404,266
------------
Net assets, at market value ................................................ $ 57,728,750
============
NET ASSET VALUE, offering and redemption price per share
($57,728,750 divided by 5,708,319 outstanding shares of beneficial
interest, no par value, unlimited number of shares authorized) .......... $10.11
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
<TABLE>
BALANCED PORTFOLIO
-----------------------------------------------------------------------------------------------------------
<CAPTION>
STATEMENT OF OPERATIONS
-----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Interest ............................................................. $ 721,498
Dividends (net of foreign taxes withheld of $182) .................... 290,725
----------
1,012,223
Expenses (Note A):
Management fee (Note B) ................................................. $ 122,045
Accounting fees (Note B) ................................................ 18,595
Trustees' fees (Note B) ................................................. 8,005
Custodian fees .......................................................... 13,189
Auditing ................................................................ 2,519
Legal ................................................................... 1,375
Other ................................................................... 5,710 171,438
---------- ----------
Net investment income ...................................................... $ 840,785
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments .......................................................... 409,897
Foreign currency related transactions ................................ (3,069) 406,828
----------
Net unrealized appreciation during the period on:
Investments .......................................................... 6,104,049
Foreign currency related transactions ................................ 14,405 6,118,454
---------- ----------
Net gain on investment transactions ..................................... 6,525,282
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....................... $7,366,067
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED YEAR
JUNE 30, ENDED
1995 DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1994
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ........................................ $ 840,785 $ 1,464,324
Net realized gain (loss) from investment transactions ........ 406,828 (70,680)
Net unrealized appreciation (depreciation) on investment
transactions during the period ............................ 6,118,454 (2,374,110)
------------ ------------
Net increase (decrease) in net assets resulting from operations . 7,366,067 (980,466)
------------ ------------
Distributions to shareholders from:
Net investment income ($.15 and $.30 per share, respectively) (775,538) (1,442,472)
------------ ------------
Net realized gains from investment transactions
($.06 and $.77 per share, respectively) ................... (316,977) (3,525,834)
------------ ------------
Portfolio share transactions:
Proceeds from shares sold .................................... 8,209,973 14,384,876
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................. 1,092,515 4,968,306
Cost of shares redeemed ...................................... (3,371,865) (12,950,121)
------------ ------------
Net increase in net assets from Portfolio share transactions .... 5,930,623 6,403,061
------------ ------------
INCREASE IN NET ASSETS .......................................... 12,204,175 454,289
Net assets at beginning of period ............................... 45,524,575 45,070,286
------------ ------------
NET ASSETS AT END OF PERIOD (including undistributed net
investment income of $457,532 and $392,285, respectively) .... $ 57,728,750 $ 45,524,575
============ ============
OTHER INFORMATION
INCREASE (DECREASE) IN PORTFOLIO SHARES
Shares outstanding at beginning of period ....................... 5,076,236 4,407,727
------------ ------------
Shares sold .................................................. 868,030 1,539,383
Shares issued to shareholders in reinvestment
of distributions......................................... 117,990 532,133
Shares redeemed .............................................. (353,937) (1,403,007)
------------ ------------
Net increase in Portfolio shares ............................. 632,083 668,509
------------ ------------
Shares outstanding at end of period ............................. 5,708,319 5,076,236
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
<TABLE>
BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED
FROM THE FINANCIAL STATEMENTS.
<CAPTION>
Six Months
Ended
June 30, Years Ended December 31, (e)
1995(e) ----------------------------------------------------------------------------------
(Unaudited) 1994 1993 1992 1991 1990 1989 1988 1987
--------------------------- ------------- -------- ------- ------- ------- ------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ....... $ 8.97 $ 10.23 $ 10.02 $ 9.85 $ 8.10 $ 8.75 $ 7.62 $ 6.88 $ 7.35
------ ------- ------- ------ ------ ------ ------ ------- -------
Income from investment
operations:
Net investment
income (a) ............... .15 .29 .30 .29 .35 .42 .40 .33 .34
Net realized and
unrealized gain (loss)
on investment
transactions ............. 1.20 (.48) .42 .36 1.77 (.59) 1.06 .64 (.45)
------ ------- ------- ------ ------ ------ ------ ------- -------
Total from investment
operations ................ 1.35 (.19) .72 .65 2.12 (.17) 1.46 .97 (.11)
------ ------- ------- ------ ------ ------ ------ ------- -------
Less distributions from:
Net investment
income ................... (.15) (.30) (.28) (.29) (.37) (.43) (.33) (.23) (.23)
Net realized gains
on investment
transactions ............. (.06) (.77) (.23) (.19) -- (.05) -- -- (.13)
------ ------- ------- ------ ------ ------ ------ ------- -------
Total distributions ........ (.21) (1.07) (.51) (.48) (.37) (.48) (.33) (.23) (.36)
------ ------- ------- ------ ------ ------ ------ ------- -------
Net asset value,
end of period ............. $10.11 $ 8.97 $ 10.23 $10.02 $ 9.85 $ 8.10 $ 8.75 $ 7.62 $ 6.88
====== ======= ======= ====== ====== ====== ====== ======= =======
TOTAL RETURN (%) ........... 15.22(D) (2.05) 7.45 6.96 26.93 (1.91) 19.50 14.21 (1.68)
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period ($ millions) ....... 58 46 45 37 25 16 18 11 12
Ratio of operating
expenses, net to
average net
assets (%) (a) ............ .67(c) .75 .75 .75 .75 .75 .75 .75 .75
Ratio of net investment
income to average
net assets (%) ............ 3.30(c) 3.19 3.01 3.01 4.00 5.15 4.74 4.48 4.42
Portfolio turnover
rate (%) .................. 91.96(c) 101.64 133.95* 51.66 62.03 49.03 77.98 109.95 111.00
<FN>
(a) Portion of expenses
reimbursed (Note B)..... $ - $ - $ - $ - $ .01 $ - $ .01 $ .03 $ .03
</FN>
</TABLE>
<TABLE>
<CAPTION>
Six For the Period
Months July 16, 1985
Ended (commencement
December of operations)
31, to June 30,
1986(e)(f) 1986
-----------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period ....... $ 7.58 $ 6.00(b)
------ ------
Income from investment
operations:
Net investment
income (a) ............... .15 .31
Net realized and
unrealized gain (loss)
on investment
transactions ............. (.11) 1.50
------ ------
Total from investment
operations ................ .04 1.81
------ ------
Less distributions from:
Net investment
income ................... (.18) (.23)
Net realized gains
on investment
transactions ............. (.09) --
------ ------
Total distributions ........ (.27) (.23)
------ ------
Net asset value,
end of period ............. $ 7.35 $ 7.58
====== ======
TOTAL RETURN (%) ........... .46(D) 30.60(D)
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period ($ millions) ....... 1 --
Ratio of operating
expenses, net to
average net
assets (%) (a) ............ .75(c) .60(c)
Ratio of net investment
income to average
net assets (%) ............ 4.20(c) 4.87(c)
Portfolio turnover
rate (%) .................. 28.86(c) 64.12(c)
<FN>
(a) Portion of expenses
reimbursed (Note B)..... $ .17 $ .80
(b) Original capital
(c) Annualized
(d) Not annualized
(e) Per share amounts, for each of the periods identified, have been calculated
using the monthly average shares outstanding during the period method.
(f) On August 22, 1986, the Trustees voted to change the year end of the Fund
from June 30 to December 31.
* On May 1, 1993, the Portfolio adopted its present name and investment
objective which is a balance of growth and income from a diversified
portfolio of equity and fixed income securities. Prior to that date, the
Portfolio was known as the Managed Diversified Portfolio and its investment
objective was to realize a high level of long#term total rate of return
consistent with prudent investment risk. The portfolio turnover rate
increased due to implementing the present investment objective. Financial
highlights for the nine periods ended December 31, 1993 should not be
considered representative of the present Portfolio.
</FN>
</TABLE>
34
<PAGE>
<TABLE>
CAPITAL GROWTH PORTFOLIO
INVESTMENT PORTFOLIO as of June 30, 1995 (Unaudited)
-----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------
5.8% REPURCHASE AGREEMENT
--------------------------------------------------------------------------------
16,956,000 Repurchase Agreement with Nesbitt Burns Securities
Inc. dated 6/30/95 at 6.125%, to be repurchased
at $16,964,655 on 7/3/95, collateralized by a
$16,890,000 U.S. Treasury Note, 6.25%, 8/31/96
(Cost $16,956,000)................................. 16,956,000
----------
--------------------------------------------------------------------------------
0.2% CONVERTIBLE BONDS
--------------------------------------------------------------------------------
FINANCIAL
Banks 1,000,000 Banco Nacional de Mexico, 7%, 12/15/99
(Cost $1,226,250).................................. 725,000
----------
--------------------------------------------------------------------------------
0.8% PREFERRED STOCKS
--------------------------------------------------------------------------------
Shares
--------------------------------------------------------------------------------
FINANCIAL 0.3%
Banks 8,000 First Nationwide Bank, non-cum. 11.5%................ 864,000
----------
TECHNOLOGY 0.5%
Electronic Components/
Distributors 14,740 Samsung Electronics Co., Ltd......................... 1,360,606
1,927 Samsung Electronics Co., Ltd. (New (b)).............. 168,628
----------
1,529,234
----------
TOTAL PREFERRED STOCKS (Cost $1,949,332)............. 2,393,234
----------
--------------------------------------------------------------------------------
92.2% COMMON STOCKS
--------------------------------------------------------------------------------
CONSUMER DISCRETIONARY 6.2%
Department &
Chain Stores 3.5% 187,600 Filene's Basement Corp.*............................. 656,600
100,000 Lowe's Companies, Inc................................ 2,987,500
110,000 May Department Stores................................ 4,578,750
71,700 Wal-Mart Stores Inc.................................. 1,917,975
----------
10,140,825
----------
Hotels & Casinos 2.0% 168,000 Carnival Corp., Class A.............................. 3,927,000
88,200 Royal Caribbean Cruises Ltd.......................... 1,940,400
5,867,400
Specialty Retail 0.7% 21,800 Fingerhut Companies, Inc............................. 340,625
95,000 Home Shopping Network Inc.*.......................... 807,500
36,000 Toys "R" Us Inc.*.................................... 1,053,000
----------
2,201,125
----------
CONSUMER STAPLES 3.6%
Alcohol & Tobacco 0.8% 80,000 RJR Nabisco Holdings Corp............................ 2,230,000
----------
Package Goods/
Cosmetics 2.8% 65,000 Clorox Co............................................ 4,241,250
55,600 Colgate-Palmolive Co................................. 4,065,750
----------
8,307,000
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
35
<PAGE>
<TABLE>
CAPITAL GROWTH PORTFOLIO
-----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HEALTH 11.2%
Biotechnology 0.6% 40,000 Biogen Inc.*......................................... 1,780,000
----------
Hospital Management 3.2% 220,000 Columbia/HCA Healthcare Corp......................... 9,515,000
----------
Pharmaceuticals 7.4% 7,500 Astra AB "A" (Free).................................. 231,342
133,050 Astra AB "B" (Free).................................. 4,003,456
40,000 BioChem Pharma, Inc.*................................ 875,000
80,000 Carter-Wallace Inc................................... 910,000
40,000 Eli Lilly Co......................................... 3,140,000
45,000 Johnson & Johnson.................................... 3,043,125
113,000 Merck & Co. Inc...................................... 5,537,000
89,000 Schering-Plough Corp................................. 3,927,125
----------
21,667,048
----------
COMMUNICATIONS 4.4%
Cellular Telephone 0.7% 56,870 Associated Group, Inc. "A"*.......................... 981,007
45,270 Associated Group, Inc. "B"*.......................... 837,495
300 Korea Mobile Telecom (a)............................. 282,434
----------
2,100,936
----------
Telephone/
Communications 3.7% 165,000 Century Telephone Enterprises........................ 4,681,875
83 DDI Corp............................................. 665,919
75,132 SBC Communicatons, Inc............................... 3,578,162
2,660,000 Telecomunicacoes de Sao Paulo S.A. (pfd.)............ 329,401
60,000 WorldCom, Inc.*...................................... 1,620,000
----------
10,875,357
----------
FINANCIAL 13.7%
Banks 3.4% 80,000 Citicorp............................................ 4,630,000
163,000 MBNA Corp........................................... 5,501,250
----------
10,131,250
----------
Insurance 7.1% 59,000 American International Group, Inc................... 6,726,000
60,000 EXEL, Ltd........................................... 3,120,000
31,300 General Re Corp..................................... 4,190,287
9,900 Liberty Corp........................................ 269,775
70,000 MBIA Inc............................................ 4,655,000
41,200 PMI Group, Inc...................................... 1,787,050
----------
20,748,112
----------
Other Financial
Companies 3.2% 100,000 Federal National Mortgage Association............... 9,437,500
----------
MEDIA 10.8%
Broadcasting &
Entertainment 6.3% 60,000 Capital Cities/ABC Inc.............................. 6,480,000
50,000 King World Productions, Inc.*....................... 2,025,000
247,100 Time Warner Inc..................................... 10,161,988
----------
18,666,988
----------
Cable Television 4.5% 279,750 Comcast Corp. "A"................................... 5,192,859
338,307 Tele-Communications Inc. "A"*....................... 7,929,070
----------
13,121,929
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
-----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SERVICE INDUSTRIES 4.3%
EDP Services 0.4% 55,400 National Data Corp. 1,281,125
----------
Environmental Services 0.5% 40,000 Browning Ferris Industries 1,445,000
----------
Investment 1.3% 85,000 Franklin Resources Inc. 3,782,500
----------
Miscellaneous
Consumer Services 1.4% 100,000 H & R Block Inc. 4,112,500
----------
Printing/Publishing 0.7% 40,000 Reuters Holdings PLC "B" (ADR) 2,005,000
----------
DURABLES 4.5%
Aerospace 1.1% 40,000 United Technologies Corp. 3,125,000
----------
Automobiles 0.8% 44,000 Autoliv AB (Free)* 2,351,680
----------
Telecommunications
Equipment 2.6% 40,000 DSC Communications Corp.* 1,860,000
75,000 General Instrument Corp.* 2,878,125
50,400 Nokia AB Oy "A" 2,950,129
----------
7,688,254
----------
MANUFACTURING 3.8%
Chemicals 1.4% 45,000 E.I. du Pont de Nemours & Co. 3,093,750
13,000 Schering AG 908,125
----------
4,001,875
----------
Diversified
Manufacturing 0.6% 60,000 Canadian Pacific Ltd. 1,042,500
21,000 Thermo Electron Corp.* 845,250
----------
1,887,750
----------
Electrical Products 1.8% 40,000 American Power Conversion Corp.* 915,000
100,000 Philips NV (New York shares) 4,275,000
----------
5,190,000
----------
TECHNOLOGY 17.8%
Computer Software 1.2% 27,000 Intuit Inc.* 2,052,000
40,000 Oracle Systems Corp.* 1,545,000
----------
3,597,000
----------
Diverse Electronic
Products 1.9% 83,100 Motorola Inc. 5,578,087
----------
EDP Peripherals 0.4% 91,700 Intergraph Corp.* 1,020,162
----------
Electronic Components/
Distributors 0.3% 74 Samsung Electronics Co., Ltd. (GDS) (a) 5,322
374 Samsung Electronics Co., Ltd. (GDR) 26,928
4,461 Samsung Electronics Co., Ltd. (a) 760,977
882 Samsung Electronics Co., Ltd. (a) (New (b)) 148,606
----------
941,833
----------
Electronic Data
Processing 5.0% 125,000 Hewlett-Packard Co. 9,312,500
40,000 International Business Machines Corp. 3,840,000
40,000 Silicon Graphics Inc.* 1,595,000
----------
14,747,500
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
<TABLE>
CAPITAL GROWTH PORTFOLIO
----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Office/Plant
Automation 3.0% 22,000 3Com Corp.*............................................. 1,474,000
40,000 Cabletron Systems Inc.*................................. 2,130,000
100,000 Cisco Systems, Inc.*.................................... 5,056,250
-----------
8,660,250
-----------
Semiconductors 6.0% 150,000 Intel Corp.............................................. 9,496,875
60,000 Texas Instruments Inc................................... 8,032,500
-----------
17,529,375
-----------
ENERGY 7.9%
Oil & Gas Production 1.3% 78,800 Triton Energy Corp...................................... 3,654,350
-----------
Oil Companies 6.6% 90,000 Amoco Corp.............................................. 5,996,250
40,000 Chevron Corp............................................ 1,865,000
40,000 Mobil Corp.............................................. 3,840,000
125,000 Repsol SA (ADR)......................................... 3,953,125
200,000 YPF SA "D" (ADR)........................................ 3,775,000
-----------
19,429,375
-----------
METALS AND MINERALS 0.5%
Steel & Metals 123,000 Usinas Siderurgicas de Minas Gerais S/A(pfd.) (ADR)..... 1,383,750
-----------
UTILITIES 3.5%
Electric Utilities 20,000 CMS Energy Corp......................................... 492,500
30,000 Centerior Energy Corp................................... 288,750
43,700 Centrais Eletricas Brasileiras S/A (ADR)................ 589,950
6,800 Central Costanera SA (ADR).............................. 214,200
69,900 Destec Energy Inc.*..................................... 899,962
50,000 Houston Industries Inc.................................. 2,106,250
30,000 Illinova Corp........................................... 761,250
58,000 Midlands Electricity PLC................................ 581,107
50,000 National Power PLC*..................................... 354,246
79,000 Public Service Co. of New Mexico*....................... 1,125,750
50,000 Scottish Power PLC...................................... 257,236
50,000 Southern Electric PLC................................... 510,099
30,000 TNP Enterprises Inc..................................... 483,750
60,000 Unicom Corp............................................. 1,597,500
-----------
10,262,550
-----------
TOTAL COMMON STOCKS (Cost $244,804,027)................. 270,465,386
-----------
----------------------------------------------------------------------
1.0% WARRANTS
----------------------------------------------------------------------
TECHNOLOGY
Semiconductors 99,500 Intel Corp. Warrants (expire 3/14/98)*
(Cost $700,053)....................................... 3,009,875
-----------
==================================================================================================================================
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $265,635,662)(c)................................ 293,549,495
===========
==================================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
38
<PAGE>
INVESTMENT PORTFOLIO
--------------------------------------------------------------------------------
* Non-income producing security.
(a) Securities valued in good faith by the Valuation Committee of the Trustees.
The cost and market value of these securities at June 30, 1995 aggregated
$504,950 and $1,197,339 (.41% of net assets), respectively.
(b) New shares issued during 1995, eligible for a pro rata share of 1995
dividends.
(c) At June 30, 1995, the net unrealized appreciation on investments based on
cost for federal income tax purposes of $265,585,026 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 $ 33,341,512
Aggregate gross unralized depreciation for all investments in which there is an excess of tax cost
over market value (5,377,043)
------------
Net unrealized appreciation
$ 27,964,469
============
</TABLE>
--------------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short-term investments),
for the six months ended June 30, 1995, aggregated $203,816,308 and
$216,473,003, respectively.
The accompanying notes are an integral part of the financial statements.
39
<PAGE>
<TABLE>
CAPITAL GROWTH PORTFOLIO
FINANCIAL STATEMENTS
----------------------------------------------------------------------------------------------------
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
----------------------------------------------------------------------------------------------------
JUNE 30, 1995 (UNAUDITED)
----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $265,635,662) (Note A).... $293,549,495
Receivables:
Investments sold................................................ 17,099,700
Dividends and interest.......................................... 281,015
Portfolio shares sold........................................... 80,587
------------
Total assets................................................ 311,010,797
LIABILITIES
Payables:
Due to custodian bank........................................... $ 1,741
Investments purchased........................................... 20,835,429
Accrued management fee (Note B)................................. 113,129
Other accrued expenses (Note B)................................. 36,808
-----------
Total liabilities........................................... 20,987,107
------------
Net assets, at market value....................................... $290,023,690
============
NET ASSETS
Net assets consist of:
Undistributed net investment income............................. $ 982,885
Net unrealized appreciation on:
Investments................................................. 27,913,833
Foreign currency related transactions....................... 38,922
Accumulated net realized gain................................... 10,056,935
Paid-in capital................................................. 251,031,115
------------
Net assets, at market value....................................... $290,023,690
============
Net asset value, offering and redemption price per share
($290,023,690 divided by 21,145,291 outstanding
shares of beneficial interest, no par value,
unlimited number of shares authorized)...................... $ 13.72
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
----------------------------------------------------------------------------------------------------
<CAPTION>
STATEMENT OF OPERATIONS
----------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
----------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $32,942)................ $ 1,647,706
Interest............................................................ 313,898
-----------
1,961,604
Expenses (Note A):
Management fee (Note B)............................................. $ 629,333
Accounting fees (Note B)............................................ 39,163
Trustees' fees (Note B)............................................. 7,760
Custodian fees...................................................... 41,676
Auditing............................................................ 14,002
Legal............................................................... 7,471
Other............................................................... 12,074 751,479
----------- -----------
Net investment income.................................................. 1,210,125
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments......................................................... 10,180,538
Foreign currency related transactions............................... (25,996) 10,154,542
-----------
Net unrealized appreciation during the period on:
Investments......................................................... 29,942,413
Foreign currency related transactions............................... 43,322 29,985,735
----------- -----------
Net gain on investment transactions.................................... 40,140,277
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $41,350,402
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
41
<PAGE>
<TABLE>
CAPITAL GROWTH PORTFOLIO
--------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------------------------------------
<CAPTION>
Six Months
Ended Year
June 30, Ended
1995 December 31,
INCREASE (DECREASE) IN NET ASSETS (Unaudited) 1994
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income........................................... $ 1,210,125 $ 1,195,374
Net realized gain from investment transactions.................. 10,154,542 8,741,905
Net unrealized appreciation (depreciation) on investment
transactions during the period.......................... 29,985,735 (35,951,788)
------------ -------------
Net increase (decrease) in net assets resulting from operations......... 41,350,402 (26,014,509)
------------ -------------
Distributions to shareholders from:
Net investment income ($.04 and $.05 per share, respectively)... (734,483) (889,382)
------------ -------------
Net realized gain from investment transactions
($.43 and $1.31 per share, respectively)................ (8,804,833) (23,981,060)
------------ -------------
Portfolio share transactions:
Proceeds from shares sold....................................... 53,172,113 157,574,508
Net asset value of shares issued to shareholders in
reinvestment of distributions........................... 9,539,316 24,870,442
Cost of shares redeemed......................................... (61,029,580) (131,982,527)
------------ -------------
Net increase in net assets from Portfolio share transactions............ 1,681,849 50,462,423
------------ -------------
INCREASE (DECREASE) IN NET ASSETS....................................... 33,492,935 (422,528)
Net assets at beginning of period....................................... 256,530,755 256,953,283
------------ -------------
NET ASSETS AT END OF PERIOD (including undistributed net
investment income of $982,885 and $507,243, respectively)....... $290,023,690 $ 256,530,755
============ =============
OTHER INFORMATION
INCREASE (DECREASE) IN PORTFOLIO SHARES
Shares outstanding at beginning of period............................... 20,979,934 17,184,932
------------ -------------
Shares sold..................................................... 4,256,654 12,319,350
Shares issued to shareholders in reinvestment of distributions.. 792,498 1,905,054
Shares redeemed................................................. (4,883,795) (10,429,402)
------------ -------------
Net increase in Portfolio shares................................ 165,357 3,795,002
------------ -------------
Shares outstanding at end of period..................................... 21,145,291 20,979,934
============ =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED
FROM THE FINANCIAL STATEMENTS.
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 31, (e)
1995(e) -----------------------------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990 1989 1988 1987
----------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period........ $ 12.23 $14.95 $12.71 $12.28 $ 8.99 $10.21 $ 8.53 $ 7.06 $ 7.67
------- ------ ------ ------ ------ ------ ------ ------- -------
Income from investment
operations:
Net investment
income (a)................ .06 .06 .06 .11 .16 .25 .35 .16 .15
Net realized and
unrealized gain
(loss) on investment
transactions.............. 1.90 (1.42) 2.52 .66 3.35 (1.00) 1.58 1.40 (.28)
------- ------ ------ ------ ------ ------ ------ ------- -------
Total from investment
operations................ 1.96 (1.36) 2.58 .77 3.51 (.75) 1.93 1.56 (.13)
------- ------ ------ ------ ------ ------ ------ ------- -------
Less distributions from:
Net investment
income.................... (.04) (.05) (.07) (.11) (.22) (.24) (.25) (.09) (.09)
Net realized gains
on investment
transactions.............. (.43) (1.31) (.27) (.23) - (.23) - - (.39)
------- ------ ------ ------ ------ ------ ------ ------- -------
Total distributions......... (.47) (1.36) (.34) (.34) (.22) (.47) (.25) (.09) (.48)
------- ------ ------ ------ ------ ------ ------ ------- -------
Net asset value,
end of period.............. $ 13.72 $12.23 $14.95 $12.71 $12.28 $ 8.99 $10.21 $ 8.53 $ 7.06
======= ====== ====== ====== ====== ====== ====== ======= =======
TOTAL RETURN (%)............ 16.48(d) (9.67) 20.88 6.42 39.56 (7.45) 22.75 22.07 (1.88)
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period ($ millions)........ 290 257 257 167 108 45 45 17 10
Ratio of operating
expenses, net to
average net
assets (%) (a)............. .57(c) .58 .60 .63 .71 .72 .75 .75 .75
Ratio of net investment
income to average
net assets (%)............. .92(c) .47 .46 .95 1.49 2.71 3.51 2.17 1.68
Portfolio turnover
rate (%)................... 159.11(c) 66.44 95.31 56.29 58.88 61.39 63.96 129.75 113.34
<FN>
(a) Portion of expenses
reimbursed (Note B)... $ - $ - $ - $ - $ - $ - $ .01 $ .01 $ .04
(b) Original capital
(c) Annualized
(d) Not annualized
(e) Per share amounts, for each of the periods identified, have been calculated using the monthly average shares outstanding
during the period method.
(f) On August 22, 1986, the Trustees voted to change the year end of the Fund from June 30 to December 31.
</FN>
</TABLE>
<TABLE>
<CAPTION>
SIX FOR THE PERIOD
MONTHS JULY 16, 1985
ENDED (COMMENCEMENT
DECEMBER OF OPERATIONS)
31, TO JUNE 30,
1986(e)(f) 1986
---------- --------------
<S> <C> <C>
Net asset value,
beginning of period........ $ 7.93 $ 6.00(b)
------ ------
Income from investment
operations:
Net investment
income (a)................ .09 .19
Net realized and
unrealized gain
(loss) on investment
transactions.............. (.07) 1.87
------ ------
Total from investment
operations................ .02 2.06
------ ------
Less distributions from:
Net investment
income.................... (.07) (.13)
Net realized gains
on investment
transactions.............. (.21) -
------ ------
Total distributions......... (.28) (.13)
------ ------
Net asset value,
end of period.............. $ 7.67 $ 7.93
====== ======
TOTAL RETURN (%)............ .26(d) 34.66(d)
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period ($ millions)........ 1 -
Ratio of operating
expenses, net to
average net
assets (%) (a)............. .75(c) .60(c)
Ratio of net investment
income to average
net assets (%)............. 2.21(c) 2.95(c)
Portfolio turnover
rate (%)................... 38.78(c) 86.22(c)
<FN>
(a) Portion of expenses
reimbursed (Note B)... $ .20 $ .81
(b) Original capital
(c) Annualized
(d) Not annualized
(e) Per share amounts, for each of the periods identified, have been calculated using the monthly average shares outstanding
during the period method.
(f) On August 22, 1986, the Trustees voted to change the year end of the Fund from June 30 to December 31.
</FN>
</TABLE>
43
<PAGE>
<TABLE>
INTERNATIONAL PORTFOLIO
INVESTMENT PORTFOLIO as of June 30, 1995 (Unaudited)
------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% OF PRINCIPAL MARKET
PORTFOLIO AMOUNT VALUE ($)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------
8.3% REPURCHASE AGREEMENT
-----------------------------------------------------------------------------------------------
U.S.$ 41,252,000 Repurchase Agreement with Nesbitt Burns Securities
Inc., dated 6/30/95 at 6.125%, to be repurchased at
$41,273,056 on 7/3/95, collateralized by a $40,320,000
U.S. Treasury Note, 6.875%, 3/31/97 (Cost $41,252,000)............. 41,252,000
----------
-----------------------------------------------------------------------------------------------
2.0% COMMERCIAL PAPER
-----------------------------------------------------------------------------------------------
U.S.$ 10,000,000 Household Finance, 5.75, 7/5/95 (Cost $ 9,993,611).................. 9,993,611
----------
-----------------------------------------------------------------------------------------------
0.1% BONDS
-----------------------------------------------------------------------------------------------
DM 350,000 Deutsche Bank AG, 8%, 4/11/00....................................... 267,021
DM 23,000 Deutsche Bank AG (PC), 9%, 12/31/02................................. 18,046
DM 33,000 Deutsche Bank AG (PC), 8.750%, 12/31/03............................. 25,391
----------
Total Bonds (Cost $220,601)......................................... 310,458
----------
-----------------------------------------------------------------------------------------------
0.6% CONVERTIBLE BONDS
-----------------------------------------------------------------------------------------------
U.S.$ 1,900,000 Henderson Land Development Co., Ltd., 4%, 10/27/96
(Property developer)............................................... 1,890,500
U.S.$ 1,050,000 Ssangyong Oil Refining Co., Ltd., 3.75%, 12/31/08
(Major oil refiner)................................................ 1,118,250
----------
Total Convertible Bonds (Cost $2,955,694)........................... 3,008,750
----------
-----------------------------------------------------------------------------------------------
4.1% PREFERRED STOCKS
-----------------------------------------------------------------------------------------------
Shares
-----------------------------------------------------------------------------------------------
GERMANY 3.4% 15,000 Rheinisch-Westfaelisches Elektrizitaetswerk AG
(Electric utility)*................................................ 4,126,261
10,000 SAP AG (Computer software manufacturer)............................. 12,600,788
----------
16,727,049
----------
ITALY 0.7% 1,500,000 Fiat SpA (Multi-industry, automobiles)*............................. 3,263,560
----------
Total Preferred Stocks (Cost $9,846,935)............................ 19,990,609
----------
-----------------------------------------------------------------------------------------------
84.8% COMMON STOCKS
-----------------------------------------------------------------------------------------------
ARGENTINA 0.7%
170,000 YPF SA "D" (ADR) (Petroleum company)................................ 3,208,750
----------
AUSTRALIA 0.7%
1,556,504 Ampol Exploration Ltd. (Oil and gas exploration company)............ 3,519,900
7,525 Coca Cola Amatil Ltd. (Soft drink bottler and distributor) (c)...... 46,075
60 M.I.M. Holdings Ltd. (Nonferrous metals and coal)................... 75
----------
3,566,050
----------
BRAZIL 3.3%
8,578,870 Centrais Eletricas Brasileiras S/A "B" (pfd.) (Electric utility).... 2,283,349
5,000,000 Companhia Cervejaria Brahma (pfd.) (Leading beer producer and
distributor)....................................................... 1,640,359
86,206 Companhia Cervejaria Brahma (pfd.) (New (b))........................ 25,754
28,110,000 Companhia Vale do Rio Doce (pfd.) (Diverse mining and industrial
complex)........................................................... 4,244,747
</TABLE>
The accompanying notes are an integral part of the financial statements.
44
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% OF MARKET
PORTFOLIO SHARES VALUE ($)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
22,000,000 Petroleo Brasileiro S/A (pfd.) (Petroleum company).................. 1,864,204
65,040,000 Telecomunicacoes Brasileiras S.A. (pfd.)
(Telecommunication services)....................................... 2,140,915
3,574,800,000 Usinas Siderurgicas de Minas Gerais S/A (pfd.)
(Non-coated flat products and electrolytic galvanized
products)......................................................... 4,038,883
----------
16,238,211
----------
CANADA 2.7%
160,000 Barrick Gold Corp. (Gold exploration and production
in North and South America)........................................ 4,047,610
201,821 Canadian Pacific Ltd. (Transportation and natural
resource conglomerate)............................................. 3,471,061
200,000 Hemlo Gold Mines, Inc. (Large gold producer, with
single mine in Ontario; active exploration company)................ 2,147,563
100,000 Imperial Oil Ltd. (Producer and refiner of natural gas
and petroleum products in Canada).................................. 3,712,736
----------
13,378,970
----------
DENMARK 0.8%
85,000 Unidanmark A/S "A" (Bank holding company)........................... 4,170,910
----------
FINLAND 2.9%
78,000 Metsa-Serla Oy "B" (Tissue paper producer).......................... 3,469,913
116,000 Nokia AB Oy "A" (Leading manufacturer of cellular
telephones)........................................................ 6,789,979
247,000 Outokumpu Oy "A" (Metals and minerals).............................. 4,106,064
----------
14,365,956
----------
FRANCE 8.0%
9,300 Carrefour (Hypermarket and food retailing).......................... 4,763,824
14,138 Castorama-Dubois Investissements (Retailer, wholesaler
and distributor)................................................... 2,343,098
10,607 Compagnie Bancaire SA (Bank)........................................ 1,268,139
30,000 Compagnie de Saint-Gobain (Glass manufacturer)...................... 3,623,808
14,950 ECIA - Equipements et Composants pour l'Industrie
Automobile (Manufacturer of automobile parts and
accessories)....................................................... 2,049,317
12,000 LVMH Moet-Hennessy Louis Vuitton (Producer of wine,
spirits and luxury products)....................................... 2,159,443
88,000 Michelin "B" (Leading tire manufacturer)*........................... 3,898,212
20,000 Societe Generale (Bank)............................................. 2,337,542
48,952 Societe Nationale Elf Aquitaine (Petroleum company)................. 3,617,478
15,420 Societe Nationale Elf Aquitaine (ADR)............................... 574,395
44,000 Television Francaise (Television broadcasting)...................... 4,330,843
70,473 Total SA "B" (International oil and gas exploration,
development and production)........................................ 4,241,817
94,687 Valeo SA (Automobile and truck components
manufacturer)...................................................... 4,604,311
----------
39,812,227
----------
GERMANY 5.8%
16,000 Bayer AG (Leading chemical producer)................................ 3,980,186
86,980 Deutsche Bank AG (Bank)............................................. 4,226,819
14,860 Mannesmann AG (Bearer) (Diversified construction
and technology company)............................................ 4,540,153
69,000 Schering AG (Pharmaceutical and chemical producer).................. 4,820,046
3,027 Siemens AG (Bearer) (Manufacturer of electrical and
electronic equipment).............................................. 1,502,719
12,720 VEBA AG (Electric utility, distributor of oil and chemicals)........ 4,999,328
12,000 Viag AG (Provider of electrical power and natural gas
services, aluminum products, chemicals, ceramics and
glass)............................................................. 4,736,305
----------
28,805,556
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
45
<PAGE>
<TABLE>
INTERNATIONAL PORTFOLIO
------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% OF MARKET
PORTFOLIO SHARES VALUE ($)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HONG KONG 3.3%
209,787 HSBC Holdings Ltd. (Bank)............................................ 2,690,863
2,665,600 Hong Kong & China Gas Co., Ltd. (Gas utility)........................ 4,254,460
24,000 Hong Kong & China Gas Co., Ltd. Warrants
(expire 12/31/95)*.................................................. 3,660
330,000 Hong Kong Electric Holdings, Ltd. (Electric utility and
real estate)........................................................ 1,121,637
1,182,000 Hutchison Whampoa, Ltd. (Container terminal and real
estate company)..................................................... 5,728,372
781,000 Television Broadcasts, Ltd. (Television broadcasting)*............... 2,745,380
----------
16,544,372
----------
INDONESIA 1.1%
200,000 Indocement Tunggal (Foreign registered)
(Cement producer)................................................... 785,811
75,400 Indonesia Satellite Corp. (ADR) (International
telecommunication services)......................................... 2,884,050
402,000 Kalbe Farma (Foreign registered) (Pharmaceutical
producer and distributor)........................................... 1,841,222
----------
5,511,083
----------
ITALY 2.3%
2,500,000 Istituto Nazionale delle Assicurazione (Insurance
company)*........................................................... 3,361,345
65,000 Luxottica Group SpA (ADR) (Manufacturer and marketer
of eyeglasses)...................................................... 2,413,125
964,000 Societa Finanziaria Telefonica Torino SpA (Telephone
utility and telecommunication equipment manufacturer)............... 2,665,913
1,130,000 Telecom Italia SpA (Telecommunication services)...................... 3,062,827
----------
11,503,210
----------
JAPAN 16.5%
1,000 Amano Corp. (Time-management systems)................................ 11,799
258,000 Canon Inc. (Leading producer of visual image and
information equipment).............................................. 4,200,814
65,000 Cox Co., Ltd. (Men's and women's wear chain store
operator)........................................................... 613,533
260 DDI Corp. (Long distance telephone and cellular operator)........... 2,086,013
255,000 Fujitsu Ltd. (Leading manufacturer of computers)..................... 2,542,328
190,000 Hitachi Construction Machinery Co., Ltd. (Leading
maker of hydraulic shovels)......................................... 1,629,756
377,000 Hitachi Ltd. (General electronics manufacturer)...................... 3,758,657
380,000 Hitachi Metals, Ltd. (Major producer of high-quality
specialty steels)................................................... 4,263,819
88,000 Horipro Inc. (Growing entertainment production company).............. 1,453,602
39,000 Ito-Yokado Co., Ltd. (Leading supermarket operator).................. 2,056,870
465,000 Itochu Corp. (Leading general trading company)...................... 2,715,769
550,000 Kawasaki Steel Corp. (Major integrated steelmaker)*................. 1,804,023
44,000 Keyence Corp. (Specialized manufacturer of sensors).................. 4,931,862
43,000 Kyocera Corp. (Leading ceramic package manufacturer)................. 3,541,266
30,000 Mabuchi Motor Co., Ltd. (Manufacturer of DC motors).................. 2,067,135
280,000 Matsushita Electrical Industrial Co., Ltd. (Consumer
electronic products manufacturer)................................... 4,360,805
295,000 NGK Spark Plug Co., Ltd. (Leading manufacturer of
automotive spark plugs)............................................. 3,271,783
540,000 NSK Ltd. (Leading manufacturer of bearings and other
machinery parts).................................................... 3,115,568
33,000 Nichiei Co., Ltd. (Finance company for small and
medium-sized firms)................................................. 2,036,340
165,000 Nippon Shokubai Corp., Ltd. (Specialty chemical producer)............ 1,458,144
945,000 Nisshin Steel Co., Ltd. (Blast furnace steelmaker)................... 3,467,583
90,000 Pioneer Electronics Corp. (Leading manufacturer of
audio equipment).................................................... 1,529,113
110,000 SMC Corp. (Leading maker of pneumatic equipment)..................... 6,320,571
</TABLE>
The accompanying notes are an integral part of the financial statements.
46
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% OF MARKET
PORTFOLIO SHARES VALUE ($)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
44,000 Seven-Eleven Japan Co., Ltd. (Leading convenience
store operator).................................................... 3,151,201
250,000 ShinMaywa Industries, Ltd. (Leading maker of dump
trucks and other specialty vehicles)............................... 2,097,221
44,000 Sony Corp. (Consumer electronic products manufacturer).............. 2,112,914
530,000 Sumitomo Corp. (Leading general trading company, with
offices, subsidiaries and affiliates throughout the
world)............................................................. 4,827,562
21,000 Sumitomo Electric Industries, Ltd. (ADR) (Leading maker
of electric wires and cables)...................................... 2,509,500
1,360,000 Sumitomo Metal Industries, Ltd. (Leading integrated
crude steel producer)*............................................. 3,546,221
----------
81,481,772
----------
KOREA 0.8%
2,000 Korea International Trust IDR (Investment company) (a)*............. 101,000
10,884 Samsung Electronics Co., Ltd. (Major electronics
manufacturer) (c).................................................. 586,735
648 Samsung Electronics Co., Ltd. (GDS) (c)............................. 46,600
55,000 Samsung Electronics Co., Ltd. (GDS)(New (b))........................ 2,970,000
3,278 Samsung Electronics Co., Ltd. (GDR)................................. 236,016
----------
3,940,351
----------
MALAYSIA 1.5%
445,000 Malayan Banking Bhd. (Leading banking and
financial services group).......................................... 3,522,765
1,100,000 Renong Berhad (Holding company involved in engineering
and construction, financial services, telecommunication
and information technology)*....................................... 2,048,400
662,000 Technology Resources Industries (Mobile telephone
operator)*......................................................... 1,900,738
----------
7,471,903
----------
NETHERLANDS 5.9%
105,000 AEGON Insurance Group NV (Insurance company)........................ 3,632,139
24,000 Akzo-Nobel N.V. (Chemical producer)................................. 2,868,538
204,870 Elsevier NV (International publisher of scientific,
professional, business, and consumer information books)............ 2,419,568
70,137 Getronics N.V. (Computer and software distributor).................. 3,435,559
43,750 Heineken Holdings N.V. "A" (Brewery)................................ 6,070,507
50,448 Internationale-Nederlanden Groep CVA (Banking and
insurance holding company)......................................... 2,790,186
137,000 Philips Electronics N.V. (Leading manufacturer of
electrical equipment).............................................. 5,800,065
26,935 Wolters Kluwer CVA (Publisher)...................................... 2,376,260
----------
29,392,822
----------
NORWAY 0.8%
271,889 Saga Petroleum AS "A" (Oil and gas exploration and
production)........................................................ 3,861,119
----------
PHILIPPINES 0.7%
10,115 Philippine Long Distance Telephone Co.
(Telecommunication services)....................................... 725,751
622,700 San Miguel Corp. "B" (Brewery)...................................... 2,582,907
----------
3,308,658
----------
PORTUGAL 0.3%
30,192 Jeronimo Martins (Food producer and retailer)....................... 1,537,460
----------
SPAIN 3.1%
37,400 Acerinox, S.A. (Stainless steel producer)........................... 4,591,439
22,000 Banco Popular Espanol, S.A. (Retail bank)........................... 3,269,350
29,066 Banco Santander, S.A. (Leading regional bank)....................... 1,145,842
160,000 Compania Telefonica Nacional de Espana S.A.
(Telecommunication services)....................................... 2,060,681
133,000 Repsol SA (Integrated oil company).................................. 4,183,529
----------
15,250,841
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
47
<PAGE>
<TABLE>
INTERNATIONAL PORTFOLIO
------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% OF MARKET
PORTFOLIO SHARES VALUE ($)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SWEDEN 6.8%
99,000 Astra AB "A" (Free) (Pharmaceutical company)......................... 3,053,708
600 Astra AB "B" (Free).................................................. 18,054
155,000 Autoliv AB (Free) (Manufacturer of safety airbags for
automobiles)........................................................ 8,284,329
324,000 L.M. Ericsson Telephone Co. "B" (ADR) (Leading
manufacturer of cellular telephone equipment)....................... 6,480,000
75,000 Mo och Domsjo AB "B" (Free) (Manufacturer of newsprint,
paperboard, and various sawn timber products)....................... 4,322,841
144,000 S.K.F. AB "B" (Free) (Manufacturer of roller bearings)............... 2,908,411
270,000 Skandia Foersaekrings AB (Free) (Financial conglomerate)*............ 5,230,689
175,000 Volvo AB "B" (Free) (Automobile manufacturer)........................ 3,330,150
----------
33,628,182
----------
SWITZERLAND 5.0%
7,000 Alusuisse-Lonza Holdings AG (Registered)
(Manufacturer of aluminum, chemicals, and paper
packaging products)................................................. 4,389,058
5,180 Brown, Boveri & Cie. AG (Bearer) (Manufacturer of
electrical equipment)............................................... 5,362,188
5 Brown, Boveri & Cie. AG (Registered)................................. 1,003
3,623 Holderbank Financiere Glaris AG (Bearer) (Cement
company)............................................................ 2,973,283
18,115 Holderbank Financiere Glaris AG Warrants
(expire 12/20/95)*.................................................. 24,384
2,514 Nestle SA (Registered) (Food manufacturer)........................... 2,617,704
1,710 SGS Holdings SA (Bearer) (Trade inspection company).................. 2,970,039
5,000 Sandoz Ltd. AG (Registered) (Pharmaceutical company)................. 3,447,677
8,054 Swiss Bank Corp. (Bearer) (Switzerland's second
largest universal bank)............................................. 2,853,697
1 Swiss Bank Corp. (Bearer) Warrants (expire 6/30/95)*................. 24
----------
24,639,057
----------
THAILAND 1.1%
15,500 American Standard Sanitaryware (Foreign registered)
(Manufacturer of bathroom fixtures)................................. 260,583
525,220 Thai Farmers Bank (Foreign registered) (Commercial bank)............. 5,021,346
----------
5,281,929
----------
UNITED KINGDOM 10.7%
810,000 British Gas PLC (Integrated gas utility)............................. 3,729,246
588,829 British Petroleum PLC (Major integrated world oil
company)............................................................ 4,218,630
278,310 Cable and Wireless PLC (International
telecommunication services in the United Kingdom
and Hong Kong)...................................................... 1,903,201
236,000 Carlton Communications PLC (Television post
production products and services)................................... 3,574,905
140,000 De La Rue PLC (Printer of commercial banknotes and
securities)......................................................... 2,083,970
660,000 Enterprise Oil PLC (Oil and gas exploration and production).......... 4,156,489
710,218 Hanson PLC (Industrial management company)........................... 2,479,212
1,320,427 Lasmo PLC (Oil production and exploration)........................... 3,601,355
170,000 Midlands Electricity PLC (Electric companies)........................ 1,703,244
495,000 PowerGen PLC (Electric utility)...................................... 3,798,306
307,362 RTZ Corp. PLC (Mining and finance company)........................... 4,005,775
654,200 Reuters Holdings PLC (International news agency)..................... 5,446,465
588,634 SmithKline Beecham "A" (Manufacturer of ethical
drugs and healthcare products)...................................... 5,326,539
7,102 U.S. Industries, Inc. (Consumer group manufacturing
and distributing housewares, recreational and leisure
products, footwear and textiles)*................................... 96,765
389,000 Waste Management International PLC (Waste
collection and disposal services)*.................................. 1,793,186
</TABLE>
The accompanying notes are an integrl part of the financial statements.
48
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% OF MARKET
PORTFOLIO SHARES VALUE ($)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
300,000 Zeneca Group PLC (Holding company: manufacturing
and marketing of pharmaceutical and agrochemical
products and specialty chemicals).............................. 5,064,408
-----------
52,981,696
-----------
TOTAL COMMON STOCKS (Cost $380,630,630)........................ 419,881,085
-----------
-----------------------------------------------------------------------------------------------
0.1% PURCHASED OPTIONS
-----------------------------------------------------------------------------------------------
Principal
Amount
-----------------------------------------------------------------------------------------------
JPY 2,352,000,000 Put on Japanese Yen, strike price JPY 84.8, expire 4/11/96
(Cost $ 777,336).............................................. 736,176
-----------
========================================================================================================================
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $445,676,807) (d)....................................... 495,172,689
===========
========================================================================================================================
<FN>
* Non-income producing security.
(a) 1000 shares = 1 IDR unit for Korea International Trust.
(b) New shares issued during 1995, eligible for a pro rata share of 1995 dividends.
(c) Securities valued in good faith by the Valuation Committee of the Trustees.
The cost and market value of these securities at June 30, 1995 aggregated $482,632
and $679,410 (.14% of net assets), respectively.
(d) At June 30, 1995, the net unrealized appreciation on investments based on cost
for federal income tax purposes of $446,129,053 was as follows:
Aggregate gross unrealized appreciation for all investments in which there
is an excess of market value over tax cost....................................................... $ 74,286,132
Aggregate gross unrealized depreciation for all investments in which there
is an excess of tax cost over market value....................................................... (25,242,496)
------------
Net unrealized appreciation....................................................................... $ 49,043,636
============
------------------------------------------------------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short-term investments), for the six months ended
June 30, 1995, aggregated $114,451,194 and $116,034,064, respectively.
------------------------------------------------------------------------------------------------------------------------
Sector breakdown of the International Portfolio's equity securities is noted on page 13.
------------------------------------------------------------------------------------------------------------------------
</FN>
</TABLE>
At June 30, 1995, outstanding written call options were as follows (Note
A):
<TABLE>
<CAPTION>
PRINCIPAL EXPIRATION STRIKE MARKET
AMOUNT DATE PRICE VALUE ($)
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Japanese Yen....... JPY 2,352,000,000 Apr. 96 JPY 75 421,008
-------
Total outstanding written options (Premiums received $777,336).................. 421,008
=======
</TABLE>
Transactions in written call option contracts during the six months ended
June 30, 1995 were:
<TABLE>
<CAPTION>
PREMIUMS
PRINCIPAL AMOUNT RECEIVED ($)
-------------------------------------
<S> <C> <C>
Outstanding at December 31, 1994..... - -
Contracts written.................. JPY 2,352,000,000 777,336
------------------- -------
Outstanding at June 30, 1995......... JPY 2,352,000,000 777,336
============= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
49
<PAGE>
<TABLE>
INTERNATIONAL PORTFOLIO
FINANCIAL STATEMENTS
---------------------------------------------------------------------------------------------------------------
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
---------------------------------------------------------------------------------------------------------------
June 30, 1995 (Unaudited)
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $445,676,807) (Note A).................... $495,172,689
Cash.............................................................................. 26,901
Receivables:
Investments sold................................................................ 1,220,002
Dividends and interest.......................................................... 2,367,618
Portfolio shares sold........................................................... 351,985
------------
Total assets.................................................................. 499,139,195
============
LIABILITIES
Payables:
Investments purchased........................................................... $1,085,461
Portfolio shares redeemed....................................................... 39,474
Accrued management fee (Note B)................................................. 349,467
Other accrued expenses (Note B)................................................. 160,068
Payable on closed forward foreign currency exchange contracts
(Note A)...................................................................... 114,417
Written options, at market (premiums received $777,336) (Note A)................ 421,008
----------
Total liabilities............................................................. 2,169,895
------------
Net assets, at market value....................................................... $496,969,300
============
NET ASSETS
Net assets consist of:
Undistributed net investment income........................................... $ 4,382,505
Net unrealized appreciation on:
Investments................................................................. 49,495,882
Written options............................................................. 356,328
Foreign currency related transactions....................................... 44,092
Accumulated net realized loss................................................. (10,690,438)
Paid-in capital............................................................... 453,380,931
------------
Net assets, at market value....................................................... $496,969,300
============
NET ASSET VALUE, offering and redemption price per share
($496,969,300 divided by 44,825,333 outstanding shares of beneficial
interest, no par value, unlimited number of shares authorized)................ $ 11.09
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
50
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
---------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
---------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $544,316)............... $ 5,522,064
Interest............................................................ 1,240,509
------------
6,762,573
Expenses (Note A):
Management fee (Note B)............................................. $ 2,040,333
Accounting fees (Note B)............................................ 135,451
Trustees' fees (Note B)............................................. 9,103
Custodian fees...................................................... 276,923
Auditing............................................................ 34,345
Legal............................................................... 15,053
Other............................................................... 18,582 2,529,790
----------- ------------
Net investment income.................................................. 4,232,783
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized loss from:
Investments......................................................... (8,333,683)
Foreign currency related transactions............................... (2,276,669) (10,610,352)
-----------
Net unrealized appreciation during the period on:
Investments......................................................... 24,550,553
Written options..................................................... 356,328
Foreign currency related transactions............................... 1,549,923 26,456,804
----------- ------------
Net gain on investment transactions.................................... 15,846,452
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $ 20,079,235
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
51
<PAGE>
<TABLE>
INTERNATIONAL PORTFOLIO
------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED YEAR
JUNE 30, ENDED
1995 DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1994
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income........................................................... $ 4,232,783 $ 2,210,527
Net realized gain (loss) from investment transactions........................... (10,610,352) 3,671,002
Net unrealized appreciation (depreciation) on investment
transactions during the period................................................ 26,456,804 (14,866,907)
------------ ------------
Net increase (decrease) in net assets resulting from operations................... 20,079,235 (8,985,378)
------------ ------------
Distributions to shareholders from:
Net investment income ($.01 and $.07 per share, respectively)................... (572,293) (1,958,854)
------------ ------------
Net realized gain from investment transactions ($.04 per share)................. (1,628,833) -
------------ ------------
Portfolio share transactions:
Proceeds from shares sold....................................................... 299,749,345 313,276,872
Net asset value of shares issued to shareholders in
reinvestment of distributions................................................. 2,201,126 1,958,854
Cost of shares redeemed......................................................... (294,895,879) (70,378,561)
------------ ------------
Net increase in net assets from Portfolio share transactions...................... 7,054,592 244,857,165
------------ ------------
INCREASE IN NET ASSETS............................................................ 24,932,701 233,912,933
Net assets at beginning of period................................................. 472,036,599 238,123,666
------------ ------------
NET ASSETS AT END OF PERIOD (including undistributed net investment
income of $4,382,505 and $722,015, respectively)................................ $ 496,969,300 $472,036,599
============ ============
OTHER INFORMATION
INCREASE (DECREASE) IN PORTFOLIO SHARES
Shares outstanding at beginning of period......................................... 44,139,826 21,943,195
------------ ------------
Shares sold..................................................................... 27,671,154 28,463,330
Shares issued to shareholders in reinvestment of distributions 216,220 177,916
Shares redeemed................................................................. (27,201,867) (6,444,615)
------------ ------------
Net increase in Portfolio shares................................................ 685,507 22,196,631
------------ ------------
Shares outstanding at end of period............................................... 44,825,333 44,139,826
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
52
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED
FROM THE FINANCIAL STATEMENTS.
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
1995(e) -----------------------------------------------------------------
(UNAUDITED) 1994(e) 1993(e) 1992(e) 1991(e) 1990(e) 1989(e) 1988
----------- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period................... $10.69 $10.85 $ 8.12 $ 8.47 $ 7.78 $ 8.46 $ 6.14 $ 5.26
------ ------ ------ ------ ------ ------ ------ -------
Income from investment
operations:
Net investment income (a)............. .10 .06 .09 .10 .12 .25 .10 .09
Net realized and unrealized
gain (loss) on investment
transactions......................... .35 (.15) 2.90 (.36) .77 (.89) 2.22(f) .79
------ ------ ------ ------ ------ ------ ------ -------
Total from investment
operations............................ .45 (.09) 2.99 (.26) .89 (.64) 2.32 .88
------ ------ ------ ------ ------ ------ ------ -------
Less distributions:
From net investment income............ (.01) (.07) (.14) (.09) (.20) (.04) - -
In excess of net investment
income............................... - - (.12) - - - - -
From net realized gains on
investment transactions.............. (.04) - - - - - - -
------ ------ ------ ------ ------ ------ ------ -------
Total distributions................... (.05) (.07) (.26) (.09) (.20) (.04) - -
------ ------ ------ ------ ------ ------ ------ -------
Net asset value, end of period......... $11.09 $10.69 $10.85 $ 8.12 $ 8.47 $ 7.78 $ 8.46 $ 6.14
====== ====== ====== ====== ====== ====== ====== =======
TOTAL RETURN (%)....................... 4.25(d) (.85) 37.82 (3.08) 11.45 (7.65) 37.79 16.73
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
($ millions).......................... 497 472 238 65 41 35 17 3
Ratio of operating expenses,
net to average net assets (%) (a)..... 1.09(c) 1.08 1.20 1.31 1.39 1.38 1.50 1.50
Ratio of net investment income
to average net assets (%)............. 1.82(c) .57 .91 1.23 1.43 2.89 1.30 1.59
Portfolio turnover rate (%)............ 53.06(c) 33.52 20.36 34.42 45.01 26.67 57.69 110.42
<FN>
(a) Portion of expenses reimbursed
(Note B) $ - $ - $ - $ - $ - $ - $ .02 $ .14
(b) Original capital
(c) Annualized
(d) Not annualized
(e) Per share amounts, for each of the periods identified, have been calculated using the monthly average shares outstanding
during the period method.
(f) Includes provision for federal income tax of $.03 per share.
</FN>
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1, 1987
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31,
1987
-----------------
<S> <C>
Net asset value,
beginning of period................... $ 6.00(b)
-------
Income from investment
operations:
Net investment income (a)............. -
Net realized and unrealized
gain (loss) on investment
transactions......................... (.64)
-------
Total from investment
operations............................ (.64)
-------
Less distributions:
From net investment income............ -
In excess of net investment
income............................... -
From net realized gains on
investment transactions.............. (.10)
-------
Total distributions................... (.10)
-------
Net asset value, end of period......... $ 5.26
=======
TOTAL RETURN (%)....................... (10.64)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
($ millions).......................... 2
Ratio of operating expenses,
net to average net assets (%) (a)..... 1.50(c)
Ratio of net investment income
to average net assets (%)............. .02(c)
Portfolio turnover rate (%)............ 146.08(c)
<FN>
(a) Portion of expenses reimbursed
(Note B) $ .07
(b) Original capital
(c) Annualized
(d) Not annualized
(e) Per share amounts, for each of the periods identified, have been calculated using the monthly average shares outstanding
during the period method.
(f) Includes provision for federal income tax of $.03 per share.
</FN>
</TABLE>
53
<PAGE>
SCUDDER VARIABLE LIFE INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited)
-------------------------------------------------------------------------------
A. Significant Accounting Policies
-------------------------------------------------------------------------------
Scudder Variable Life Investment Fund (the "Fund") is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended, as an open-end, diversified management investment company.
Its shares of beneficial interest are divided into six separate diversified
series, called "Portfolios." These financial statements report on five
Portfolios which are the Money Market Portfolio, Bond Portfolio, Balanced
Portfolio, Capital Growth Portfolio, and International Portfolio.
The Fund is intended to be the funding vehicle for variable annuity contracts
and variable life insurance policies to be offered by the separate accounts of
certain life insurance companies ("Participating Insurance Companies"). As of
June 30, 1995, ownership breakdown of the Portfolios by each Participating
Insurance Company is as follows:
<TABLE>
<CAPTION>
PORTFOLIOS
----------------------------------------------
PARTICIPATING
MONEY CAPITAL INTERNA-
INSURANCE COMPANIES MARKET BOND BALANCED GROWTH TIONAL
------------------------------------ ------ ---- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Aetna Life Insurance & Annuity Co.............. -% -% -% -% 45.8%
American Skandia Life Assurance Co............. - 35.8 0.1 - 0.5
AUSA Life Insurance Co......................... - - - - 0.8
Banner Life Insurance Co....................... 0.3 0.4 6.8 1.4 0.5
Charter National Life Insurance Co............. 59.8 14.2 78.5 26.9 16.7
Fortis Benefits Insurance Co................... - - - - 0.3
Intramerica Life Insurance Co.................. 5.1 1.6 5.7 2.4 1.5
Lincoln Benefit Life Co........................ - 0.5 1.7 - -
Mutual of America Life Insurance Co............ - 45.3 - 64.8 24.8
Paragon Life Insurance Co...................... - - 0.3 0.1 0.1
Providentmutual Life and Annuity Co.
of America.................................... - 2.0 - - -
Safeco Life Insurance Co....................... - - 6.9 - 2.3
Union Central Life Insurance Co................ 34.6 - - 4.3 6.7
United of Omaha Life Insurance Co.............. 0.2 0.2 - - -
USAA Life Insurance Co......................... - - - 0.1 -
----- ----- ----- ----- -----
100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
The policies described below are followed consistently by the Fund in the
preparation of the financial statements for its Portfolios in conformity with
generally accepted accounting principles.
Security Valuation. The Money Market Portfolio values all securities utilizing
the amortized cost method permitted in accordance with Rule 2a-7 under the
Investment Company Act of 1940, as amended, and pursuant to which the Portfolio
must adhere to certain conditions. Under this method, which does not take into
account unrealized gains or losses on securities, an instrument is initially
valued at its cost and thereafter assumes a constant accretion/amortization to
maturity of any discount/premium.
Securities in each of the remaining Portfolios are valued in the following
manner:
Portfolio securities which are traded on U.S. or foreign stock exchanges are
valued at the most recent sale price reported on the exchange on which the
security is traded most extensively. If no sale occurred, the security is then
valued at the calculated mean between the most recent bid and asked quotations.
If there are no such bid and asked quotations, the most recent bid quotation is
used. Securities quoted on the National Association of Securities Dealers
Automatic Quotation ("NASDAQ") System, for which there have been sales, are
valued at the most recent sale price reported on such system. If there are no
such sales, the value is the high or "inside" bid quotation. Securities which
are not quoted on the NASDAQ System but are traded in another over-the-counter
market are valued at the most recent sale price on such market. If no sale
occurred, the security is then valued at the calculated mean between the most
recent bid and asked quotations. If there are no such bid and asked quotations,
the most recent bid quotation shall be used.
54
<PAGE>
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
Portfolio debt securities with remaining maturities greater than sixty days are
valued by pricing agents approved by the officers of the Fund, which quotations
reflect broker/dealer-supplied valuations and electronic data processing
techniques. If the pricing agents are unable to provide such quotations, the
most recent bid quotation supplied by a bona fide market maker shall be used.
Short-term investments having a maturity of sixty days or less are valued at
amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Trustees.
Options. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or sell
to (put option), the writer a designated instrument at a specified price within
a specified period of time. Certain options, including options on indices, will
require cash settlement by the Fund if the option is exercised. During the
period, the International Portfolio purchased put options on currencies and
wrote call options on currencies as a hedge against potential adverse price
movements in the value of portfolio assets.
The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last sale
price or, in the absence of a sale, the mean between the closing bid and asked
price or at the most recent asked price (bid for purchased options) if no bid
and asked price are available. Over-the-counter written or purchased options are
valued using dealer supplied quotations.
Foreign Currency Translations. The books and records of the Portfolios are
maintained in U.S. dollars. Foreign currency transactions are translated into
U.S. dollars on the following basis:
(i) market value of investment securities, other assets and
liabilities at the daily rates of
exchange, and
(ii) purchases and sales of investment securities, dividend
and interest income and certain
expenses at the rates of exchange prevailing on the
respective dates of such transactions.
The Portfolios do not isolate that portion of gains and losses on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
Forward Foreign Currency Exchange Contracts. 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
non-money market Portfolios utilized forward contracts as a hedge in connection
with portfolio purchases and sales of securities denominated in foreign
currencies and the Bond Portfolio, Balance Portfolio, and the International
Portfolio utilized forward contracts as a hedge against changes in 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. 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 the forward contract to buy and the 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 Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
55
<PAGE>
SCUDDER VARIABLE LIFE INVESTMENT FUND
-------------------------------------------------------------------------------
Repurchase Agreements. The Fund on behalf of each Portfolio may enter into
repurchase agreements with U.S. and foreign banks and broker/dealers whereby the
Fund, through its custodian, receives delivery of the underlying securities, the
amount of which at the time of purchase and each subsequent business day is
required to be maintained at such a level that the market value, depending on
the maturity of the repurchase agreement and the underlying collateral, is equal
to at least 100.5% of the resale price.
Federal Income Taxes. Each Portfolio is treated as a single corporate taxpayer
as provided for in the Internal Revenue Code of 1986, as amended. It is each
Portfolio's policy to comply with the requirements of the Internal Revenue Code
which are applicable to regulated investment companies and to distribute all of
its investment company taxable income to the separate accounts of the
Participating Insurance Companies which hold its shares. Accordingly, the
Portfolios paid no federal income taxes and no provision for federal income
taxes was required.
Distribution of Income and Gains. All of the net investment income of the Money
Market Portfolio is declared as a dividend to shareholders of record as of the
close of business each day and is paid to shareholders monthly. Dividends from
the Bond Portfolio, Balanced Portfolio, and the Capital Growth Portfolio are
declared and paid quarterly in April, July, October and January. All of the net
investment income of the International Portfolio normally will be declared and
distributed as a dividend annually. During any particular year, net realized
gains from investment transactions for each Portfolio, in excess of available
capital loss carryforwards, would be taxable to the Portfolio if not distributed
and, therefore, will be distributed to the Participating Insurance Companies.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. The differences
primarily relate to investments in forward contracts, passive foreign investment
companies, post October loss deferral, non-taxable distributions, and certain
securities sold at a loss. As a result, net investment income (loss) and net
realized gain (loss) on investment transactions for a reporting period may
differ significantly from distributions during such period. Accordingly, the
Portfolios may periodically make reclassifications among certain of its capital
accounts without impacting the net asset value of each Portfolio.
The Portfolios use the specific identification method for determining realized
gain or loss on investments for both financial and federal income tax reporting
purposes.
Expenses. Each Portfolio is charged for those expenses which are directly
attributable to it, such as management fees and custodian fees, while other
expenses (reports to shareholders, legal and audit fees) are allocated based on
relative net asset value among the Portfolios.
Other. Investment security transactions are accounted for on a trade date basis.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. All original
issue discounts are accreted for both tax and financial reporting purposes.
-------------------------------------------------------------------------------
B. Related Parties
-------------------------------------------------------------------------------
Under the Fund's Investment Advisory Agreement (the "Agreement") with Scudder,
Stevens and Clark, Inc. (the "Adviser"), the Fund agrees to pay the Adviser a
fee, based on average daily net assets, equal to an annual rate of 0.37% for the
Money Market Portfolio, 0.475% for the Bond Portfolio, 0.475% for the Balanced
Portfolio, 0.475% for the Capital Growth Portfolio, and 0.875% for the
International Portfolio.
The Trustees authorized the Fund on behalf of each Portfolio to pay Scudder Fund
Accounting Corp., a wholly-owned 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.
56
<PAGE>
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
For a period of five years from the date of execution of a Participation
Agreement with the Fund, and from year to year thereafter as agreed by the Fund
and the Participating Insurance Companies, each of the Participating Insurance
Companies has agreed to reimburse the Fund to the extent that the annual
operating expenses of any Portfolio of the Fund, other than the International
Portfolio, exceed three-quarters of one percent (0.75 of 1%) of that Portfolio's
average annual net assets. The Participating Insurance Companies have agreed to
reimburse the Fund to the extent that such expenses of the International
Portfolio exceed one and one-half percent (1.50 of 1%) of the Portfolio's
average annual net assets. The Adviser may advance some or all of such
reimbursement to the Fund prior to receiving payment therefore from a
Participating Insurance Company, but it is under no obligation to do so. If the
Adviser does advance such reimbursement to the Fund and does not receive payment
therefore, it will be entitled to be repaid such amounts by the Fund.
The Fund pays each Trustee not affiliated with the Adviser and not a Trustee of
other Scudder affiliated funds $12,000 annually plus specified amounts for
attended board and committee meetings. The Fund pays each Trustee not affiliated
with the Adviser and who is a Trustee of other Scudder affiliated funds $7,500
annually plus specified amounts for attended board and committee meetings.
Allocated Trustees' fees for each Portfolio for the six months ended June 30,
1995 are detailed in each Portfolio's statement of operations.
57
<PAGE>
Celebrating Over 75 Years of Serving Investors
--------------------------------------------------------------------------------
Established in 1919 by Theodore Scudder,
Sidney Stevens, and F. Haven Clark, Scudder, Stevens
& Clark was the first independent investment counsel
firm in the United States. Since its birth, Scudder's
pioneering spirit and commitment to professional
long-term investment management have helped shape the
investment industry. In 1928, we introduced the
nation's first no-load mutual fund. Today we offer 36
pure no load(TM) funds, including the first
international mutual fund offered to U.S. investors.
Over the years, Scudder's global investment
perspective and dedication to research and
fundamental investment disciplines have helped
Scudder become one of the largest and most respected
investment managers in the world. Though times have
changed since our beginnings, we remain committed to
our long-standing principles: managing money with
integrity and distinction; keeping the interests of
our clients first; providing access to investments
and markets that may not be easily available to
individuals; and making investing as simple and
convenient as possible through friendly,
comprehensive service.
An investment in the Money Market Portfolio
is neither insured nor guaranteed by the
United States Government and there can be no
assurance that the Portfolio will be able to
maintain a stable net asset value of $1.00
per share.
This information must be preceded or
accompanied by a current prospectus.
Portfolio changes should not be considered
recommendations for action by individual
investors.
