<PAGE>
RUSSELL INSURANCE FUNDS
Russell Insurance Funds is a "series
mutual fund" with four different
investment portfolios.
These financial statements report on
four Funds, each of which has distinct
investment objectives and strategies.
FRANK RUSSELL INVESTMENT
MANAGEMENT COMPANY
Responsible for overall management
and administration of the Funds.
FRANK RUSSELL COMPANY
Consultant to Frank Russell
Investment Management Company.
<PAGE>
RUSSELL INSURANCE FUNDS
SEMIANNUAL REPORT
JUNE 30, 1997
(UNAUDITED)
TABLE OF CONTENTS
Page
Multi-Style Equity Fund. . . . . . . . . . . . . . . . 2
Aggressive Equity Fund . . . . . . . . . . . . . . . . 8
Non-US Fund. . . . . . . . . . . . . . . . . . . . . . 18
Core Bond Fund . . . . . . . . . . . . . . . . . . . . 28
Notes to Financial Statements. . . . . . . . . . . . . 35
Manager, Money Managers and Service Providers. . . . . 41
RUSSELL INSURANCE FUNDS
Copyright -C- Frank Russell Company 1997. All rights reserved. This material is
proprietary and may not be reproduced, transferred, or distributed in any form
without prior written permission from Frank Russell Company. It is delivered on
an "as is" basis without warranty. The Russell logo is a trademark and service
mark of Frank Russell Company. This material must be accompanied or preceded by
a current Russell Insurance Funds' Prospectus containing complete information
concerning the investment objectives and operations of the Funds, charges, and
expenses. The Prospectus should be read carefully before an investment is made.
The performance quoted represents past performance and investment return and
principal value of an investment will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost. Investments in securities of
non-US issuers and foreign currencies involve investment risks different than
those of US issuers; the Prospectus contains further information and details
regarding these risks. Russell Fund Distributors, Inc., is the distributor of
Russell Insurance Funds.
<PAGE>
MULTI-STYLE EQUITY FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
COMMON STOCKS - 96.9%
BASIC INDUSTRIES - 4.1%
James River Corp. of Virginia 5,000 $ 185
Mead Corp. 1,500 93
Monsanto Co. 4,700 202
Praxair, Inc. 2,500 140
Reynolds Metals Co. 2,100 150
----------
770
----------
CAPITAL GOODS - 4.5%
Boston Scientific Corp. (a) 1,700 104
Caterpillar, Inc. 1,800 193
Foster Wheeler Corp. 3,600 146
General Electric Co. 6,100 399
----------
842
----------
CONSUMER BASICS - 18.2%
American Home Products Corp. 400 31
Archer-Daniels-Midland Co. 5,900 139
Baxter International, Inc. 3,100 162
Bristol-Myers Squibb Co. 6,500 527
Coca-Cola Co. (The) 1,700 115
Colgate-Palmolive Co. 1,800 117
Columbia/HCA Healthcare Corp. 4,400 173
Gillette Co. 2,500 237
Lilly (Eli) & Co. 2,000 219
Medtronic, Inc. 1,800 146
Merck & Co., Inc. 3,700 383
PepsiCo, Inc. 5,000 188
Pfizer, Inc. 1,700 203
Philip Morris Cos., Inc. 6,300 280
Sara Lee Corp. 3,200 133
Schering-Plough Corp. 8,000 382
----------
3,435
----------
CONSUMER DURABLES - 2.5%
Ford Motor Co. 7,200 272
Whirlpool Corp. 3,600 196
----------
468
----------
CONSUMER NON-DURABLES - 7.7%
Avon Products, Inc. 2,700 191
Dayton Hudson Corp. 7,700 410
Home Depot, Inc. (The) 2,800 193
Kohl's Corp. (a) 2,000 106
Liz Claiborne, Inc. 1,600 75
PeopleSoft, Inc. 3,400 179
Sears Roebuck & Co. 2,100 113
Wal-Mart Stores, Inc. 5,600 188
----------
1,455
----------
CONSUMER SERVICES - 4.0%
AMR Corp. (a) 1,800 167
Brinker International, Inc. (a) 3,700 53
Carnival Corp. Class A 4,200 173
HFS, Inc. (a) 3,300 191
Hilton Hotels Corp. 3,900 104
Mirage Resorts, Inc. (a) 3,000 75
----------
763
----------
ENERGY - 6.6%
Amerada Hess Corp. NPV 3,500 194
Amoco Corp. 1,700 148
Atlantic Richfield Co. 2,600 183
British Petroleum Co. PLC - ADR 2,400 180
Exxon Corp. 3,600 221
Mobil Corp. 2,000 140
Texaco, Inc. 1,700 185
----------
1,251
----------
FINANCE - 19.9%
Aetna, Inc. 2,200 225
Ahmanson (H.F.) & Co. 4,300 185
Allstate Corp. 3,600 263
Banc One Corp. 3,200 155
BankAmerica Corp. 6,600 426
Barnett Banks, Inc. 1,400 74
Chase Manhattan Corp. 2,400 233
Chubb Corp. (The) 3,400 227
Citicorp 900 109
Conseco, Inc. 3,300 122
Federal National Mortgage Association 5,500 240
First Chicago NBD Corp. 1,700 103
Morgan Stanley, Dean Witter, Discover and Co. 5,500 237
NationsBank Corp. 5,100 329
Salomon, Inc. 3,300 184
Student Loan Marketing Association 1,800 229
Transamerica Financial Corp. 1,100 102
Travelers, Inc. 5,100 321
----------
3,764
----------
2 Multi-Style Equity Fund
<PAGE>
MULTI-STYLE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
GENERAL BUSINESS - 4.2%
Ascend Communications, Inc. (a) 2,000 $ 79
CUC International, Inc. 5,500 142
SBC Communications, Inc. 2,600 161
Service Corp. International 4,100 135
Time Warner, Inc. 2,500 121
Tribune Co. 3,400 162
----------
800
----------
MISCELLANEOUS - 0.3%
Waste Management, Inc. 1,847 59
----------
59
----------
TECHNOLOGY - 18.3%
Adaptec, Inc. 2,600 90
AlliedSignal, Inc. 1,900 160
Applied Materials, Inc. (a) 1,900 134
Boeing Co. 1,600 85
COMPAQ Computer Corp. (a) 3,900 387
Computer Associates International, Inc. 1,600 89
Guidant Corp. 2,100 179
HBO & Co. 2,400 165
Hewlett-Packard Co. 2,600 146
Honeywell, Inc. 1,600 121
Intel Corp. 3,000 425
International Business Machines Corp. 2,800 253
Microsoft Corp. 2,300 291
Motorola, Inc. 1,300 99
National Semiconductor Corp. (a) 4,100 126
Rational Software Corp. 1,100 18
Seagate Technology 2,900 102
Sundstrand Corp. 1,900 106
Texas Instruments, Inc. 1,300 109
Textron, Inc. 3,000 199
United Technologies Corp. 2,000 166
----------
3,450
----------
TRANSPORTATION - 0.6%
Ryder System, Inc. 3,700 122
----------
122
----------
UTILITIES - 6.0%
AT&T Corp. 4,500 158
Bell Atlantic Corp. 2,100 159
BellSouth Corp. 800 37
Edison International 5,900 147
Entergy Corp. 5,000 137
MCI Communications Corp. 5,300 203
Potomac Electric Power Co. 4,500 104
WorldCom, Inc. 5,800 185
----------
1,130
----------
TOTAL COMMON STOCKS
(cost $15,624) 18,309
----------
PRINCIPAL
AMOUNT
(000)
----------
SHORT-TERM INVESTMENTS - 3.3%
Federated Prime Cash Obligation Fund (b) $ 625 625
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $625) 625
----------
TOTAL INVESTMENTS
(identified cost $16,249)(c) - 100.2% 18,934
OTHER ASSETS AND LIABILITIES,
NET - (0.2%) (39)
----------
NET ASSETS - 100.0% $ 18,895
----------
----------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) See Note 2 for federal income tax information.
ABBREVIATIONS:
ADR - American Depositary Receipt
NPV - No Par Value
PLC - Public Limited Company
The accompanying notes are an integral part of the financial statements.
Multi-Style Equity Fund 3
<PAGE>
MULTI-STYLE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $16,249,046)(Note 2). . . . . . . . . . . . . . . . . . . . . . . $ 18,933,695
Receivables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,173
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,146
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,289
-----------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,051,303
LIABILITIES
Payables:
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 93,039
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 20,689
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,323
-----------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156,051
-----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,895,252
-----------------
-----------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,057
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (282,262)
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . 2,684,649
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,458
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,443,350
-----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,895,252
-----------------
-----------------
NET ASSET VALUE, offering and redemption price per share:
($18,895,252 divided by 1,645,768 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.48
-----------------
-----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4 Multi-Style Equity Fund
<PAGE>
MULTI-STYLE EQUITY FUND
STATEMENT OF OPERATIONS
For the Period January 2, 1997 (Commencement of Operations)
to June 30, 1997 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 142,168
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,314
-----------------
Total Investment Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152,482
EXPENSES (Notes 2 and 4):
Management fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 66,374
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,796
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,182
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,384
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,425
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,904
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 711
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,865
-----------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145,641
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (67,354)
-----------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,287
-----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,195
-----------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (282,262)
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . 2,684,649
-----------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,402,387
-----------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 2,476,582
-----------------
-----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Multi-Style Equity Fund 5
<PAGE>
MULTI-STYLE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Period January 2, 1997 (Commencement of Operations)
to June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 74,195
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (282,262)
Net change in unrealized appreciation or depreciation . . . . . . . . . . . . . . . . . . . . . . . . 2,684,649
-----------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . 2,476,582
-----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (41,138)
-----------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 5). . . . . . . . . . . . . . 16,434,808
-----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,870,252
NET ASSETS
Beginning of period (original capital) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
-----------------
End of period (including undistributed net investment income of $33,057) . . . . . . . . . . . . . . . $ 18,895,252
-----------------
-----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6 Multi-Style Equity Fund
<PAGE>
MULTI-STYLE EQUITY FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding
throughout the period and other performance information derived from
the financial statements.
<TABLE>
<CAPTION>
1997*
-----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.00
-----------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .05
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . 1.46
-----------------
Total Income From Investment Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.51
-----------------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.03)
-----------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.48
-----------------
-----------------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.10
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,895
Ratios to average net assets (%)(b):
Operating expenses, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .92
Operating expenses, gross. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.71
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .87
Portfolio turnover rate (%)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52.62
Per share amount of fees waived ($ omitted)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0410
Average commission rate paid per share of security ($ omitted) . . . . . . . . . . . . . . . . . . . . .0283
</TABLE>
* For the period January 2, 1997 (commencement of operations) to
June 30, 1997 (Unaudited).
(a) The total return for the period is not annualized.
(b) The ratios for the period are annualized.
(c) See Note 4.
Multi-Style Equity Fund 7
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
COMMON STOCKS - 96.6%
BASIC INDUSTRIES - 8.3%
Advanced Technologies Laboratories, Inc. (a) 100 $ 4
Amcast Industrial Corp. 1,600 40
ASARCO, Inc. 1,200 37
Bio-Rad Laboratories, Inc. Class A (a) 300 8
Brush Wellman, Inc. 1,300 27
CalMat Co. 600 13
Chase Industries, Inc. (a) 1,700 41
Cleveland-Cliffs, Inc. 1,900 77
Cytec Industries, Inc. 300 11
Dexter Corp. 1,700 54
Fuller (H.B.) Co. 800 44
Inland Steel Industries, Inc. 2,900 76
International Specialty Products (a) 4,900 69
James River Corp. of Virginia 1,900 70
Mississippi Chemical Corp. 2,000 42
Mosinee Paper Corp. 350 8
P.H. Glatfelter Co. 1,500 30
Pope & Talbot, Inc. 100 2
Quanex Corp. 3,500 107
Reliance Steel & Aluminum Co. 300 8
Rexene Corp. 2,600 41
Sealed Air Corp. (a) 200 10
Terra Industries, Inc. 4,500 52
Tredegar Industries, Inc. 900 50
UCAR International, Inc. (a) 800 37
WD-40 Co. 600 36
----------
994
----------
CAPITAL GOODS - 8.4%
Aeroquip-Vickers, Inc. 600 28
ANADIGICS, Inc. 1,000 31
Arrow Electronics, Inc. (a) 1,200 64
Barnes Group, Inc. 3,600 107
Charter Power Systems, Inc. (a) 300 11
Cohu, Inc. 1,100 34
Core Industries, Inc. 700 17
Cummins Engine Co., Inc. 400 28
DT Industries, Inc. 900 32
Fluke Corp. 1,200 71
Franklin Electric Co., Inc. 500 24
Global Industrial Technologies, Inc. (a) 1,800 37
Harnischfeger Industries, Inc. 500 21
Harsco Corp. 2,000 81
Kuhlman Corp. 1,900 61
Lindsay Manufacturing Co. 300 10
Martin Marietta Materials, Inc. 1,500 49
Park Electrochemical Corp. 1,200 32
Robbins & Myers, Inc. 2,800 92
Simpson Manufacturing Co., Inc. (a) 400 10
SPS Technologies, Inc. (a) 200 14
Tecumseh Products Co. Class A 600 36
TETRA Technologies, Inc. (a) 300 7
Timken Co. 2,100 75
Zurn Industries, Inc. 1,300 37
----------
1,009
----------
CONSUMER BASICS - 13.6%
ALZA Corp. (a) 2,600 75
American HomePatient, Inc. 400 10
Arbor Health Care Co. (a) 500 16
Ballard Medical Products 2,100 42
Bergen Brunswig Corp. Class A 6,900 192
Bindley Western Industries, Inc. 2,600 60
Biomet, Inc. 4,200 78
Culbro Corp. (a) 200 28
Golden Poultry Co. 800 11
Health Care & Retirement Corp. (a) 200 7
Health Management Associates Class A (a) 1,100 31
Hologic, Inc. (a) 700 19
Incyte Pharmaceuticals, Inc. (a) 300 19
Integrated Health Services, Inc. 900 35
International Multifoods Corp. 1,400 35
Life Technologies, Inc. 2,300 63
Lincare Holdings, Inc. (a) 1,400 60
Living Centers of America, Inc. (a) 300 12
Mafco Consolidated Group, Inc. 1,500 50
Marquette Medical Systems, Inc. Class A (a) 1,400 31
McKesson Corp. 1,700 132
Mine Safety Appliances Co. 1,600 97
Omnicare, Inc. 500 16
Parexel International Corp. 300 9
Patterson Dental Co. (a) 300 10
RoTech Medical Corp. (a) 700 14
Smithfield Foods, Inc. (a) 300 18
Snap-On Tools Corp. 1,900 75
Spine-Tech, Inc. (a) 500 18
Standard Commercial Corp. 808 14
Starrett (L.S.) Co. Class A 300 10
Stryker Corp. 600 21
Universal Corp. 4,200 133
Universal Health Services, Inc. Class B (a) 3,500 135
Vencor, Inc. (a) 600 25
Vivus, Inc. 400 10
Weis Markets, Inc. 1,000 29
----------
1,640
----------
8 Agressive Equity Fund
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
CONSUMER DURABLES - 4.4%
Arvin Industries, Inc. 5,700 $ 155
CORT Business Services Corp. (a) 3,100 92
Excel Industries, Inc. 900 18
Furniture Brands International, Inc. (a) 1,900 37
Kimball International, Inc. Class B 1,500 60
La-Z-Boy Chair Co. 1,200 43
Libbey, Inc. 400 14
National Presto Industries, Inc. 700 28
Simpson Industries, Inc. 1,300 14
Thor Industries, Inc. 400 10
US Industries, Inc. (a) 1,500 53
----------
524
----------
CONSUMER NON-DURABLES - 8.3%
AnnTaylor Stores Corp. (a) 2,000 39
Block Drug Co., Inc. Class A 800 35
Carson Pirie Scott & Co. (a) 1,100 35
Cash America International, Inc. 3,700 39
Cole National Corp. Class A (a) 500 22
Coors (Adolph) Co. Class B 800 21
Dress Barn, Inc. (a) 2,700 52
Duty Free International, Inc. 2,100 39
Galey & Lord, Inc. (a) 1,000 19
Genesco, Inc. (a) 1,800 25
Goody's Family Clothing, Inc. (a) 1,500 41
Guilford Mills, Inc. 2,250 47
Hancock Fabrics, Inc. 1,400 19
Kellwood Co. 800 22
MacFrugals Bargains Close Outs, Inc. (a) 1,500 41
Meyer (Fred), Inc. (a) 2,700 140
Mohawk Industries, Inc. (a) 2,700 61
Morningstar Group, Inc. (a) 600 18
Oxford Industries, Inc. 500 14
Paragon Trade Brands, Inc. (a) 700 12
Pier 1 Imports, Inc. 3,100 82
Russell Corp. 900 27
Sports Authority, Inc. 800 16
Tiffany & Co. 1,600 74
Tultex Corp. (a) 3,500 21
Unifirst Corp. 300 6
WestPoint Stevens, Inc. (a) 800 31
Zale Corp. (a) 300 6
----------
1,004
----------
CONSUMER SERVICES - 2.7%
American Classic Voyages Co. (a) 1,500 15
Bristol Hotel Co. (a) 300 11
CKE Restaurants, Inc. (a) 1,100 35
Consolidated Products, Inc. 100 2
Foodmaker, Inc. (a) 5,100 83
Hollywood Entertainment Corp. (a) 300 7
Midwest Express Holdings, Inc. 2,300 63
NPC International, Inc. (a) 700 8
Rainforest Cafe, Inc. 700 18
Ryan's Family Steak Houses, Inc. (a) 4,800 41
Showbiz Pizza Time, Inc. (a) 600 16
USAir Group, Inc. (a) 800 28
----------
327
----------
ENERGY - 3.1%
Berry Petroleum Co. Class A 1,700 32
BJ Services Co. (a) 700 37
Cabot Oil & Gas Corp. 1,700 30
Camco International, Inc. 200 11
Energen Corp. 200 7
Helmerich & Payne, Inc. 1,100 63
Lomak Petroleum, Inc. 800 14
Mitchell Energy & Development Corp. 3,200 70
Smith International, Inc. (a) 700 43
Tesoro Petroleum Corp. (a) 4,700 70
----------
377
----------
FINANCE - 12.5%
AMBAC, Inc. 1,100 84
American Annuity Group, Inc. 1,500 27
American Heritage Life Investment Corp. 800 26
Astoria Financial Corp. 1,100 52
Charter One Financial, Inc. 200 11
Community Trust Bancorp, Inc. 400 11
Delphi Financial Group, Inc. 612 23
Deposit Guaranty Corp. 600 19
First American Financial Corp. 2,400 94
First Empire State Corp. 100 34
Fort Wayne National Corp. 900 42
Fremont General Corp. 2,000 81
Greenpoint Financial Corp. 600 40
HCC Insurance Holdings, Inc. 400 11
Imperial Bancorp 770 22
Interra Financial, Inc. 300 13
Life USA Holdings, Inc. (a) 800 11
Mercantile Bankshares Corp. 2,000 80
ML Bancorp, Inc. 800 15
National Western Life Insurance Co. Class A (a) 300 26
Aggressive Equity Fund 9
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Navigators Group, Inc. (The)(a) 600 $ 10
NBT Bancorp, Inc. 400 10
North American Mortgage Co. 500 12
North Fork Bancorporation, Inc. 1,000 21
Orion Capital Corp. 600 44
Pacific Century Financial Corp. 1,600 74
PaineWebber Group, Inc. 800 28
PennCorp Financial Group, Inc. 1,400 54
Poe & Brown, Inc. 1,000 36
Popular, Inc. 2,500 100
Provident Bankshares Corp. 950 39
Raymond James Financial, Inc. 550 15
Reliastar Financial Corp. 100 7
Sotheby's Holdings Co., Inc. Class A 3,100 52
T R Financial Corp. 2,600 65
UMB Financial Corp. 800 35
United Companies Financial Corp. 400 11
USBANCORP, Inc. 800 43
Value Line, Inc. 1,100 48
Wilmington Trust Corp. 1,600 73
----------
1,499
----------
GENERAL BUSINESS - 8.4%
All American Communications, Inc. (a) 1,200 15
Barra, Inc. (a) 700 23
BHC Communications, Inc. Class A 100 12
Big Flower Press Holdings, Inc. (a) 400 8
Bowne & Co., Inc. 4,000 140
Central Newspapers, Inc. Class A 1,400 100
Comdisco, Inc. 2,250 59
FIserv, Inc. (a) 300 13
Grey Advertising 300 96
GTECH Holdings Corp. (a) 3,700 119
Houghton Mifflin Co. 300 20
Hunt Manufacturing Co. 600 11
Interim Services, Inc. (a) 200 9
Logicon, Inc. 1,400 74
McClatchy Newspapers, Inc. Class A 1,625 48
McGrath Rent Corp. 3,200 62
Merrill Corp. 1,200 43
Miller (Herman), Inc. 200 7
New England Business Service, Inc. 1,100 29
Norrell Corp. 1,000 33
Pinkerton's, Inc. (a) 200 6
Pittston Brink's Group 400 12
QuickResponse Services, Inc. (a) 300 11
Standard Register Co. 400 12
Stewart Enterprises, Inc. Class A 200 8
Systems & Computer Technology Corp. (a) 1,400 37
United Wisconsin Services, Inc. 200 7
----------
1,014
----------
MISCELLANEOUS - 2.4%
GenCorp, Inc. 4,700 109
ITT Educational Services, Inc. 1,200 30
Learning Tree International, Inc. 1,700 75
Mathews International Corp. Class A 400 14
On Assignment, Inc. (a) 300 12
Tracor, Inc. (a) 1,800 45
Universal Forest Products, Inc. 400 6
----------
291
----------
SHELTER - 2.6%
Centex Corp. 2,400 98
Florida Rock Industries, Inc. 700 28
Lafarge Coppee 2,900 71
Southdown, Inc. 2,100 92
Standard Pacific Corp. 1,800 18
USG Corp. (a) 300 11
----------
318
----------
TECHNOLOGY - 10.5%
Alliant Techsystems, Inc. (a) 200 11
Avnet, Inc. 300 17
Beckman Instruments, Inc. 1,500 72
Boole & Babbage, Inc. 400 8
Citrix Systems, Inc. (a) 100 4
Coltec Industries, Inc. (a) 4,400 86
CTS Corp. 800 55
Dallas Semiconductor Corp. 300 12
Data General Corp. (a) 3,800 99
Davox Corp. 400 14
Digital Microwave Corp. (a) 300 9
Dionex Corp. (a) 200 10
Electroglas, Inc. (a) 400 10
Encad, Inc. (a) 1,200 50
Esterline Corp. (a) 1,900 67
General Binding Corp. 800 23
Harbinger Corp. 900 25
Helix Technology Corp. 200 8
ITI Technologies, Inc. (a) 1,600 37
KEMET Corp. (a) 300 7
Lincoln Electric Co. 200 7
MasTec, Inc. 200 9
10 Aggressive Equity Fund
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Orbital Sciences Corp. Class A (a) 600 $ 10
Periphonics Corp. 1,100 23
Pittway Corp. Class A 300 15
RadiSys Corp. (a) 100 4
SpeedFam International, Inc. (a) 500 18
SPSS, Inc. (a) 300 9
Stratus Computer, Inc. (a) 1,700 85
Supertex, Inc. (a) 2,900 32
Symantec Corp. (a) 3,900 76
Symbol Technologies, Inc. 3,150 106
Tech-Sym Corp. (a) 1,300 43
Tektronix, Inc. 200 12
Thermo Ecotek Corp. 1,300 20
Thiokol Corp. 800 56
Veritas Software Corp. 600 30
Viasoft, Inc. 800 41
Viewlogic Systems, Inc. (a) 2,000 29
Vitesse Semiconductor Corp. 200 7
Wall Data, Inc. (a) 200 5
Wind River Systems, Inc. 200 8
----------
1,269
----------
TRANSPORTATION - 5.1%
Airborne Freight Corp. 1,900 80
Alexander & Baldwin, Inc. 2,300 60
CNF Transportation, Inc. 3,300 106
GATX Corp. 2,100 121
Interpool, Inc. 600 9
Roadway Express, Inc. 300 7
Rollins Truck Leasing Corp. 4,200 63
USFreightways Corp. 2,400 62
Werner Enterprises, Inc. 900 17
Yellow Corp. (a) 4,000 89
----------
614
----------
UTILITIES - 6.3%
American Water Works, Inc. 1,900 41
Black Hills Corp. 1,300 37
Boston Edison Co. 1,100 29
Calenergy, Inc. (a) 400 15
Central Hudson Gas & Electric Corp. 1,500 52
El Paso Natural Gas Co. 400 22
Hawaiian Electric Industries, Inc. 900 35
KU Energy Corp. 1,100 37
NIPSCO Industries, Inc. 100 4
OGE Energy Corp. 1,000 45
Pinnacle West Capital Corp. 1,200 36
Sierra Pacific Resources 2,900 93
Tel-Save Holdings, Inc. 1,900 29
TNP Enterprises, Inc. 3,700 86
Tuscon Electric Power Co. (a) 6,400 93
US Long Distance Corp. 2,000 34
Washington Gas & Light Co. 1,400 35
Washington Water Power Co. 1,800 35
----------
758
----------
TOTAL COMMON STOCKS
(cost $10,123) 11,638
----------
PRINCIPAL
AMOUNT
(000)
----------
SHORT-TERM INVESTMENTS - 3.7%
Federated Prime Cash Obligation Fund (b) $ 398 398
United States Treasury Notes (c)
5.750% due 10/31/97 50 50
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $448) 448
----------
TOTAL INVESTMENTS
(identified cost $10,571)(d) - 100.3% 12,086
OTHER ASSETS AND LIABILITIES,
NET - (0.3%) (37)
----------
NET ASSETS - 100.0% $ 12,049
----------
----------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Held as collateral by the custodian in connection with futures contracts
purchased by the Fund.
(d) See Note 2 for federal income tax information.
The accompanying notes are an integral part of the financial statements.
Aggressive Equity Fund 11
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
---------- --------------
FUTURES CONTRACTS
(Notes 2 and 3)
S & P 400 Midcap Index Futures Contracts
expiration date 09/97 3 $ 5
----------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased (#) $ 5
----------
----------
(#) At June 30, 1997, United States Treasury Notes valued at $50 were held as
collateral by the custodian in connection with futures contracts purchased
by the Fund.
The accompanying notes are an integral part of the financial statements.
12 Aggressive Equity Fund
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $10,571,333)(Note 2). . . . . . . . . . . . . . . . . . . . . . . $ 12,085,980
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,891
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,724
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,289
------------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,108,884
LIABILITIES
Payables:
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,621
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 18,284
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,996
Daily variation margin on futures contracts (Notes 2 and 3). . . . . . . . . . . . 1,875
------------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,776
------------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,049,108
------------------
------------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,662
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,352
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,514,647
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,150
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,414
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,404,883
------------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,049,108
------------------
------------------
NET ASSET VALUE, offering and redemption price per share:
($12,049,108 divided by 1,041,415 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.57
------------------
------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Aggressive Equity Fund 13
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF OPERATIONS
For the Period January 2, 1997 (Commencement of Operations)
to June 30, 1997 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 101,514
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,900
------------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,414
EXPENSES (Notes 2 and 4):
Management fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,488
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,106
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,382
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,830
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,263
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,905
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 711
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,901
------------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126,586
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (60,155)
------------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,431
------------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,983
------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,032
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,320 100,352
------------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,514,647
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,150 1,519,797
------------------ ------------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,620,149
------------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 1,665,132
------------------
------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 Aggressive Equity Fund
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Period January 2, 1997 (Commencement of Operations)
to June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 44,983
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,352
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . . . . . . . . . . . 1,519,797
------------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . 1,665,132
------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (31,320)
------------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 5). . . . . . . . . . . . . . 10,390,296
------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,024,108
NET ASSETS
Beginning of period (original capital) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
------------------
End of period (including undistributed net investment income of $13,662) . . . . . . . . . . . . . . . $ 12,049,108
------------------
------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Aggressive Equity Fund 15
<PAGE>
AGGRESSIVE EQUITY FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1997*
------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.00
------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .04
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . 1.56
------------------
Total Income From Investment Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.60
------------------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.03)
------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.57
------------------
------------------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.06
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,049
Ratios to average net assets (%)(b):
Operating expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.25
Operating expenses, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.38
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85
Portfolio turnover rate (%)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64.83
Per share amount of fees waived ($ omitted)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0579
Average commission rate paid per share of security ($ omitted) . . . . . . . . . . . . . . . . . . . . .0355
</TABLE>
* For the period January 2, 1997 (commencement of operations) to
June 30, 1997 (Unaudited).
(a) The total return for the period is not annualized.
(b) The ratios for the period are annualized.
(c) See Note 4.
16 Aggressive Equity Fund
<PAGE>
NON-US FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
COMMON STOCKS - 95.6%
AUSTRALIA - 2.3%
Amcor, Ltd. 900 $ 6
Broken Hill Proprietary Co. 3,100 45
CSR, Ltd. 5,100 20
Mayne Nickless, Ltd. 1,000 6
National Australia Bank, Ltd. 900 13
Southcorp Holdings, Ltd. 3,500 13
Western Mining Corp., Ltd. 3,700 23
Westpac Banking Corp. 4,900 30
----------
156
----------
AUSTRIA - 0.2%
OMV AG 100 13
----------
13
----------
BELGIUM - 1.1%
Arbed SA NPV (a) 45 5
Credit Communal Holding/ Dexia NPV 150 16
Electrabel NPV 90 20
Fortis AG 45 9
Groupe Bruxelles Lambert NPV 60 10
PetroFina SA NPV 35 13
----------
73
----------
DENMARK - 0.8%
Jyske Bank AS (Regd.) 200 17
Novo Nordisk AS Series B 149 16
Ostasiatiske Kompagni (a) 500 12
Tele Danmark AS Series B 200 11
----------
56
----------
FINLAND - 0.7%
Cultor OY Series II 200 11
Metra AB Series B 400 12
Nokia AB Series K 300 22
----------
45
----------
FRANCE - 6.6%
Alcatel Alsthom 103 13
Carrefour SA 38 28
Christian Dior 120 20
Cie de St. Gobain 172 25
Compagnie Bancaire SA 100 13
Eaux (cie Generale) 266 34
Elf Aquitaine SA 530 57
Eridania Beghin-Say 100 15
L'Air Liquide 100 16
Pathe SA 145 29
Peugeot SA 156 15
Promodes 67 26
Rhone-Poulenc SA Class A - ADR 460 19
Sanofi SA 183 18
SEITA 500 16
SGS Thomson Microelectronics (a) 170 13
Sidel SA 175 14
Societe Generale 210 23
Synthelabo 200 26
Union des Assurances Federales 200 23
Usinor Sacilor 400 7
----------
450
----------
GERMANY - 6.6%
Allianz AG (Regd) (a) 65 14
BASF AG 240 9
Bayer AG 880 34
Bayerische Hypotheken-und Wechsel Bank AG 950 28
Bilfinger & Berger BAU AG (a) 210 9
Continental AG 1,230 31
Deutsche Lufthansa AG 870 17
Deutsche Telekom AG 1,260 30
Douglas Holding AG 550 22
Dresdner Bank AG 910 31
Fried, Krupp AG Hoesch New 160 31
Hannover Rueckversicherungs AG 100 6
Henkel KGAA 380 20
Muenchener Rueckversicherungs 19 53
SAP AG 30 6
Siemens AG 770 46
SKW Trostberg AG 340 12
Veba AG 783 44
Volkswagen International AG 1998 Warrants (a) 10 4
----------
447
----------
HONG KONG - 3.5%
Cheung Kong Holdings, Ltd. 5,000 49
Dickson Concepts International, Ltd. 8,000 29
Henderson Land Development Co., Ltd. 2,000 18
Hong Kong Electric Holding, Ltd. 5,000 20
Hong Kong Telecommunications, Ltd. 200 1
HSBC Holdings (UK Regd) PLC 1,600 48
Hutchison Whampoa, Ltd. 4,000 35
New World Infrastructure, Ltd. (a) 6,000 17
Swire Pacific, Ltd. Class A 2,500 22
----------
239
----------
18 Non-US Fund
<PAGE>
NON-US FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
ITALY - 3.2%
Ente Nazionale Idrocarburi SPA (Regd) 10,000 $ 57
Fiat SPA 6,000 21
Istituto Mobiliane Italiano SPA 3,000 27
Istituto Nazionale Delle Assicurazioni 30,000 46
Mediaset SPA 3,000 13
Telecom Italia SPA 17,000 54
----------
218
----------
JAPAN - 32.1%
Asahi Bank, Ltd. 5,000 43
Bank Of Tokyo - Mitsubishi, Ltd. 4,000 80
Canon Sales Co., Inc. 3,000 70
Cosmo Oil Co. 2,000 10
Dai Ichi Kangyo Bank 1,000 14
Dai Ichi Pharmaceutical Co. 2,000 35
Daiken Corp. 6,000 38
Daiwa Bank 6,000 28
Daiwa Kosho Lease Co., Ltd. 4,000 31
Daiwa Securities 5,000 39
DDI Corp. 6 44
Ebara Corp. 2,000 30
Fuji Photo Film Co. 1,000 40
Fujitsu, Ltd. 2,000 28
Hitachi, Ltd. 4,000 45
Ishihara Sangyo (a) 18,000 53
Izumi Co. 1,000 15
Izumiya Co., Ltd. 2,000 32
Japan Tobacco, Inc. 8 63
Kyocera Corp. 1,000 79
Long Term Credit Bank Japan 3,000 13
Matsushita Electric Industrial Co., Ltd. 4,000 81
Mitsubishi Electric Corp. 6,000 34
Mitsubishi Estate Co., Ltd. 4,000 58
Mitsubishi Heavy Industries 5,000 38
Mitsui Mining & Smelting 11,000 49
Mitsui Trust & Banking 7,000 53
Murata Manufacturing Co., Ltd. 1,000 40
Nippon Oil Co. 2,000 11
Nippon Steel Corp. 17,000 54
Nippon Telegraph & Telephone Corp. 5 48
Nissan Motor Co., Ltd. 11,000 85
Nomura Securities 2,000 28
NSK, Ltd. 7,000 45
Oji Paper Co., Ltd. 2,000 12
Sakura Bank, Ltd. 8,000 61
San-In Godo Bank 6,000 50
Seino Transportation 2,000 22
Seiren Co., Ltd. 7,000 32
Sekisui Chemical Co., Ltd. 3,000 30
Shimachu Co., Ltd. 1,100 33
Sony Corp. 600 52
Sumitomo Forestry 3,000 33
Sumitomo Rubber Industries 1,000 7
Taisei Corp. 13,000 60
Tokio Marine & Fire Insurance Co. 3,000 39
Tokyo Electric Power 1,800 38
Topy Industries, Ltd. 5,000 18
Toyota Motor Corp. 3,000 88
West Japan Railway Co. 16 63
Yamanouchi Pharmaceutical 2,000 54
Yokohama Rubber Co., Ltd. 7,000 30
----------
2,176
----------
MALAYSIA - 2.0%
Boustead Holdings Berhad 6,000 13
Commerce Asset Holdings 8,000 21
Hong Leong Properties Berhad 12,000 14
IJM Corp. Berhad 7,000 15
Pelangi Berhad 10,000 10
Petronas Dagangan Berhad 10,000 24
Sime Darby Berhad 5,000 17
Tanjong PLC 3,000 10
Tenaga Nasional Berhad 3,000 14
----------
138
----------
NETHERLANDS - 5.0%
Aegon NV 277 19
DSM NV (BR) 288 29
Heineken NV 50 9
ING Groep NV 1,162 54
Philips Electronics 380 27
Polygram 120 6
Royal Dutch Petroleum Co. (a) 2,240 116
Royal PTT Nederland NV 320 13
Unilever NV CVA 240 50
Wolters Kluwer CVA 121 15
----------
338
----------
NEW ZEALAND - 0.3%
Lion Nathan, Ltd. 4,300 11
Telecom Corp. of New Zealand, Ltd. 2,300 12
----------
23
----------
Non-US Fund 19
<PAGE>
NON-US FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
NORWAY - 0.5%
Kvaerner Industries AS Series B 240 $ 14
Norsk Hydro AS 260 14
Storebrand ASA Series A (a) 1,500 9
----------
37
----------
SINGAPORE - 1.1%
Hotel Properties 4,000 7
Singapore Airlines, Ltd. (Alien Market) 3,000 27
Singapore Press Holdings (Alien Market) 1,000 20
United Overseas Bank, Ltd. (Alien Market) 2,000 20
----------
74
----------
SPAIN - 2.5%
Acerinox SA 44 8
Banco Bilbao Vizcaya (Regd) 400 33
Banco Popular Espanol (Regd) 120 29
Hidroelectrica del Cantabrico SA 480 20
Iberdrola SA 3,800 48
Repsol SA 600 25
Vallehermoso SA 200 5
----------
168
----------
SWEDEN - 2.4%
Autoliv, Inc. (a) 420 16
Incentive AB Series B 400 37
Scania AB Series B 900 28
SKF AB Series A 1,300 32
Telefonaktiebolaget Ericsson (LM) Series B 1,200 47
----------
160
----------
SWITZERLAND - 6.4%
Fischer (Georg) AG (BR) 17 24
Holderbank Financiere Glarus AG (BR) 14 13
Liechtenstein Global Trust AG 40 24
Nestle SA (Regd) 41 54
Novartis AG (Regd.) 98 157
Roche Holdings Genusscheine AG NPV 7 63
Schweiz Bankgesellsch (BR) 50 57
Schweiz Ruckversicher (Regd) 28 40
----------
432
----------
UNITED KINGDOM - 18.3%
Allied Colloids PLC 8,600 18
Allied Irish Banks 3,200 25
Allied Lyons 3,200 23
Amersham International PLC 400 11
B.A.T. Industries PLC 3,900 35
British Airways PLC 2,300 26
British Petroleum Co. PLC 4,200 52
British Telecom PLC 7,000 52
BTR PLC 3,600 12
Burmah Castrol PLC 700 12
Cadbury Schweppes PLC 2,200 20
Compass Group PLC 2,000 22
Energy Group PLC 1,000 11
Flextech PLC (a) 900 10
General Cable PLC (a) 3,600 10
General Electric Co. PLC 900 5
Glaxo Wellcome PLC 5,300 110
Glynwed International PLC 3,200 12
Great University Stores PLC 2,000 20
Guardian Royal Exchange PLC 9,400 43
Guinness PLC 4,100 40
Hillsdown Holdings PLC 3,000 8
HSBC Holdings PLC 3,300 102
Kingfisher PLC 1,300 15
Lloyds TSB Group PLC 5,800 60
LucasVarity PLC 5,400 19
MEPC PLC 2,500 20
Norwich Union PLC (a) 990 5
Pilkington Brothers PLC 8,000 18
Racal Electronics PLC 5,300 21
Rank Group PLC 4,800 30
Reed International 1,500 15
RMC Group PLC 1,100 18
Rolls-Royce PLC 4,000 15
Royal Bank of Scotland Group PLC 3,000 28
RTZ Corp. PLC (Regd) 650 11
Safeway PLC 2,200 13
Sainsbury (J.) PLC 4,100 25
Scottish Power PLC 5,500 36
Sears PLC 14,000 16
Shell Transportation & Trading PLC (Regd) 2,100 14
Standard Chartered Bank Group PLC 1,600 24
Tomkins PLC 4,500 19
United Newspaper, Ltd. PLC 1,000 12
Vickers, Ltd. PLC 3,000 10
Vodafone Group PLC 8,300 41
Wessex Water PLC 3,400 23
Willis Corroon Group PLC 3,700 8
Zeneca Group PLC 1,400 46
----------
1,241
----------
TOTAL COMMON STOCKS
(cost $5,940) 6,484
----------
20 Non-US Fund
<PAGE>
NON-US FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
PREFERRED STOCKS - 2.2%
AUSTRALIA - 0.3%
News Corp., Ltd. 5,300 $ 21
----------
21
----------
AUSTRIA - 0.2%
Creditanstalt-Bankverein 265 11
----------
11
----------
GERMANY - 1.7%
GEA AG 25 10
MAN AG 57 14
RWE AG NV 1,110 39
SAP AG 90 19
Volkswagen AG 65 36
----------
118
----------
TOTAL PREFERRED STOCKS
(cost $125) 150
----------
PRINCIPAL
AMOUNT
(000)
----------
LONG-TERM INVESTMENTS - 0.7%
JAPAN - 0.7%
STB Cayman Capital, Ltd. (conv.)(a)
0.500% due 10/01/07 JPY 5,000 49
----------
TOTAL LONG-TERM INVESTMENTS
(cost $43) 49
----------
SHORT-TERM INVESTMENTS - 1.0%
UNITED STATES - 1.0%
Federated Prime Cash Obligation Fund (b) $ 65 65
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $65) 65
----------
TOTAL INVESTMENTS
(identified cost $6,173)(c) - 99.5% 6,748
OTHER ASSETS AND LIABILITIES,
NET - 0.5% 36
----------
NET ASSETS - 100.0% $ 6,784
----------
----------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) See Note 2 for federal income tax information.
ABBREVIATIONS:
ADR - American Depositary Receipt
NPV - No Par Value
NV - Nonvoting
PLC - Public Limited Company
FOREIGN CURRENCY ABBREVIATIONS:
JPY - Japanese yen
The accompanying notes are an integral part of the financial statements.
Non-US Fund 21
<PAGE>
NON-US FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS (000)
- ------------------------------------------------ ---------- ----------
Europe 37.8% $ 2,566
Japan 32.8 2,225
United Kingdom 18.3 1,241
Pacific Basin 9.6 651
United States (Short-Term Investments) 1.0 65
---------- ----------
Total Investments 99.5 6,748
Other Assets and Liabilities, Net 0.5 36
---------- ----------
NET ASSETS 100.0% $ 6,784
---------- ----------
---------- ----------
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS (000)
- ------------------------------------------------ ---------- ----------
Basic Industries 6.5% $ 444
Capital Goods 8.7 587
Consumer Basics 15.2 1,031
Consumer Durable Goods 7.7 522
Consumer Non-Durables 4.8 329
Consumer Services 1.5 99
Energy 7.6 514
Finance 22.1 1,502
General Business 2.1 143
Miscellaneous 6.1 411
Shelter 1.9 130
Technology 4.1 276
Transportation 1.3 90
Utilities 8.2 556
Long-Term Investments 0.7 49
Short-Term Investments 1.0 65
---------- ----------
Total Investments 99.5 6,748
Other Assets and Liabilities, Net 0.5 36
---------- ----------
NET ASSETS 100.0% $ 6,784
---------- ----------
---------- ----------
The accompanying notes are an integral part of the financial statements.
22 Non-US Fund
<PAGE>
NON-US FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $6,172,736)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . $ 6,747,526
Foreign currency holdings (identified cost $63,604). . . . . . . . . . . . . . . . . . . . . . . . . . . 63,299
Receivables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,164
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,494
From Manager (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,806
Foreign taxes recoverable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,527
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,289
----------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,981,105
LIABILITIES
Payables:
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 136,574
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 15,101
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,094
----------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196,769
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,784,336
----------------
----------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 46,712
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,859
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 574,790
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (91)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,069
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,065,997
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,784,336
----------------
----------------
NET ASSET VALUE, offering and redemption price per share:
($6,784,336 divided by 606,934 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.18
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Non-US Fund 23
<PAGE>
NON-US FUND
STATEMENT OF OPERATIONS
For the Period January 2, 1997 (Commencement of Operations)
to June 30, 1997 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 87,820
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,133
Less foreign taxes withheld. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,987)
----------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,966
EXPENSES (Notes 2 and 4):
Management fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,686
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,650
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,950
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,524
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,447
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,905
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 711
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,286
----------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,159
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (84,905)
----------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,254
----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,712
----------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,975
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . 23,884 90,859
----------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 574,790
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . (91) 574,699
---------------- ----------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 665,558
----------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 712,270
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24 Non-US Fund
<PAGE>
NON-US FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Period January 2, 1997 (Commencement of Operations)
to June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 46,712
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,859
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . . . . . . . . . . . 574,699
----------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . 712,270
----------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 5). . . . . . . . . . . . . . 6,047,066
----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,759,336
NET ASSETS
Beginning of period (original capital) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
----------------
End of period (including undistributed net investment income of $46,712) . . . . . . . . . . . . . . . $ 6,784,336
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Non-US Fund 25
<PAGE>
NON-US FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding
throughout the period and other performance information derived from
the financial statements.
<TABLE>
<CAPTION>
1997*
----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.00
----------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .08
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . 1.10
----------------
Total Income From Investment Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.18
----------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.18
----------------
----------------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.80
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,784
Ratios to average net assets (%)(b):
Operating expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.30
Operating expenses, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.11
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.55
Portfolio turnover rate (%)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58.72
Per share amount of fees waived ($ omitted)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1073
Per share amount of fees reimbursed ($ omitted)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . .0326
Average commission rate paid per share of security ($ omitted)(d). . . . . . . . . . . . . . . . . . . .0024
</TABLE>
* For the period January 2, 1997 (commencement of operations) to
June 30, 1997 (Unaudited).
(a) The total return for the period is not annualized.
(b) The ratios for the period are annualized.
(c) See Note 4.
(d) In certain foreign markets the relationship between the translated
U.S. dollar price per share and commission paid per share may vary
from that of domestic markets.
26 Non-US Fund
<PAGE>
CORE BOND FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
LONG-TERM INVESTMENTS - 78.5%
ASSET-BACKED SECURITIES - 1.6%
The Money Store Home Equity Loan Trust
Series 1994-D Class A-4
8.750% due 01/15/20 $ 50 $ 52
Series 1996-B Class A5
7.180% due 12/15/14 60 61
----------
113
----------
CORPORATE BONDS AND NOTES - 20.3%
Aames Financial Corp.
9.125% due 11/01/03 25 25
Amerus Capital I Series A
8.850% due 02/01/27 25 25
Banponce Trust I Series A
8.327% due 02/01/27 25 25
Bear Stearns Capital Trust I
7.000% due 01/15/27 100 99
Chevy Chase Savings Bank
9.250% due 12/01/05 25 25
Citicorp
9.500% due 02/01/02 50 55
Dime Bancorp Trust I Series A
9.330% due 05/06/27 25 26
ERAC USA Finance Co. (MTN)
7.500% due 06/15/03 50 51
Exide Corp.
2.900% due 12/15/05 50 31
Ferrellgas LP/Financing Corp. Series A
10.000% due 08/01/01 35 37
First Nationwide Holdings
12.500% due 04/15/03 50 56
First Tennessee Capital I Series A
8.070% due 01/06/27 25 25
Goldman Sachs Group, L.P.
6.200% due 02/15/01 75 74
Greenwich Air Services, Inc.
10.500% due 06/01/06 25 29
Imperial Capital Trust I
9.980% due 12/31/26 25 25
Imperial Credit Industries, Inc., Series B
9.875% due 01/15/07 35 34
Jones Intercable, Inc.
9.625% due 03/15/02 25 26
Markel Capital Trust I
8.710% due 01/01/46 25 25
Meditrust
7.375% due 07/15/00 25 25
MFS Communications Step Up Bond
Zero Coupon due 01/15/04 20 19
Zero Coupon due 01/15/06 25 20
News America Holdings, Inc.
7.700% due 10/30/25 50 47
NWCG Holdings Corp., Series B
Zero Coupon due 06/15/99 25 22
Ocwen Financial Corp.
11.875% due 10/01/03 50 54
Orion Capital Trust I
8.730% due 01/01/37 25 25
Reliance Group Holdings, Inc.
9.000% due 11/15/00 50 52
Revlon Worldwide
Zero Coupon due 03/15/01 40 27
Rose Hills Acquisition Corp.
9.500% due 11/15/04 25 26
Salomon, Inc. (MTN)
6.625% due 11/30/00 25 25
Simon Debartolo Group LP
6.875% due 11/15/06 50 48
Southland Corp. Series A
4.500% due 06/15/04 50 40
Tanger Properties LP
8.750% due 03/11/01 25 27
Taubman Realty Group, L.P.
8.000% due 06/15/99 25 25
Tenet Healthcare Corp.
7.875% due 01/15/03 25 25
Time Warner, Inc.
9.150% due 02/01/23 100 110
Travelers Property Casualty Corp.
6.750% due 04/15/01 25 25
United Companies Financial Corp.
7.700% due 01/15/04 50 50
United Dominion Realty Trust, Inc.
7.250% due 01/15/07 25 25
----------
1,410
----------
28 Core Bond Fund
<PAGE>
CORE BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
MORTGAGE-BACKED SECURITIES - 34.8%
Federal Home Loan Mortgage Corp.
6.000% 15 Year TBA (d) $ 100 $ 96
Federal Home Loan Mortgage Corp.
Participation Certificate
Group #D7-3684 7.500% due 08/01/26 79 79
Federal National Mortgage Association
Pool #303192 8.500% due 03/01/25 468 487
Pool #303197 8.500% due 03/01/25 92 96
Pool #313232 8.500% due 05/01/25 345 359
Pool #345713 7.000% due 07/01/26 201 197
Pool #351687 7.000% due 11/01/26 201 197
Federal National Mortgage Association
REMIC Series 1992-10 Class ZD
8.000% due 11/25/21 770 766
Government National Mortgage Association
Pool #423495 7.000% due 02/15/26 135 133
----------
2,410
----------
NON-US BONDS - 0.3%
Videotron Holdings PLC Step Up Bond
Zero Coupon until 07/01/99 due 07/01/04 25 23
----------
23
----------
UNITED STATES GOVERNMENT TREASURIES - 21.5%
United States Treasury Notes
5.625% due 11/30/98 25 25
5.875% due 11/15/99 30 30
6.625% due 06/30/01 390 393
6.250% due 10/31/01 25 25
5.750% due 08/15/03 (d) 450 435
6.500% due 08/15/05 75 75
6.625% due 05/15/07 (d) 500 504
----------
1,487
----------
TOTAL LONG-TERM INVESTMENTS
(cost $5,442) 5,443
----------
NUMBER
OF
SHARES
----------
PREFERRED STOCKS - 0.7%
El Paso Electric Co. Series A 206 23
Highwood Properties, Inc. Series A 25 25
----------
TOTAL PREFERRED STOCKS
(cost $48) 48
----------
PRINCIPAL
AMOUNT
(000)
----------
SHORT-TERM INVESTMENTS - 27.7%
American Express Credit Corp.
5.530% due 07/08/97 (a) $ 100 100
Ameritech Corp.
5.540% due 08/28/97 (a) 100 99
British Columbia, Province
5.500% due 07/11/97 (a) 100 100
Caisse D Amortissement
5.550% due 08/05/97 (a) 100 99
Canadian Wheat Board
5.540% due 09/11/97 100 99
Emerson Electric Co.
5.530% due 08/12/97 (a) 100 99
Federal Home Loan Mortgage Discount Note
5.420% due 07/14/97 (a)(c) 50 50
5.520% due 08/12/97 (a)(c) 100 99
Federated Prime Cash Obligation Fund (a) 278 278
Florida Power Corp.
5.520% due 07/09/97 (a) 100 100
Ford Motor Credit Co.
5.580% due 07/02/97 (a) 100 100
General Electric Capital Corp.
5.550% due 08/08/97 (a) 100 99
Illinois Tool Works, Inc.
5.510% due 07/15/97 (a) 100 100
KFW International Finance, Inc.
5.500% due 07/10/97 (a) 100 100
Kingdom of Sweden
5.560% due 07/11/97 (a) 100 100
Core Bond Fund 29
<PAGE>
CORE BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
National Rural Utilities Cooperative
Finance Corp.
5.530% due 07/22/97 (a) $ 100 $ 100
Procter & Gamble Co.
5.550% due 07/24/97 (a) 100 100
Western Australian Treasury
5.500% due 07/11/97 (a) 100 100
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,922) 1,922
----------
TOTAL INVESTMENTS
(identified cost $7,412)(b) - 106.9% 7,413
OTHER ASSETS AND LIABILITIES, NET - (6.9%) (482)
----------
NET ASSETS - 100.0% $ 6,931
----------
----------
(a) At cost, which approximates market.
(b) See Note 2 for federal income tax information.
(c) Rate noted is yield-to-maturity.
(d) Forward commitment. See Note 2.
ABBREVIATIONS:
MTN - Medium Term Note
PLC - Public Limited Company
REMIC - Real Estate Mortgage Investment Conduit
The accompanying notes are an integral part of the financial statements.
30 Core Bond Fund
<PAGE>
CORE BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $7,411,540)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . $ 7,412,760
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,675
Investments sold (delayed settlement)(Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,093
From Manager (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,125
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,289
----------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,626,942
LIABILITIES
Payables:
Investments purchased (delayed settlement)(Note 2) . . . . . . . . . . . . . . . . $ 655,351
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 12,524
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,576
----------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 695,451
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,931,491
----------------
----------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 131,715
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,614)
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . 1,220
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,829
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,820,341
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,931,491
----------------
----------------
NET ASSET VALUE, offering and redemption price per share:
($6,931,491 divided by 682,926 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.15
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Core Bond Fund 31
<PAGE>
CORE BOND FUND
STATEMENT OF OPERATIONS
For the Period January 2, 1997 (Commencement of Operations)
to June 30, 1997 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 247,719
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,408
----------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255,127
EXPENSES (Notes 2 and 4):
Management fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,870
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,169
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,445
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,573
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,505
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,904
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 711
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,118
----------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,295
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (51,803)
----------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,492
----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228,635
----------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,614)
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . 1,220
----------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27,394)
----------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 201,241
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
32 Core Bond Fund
<PAGE>
CORE BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Period January 2, 1997 (Commencement of Operations)
to June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 228,635
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,614)
Net change in unrealized appreciation or depreciation . . . . . . . . . . . . . . . . . . . . . . . . 1,220
----------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . 201,241
----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (96,920)
----------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 5). . . . . . . . . . . . . . 6,802,170
----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,906,491
NET ASSETS
Beginning of period (original capital) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
----------------
End of period (including undistributed net investment income of $131,715). . . . . . . . . . . . . . . $ 6,931,491
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Core Bond Fund 33
<PAGE>
CORE BOND FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding
throughout the period and other performance information derived from
the financial statements.
<TABLE>
<CAPTION>
1997*
----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.00
----------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . (.05)
----------------
Total Income From Investment Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
----------------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.14)
----------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.15
----------------
----------------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.00
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,931
Ratios to average net assets (%)(b):
Operating expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80
Operating expenses, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.36
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.90
Portfolio turnover rate (%)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69.01
Per share amount of fees waived ($ omitted)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0585
Per share amount of fees reimbursed ($ omitted)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . .0179
</TABLE>
* For the period January 2, 1997 (commencement of operations) to
June 30, 1997 (Unaudited).
(a) The total return for the period is not annualized.
(b) The ratios for the period are annualized.
(c) See Note 4.
34 Core Bond Fund
<PAGE>
RUSSELL INSURANCE FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (Unaudited)
1. ORGANIZATION
Russell Insurance Funds (the "Investment Company") is a series mutual fund
with four investment portfolios, referred to as "Funds." These financial
statements report on the Funds, each of which has distinct investment
objectives and strategies. The Investment Company is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. It is organized and operates as a
Massachusetts business trust under a master trust agreement dated July 11,
1996. The Investment Company's master trust agreement permits the Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest at a $.01 par value. Shares of the Investment Company
are offered only to a separate account of General American Life Insurance
Company ("General American") at June 30, 1997. General American controlled
the Funds by ownership of virtually all the Funds' shares of beneficial
interest.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies followed by the Funds in the preparation of these financial
statements.
SECURITY VALUATION: United States equity and fixed-income securities listed
and traded principally on any national securities exchange are valued on
the basis of the last sale price or, lacking any sale, at the closing bid
price, on the primary exchange on which the security is traded. United
States over-the-counter equity and fixed-income securities and options are
valued on the basis of the closing bid price. Futures contracts are valued
on the basis of the last sale price. Many fixed-income securities do not
trade each day and, thus, last sale or bid prices are frequently not
available. Fixed income securities, therefore, may be valued using prices
provided by a pricing service when such prices are believed to reflect the
fair market value of such securities.
International equity and fixed income securities traded on a national
securities exchange are valued on the basis of the last sale price.
International securities traded over the counter are valued on the basis of
the mean of bid prices. In the absence of a last sale or mean bid price,
respectively, such securities may be valued on the basis of prices provided
by a pricing service if those prices are believed to reflect the fair
market value of such securities.
Money Market instruments maturing within 60 days of the valuation date held
by the Funds are valued at amortized cost unless the Board of Trustees
determines that amortized cost does not represent fair value.
The Funds may value certain securities for which market quotations are not
readily available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
INVESTMENT TRANSACTIONS: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost incurred by each money manager
within a particular fund. The Funds may lend portfolio securities but have
not done so in 1997.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded on the accrual basis.
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting
purposes. All short-term and long-term premiums/discounts are
amortized/accreted for both tax and financial reporting purposes.
FEDERAL INCOME TAXES: As a Massachusetts business trust, each Fund is a
separate corporate taxpayer and determines its net investment income and
capital gains (or losses) and the amounts to be distributed to each Fund's
shareholders without regard to the income and capital gains (or losses) of
the other Funds.
It is each Fund's intention to qualify as a regulated investment company
and distribute all of its taxable income. Therefore, no federal income tax
provision was required for the Funds.
Notes to Financial Statements 35
<PAGE>
RUSSELL INSURANCE FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1997 (Unaudited)
The aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of June 30, 1997 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS NET
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Multi-Style Equity $ 16,258,464 $ 2,833,599 $ (158,368) $ 2,675,231
Aggressive Equity 10,575,202 1,656,228 (145,450) 1,510,778
Non-US 6,173,209 712,860 (138,543) 574,317
Core Bond 7,396,222 25,322 (8,784) 16,538
</TABLE>
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: For all Funds, income
dividends and capital gain distributions, if any, are recorded on the
ex-dividend date. Dividends are generally declared and paid quarterly,
except for the Non-U.S. Fund, which generally declares and pays dividends
annually. Capital gain distributions are generally declared and paid
annually. An additional distribution may be paid by the Funds to avoid
imposition of federal income tax on any remaining undistributed capital
gains and net investment income.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) on
investment and foreign currency-related transactions for a reporting period
may differ significantly from distributions during such period. The
differences between tax regulations and GAAP primarily relate to
investments in options, futures, forward contracts, passive foreign
investment companies, foreign-denominated investments, mortgage-backed
securities, and certain securities sold at a loss. Accordingly, a Fund may
periodically make a reclassification among certain of its capital accounts
without impacting its net asset value.
EXPENSES: The Funds will pay their own expenses other than those expressly
assumed by Frank Russell Investment Management Company ("FRIMCo" or
"Manager"). Most expenses can be directly attributed to the individual
Funds. Expenses which cannot be directly attributed are allocated among all
Funds principally based on their relative net assets.
DEFERRED ORGANIZATION EXPENSES: The deferred organization costs are
estimated by the Funds in connection with their organization. The Funds are
expected to reimburse FRIMCo for their payment of these costs made in
advance. The costs have been deferred and are being amortized on a
straight-line basis over 60 months.
FOREIGN CURRENCY TRANSLATIONS: The books and records of the Funds are
maintained in U.S. dollars. Foreign currency amounts and transactions of
the Funds are translated into U.S. dollars on the following basis:
(a) Market value of investment securities, other assets and
liabilities at the closing rate of exchange on the valuation
date.
(b) Purchases and sales of investment securities and income at the
closing rate of exchange prevailing on the respective trade dates
of such transactions.
Reported net realized gains or losses from foreign currency-related
transactions arise from: sales and maturities of short-term securities;
sales of foreign currencies; currency gains or losses realized between the
trade and settlement dates on securities transactions; the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized gains or losses from foreign
currency-related transactions arise from changes in the value of assets and
liabilities, other than investments in securities, at period-end, as a
result of changes in the exchange rates.
36 Notes to Financial Statements
<PAGE>
RUSSELL INSURANCE FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1997 (Unaudited)
It is not practical to isolate that portion of the results of operations of
the Funds that arises as a result of changes in exchange rates from that
portion that arises from changes in market prices of investments during the
year. Such fluctuations are included with the net realized and unrealized
gain or loss from investments. However, for federal income tax purposes the
Funds do isolate the effects of changes in foreign exchange rates from the
fluctuations arising from changes in market prices for realized gain (or
loss) on debt obligations.
DERIVATIVES: To the extent permitted by the investment objectives,
restrictions and policies set forth in the Funds' Prospectus and
Statement of Additional Information, the Funds may participate in
various derivative-based transactions. Derivative securities are
instruments or agreements whose value is derived from an underlying
security or index. They include options, futures, swaps, forwards,
structured notes and stripped securities. These instruments offer unique
characteristics and risks that assist the Funds in meeting their
investment strategies.
The Funds typically use derivatives in three ways: cash equitization,
hedging, and return enhancement. Cash equitization is a technique that may
be used by certain Funds through the use of options and futures to earn
market-like returns with their excess and liquidity reserve cash balances.
Hedging is used by some funds to limit or control risks, such as adverse
movements in exchange rates and interest rates. Return enhancement can be
accomplished through the use of derivatives in a Fund. By purchasing
certain instruments, Funds may more effectively achieve the desired
portfolio characteristics that allow them to meet their investment
objectives. Depending on how the derivatives are structured and utilized,
the risks associated with them may vary widely. These risks are generally
categorized as market risk, liquidity risk and counterparty or credit risk.
FOREIGN CURRENCY EXCHANGE CONTRACTS: In connection with portfolio purchases
and sales of securities denominated in a foreign currency, certain Funds
may enter into foreign currency exchange spot contracts and forward foreign
currency exchange contracts ("contracts"). Contracts are recorded at market
value. Certain risks may arise upon entering into these contracts from the
potential inability of counterparties to meet the terms of their contracts
and are generally limited to the amount of unrealized gain on the
contracts, if any, that is recognized in the Statement of Assets and
Liabilities. Realized gains or losses arising from such transactions are
included in net realized gain (or loss) from foreign currency-related
transactions.
FORWARD COMMITMENTS: The Funds may contract to purchase securities for a
fixed price at a future date beyond customary settlement time (not to
exceed 120 days)(i.e., a "forward commitment," "delayed settlement" or
"when issued" transaction, e.g., to be announced ("TBA")) consistent with a
Fund's ability to manage its investment portfolio and meet redemption
requests. The price of the underlying securities and the date when the
securities will be delivered and paid for are fixed at the time the
transaction is negotiated. The Funds may dispose of a forward commitment
transaction prior to settlement if it is appropriate to do so and realize
short-term gains (or losses) upon such sale. When effecting such
transactions, cash or liquid high-grade debt obligations of the Fund in a
dollar amount sufficient to make payment for the portfolio securities to be
purchased will be segregated on the Fund's records at the trade date and
maintained until the transaction is settled. A forward commitment
transaction involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date or the other party to the
transaction fails to complete the transaction.
FUTURES CONTRACTS: The domestic and international equity Funds utilize
futures to equitize liquidity reserve balances. The face or contract
amounts of these instruments reflect the extent of the Funds' exposure to
off balance sheet risk. The primary risks associated with the use of
futures contracts are an imperfect correlation between the change in market
value of the securities held by the Fund and the prices of futures
contracts, and the possibility of an illiquid market. Changes in the
initial settlement values of futures contracts are accounted for as
unrealized appreciation (depreciation) until the contracts are terminated,
at which time realized gains and losses are recognized.
The Funds may invest in interest rate futures contracts, stock index
futures contracts, and foreign currency futures contracts and options
thereon that are traded on a United States or foreign exchange or board of
trade.
Notes to Financial Statements 37
<PAGE>
RUSSELL INSURANCE FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1997 (Unaudited)
3. INVESTMENT TRANSACTIONS
SECURITIES: During the period January 2, 1997 (commencement of operations)
to June 30, 1997, purchases and sales of investment securities (excluding
U.S. Government and Agency obligations, short-term investments, options,
futures and repurchase agreements) were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES PURCHASES SALES
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Multi-Style Equity $ 20,336,027 $ 4,393,614 Non-US $ 7,800,824 $ 1,759,835
Aggressive Equity 13,589,850 3,355,984 Core Bond 2,021,480 429,749
</TABLE>
Purchases and sales of U.S. Government and Agency obligations (excluding
short-term investments, options, futures and repurchase agreements) were as
follows:
PURCHASES SALES
--------------- ---------------
Core Bond $ 15,927,000 $ 12,051,059
FUTURES CONTRACTS: Fund transactions in futures contract purchases for the
period January 2, 1997 (commencement of operations) to June 30, 1997 were
as follows:
AGGRESSIVE EQUITY FUTURES CONTRACTS
AGGREGATE
NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1)
---------------- ----------------
Outstanding January 1, 1997 -- $ --
Opened 12 1,615,000
Closed (9) (1,185,750)
---------------- ----------------
Outstanding June 30, 1997 3 $ 429,250
---------------- ----------------
---------------- ----------------
(1) The aggregate face value of contracts is computed on the date each
contract was opened.
4. RELATED PARTIES
MANAGER: FRIMCo operates and administers all of the Funds which comprise
the Investment Company. FRIMCo is a wholly owned subsidiary of Frank
Russell Company, which researches and recommends to FRIMCo, and to the
Investment Company, one or more investment management organizations to
manage the portfolio of each Fund.
For the period January 2, 1997 (commencement of operations) to June 30,
1997, the management fee paid to FRIMCo, for the Funds listed below, in
accordance with the Investment Company's Management Agreement with that
firm, amounted to $165,418 before waivers and/or reimbursements. Such fee
is payable monthly and is equal to the annual rate, by Fund, shown in the
following table, of the average daily net assets of the applicable Fund.
ANNUAL RATE ANNUAL RATE
------------ -----------
Multi-Style Equity 0.78% Non-US 0.95%
Aggressive Equity 0.95 Core Bond 0.60
FRIMCo has voluntarily agreed to waive a portion of its management fee for
each Fund, up to the full amount of its fee, to the extent the Fund's
operating expenses exceed specified limits imposed by FRIMCo on an annual
basis. The Custodian has voluntarily agreed to waive its fee for
approximately the first twelve months after each Fund becomes operational.
Additionally, FRIMCo has voluntarily agreed to reimburse each Fund for all
remaining expenses, after fee waivers, that still exceed their respective
expense caps.
38 Notes to Financial Statements
<PAGE>
RUSSELL INSURANCE FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1997 (Unaudited)
The expense caps, waivers and reimbursements as of June 30, 1997 were as
follows:
<TABLE>
<CAPTION>
EXPENSE MANAGEMENT CUSTODIAN FEES REIMBURSED TOTAL EXPENSE
CAP FEES WAIVED WAIVED BY FRIMCO REDUCTIONS
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Multi-Style Equity 0.92% $ 46,630 $ 20,724 $ -- $ 67,354
Aggressive Equity 1.25 35,197 24,958 -- 60,155
Non-US 1.30 26,236 38,863 19,806 84,905
Core Bond 0.80 19,870 19,809 12,124 51,803
</TABLE>
TRANSFER AGENT: The Funds have a contract with FRIMCo, for the Funds listed
above, to provide transfer agent services to the Investment Company. Total
fees for the period January 2, 1997 (commencement of operations) to
June 30, 1997 were $24,960.
DISTRIBUTOR: Russell Fund Distributors, Inc. (the "Distributor"), a wholly
owned subsidiary of FRIMCo, is the principal Distributor for Investment
Company shares. The Distributor receives no compensation from the
Investment Company for its services.
ACCRUED FEES PAYABLE TO AFFILIATES AS OF JUNE 30, 1997 WERE AS FOLLOWS:
<TABLE>
<CAPTION>
MANAGEMENT TRANSFER ORGANIZATIONAL
FEES AGENT FEES FEES TOTALS
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Multi-Style Equity $ 6,386 $ 4,303 $ 10,000 $ 20,689
Aggressive Equity 4,942 3,342 10,000 18,284
Non-US 1,881 3,220 10,000 15,101
Core Bond -- 2,524 10,000 12,524
-------------- -------------- -------------- --------------
$ 13,209 $ 13,389 $ 40,000 $ 66,598
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
BROKERAGE COMMISSIONS: The Funds paid brokerage commissions to
non-affiliated brokers who provided brokerage and research services to the
Manager. The Funds also paid brokerage commissions for trades executed
through Frank Russell Securities, Inc., an affiliate of the Frank Russell
Investment Management Company. These commissions are net of a refund (up to
70% of gross commissions) paid back to the Fund effecting such transactions
after reimbursement for research services provided to FRIMCo. Frank Russell
Securities, Inc. retained $3,097 from such transactions made by the
Multi-Style Equity Fund during the period January 2, 1997 (commencement of
operations) to June 30, 1997.
BOARD OF TRUSTEES: The Investment Company pays each of its Trustees not
affiliated with FRIMCo a retainer of $8,000 per year plus out-of-pocket
expenses. Total Trustee expenses were $27,618 for the period January 2,
1997 (commencement of operations) to June 30, 1997, and were allocated to
each Fund on a pro rata basis.
5. SHARE TRANSACTIONS
Share transactions for the period January 2, 1997 (commencement of
operations) to June 30, 1997 were as follows:
MULTI-STYLE EQUITY SHARES DOLLARS
-------------- --------------
Proceeds from shares sold 1,641,675 $ 16,421,361
Proceeds from reinvestment
of distributions 4,215 41,138
Payments for shares redeemed (2,622) (27,691)
-------------- --------------
Total net increase (decrease) 1,643,268 $ 16,434,808
-------------- --------------
-------------- --------------
Notes to Financial Statements 39
<PAGE>
RUSSELL INSURANCE FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1997 (Unaudited)
AGGRESSIVE EQUITY SHARES DOLLARS
-------------- --------------
Proceeds from shares sold 1,036,772 $ 10,369,915
Proceeds from reinvestment
of distributions 3,189 31,320
Payments for shares redeemed (1,046) (10,939)
-------------- --------------
Total net increase (decrease) 1,038,915 $ 10,390,296
-------------- --------------
-------------- --------------
NON-US
Proceeds from shares sold 606,002 $ 6,063,030
Proceeds from reinvestment
of distributions -- --
Payments for shares redeemed (1,568) (15,964)
-------------- --------------
Total net increase (decrease) 604,434 $ 6,047,066
-------------- --------------
-------------- --------------
CORE BOND
Proceeds from shares sold 672,630 $ 6,726,445
Proceeds from reinvestment
of distributions 9,920 96,920
Payments for shares redeemed (2,125) (21,195)
-------------- --------------
Total net increase (decrease) 680,425 $ 6,802,170
-------------- --------------
-------------- --------------
6. DIVIDENDS
On July 1, 1997, the Board of Trustees declared the following dividends
from net investment income payable on July 10, 1997, to shareholders of
record on July 2, 1997:
Multi-Style Equity $ 0.0201
Aggressive Equity 0.0131
Core Bond 0.1929
40 Notes to Financial Statements
<PAGE>
RUSSELL INSURANCE FUNDS
909 A Street, Tacoma, Washington 98402
(800) 832-6688
In Washington (253) 627-7001
TRUSTEES
George F. Russell, Jr., Chairman
Lynn L. Anderson
Paul E. Anderson
Paul Anton, PhD
William E. Baxter
Lee C. Gingrich
Eleanor W. Palmer
OFFICERS
Lynn L. Anderson, President and Chief Executive Officer
Peter F. Apanovitch, Manager of Short Term Investment Funds
George W. Weber, Treasurer and Chief Accounting Officer
Randall P. Lert, Director of Investments
Karl Ege, Secretary and General Counsel
MANAGER, TRANSFER AND DIVIDEND PAYING AGENT
Frank Russell Investment Management Company
909 A Street
Tacoma, WA 98402
CONSULTANT
Frank Russell Company
909 A Street
Tacoma, WA 98402
OFFICE OF SHAREHOLDER INQUIRIES
909 A Street
Tacoma, Washington 98402
(800) 832-6688
In Washington (253) 627-7001
CUSTODIAN
State Street Company
1776 Heritage Drive
North Quincy, MA 02171
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
2600 - One Commerce Square
Philadelphia, PA 19103-7098
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
MONEY MANAGERS
MULTI-STYLE EQUITY FUND
Chancellor LGT Asset Management Inc., New York, NY
Equinox Capital Management, Inc., New York, NY
Westpeak Investment Advisors, LP, Boulder, CO
AGGRESSIVE EQUITY FUND
Rothschild Asset Management, Inc., New York, NY
Westpeak Investment Advisors, LP, Boulder, CO
NON-US FUND
J.P. Morgan Investment Management, Inc., New York, NY
Oechsle International Advisors, Boston, MA
The Boston Company Asset Management, Inc., Boston, MA
CORE BOND FUND
Pacific Investment Management Company, Newport Beach, CA
Standish, Ayer & Wood, Inc., Boston, MA
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUNDS AND IS SUBMITTED
FOR THE GENERAL INFORMATION OF SHAREHOLDERS AND IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS ACCOMPANIED OR PRECEDED BY AN
EFFECTIVE PROSPECTUS. NOTHING HEREIN CONTAINED IS TO BE CONSIDERED AN OFFER OF
SALE OR A SOLICITATION OF AN OFFER TO BUY SHARES OF RUSSELL INSURANCE FUNDS.
SUCH OFFERING IS MADE ONLY BY PROSPECTUS, WHICH INCLUDES DETAILS AS TO OFFERING
PRICE AND OTHER MATERIAL INFORMATION.
Manager, Money Managers and Service Providers 41
