<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, 1998 (UNAUDITED)
TABLE OF CONTENTS
Page
Multi-Style Equity Fund . . . . . . . . . . . . . . . . . . 2
Aggressive Equity Fund. . . . . . . . . . . . . . . . . . . 10
Non-US Fund . . . . . . . . . . . . . . . . . . . . . . . . 20
Core Bond Fund. . . . . . . . . . . . . . . . . . . . . . . 30
Notes to Financial Statements . . . . . . . . . . . . . . . 38
Manager, Money Managers and Service Providers . . . . . . . 44
RUSSELL INSURANCE FUNDS
Copyright -C- Frank Russell Company 1998. 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, 1998 (Unaudited)
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
COMMON STOCKS - 91.9%
AUTO AND TRANSPORTATION - 4.3%
AMR Corp. (a) 5,500 $ 458
Delta Air Lines, Inc. 3,400 440
Ford Motor Co. 11,400 673
Northwest Airlines Corp. Class A (a) 8,800 339
UAL Corp. (a) 3,300 257
----------
2,167
----------
CONSUMER DISCRETIONARY - 15.5%
Carnival Corp. Class A 13,900 551
Dayton Hudson Corp. 13,200 640
Disney (Walt) Co. 6,000 630
Eastman Kodak Co. 5,098 372
Federated Department Stores, Inc. (a) 6,999 377
Gannett Co., Inc. 4,900 348
Hasbro, Inc. 6,600 260
Home Depot, Inc. (The) 11,100 922
JC Penney & Co., Inc. 6,500 470
Kohl's Corp. (a) 4,300 223
MediaOne Group, Inc. (a) 17,200 756
Sears Roebuck & Co. 5,000 305
Tele-Communications, Inc. Series A New (a) 10,700 415
Time Warner, Inc. 4,000 342
Tribune Co. 6,200 427
Wal-Mart Stores, Inc. 5,400 328
Whirlpool Corp. 6,700 461
----------
7,827
----------
CONSUMER STAPLES - 5.8%
Anheuser-Busch Cos., Inc. 7,600 359
Campbell Soup Co. 3,600 191
Coca-Cola Co. (The) 2,500 214
Colgate-Palmolive Co. 3,700 326
ConAgra, Inc. 11,600 367
Gillette Co. 2,000 113
PepsiCo, Inc. 9,300 383
Philip Morris Cos., Inc. 25,000 984
----------
2,937
----------
FINANCIAL SERVICES - 22.6%
Ahmanson (H.F.) & Co. 10,700 760
Allstate Corp. 5,700 522
American International Group, Inc. 1,700 248
Associates First Capital Corp. Class A 8,527 656
BankAmerica Corp. 7,100 614
Bankers Trust New York Corp. 1,700 197
Chase Manhattan Corp. 11,700 883
Citicorp 4,900 731
Federal National Mortgage Association 12,600 766
Fleet Financial Group, Inc. 6,100 509
Hartford Financial Services Group, Inc. (The) 2,700 309
Household International Corp. 6,200 308
MBNA Corp. 19,100 630
Merrill Lynch & Co., Inc. 3,450 318
MGIC Investment Corp. 1,400 80
Morgan Stanley, Dean Witter, Discover and Co. 16,300 1,489
NationsBank Corp. 16,600 1,270
Progressive Corp. 1,900 268
Ryder System, Inc. 6,800 215
Transamerica Financial Corp. 2,100 242
Travelers, Inc. 5,607 340
----------
11,355
----------
HEALTH CARE - 9.2%
Aetna, Inc. 5,900 449
Baxter International, Inc. 5,800 312
Bristol-Myers Squibb Co. 8,400 966
Columbia/HCA Healthcare Corp. 12,000 350
Humana, Inc. (a) 3,400 106
Merck & Co., Inc. 3,300 441
Pfizer, Inc. 4,800 522
Schering-Plough Corp. 9,900 907
U.S. Surgical Corp. 700 32
United Healthcare Corp. 8,900 565
----------
4,650
----------
INTEGRATED OILS - 4.3%
Amerada Hess Corp. NPV 6,400 348
Ashland, Inc. 1,215 63
Atlantic Richfield Co. 3,100 242
Coastal Corp. 3,500 244
Exxon Corp. 8,500 606
Mobil Corp. 3,600 276
Texaco, Inc. 6,200 370
----------
2,149
----------
MATERIALS AND PROCESSING - 3.6%
Eastman Chemical Co. 2,200 137
FMC Corp. (a) 2,800 191
International Paper Co. 5,900 254
</TABLE>
2 Multi-Style Equity Fund
<PAGE>
MULTI-STYLE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
Reynolds Metals Co. 4,100 $ 229
Tyco International, Ltd. 16,000 1,008
----------
1,819
----------
OTHER ENERGY - 1.2%
Halliburton Co. 9,100 406
Schlumberger, Ltd. 2,700 184
----------
590
----------
PRODUCER DURABLES - 3.6%
Caterpillar, Inc. 2,200 116
Foster Wheeler Corp. 7,100 152
General Electric Co. 6,000 546
Honeywell, Inc. 1,200 100
United Technologies Corp. 3,600 333
Xerox Corp. 5,300 539
----------
1,786
----------
TECHNOLOGY - 10.8%
Cisco Systems, Inc. (a) 12,200 1,123
COMPAQ Computer Corp. 17,500 497
Dell Computer Corp. (a) 11,400 1,057
Electronic Data Systems Corp. 12,310 492
Ericsson (LM) Telephone Co. Class B - ADR 7,100 203
Hewlett-Packard Co. 3,500 210
Intel Corp. 3,200 237
International Business Machines Corp. 6,100 700
Lucent Technologies, Inc. 1,400 117
Microsoft Corp. (a) 5,000 542
Tellabs, Inc. (a) 3,200 229
----------
5,407
----------
UTILITIES - 11.0%
Airtouch Communications, Inc. (a) 19,500 1,139
AT&T Corp. 11,200 640
Bell Atlantic Corp. 13,580 620
Consolidated Edison, Inc. 6,600 304
Edison International 6,700 198
FPL Group, Inc. 3,900 246
GTE Corp. 7,104 395
MCI Communications Corp. 2,000 116
PacifiCorp. 12,900 292
PG&E Corp. 16,230 512
SBC Communications, Inc. 9,800 392
WorldCom, Inc. (a) 13,600 657
----------
5,511
----------
TOTAL COMMON STOCKS
(cost $39,551) 46,198
----------
PREFERRED STOCKS - 2.6%
Nokia Corp. - ADR 17,800 1,291
----------
TOTAL PREFERRED STOCKS
(cost $907) 1,291
----------
<CAPTION>
PRINCIPAL
AMOUNT
(000)
----------
<S> <C>
SHORT-TERM INVESTMENTS - 5.5%
Federated Prime Cash Obligation Fund (b) $ 2,595 2,595
United States Treasury Notes (b)(c)
5.250% due 07/31/98 200 200
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $2,795) 2,795
----------
TOTAL INVESTMENTS
(identified cost $43,253)(d) - 100.0% 50,284
OTHER ASSETS AND LIABILITIES,
NET - 0.0% 8
----------
NET ASSETS - 100.0% $ 50,292
----------
----------
</TABLE>
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Held as collateral in connection with futures contracts purchased by the
Fund.
(d) See Note 2 for federal income tax information.
Abbreviations:
ADR - American Depository Receipt
NPV - No Par Value
The accompanying notes are an integral part of the financial statements.
Multi-Style Equity Fund 3
<PAGE>
MULTI-STYLE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
---------- ------------
<S> <C> <C>
FUTURES CONTRACTS
(Notes 2 and 3)
S&P 500 Index Futures Contracts
expiration date 09/98 6 $ 39
----------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased (#) $ 39
----------
----------
</TABLE>
(#) At June 30, 1998, United States Treasury Notes valued at $200 were held as
collateral in connection with futures contracts purchased by the Fund.
The accompanying notes are an integral part of the financial statements.
4 Multi-Style Equity Fund
<PAGE>
MULTI-STYLE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998 (Unaudited)
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $43,252,863)(Note 2) . . . . . . . . . . . . . . . . . . . . . . $ 50,284,448
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,852
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,252
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,632
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,565,184
LIABILITIES
Payables:
Investments purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 150,974
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 45,333
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,509
Daily variation margin on futures contracts (Notes 2 and 3). . . . . . . . . . . . 10,850
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273,666
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,291,518
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,265
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,974,121
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,031,585
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,775
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,504
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,170,268
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,291,518
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($50,291,518 divided by 3,350,436 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15.01
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Multi-Style Equity Fund 5
<PAGE>
MULTI-STYLE EQUITY FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1998 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 283,467
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,949
--------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288,416
EXPENSES (Notes 2 and 4):
Management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 136,051
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,781
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,455
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,136
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,872
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,169
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 533
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,392
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230,389
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (69,919)
--------------
Expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,470
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127,946
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,927,773
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,322 3,002,095
--------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,077,539
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,700 3,119,239
-------------- --------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,121,334
--------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . $ 6,249,280
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6 Multi-Style Equity Fund
<PAGE>
MULTI-STYLE EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE PERIOD
ENDED JUNE 30, 1998 JANUARY 2, 1997* TO
(UNAUDITED) DECEMBER 31, 1997
------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 127,946 $ 146,483
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,002,095 581,770
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . 3,119,239 3,951,121
------------------- -------------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . 6,249,280 4,679,374
------------------- -------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (125,686) (105,478)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . (609,744) --
------------------- -------------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . (735,430) (105,478)
------------------- -------------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 5). . . . 21,138,660 19,040,112
------------------- -------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 26,652,510 23,614,008
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,639,008 25,000
------------------- -------------------
End of period (including undistributed net investment income of
$43,265 and $41,005, respectively). . . . . . . . . . . . . . . . . . . . . . . $ 50,291,518 $ 23,639,008
------------------- -------------------
------------------- -------------------
</TABLE>
* Commencement of Operations.
The accompanying notes are an integral part of the financial statements.
Multi-Style Equity Fund 7
<PAGE>
MULTI-STYLE EQUITY FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each of the periods and other performance information derived from the
financial statements.
<TABLE>
<CAPTION>
1998* 1997**
---------- ----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . $ 12.78 $ 10.00
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .04 .09
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . 2.51 2.75
---------- ----------
Total Income From Investment Operations. . . . . . . . . . . . . . . . . . . . . . . 2.55 2.84
---------- ----------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.05) (.06)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . (.27) --
---------- ----------
Total Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.32) (.06)
---------- ----------
Net Asset Value, End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15.01 $ 12.78
---------- ----------
---------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.31 28.53
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . . . . . . . . . . 50,292 23,639
Ratios to average net assets (%)(b):
Operating expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .92 .92
Operating expenses, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.32 1.61
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73 .76
Portfolio turnover rate (%)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 91.42 64.95
</TABLE>
* For the six months ended June 30, 1998 (Unaudited).
** For the period January 2, 1997 (commencement of operations) to
December 31, 1997.
(a) The total return for the period is not annualized.
(b) The ratios for the periods ended June 30, 1998 and December 31, 1997 are
annualized.
8 Multi-Style Equity Fund
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF NET ASSETS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
COMMON STOCKS - 93.1%
AUTO AND TRANSPORTATION - 7.5%
Airborne Freight Corp. 5,400 $ 188
Alaska Air Group, Inc. (a) 5,000 273
Arvin Industries, Inc. 6,500 236
Avondale Industries, Inc. (a) 600 16
Barnes Group, Inc. 3,600 97
CNF Transportation, Inc. 700 30
Federal-Mogul Corp. 500 34
Fleetwood Enterprises, Inc. 3,200 128
Landstar Systems, Inc. (a) 1,600 56
M.S. Carriers, Inc. (a) 1,800 49
Midwest Express Holdings, Inc. (a) 900 32
Modine Manufacturing Co. 3,100 107
MotivePower Industries, Inc. (a) 1,500 37
Navistar International Corp. (a) 3,700 107
Simpson Industries, Inc. 1,900 26
Trinity Industries, Inc. 1,900 79
USFreightways Corp. 2,400 79
Winnebago Industries, Inc. 2,500 32
----------
1,606
----------
CONSUMER DISCRETIONARY - 20.5%
Aaron Rents, Inc. 600 12
Abacus Direct Corp. (a) 700 36
Ames Department Stores, Inc. New (a) 4,000 105
Anchor Gaming (a) 700 54
Authentic Fitness Corp. 2,600 41
Barnes & Noble, Inc. (a) 1,600 60
Barra, Inc. (a) 1,050 26
Best Buy Co. (a) 3,800 137
BHC Communications, Inc. Class A 100 14
Bob Evans Farms, Inc. 5,200 110
Bowne & Co., Inc. 4,500 203
Brinker International, Inc. (a) 4,800 92
Buckle, Inc. (The) (a) 1,200 35
CapStar Hotel Co. (a) 700 20
Cato Corp. Class A 3,400 59
Chris Craft Industries, Inc. (a) 618 34
CKE Restaurants, Inc. 1,210 50
Computer Horizons Corp. (a) 500 19
Computer Task Group, Inc. 800 27
Copart, Inc. (a) 1,700 39
Cox Radio, Inc. Class A (a) 1,500 65
Day Runner, Inc. (a) 2,000 50
Department 56, Inc. (a) 2,200 78
Dress Barn, Inc. (a) 3,300 82
Fingerhut Cos., Inc. 2,400 79
Foodmaker, Inc. (a) 5,100 86
Footstar, Inc. (a) 700 34
Furniture Brands International, Inc. (a) 1,900 53
Genesco, Inc. (a) 4,100 67
Goody's Family Clothing, Inc. (a) 2,400 131
Grand Casinos, Inc. (a) 4,600 77
Grey Advertising 300 119
ITT Educational Services, Inc. (a) 1,200 39
Leasing Solutions, Inc. (a) 1,100 32
Legato Systems, Inc. (a) 1,000 39
Libbey, Inc. 400 15
Linens 'N Things, Inc. (a) 7,300 223
Media General, Inc. Class A 2,100 102
Merrill Corp. 2,400 53
Michaels Stores, Inc. (a) 500 18
Mine Safety Appliances Co. 1,600 115
Musicland Stores Corp. (a) 3,600 50
Neiman-Marcus Group, Inc. (a) 3,800 165
On Assignment, Inc. (a) 600 21
Oshkosh B' Gosh, Inc. Class A 2,100 93
Outback Steakhouse, Inc. (a) 3,600 140
Pacific Sunwear of California (a) 600 21
Payless ShoeSource, Inc. (a) 1,900 140
Pittston Brink's Group 400 15
Plantronics, Inc. New (a) 700 36
Pulitzer Publishing Co. 1,300 116
Regis Corp. 2,800 82
Ross Stores, Inc. 3,000 129
Russ Berrie & Co., Inc. 3,100 78
Ryan's Family Steak Houses, Inc. (a) 4,800 49
Showbiz Pizza Time, Inc. (a) 600 24
Snyder Communications, Inc. (a) 500 22
Sonic Corp. (a) 2,250 50
StaffMark, Inc. (a) 2,000 73
Tiffany & Co. 2,100 101
Transaction Network Services, Inc. (a) 2,000 42
United Stationers, Inc. (a) 1,300 84
Univision Communications, Inc. Class A (a) 1,200 45
WestPoint Stevens, Inc. (a) 1,600 53
Wet Seal, Inc. Class A (The) (a) 1,300 41
----------
4,400
----------
CONSUMER STAPLES - 2.7%
Coors (Adolph) Co. Class B 800 27
Dial Corp. New 1,500 39
Earthgrains Co. 2,000 112
Genovese Drug Stores, Inc. Class A 1,210 24
Michael Foods, Inc. 2,700 79
Pilgrim's Pride Corp. 3,000 60
Smithfield Foods, Inc. (a) 600 18
</TABLE>
10 Aggressive Equity Fund
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
Universal Corp. 2,100 $ 79
Universal Foods Corp. 4,000 89
Whole Foods Market, Inc. (a) 900 54
----------
581
----------
FINANCIAL SERVICES - 20.0%
Acceptance Insurance Companies, Inc. (a) 2,300 56
Alfa Corp. 1,800 37
Alleghany Corp. (a) 400 93
Ambac Financial Group, Inc. 2,400 140
American Annuity Group, Inc. 1,500 36
Area Bancshares Corp. New 1,400 48
BSB Bancorp, Inc. 400 12
Centura Banks, Inc. 200 13
Chicago Title Corp. (a) 1,200 55
CMAC Investment Corp. 400 25
CNB Bancshares, Inc. 2,300 110
Comdisco, Inc. 4,300 82
CORT Business Services Corp. (a) 3,100 98
Cullen Frost Bankers, Inc. 900 49
Dain Rauscher Corp. 300 16
Delphi Financial Group, Inc. (a) 2,766 156
E.W. Blanch Holdings, Inc. 1,300 48
Eaton Vance Corp. 1,500 69
Envoy Corp. New (a) 600 28
Everest Reinsurance Holdings, Inc. 1,100 42
FBL Financial Group, Inc. Class A 1,300 33
First American Corp. 702 34
First American Financial Corp. 1,900 171
First Citizens BancShares, Inc. 300 30
First Financial Corp. - Indiana 300 15
FirstFed Financial Corp. (a) 1,600 83
Fiserv, Inc. (a) 300 13
Foremost Corp. of America 3,000 72
Fremont General Corp. 1,400 76
Fund American Cos., Inc. 100 15
Gallagher (Arthur J.) & Co. 1,900 85
GATX Corp. 5,300 233
GBC Bancorp 3,000 80
Horace Mann Educators Corp. 600 21
HSB Group, Inc. 2,250 120
Imperial Bancorp (a) 1,155 35
Jefferies Group, Inc. 2,600 107
JSB Financial, Inc. 600 35
McGrath RentCorp 4,000 85
Mercantile Bankshares Corp. 3,000 104
Merchants New York Bancorp, Inc. 1,800 67
Mississippi Valley Bancshares, Inc. 400 16
NAC Reinsurance Corp. 1,900 102
National Bancorp of Alaska, Inc. 2,400 74
National Western Life Insurance Co. Class A (a) 300 36
NBT Bancorp, Inc. 1,200 31
North Fork Bancorporation, Inc. 2,393 58
Ocwen Financial Corp. (a) 500 13
Orion Capital Corp. 1,200 67
Pioneer Group, Inc. 2,600 68
Poe & Brown, Inc. 2,800 104
Policy Management Systems Corp. (a) 2,800 110
Raymond James Financial, Inc. 675 20
RLI Corp. 1,250 51
Rollins Truck Leasing Corp. 7,800 97
SEI Corp. 500 31
Selective Insurance Group, Inc. 1,000 22
SPS Transaction Services, Inc. (a) 2,400 75
TR Financial Corp. 2,400 100
Triangle Bancorp, Inc. 500 16
U.S. Trust Corp. New 2,300 175
USBANCORP, Inc. 800 62
Valley National Bancorp 875 25
Value Line, Inc. 1,900 72
Webster Financial Corp. 800 27
XTRA Corp. 1,900 115
----------
4,294
----------
HEALTH CARE - 5.0%
Alpharma, Inc. Class A 3,000 66
Arterial Vascular Engineering, Inc. (a) 1,200 43
Bergen Brunswig Corp. Class A 3,100 144
Bindley Western Industries, Inc. 2,133 70
Datascope Corp. (a) 1,900 51
Health Care & Retirement Corp. (a) 1,800 71
Immunex Corp. New (a) 500 33
Integrated Health Services, Inc. 3,000 113
Mariner Health Group, Inc. (a) 3,500 58
Marquette Medical Systems, Inc. Class A (a) 2,100 54
Organogenesis, Inc. (a) 875 17
Patterson Dental Co. (a) 450 16
Safeskin Corp. (a) 400 16
Shared Medical Systems 1,300 95
Theragenics Corp. (a) 600 16
Universal Health Services, Inc. Class B (a) 3,500 204
----------
1,067
----------
</TABLE>
Aggressive Equity Fund 11
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
INTEGRATED OILS - 0.7%
Holly Corp. 800 $ 20
Lyondell Petrochemical Co. 4,000 122
----------
142
----------
MATERIALS AND PROCESSING - 12.8%
ACX Technologies, Inc. (a) 3,000 65
Ameron, Inc. 300 17
AptarGroup, Inc. 700 44
Bowater, Inc. 1,100 52
Brush Wellman, Inc. 1,100 23
Centex Corp. 6,600 249
Crompton & Knowles Corp. 4,700 118
Dexter Corp. 1,700 54
Giant Cement Holding, Inc. (a) 900 26
Granite Construction, Inc. 1,900 58
Guilford Mills, Inc. 3,000 60
Hughes Supply, Inc. 2,400 88
Interface, Inc. 4,200 85
International Specialty Products (a) 5,800 108
Lafarge Corp. 3,500 138
Lone Star Industries, Inc. 1,100 85
Martin Marietta Materials, Inc. 1,500 68
Millennium Chemicals, Inc. 900 30
Mohawk Industries, Inc. (a) 3,050 97
New England Business Service, Inc. 1,500 48
NL Industries, Inc. 900 18
Oneida, Ltd. 2,400 74
Scotts Co. (The) Class A (a) 2,300 86
Shaw Group, Inc. (The) (a) 1,400 36
Simpson Manufacturing Co., Inc. (a) 1,400 54
Southdown, Inc. 3,000 214
Spartech Corp. 600 13
SPS Technologies, Inc. (a) 400 23
Teleflex, Inc. 2,800 106
Texas Industries, Inc. 3,100 164
TJ International, Inc. 1,500 45
US Industries, Inc. New 2,250 56
Vulcan Materials Co. 1,000 107
Webb (Del E.) Corp. 2,200 57
Wellman, Inc. 5,000 113
Wolverine Tube, Inc. (a) 1,800 68
----------
2,747
----------
OTHER ENERGY - 2.0%
BEC Energy (a) 3,700 154
BJ Services Co. (a) 1,400 41
Cooper Cameron Corp. (a) 700 36
Enron Oil & Gas Co. 6,600 133
Penn Virginia Corp. 700 18
RPC, Inc. 1,400 17
Varco International, Inc. (a) 900 18
Veritas DGC, Inc. (a) 400 20
----------
437
----------
PRODUCER DURABLES - 5.8%
Aeroquip-Vickers, Inc. 600 35
AFC Cable Systems, Inc. (a) 1,375 49
C&D Technologies, Inc. 300 17
Cincinnati Milacron, Inc. 3,400 83
Cordant Technologies, Inc. 1,000 46
CTS Corp. 2,400 71
Daniel Industries, Inc. 2,700 51
Ducommun, Inc. (a) 3,450 69
Encore Wire Corp. (a) 1,050 17
Fluke Corp. 600 20
Franklin Electric Co., Inc. 500 33
GenCorp, Inc. 4,200 106
Gleason Corp. 800 23
Kuhlman Corp. 1,900 75
Mathews International Corp. Class A 800 19
Miller (Herman), Inc. 1,800 44
National Service Industries, Inc. 1,000 51
SPX Corp. (a) 1,700 109
Standard Pacific Corp. 3,200 66
Superior TeleCom, Inc. 3,000 125
Tektronix, Inc. 2,800 99
Watts Industries, Inc. Class A 2,400 50
----------
1,258
----------
TECHNOLOGY - 8.3%
Anixter International, Inc. (a) 5,100 97
Aspect Development, Inc. (a) 600 45
Aspen Technology, Inc. (a) 700 35
Autodesk, Inc. 2,700 104
Avid Technology, Inc. (a) 2,300 77
Cambridge Technology Partners, Inc. (a) 700 38
CHS Electronics, Inc. (a) 600 11
Ciber, Inc. (a) 600 23
Citrix Systems, Inc. (a) 1,050 71
Electro Rent Corp. (a) 3,400 76
Esterline Corp. (a) 3,800 79
FileNet Corp. (a) 2,800 80
Learning Co., Inc. (The) (a) 600 18
National Computer Systems, Inc. 3,000 72
</TABLE>
12 Aggressive Equity Fund
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
Park Electrochemical Corp. 1,200 $ 25
PMC - Sierra, Inc. (a) 600 28
Sanmina Corp. (a) 1,800 78
Siebel Systems, Inc. (a) 2,700 87
Symantec Corp. (a) 4,100 107
Symbol Technologies, Inc. 2,800 106
Systems & Computer Technology Corp. (a) 4,200 113
Telxon Corp. 2,800 90
Tracor, Inc. New (a) 1,800 72
Transaction Systems Architects, Inc. Class A (a) 900 35
Veritas Software Corp. (a) 1,350 56
Volt Information Sciences, Inc. (a) 200 5
Whittman-Hart, Inc. (a) 1,000 48
Zebra Technologies Corp. Class A (a) 2,700 115
----------
1,791
----------
UTILITIES - 7.8%
Black Hills Corp. 1,950 45
Cellular Communications International, Inc. (a) 750 37
Central Hudson Gas & Electric Corp. 1,600 73
Comsat Corp. Series 1 2,000 57
Eastern Utilities Associates 1,100 29
Energen Corp. 7,900 159
Energy East Corp. (a) 5,900 246
MDU Resources Group, Inc. 400 14
MidAmerican Energy Holdings Co. 1,300 28
Minnesota Power & Light Co. 1,900 76
National Fuel & Gas Co. 2,100 92
NIPSCO Industries, Inc. 4,200 118
NUI Corp. 1,800 46
OGE Energy Corp. 2,000 54
Pacific Gateway Exchange, Inc. (a) 700 28
Rochester Gas & Electric Corp. 3,800 121
UGI Corp. 2,700 67
United Illuminating Co. 3,300 167
United States Cellular Corp. (a) 4,200 129
WICOR, Inc. 3,600 83
----------
1,669
----------
TOTAL COMMON STOCKS
(cost $17,013) 19,992
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
<S> <C> <C>
SHORT-TERM INVESTMENTS - 7.2%
Federated Prime Cash Obligaton Fund (b) $ 1,505 $ 1,505
United States Treasury Notes
5.250% due 07/31/98 (b)(c) 50 50
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,555) 1,555
----------
TOTAL INVESTMENTS
(identified cost $18,568)(d) - 100.3% 21,547
OTHER ASSETS AND LIABILITIES,
NET - (0.3%) (69)
----------
NET ASSETS - 100.0% $ 21,478
----------
----------
</TABLE>
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Held as collateral 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 13
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
---------- ------------
<S> <C> <C>
FUTURES CONTRACTS
(Notes 2 and 3)
S&P 400 Midcap Index Futures Contracts
expiration date 09/98 6 $ 25
----------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased (#) $ 25
----------
----------
</TABLE>
(#) At June 30, 1998, United States Treasury Notes valued at $50 were held as
collateral in connection with futures contracts purchased by the Fund.
The accompanying notes are an integral part of the financial statements.
14 Aggressive Equity Fund
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998 (Unaudited)
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $18,567,560)(Note 2) . . . . . . . . . . . . . . . . . . . . . . $ 21,547,342
Dividends and interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,473
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,632
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,572,447
LIABILITIES
Payables:
Accrued fees to affiliates (Note 4) . . . . . . . . . . . . . . . . . . . . . . . $ 47,960
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,802
Daily variation margin on futures contracts (Notes 2 and 3). . . . . . . . . . . . 900
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,662
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,477,785
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,599
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 649,782
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,979,782
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,200
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,952
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,805,470
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,477,785
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($21,477,785 divided by 1,595,188 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13.46
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Aggressive Equity Fund 15
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1998 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 127,780
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,330
--------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129,110
EXPENSES (Notes 2 and 4):
Management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 86,722
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,566
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,768
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,993
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 996
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,169
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 533
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,738
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161,485
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (47,378)
--------------
Expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,107
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,003
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 650,111
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,847 658,958
--------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463,644
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,250 482,894
-------------- --------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,141,852
--------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . $ 1,156,855
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 Aggressive Equity Fund
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE PERIOD
ENDED JUNE 30, 1998 JANUARY 2, 1997* TO
(UNAUDITED) DECEMBER 31, 1997
------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,003 $ 48,134
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 658,958 1,098,319
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . 482,894 2,522,089
------------------- -------------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . 1,156,855 3,668,542
------------------- -------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,576) (44,962)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . (1,107,495) --
------------------- -------------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . (1,124,071) (44,962)
------------------- -------------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 5). . . . 6,073,337 11,723,084
------------------- -------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 6,106,121 15,346,664
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,371,664 25,000
------------------- -------------------
End of period (including undistributed net investment income of
$1,599 and $3,172, respectively). . . . . . . . . . . . . . . . . . . . . . . . $ 21,477,785 $ 15,371,664
------------------- -------------------
------------------- -------------------
</TABLE>
* Commencement of operations.
The accompanying notes are an integral part of the financial statements.
Aggressive Equity Fund 17
<PAGE>
AGGRESSIVE EQUITY FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each of the periods and other performance information derived from the
financial statements.
<TABLE>
<CAPTION>
1998* 1997**
---------- ----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . $ 13.45 $ 10.00
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .01 .04
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . .89 3.45
---------- ----------
Total Income From Investment Operations . . . . . . . . . . . . . . . . . . . . .90 3.49
---------- ----------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.01) (.04)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . (.88) --
---------- ----------
Total Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.89) (.04)
---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13.46 $ 13.45
---------- ----------
---------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01 35.07
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . . . . . . . . . . 21,478 15,372
Ratios to average net assets (%)(b):
Operating expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.25 1.25
Operating expenses, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.77 2.22
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 .39
Portfolio turnover rate (%)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 193.00 91.56
</TABLE>
* For the six months ended June 30, 1998 (Unaudited).
** For the period January 2, 1997 (commencement of operations) to
December 31, 1997.
(a) Periods less than one year are not annualized.
(b) The ratios for the periods ended June 30, 1998 and December 31, 1997, are
annualized.
18 Aggressive Equity Fund
<PAGE>
NON-US FUND
STATEMENT OF NET ASSETS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
COMMON STOCKS - 88.0%
AUSTRALIA - 1.6%
AMP, Ltd. (a) 680 $ 8
Broken Hill Proprietary Co. 6,100 52
CSR, Ltd. 9,100 26
Mayne Nickless, Ltd. 5,239 28
National Australia Bank, Ltd. 2,700 36
Southcorp Holdings, Ltd. 3,500 10
Telstra Corp., Ltd. 2,000 5
Western Mining Corp., Ltd. 12,800 39
Westpac Banking Corp. 7,233 44
----------
248
----------
AUSTRIA - 0.7%
Bank Austria AG 1,500 108
----------
108
----------
BELGIUM - 0.5%
Delhaize-Le Lion NPV 390 27
PetroFina SA NPV 135 56
----------
83
----------
DENMARK - 1.4%
Danisco 1,200 81
GN Store Nord A/S 2,400 73
Jyske Bank AS (Regd) 200 24
Olicom A/S (a) 1,100 29
----------
207
----------
FINLAND - 0.7%
Kymmene OY 1,000 28
Orion-Yhtyma OY Series B 1,760 54
Rautaruukki OY 2,500 19
----------
101
----------
FRANCE - 10.3%
AXA - UAP 482 54
Carrefour SA 148 94
Christian Dior 319 40
Cie de St. Gobain 276 51
Elf Aquitaine SA 730 103
Groupe Danone 200 55
L'Air Liquide 264 44
Lagardere Groupe (Regd) 1,452 60
Lyonnais Eaux Dumez 400 66
Paribas (a) 1,155 124
Peugeot SA 327 70
Rhodia SA (a) 2,392 67
Sanofi SA 493 58
SGS Thomson Microelectronics (a) 2,000 142
Societe Generale 700 146
Thomson-CSF 1,000 38
Total Co. SA Class B 950 124
Union des Assurances Federales 200 31
Vivendi 882 187
----------
1,554
----------
GERMANY - 11.8%
Adidas AG 400 70
Allianz AG (Regd) 510 170
Bayer AG 1,500 78
Bilfinger & Berger BAU AG 310 11
Continental AG 1,530 48
Deutsche Bank AG 1,663 141
Deutsche Lufthansa AG 4,170 105
Dresdner Bank AG 1,800 97
Karstadt AG 200 97
Merck KGAA 500 22
Muenchener Rueckversicherungs-Gesellschaft AG 250 124
ProSieben Media AG - ADR (a) 40 1
RWE AG 3,100 184
SAP AG 200 121
Schering AG 790 93
SGL Carbon AG 500 58
Siemens AG 1,640 100
SKW Trostberg AG 940 34
Veba AG 2,192 148
Volkswagen International AG 80 78
----------
1,780
----------
HONG KONG - 1.5%
Dickson Concepts International, Ltd. 14,500 20
Hong Kong & China Gas Co., Ltd. 15,400 17
Hong Kong Electric Holding, Ltd. 9,000 28
HSBC Holdings (UK Regd) PLC 2,000 49
Hutchison Whampoa, Ltd. 12,000 63
New World Development Co., Ltd. 7,000 14
Sun Hung Kai Properties, Ltd. 8,000 34
----------
225
----------
</TABLE>
20 Non-US Fund
<PAGE>
NON-US FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
IRELAND - 0.4%
Greencore Group PLC 5,100 $ 28
Irish Life PLC 3,000 27
----------
55
----------
ITALY - 3.3%
Assicurazioni Generali SPA 2,800 91
Ente Nazionale Idrocarburi SPA (Regd) 12,200 80
First Banco S. Paolo 6,500 94
Istituto Mobiliane Italiano SPA 3,000 47
Mediolanum SPA 1,500 48
Telecom Italia SPA 28,700 139
----------
499
----------
JAPAN - 17.4%
Asahi Bank, Ltd. 18,000 79
Bridgestone Tire Corp. 4,000 95
Canon, Inc. 3,000 68
Dai Nippon Ink & Chemical Corp. 11,000 34
DDI Corp. 19 66
Ebara Corp. 5,000 45
Fanuc Co. 2,000 69
Fuji Photo Film Co. 2,000 70
Fujitsu, Ltd. 10,000 106
Hitachi, Ltd. 9,000 59
Honda Motor Co., Ltd. 2,000 71
Ito-Yokado Co., Ltd. 2,000 94
Japan Tobacco, Inc. 6 41
Mitsubishi Corp. 19,000 118
Mitsubishi Estate Co., Ltd. 9,000 79
Mitsui Mining & Smelting 11,000 46
Mitsui Trust & Banking 15,000 35
Nichiei Co., Ltd. 900 61
Nippon Steel Corp. 16,000 28
Nippon Telegraph & Telephone Corp. 16 133
Nippon Yusen 15,000 51
Nishimatsu Construction 8,000 39
Nomura Securities 4,000 47
Pioneer Electronics Corp. 3,000 57
Ricoh Co., Ltd. 3,000 32
San-In Godo Bank 6,000 39
Sanwa Bank 4,000 36
Sekisui Chemical Co., Ltd. 11,000 56
Shin-Etsu Chemical Co. 3,000 52
Sony Corp. 1,400 121
Sony Music Entertainment, Inc. 1,700 72
Takeda Chemical Industries 4,000 107
Takefuji Corp. 1,800 83
Tokyo Electronics 1,000 31
Toppan Printing 1,000 11
Tostem Corp. 5,000 65
Toyota Motor Corp. 7,000 183
West Japan Railway Co. 19 70
Yamanouchi Pharmaceutical 4,000 85
----------
2,634
----------
MALAYSIA - 0.4%
Genting Berhad 8,400 15
IOI Corporated Berhad 35,000 17
Malakoff Berhad 12,000 23
----------
55
----------
NETHERLANDS - 5.5%
ING Groep NV 2,162 142
Koninklijke KPN NV (a) 1,900 73
Philips Electronics 1,590 134
Royal Dutch Petroleum Co. 2,600 144
Royal PTT Nederland NV 900 35
TNT Post Group NV (a) 1,900 49
Unilever NV 1,480 118
Vedior 1,282 36
Vendex NV (a) 1,300 49
Wolters Kluwer CVA 400 54
----------
834
----------
NEW ZEALAND - 0.2%
Telecom Corp. of New Zealand, Ltd. 6,300 26
----------
26
----------
NORWAY - 0.9%
Kvaerner Industries AS 1,000 34
Kvaerner Industries AS Series B 640 20
Norsk Hydro AS 400 18
Nycomed Amersham PLC 8,000 59
----------
131
----------
PORTUGAL - 0.6%
Bco Pinto & Sotto Mayor SA 1,742 43
Portugal Telecom SA 950 51
----------
94
----------
</TABLE>
Non-US Fund 21
<PAGE>
NON-US FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
SINGAPORE - 0.4%
City Developments 4,000 $ 11
Fraser & Neave 3,000 8
Singapore Airlines, Ltd. (Alien Market) 4,000 19
Singapore Press Holdings, Ltd.
(Alien Market) 1,276 9
United Overseas Bank, Ltd. (Alien Market) 6,000 18
----------
65
----------
SPAIN - 1.5%
Banco Bilbao Vizcaya SA 1,100 56
Hidroelectrica del Cantabrico SA 480 22
Iberdrola SA 7,300 119
Repsol SA 600 33
----------
230
----------
SWEDEN - 2.7%
Astra AB Series A 3,800 78
Autoliv, Inc. 2,420 77
Gambro AB Series B (a) 3,250 59
Skandia Forsakrings AB (a) 3,630 52
SKF AB Series A 1,300 23
Stora Kopparbergs Bergslags Aktiebolag
Series A 4,500 71
Svenska Handelsbank Series B Free 1,100 49
----------
409
----------
SWITZERLAND - 6.6%
ABB AG 35 52
Holderbank Financiere Glarus AG (BR) 72 92
Nestle SA (Regd) 120 257
Novartis AG (Regd.) 68 113
Roche Holdings Genusscheine AG NPV 12 118
UBS AG (a) 600 223
Zurich Versicherungsgesellschaft (Regd) 230 147
----------
1,002
----------
UNITED KINGDOM - 19.6%
B.A.T. Industries PLC 3,900 39
Barclays Bank PLC 1,328 38
BASS PLC 3,485 65
Billiton PLC 26,200 53
British Airways PLC 5,500 60
British Petroleum Co. PLC 4,325 63
British Sky Broadcasting Group PLC 6,000 43
British Telecom PLC 9,100 112
Burmah Castrol PLC 700 12
Cable & Wireless PLC 8,500 103
Cadbury Schweppes PLC 3,100 48
Compass Group PLC (a) 4,000 46
Diageo PLC 7,842 93
Glaxo Wellcome PLC 6,300 189
Glynwed International PLC 11,800 49
Great University Stores PLC 4,000 53
HSBC Holdings PLC 4,600 117
Kingfisher PLC 3,700 60
Lloyds TSB Group PLC 16,900 237
LucasVarity PLC 19,400 77
MEPC PLC 3,500 31
MFI Furniture Group PLC 20,684 22
National Power PLC 3,700 35
Northern Rock PLC 4,000 35
Nycomed Amersham PLC (a) 3,619 27
Pilkington Brothers PLC 25,200 46
Powergen PLC 3,000 41
Prudential Corp. PLC 6,400 84
Racal Electronics PLC 8,300 47
Rank Group PLC 7,800 43
Reed International 4,500 41
RMC Group PLC 1,600 28
Royal & Sun Alliance Insurance
Group PLC 9,000 93
Royal Bank of Scotland Group PLC 4,300 75
Sainsbury (J.) PLC 8,100 72
Sears PLC 19,000 17
Shell Transportation & Trading PLC (Regd) 16,300 115
Smith & Nephew PLC 13,000 33
SmithKline Beecham PLC 6,000 73
Tomkins PLC 11,500 62
Unilever PLC 6,800 72
Vickers, Ltd. PLC 8,000 29
Vodafone Group PLC 8,400 107
Wessex Water PLC 8,000 61
Zeneca Group PLC 2,800 121
----------
2,967
----------
TOTAL COMMON STOCKS
(cost $12,487) 13,307
----------
</TABLE>
22 Non-US Fund
<PAGE>
NON-US FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
PREFERRED STOCKS - 0.8%
AUSTRALIA - 0.2%
News Corp., Ltd. 5,300 $ 38
----------
38
----------
GERMANY - 0.2%
ProSieben Media AG NV (a) 226 12
Volkswagen AG 26 18
----------
30
----------
JAPAN - 0.3%
Sanwa International Financial
Bermuda Trust (conv.) 6,000,000 44
----------
44
----------
UNITED STATES - 0.1%
WBK STRYPES Trust (conv.) 400 12
----------
12
----------
TOTAL PREFERRED STOCKS
(cost $112) 124
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
<S> <C> <C>
LONG-TERM INVESTMENTS - 0.0%
JAPAN - 0.0%
MTI Capital, Ltd. (conv.)
0.500% due 10/01/07 JPY 1,000 $ 6
----------
TOTAL LONG-TERM INVESTMENTS
(cost $5) 6
----------
SHORT-TERM INVESTMENTS - 11.3%
UNITED STATES - 11.3%
Federated Prime Cash Obligation Fund (b) $ 1,513 1,513
United States Treasury Notes (b)(d)
5.250% due 07/31/98 200 200
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,713) 1,713
----------
TOTAL INVESTMENTS
(identified cost $14,317)(c) - 100.1% 15,150
OTHER ASSETS AND LIABILITIES,
NET - (0.1)% (22)
----------
NET ASSETS - 100.0% $ 15,128
----------
----------
</TABLE>
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) See Note 2 for federal income tax information.
(d) Held as collateral in connection with futures contracts purchased by the
Fund.
ABBREVIATIONS:
ADR - American Depositary Receipt
NPV - No Par Value
NV - Nonvoting
PLC - Public Limited Company
FOREIGN CURRENCY ABBREVIATIONS:
JPY - Japanese yen
NLG - Dutch guilder
The accompanying notes are an integral part of the financial statements.
Non-US Fund 23
<PAGE>
NON-US FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
--------- --------------
<S> <C> <C>
FUTURES CONTRACTS
(Notes 2 and 3)
FTSE - 100 Index
Futures Contracts (UK)
expiration date 09/98 6 $ 12
TOPIX Index
Futures Contracts (Japan)
expiration date 09/98 7 13
--------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased (#) $ 25
--------------
--------------
</TABLE>
(#) At June 30, 1998, United States Treasury Notes valued at $200 were held as
collateral in connection with futures contracts purchased by the Fund.
FOREIGN CURRENCY EXCHANGE SPOT CONTRACTS (NOTE 2)
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION
DELIVER FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
USD 35 JPY 4,855 07/02/98 $ --
USD 34 NLG 70 07/02/98 --
------------
$ --
------------
------------
</TABLE>
<TABLE>
<CAPTION>
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS (000)
- ----------------------------------- -------- ---------
<S> <C> <C>
Europe 46.4% $ 7,023
Japan 17.8 2,684
United Kingdom 19.6 2,967
Pacific Basin 4.3 658
United States (Short-Term Investments) 11.3 1,713
Other 0.7 105
-------- ---------
Total Investments 100.1 15,150
Other Assets and Liabilities, Net (0.1) (22)
-------- ---------
NET ASSETS 100.0% $ 15,128
-------- ---------
-------- ---------
</TABLE>
<TABLE>
<CAPTION>
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS (000)
- ----------------------------------- -------- ---------
<S> <C> <C>
Auto & Transportation 7.3% $ 1,096
Consumer Discretionary 13.6 2,052
Consumer Staples 6.9 1,040
Financial Services 21.4 3,237
Health Care 8.5 1,288
Integrated Oils 1.5 234
Materials & Processing 10.0 1,511
Miscellaneous 1.1 170
Other Energy 5.2 784
Producer Durables 2.9 435
Technology 4.5 686
Utilities 5.9 898
Long-Term Investments -- 6
Short-Term Investments 11.3 1,713
-------- ---------
Total Investments 100.1 15,150
Other Assets and Liabilities, Net (0.1) (22)
-------- ---------
NET ASSETS 100.0% $ 15,128
-------- ---------
-------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24 Non-US Fund
<PAGE>
NON-US FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments at market (identified cost $14,316,957)(Note 2) . . . . . . . . . . . . . . . . . . . . . . $ 15,150,122
Foreign currency holdings (identified cost $463,268) . . . . . . . . . . . . . . . . . . . . . . . . . . 460,454
Foreign currency exchange spot contracts (cost $69,357)(Note 2). . . . . . . . . . . . . . . . . . . . . 69,357
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,070
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,491
Foreign taxes recoverable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,739
From manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,915
Daily variation margin on futures contracts (Notes 2 and 3). . . . . . . . . . . . . . . . . . . . . . 6,350
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,631
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,831,129
LIABILITIES
Payables:
Investments purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 555,209
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 23,986
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,469
Foreign currency exchange spot contracts (cost $69,357)(Note 2). . . . . . . . . . . 69,169
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702,833
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,128,296
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,608
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (83,838)
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 833,165
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,967
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,706)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,668
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,319,432
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,128,296
--------------
NET ASSET VALUE, offering and redemption price per share:
($15,128,296 divided by 1,366,779 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.07
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Non-US Fund 25
<PAGE>
NON-US FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 163,256
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,350
Less foreign taxes withheld. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,695)
--------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151,911
EXPENSES (Notes 2 and 4):
Management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 49,076
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,805
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,868
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,882
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,014
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,169
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 534
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,800
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145,148
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (77,991)
--------------
Expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,157
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,754
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,864
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (37,933)
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . (1,987) 90,944
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 827,547
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,967
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . 2,126 854,640
-------------- --------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 945,584
--------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . $ 1,030,338
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
26 Non-US Fund
<PAGE>
NON-US FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE PERIOD
ENDED JUNE 30, 1998 JANUARY 2, 1997* TO
(UNAUDITED) DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 84,754 $ 63,616
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,944 (112,384)
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . 854,640 1,786
----------------- -----------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . 1,030,338 (46,982)
----------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (146,521) --
In excess of net realized gain on investments. . . . . . . . . . . . . . . . . . . (41,639) --
----------------- -----------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . (188,160) --
----------------- -----------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 5). . . . 7,409,859 6,898,241
----------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 8,252,037 6,851,259
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,876,259 25,000
----------------- -----------------
End of period (including undistributed net investment income of
$22,608 and $84,375, respectively) . . . . . . . . . . . . . . . . . . . . . . . . $ 15,128,296 $ 6,876,259
----------------- -----------------
</TABLE>
* Commencement of operations.
The accompanying notes are an integral part of the financial statements.
Non-US Fund 27
<PAGE>
NON-US FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each of the periods and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1998* 1997**
---------- ----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . $ 10.03 $ 10.00
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .07 .09
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . 1.20 (.06)
---------- ----------
Total Income From Investment Operations . . . . . . . . . . . . . . . . . . . . 1.27 .03
---------- ----------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.18) --
In excess of net realized gain on investments. . . . . . . . . . . . . . . . . . . (.05) --
---------- ----------
Total Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.23) --
---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.07 $ 10.03
---------- ----------
---------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.76 .30
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . . . . . . . . . . 15,128 6,876
Ratios to average net assets (%)(b):
Operating expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.30 1.30
Operating expenses, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.81 3.60
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.64 .98
Portfolio turnover rate (%)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 55.62 68.54
</TABLE>
* For the six months ended June 30, 1998 (Unaudited).
** For the period January 2, 1997 (commencement of operations) to December 31,
1997.
(a) The total return for the period is not annualized.
(b) The ratios for the periods ended June 30, 1998 and December 31, 1997 are
annualized.
28 Non-US Fund
<PAGE>
CORE BOND FUND
STATEMENT OF NET ASSETS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
<S> <C> <C>
LONG-TERM INVESTMENTS - 86.4%
CORPORATE BONDS AND NOTES - 25.5%
Amer Express Bank
5.813% due 03/13/99 $ 150 $ 149
American Standard Co.
7.375% due 04/15/05 50 50
Amerus Capital I
Series A
8.850% due 02/01/27 25 28
Amresco, Inc.
Series 1998 A
9.875% due 03/15/05 25 25
BankBoston Corporation
6.875% due 07/15/03 25 26
Bankers Trust of NY Corp.
5.787% due 05/11/03 200 200
CBS Corp.
8.625% due 08/01/12 25 27
Citicorp
9.500% due 02/01/02 50 55
Clear Channel Communications
6.875% due 06/15/18 25 25
Colonial Realty LP
7.160% due 01/17/03 (MTN) 50 52
Conmed Corp.
9.000% due 03/15/08 25 25
Conseco Financing Trust II
8.700% due 11/15/26 50 56
Conseco Financing Trust III
8.796% due 04/01/27 75 86
Crescent Real Estate Equities
6.625% due 09/15/02 75 74
Dime Bancorp Trust I
Series A
9.330% due 05/06/27 25 29
ERAC USA Finance Co. (MTN)
7.500% due 06/15/03 50 53
Exide Corp.
2.900% due 12/15/05 50 31
Extendicare Health Services, Inc.
9.350% due 12/15/07 25 25
Ferrellgas LP/Financing Corp.
Series A
10.000% due 08/01/01 35 37
First Nationwide Holdings, Inc.
12.500% due 04/15/03 25 28
10.625% due 10/01/03 25 28
Florida Residential Property &
Casualty Insurance Co.
Series 1997- A
7.250% due 07/01/02 100 103
Ford Motor Credit Co.
5.838% due 06/04/02 (MTN) 250 250
Global Crossing Holdings Ltd.
9.625% due 05/15/08 75 78
Great Atlantic & Pacific Tea, Inc.
7.700% due 01/15/04 25 25
Grove Worldwide LLC
9.250% due 05/01/08 25 25
Health Care REIT, Inc.
7.625% due 03/15/08 50 50
Homeside Lending, Inc.
6.750% due 08/01/04 (MTN) 50 51
Household Finance Corp.
5.855% due 08/20/01 (MTN)(d) 150 150
5.816% due 05/07/02 (MTN)(d) 150 150
Idex Corp.
6.875% due 02/15/08 50 50
Imperial Capital Trust I
Series B
9.980% due 12/31/26 25 29
Imperial Credit Industries, Inc.
Series B
9.875% due 01/15/07 35 35
Jackson National Life Insurance Co.
8.150% due 03/15/27 25 29
Kaufman and Broad Home Corp.
7.750% due 10/15/04 50 50
Lehman Brothers Holdings, Inc.
6.250% due 04/01/03 25 25
Lite-On Technology Corp. (conv.)
Zero Coupon due 12/01/02 50 50
Loewen Group International, Inc.
Series 7
7.600% due 06/01/08 50 50
Markel Capital Trust I
Series B
8.710% due 01/01/46 25 27
McLeodusa, Inc.
8.375% due 03/15/08 50 50
Meditrust
7.375% due 07/15/00 25 25
</TABLE>
30 Core Bond Fund
<PAGE>
CORE BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
<S> <C> <C>
MMI Capital Trust I
7.625% due 12/15/27 $ 25 $ 26
Morgan Stanley Dean Witter
5.875% due 03/11/03 (MTN) 300 300
Natexis Ambs Co. LLC
Series A
8.440% due 12/29/49 75 75
Niagara Mohawk Power Corp.
Series B
7.000% due 10/01/00 400 400
NVR, Inc.
8.000% due 06/01/05 75 74
Ocwen Financial Corp.
11.875% due 10/01/03 50 56
Orion Capital Trust II
7.701% due 04/15/28 75 79
Philip Morris Cos., Inc.
6.150% due 03/15/00 100 100
Premier Parks, Inc. Step Up Bond
Zero Coupon due 04/01/08 25 17
PX Escrow Company Step Up Bond
Zero Coupon due 02/01/06 75 54
Republic of New York Corp.
5.682% due 10/28/02 750 736
Revlon Worldwide Series B
Zero Coupon due 03/15/01 165 128
Rose Hills Corp.
9.500% due 11/15/04 25 26
Salomon, Inc. (MTN)
6.625% due 11/30/00 25 25
Simon Debartolo Group LP
6.750% due 06/15/05 50 50
Sinclair Broadcast Group, Inc.
8.750% due 12/15/07 25 26
Socgen Real Estate Co. LLC
Series A
7.640% due 12/29/49 100 102
Southland Corp.
Series A
4.500% due 06/15/04 50 41
Summit Properties Partnership
7.200% due 08/15/07 25 25
Sun Healthcare Group, Inc.
9.500% due 07/01/07 25 25
Tanger Properties LP
8.750% due 03/11/01 25 26
7.875% due 10/24/04 25 25
TCI Communications, Inc.
7.875% due 02/15/26 95 108
Tenet Healthcare Corp.
8.625% due 12/01/03 100 105
8.125% due 12/01/08 50 50
Toll Brothers Corp.
7.750% due 09/15/07 25 25
Travelers Property Casualty Corp.
6.750% due 04/15/01 25 25
Tricon Global Restaurants, Inc.
7.450% due 05/15/05 25 25
United Companies Financial Corp.
7.700% due 01/15/04 25 26
United States Filter Corp.
6.500% due 05/15/03 75 76
Westinghouse Credit Corp.
8.875% due 06/14/14 50 57
Worldcom, Inc.
7.550% due 04/01/04 75 79
----------
5,403
----------
EURODOLLAR BONDS - 0.8%
Amvescap PLC
6.600% due 05/15/05 50 51
Argentina (Republic of)
11.000% due 10/09/06 50 50
Flag Ltd.
8.250% due 01/30/08 50 50
Videotron Holdings PLC Step Up Bond
Zero Coupon due 07/01/04 25 25
----------
176
----------
MORTGAGE-BACKED SECURITIES - 35.2%
Advanta Mortgage Loan Trust
Series 97-4 Class M1
7.040% due 01/25/29 50 51
Chase Commercial Mortgage Securities Corp.
6.600% due 12/19/07 25 25
Federal Home Loan Mortgage Corp.
Participation Certificate
6.000% due 2011 89 89
6.500% due 2028 124 123
</TABLE>
Core Bond Fund 31
<PAGE>
CORE BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
<S> <C> <C>
Federal National Mortgage Association
6.000% due 2008 $ 1,300 $ 1,318
6.500% due 2013 471 473
6.500% due 2028 172 171
7.000% due 2028 140 142
Federal National Mortgage Association
(REMIC)
Series 1992-10 Class ZD
8.000% due 11/25/21 828 906
Federal National Mortgage Association
6.500% 30 Year Pass-thru TBA (c) 975 971
Government National Mortgage Association
8.000% due 2025 235 244
7.000% due 2026 126 128
7.500% due 2026 243 249
8.000% due 2026 202 209
6.000% due 2027 783 794
7.500% due 2027 24 25
Government National Mortgage Association
7.000% 30 Year TBA (c) 750 762
8.000% 30 Year TBA (c) 425 440
MBNA Master Credit Card Trust
Series 1994-B Class A
5.591% due 01/15/02 100 100
Oakwood Mortgage Investors, Inc.
Series 1998 Class B2
7.750% due 04/15/28 75 76
Residential Funding Mortgage Securities I
6.500% due 04/25/13 99 100
Residential Funding Mortgage Securities II
Series 1997-HS5 Class M1
7.010% due 05/25/27 50 52
----------
7,448
----------
UNITED STATES GOVERNMENT
TREASURIES - 24.3%
United States Treasury Bonds
8.125% due 08/15/19 570 736
6.500% due 11/15/26 250 278
6.625% due 02/15/27 1,985 2,242
United States Treasury Notes
5.875% due 11/15/99 1,090 1,095
6.625% due 06/30/01 290 298
6.625% due 04/30/02 415 430
5.750% due 08/15/03 50 50
----------
5,129
----------
YANKEE BONDS - 0.6%
Applied International Finance
11.750% due 10/01/05 25 22
Call Net Enterprises, Inc. Step Up Bond
Zero Coupon due 08/15/07 25 19
National Westminster Bank PLC
7.750% due 04/29/49 (d) 25 27
Republic of Argentina
9.500% due 11/30/02 (d) 25 25
Royal Caribbean Cruises Ltd.
7.500% due 10/15/27 25 26
----------
119
----------
TOTAL LONG-TERM INVESTMENTS
(cost $18,036) 18,275
----------
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
<S> <C> <C>
PREFERRED STOCKS - 0.6%
El Paso Electric Co.
Series A 229 25
Equity Office Properties Trust
Series B 1,500 65
Primedia, Inc. 250 25
----------
TOTAL PREFERRED STOCKS
(cost $117) 115
----------
<CAPTION>
PRINCIPAL
AMOUNT
(000)
----------
<S> <C> <C>
SHORT-TERM INVESTMENTS - 17.3%
Bellsouth Telecomm, Inc.
5.490% due 09/10/98 $ 400 396
Federal Agriculture Mortgage Corp.
Discount Notes
5.400% due 07/20/98 (a)(e) 285 284
Federal Home Loan Mortgage
Discount Notes
5.400% due 08/20/98 (a)(e) 200 198
Federated Prime Cash
Obligation Fund (a) 1,888 1,888
</TABLE>
32 Core Bond Fund
<PAGE>
CORE BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
<S> <C> <C>
Florida Power Corp.
5.500% due 07/08/98 (a) $ 200 $ 200
General Electric Capital Corp.
Discount Note
5.490% due 07/22/98 (a)(e) 300 299
General Motors Acceptance Corp.
5.530% due 07/29/98 (a) 400 398
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $3,664) 3,663
----------
TOTAL INVESTMENTS
(identified cost $21,817)(b) - 104.3% 22,053
OTHER ASSETS AND LIABILITIES,
NET - (4.3%) (908)
----------
NET ASSETS - 100.0% $ 21,145
----------
----------
</TABLE>
(a) At cost, which approximates market.
(b) See Note 2 for federal income tax information.
(c) Forward commitment. See Note 2.
(d) Adjustable or floating rate security.
(e) Rate noted is yield-to-maturity.
ABBREVIATIONS:
MTN - Medium Term Note
PLC - Public Limited Company
REIT - Real Estate Investment Trust
REMIC - Real Estate Mortgage Investment Conduit
TBA - To Be Announced Security
The accompanying notes are an integral part of the financial statements.
Core Bond Fund 33
<PAGE>
CORE BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998 (Unaudited)
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $21,816,738)(Note 2) . . . . . . . . . . . . . . . . . . . . . . $ 22,053,443
Cash. . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285,996
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215,690
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 666,158
From Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,459
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,632
--------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,236,378
LIABILITIES
Payables:
Investments purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,890
Investments purchased (delayed settlement)(Note 2) . . . . . . . . . . . . . . . . 2,016,686
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 5,278
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,626
--------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,091,480
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,144,898
--------------
--------------
NET ASSETS CONSIST OF:
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 222,591
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,213
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . 236,705
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,029
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,570,360
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,144,898
--------------
--------------
NET ASSET VALUE, offering and redemption price per share:
($21,144,898 divided by 2,002,914 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.56
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
34 Core Bond Fund
<PAGE>
CORE BOND FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1998 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 345,915
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,042
--------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420,957
EXPENSES (Notes 2 and 4):
Management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,406
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,649
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,369
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,757
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,181
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,169
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 533
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,676
--------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,740
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (50,865)
--------------
Expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,875
--------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367,082
--------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,813
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . 57,562
--------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161,375
--------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . $ 528,457
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Core Bond Fund 35
<PAGE>
CORE BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE PERIOD
ENDED JUNE 30, 1998 JANUARY 2, 1997* TO
(UNAUDITED) DECEMBER 31, 1997
------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 367,082 $ 461,020
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,813 40,078
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . 57,562 179,143
------------------- -------------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . 528,457 680,241
------------------- -------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (263,033) (338,625)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . (52,532) --
------------------- -------------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . (315,565) (338,625)
------------------- -------------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 5) . . . 12,409,323 8,156,067
------------------- -------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 12,622,215 8,497,683
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,522,683 25,000
------------------- -------------------
End of period (including undistributed net investment income of
$222,591 and $118,541, respectively) . . . . . . . . . . . . . . . . . . . . . $ 21,144,898 $ 8,522,683
------------------- -------------------
------------------- -------------------
</TABLE>
* Commencement of operations.
The accompanying notes are an integral part of the financial statements.
36 Core Bond Fund
<PAGE>
CORE BOND FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each of the periods and other performance information derived from the
financial statements.
<TABLE>
<CAPTION>
1998* 1997**
---------- ----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . $ 10.45 $ 10.00
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 .64
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . .19 .30
---------- ----------
Total Income From Investment Operations . . . . . . . . . . . . . . . . . . . . .39 .94
---------- ----------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.23) (.49)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . (.05) --
---------- ----------
Total Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.28) (.49)
---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.56 $ 10.45
---------- ----------
---------- ----------
TOTAL RETURN (%)(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.86 9.73
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . . . . . . . . . . 21,145 8,523
Ratios to average net assets (%)(b):
Operating expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80 .80
Operating expenses, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.56 2.20
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.45 6.38
Portfolio turnover rate (%)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 87.64 53.86
</TABLE>
* For the six months ended June 30, 1998 (Unaudited).
** For the period January 2, 1997 (commencement of operations) to
December 31, 1997.
(a) The total return for the period is not annualized.
(b) The ratios for the periods ended June 30, 1998 and December 31, 1997
are annualized.
Core Bond Fund 37
<PAGE>
RUSSELL INSURANCE FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (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. These Funds are offered at net asset value to
qualified insurance company separate accounts offering variable insurance
products. 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.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles ("GAAP") which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently 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.
Short-term investments maturing within 60 days of the valuation date 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 specific identified cost incurred by each money
manager within a particular fund. The Funds may lend portfolio securities
but have not done so in 1998.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded on the accrual basis.
AMORTIZATION AND ACCRETION: All premiums and discounts, including original
issue discounts, for the Funds 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. From November 1, 1997 to December 31,
1997, the Non-US Fund incurred net realized capital losses of $186,584. As
permitted by tax regulations, the Non-US Fund intends to elect to defer
these losses and treat them as arising in the year ending December 31,
1998.
38 Notes to Financial Statements
<PAGE>
RUSSELL INSURANCE FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1998 (Unaudited)
The aggregate cost of investments and the composition of gross unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of June 30, 1998 are as follows:
<TABLE>
<CAPTION>
NET
GROSS GROSS UNREALIZED
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Multi-Style Equity $ 43,271,494 $ 7,733,804 $ (720,850) $ 7,012,954
Aggressive Equity 18,569,519 3,417,137 (439,314) 2,977,823
Non-US 14,594,147 976,351 (420,376) 555,975
Core Bond 21,818,208 292,021 (56,786) 235,235
</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 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: Organization costs of the Funds have been
deferred and are being amortized over 60 months on a straight-line basis.
FOREIGN CURRENCY TRANSLATIONS: The books and records of the Funds are
maintained in U.S. dollars. Foreign currency amounts and transactions of
the Non-US Fund 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) Outstanding 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 Non-US 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.
It is not practical to isolate that portion of the results of operations of
the Non-US Fund 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 Non-US Fund does 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.
Notes to Financial Statements 39
<PAGE>
RUSSELL INSURANCE FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1998 (Unaudited)
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, the Non-US Fund
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. Open contracts at June 30, 1998 are presented on the
Statement of Net Assets of the Fund.
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.
3. INVESTMENT TRANSACTIONS
SECURITIES: During the six months ended June 30, 1998, purchases and sales
of investment securities (excluding U.S. Government and Agency obligations,
short-term investments, futures and repurchase agreements) were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES PURCHASES SALES
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Multi-Style Equity $ 33,885,018 $ 15,492,742 Non-US $ 8,605,172 $ 2,634,420
Aggressive Equity 10,476,001 6,572,083 Core Bond 5,000,396 890,401
</TABLE>
40 Notes to Financial Statements
<PAGE>
RUSSELL INSURANCE FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1998 (Unaudited)
Purchases and sales of U.S. Government and Agency obligations (excluding
short-term investments, options, futures and repurchase agreements) were as
follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Core Bond $ 20,860,440 $ 13,004,779
</TABLE>
FUTURES CONTRACTS: Fund transactions in futures contract purchases for the
six months ended June 30, 1998 were as follows:
<TABLE>
<CAPTION>
MULTI-STYLE EQUITY FUTURES CONTRACTS
AGGREGATE
NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1)
----------- ---------------
<S> <C> <C>
Outstanding December 31, 1997 2 $ 492,475
Opened 56 13,150,927
Closed (52) (11,967,677)
----------- ---------------
Outstanding June 30, 1998 6 $ 1,675,725
----------- ---------------
----------- ---------------
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE EQUITY FUTURES CONTRACTS
AGGREGATE
NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1)
----------- ---------------
<S> <C> <C>
Outstanding December 31, 1997 2 $ 329,200
Opened 18 3,331,301
Closed (14) (2,591,901)
----------- ---------------
Outstanding June 30, 1998 6 $ 1,068,600
----------- ---------------
----------- ---------------
</TABLE>
<TABLE>
<CAPTION>
NON-US FUND FUTURES CONTRACTS
AGGREGATE
NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1)
----------- ---------------
<S> <C> <C>
Outstanding December 31, 1997 -- $ --
Opened 40 4,003,001
Closed (27) (2,820,111)
----------- ---------------
Outstanding June 30, 1998 13 $ 1,182,890
----------- ---------------
----------- ---------------
</TABLE>
(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 six months ended June 30, 1998, 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 $312,255 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.
<TABLE>
<CAPTION>
ANNUAL RATE ANNUAL RATE
----------- -----------
<S> <C> <C> <C>
Multi-Style Equity 0.78% Non-US 0.95%
Aggressive Equity 0.95 Core Bond 0.60
</TABLE>
Notes to Financial Statements 41
<PAGE>
RUSSELL INSURANCE FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1998 (Unaudited)
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. Additionally, FRIMCo has voluntarily agreed to reimburse each Fund
for all remaining expenses, after fee waivers, that still exceed their
respective expense caps.
The expense caps, waivers and reimbursements as of June 30, 1998 were as
follows:
<TABLE>
<CAPTION>
EXPENSE MANAGEMENT REIMBURSED TOTAL EXPENSE
CAP FEES WAIVED BY FRIMCO REDUCTIONS
------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Multi-Style Equity 0.92% $ 69,919 $ -- $ 69,919
Aggressive Equity 1.25 47,378 -- 47,378
Non-US 1.30 49,076 28,915 77,991
Core Bond 0.80 40,406 10,459 50,865
</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 six months ended June 30, 1998 were $36,460.
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, 1998 WERE AS FOLLOWS:
<TABLE>
<CAPTION>
MANAGEMENT TRANSFER
FEES AGENT FEES TOTALS
--------- ---------- ----------
<S> <C> <C> <C>
Multi-Style Equity $ 38,570 $ 6,763 $ 45,333
Aggressive Equity 39,482 8,478 47,960
Non-US 17,574 6,412 23,986
Core Bond -- 5,278 5,278
--------- ---------- ----------
$ 95,626 $ 26,931 $ 122,557
--------- ---------- ----------
--------- ---------- ----------
</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 FRIMCo. 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. The amount retained by Frank Russell
Securities, Inc. for the six months ended June 30, 1998 for the Multi-Style
Equity Fund was $10,360 and for the Non-US Fund was $661.
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 $16,676 for the six months ended June
30, 1998, and were allocated to each Fund on a pro rata basis.
BENEFICIAL INTEREST: As of June 30, 1998, FRIMCo and the Funds had three
client relationships that represented more than 5% of the total outstanding
shares of the respective Funds.
<TABLE>
<CAPTION>
CLIENT RELATIONSHIP
PERCENTAGES
----------------------
<S> <C> <C> <C>
Multi-Style Equity 30% 40% 30%
Aggressive Equity 22 60 13
Non-US 30 30 34
Core Bond 36 22 41
</TABLE>
42 Notes to Financial Statements
<PAGE>
RUSSELL INSURANCE FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
June 30, 1998 (Unaudited)
5. SHARE TRANSACTIONS
Share transactions for the periods were as follows:
<TABLE>
<CAPTION>
SHARES DOLLARS
------------------------------- ---------------------------------
MULTI-STYLE EQUITY 1998* 1997** 1998* 1997**
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Proceeds from shares sold 1,494,422 3,159,950 $ 21,089,030 $ 35,492,250
Proceeds from reinvestment
of distributions 54,712 9,451 735,431 105,477
Payments for shares redeemed (48,732) (1,321,867) (685,801) (16,557,615)
------------- ------------- ------------- -------------
Total net increase (decrease) 1,500,402 1,847,534 $ 21,138,660 $ 19,040,112
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
<CAPTION>
AGGRESSIVE EQUITY 1998* 1997** 1998* 1997**
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Proceeds from shares sold 404,452 2,044,963 $ 5,473,708 $ 23,639,882
Proceeds from reinvestment
of distributions 86,919 4,358 1,124,071 44,962
Payments for shares redeemed (38,724) (909,280) (524,442) (11,961,760)
------------- ------------- ------------- -------------
Total net increase (decrease) 452,647 1,140,041 $ 6,073,337 $ 11,723,084
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
<CAPTION>
NON-US 1998* 1997** 1998* 1997**
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Proceeds from shares sold 699,737 1,090,627 $ 7,620,489 $ 10,979,143
Proceeds from reinvestment
of distributions 17,903 -- 188,159 --
Payments for shares redeemed (36,605) (407,383) (398,789) (4,080,902)
------------- ------------- ------------- -------------
Total net increase (decrease) 681,035 683,244 $ 7,409,859 $ 6,898,241
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
<CAPTION>
CORE BOND 1998* 1997** 1998* 1997**
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Proceeds from shares sold 1,201,221 1,210,165 $ 12,558,485 $ 12,264,143
Proceeds from reinvestment
of distributions 30,215 33,875 315,565 338,625
Payments for shares redeemed (44,480) (430,582) (464,727) (4,446,701)
------------- ------------- ------------- -------------
Total net increase (decrease) 1,186,956 813,458 $ 12,409,323 $ 8,156,067
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
* For the six months ended June 30, 1998 (Unaudited).
** For the period January 2, 1997 (commencement of operations) to December 31,
1997.
6. DIVIDENDS
On July 1, 1998, the Board of Trustees declared the following dividends
from net investment income payable on July 7, 1998 to shareholders of
record on July 2, 1998.
<TABLE>
<S> <C>
Multi-Style Equity $0.0129
Aggressive Equity 0.0010
Core Bond 0.1102
</TABLE>
7. SUBSEQUENT EVENTS
On August 10, 1998, Frank Russell Company entered into an agreement with
The Northwestern Mutual Life Insurance Co., an insurance organization,
pursuant to which Northwestern Mutual Life will acquire all of the
outstanding common stock of Frank Russell Company.
Notes to Financial Statements 43
<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
Mark E. Swanson, 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, WA 98402
(800) 832-6688
In Washington (253) 627-7001
CUSTODIAN
State Street Bank and Trust 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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, MA 02109
DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
MONEY MANAGERS
MULTI-STYLE EQUITY FUND
Alliance Capital Management L.P., Minneapolis, MN
Equinox Capital Management, Inc., New York, NY
Westpeak Investment Advisors, L.P., Boulder, CO
AGGRESSIVE EQUITY FUND
Rothschild Asset Management, Inc., New York, NY
Westpeak Investment Advisors, L.P., 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.
44 Manager, Money Managers and Service Providers
