<PAGE>
1999 ANNUAL REPORT
MULTI-STYLE EQUITY FUND
AGGRESSIVE EQUITY FUND
NON-US FUND
CORE BOND FUND
REAL ESTATE SECURITIES FUND
DECEMBER 31, 1999
[GRAPHIC]
<PAGE>
RUSSELL INSURANCE FUNDS
Russell Insurance Funds is a
"series mutual fund" with five
different investment portfolios.
These financial statements report
on five 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
ANNUAL REPORT
DECEMBER 31, 1999
TABLE OF CONTENTS
Page
Multi-Style Equity Fund.................................................. 2
Aggressive Equity Fund................................................... 14
Non-US Fund.............................................................. 30
Core Bond Fund........................................................... 44
Real Estate Securities Fund.............................................. 56
Notes to Financial Statements............................................ 64
Report of Independent Accountants........................................ 71
Tax Information.......................................................... 72
Manager, Money Managers and Service Providers............................ 73
RUSSELL INSURANCE FUNDS
Copyright-C- Frank Russell Company 2000. 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 the 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
PORTFOLIO MANAGEMENT DISCUSSION
December 31, 1999 (Unaudited)
OBJECTIVE: To provide income and capital growth by investing principally in
equity securities.
INVESTS IN: Primarily US equity securities.
STRATEGY: The Fund uses a multi-style, multi-manager strategy intended to
achieve higher returns with moderate risk. The Fund employed the investment
management services of six managers with four separate and distinct investment
styles.
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT
DATES MULTI-STYLE RUSSELL 1000-REGISTERED TRADEMARK- LIPPER-REGISTERED TRADEMARK-
EQUITY FUND INDEX GROWTH & INCOME
<S> <C> <C> <C>
Inception* $10,000 $10,000 $10,000
1997 $12,853 $13,285 $12,709
1998 $16,643 $16,875 $14,657
1999 $19,383 $20,404 $16,672
YEARLY PERIODS ENDED DECEMBER 31
</TABLE>
MULTI-STYLE EQUITY FUND
<TABLE>
<CAPTION>
PERIODS ENDED GROWTH OF TOTAL
12/31/99 $10,000 RETURN
- ---------------- ------------ --------
<S> <C> <C>
1 Year $11,717 17.17%
Inception $19,383 24.73%#
</TABLE>
RUSSELL 1000-REGISTERED TRADEMARK- INDEX
<TABLE>
<CAPTION>
PERIODS ENDED GROWTH OF TOTAL
12/31/99 $10,000 RETURN
- ---------------- ------------ -------
<S> <C> <C>
1 Year $12,091 20.91%
Inception $20,404 26.84%#
</TABLE>
LIPPER-REGISTERED TRADEMARK- GROWTH & INCOME FUNDS BENCHMARK
<TABLE>
<CAPTION>
PERIODS ENDED GROWTH OF TOTAL
12/31/99 $10,000 RETURN
- ---------------- ------------ --------
<S> <C> <C>
1 Year $11,375 13.75%
Inception $16,672 18.57%#
</TABLE>
2 Multi-Style Equity Fund
<PAGE>
MULTI-STYLE EQUITY FUND
PORTFOLIO MANAGEMENT DISCUSSION
December 31, 1999 (Unaudited)
PERFORMANCE REVIEW
For the year ended December 31, 1999, the Multi-Style Equity Fund reflected a
total return of 17.2%, as compared to the Russell 1000-Registered Trademark-
Index results of 20.9%. The Fund trailed the index primarily due to
disappointing security selection linked to underexposure to high valuation
technology stocks. Performance compared more favorably with the 13.8% average
return of mutual funds tracked in the Lipper Growth and Income Funds Universe.
PORTFOLIO HIGHLIGHTS
Overall, stocks provided investors with their fifth consecutive year of returns
in excess of 20% - an unprecedented trend in the US stock market's history. Of
equal surprise was the ascent of the market amidst rising interest rates and a
tight monetary policy as directed by the US Federal Reserve Board. Though share
prices ended the year markedly higher, investors faced a volatile market,
including some sector rotation early in the year. Unlike the previous four
years, the market's advance was much broader across market capitalization tiers,
with small cap shares actually finishing the year slightly higher than large
caps after an end of year rally. Valuation sensitivity proved an extreme
liability for investors as value stocks in the Russell 1000 Index again trailed
their growth counterparts, this time by 26 percentage points for the one year
period. However, the outperformance was far more reflective of technology than
growth in any general sense, with consumer staples and health care issues
(typically considered "growth" sectors) actually posting losses.
The Multi-Style Equity Fund's multi- manager mix afforded it some opportunities
not shared by funds with more narrow approaches to the growth and income style.
The Fund's growth managers produced strong returns, though their reluctance to
accept increasingly extreme valuations led them to underweight several of the
market's strongest performing issues during the second half of the year. The
Fund's value- oriented managers had a very frustrating year as their valuation
sensitivity focused their investments away from the market's strongest
performing issues.
Several changes were made to the Fund's structure. Three new managers were
funded, and Westpeak's assignment was expanded to provide a supplementary
defensive role to the Fund in September. Additional analysis of the Fund's
structure may result in further changes in the manager line up and to manager
allocations with an objective of improving performance consistency in extreme
market environments.
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
(AS A PERCENT OF TOTAL INVESTMENTS) DECEMBER 31, 1999
<S> <C>
Microsoft Corp. 2.7%
Cisco Systems, Inc. 2.6
General Electric Co. 2.3
Intel Corp. 1.8
Citigroup, Inc. 1.7
Nokia Corp. - ADR 1.6
Lucent Technologies, Inc. 1.6
Home Depot, Inc. (The) 1.6
Bristol-Myers Squibb Co. 1.4
Dell Computer Corp. 1.4
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
DECEMBER 31, 1999
<S> <C>
Current P/E Ratio 25.8x
Portfolio Price/Book Ratio 4.52x
Market Capitalization - $- Weighted Average 111.67 Bil
Number of Holdings 403
</TABLE>
<TABLE>
<CAPTION>
MONEY MANAGERS STYLES
<S> <C>
Alliance Capital Management L.P. Growth
Equinox Capital Management, Inc. Value
Lincoln Capital Management Co. Growth
Peachtree Asset Management Market-Oriented
Sanford C. Bernstein & Co. Inc. Value
Westpeak Investment Advisors, L.P. Defensive
Westpeak Investment Advisors, L.P. Market-Oriented
</TABLE>
* The Fund commenced operations on January 2, 1997. Index comparison began
January 1, 1997.
** Russell 1000-Registered Trademark- Index includes the 1,000 largest
companies in the Russell 3000-Registered Trademark- Index, the smallest of
which is valued at about $1,124.8 million. The Russell 1000 Index
represents the universe of stocks from which most active money managers
typically select. The Russell 1000 Index return reflects adjustments for
income dividends and capital gains distributions reinvested as of the
ex-dividend dates.
++ Lipper-Registered Trademark- Growth & Income Funds Benchmark is the
average total return for the universe of funds within the Growth and
Income Funds investment objective. The total return for the funds reflects
adjustments for income dividends and capital gains distributions
reinvested as of the ex-dividend dates.
Section Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Multi-Style Equity Fund 3
<PAGE>
MULTI-STYLE EQUITY FUND
STATEMENT OF NET ASSETS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- ------
<S> <C> <C>
COMMON STOCKS - 89.7%
AUTO AND TRANSPORTATION - 2.4%
Burlington Northern, Inc. 8,800 213
Cooper Tire & Rubber Co. 6,100 95
CSX Corp. 4,200 132
Dana Corp. 7,800 234
Delphi Automotive Systems Corp. 16,932 267
Delta Air Lines, Inc. 12,300 613
Eaton Corp. 4,500 327
Ford Motor Co. 26,900 1,437
General Motors Corp. 16,500 1,199
Genuine Parts Co. 7,500 186
Hertz Corp. Class A 900 45
Lear Corp. (a) 3,300 106
Norfolk Southern Corp. 11,800 242
PACCAR, Inc. 7,300 323
TRW, Inc. 4,700 244
Union Pacific Corp. 24,300 1,060
-------
6,723
-------
CONSUMER DISCRETIONARY - 9.9%
Abercrombie & Fitch Co. Class A (a) 13,200 352
Alberto Culver Co. Class B 1,200 31
AMFM, Inc. (a) 7,900 618
AT&T Corp. - Liberty Media Group 46,400 2,633
Class A (a)
Avon Products, Inc. 500 17
Bed Bath & Beyond, Inc. (a) 6,500 225
Black & Decker Corp. 4,100 214
Brunswick Corp. 1,300 29
Carnival Corp. Class A NPV 2,700 129
Clear Channel
Communications, Inc. (a) 7,200 643
Costco Wholesale Corp. (a) 8,600 784
Dayton Hudson Corp. 9,500 698
Dillard's, Inc. Class A 6,000 121
Disney (Walt) Co. 17,300 506
Eastman Kodak Co. 8,498 563
Estee Lauder Cos., Class A 1,100 55
Federated Department Stores, Inc. (a) 9,600 485
Fortune Brands, Inc. 7,600 251
Gannett Co., Inc. 5,500 449
Gap, Inc. 16,200 745
Hasbro, Inc. 1,100 21
Home Depot, Inc. (The) 64,950 4,453
Interpublic Group Cos., Inc. 2,400 138
JC Penney & Co., Inc. 4,600 92
Knight-Ridder, Inc. 15,200 904
Kohl's Corp. (a) 13,500 975
Limited, Inc. (The) 2,000 87
Lowe's Cos., Inc. 20,200 1,207
Mattel, Inc. 11,000 144
May Department Stores Co. 9,200 297
Maytag Corp. 600 29
McDonald's Corp. 8,600 347
McGraw-Hill, Inc. 600 37
MediaOne Group, Inc. (a) 30,700 2,358
NIKE, Inc. Class B 1,100 55
Office Depot, Inc. (a) 16,500 180
Omnicom Group, Inc. 300 30
SABRE Group Holdings, Inc. (The),
Class A (a) 1,400 72
Saks, Inc. (a) 7,000 109
Sears Roebuck & Co. 5,400 164
Time Warner, Inc. 21,100 1,528
TJX Cos., Inc. 7,800 159
Tribune Co. 17,600 969
Tupperware Corp. 1,700 29
Univision Communications, Inc.
Class A (a) 500 51
V.F. Corp. 5,600 168
Valassis Communications, Inc. (a) 1,600 68
Wal-Mart Stores, Inc. 51,500 3,560
Wendy's International, Inc. 1,400 29
Whirlpool Corp. 5,100 332
Zale Corp. (a) 2,400 116
-------
28,256
-------
CONSUMER STAPLES - 4.8%
Albertson's, Inc. 600 19
Anheuser-Busch Cos., Inc. 2,500 177
Campbell Soup Co. 4,300 166
Coca-Cola Co. (The) 22,300 1,299
Colgate-Palmolive Co. 16,200 1,053
ConAgra, Inc. 21,500 485
CVS Corp. 18,900 755
General Mills, Inc. 1,300 46
Gillette Co. 18,400 758
Heinz (H.J.) Co. 4,400 175
Hormel Foods Corp. 5,100 207
IBP, Inc. 22,000 396
Kellogg Co. 4,800 148
Kroger Co. (a) 27,800 525
McCormick & Co., Inc. 1,800 54
Nabisco Holdings Corp. Class A 13,900 440
Pepsi Bottling Group, Inc. (The) 7,500 124
PepsiCo, Inc. 35,100 1,237
Philip Morris Cos., Inc. 22,100 512
Procter & Gamble Co. 17,400 1,906
Quaker Oats Co. 14,200 932
R.J. Reynolds Tobacco
Holdings, Inc. (a) 2,633 46
4 Multi-Style Equity Fund
<PAGE>
MULTI-STYLE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- ------
<S> <C> <C>
Ralston-Purina Group 12,000 335
Safeway, Inc. (a) 13,900 495
Sara Lee Corp. 20,000 441
SuperValu, Inc. 8,500 170
SYSCO Corp. 3,700 146
Tyson Foods, Inc. Class A 8,000 130
Unilever NV (a) 1,100 60
UST Corp. 2,800 71
Walgreen Co. 16,800 491
-------
13,799
-------
FINANCIAL SERVICES - 15.7%
Aetna, Inc. 6,500 363
AFLAC, Inc. 10,200 481
Allstate Corp. 10,100 242
Ambac Financial Group, Inc. 8,700 454
American Express Co. 900 150
American General Corp. 16,800 1,275
American International Group, Inc. 29,450 3,184
AmSouth Bancorp 22,550 435
AON Corp. 7,400 296
Associates First Capital Corp. Class A 37,600 1,032
Astoria Financial Corp. 4,700 143
Automatic Data Processing, Inc. 11,600 625
AXA Financial, Inc. 3,800 129
Bank of America Corp. 39,150 1,965
Bank One Corp. 25,600 821
Bear Stearns Co., Inc. 12,250 524
Capital One Financial Corp. 11,100 535
Chase Manhattan Corp. 25,000 1,942
Chubb Corp. (The) 4,300 242
CIGNA Corp. 12,000 967
Citigroup, Inc. 87,450 4,859
Commerce Bancshares, Inc. 15,120 519
Concord EFS, Inc. (a) 9,900 254
Conseco, Inc. 38,850 694
Countrywide Credit Industries, Inc. 5,100 129
Dun & Bradstreet Corp. 6,000 177
Fannie Mae 29,100 1,817
Federal Home Loan Mortgage Corp. 17,200 809
First Data Corp. 1,300 64
First Union Corp. 12,500 410
Fleet Financial Corp. 44,237 1,540
Foundation Health Systems, Inc. (a) 7,000 70
Golden State Bancorp, Inc. (a) 16,200 279
Golden West Financial Corp. 8,100 271
Goldman Sachs Group, Inc. (a) 4,500 424
Hartford Financial Services
Group, Inc. (The) 24,400 1,156
Household International Corp. 1,300 48
Jefferson-Pilot Corp. 1,200 82
KeyCorp 11,500 254
Lehman Brothers Holdings, Inc. 1,600 136
Lincoln National Corp. 2,900 116
Loews Corp. 5,700 346
Marsh & McLennan Cos., Inc. 6,200 593
Marshall & Ilsley Corp. 2,000 126
MBIA, Inc. 3,300 174
MBNA Corp. 79,200 2,159
Merrill Lynch & Co., Inc. 4,800 401
MGIC Investment Corp. 4,500 271
Morgan (J.P.) & Co., Inc. 11,300 1,431
Morgan Stanley Dean Witter & Co. 26,200 3,741
National City Corp. 12,100 287
Old Republic International Corp. 7,900 108
Paychex, Inc. 16,100 643
PMI Group, Inc. (The) 2,200 107
PNC Bank Corp. 15,500 690
Provident Financial Group, Inc. 1,600 57
Providian Financial Corp. 3,800 346
SAFECO Corp. 6,200 154
SouthTrust Corp. 9,700 366
St. Paul Cos., Inc. 7,100 239
State Street Corp. 3,100 226
Summit Bancorp 7,000 214
SunTrust Banks, Inc. 7,800 537
Torchmark Corp. 6,200 180
Travelers Property Casualty Corp.
Class A 3,800 130
UnionBanCal Corp. 18,700 737
Washington Mutual, Inc. 11,500 299
Wells Fargo Co. 7,200 291
-------
44,766
-------
HEALTH CARE - 8.3%
Abbott Laboratories 4,400 160
Allergan, Inc. 4,000 199
ALZA Corp. (a) 9,500 329
American Home Products Corp. 12,400 489
Amgen, Inc. (a) 12,400 744
Andrx Corp. (a) 1,800 75
AstraZeneca Group PLC - ADR 12,400 518
Bard (C.R.), Inc. 2,700 143
Bausch & Lomb, Inc. 200 14
Baxter International, Inc. 12,000 754
Becton, Dickinson & Co. 7,700 206
Bergen Brunswig Corp. Class A 8,000 67
Biogen, Inc. (a) 1,700 144
Bristol-Myers Squibb Co. 61,700 3,960
Columbia/HCA Healthcare Corp. 37,500 1,099
Forest Labs, Inc. (a) 3,700 227
Genzyme Corp. (a) 3,000 135
Multi-Style Equity Fund 5
<PAGE>
MULTI-STYLE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- ------
<S> <C> <C>
IVAX Corp. (a) 6,400 165
Johnson & Johnson 19,500 1,815
Jones Pharma, Inc. 1,800 78
Lilly (Eli) & Co. 8,900 592
Mallinckrodt, Inc. 7,600 242
Manor Care, Inc. (a) 7,000 112
MedImmune, Inc. (a) 600 99
Medtronic, Inc. 29,300 1,067
Merck & Co., Inc. 10,800 724
PacifiCare Health Systems, Inc. (a) 1,500 80
Patterson Dental Co. (a) 1,900 81
PE Corp. 200 24
Pfizer, Inc. 59,800 1,940
Pharmacia & Upjohn, Inc. 22,700 1,022
Schering-Plough Corp. 68,700 2,897
United Healthcare Corp. 7,600 404
Warner-Lambert Co. 37,600 3,081
Wellpoint Health Networks, Inc. (a) 700 46
-------
23,732
-------
INTEGRATED OILS - 3.6%
Amerada Hess Corp. 13,200 749
Ashland, Inc. 4,000 132
Chevron Corp. 6,700 580
Coastal Corp. 16,200 574
Conoco, Inc. Class A 8,700 215
Conoco, Inc. Class B NPV 2,702 67
Enron Corp. 2,100 93
Exxon Mobil Corp. NPV (a) 44,632 3,597
Lyondell Petrochemical Co. 5,500 70
Phillips Petroleum Co. 20,900 982
Royal Dutch Petroleum Co. 16,400 991
Texaco, Inc. 18,200 988
Unocal Corp. 40,900 1,374
-------
10,412
-------
MATERIALS AND PROCESSING - 6.9%
Air Products & Chemicals, Inc. 7,000 235
Alcoa, Inc. 10,700 888
Allegheny Technologies, Inc. (a) 4,400 99
American Standard Cos., Inc. (a) 4,300 197
Archer-Daniels- Midland Co. 19,005 232
Armstrong World Industries, Inc. 2,400 80
Ball Corp. 1,400 55
Boise Cascade Corp. 3,400 138
Cabot Corp. 4,000 82
Centex Corp. 7,200 178
Champion International Corp. 13,200 818
CK Witco Corp. 3,142 42
Consolidated Papers, Inc. 5,200 165
Corning, Inc. 1,200 155
Crown Cork & Seal Co., Inc. 5,200 116
Dow Chemical Co. 13,500 1,804
du Pont (E.I.) de Nemours & Co. 17,884 1,178
Ecolab, Inc. 500 20
Engelhard Corp. 1,900 36
Fluor Corp. 5,500 252
FMC Corp. (a) 2,000 115
Fort James Corp. 7,100 194
Georgia-Pacific Corp. (Timber Group) 4,000 99
Georgia-Pacific Group 7,700 391
Goodrich (B.F.) Co. 6,100 168
Great Lakes Chemical Corp. 3,700 141
Hercules, Inc. 4,700 131
Illinois Tool Works, Inc. 9,100 615
International Paper Co. 26,900 1,518
Kimberly-Clark Corp. 5,400 352
Masco Corp. 700 18
Mead Corp. 5,000 217
Millennium Chemicals, Inc. 4,600 91
Minnesota Mining & Manufacturing Co. 3,800 372
Monsanto Co. 30,400 1,083
Nucor Corp. 4,000 219
Owens Corning 3,200 62
Owens-Illinois, Inc. (a) 6,900 173
PPG Industries, Inc. 300 19
Praxair, Inc. 6,000 302
Sealed Air Corp. New (a) 9,500 492
Sherwin-Williams Co. 7,100 149
Sigma Aldrich Corp. 6,500 195
Smurfit-Stone Container Corp. (a) 8,800 215
Sonoco Products Co. 6,100 139
Temple-Inland, Inc. 3,600 237
Textron, Inc. 9,700 744
Tyco International, Ltd. 85,800 3,335
Union Carbide Corp. 3,600 240
USG Corp. 4,700 221
W.R. Grace & Co. (a) 7,400 103
Westvaco Corp. 3,800 124
Weyerhaeuser Co. 1,800 129
Willamette Industries, Inc. 4,700 218
-------
19,591
-------
OTHER ENERGY - 0.7%
Apache Corp. 15,400 569
Constellation Energy Group 1,100 32
El Paso Energy Corp. 3,800 147
Occidental Petroleum Corp. 12,300 266
Schlumberger, Ltd. 900 51
Sempra Energy 11,500 200
Sunoco, Inc. 4,200 99
6 Multi-Style Equity Fund
<PAGE>
MULTI-STYLE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- ------
<S> <C> <C>
Tosco Corp. 8,300 225
Transocean Sedco Forex, Inc. NPV (a) 174 6
Ultramar Diamond Shamrock Corp. 15,300 347
Vastar Resources, Inc. 2,100 124
-------
2,066
-------
PRODUCER DURABLES - 6.1%
Applied Materials, Inc. (a) 23,600 2,988
Boeing Co. 13,500 561
Briggs & Stratton Corp. 300 16
Caterpillar, Inc. 8,000 377
Cummins Engine Co., Inc. 3,900 188
Deere & Co. 21,100 915
Diebold, Inc. 1,800 42
Dover Corp. 2,600 118
General Electric Co. 42,000 6,500
Honeywell International, Inc. (a) 2,975 172
Ingersoll-Rand Co. 7,100 391
KLA Instruments Corp. (a) 11,700 1,302
Lexmark International Group, Inc.
Class A (a) 1,600 145
Litton Industries, Inc. (a) 6,100 304
Lockheed Martin Corp. 6,900 151
National Service Industries, Inc. 800 24
Northrop Grumman Corp. 3,800 205
Pall Corp. 1,600 35
Pitney Bowes, Inc. 1,600 77
Raytheon Co. Class B 20,658 549
Rockwell International Corp. 6,100 292
Snap-On Tools Corp. 3,900 104
Solectron Corp. (a) 6,300 599
Tecumseh Products Co. Class A 6,000 283
Thomas & Betts Corp. 3,400 108
United Technologies Corp. 16,200 1,053
-------
17,499
-------
TECHNOLOGY - 21.4%
Adaptec, Inc. (a) 6,900 344
Adobe Systems, Inc. 2,000 135
Adtran, Inc. (a) 11,200 576
America Online, Inc. (a) 50,200 3,787
Analog Devices, Inc. (a) 11,300 1,051
Apple Computer, Inc. (a) 11,300 1,161
AVX Corp. 3,200 160
BMC Software, Inc. (a) 18,100 1,446
Broadcom Corp. Class A (a) 300 82
Cisco Systems, Inc. (a) 69,700 7,462
Computer Associates
International, Inc. 4,600 322
Compuware Corp. (a) 25,100 933
Comverse Technology, Inc. (a) 500 72
Cooper Industries, Inc. 4,500 182
Dallas Semiconductor Corp. 1,200 77
Dell Computer Corp. (a) 77,200 3,932
EarthLink Network, Inc. (a) 10,100 429
eBay, Inc. (a) 1,300 163
Electronic Data Systems Corp. 18,010 1,206
Electronics For Imaging, Inc. (a) 2,100 123
EMC Corp. (a) 25,100 2,742
General Dynamics Corp. 18,100 955
Harris Corp. 5,000 133
Hewlett-Packard Co. 6,300 718
IMS Health, Inc. 6,800 185
Ingram Micro, Inc. Class A (a) 6,900 91
Inktomi Corp. (a) 3,000 266
Intel Corp. 60,754 4,997
International Business
Machines Corp. 15,060 1,626
JDS Uniphase Corp. (a) 2,200 355
Lattice Semiconductor Corp. (a) 1,000 47
LSI Logic Corp. (a) 17,600 1,188
Lucent Technologies, Inc. 60,100 4,495
Maxim Integrated Products, Inc. (a) 800 38
Micron Technology, Inc. (a) 4,100 319
Microsoft Corp. (a) 65,300 7,620
MindSpring Enterprises, Inc. (a) 13,400 352
Motorola, Inc. 9,700 1,428
National Instruments Corp. (a) 3,600 138
Nextel Communications, Inc.
Class A (a) 10,900 1,123
Oracle Systems Corp. (a) 9,500 1,064
QUALCOMM, Inc. (a) 1,200 211
Quantum Corp. DLT & Storage Systems (a) 8,800 133
Quantum Corp. Hard Disk Drive (a) 4,400 31
Scientific-Atlanta, Inc. 14,700 818
Seagate Technology (a) 6,400 298
Sun Microsystems, Inc. (a) 34,300 2,653
Synopsys, Inc. (a) 700 47
Tech Data Corp. (a) 3,000 81
Tellabs, Inc. (a) 6,500 417
Texas Instruments, Inc. 16,200 1,569
Unisys Corp. (a) 27,700 885
Veritas Software Corp. (a) 750 107
Xilinx, Inc. (a) 4,200 191
Yahoo!, Inc. (a) 400 173
Zebra Technologies Corp. Class A (a) 700 41
-------
61,178
-------
UTILITIES - 9.9%
Allegheny Energy, Inc. 6,100 164
Alliant Energy Corp. (a) 5,300 146
Alltel Corp. 4,000 331
Multi-Style Equity Fund 7
<PAGE>
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- ------
<S> <C> <C>
Ameren Corp. 7,000 229
American Electric Power Co., Inc. 4,800 154
AT&T Corp. 50,500 2,563
Bell Atlantic Corp. 30,880 1,901
BellSouth Corp. 25,900 1,212
Central & Southwest Corp. 8,500 170
Cinergy Corp. 7,400 179
Columbia Energy Group 9,900 626
Comcast Corp. Special Class A 17,900 904
Consolidated Edison, Inc. 7,100 245
Cox Communications, Inc. Class A (a) 21,000 1,082
DTE Energy Co. 2,300 72
Energy East Corp. 7,900 164
Entergy Corp. 15,900 409
FirstEnergy Corp. 8,300 188
GPU, Inc. 14,200 425
GTE Corp. 4,300 303
MCI WorldCom, Inc. (a) 56,550 2,998
New Century Energies, Inc. 5,000 152
Nokia Corp. - ADR 24,200 4,598
Northern States Power Co. 7,500 146
Peco Energy Co. 1,900 66
PG&E Corp. 8,700 178
Potomac Electric Power Co. 5,600 128
PP&L Resources, Inc. 28,500 652
Public Service Enterprise Group, Inc. 17,200 599
SBC Communications, Inc. 61,953 3,020
Southern Co. 13,200 310
Sprint Corp. 31,058 2,092
Telephone & Data Systems, Inc. 300 38
Texas Utilities Co. 17,300 615
U.S. West, Inc. NPV 300 22
Unicom Corp. 7,300 245
United States Cellular Corp. (a) 1,800 182
Vodafone Group PLC - ADR 11,300 559
Western Resources, Inc. 4,600 78
Wisconsin Energy Corp. 6,300 121
-------
28,266
-------
TOTAL COMMON STOCKS
(cost $233,147) 256,288
<CAPTION>
MARKET
PRINCIPLE VALUE
AMOUNT (000)
(000) $
--------- -------
<S> <C> <C>
SHORT-TERM INVESTMENTS - 10.2%
Frank Russell Investment Company 26,999 26,999
Money Market Fund,
due on demand (b)
United States Treasury Bills (b)(c)(d) 2,250 2,244
-------
4.670% due 01/20/00
TOTAL SHORT-TERM INVESTMENTS
(cost $29,243) 29,243
-------
TOTAL INVESTMENTS - 99.9%
(identified cost $262,390) 285,531
OTHER ASSETS AND LIABILITIES,
NET - 0.1% 346
-------
NET ASSETS - 100.0% 285,877
-------
-------
</TABLE>
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
(c) Held as collateral in connection with futures contracts purchased by the
Fund.
(d) Rate noted is yield-to-maturity from date of acquisition.
Abbreviations:
ADR - American Depositary Receipt
NPV - No Par Value
See accompanying notes which are an integral part of the financial statements.
8 Multi-Style Equity Fund
<PAGE>
MULTI-STYLE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
<TABLE>
<CAPTION>
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
---------- --------------
<S> <C> <C>
FUTURES CONTRACTS
NASDAQ 100 Index
expiration date 03/00 11 $ 513
S&P 500 Index
expiration date 03/00 50 564
S&P Midcap 400 Index
expiration date 03/00 18 186
-------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $1,263
-------
-------
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Multi-Style Equity Fund 9
<PAGE>
MULTI-STYLE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
Amounts in thousands (EXCEPT PER SHARE AMOUNTS) December 31, 1999
<S> <C> <C>
ASSETS
Investments at market (identified cost $262,390) ....................................... $285,531
Receivables:
Dividends ........................................................................... 407
Investments sold .................................................................... 63
Fund shares sold .................................................................... 100
Daily variation margin on futures contracts ......................................... 89
Deferred organization expenses 3
-----------
Total assets ..................................................................... 286,193
LIABILITIES
Payables:
Investments purchased ................................................... $ 54
Fund shares redeemed .................................................... 4
Accrued fees to affiliates .............................................. 170
Other accrued expenses .................................................. 88
--------
Total liabilities ................................................................ 316
-----------
NET ASSETS ............................................................................. $285,877
-----------
-----------
NET ASSETS CONSIST OF:
Undistributed net investment income .................................................... $160
Accumulated net realized gain (loss) ................................................... 2,996
Unrealized appreciation (depreciation) on:
Investments ......................................................................... 23,141
Futures contracts ................................................................... 1,263
Shares of beneficial interest .......................................................... 170
Additional paid-in capital ............................................................. 258,147
-----------
NET ASSETS ............................................................................. $285,877
-----------
-----------
NET ASSET VALUE, offering and redemption price per share:
($285,877,123 divided by 17,025,412 shares of $.01 par value
shares of beneficial interest outstanding) .......................................... $16.79
-----------
-----------
</TABLE>
See accompanying notes which are an integral part of the financial statements.
10 Multi-Style Equity Fund
<PAGE>
MULTI-STYLE EQUITY FUND
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<CAPTION>
Amounts in thousands
<S> <C> <C>
INVESTMENT INCOME
Dividends ........................................................................... $ 2,255
Dividends from Money Market Fund .................................................... 539
Interest ............................................................................ 88
-----------
Total investment income .......................................................... 2,882
EXPENSES
Management fees .......................................................... $ 1,357
Custodian fees ........................................................... 167
Transfer agent fees ...................................................... 4
Professional fees ........................................................ 6
Registration fees ........................................................ 47
Trustees' fees ........................................................... 9
Amortization of deferred organization expenses ........................... 1
Miscellaneous ............................................................ 32
--------
Expenses before reductions ............................................... 1,623
Expense reductions ....................................................... (22)
--------
Expenses, net .................................................................... 1,601
-----------
Net investment income .................................................................. 1,281
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments .............................................................. 10,834
Futures contracts ........................................................ 1,143 11,977
Net change in unrealized appreciation (depreciation) on: --------
Investments .............................................................. 12,317
Futures contracts ........................................................ 1,047 13,364
-------- -----------
Net realized and unrealized gain (loss) ................................................ 25,341
-----------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS .................................. $26,622
-----------
-----------
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Multi-Style Equity Fund 11
<PAGE>
MULTI-STYLE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands Years Ended December 31,
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income ....................................................... $1,281 $ 326
Net realized gain (loss) .................................................... 11,977 4,501
Net change in unrealized appreciation (depreciation) ........................ 13,364 7,089
-------- --------
Net increase (decrease) in net assets from operations .................... 26,622 11,916
-------- --------
DISTRIBUTIONS
From net investment income .................................................. (1,240) (248)
From net realized gain ...................................................... (13,454) (610)
-------- --------
Net decrease in net assets from distributions ............................ (14,694) (858)
-------- --------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ............... 199,951 39,301
-------- --------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS .................................... 211,879 50,359
NET ASSETS
Beginning of period ......................................................... 73,998 23,639
-------- --------
End of period (including undistributed net investment income of
$160 and $119, respectively) ............................................... $285,877 $73,998
-------- --------
-------- --------
</TABLE>
See accompanying notes which are an integral part of the financial statements.
12 Multi-Style Equity Fund
<PAGE>
MULTI-STYLE EQUITY FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1999 1998 1997*
-------- -------- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........................ $ 16.02 $ 12.78 $ 10.00
-------- -------- --------
INCOME FROM OPERATIONS
Net investment income (a) ................................ .12 .10 .09
Net realized and unrealized gain (loss) .................. 2.41 3.49 2.75
-------- -------- --------
Total income from operations .......................... 2.53 3.59 2.84
-------- -------- --------
DISTRIBUTIONS
From net investment income ............................... (.12) (.08) (.06)
From net realized gain ................................... (1.64) (.27) --
-------- -------- --------
Total distributions ................................... (1.76) (.35) (.06)
-------- -------- --------
NET ASSET VALUE, END OF PERIOD .............................. $ 16.79 $ 16.02 $ 12.78
-------- -------- --------
-------- -------- --------
TOTAL RETURN (%)(b) ......................................... 17.17 28.71 28.53
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ................. 285,877 73,998 23,639
Ratios to average net assets (%)(c):
Operating expenses, net ............................... .92 .92 .92
Operating expenses, gross ............................. .96 1.21 1.61
Net investment income ................................. .74 .70 .76
Portfolio turnover rate (%) .............................. 67.67 78.89 64.95
</TABLE>
* For the period January 2, 1997 (commencement of operations) to December 31,
1997.
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
Multi-Style Equity Fund 13
<PAGE>
AGGRESSIVE EQUITY FUND
PORTFOLIO MANAGEMENT DISCUSSION
December 31, 1999 (Unaudited)
OBJECTIVE: To provide capital appreciation by assuming a higher level of
volatility than is ordinarily expected from Multi-Style Equity Fund by investing
in equity securities.
INVESTS IN: Primarily common stocks of small and medium capitalization US
companies.
STRATEGY: The Fund uses a multi-style, multi-manager strategy intended to
achieve higher returns with moderate risk. The Fund employed the investment
management services of four small capitalization stock fund managers with
distinct investment styles.
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT
DATES AGGRESSIVE RUSSELL 2500-TM- LIPPER-REGISTERED TRADEMARK-
EQUITY FUND INDEX** SMALL CO. GROWTH ++
<S> <C> <C> <C>
Inception* $10,000 $10,000 $10,000
1997 $13,507 $12,436 $12,074
1998 $13,644 $12,484 $11,997
1999 $14,474 $15,498 $15,918
YEARLY PERIODS ENDED DECEMBER 31
</TABLE>
AGGRESSIVE EQUITY FUND
<TABLE>
<CAPTION>
PERIODS ENDED GROWTH OF TOTAL
12/31/99 $10,000 RETURN
- ---------------- ------------ --------
<S> <C> <C>
1 Year $10,608 6.08%
Inception $14,474 13.14%Section
</TABLE>
RUSSELL 2500(TM) INDEX
<TABLE>
<CAPTION>
PERIODS ENDED GROWTH OF TOTAL
12/31/99 $10,000 RETURN
- ---------------- ------------ --------
<S> <C> <C>
1 Year $12,415 24.15%
Inception $15,498 15.72%Section
</TABLE>
LIPPER-REGISTERED TRADEMARK- SMALL CO. GROWTH FUNDS BENCHMARK
<TABLE>
<CAPTION>
PERIODS ENDED GROWTH OF TOTAL
12/31/99 $10,000 RETURN
- ---------------- ------------ --------
<S> <C> <C>
1 Year $13,268 32.68%
Inception $15,918 16.76%Section
</TABLE>
14 Aggressive Equity Fund
<PAGE>
AGRRESSIVE EQUITY FUND
PORTFOLIO MANAGEMENT DISCUSSION
December 31, 1999 (Unaudited)
PERFORMANCE REVIEW
For the year ended December 31, 1999, the Aggressive Equity Fund reflected a
total return of 6.1% as compared to the Russell 2500(TM) Index, which gained
24.2%. The Fund's performance trailed other small cap funds tracked by Lipper
Analytical Services which gained 32.7%. The Fund's underexposure to high-priced
technology issues proved devastating to performance as the divergence of returns
between growth and value investments was extreme among small cap stocks.
PORTFOLIO HIGHLIGHTS
Small capitalization stocks caught up with large cap issues at year end 1999.
The Russell 2000-Registered Trademark- Index gained 18.5% in the fourth
quarter to bring its annual gain to 21.3% versus the Russell 1000-Registered
Trademark- Index gain of 20.9%. The performance of small caps was also
dominated by technology shares, with small cap technology issues up more than
100% for the year. Ineffective security selection results accounted for the
Fund's margin of underperformance; however, its underlying cause was tied
much more to the disparities in returns by valuation. As managers grew
increasingly concerned with overvaluation, their decisions to rotate to more
attractively valued alternatives led to significant underexposure to the
strongest performing issues, generally the stocks of Internet companies. A
consequent tactical value bias in the portfolio had a severe impact on
performance results in a price momentum dominated market.
In April, several changes were made to the Fund's structure. Two new managers
were added to broaden the style mix. Fund management grappled with performance
trends, especially late in the year as managers increasingly moved away from
stocks as a result of valuation concerns. Efforts to fortify the Fund's growth
exposure proved disappointing, as the Fund's growth manager was unable to
rationalize share prices on some of the market's hottest issues-which continued
to post strong gains nonetheless. Complicating matters further was a scarce
supply of investment manager alternatives or additions in the growth category as
market conditions led many investment management firms to close to new assets.
Analysis of the Fund's structure is expected to result in some changes in the
manager line up and to manager allocations, with an objective of improving
performance consistency in extreme market environments.
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
(as a percent of Total Investments) December 31, 1999
<S> <C>
Exodus Communications, Inc. 1.0%
S&P Mid-Cap 400 Depository Receipts 0.9
Symbol Technologies, Inc. 0.7
Network Appliance, inc. 0.7
PMC - Sierra, Inc. 0.7
Affiliated Computer Services, Inc. Class A 0.6
VeriSign, Inc. 0.6
DST Systems, Inc. 0.6
DoubleClick, Inc. 0.5
Conexant Systems, Inc. 0.5
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
December 31, 1999
<S> <C>
Current P/E Ratio 17.4x
Portfolio Price/Book Ratio 2.64x
Market Capitalization - $- Weighted Average 2.90 Bil
Number of Holdings 786
</TABLE>
<TABLE>
<CAPTION>
MONEY MANAGERS STYLES
<S> <C>
Geewax, Terker & Co. Growth
Rothchild Asset Management, Inc. Small Cap - Value
Trinity Investment Management Corp. Value
Westpeak Investment Advisors, L.P. Small Cap - Value
</TABLE>
* The Fund commenced operations on January 2, 1997. Index comparison began
January 1, 1997.
** Russell 2500(TM) Index is composed of the bottom 500 stocks in the Russell
1000-Registered Trademark- Index and all the stocks in the Russell 2000
-Registered Trademark- Index. The largest security in this index has a
market capitalization of about $2.0 billion. The Russell 2500 Index return
reflects adjustments for income dividends and capital gains distributions
reinvested as of the ex-dividend dates.
++ Lipper-Registered Trademark- Small Co. Growth Funds Benchmark is the
average total return for the universe of funds within the Small Company
Growth Funds investment objective. The total return for the funds reflects
adjustments for income dividends and capital gains distributions reinvested
as of the ex-dividend dates.
Section Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Aggressive Equity Fund 15
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF NET ASSETS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
<S> <C> <C>
COMMON STOCKS - 91.6%
AUTO AND TRANSPORTATION - 3.8%
AAR Corp. 2,500 45
AirTran Holdings, Inc. (a) 3,400 15
Alaska Air Group, Inc. (a) 5,800 204
America West Holding Corp.
Class B (a) 10,300 214
American Freightways Corp. (a) 8,800 142
Amtran, Inc. (a) 1,700 32
Arvin Industries, Inc. 6,400 182
Avis Rent A Car, Inc. (a) 10,300 263
BE Aerospace, Inc. (a) 2,700 23
Borg-Warner Automotive, Inc. 3,600 146
Carlisle Cos., Inc. 4,000 144
Continental Airlines, Inc. Class B (a) 5,500 244
Dollar Thrifty Automotive
Group, Inc. (a) 5,100 122
Eagle USA Airfreight, Inc. (a) 1,750 76
Expeditors International of
Washington, Inc. 3,500 152
Federal-Mogul Corp. 6,600 133
Fleetwood Enterprises, Inc. 1,600 33
Florida East Coast Industries, Inc. 600 25
Group 1 Automotive, Inc. (a) 2,100 29
Hertz Corp. Class A 1,500 75
Landstar Systems, Inc. (a) 1,600 67
Lear Corp. (a) 2,000 64
M.S. Carriers, Inc. (a) 1,800 42
Mascotech, Inc. 3,500 44
Meritor Automotive, Inc. 700 14
Mesaba Holdings, Inc. (a) 3,200 37
Midwest Express Holdings, Inc. (a) 1,400 45
Miller Industries, Inc. (a) 7,400 21
Myers Industries, Inc. 5,740 90
National R.V. Holdings, Inc. (a) 1,050 20
Navistar International Corp. (a) 5,000 237
Newport News Shipbuilding, Inc. 1,400 38
Northwest Airlines Corp. Class A (a) 3,900 86
O'Reilly Automotive, Inc. (a) 3,200 69
Polaris Industries, Inc. 700 25
Simpson Industries, Inc. 3,300 37
Standard Motor Products, Inc. Class A 2,200 35
Swift Transportation Co., Inc. (a) 3,100 55
Tower Automotive, Inc. (a) 6,200 96
USFreightways Corp. 1,600 76
Wabash National Corp. 1,900 28
Winnebago Industries, Inc. 1,800 36
XTRA Corp. (a) 1,000 43
Yellow Corp. (a) 10,700 180
------- -------
3,784
------- -------
CONSUMER DISCRETIONARY - 13.9%
7-Eleven, Inc. (a) 19,600 35
99 Cents Only Stores NPV (a) 1,500 57
Aaron Rents, Inc. 1,700 30
ABM Industries, Inc. 900 18
AC Nielsen Corp. (a) 2,500 62
Acclaim Entertainment, Inc. (a) 13,500 69
Ackerley Communications, Inc. 1,400 25
Activision, Inc. New (a) 11,200 172
Alberto Culver Co. Class B 4,000 103
AMC Entertainment, Inc. (a) 2,500 22
AMERCO (a) 7,600 189
Anchor Gaming (a) 1,600 69
AnnTaylor Stores Corp. (a) 6,900 238
Applebee's International, Inc. 6,400 188
Argosy Gaming Co. (a) 1,200 19
Barnes & Noble, Inc. (a) 8,700 179
Barra, Inc. (a) 3,200 102
Bebe Stores, Inc. (a) 700 19
Bed Bath & Beyond, Inc. (a) 2,700 94
Belo (A.H.) Corp. Class A 6,900 132
BJ's Wholesale Club, Inc. (a) 2,000 73
Borders Group, Inc. (a) 4,000 64
Brinker International, Inc. (a) 14,100 338
Brown Shoe Co., Inc 6,900 97
Brunswick Corp. 1,500 33
Buckle, Inc. (The) (a) 1,600 24
Buffets, Inc. (a) 9,700 97
Catalina Marketing Corp. (a) 1,500 174
CDI Corp. (a) 1,700 41
CEC Entertainment, Inc. (a) 5,350 152
Central Newspapers, Inc. Class A 5,600 221
Charming Shoppes, Inc. (a) 4,900 32
Cheesecake Factory (The), Inc. (a) 1,900 66
Chicos Fas, Inc. (a) 1,200 45
Choice Hotels International, Inc. (a) 1,100 19
Chris Craft Industries, Inc. (a) 3,948 285
Copart, Inc. (a) 4,800 207
Cornell Corrections, Inc. (a) 1,900 16
Cox Radio, Inc. Class A (a) 1,500 150
Darden Restaurants, Inc. 8,300 150
Deluxe Corp. 10,200 280
DeVry, Inc. (a) 4,400 82
Dollar Tree Stores, Inc. (a) 4,800 232
Electronic Arts, Inc. (a) 2,300 193
Emmis Broadcasting Corp. Class A (a) 1,300 162
Entercom Communications Corp. (a) 1,100 73
Equity Inns, Inc. 3,400 23
Ethan Allen Interiors, Inc. 3,300 106
Extended Stay America, Inc. (a) 8,300 63
16 Aggressive Equity Fund
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
<S> <C> <C>
Fairfield Communities, Inc. (a) 4,200 45
Footstar, Inc. (a) 900 27
Furniture Brands International, Inc. (a) 7,600 167
Genesco, Inc. (a) 4,500 59
GTECH Holdings Corp. (a) 6,700 147
Guitar Center, Inc. (a) 3,700 37
Harcourt General, Inc. 4,900 197
Harland (John H.) Co. 3,500 64
Haverty Furniture Co., Inc. 7,300 92
Hispanic Broadcasting Corp. (a) 3,200 294
Hollywood Entertainment Corp. (a) 3,300 47
Hollywood Park, Inc. (a) 6,800 153
Houghton Mifflin Co. 3,200 135
Innkeepers USA Trust 4,900 40
Insight Enterprises, Inc. (a) 1,800 73
Interim Services, Inc. (a) 8,400 208
JAKKS Pacific, Inc. (a) 2,100 39
Jones Apparel Group, Inc. (a) 6,700 182
Kellwood Co. 2,800 54
La-Z-Boy Inc. 13,200 222
Lason, Inc. (a) 2,300 25
Lee Enterprises, Inc. 1,700 54
Legato Systems, Inc. (a) 7,100 488
Linens 'N Things, Inc. (a) 4,200 124
Liz Claiborne, Inc. 1,200 45
Mandalay Resort Group (a) 8,800 177
Manpower, Inc. 1,800 68
McClatchy Co. Class A 1,000 43
Media General, Inc. Class A 1,700 88
Meredith Corp. 1,300 54
MGM Grand, Inc. (a) 200 10
Michaels Stores, Inc. (a) 2,300 65
Movado Group, Inc. 1,900 41
Musicland Stores Corp. (a) 13,700 116
Neff Corp. (a) 2,800 18
NOVA Corp. / Georgia (a) 2,100 66
O'Charleys, Inc. (a) 1,700 22
Ogden Corp. 3,400 41
On Assignment, Inc. (a) 1,700 50
Oshkosh B' Gosh, Inc. Class A 2,300 45
Outback Steakhouse, Inc. (a) 4,600 119
Pacific Sunwear of California (a) 2,600 83
Payless ShoeSource, Inc. (a) 1,600 75
Pep Boys - Manny, Moe & Jack 8,300 76
Petco Animal Supplies, Inc. (a) 5,200 75
Pierce Leahy Corp. (a) 1,700 74
Playtex Products, Inc. (a) 6,100 94
Pomeroy Computer Resources, Inc. (a) 1,400 18
Pre-paid Legal Services, Inc. (a) 1,900 46
Provant, Inc. (a) 3,000 75
Quicksilver, Inc. (a) 5,250 81
RARE Hospitality International, Inc.
NPV (a) 5,400 117
Regis Corp. 3,250 61
Rent-A-Center, Inc. (a) 2,400 47
Rent-Way, Inc. (a) 2,000 37
Ross Stores, Inc. 15,300 274
Ruby Tuesday, Inc. 4,800 87
Russ Berrie & Co., Inc. 2,900 76
Ryan's Family Steak Houses, Inc. (a) 6,100 52
Salton, Inc. (a) 3,300 110
Shaw Industries, Inc. (a) 9,500 147
ShopKo Stores, Inc. (a) 1,200 28
Sonic Corp. (a) 4,250 118
Springs Industries, Inc. 3,700 148
Station Casinos, Inc. (a) 2,800 63
Sunglass Hut International, Inc. (a) 5,700 64
Talbots, Inc. 2,700 121
TETRA Technologies, Inc. (a) 3,325 51
The Men's Wearhouse, Inc. (a) 3,900 115
Tiffany & Co. 3,700 330
Timberland Co. Class A (a) 1,400 74
Toro Co. 3,800 142
Trendwest Resorts, Inc. NPV (a) 800 18
Tupperware Corp. 1,100 19
United Stationers, Inc. (a) 2,600 74
Urban Outfitters, Inc. (a) 1,700 50
Valassis Communications, Inc. (a) 4,200 177
Wackenhut Corp. 1,000 15
Wallace Computer Services, Inc. 10,300 171
Warnaco Group, Inc. Class A 7,900 97
Wendy's International, Inc. 5,900 122
West Marine, Inc. (a) 2,300 19
Westwood One, Inc. (a) 1,600 122
Wiley (John) & Son Inc. Class A 3,500 59
Williams-Sonoma, Inc. (a) 3,300 152
Windmere Corp. (a) 2,400 41
WMS Industries, Inc. (a) 3,100 41
Zale Corp. (a) 6,600 319
------- -------
13,816
------- -------
CONSUMER STAPLES - 2.6%
Canandaigua Brands Inc. Class A (a) 1,800 92
Church and Dwight Co., Inc. 4,100 109
Coors (Adolph) Co. Class B 3,000 158
Dean Foods Co. 2,900 115
Dole Food Co., Inc. 4,700 76
Fleming Cos., Inc. 3,000 31
IBP, Inc. 27,400 493
International Home
Foods, Inc. New (a) 2,800 49
Aggressive Equity Fund 17
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
<S> <C> <C>
Interstate Bakeries Corp. 7,500 136
J & J Snack Foods Corp. (a) 1,400 29
Jack in the Box, Inc. (a) 5,100 106
Longs Drug Stores, Inc. 1,400 36
Performance Food Group Co. (a) 1,900 46
Ralcorp Holdings, Inc. (a) 10,200 203
Robert Mondavi Corp. Class A (a) 700 24
Schweitzer-Mauduit
International, Inc. 4,400 59
Smithfield Foods, Inc. (a) 5,800 139
Suiza Foods Corp. (a) 3,900 155
SuperValu, Inc. 15,300 306
Universal Corp. 4,900 112
Universal Foods Corp. 5,900 120
------- -------
2,594
------- -------
FINANCIAL SERVICES - 12.6%
Acceptance Insurance
Companies, Inc. (a) 2,900 17
Advanta Corp. Class A 2,900 53
Advest Group, Inc. (The) 1,700 31
Allmerica Financial Corp. 3,800 211
Ambac Financial Group, Inc. 2,000 104
American Annuity Group, Inc. 2,700 49
American Financial Group, Inc. 4,000 105
AmeriCredit Corp. (a) 4,700 87
Arden Realty Group, Inc. 7,600 152
Area Bancshares Corp. 1,400 34
Astoria Financial Corp. 5,700 173
BancWest Corp. New 800 16
Bank United Corp. Class A 3,800 103
BankAtlantic Bancorp, Inc. 11,200 57
Bay View Capital Corp. 3,500 50
BISYS Group, Inc. New (a) 7,000 456
BOK Financial Corp. (a) 1,054 21
BSB Bancorp, Inc. 1,600 31
CarrAmerica Realty Corp. 8,100 171
Cathay Bancorp, Inc. 2,000 82
CBL & Associates Properties, Inc. 3,900 80
Chelsea GCA Realty, Inc. 2,600 77
Citizens Banking Corp. 2,500 55
City National Corp. 3,600 119
Colonial BancGroup, Inc. 11,500 119
Commerce Bancorp, Inc. 3,400 137
Commerce Bancshares, Inc. 787 27
Community First Bankshares, Inc. 2,800 44
Community Trust Bancorp, Inc. 3,400 68
Concord EFS, Inc. (a) 2,400 62
Crown American Realty Trust 5,700 31
CVB Financial Corp. 1,800 42
Delphi Financial Group, Inc. (a) 4,953 149
Developers Diversified Realty Corp. 7,600 98
Dime Bancorp, Inc. 13,300 201
Doral Financial Corp. 6,600 81
DST Systems, Inc. (a) 7,300 557
DVI, Inc. (a) 2,700 41
E.W. Blanch Holdings, Inc. 2,700 165
Enhance Financial Services
Group, Inc. 5,900 96
Everest Reinsurance Holdings, Inc. 4,900 109
FBL Financial Group, Inc. Class A 4,100 82
Federal Realty Investment Trust 5,400 102
Federated Investors, Inc. Class B NPV 4,300 86
Financial Federal Corp. (a) 2,000 46
Financial Security Assurance
Holdings, Ltd. 2,300 120
FINOVA Group, Inc. 900 32
First American Financial Corp. 6,800 85
First Bancorp. 1,000 21
First Charter Corp. NPV 4,800 71
First Citizens BancShares, Inc. 1,200 84
First Federal Capital Corp. 2,500 34
First Republic Bank (a) 800 19
First Sentinel Bancorp, Inc. 8,600 68
First Washington Bancorp, Inc. 3,400 50
FirstFed Financial Corp. (a) 1,500 21
FirstMerit Corp. 5,800 134
Frontier Insurance Group, Inc. 4,700 16
Fulton Financial Corp. 2,500 45
Gallagher (Arthur J.) & Co. 1,900 123
GATX Corp. 6,900 233
GBC Bancorp 5,200 99
General Growth Properties, Inc. 3,700 104
Glimcher Realty Trust 5,000 64
Golden State Bancorp, Inc. (a) 8,100 140
Greater Bay Bancorp NPV 1,300 55
Greenpoint Financial Corp. 2,000 48
Hamilton Bancorp, Inc. (a) 1,500 26
HCC Insurance Holdings, Inc. 8,600 113
Healthcare Realty Trust, Inc. 6,000 94
Heller Financial, Inc. Class A 1,000 20
Hibernia Corp. Class A 18,300 194
Hospitality Properties Trust 5,500 105
Hudson United Bancorp NPV 2,781 71
Imperial Bancorp (a) 1,247 30
Independent Bank Corp. 900 11
Interpool, Inc. 1,700 13
Investors Financial Services Corp. 3,200 147
J.P. Realty, Inc. 2,500 39
John Nuveen & Co., Inc. Class A 3,500 126
JSB Financial, Inc. 600 31
LTC Properties 6,100 51
18 Aggressive Equity Fund
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
<S> <C> <C>
Macerich Co. (The) 4,200 87
McGrath RentCorp 1,000 18
Medical Assurance, Inc. (a) 3,000 64
Mercantile Bankshares Corp. 2,800 89
Metris Companies, Inc. 1,200 43
Mid-State Bancshares NPV 700 22
Midland Co. 1,100 23
MONY Group, Inc. (The) 2,000 58
Morgan Keegan, Inc. 2,800 47
National City Bancorporation 1,900 32
National Commerce Bancorp 5,500 125
National Golf Properties, Inc. 1,700 34
NBT Bancorp, Inc. 1,260 19
North Fork Bancorp., Inc. 8,700 152
OceanFirst Financial Corp. 4,000 69
Omega Healthcare Investors 5,500 70
Oriental Financial Group, Inc. 1,900 42
Pacific Century Financial Corp. 3,100 58
Penn Treaty American Corp. (a) 2,700 43
Pennsylvania Real Estate 2,200 32
Investment Trust
Peoples Heritage Financial Group 10,800 162
PFF Bancorp, Inc. (a) 4,100 79
PMI Group, Inc. (The) 5,200 254
Professionals Group, Inc. NPV (a) 2,860 67
Profit Recovery Group
International, Inc. (The) (a) 2,100 56
Provident Bankshares Corp. 5,300 92
Provident Financial Group, Inc. 3,700 133
Queens County Bancorp 1,600 43
Radian Group, Inc. (a) 6,600 315
Riggs National Corp. 9,100 119
Rollins Truck Leasing Corp. 6,450 77
Roslyn Bancorp, Inc. 2,420 44
S&P Mid-Cap 400 Depository Receipts 10,400 844
S&T Bancorp, Inc. 1,200 28
SEI Corp. 1,000 119
Silicon Valley Bancshares (a) 2,500 123
Sky Financial Group, Inc. 2,410 49
Sotheby's Holdings Co., Inc. Class A 3,100 93
Southwest Bancorporation of
Texas, Inc. New (a) 1,000 20
Sovereign Bancorp, Inc. 16,800 124
Sovran Self Storage, Inc. 3,800 72
Sterling Bancshares, Inc. 4,000 45
Stewart Information Services Corp. 3,400 45
TCF Financial Corp. 700 17
Texas Regional Bancshares, Inc.
Class A 3,600 104
Triangle Bancorp, Inc. 3,100 60
U.S. Trust Corp. 1,300 104
UICI (a) 9,200 97
UMB Financial Corp. 2,530 94
United Bankshares, Inc. 1,600 38
USBANCORP, Inc. 6,300 74
Valley National Bancorp 918 26
Washington Federal, Inc. 10,500 206
Webster Financial Corp. 5,600 132
------- -------
12,496
------- -------
HEALTH CARE - 5.9%
Abgenix, Inc. (a) 600 78
Advance Paradigm, Inc. (a) 3,200 69
Alpharma, Inc. Class A 9,100 280
Arrow International, Inc. NPV 200 6
Bard (C.R.), Inc. 1,700 90
Bindley Western Industries, Inc. 9,366 141
Bio-Rad Laboratories, Inc. Class A (a) 1,900 44
Bio-Technology General Corp. (a) 4,000 61
Biogen, Inc. (a) 600 51
Biomatrix, Inc. (a) 2,200 42
Biomet, Inc. 900 36
ChiRex, Inc. (a) 2,700 39
Chiron Corp. (a) 3,000 127
Cooper Companies, Inc. (a) 5,900 178
Coventry Health Care, Inc. (a) 12,600 85
Datascope Corp. (a) 1,700 67
DENTSPLY International, Inc. 5,900 139
Diagnostic Products Corp. 1,900 47
Dura Pharmaceuticals, Inc. (a) 6,500 91
Enzon, Inc. (a) 3,000 129
Genzyme Corp. (a) 3,600 161
Gilead Sciences, Inc. (a) 1,900 103
Gliatech, Inc. (a) 1,400 23
Hanger Orthopedic Group, Inc. (a) 4,500 45
Hooper Holmes, Inc. 2,000 51
Human Genome Sciences, Inc. (a) 1,600 244
ICN Pharmaceuticals, Inc. 2,200 56
IDEC Pharmaceuticals Corp. (a) 1,000 98
Imclone Systems, Inc. (a) 1,700 67
IVAX Corp. (a) 14,700 378
Jones Pharma, Inc. 3,800 165
King Pharmaceuticals, Inc. NPV (a) 2,450 137
Mallinckrodt, Inc. 9,000 286
Medco Research, Inc. (a) 1,600 48
Medicis Pharmaceutical Corp.
Class A. (a) 1,900 81
MedImmune, Inc. (a) 3,100 514
Mid Atlantic Medical 4,100 34
Services, Inc.(a)
Millennium Pharmaceuticals, Inc. (a) 1,900 232
Aggressive Equity Fund 19
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF NET ASSETS
December 31, 1999
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
<S> <C> <C>
Mylan Laboratories, Inc. 8,600 217
NBTY, Inc. (a) 10,400 114
Owens & Minor, Inc., Holding Co. 2,200 20
Patterson Dental Co. (a) 2,000 85
Perrigo Co. (a) 1,300 10
Professional Detailing, Inc. (a) 1,200 36
ResMed, Inc. (a) 600 25
Shire Pharmaceuticals Group 1,772 51
PLC ADR (a)
St. Jude Medical, Inc. (a) 2,300 71
Sybron International Corp. (a) 4,200 104
Syncor International Corp. (a) 3,200 91
Techne Corp. (a) 2,800 154
Thermo BioAnalysis Corp. (a) 1,400 26
Trigon Healthcare, Inc. (a) 1,700 50
United Payors & United 2,400 38
Providers, Inc. (a)
Universal Health Services, Inc.
Class B (a) 1,400 50
US Oncology, Inc. (a) 7,400 36
Veterinary Centers of
America, Inc. (a) 2,000 26
Vital Signs, Inc. 1,300 29
Wesley Jessen VisionCare,
Inc. New (a) 2,600 98
------- -------
5,854
------- -------
INTEGRATED OILS - 0.6%
Ashland, Inc. 4,500 148
Cabot Oil & Gas Corp. 2,100 34
Cross Timbers Oil Co. 6,900 63
Houston Exploration Co. (The) (a) 2,900 58
Murphy Oil Corp. 2,500 143
Tesoro Petroleum Corp. (a) 9,800 113
------- -------
559
------- -------
MATERIALS AND PROCESSING - 8.6%
ACX Technologies, Inc. (a) 1,800 19
Airgas, Inc. (a) 7,200 68
AK Steel Holding Corp. 15,700 296
AptarGroup, Inc. 300 8
Armstrong World Industries, Inc. 4,500 150
Ball Corp. 6,900 272
Banta Corp. 2,700 61
BMC Industries, Inc. (a) 6,600 32
Boise Cascade Corp. 10,400 421
Bowater, Inc. 1,100 60
Brady Corp. Class A 1,600 54
Cabot Corp. 5,300 108
Cambrex Corp. 2,000 69
Carpenter Technology Corp. 3,500 96
Centex Construction Products, Inc. 1,200 47
Centex Corp. 6,400 158
Chemed Corp. 3,300 94
Clarcor, Inc. 1,300 23
Commercial Metals Co. 2,500 85
Cytec Industries, Inc. (a) 1,200 28
Dal-Tile International, Inc. (a) 4,400 45
Dexter Corp. 800 32
Elcor Chemical Corp. 700 21
Engelhard Corp. 13,300 251
Ethyl Corp. 6,600 26
FMC Corp. (a) 3,200 183
Freeport-McMoRan Copper & Gold,
Inc. Class B (a) 11,700 247
Geon Co. 3,500 114
Georgia Gulf Corp. 3,800 116
Georgia-Pacific Corp. (Timber Group) 1,500 37
Gibraltar Steel Corp. (a) 800 18
Glenborough Realty Trust, Inc. 8,000 107
Harsco Corp. 4,300 137
Hercules, Inc. 6,900 192
IMCO Recycling, Inc. 3,900 49
Internet Corp. 3,800 44
Jacob's Engineering Group, Inc. (a) 5,100 166
Lafarge Corp. 3,200 88
Lilly Industrial Coatings, Inc. Class A 2,100 28
Louisiana Pacific Corp. 12,200 174
LSI Industries, Inc. 1,300 28
LTV Corp. 20,200 83
Lubrizol Corp. 5,200 161
Lydall, Inc. (a) 4,200 28
MasTec, Inc. (a) 1,800 80
MAXXAM, Inc. (a) 1,500 64
Millennium Chemicals, Inc. 3,900 77
Minerals Technologies, Inc. 700 28
Mohawk Industries, Inc. (a) 2,300 61
Mueller Industries, Inc. (a) 2,900 105
National Steel Corp. Class B 4,500 34
NCI Building Systems, Inc. (a) 4,200 78
New England Business Service, Inc. 1,400 34
Nortek, Inc. (a) 4,500 126
Oregon Steel Mills, Inc. 4,600 37
Phelps Dodge Corp. 1,700 114
Polymer Group, Inc. 6,600 120
Potlatch Corp. 2,800 125
Precision Castparts Corp. 3,000 79
Quanex Corp. 5,600 143
Reliance Steel & Aluminum Co. 1,050 25
Rock-Tenn Co. Class A 300 4
Rouse Co. (The) 8,000 170
RPM, Inc. (Ohio) 4,500 46
20 Aggressive Equity Fund
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
<S> <C> <C>
Ryerson Tull, Inc. 3,400 66
Scotts Co. (The) Class A (a) 900 36
Shorewood Packaging Corp. (a) 5,700 108
Simpson Manufacturing Co., Inc. (a) 2,200 96
Spartech Corp. 4,000 129
SPS Technologies, Inc. (a) 1,000 32
St. Joe Co. (The) 600 15
St. Mary Land & Exploration Co. 2,300 54
Stillwater Mining Co. (a) 600 19
Storage USA, Inc. 3,800 115
Teleflex, Inc. 4,000 125
Temple-Inland, Inc. 2,600 171
Texas Industries, Inc. 4,100 175
Timken Co. 1,600 33
Tractor Supply Co. (a) 1,400 22
Tredegar Industries, Inc. 3,000 62
Universal Forest Products, Inc. 1,600 24
USG Corp. 5,100 240
USX-U.S. Steel Group 5,700 188
Valspar Corp. 700 29
W.R. Grace & Co. (a) 11,400 158
Waters Corp. (a) 5,300 281
Webb (Del E.) Corp. (a) 4,600 115
Westvaco Corp. 5,700 186
------- -------
8,553
------- -------
MISCELLANEOUS - 1.2%
ChoicePoint, Inc. (a) 1,200 50
Duke Realty Investments, Inc. 9,900 193
Franchise Finance Corp. of America 6,900 165
HRPT Properties Trust 18,500 167
LNR Property Corp. 1,700 34
MAXIMUS, Inc. (a) 1,500 51
ProLogis Trust 6,600 127
Public Storage, Inc. 7,100 161
Stone Energy Corp. (a) 1,400 50
TeleTech Holdings, Inc. (a) 2,800 94
URS Corp. (a) 4,300 93
------- -------
1,185
------- -------
OTHER ENERGY - 3.1%
Apache Corp. 1,500 56
Arch Coal, Inc. 4,000 45
Barrett Resources Corp. (a) 2,000 59
Basin Exploration, Inc. (a) 1,800 32
Cal Dive International, Inc. NPV (a) 900 29
Devon Energy Corp. 1,600 53
Dynegy, Inc. 1,000 24
ENSCO International, Inc. 4,200 96
EOG Resources, Inc. 17,100 300
Forest Oil Corp. (a) 5,600 74
Global Marine, Inc. (a) 2,800 47
Helmerich & Payne, Inc. 3,300 72
HS Resources, Inc. (a) 8,300 143
Louis Dreyfus Natural Gas Corp. (a) 10,000 181
MidAmerican Energy Holdings Co. (a) 5,000 169
Mitchell Energy & Development
Corp. Class A 4,400 97
Newfield Exploration Co. (a) 5,100 136
Noble Drilling Corp. (a) 7,300 239
Northwestern Corp. 4,900 108
Oceaneering International, Inc. (a) 5,200 78
ONEOK, Inc. 3,500 88
RPC, Inc. 6,300 36
Seacor Holdings, Inc. (a) 5,400 279
Seitel, Inc. (a) 17,300 117
Swift Energy Co. (a) 5,400 62
Tidewater, Inc. 4,900 176
Ultramar Diamond Shamrock Corp. 1,600 36
UniSource Energy Corp. NPV (a) 8,200 92
Varco International, Inc. (a) 9,800 100
Vintage Petroleum, Inc. (a) 2,100 25
------- -------
3,049
------- -------
PRODUCER DURABLES - 6.8%
American Power Conversion Corp. (a) 4,000 105
AMETEK, Inc. 3,100 59
ANTEC Corp. (a) 3,900 142
Applied Power, Inc., Class A 1,500 55
Astec Industries, Inc. (a) 2,600 49
Beckman Coulter, Inc. 2,000 102
Belden, Inc. 6,200 130
Briggs & Stratton Corp. 4,100 220
Columbus McKinnon Corp. 2,800 28
CommScope, Inc. (a) 5,100 205
Cordant Technologies, Inc. 4,000 132
Crane Co. 2,700 54
Credence Systems Corp. (a) 1,700 147
CTS Corp. 6,000 452
Cummins Engine Co., Inc. 5,300 256
D.R. Horton, Inc. 9,000 124
Detroit Diesel Corp. 4,100 79
Diebold, Inc. 4,800 113
Donaldson Co., Inc. 2,400 58
Ducommun, Inc. (a) 3,450 37
DuPont Photomasks, Inc. (a) 400 19
Dura Automotive Systems, Inc. (a) 2,200 38
EMCOR Group, Inc. (a) 4,200 77
Franklin Electric Co., Inc. 600 42
General Semiconductor, Inc. (a) 5,800 82
Gleason Corp. 2,100 49
Aggressive Equity Fund 21
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
<S> <C> <C>
Howmet International, Inc. (a) 2,500 45
IDEX Corp. 1,800 55
JLG Industries, Inc. 6,700 107
Kaufman & Broad Home Corp. 5,600 135
Kent Electronics Corp. (a) 2,400 55
Lincoln Electric Holdings, Inc. NPV 5,200 107
Litton Industries, Inc. (a) 1,600 80
M.D.C. Holdings, Inc. 1,400 22
Manitowoc Co., Inc. 5,850 199
Mark IV Industries, Inc. 7,000 124
Mathews International Corp. Class A 1,900 51
Mettler-Toledo
International, Inc. New (a) 3,300 126
Micrel, Inc. NPV (a) 1,160 66
Millipore Corp. 3,200 123
Moog, Inc. (a) 1,000 27
MTS Systems Corp. 2,500 19
NACCO Industries, Inc. Class A 2,000 111
National Service Industries, Inc. 1,200 35
Novellus Systems, Inc. (a) 2,800 343
NVR, Inc. (a) 1,100 52
Optical Coating Laboratory, Inc. 600 176
Pittway Corp. Class A 1,900 85
Plexus Corp. (a) 900 40
PRI Automation, Inc. (a) 400 27
Pulte Corp. 5,200 117
Roper Industries, Inc. 1,800 68
Ryland Group, Inc. (The) 8,200 189
Sawtek, Inc. (a) 1,700 113
Sensormatic Electronics Corp. (a) 1,300 23
Smith (A.O.) Corp. 900 20
SPX Corp. (a) 4,000 323
Superior TeleCom, Inc. 1,600 25
Technitrol, Inc. 1,500 67
Tecumseh Products Co. Class A 6,400 302
Terex Corp. (a) 4,600 128
Thomas & Betts Corp. 2,800 89
Toll Brothers, Inc. (a) 1,000 19
York International Corp. 7,600 209
------- -------
6,756
------- -------
TECHNOLOGY - 25.1%
Actel Corp. (a) 9,800 235
Actuate Corp. (a) 1,700 72
Adobe Systems, Inc. 1,500 101
Adtran, Inc. (a) 4,200 216
Advanced Digital Information (a) 1,300 63
Advanced Fibre Communications (a) 3,400 152
Affiliated Computer Services, Inc. 12,900 593
Class A (a)
Allaire Corp. (a) 800 117
Alliant Techsystems, Inc. (a) 1,900 118
American Management
Systems, Inc. (a) 10,100 315
Amkor Technology, Inc. (a) 4,900 138
Amphenol Corp. Class A (a) 600 40
ANADIGICS, Inc. (a) 1,200 57
Ancor Communications, Inc. (a) 2,100 143
Anixter International, Inc. (a) 5,500 113
Applied Micro Circuits Corp. (a) 2,200 279
Arrow Electronics, Inc. (a) 5,200 132
Artesyn Technologies, Inc. (a) 2,300 48
Aspect Development, Inc. (a) 1,200 82
Atmel Corp. (a) 15,400 455
Avant! Corp. (a) 3,060 46
Avnet, Inc. 1,100 67
BEA Systems, Inc. (a) 7,600 531
Bell & Howell Co. (a) 2,300 73
BindView Development Corp. (a) 1,100 55
Black Box Corp. (a) 2,900 194
BroadVision, Inc. (a) 3,150 536
Brooktrout Technology, Inc. (a) 700 13
Burr-Brown Corp. (a) 2,800 101
C-Cube Microsystems, Inc. (a) 3,800 237
CACI International, Inc. Class A (a) 1,000 23
CDW Computer Centers, Inc. (a) 1,800 141
Checkpoint Systems, Inc. (a) 9,000 92
Citrix Systems, Inc. (a) 600 74
Clarify, Inc. (a) 900 114
CNET, Inc. (a) 3,700 210
Coherent, Inc. (a) 800 21
Compucom Systems, Inc. (a) 7,000 28
Comverse Technology, Inc. (a) 2,000 289
Concord Communications, Inc. (a) 1,700 75
Conexant Systems, Inc. (a) 8,200 542
Covad Communications
Group, Inc. (a) 3,000 167
Cybex Computer Products Corp. (a) 1,800 73
Cymer, Inc. (a) 1,700 76
Cypress Semiconductor Corp. (a) 15,400 499
Dallas Semiconductor Corp. 7,300 470
DII Group, Inc. (The) (a) 3,500 248
DoubleClick, Inc. (a) 2,144 543
Electro Rent Corp. (a) 7,600 87
Electronics For Imaging, Inc. (a) 3,500 205
Emulex Corp. (a) 2,000 226
Entrust Technologies, Inc. (a) 900 54
Esterline Corp. (a) 3,800 44
Exodus Communications, Inc. (a) 11,000 976
Go2Net, Inc. (a) 1,700 148
Great Plains Software, Inc. (a) 800 60
Hadco Corp. (a) 3,400 173
22 Aggressive Equity Fund
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
<S> <C> <C>
Haemonetics Corp. (a) 1,600 38
Harmonic Lightwaves, Inc. (a) 1,200 114
Hyperion Solutions Corp. (a) 1,100 48
i2 Technologies, Inc. (a) 1,500 297
Imation Corp. (a) 6,800 228
In Focus Systems, Inc. (a) 2,800 65
InfoSpace.com, Inc. (a) 1,400 298
Integrated Device Technology, Inc. (a) 14,900 431
Intermedia Communications, Inc. (a) 3,900 151
International Rectifier Corp. (a) 5,400 140
InterVoice, Inc. (a) 3,800 88
Intuit, Inc. (a) 1,400 84
ISS Group, Inc. (a) 1,200 85
ITI Technologies, Inc. (a) 1,700 51
Kemet Corp. (a) 1,100 50
Kopin Corp. (a) 1,400 59
Kronos, Inc. (a) 1,300 79
L-3 Communications Holdings, Inc. (a) 600 25
Lam Research Corp. (a) 1,200 134
Lattice Semiconductor Corp. (a) 2,800 132
LTX Corp. (a) 1,000 22
Macromedia, Inc. (a) 3,600 263
Macrovision Corp. (a) 1,300 96
Mercury Interactive Corp. (a) 2,400 259
Microchip Technology, Inc. (a) 3,900 267
Micromuse, Inc. (a) 1,500 255
Micron Electronics, Inc. (a) 3,600 40
MICROS Systems, Inc. (a) 1,900 140
MicroStrategy, Inc. (a) 2,100 441
Midway Games, Inc. (a) 900 22
MIPS Technologies, Inc. (a) 1,300 68
National Computer Systems, Inc. 2,300 86
National Instruments Corp. (a) 1,800 69
National Semiconductor Corp. (a) 2,100 90
Network Appliance, Inc. (a) 8,000 664
Network Equipment Technologies, Inc. (a) 1,400 17
NVIDIA Corp. (a) 700 33
P-COM, Inc. (a) 1,100 10
Park Electrochemical Corp. 3,900 104
Peregrine Systems, Inc. (a) 2,000 168
Pinnacle Systems, Inc. NPV (a) 1,400 57
PMC - Sierra, Inc. (a) 4,100 657
Power Integrations, Inc. (a) 2,300 108
Progress Software Corp. (a) 2,800 158
Proxim, Inc. (a) 500 55
QLogic Corp. (a) 2,400 384
QRS Corp. (a) 1,200 126
Quantum Corp. DLT & Storage
Systems (a) 13,500 204
Rational Software Corp. New (a) 5,000 246
Remedy Corp. (a) 4,200 199
RF Micro Devices, Inc. (a) 4,400 300
Sandisk Corp. (a) 700 68
Sapient Corp. (a) 2,200 310
SCI Systems, Inc. (a) 3,500 288
Scientific-Atlanta, Inc. 7,500 417
Scott Technologies, Inc. (a) 1,400 26
SDL, Inc. (a) 1,100 240
Semtech Corp. (a) 1,800 94
Sequa Corp. (a) 400 22
SPSS, Inc. (a) 2,600 66
Sterling Software, Inc. (a) 2,800 88
Structural Dynamics Research Corp. (a) 3,700 47
Sykes Enterprises, Inc. (a) 1,100 48
Symantec Corp. (a) 4,000 235
Symbol Technologies, Inc. 10,850 689
Synopsys, Inc. (a) 1,700 113
Tech Data Corp. (a) 1,400 38
THQ, Inc. (a) 2,550 59
TranSwitch Corp. (a) 2,200 159
Triquint Semiconductor, Inc. (a) 1,300 144
USWeb Corp. (a) 3,700 164
VeriSign, Inc. (a) 3,100 592
Veritas Software Corp. (a) 950 136
VerticalNet, Inc. (a) 1,800 294
Vignette Corp. (a) 1,900 310
Vishay Intertechnology, Inc. (a) 14,375 455
Whittman-Hart, Inc. (a) 2,500 134
Wind River Systems, Inc. (a) 1,500 55
Xircom, Inc. (a) 3,000 225
Zebra Technologies Corp. Class A (a) 3,300 191
------- -------
24,892
------- -------
UTILITIES - 7.4%
AGL Resources, Inc. 2,600 44
Allegiance Telecom, Inc. (a) 3,800 348
Alliant Energy Corp. (a) 6,900 190
Alltel Corp. 1,141 94
Associated Group, Inc. (The) Class A (a) 1,400 128
Aware, Inc. (a) 500 18
Calpine Corp. (a) 2,200 141
Cascade Natural Gas Corp. 1,100 18
Commonwealth Telephone
Enterprises, Inc. (a) 4,300 226
Conectiv, Inc. 15,900 267
Energen Corp. 8,700 157
Energy East Corp. 17,100 356
Hawaiian Electric Industries, Inc. 4,800 139
Aggressive Equity Fund 23
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
<S> <C> <C>
Laclede Gas Co. 3,100 67
Leap Wireless International, Inc. (a) 1,900 148
LG&E Energy Corp. 11,300 197
McLeodUSA, Inc. (a) 4,300 253
MDU Resources Group, Inc. 1,700 34
Minnesota Power, Inc. 7,100 120
National Fuel Gas Co. 2,500 116
NICOR, Inc. 3,300 107
NiSource, Inc. NPV 10,700 191
Northwest Natural Gas Co. 6,400 139
NUI Corp. 2,900 77
OGE Energy Corp. 4,700 89
Omnipoint Corp. (a) 1,600 193
Paging Network, Inc. (a) 38,000 30
Peoples Energy Corp. 1,200 40
Powertel, Inc. (a) 1,300 130
Powerwave Technologies, Inc. (a) 1,200 70
Price Communications Corp. (a) 2,900 81
Public Service Co. of New Mexico 14,400 234
Questar Corp. 7,600 114
Razorfish, Inc. (a) 975 93
RGS Energy Group, Inc. 9,100 187
Sierra Pacific Resources NPV 4,200 73
Southwest Gas Corp. 5,000 115
Southwestern Energy Co. 8,200 54
TALK.com, Inc. (a) 2,100 37
TECO Energy, Inc. 7,100 132
Telephone & Data Systems, Inc. 500 63
TNP Enterprises, Inc. 5,100 210
UGI Corp. 11,300 231
United Illuminating Co. 3,200 164
United States Cellular Corp. (a) 1,500 151
UtiliCorp United, Inc. 12,750 248
VoiceStream Wireless Corp. NPV (a) 2,900 411
Western Resources, Inc. 9,000 153
WICOR, Inc. 4,000 117
WinStar Communications, Inc. (a) 2,200 165
WPS Resources Corp. 4,700 118
-------
7,278
-------
TOTAL COMMON STOCKS
(cost $82,182) 90,816
-------
PRINCIPAL
AMOUNT
(000)
$
---------
SHORT-TERM INVESTMENTS - 7.9%
Frank Russell Investment Company 7,238 7,238
Money Market Fund,
due on demand (b)
United States Treasury Bills (b)(c)(d)
4.750% due 01/20/00 150 149
4.845% due 01/20/00 450 449
-------
TOTAL SHORT-TERM INVESTMENTS
(cost $7,836) 7,836
-------
TOTAL INVESTMENTS - 99.5%
(identified cost $90,018) 98,652
OTHER ASSETS AND LIABILITIES,
Net - 0.5% 498
-------
NET ASSETS - 100.0% 99,150
-------
-------
</TABLE>
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
(c) Held as collateral in connection with futures contracts purchased by the
Fund.
(d) Rate noted is yield-to-maturity from date of acquisition.
ABBREVIATIONS:
NPV - No Par Value
See accompanying notes which are an integral part of the financial statements.
24 Aggressive Equity Fund
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
<TABLE>
<CAPTION>
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
--------- --------------
<S> <C> <C>
FUTURES CONTRACTS
S&P 500 Index 8 $ 87
expiration date 03/00
S&P 400 Midcap Index 20 209
------------
expiration date 03/00
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ 296
------------
------------
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Aggressive Equity Fund 25
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
Amounts in thousands (EXCEPT PER SHARE AMOUNTS) December 31, 1999
<S> <C> <C>
ASSETS
Investments at market (identified cost $90,018) .......................... $ 98,652
Receivables:
Dividends ............................................................. 128
Investments sold ...................................................... 4,279
Fund shares sold ...................................................... 21
Daily variation margin on futures contracts ........................... 35
Deferred organization expenses ........................................... 3
-----------------
Total assets ....................................................... 103,118
LIABILITIES
Payables:
Investments purchased .................................... $ 3,814
Fund shares redeemed ..................................... 1
Accrued fees to affiliates ............................... 87
Other accrued expenses ................................... 66
---------
Total liabilities .................................................. 3,968
-----------------
NET ASSETS ............................................................... $ 99,150
-----------------
-----------------
NET ASSETS CONSIST OF:
Undistributed net investment income ...................................... $ 42
Accumulated net realized gain (loss) ..................................... 1,501
Unrealized appreciation (depreciation) on: ...............................
Investments ........................................................... 8,634
Futures contracts ..................................................... 296
Shares of beneficial interest ............................................ 74
Additional paid-in capital ............................................... 88,603
-----------------
NET ASSETS ............................................................... $ 99,150
-----------------
-----------------
NET ASSET VALUE, offering and redemption price per share:
($99,150,194 divided by 7,421,694 shares of $.01 par value
shares of beneficial interest outstanding) ......................... $ 13.36
-----------------
-----------------
</TABLE>
See accompanying notes which are an integral part of the financial statements.
26 Aggressive Equity Fund
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Amounts in thousands Year Ended December 31, 1999
<S> <C> <C>
INVESTMENT INCOME
Dividends ............................................................. $ 773
Dividends from Money Market Fund ...................................... 166
Interest .............................................................. 28
-----------------
Total investment income ............................................ 967
EXPENSES
Management fees .......................................... $ 567
Custodian fees ........................................... 156
Professional fees ........................................ 14
Registration fees ........................................ 16
Trustees' fees ........................................... 9
Amortization of deferred organization expenses ........... 1
Miscellaneous ............................................ 34
----------
Expenses before reductions ............................... 797
Expense reductions ....................................... (51)
----------
Expenses, net ..................................................... 746
-----------------
Net investment income ................................................... 221
-----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments .............................................. 1,763
Futures contracts ........................................ 267 2,030
----------
Net change in unrealized appreciation (depreciation) on:
Investments .............................................. 5,867
Futures contracts ........................................ 174 6,041
---------- -----------------
Net realized and unrealized gain (loss) .................................. 8,071
-----------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS .................... $ 8,292
-----------------
-----------------
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Aggressive Equity Fund 27
<PAGE>
AGGRESSIVE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands Years Ended December 31,
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income .................................................... $ 221 $ 37
Net realized gain (loss) ................................................. 2,030 (180)
Net change in unrealized appreciation (depreciation) ..................... 6,041 367
---------- ----------
Net increase (decrease) in net assets from operations ................. 8,292 224
---------- ----------
DISTRIBUTIONS
From net investment income ............................................... (193) (26)
From net realized gain ................................................... (340) (1,107)
---------- ----------
Net decrease in net assets from distributions ......................... (533) (1,133)
---------- ----------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ............ 66,784 10,144
---------- ----------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ................................. 74,543 9,235
NET ASSETS
Beginning of period ...................................................... 24,607 15,372
---------- ----------
End of period (including undistributed net investment income of
$42 and $14, respectively) ............................................ $ 99,150 $ 24,607
---------- ----------
---------- ----------
</TABLE>
See accompanying notes which are an integral part of the financial statements.
28 Aggressive Equity Fund
<PAGE>
AGGRESSIVE EQUITY FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1999
-------------------------------------
1999 1998 1997*
-------- -------- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.......................... $ 12.70 $ 13.45 $ 10.00
-------- -------- --------
INCOME FROM OPERATIONS
Net investment income (a).................................. .05 .02 .04
Net realized and unrealized gain (loss).................... .71 .13 3.45
-------- -------- --------
Total income from operations............................ .76 .15 3.49
-------- -------- --------
DISTRIBUTIONS
From net investment income................................. (.04) (.02) (.04)
From net realized gain..................................... (.06) (.88) --
-------- -------- --------
Total distributions..................................... (.10) (.90) (.04)
-------- -------- --------
NET ASSET VALUE, END OF PERIOD................................ $ 13.36 $ 12.70 $ 13.45
-------- -------- --------
-------- -------- --------
TOTAL RETURN (%)(b)........................................... 6.08 1.02 35.07
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)................... 99,150 24,607 15,372
Ratios to average net assets (%)(c):
Operating expenses, net................................. 1.25 1.25 1.25
Operating expenses, gross............................... 1.34 1.67 2.22
Net investment income................................... .37 .19 .39
Portfolio turnover rate (%)................................ 111.46 79.88 91.56
</TABLE>
* For the period January 2, 1997 (commencement of operations) to December 31,
1997.
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
Aggressive Equity Fund 29
<PAGE>
NON-US FUND
PORTFOLIO MANAGEMENT DISCUSSION
December 31, 1999 (Unaudited)
OBJECTIVE: To provide favorable total return and additional diversification for
US investors by investing primarily in equity and fixed-income securities of
non-US companies, and securities issued by non-US governments.
INVESTS IN: Primarily the equity securities of non-US companies in developed
foreign markets.
STRATEGY: The Fund uses a multi-manager strategy intended to achieve higher
returns with moderate risk by employing the investment management services of
four managers with three separate and distinct investment approaches. The Fund's
primary source of added value is intended to be stock selection with only
moderate country allocations relative to the index to capture the
diversification benefits of international investment in an asset allocation
context.
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT
SALOMON SMITH BARNEY BMI WORLD LIPPER-REGISTERED TRADEMARK-
DATES NON-US FUND EX-US++++ INTERNATIONAL++
<S> <C> <C> <C>
Inception* $10,000 $10,000 $10,000
1997 $10,030 $10,261 $10,513
1998 $11,330 $12,030 $11,870
1999 $15,109 $15,486 $16,588
YEARLY PERIODS ENDED DECEMBER 31
</TABLE>
<TABLE>
<CAPTION>
NON-US FUND
PERIODS ENDED GROWTH OF TOTAL
12/31/99 $10,000 RETURN
------------- --------- ------
<S> <C> <C>
1 Year $13,336 33.36%
Inception $15,109 14.78%Section
</TABLE>
<TABLE>
<CAPTION>
LIPPER-REGISTERED TRADEMARK- INTERNATIONAL FUNDS BENCHMARK
PERIODS ENDED GROWTH OF TOTAL
12/31/99 $10,000 RETURN
------------- --------- ------
<S> <C> <C>
1 Year $13,974 39.74%
Inception $16,588 18.38%Section
</TABLE>
<TABLE>
<CAPTION>
SALOMON SMITH BARNEY BROAD MARKET INDEX (BMI) EX-US
PERIODS ENDED GROWTH OF TOTAL
12/31/99 $10,000 RETURN
------------- --------- ------
<S> <C> <C>
1 Year $12,873 28.73%
Inception $15,486 15.70%Section
</TABLE>
30 Non-US Fund
<PAGE>
NON-US FUND
PORTFOLIO MANAGEMENT DISCUSSION
December 31, 1999 (Unaudited)
PERFORMANCE REVIEW
For the year ended December 31, 1999, the Non-US Fund had a total return of
33.4% as compared to the Salomon Smith Barney Broad Market Index (BMI) ex-US,
which gained 28.7% for the year. The Fund's performance advantage over the
benchmark was primarily due to the strong results of its growth- oriented
managers during the year.
PORTFOLIO HIGHLIGHTS
Dominant trends in the non-US developed markets were once again similar to those
in the US. Technology trounced other sectors, particularly late in the year, as
Internet enthusiasm spread globally. Positive economic momentum also helped Fund
performance, with Japan in particular appearing to be on its way to recovery.
Japan led all other international markets, with the BMI- Japan Index up 68% for
the year. Continental European markets were strong performers as the European
Union continued to foster optimism in the stock market. The United Kingdom
performed well, but lagged the majority of other major markets as it struggled
with inflationary pressures.
The Fund's value manager performed well relative to its value-biased peers,
though it trailed broad market benchmarks. The growth managers produced gains
well ahead of the BMI-ex US. The Fund finished the year behind the average
international fund tracked by Lipper Analytical Services, which gained 39.7%.
The Fund's restrictions on emerging markets investments accounted for the
shortfall.
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
(as a percent of Total Investments) December 31, 1999
<S> <C>
Mannesmann AG NPV (Germany) 2.2%
Koninklijke KPN NV (Netherlands) 1.9
Nippon Telegraph & Telephone Corp. (Japan) 1.6
Fujitsu, Ltd. (Japan) 1.4
NTT Mobile Communication Network, Inc. (Japan) 1.4
Sony Corp. (Japan) 1.4
Vivendi (France) 1.2
Vodafone Group PLC (United Kingdom) 1.1
Glaxo Wellcome PLC (United Kingdom) 1.0
Telecom Italia Mobile SPA (Italy) 1.0
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
December 31, 1999
<S> <C>
Current P/E Ratio 27.37x
Portfolio Price/Book Ratio 3.43x
Market Capitalization - $- Weighted Average 54.6 Bil
Number of Holdings 427
</TABLE>
<TABLE>
<CAPTION>
MONEY MANAGERS STYLES
<S> <C>
J.P. Morgan Investment Management, Inc. Market Oriented
Montgomery Asset Management, LLC Growth
Oechsle International Advisors Growth
The Boston Company Asset Management, Inc. Value
</TABLE>
* The Fund commenced operations on January 2, 1997. Index comparison began
January 1, 1997.
++ Lipper-Registered Trademark- International Funds Benchmark is the average
total return for the universe of funds within the International Funds
investment objective. The total return for the funds reflects adjustments
for income dividends and capital gains distributions reinvested as of the
ex-dividend dates.
++++ Salomon Smith Barney BMI Index ex-US is a comprehensive float-weighted
equity index consisting of every company with an investable market
capitalization of over $100 million in 22 countries. This Index has broader
representation than the MSCI EAFE Index.
Section Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Non-US Fund 31
<PAGE>
NON-US FUND
STATEMENT OF NET ASSETS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
----------- ---------
<S> <C> <C>
COMMON STOCKS - 89.9%
AUSTRALIA - 1.7%
AMP, Ltd. 5,300 59
Australia & New Zealand Bank Group, 194,154 1,412
Ltd.
Broken Hill Proprietary Co. 7,600 100
Cable & Wireless Optus, Ltd. NPV (a) 198,500 663
CSR, Ltd. 19,600 48
Goodman Fielder Wattie 202,257 181
Lend Lease Corp. 6,100 85
National Australia Bank, Ltd. 8,600 132
Pacific Dunlop, Ltd. 140,741 199
Southcorp Holdings, Ltd. 26,100 92
Telstra Corp., Ltd. (a) 7,498 26
Telstra Corp., Ltd. NPV 23,400 127
Westpac Banking Corp. 9,300 64
WMC, Ltd. 9,300 52
--------
3,240
--------
AUSTRIA - 0.2%
Bank Austria AG 8,500 479
--------
BELGIUM - 0.2%
Dexia NPV 200 32
Dexia NPV (a) 2,050 339
Real Software NPV 300 24
--------
395
--------
CANADA - 0.8%
BCE, Inc. 11,326 1,029
Seagram Co., Ltd. 11,583 519
--------
1,548
--------
DENMARK - 0.2%
Jyske Bank A/S (Regd) (a) 14,500 292
Ratin A/S Series B 581 66
--------
358
--------
FINLAND - 1.4%
Comptel Oyj NPV (a) 163 11
Helsinki Telephone Corp. Series E 5,800 483
Kesko Oyj 22,500 286
Nokia Oyj 9,905 1,796
Sonera Oyj 1,918 131
Tietoenator Oyj NPV 1,680 106
--------
2,813
--------
FRANCE - 11.0%
Alcatel Alsthom 5,177 1,189
Alstom (a) 42,262 1,409
Assurances Generales de France 7,774 421
Atos SA (a) 408 68
Aventis SA (a) 17,793 1,032
AXA - UAP 6,197 864
Banque Nationale Paris 15,625 1,442
Bongrain SA 600 199
Carrefour SA (a) 7,893 1,456
Castorama Dubois 2,640 803
Christian Dior SA 800 198
Cie de St. Gobain 769 145
CNP Assurances (a) 1,500 55
Coflexip SA 2,526 184
Elf Aquitaine - ADR 500 38
France Telecom SA 5,170 684
Groupe Danone 750 177
L'Air Liquide 5,705 955
Lagardere Groupe (Regd) 2,140 116
Michelin (Cie Gen) Class B (Regd) 9,792 385
Peugeot SA 850 193
Pinault-Printemps- Redoute SA (a) 740 195
Renault (Regie Nationale) 1,343 65
Rhodia SA 24,423 552
Rhone-Poulenc SA Class A - ADR 23,650 1,375
Societe Generale 1,624 378
Suez Lyonnaise des Eaux 6,551 1,050
Thomson-CSF 11,600 383
Total Co. SA Class B (a) 9,132 1,219
Total Fina SA - ADR 6,837 473
TV Francaise (TF1) 900 471
Usinor Sacilor 19,606 368
Valeo SA 7,900 610
Vivendi (a) 26,817 2,422
--------
21,574
--------
GERMANY - 7.4%
BASF AG 3,951 203
Bayer AG 15,302 724
Bayerische Hypo Vereinsbank AG 5,400 369
Bayerische Motoren Werke AG (a) 14,514 443
Bilfinger & Berger BAU AG 2,403 52
Celanese AG NPV (a) 1,239 23
Consors Discount Broker AG NPV (a) 760 64
DaimlerChrysler AG 3,790 295
Deutsche Bank AG (Regd) NPV (a) 10,407 879
Deutsche Lufthansa AG 40,031 932
Deutsche Telekom AG 11,288 804
Entrium Direct Bankers AG NPV (a) 2,700 41
Epcos AG NPV (a) 6,600 495
Hochtief AG 1,443 54
Hoechst AG 2,025 62
Mannesmann AG NPV (a) 17,478 4,217
Merck KGAA 13,934 432
32 Non-US Fund
<PAGE>
NON-US FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
----------- ---------
<S> <C> <C>
Metallgesellschaft AG (a) 8,000 160
ProSieben Media AG - ADR (a) 40 1
SAP AG 394 194
SAP AG - ADR 3,200 167
Schering AG 734 89
Siemens AG NPV (a) 13,434 1,709
Stinnes AG NPV (a) 3,471 73
Thyssen Krupp AG NPV (a) 4,351 133
Veba AG 21,647 1,052
Viag AG NPV (a) 13,515 248
Volkswagen AG 11,029 621
--------
14,536
--------
GREECE - 0.3%
Hellenic Telecommunication
Organization SA - ADR 46,914 560
--------
HONG KONG - 1.5%
Cathay Pacific Airways 67,000 119
CDL Hotels International 158,000 63
Cheung Kong Holdings, Ltd. 68,000 862
Dao Heng Bank Group, Ltd. 26,000 134
Henderson Investment, Ltd. 172,000 178
Henderson Land Development Co., Ltd. 52,000 334
Hong Kong Electric Holding, Ltd. 172,357 539
Hong Kong Telecommunications, Ltd. 38,000 110
Hutchison Whampoa, Ltd. 16,000 233
SmarTone Telecommunications 15,500 75
Holdings, Ltd.
Sun Hung Kai Properties, Ltd. 20,000 208
--------
2,855
--------
IRELAND - 0.2%
Bank of Ireland 12,525 100
CRH PLC 4,298 93
Irish Life & Permanent PLC 5,181 49
Jefferson Smurfit Group PLC 42,718 128
--------
370
--------
ITALY - 4.1%
Assicurazioni Generali SpA 2,639 87
Banca Nazionale del Lavoro (a) 175,734 586
Banca Popolare di Bergamo CV 8,300 192
Banca Popolare di Brescia 732 65
Banco Fideuram SpA 14,900 177
ENI SpA - ADR 7,800 430
Ente Nazionale Idrocarburi SpA 62,571 344
(Regd)
Fiat SpA (a) 2,650 76
Istituto Mobiliare Italiano SpA 46,084 626
Mediaset SpA 97,625 1,518
Mediolanum SpA 6,066 79
Saipem SpA 13,000 47
Telecom Italia Mobile SpA 176,284 1,969
Telecom Italia SpA (a) 98,813 602
Telecom Italia SpA di Risp (a) 57,228 807
Unicredito Italiano SpA 78,044 385
--------
7,990
--------
JAPAN - 24.8%
77th Bank, Ltd. (The) 38,000 398
Advantest Corp. 400 106
Aiful Corp. 1,900 232
Ajinomoto Co., Inc. 7,000 73
Asahi Bank, Ltd. 30,000 185
Asahi Glass Co., Ltd. 57,000 441
Bank of Fukuoka, Ltd. (The) 10,000 69
Bank of Tokyo - Mitsubishi, Ltd. 60,000 836
Bridgestone Tire Corp. 5,000 110
Canon, Inc. 34,000 1,351
Citizen Watch Co., Ltd. 12,000 76
Credit Saison Co. 26,900 469
Dai-Tokyo Fire & Marine 76,000 310
Daiwa Securities Group, Inc. 41,000 642
DDI Corp. 15 206
Ebara Corp. 17,000 190
Fanuc Co. 1,200 153
Fuji Bank, Ltd. 128,000 1,244
Fuji Heavy Industries, Ltd. 10,000 69
Fuji Machine Manufacturing Co. 10,000 806
Fujitsu, Ltd. 60,000 2,737
Hitachi Software Engineering Co., 1,000 146
Ltd.
Hitachi, Ltd. 120,000 1,926
Honda Motor Co., Ltd. 14,000 521
Ito-Yokado Co., Ltd. 2,000 217
Itochu Corp. (a) 45,000 224
Japan Tobacco, Inc. 9 69
Kaken Pharmaceutical Co., Ltd. 4,000 22
Kao Corp. 37,000 1,056
Kawasaki Steel Corp. (a) 45,000 81
Kyocera Corp. 6,900 1,790
Mabuchi Motor Co., Ltd. 4,900 855
Marubeni Corp. 145,000 609
Marui Co., Ltd. 2,000 30
Matsumotokiyoshi 7,300 565
Matsushita Communication 200 53
Matsushita Electric Industrial Co., 18,000 499
Ltd.
Minebea Co., Ltd. 60,000 1,029
Mitsubishi Chemical 68,000 240
Non-US Fund 33
<PAGE>
NON-US FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
----------- ---------
<S> <C> <C>
Mitsubishi Corp. 34,000 263
Mitsubishi Estate Co., Ltd. 28,000 273
Mitsubishi Heavy Industries 76,000 254
Mitsubishi Trust & Banking 2,000 18
Mitsui Fudosan Co., Ltd. 26,000 176
Mitsui Marine & Fire Insurance Co., 12,000 71
Ltd.
Mitsui Trust & Banking Co., Ltd. 13,000 29
Murata Manufacturing Co., Ltd. 1,000 235
Namco 14,000 907
NEC Corp. 8,000 191
Nichiei Co., Ltd. 6,800 148
Nikko Securities Co., Ltd. 99,000 1,253
Nintendo Co., Ltd. 700 116
Nippon Express Co., Ltd. 108,000 597
Nippon Steel Corp. 90,000 211
Nippon Telegraph & Telephone Corp. 184 3,152
Nippon Yusen 65,000 266
Nishimatsu Construction 79,000 317
Nissan Motor Co., Ltd. (a) 105,000 413
Nomura Securities Co., Ltd. 24,000 433
NTT Mobile Communication Network, 70 2,693
Inc. NPV
Omron Corp. 4,000 92
Osaka Gas Co. 36,000 87
Pioneer Electronics Corp. 9,000 238
Promise Co., Ltd. 2,400 122
Ricoh Co., Ltd. 13,000 245
Rinnai Corp. 19,200 357
Rohm Co. 4,500 1,850
Sakura Bank, Ltd. 58,000 336
Sankyo Co., Ltd. 19,000 391
Sankyo Co., Ltd. GUNMA 1,100 82
Sanwa Bank 38,000 462
Sanyo Electric Co., Ltd. 18,000 73
Sekisui Chemical Co., Ltd. 18,000 80
Shin-Etsu Chemical Co., Ltd. 5,000 215
Shohkoh Fund & Co., Ltd. 1,340 531
Snow Brand Milk Products Co., Ltd. 13,000 52
Softbank Corp. 800 766
Sony Corp. 8,900 2,639
Sony Music Entertainment, Inc. 4,000 798
Sumitomo Bakelite Co., Ltd. 6,000 54
Sumitomo Bank 7,000 96
Sumitomo Rubber Industries 20,000 88
Suzuki Motor Corp. 11,000 161
Taiheiyo Cement Corp. 20,000 38
Taisho Pharmaceutical Co., Ltd. 14,000 411
Takeda Chemical Industries 6,000 297
Takefuji Corp. 3,400 426
Tokuyama Corp. 16,000 59
Tokyo Electric Power 6,200 166
Tokyo Electron, Ltd. 4,000 548
Tokyo Gas Co. 32,000 78
Tokyo Steel Manufacturing 8,000 28
Toppan Printing Co., Ltd. 8,000 80
Toshiba Corp. 98,000 748
Tostem Corp. 7,000 126
Toyo Trust & Banking Co., Ltd. (The) 21,000 86
Toyota Motor Corp. 31,000 1,502
UNY Co., Ltd. 7,000 68
West Japan Railway Co. 73 259
Yamaha Corp. 3,000 19
Yamanouchi Pharmaceutical 28,000 977
York-Benimaru Co., Ltd. 1,000 26
Yoshitomi Pharmaceutical Ind., Ltd. 7,000 88
--------
48,496
--------
MALAYSIA - 0.1%
Genting Berhad 16,000 57
IOI Corporated Berhad 81,000 49
--------
106
--------
NETHERLANDS - 9.7%
ABN Amro Holding NV 44,412 1,110
Aegon NV 5,308 513
AKZO Nobel NV 12,300 617
AKZO Nobel NV - ADR 6,994 349
Buhrmann NV 24,253 365
Equant NV - NY Reg Share (a) 8,561 972
Fortis (NL) NV 14,998 540
Getronics NV 1,435 114
Heineken NV 14,600 712
Hollandsche Beton Groep NV 10,570 101
Hunter Douglas NV 14,413 392
ING Groep NV 23,207 1,401
Koninklijke (Royal) Philips 3,044 414
Electronics NV (a)
Koninklijke KPN NV 37,356 3,646
Koninklijke KPN NV- ADR 2,478 238
Koninklijke Numico NV 2,767 103
KPNQwest NV (a) 2,559 170
Laurus NV 19,038 343
Royal Dutch Petroleum Co. 12,395 760
STMicroelectronics (a) 10,482 1,613
Stork NV 18,615 272
Unilever NV (a) 8,100 441
United Pan-Europe Communications NV 5,175 662
(a)
Vedior 26,343 271
Vendex NV 41,811 1,112
34 Non-US Fund
<PAGE>
NON-US FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
----------- ---------
<S> <C> <C>
VNU NV 29,450 1,549
Wolters Kluwer NV (a) 5,328 181
--------
18,961
--------
NEW ZEALAND - 0.7%
Fletcher Challenge Building 2,800 4
Fletcher Challenge Energy 1,600 4
Fletcher Challenge Paper 242,045 169
Telecom Corp. of New Zealand, Ltd. 250,606 1,179
NPV
--------
1,356
--------
NORWAY - 0.5%
Norsk Hydro AS 5,000 210
Orkla ASA Class A 21,628 373
Petroleum Geo- Services ASA - ADR (a) 26,500 472
--------
1,055
--------
PORTUGAL - 0.5%
Banco Pinto & Sotto Mayor SA 6,516 140
Electricidade de Portugal SA 8,700 152
Portugal Telecom SA (a) 46,550 511
PT MULTIMEDIA - Servicos de
Telecomunicacoes e Multimedia
SGPS SA (a) 1,468 83
--------
886
--------
SINGAPORE - 0.9%
Creative Technology, Ltd. (a) 16,400 281
DBS Group Holdings, Ltd. (a) 40,793 669
Neptune Orient Lines, Ltd. (a) 57,000 76
Oversea-Chinese Banking Corp., Ltd. 20,000 184
Singapore Press Holdings, Ltd. 3,400 74
Singapore Telecommunications, Ltd. 32,000 66
United Overseas Bank, Ltd. 45,024 397
Venture Manufacturing (Singapore),
Ltd. 9,000 103
--------
1,850
--------
SOUTH KOREA - 0.3%
Samsung Electronics - GDR (a) 5,370 651
--------
SPAIN - 3.2%
Banco Bilbao Vizcaya SA 5,597 80
Banco Popular Espanol SA 11,137 726
Banco Santander Central Hispano SA 66,451 752
(a)
Centros Comerciales Continente S.A. 2,147 43
Corporacion Bancaria de Espana SA 30,050 706
(Regd)
Endesa SA 45,860 911
Indra Sistemas SA 5,784 109
Repsol SA (a) 8,700 202
Repsol SA - ADR 25,824 600
Tabacalera SA Class A (Regd) 37,621 538
Telefonica SA (a) 61,095 1,526
Union Electrica Fenosa SA 3,477 62
--------
6,255
--------
SWEDEN - 1.9%
ABB, Ltd. (a) 722 88
Autoliv, Inc. 16,286 477
Electrolux AB Series B 2,556 64
Foreningssparbanken AB Series A 4,327 64
Modern Times Group MTG AB Series B 1,076 53
(a)
Skandia Forsakrings AB 3,010 91
SKF AB Series B 18,279 445
Stora Enso Oyj Class R 15,045 258
Telefonaktiebolaget Ericsson (LM)
Class B - ADR 2,900 190
Telefonaktiebolaget Ericsson (LM)
Series B 29,254 1,880
--------
3,610
--------
SWITZERLAND - 3.4%
Barry Callebaut AG (Regd) 2,206 321
Clariant AG (Regd) 1,773 845
Forbo Holding AG (Regd) 629 296
Geberit International AG (a) 195 67
Holderbank Financiere Glarus AG (BR) 48 66
Julius Baer Holding Ltd., Class B 90 272
Nestle SA (Regd) 232 425
Novartis AG (Regd) 622 913
Richemont Series A (BR) 56 134
Roche Holdings Genusscheine AG NPV 49 582
Schweizerische Lebensversicherungs-
und Rentenanstalt (a) 130 76
SGS Holding (BR) (a) 50 64
Sulzer AG (Regd) (a) 441 287
Swisscom AG (Regd) 1,921 776
UBS AG (Regd) 4,369 1,180
Zurich Allied AG 519 295
--------
6,599
--------
Non-US Fund 35
<PAGE>
NON-US FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
----------- ---------
<S> <C> <C>
TAIWAN - 0.1%
Hon Hai Precision Industry Co., Ltd.
GDR (a) 10,300 199
--------
UNITED KINGDOM - 14.3%
Allied Zurich AG 30,450 359
ARM Holdings PLC (a) 800 54
Arriva PLC 2,700 11
Barclays Bank PLC 40,622 1,167
Bass PLC 3,985 50
BG Group PLC (a) 10,488 68
Billiton PLC 21,800 129
BOC Group PLC 15,602 336
BP Amoco PLC 90,726 916
British Aerospace PLC 223,825 1,471
British Airways PLC 27,746 181
British American Tobacco PLC 9,150 52
British Sky Broadcasting Group PLC 9,800 158
British Telecom PLC 38,600 935
Bunzl PLC 110,088 605
Cable & Wireless PLC 17,700 304
Cadbury Schweppes PLC (a) 13,600 82
CMG PLC 700 51
Compass Group PLC 15,700 216
Corus Group PLC (a) 162,600 423
Diageo PLC 201,958 1,612
Dixons Group PLC 3,700 89
Enterprise Oil PLC 3,400 23
FirstGroup PLC 13,000 50
Freeserve PLC (a) 30,900 314
Glaxo Wellcome PLC 72,269 2,048
Glynwed International PLC 21,500 83
Great University Stores PLC 6,900 40
Hanson PLC 10,300 86
Hays PLC 3,000 48
HSBC Holdings PLC 67,514 936
Imperial Chemical Industries PLC 44,265 468
Invensys PLC 157,100 831
Kingfisher PLC 9,700 108
Laird Group PLC 52,832 207
Lloyds TSB Group PLC 48,400 601
Marconi PLC 10,600 187
Marks & Spencer PLC 65,932 315
Medeva PLC 817 2
MEPC PLC 12,743 96
MFI Furniture Group PLC 23,684 17
Morgan Crucible PLC 107,062 500
National Power PLC 109,839 633
NDS Group PLC - ADR (a) 257 8
Northern Foods PLC 2,600 4
Norwich Union PLC (a) 4,300 33
Nycomed Amersham PLC 7,319 46
Ocean Group PLC 2,400 45
Pearson PLC 6,700 218
Pilkington Brothers PLC 24,800 34
PowerGen PLC 51,863 373
Prudential Corp. PLC 26,500 517
Racal Electronics PLC 13,800 124
Railtrack Group PLC 26,285 442
Reckitt Benckiser PLC 4,200 40
Reed International PLC 108,501 815
Reuters Group PLC 6,200 86
Rexam PLC 103,081 420
Rio Tinto Corp. PLC (Regd) 22,596 542
Royal & Sun Alliance Insurance Group 82,339 617
PLC (a)
Royal Bank of Scotland Group PLC 27,844 493
Safeway PLC 99,638 346
Sage Group PLC (The) 5,000 61
Scottish & Southern Energy PLC 37,660 300
ScottishPower PLC 20,000 152
SEMA Group PLC 1,800 32
Smith & Nephew PLC 6,200 21
SmithKline Beecham PLC 23,200 294
Somerfield PLC 79,796 116
Tate & Lyle, Ltd. PLC 4,200 27
TeleWest Communications PLC (a) 98,517 523
Tesco Store Holdings PLC 34,800 106
Thus PLC (a) 5,000 32
TI Group PLC 4,300 31
Tomkins PLC 79,900 261
Unilever PLC (a) 58,870 433
Vodafone Group PLC 431,259 2,150
Williams PLC 9,700 44
Wolseley PLC 64,427 494
Woolwich PLC 20,200 107
Zeneca Group PLC 18,708 776
--------
28,025
--------
UNITED STATES - 0.5%
Global TeleSystems Group, Inc. (a) 16,500 571
Infonet Services Corp. Class B (a) 14,400 378
--------
949
--------
TOTAL COMMON STOCKS
(cost $145,392) 175,716
--------
36 Non-US Fund
<PAGE>
NON-US FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
----------- ---------
<S> <C> <C>
PREFERRED STOCKS - 1.6%
AUSTRALIA - 0.1%
News Corp., Ltd. 24,400 209
--------
BRAZIL - 0.3%
Telecomunicacoes Brasileiras SA -
ADR (a) 4,500 578
--------
GERMANY - 1.2%
Hugo Boss AG (a) 1,550 198
Marschollek, Lautenschlaeger und 130 39
Partner AG NPV (a)
Porsche AG 145 397
ProSieben Media AG NV 5,945 346
Rheinmetall AG 5,000 53
SAP AG 2,053 1,237
Volkswagen AG 831 27
--------
2,297
--------
LUXEMBOURG - 0.0%
AB International Cayman Trust Units
(conv.) 2,000,000 29
--------
TOTAL PREFERRED STOCKS
(cost $2,516) 3,113
--------
<CAPTION>
PRINCIPAL
AMOUNT (000) $
--------------
<S> <C> <C>
LONG-TERM INVESTMENTS - 0.0%
UNITED KINGDOM - 0.0%
BG Transco Holdings PLC (a) GBP 1 2
7.057% due 12/14/09
4.188% due 12/14/22 GBP 1 1
7.000% due 12/16/24 GBP 1 2
--------
TOTAL LONG-TERM INVESTMENTS
(cost $8) 5
--------
SHORT-TERM INVESTMENTS - 7.8%
UNITED STATES - 7.8%
Frank Russell Investment Company
Money Market Fund, due on demand
(b) 13,615 13,615
United States Treasury Bills
4.670% due 01/20/00 (b)(c)(d) 1,700 1,695
--------
TOTAL SHORT-TERM INVESTMENTS
(cost $15,310) 15,310
--------
TOTAL INVESTMENTS - 99.3%
(identified cost $163,226) 194,144
OTHER ASSETS AND LIABILITIES,
NET - 0.7% 1,375
--------
NET ASSETS - 100.0% 195,519
--------
--------
</TABLE>
(a) Nonincome-producing security.
(b) At amortized cost, which approximates market.
(c) Held as collateral in connection with futures contracts purchased by the
Fund.
(d) Rate noted is yield-to-maturity from date of acquisition.
ABBREVIATIONS:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
NPV - No Par Value
NV - Nonvoting
BR - Bearer
FOREIGN CURRENCY ABBREVIATIONS:
EUR - Eurodollar
GBP - British pound
JPY - Japanese yen
USD - U.S. dollar
See accompanying notes which are an integral part of the financial statements.
Non-US Fund 37
<PAGE>
NON-US FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
<TABLE>
<CAPTION>
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
--------- --------------
<S> <C> <C>
Futures Contracts
TOPIX Index (Japan)
expiration date 03/ 00 32 $263
FTSE - 100 Index (UK)
expiration date 03/ 00 28 123
CAC-40 Index (France)
expiration date 03/ 00 60 271
DAX Index (Germany)
expiration date 03/ 00 20 376
------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $1,033
------
------
</TABLE>
<TABLE>
<CAPTION>
MARKET
% OF VALUE
NET (000)
INDUSTRY DIVERSIFICATION (UNAUDITED) ASSETS $
- ------------------------------------ -------- ----------
<S> <C> <C>
Auto & Transportation 4.8% 9,393
Consumer Discretionary 13.0 25,412
Consumer Staples 4.2 8,255
Financial Services 17.1 33,407
Health Care 4.5 8,713
Integrated Oils 0.7 1,276
Materials & Processing 8.5 16,583
Miscellaneous 1.7 3,278
Other Energy 2.5 4,898
Producer Durables 10.3 20,211
Technology 8.8 17,273
Utilities 15.4 30,130
Short-Term Investments 7.8 15,310
Long-Term Investments 0.0 5
-------- ----------
Total Investments 99.3 194,144
Other Assets and Liabilities, Net 0.7 1,375
-------- ----------
NET ASSETS 100.0% 195,519
-------- ----------
-------- ----------
</TABLE>
<TABLE>
<CAPTION>
GEOGRAPHIC DIVERSIFICATION MARKET
(UNAUDITED) % OF VALUE
NET (000)
ASSETS $
- -------------------------- --------- -----------
<S> <C> <C>
Europe 45.4% 88,766
Japan 24.8 48,496
United Kingdom 14.3 28,030
Pacific Basin 5.4 10,466
United States 8.3 16,260
Other 1.1 2,126
--------- -----------
Total Investments 99.3 194,144
Other Assets and Liabilities, Net 0.7 1,375
--------- -----------
NET ASSETS 100.0% 195,519
--------- -----------
--------- -----------
</TABLE>
See accompanying notes which are an integral part of the financial statements.
38 Non-US Fund
<PAGE>
NON-US FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<TABLE>
<CAPTION>
Unrealized
Contracts to In Exchange Appreciation
Deliver For Settlement (Depreciation)
(000) (000) Date (000)
- --------------- --------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
USD 8,381 EUR 8,250 03/24/00 $ (20)
USD 3,811 GBP 2,375 03/24/00 25
USD 7,296 JPY 735,000 03/24/00 (4)
EUR 1,000 USD 1,016 03/24/00 2
GBP 250 USD 403 03/24/00 --
JPY 200,000 USD 1,991 03/24/00 7
--------
$ 10
--------
--------
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Non-US Fund 39
<PAGE>
NON-US FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (EXCEPT PER SHARE AMOUNTS) December 31, 1999
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $163,226) ......................................................... $ 194,144
Foreign currency holdings (identified cost $1,328) ....................................................... 1,328
Unrealized appreciation on forward foreign currency exchange contracts.................................... 34
Receivables:
Dividends and interest ................................................................................ 193
Investments sold ...................................................................................... 144
Fund shares sold ...................................................................................... 49
Foreign taxes recoverable ............................................................................. 109
Daily variation margin on futures contracts ........................................................... 4
Deferred organization expenses ........................................................................... 3
-----------
Total assets ....................................................................................... 196,008
LIABILITIES
Payables:
Investments purchased ........................................................................ $ 211
Fund shares redeemed ......................................................................... 11
Accrued fees to affiliates ................................................................... 127
Other accrued expenses ....................................................................... 116
Unrealized depreciation on forward foreign currency exchange contracts .......................... 24
--------
Total liabilities .................................................................................. 489
-----------
NET ASSETS ............................................................................................... $ 195,519
-----------
-----------
NET ASSETS CONSIST OF:
Accumulated distributions in excess of net investment income ............................................. $(603)
Accumulated net realized gain (loss) ..................................................................... 3,423
Unrealized appreciation (depreciation) on:
Investments ........................................................................................... 30,918
Futures contracts ..................................................................................... 1,033
Foreign currency-related transactions ................................................................. 6
Shares of beneficial interest ............................................................................ 138
Additional paid-in capital ............................................................................... 160,604
-----------
NET ASSETS ............................................................................................... $ 195,519
-----------
-----------
NET ASSET VALUE, offering and redemption price per share:
($195,518,976 divided by 13,780,509 shares of $.01 par value
shares of beneficial interest outstanding) ......................................................... $ 14.19
-----------
-----------
</TABLE>
See accompanying notes which are an integral part of the financial statements.
40 Non-US Fund
<PAGE>
NON-US FUND
STATEMENT OF OPERATIONS
Amounts in thousands Year Ended December 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends ........................................................................................... $ 2,082
Dividends from Money Market Fund .................................................................... 266
Interest ............................................................................................ 103
Less foreign taxes withheld ......................................................................... (226)
-----------
Total investment income .......................................................................... 2,225
EXPENSES
Management fees ........................................................................... $ 1,007
Custodian fees ............................................................................ 485
Professional fees ......................................................................... 22
Registration fees ......................................................................... 35
Trustees' fees ............................................................................ 9
Amortization of deferred organization expenses ............................................ 1
Miscellaneous ............................................................................. 33
----------
Expenses before reductions ................................................................ 1,592
Expense reductions ........................................................................ (215)
----------
Expenses, net .................................................................................... 1,377
-----------
Net investment income .................................................................................. 848
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ............................................................................... 6,554
Futures contracts ......................................................................... 1,899
Foreign currency-related transactions ..................................................... (299) 8,154
----------
Net change in unrealized appreciation (depreciation) on:
Investments ............................................................................... 29,080
Futures contracts ......................................................................... 1,029
Foreign currency-related transactions ..................................................... 6 30,115
---------- -----------
Net realized and unrealized gain (loss) ................................................................ 38,269
-----------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS .................................................. $ 39,117
-----------
-----------
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Non-US Fund 41
<PAGE>
NON-US FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1999 1998
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income ..................................................................... $ 848 $ 106
Net realized gain (loss) .................................................................. 8,154 (446)
Net change in unrealized appreciation (depreciation) ...................................... 30,115 1,840
--------- -----------
Net increase (decrease) in net assets from operations .................................. 39,117 1,500
--------- -----------
DISTRIBUTIONS
From net investment income ................................................................ (1,621) (146)
From net realized gain .................................................................... (3,985) (41)
--------- -----------
Net decrease in net assets from distributions .......................................... (5,606) (187)
--------- -----------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ............................. 140,588 13,231
--------- -----------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS .................................................. 174,099 14,544
NET ASSETS
Beginning of period ....................................................................... 21,420 6,876
--------- -----------
End of period (including accumulated distributions in excess of
net investment income of $603 and undistributed net investment
income of $133, respectively) .......................................................... $ 195,519 $ 21,420
--------- -----------
--------- -----------
</TABLE>
See accompanying notes which are an integral part of the financial statements.
42 Non-US Fund
<PAGE>
NON-US FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1999 1998 1997*
---------- ----------- -----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ....................... $ 11.09 $ 10.03 $ 10.00
------- --------- --------
INCOME FROM OPERATIONS
Net investment income (a) ............................... .10 .08 .09
Net realized and unrealized gain (loss) ................. 3.53 1.21 (.06)
------- --------- --------
Total income from operations ......................... 3.63 1.29 .03
------- --------- --------
DISTRIBUTIONS
From net investment income .............................. (.23) (.18) --
From net realized gain .................................. (.30) (.05) --
------- --------- --------
Total distributions .................................. (.53) (.23) --
------- --------- --------
NET ASSET VALUE, END OF PERIOD ............................. $ 14.19 $ 11.09 $ 10.03
------- --------- --------
------- --------- --------
TOTAL RETURN (%)(b) ........................................ 33.36 12.96 .30
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ................ 195,519 21,420 6,876
Ratios to average net assets (%)(c):
Operating expenses, net .............................. 1.30 1.30 1.30
Operating expenses, gross ............................ 1.50 2.37 3.60
Net investment income ................................ .80 .77 .98
Portfolio turnover rate (%) ............................. 83.45 50.36 68.54
</TABLE>
* For the period January 2, 1997 (commencement of operations) to December 31,
1997.
(a) For periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
<PAGE>
CORE BOND FUND
PORTFOLIO MANAGEMENT DISCUSSION
December 31, 1999 (Unaudited)
OBJECTIVE: To maximize total return through capital appreciation and income by
assuming a level of volatility consistent with the broad fixed-income market, by
investing in fixed-income securities.
INVESTS IN: Fixed-income securities.
STRATEGY: The Fund uses a multi-style, multi-manager strategy and employed two
managers with distinct approaches to managing portfolios of
intermediate-maturity fixed income securities.
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT
DATES CORE BOND LB AGGREGATE **
FUND
<S> <C> <C>
Inception* $10,000 $10,000
1997 $10,973 $10,966
1998 $11,784 $11,918
1999 $11,712 $11,820
YEARLY PERIODS ENDED DECEMBER 31
</TABLE>
CORE BOND FUND
<TABLE>
<CAPTION>
PERIODS ENDED GROWTH OF TOTAL
12/31/99 $10,000 RETURN
- ----------------- ----------- --------
<S> <C> <C>
1 Year $ 9,939 (0.61)%
Inception $11,712 5.42%Section
</TABLE>
LEHMAN BROTHERS AGGREGATE BOND INDEX
<TABLE>
<CAPTION>
PERIODS ENDED GROWTH OF TOTAL
12/31/99 $10,000 RETURN
- ----------------- ----------- --------
<S> <C> <C>
1 Year $9,918 (0.82)%
Inception $11,820 5.73%Section
</TABLE>
44 Core Bond Fund
<PAGE>
CORE BOND FUND
PORTFOLIO MANAGEMENT DISCUSSION
December 31, 1999 (Unaudited)
PERFORMANCE REVIEW
For the year ended December 31, 1999, the Core Bond Fund posted a loss of 0.6%,
as compared to the Lehman Brothers Aggregate Bond Index, which fell 0.8%. The
Fund outperformed the Index primarily due to the Fund's emphasis on yield
sectors, which gained as favorable economic trends led to narrowing credit
spreads. Higher yields helped offset rising interest rates.
PORTFOLIO HIGHLIGHTS
Bonds suffered their worst setbacks since 1994 and the second worst in over two
decades. Strong US economic growth led to significantly higher interest rates as
well as aggressive Fed intervention via actual policy tightening. US treasuries
were most severely impacted relative to other sectors of the US bond market
during the year. Spread sectors, including corporate bonds and mortgage- and
asset-backed securities, fared better as post-emerging markets crisis spread
widening reversed.
The Fund's emphasis on spread sector holdings and a neutral approach to short
duration posture helped mitigate market weakness. High grade corporates and
mortgage-backed securities were overweighted relative to the Lehman Brothers
Aggregate Bond Index. Effective security selection also helped Fund performance
results, while yield curve strategies provided a slightly negative impact. In a
difficult market, both managers' approaches added value by limiting some of the
downside performance of the market during the period.
<TABLE>
<CAPTION>
TOP TEN ISSUERS
(as a percent of Total Investments) December 31, 1999
<S> <C>
Government National Mortgage Association 17.2%
United States Treasury 17.2
Federal National Mortgage Association 7.2
Federal Home Loan Mortgage Corp. 4.9
Korea Development Bank 3.1
Advanta Mortgage Loan Trust 2.2
ICI Wilmington, Inc. 2.1
Rohm & Haas Co. 2.0
Ford Motor Credit Co. 1.7
Waste Management, Inc. 1.2
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
December 31, 1999
<S> <C>
Weighted Average Quality Diversification AA1
Weighted Average Years-to- Maturity 7.4 Years
Weighted Average Duration 4.6 Years
Current Yield (SEC 30-day standardized) 6.6%
Number of Issues 243
Number of Issuers 199
</TABLE>
<TABLE>
<CAPTION>
MONEY MANAGERS STYLES
<S> <C>
Pacific Investment Management Co. Broad Market-Sector Rotation
Standish, Ayer & Wood, Inc. Broad Market-Sector Rotation
</TABLE>
* The Fund commenced operations on January 2, 1997. Index comparison began
January 1, 1997.
** Lehman Brothers Aggregate Bond Index is composed of securities from
Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed
Securities Index, and the Asset-Backed Securities Index. Total return
comprises price appreciation/depreciation and income as a percentage
of the original investment. Indexes are rebalanced monthly by market
capitalization.
Section Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Core Bond Fund 45
<PAGE>
CORE BOND FUND
STATEMENT OF NET ASSETS
December 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
------- -------
<S> <C> <C>
LONG-TERM INVESTMENTS - 100.1%
ASSET-BACKED SECURITIES - 1.6%
ARG Funding Corp.
Series 1999-1A Class A3
6.020% due 05/20/04 200 189
Delta Funding Home Equity Loan Trust
Series 1998-4 Class A4F
6.340% due 04/15/26 125 115
Discover Card Master Trust I
Series 1996-3 Class A
6.050% due 08/18/08 350 328
Green Tree Financial Corp.
Series 1998-6 Class M1
6.630% due 06/01/30 100 90
MBNA Master Credit Card Trust
Series 1999-G Class B
6.600% due 12/15/06 175 170
Residential Asset Securities Corp.
Series 1998-KS3 Class AI7
5.980% due 10/25/29 175 163
Student Loan Marketing Association
Loan Trust
Series 1996-4 Class A1
5.344% due 07/25/04 (c) 194 192
Vanderbilt Mortgage & Finance, Inc.
Series 1998-C Class 1A6
6.750% due 10/07/28 100 88
-------
1,335
-------
CORPORATE BONDS AND NOTES - 32.1%
Adelphia Communications Corp.
Series B
8.125% due 07/15/03 50 47
Ahold Finance USA, Inc.
6.250% due 05/01/09 215 192
Albertson's, Inc.
7.450% due 08/01/29 75 70
Allied Waste North America, Inc.
Series B
7.375% due 01/01/04 50 45
7.625% due 01/01/06 200 179
American Financial Group, Inc.
7.125% due 04/15/09 75 66
American General Finance Corp.
6.170% due 05/06/03 (MTN) 400 385
American Standard Co.
7.375% due 04/15/05 50 46
Amerus Life Holdings, Inc.
6.950% due 06/15/05 75 68
Aramark Corp.
6.750% due 08/01/04 15 14
7.000% due 07/15/06 100 94
AT&T Capital Corp.
Series G
6.830% due 12/01/00 (MTN)(c) 700 703
Bankers Trust Corp.
6.164% due 05/11/03 (c) 200 200
Citicorp
9.500% due 02/01/02 50 52
Citizens Utilities Co.
8.450% due 09/01/01 200 204
Conmed Corp.
9.000% due 03/15/08 25 23
Cox Communications, Inc.
7.500% due 08/15/04 150 151
Crescent Real Estate Equities
6.625% due 09/15/02 75 68
CSC Holdings, Inc.
Series B
8.125% due 07/15/09 150 149
CSX Corp.
7.250% due 05/01/04 350 348
CVS Corp.
5.500% due 02/15/04 150 140
DDTE Capital Corp.
7.110% due 11/15/03 500 481
Delta Air Lines, Inc.
8.300% due 12/15/29 350 337
Diageo Capital PLC
7.000% due 10/27/09 275 278
Duke Realty, L.P.
7.375% due 09/22/05 325 316
EOP Operating, L.P.
6.500% due 01/15/04 75 72
ERAC USA Finance Co.
7.500% due 06/15/03 (MTN) 50 50
Exide Corp.
10.000% due 04/15/05 150 144
2.900% due 12/15/05 75 39
Extendicare Health Services, Inc.
9.350% due 12/15/07 25 15
First Union Corp.
7.500% due 07/15/06 150 150
Firstar Bank North America
7.125% due 12/01/09 300 290
Ford Motor Credit Co.
6.271% due 06/04/02 (MTN)(c) 250 251
6.700% due 07/16/04 375 367
Series 1
6.362% due 11/24/03 (c) 1,000 1,001
</TABLE>
46 Core Bond Fund
<PAGE>
CORE BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
------- -------
<S> <C> <C>
Fort James Corp.
6.875% due 09/15/07 300 285
Global Crossings Holdings, Ltd.
9.625% due 05/15/08 50 50
Golden State Holdings
7.125% due 08/01/05 75 68
Goldman Sachs Group
Series A
6.604% due 01/16/01 (MTN)(c) 200 201
Grove Worldwide, L.L.C.
9.250% due 05/01/08 25 7
GS Escrow Corp.
7.000% due 08/01/03 150 139
Health Care REIT, Inc.
7.625% due 03/15/08 50 44
Horseshoe Gaming Holding Corp.
8.625% due 05/15/09 250 241
Household Finance Corp.
6.264% due 08/20/01 (MTN)(c) 150 150
6.258% due 05/07/02 (MTN)(c) 150 150
Series E
6.125% due 02/27/03 (MTN) 1,000 954
Huntsman ICI Holdings, L.L.C.
Zero Coupon due 12/31/09 1,100 331
IBJ Preferred Capital Co., L.L.C.
8.790% due 12/29/49 100 95
ICI Wilmington, Inc.
9.500% due 11/15/00 2,000 2,039
Idex Corp.
6.875% due 02/15/08 50 45
Imperial Capital Trust I
Series B
9.980% due 12/31/26 25 23
International Business Machines Corp.
8.375% due 11/01/19 175 192
Isle of Capri Casinos, Inc.
8.750% due 04/15/09 200 184
ITT Corp.
6.250% due 11/15/00 800 784
Kaufman and Broad Home Corp.
7.750% due 10/15/04 50 47
Kentucky Power Co.
6.005% due 11/02/00 (c) 1,000 1,000
Kroger Co.
8.000% due 09/15/29 50 49
Lear Corp.
7.960% due 05/15/05 250 240
Lehman Brothers Holdings, Inc.
6.625% due 04/01/04 175 169
7.625% due 06/01/06 25 25
Series E
6.979% due 04/02/02 (MTN)(c) 300 302
Lilly Industries, Inc.
7.750% due 12/01/07 125 118
Lite-On Technology Corp.
Zero Coupon due 12/01/02 (conv.) 50 52
McLeodUSA, Inc.
8.375% due 03/15/08 125 119
9.500% due 11/01/08 100 100
8.125% due 02/15/09 75 70
Meditrust
7.375% due 07/15/00 25 20
Merita Bank, Ltd.
7.150% due 12/29/49 250 242
Metromedia Fiber Network, Inc.
10.000% due 12/15/09 100 102
MMI Capital Trust I
Series B
7.625% due 12/15/27 25 21
Mohegan Tribal Gaming Authority
8.125% due 01/01/06 125 122
8.750% due 01/01/09 25 25
Morgan Stanley Dean Witter & Co.
Series C
5.820% due 06/19/00 (MTN)(c) 1,000 988
Nabors Industries, Inc.
6.800% due 04/15/04 500 483
Natexix Ambs Co., L.L.C.
8.440% due 12/29/49 75 71
News America, Inc.
7.125% due 04/08/28 75 65
NEXTLINK Communications, Inc.
12.500% due 04/15/06 150 162
NVR, Inc.
8.000% due 06/01/05 75 71
Paine Webber Group, Inc.
6.375% due 05/15/04 100 95
Panamsat Corp.
6.000% due 01/15/03 75 70
Parker Retirement Savings Plan
6.340% due 07/15/08 470 438
Philip Morris Cos., Inc.
6.150% due 03/15/00 100 100
7.250% due 01/15/03 500 490
Premier Parks, Inc.
Step Up Bond
Zero Coupon due 04/01/08 (c) 25 17
</TABLE>
Core Bond Fund 47
<PAGE>
CORE BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
------- -------
<S> <C> <C>
PX Escrow Corp. Step Up Bond
Zero Coupon due 02/01/06 (c) 75 37
Qwest Communications International,
Inc.
Series B
7.250% due 11/01/08 25 24
7.500% due 11/01/08 25 25
Qwest Communications International,
Inc. Step Up Bond
Zero Coupon due 10/15/07 (c) 25 20
Series B
Zero Coupon due 02/01/08 (c) 125 98
Regency Centers, L.P.
7.400% due 04/01/04 75 72
Republic of New York Corp.
6.144% due 10/28/02 (c) 750 740
Revlon Consumer Products Corp.
8.125% due 02/01/06 25 18
Revlon Worldwide Corp.
Series B
Zero Coupon due 03/15/01 115 22
Rose Hills Corp.
9.500% due 11/15/04 25 20
Safeway, Inc.
6.050% due 11/15/03 200 191
Salomon Smith Barney Holdings, Inc.
6.500% due 10/15/02 500 493
6.250% due 06/15/05 100 95
Sequa Corp.
9.000% due 08/01/09 300 291
Simon Debartolo Group, L.P.
6.625% due 06/15/03 75 72
6.750% due 06/15/05 50 46
Simon Property Group, Inc.
6.750% due 02/09/04 25 24
Speedway Motorsports, Inc.
Series D
8.500% due 08/15/07 275 267
Tanger Properties, L.P.
8.750% due 03/11/01 25 25
7.875% due 10/24/04 25 23
Tenet Healthcare Corp.
7.875% due 01/15/03 25 24
8.625% due 12/01/03 100 99
Texas Utilities
6.725% due 06/25/01 (c) 600 599
Time Warner, Inc.
6.625% due 05/15/29 200 171
Toll Brothers Corp.
7.750% due 09/15/07 25 23
Travelers Property Casualty Corp.
6.750% due 04/15/01 25 25
Tricon Global Restaurants, Inc.
7.450% due 05/15/05 25 24
7.650% due 05/15/08 175 164
U.S. Bancorp
Series J
6.000% due 05/15/04 (MTN) 125 119
Union Planters Bank
6.500% due 03/15/18 50 44
United Companies Financial Corp.
7.700% due 01/15/04 (d) 25 7
United Technologies Corp.
6.625% due 11/15/04 175 172
US West Communications, Inc.
5.650% due 11/01/04 750 697
Walt Disney Co.
5.125% due 12/15/03 50 47
Waste Management, Inc.
6.375% due 12/01/03 300 270
6.500% due 05/14/04 1,000 897
Wells Fargo & Co.
6.625% due 07/15/04 1,100 1,074
Westdeutsche Landesbank NY
6.050% due 01/15/09 500 446
Williams Communications Group, Inc.
10.700% due 10/01/07 150 158
Wisconsin Central Transportation
Corp.
6.625% due 04/15/08 325 298
-------
26,851
-------
EURODOLLAR BONDS - 6.0%
British Sky Broadcasting Group PLC
8.200% due 07/15/09 225 217
Ford Credit of Canada, Ltd.
6.280% due 12/16/02 (c) 1,000 996
Korea Development Bank
7.625% due 10/01/02 2,000 1,993
Morgan Stanley Dean Witter
6.308% due 03/11/03 (MTN)(c) 300 299
Phillippines, Republic Of
9.500% due 10/21/24 429 433
Poland, Republic of, Step Up Bond
Series RSTA
4.000% due 10/27/24 500 328
Quebec, Province of
7.500% due 09/15/29 175 167
Skandinaviska Enskilda Banken
6.500% due 12/29/49 275 257
</TABLE>
48 Core Bond Fund
<PAGE>
CORE BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
------- -------
<S> <C> <C>
Tyco International Group SA
6.875% due 09/05/02 300 296
Upm-Kymmene Corp.
7.450% due 11/26/27 50 45
-------
5,031
-------
MORTGAGE-BACKED SECURITIES - 34.9%
Advanta Mortgage Loan Trust
Series 1997-4 Class M1
7.040% due 01/25/29 50 48
Series 1999-2 Class A6
6.820% due 05/25/29 100 97
Series 1999-3 Class A1
6.810% due 05/25/14 891 887
Series 1999-3 Class A4
7.750% due 10/25/26 100 101
Step Up Bond
Series 1999-3 Class A7
6.885% due 08/25/29 (c) 953 955
Chase Commercial Mortgage
Securities Corp.
Series 1997-2 Class D
6.600% due 12/19/07 25 21
Chase Mortgage Finance Corp.
Series 1993-N Class A9
6.750% due 11/25/24 850 751
Countrywide Home Loans
Series 1997-7 Class A3
6.250% due 08/25/14 490 454
Federal Home Loan Mortgage Corp.
6.000% 30 Year Gold TBA (b) 2,200 2,014
7.000% 30 Year TBA (b) 800 774
Federal National Mortgage Association
6.500% 30 Year TBA (b) 400 377
7.500% 30 Year TBA (b) 1,450 1,434
7.000% due 2014 622 613
5.650% due 2017 (c) 429 414
9.000% due 2025 227 236
6.500% due 2029 848 799
Series 1997-77 Class G
6.500% due 05/18/23 228 225
Federal National Mortgage
Association (REMIC)
Series 1992-10 Class ZD
8.000% due 11/25/21 940 919
GMAC Commercial Mortgage
Securities, Inc.
Series 1997-C1 Class A2
6.850% due 09/15/06 125 122
Government National Mortgage
Association
6.000% 30 Year TBA (b) 500 453
6.500% 30 Year TBA (b) 4,000 3,880
7.000% 30 Year TBA (b) 3,900 3,766
8.000% 30 Year TBA (b) 175 177
9.000% due 2017 517 545
8.000% due 2024 98 99
8.000% due 2025 143 145
7.000% due 2026 105 102
8.000% due 2026 171 173
6.500% due 2027 (c) 380 383
7.000% due 2027 574 555
7.000% due 2028 2,848 2,750
7.500% due 2029 1,060 1,048
8.000% due 2029 2,397 2,421
Merrill Lynch Mortgage
Investors, Inc.
Series 1997-C1 Class D
7.120% due 06/18/29 350 322
Midland Realty Acceptance Corp.
Series 1996-C2 Class A2
7.233% due 01/25/29 125 124
Morgan Stanley Capital I, Inc.
Series 1998-HF1 Class A2
6.520% due 01/15/08 125 118
Norwest Asset Securities Corp.
Series 1997-21 Class A2
7.000% due 01/25/28 466 457
Series 1998-14 Class A2
6.500% due 06/25/13 357 347
Residential Funding Mortgage
Securities II
Series 1997-HS5 Class M1
7.010% due 05/25/27 50 49
-------
29,155
-------
NON-US BONDS - 0.2%
New Zealand, Government of
Series 403
5.500% due 04/15/03 NZD 300 150
-------
UNITED STATES GOVERNMENT AGENCIES - 3.6%
Federal Home Loan Bank
Series 1TO1
5.875% due 08/15/01 125 124
Federal Home Loan Mortgage Corp.
6.300% due 06/01/04 1,000 974
5.750% due 03/15/09 850 776
</TABLE>
Core Bond Fund 49
<PAGE>
CORE BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
------- -------
<S> <C> <C>
Federal National Mortgage Association
5.125% due 02/13/04 25 24
5.625% due 05/14/04 1,200 1,147
-------
3,045
-------
UNITED STATES GOVERNMENT TREASURIES - 19.5%
United States Treasury Bonds
12.000% due 08/15/13 4,800 6,409
11.250% due 02/15/15 1,250 1,767
8.125% due 05/15/21 1,175 1,347
6.625% due 02/15/27 705 699
United States Treasury Notes
4.625% due 11/30/00 1,575 1,554
6.625% due 04/30/02 475 479
3.625% due 07/15/02 961 951
7.875% due 11/15/04 50 53
3.875% due 01/15/09 675 652
6.000% due 08/15/09 2,500 2,422
-------
16,333
-------
YANKEE BONDS - 2.2%
Amvescap PLC
6.600% due 05/15/05 50 45
British Sky Broadcasting Group PLC
6.875% due 02/23/09 75 66
Colt Telecom Group PLC
Step Up Bond
Zero Coupon due 12/15/06 (c) 150 132
Domtar, Inc.
8.750% due 08/01/06 100 99
Edperbrascan Corp.
7.125% due 12/16/03 50 48
Korea Development Bank
9.600% due 12/01/00 1,000 1,016
National Westminster Bank PLC
7.750% due 04/29/49 25 24
Royal Caribbean Cruises, Ltd.
8.125% due 07/28/04 125 127
7.500% due 10/15/27 25 22
Stagecoach Holdings PLC
8.625% due 11/15/09 275 273
-------
1,852
-------
TOTAL LONG-TERM INVESTMENTS
(cost $85,977) 83,752
-------
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
------- -------
<S> <C> <C>
PREFERRED STOCKS - 0.2%
Equity Office Property Trust Series B 1,500 59
Global Crossing Holdings, Ltd. 800 80
-------
TOTAL PREFERRED STOCKS
(cost $149) 139
-------
<CAPTION>
PRINCIPAL
AMOUNT
(000)
$
----------
SHORT-TERM INVESTMENTS - 14.1%
Federal Home Loan Bank
Discount Note
5.680% due 01/19/00 (a) 1,000 998
Federal Home Loan Mortgage Corp.
Discount Note
5.600% due 01/25/00 (a) 175 174
Federal National Mortgage
Association Discount Note
5.580% due 01/19/00 (a) 725 723
Frank Russell Investment Company
Money Market Fund,
due on demand (a) 6,430 6,430
Houston Industries Finance
Commercial Paper
6.500% due 01/19/00 (a) 1,000 997
Houston Industries, Inc. Commercial
Paper
6.220% due 02/24/00 (a) 500 495
Rohm & Haas Co. Commercial Paper
6.380% due 01/28/00 (a) 1,900 1,891
United States Treasury Bills
4.710% due 02/17/00 (a)(e)(f) 100 99
-------
TOTAL SHORT-TERM INVESTMENTS
(cost $11,807) 11,807
-------
</TABLE>
50 Core Bond Fund
<PAGE>
CORE BOND FUND
STATEMENT OF NET ASSETS, CONTINUED December 31, 1999
<TABLE>
<CAPTION>
MARKET
VALUE
(000)
$
-------
<S> <C>
TOTAL INVESTMENTS - 114.4%
(identified cost $97,933) 95,698
OTHER ASSETS AND LIABILITIES,
NET - (14.4%) (12,078)
-------
NET ASSETS - 100.0% 83,620
-------
-------
<CAPTION>
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
---------- ---------------
<S> <C> <C>
FUTURES CONTRACTS
United States Treasury Notes 10 Year 32 $(10)
Futures ---------------
expiration date 03/ 00
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $(10)
---------------
---------------
</TABLE>
(a) At amortized cost, which approximates market.
(b) Forward commitment.
(c) Adjustable or floating rate security.
(d) Issuer in default.
(e) Rate noted is yield-to-maturity from date of acquisition.
(f) Held as collateral in connection with futures contracts purchased by the
Fund.
ABBREVIATIONS:
MTN - Medium Term Note
REMIC - Real Estate Mortgage Investment Conduit
REIT - Real Estate Investment Trust
TBA - To Be Announced Security
FOREIGN CURRENCY ABBREVIATION:
NZD - New Zealand Dollar
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 51
<PAGE>
CORE BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
Amounts in thousands (EXCEPT PER SHARE AMOUNTS) December 31, 1999
<S> <C> <C>
ASSETS
Investments at market (identified cost $97,933) .......................... $ 95,698
Receivables:
Dividends and interest ................................................ 1,114
Investments sold (delayed settlement) ................................. 1,478
Fund shares sold ...................................................... 91
Deferred organization expenses ........................................... 3
-----------------
Total assets ....................................................... 98,384
LIABILITIES
Payables:
Investments purchased (delayed settlement) ............... $ 14,659
Fund shares redeemed ..................................... 24
Accrued fees to affiliates ............................... 47
Other accrued expenses ................................... 21
Daily variation margin on futures contracts .............. 13
--------
Total liabilities ................................................. 14,764
-----------------
NET ASSETS .............................................................. $ 83,620
-----------------
-----------------
NET ASSETS CONSIST OF:
Accumulated distributions in excess of net realized gain ................ $ (1,567)
Unrealized appreciation (depreciation) on:
Investments .......................................................... (2,235)
Futures contracts .................................................... (10)
Shares of beneficial interest ........................................... 87
Additional paid-in capital .............................................. 87,345
-----------------
NET ASSETS .............................................................. $ 83,620
-----------------
-----------------
NET ASSET VALUE, offering and redemption price per share:
($83,619,503 divided by 8,676,250 shares of $.01 par value
shares of beneficial interest outstanding) ........................ $ 9.64
-----------------
-----------------
</TABLE>
See accompanying notes which are an integral part of the financial statements.
52 Core Bond Fund
<PAGE>
CORE BOND FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Amounts in thousands Year Ended December 31, 1999
<S> <C> <C>
INVESTMENT INCOME
Interest .............................................................. $ 3,482
Dividends from Money Market Fund ...................................... 175
Dividends ............................................................. 149
-----------------
Total investment income ............................................ 3,806
EXPENSES
Management fees .......................................... $ 348
Custodian fees ........................................... 98
Professional fees ........................................ 6
Registration fees ........................................ 11
Trustees' fees ........................................... 9
Amortization of deferred organization expenses ........... 1
Miscellaneous ............................................ 23
----------
Expenses before reductions ............................... 496
Expense reductions ....................................... (32)
----------
Expenses, net ..................................................... 464
-----------------
Net investment income ................................................... 3,342
-----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ................................................. (1,449)
Futures contracts ........................................... (6)
Options written ............................................. 20 (1,435)
Net change in unrealized appreciation (depreciation) on: ----------
Investments ................................................. (2,241)
Futures contracts ........................................... (10) (2,251)
---------- -----------------
Net realized and unrealized gain (loss) .................................. (3,686)
-----------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS .................... $(344)
-----------------
-----------------
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 53
<PAGE>
CORE BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands Years Ended December 31,
1999 1998
---------- ----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income .................................................... $ 3,342 $ 1,058
Net realized gain (loss) ................................................. (1,435) 493
Net change in unrealized appreciation (depreciation) ..................... (2,251) (173)
---------- ----------
Net increase (decrease) in net assets from operations ................. (344) 1,378
---------- ----------
DISTRIBUTIONS
From net investment income ............................................... (3,428) (796)
From net realized gain ................................................... (911) (53)
Tax return of capital .................................................... (1,152) --
---------- ----------
Net decrease in net assets from distributions ......................... (5,491) (849)
---------- ----------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ............ 57,150 23,253
---------- ----------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ................................. 51,315 23,782
NET ASSETS
Beginning of period ...................................................... 32,305 8,523
---------- ----------
End of period (including undistributed net investment income of
$383 at December 31, 1998) ............................................ $83,620 $32,305
---------- ----------
---------- ----------
</TABLE>
See accompanying notes which are an integral part of the financial statements.
54 Core Bond Fund
<PAGE>
CORE BOND FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1999 1998 1997*
-------- -------- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ...................... $10.68 $10.45 $10.00
-------- -------- --------
INCOME FROM OPERATIONS
Net investment income (a) .............................. .59 .56 .64
Net realized and unrealized gain (loss) ................ (.65) .19 .30
-------- -------- --------
Total income from operations ........................ (.06) .75 .94
-------- -------- --------
DISTRIBUTIONS
From net investment income ............................. (.61) (.47) (.49)
From net realized gain ................................. (.16) (.05) --
Tax return of capital .................................. (.21) -- --
-------- -------- --------
Total distributions ................................. (.98) (.52) (.49)
-------- -------- --------
NET ASSET VALUE, END OF PERIOD ............................ $9.64 $10.68 $10.45
-------- -------- --------
-------- -------- --------
TOTAL RETURN (%)(b) ....................................... (.61) 7.38 9.73
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ............... 83,620 32,305 8,523
Ratios to average net assets (%)(c):
Operating expenses, net ............................. .80 .80 .80
Operating expenses, gross ........................... .86 1.28 2.20
Net investment income ............................... 5.77 5.34 6.38
Portfolio turnover rate (%) ............................ 139.06 75.95 53.86
</TABLE>
* For the period January 2, 1997 (commencement of operations) to December 31,
1997.
(a) For the periods subsequent to December 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
Core Bond Fund 55
<PAGE>
REAL ESTATE SECURITIES FUND
PORTFOLIO MANAGEMENT DISCUSSION
December 31, 1999 (Unaudited)
OBJECTIVE: To generate a high level of total return through above-average
current income, while maintaining the potential for capital appreciation.
INVESTS IN: Primarily the equity securities of US real estate investment trusts
and real estate operating companies.
STRATEGY: The Fund uses a multi-manager strategy intended to achieve higher
returns with moderate risk. The Fund employed the investment management services
of two managers with distinct approaches to investing in real estate equity
securities.
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT
REAL ESTATE LIPPER-REGISTERED TRADEMARK-
DATES SECURITIES FUND NAREIT EQUITY REIT** REAL ESTATE ++
<S> <C> <C> <C>
Inception* $10,000 $10,000 $10,000
1999 $ 9,274 $ 9,153 $10,129
YEARLY PERIOD ENDED DECEMBER 31
</TABLE>
REAL ESTATE SECURITIES FUND
<TABLE>
<CAPTION>
PERIOD ENDED GROWTH OF TOTAL RETURN
12/31/99 $10,000
- ------------ --------- ------------
<S> <C> <C>
Inception* $9,274 (7.26)%
</TABLE>
NAREIT EQUITY REIT INDEX
<TABLE>
<CAPTION>
PERIOD ENDED GROWTH OF TOTAL RETURN
12/31/99 $10,000
- ------------ --------- ------------
<S> <C> <C>
Inception* $9,153 (8.47)%
</TABLE>
LIPPER-REGISTERED TRADEMARK- REAL ESTATE BENCHMARK
<TABLE>
<CAPTION>
PERIOD ENDED GROWTH OF TOTAL RETURN
12/31/99 $10,000
- ------------ --------- ------------
<S> <C> <C>
Inception* $10,129 1.29%
</TABLE>
56 Real Estate Securities Fund
<PAGE>
REAL ESTATE SECURITIES FUND
PORTFOLIO MANAGEMENT DISCUSSION
December 31, 1999 (Unaudited)
PERFORMANCE REVIEW
Since its inception on April 30, 1999, the Real Estate Securities Fund lost 7.3%
as compared to the NAREIT Equity REIT Index, which fell 8.5%. The Fund's margin
of performance over the benchmark was primarily due to effective security
selection.
PORTFOLIO HIGHLIGHTS
REITs suffered through one their worst years in history, saved only by a
December rally that cut losses for the year. The NAREIT Equity REIT Index fell
1% for the year. REITs suffered from a number of negative trends, including
weakness in small cap, value equity investments. Also impacting the REIT
markets' performance was concern that late economic cycle prospects would impair
the ability of the underlying properties to generate internal growth through
rental growth and higher occupancy rates. External growth opportunities also
were questioned, given unattractive capital raising prospects, with depressed
prices discouraging equity issuance and rising interest rates and credit spreads
limiting debt financing.
The Real Estate Securities Fund fared somewhat better from its April inception.
Effective security selection by both managers helped the Fund limit downside,
resulting in 120 basis points of outperformance versus the benchmark by the end
of the Fund's eight months of operation.
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
(as a percent of Total Investments) December 31, 1999
<S> <C>
Equity Office Properties Trust 5.0%
Vornado Realty Trust 4.3
Apartment Investment & Management Co. Class A 4.2
Avalonbay Communities, Inc. 3.9
Spieker Properties, Inc. 3.8
Starwood Hotels & Resorts Worldwide, Inc. 3.7
Reckson Services Industries, Inc. 3.3
Simon Property Group, Inc. 2.9
Mack-Cali Realty Corp. 2.9
Equity Residential Properties Trust 2.9
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
December 31, 1999
<S> <C>
Current P/E Ratio 15.9x
Portfolio Price/Book Ratio 1.32x
Market Capitalization - $- Weighted Average 2.30 Bil
Number of Holdings 63
</TABLE>
MONEY MANAGERS
AEW Capital Management, L.P.
Cohen & Steers Capital Management, Inc.
* Real Estate Securities Fund assumes initial investment on April 30, 1999.
NAREIT Index comparison for the initial investment began May 1, 1999.
Lipper index comparison for the initial investment began April 1, 1999.
** NAREIT Equity REIT Index is an index composed of all the data based on the
last closing price of the month for all tax-qualified REITs listed on the
New York Stock Exchange, American Stock Exchange, and the NASDAQ National
Market System. The data is market value- weighted. The total-return
calculation is based upon whether it is 1-month, 3-months or 12-months.
Only those REITs listed for the entire period are used in the total return
calculation.
++ Lipper-Registered Trademark- Real Estate Benchmark is the average total
return for the universe of funds within the Real Estate Funds investment
objective. The total return for the funds reflects adjustments for income
dividends and capital gains distributions reinvested as of the ex-dividend
dates.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Real Estate Securities Fund 57
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF NET ASSETS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
NUMBER VALUE
OF (000)
SHARES $
---------- ----------
<S> <C> <C>
COMMON STOCKS (b) - 89.3%
APARTMENT - 18.7%
Apartment Investment & Management
Co. Class A 58,700 2,337
Archstone Communities Trust 33,950 696
Avalonbay Communities, Inc. 62,500 2,145
Brookfield Properties Corp. 22,700 238
Camden Property Trust 19,600 537
Equity Residential Properties Trust 37,000 1,579
Essex Property Trust, Inc. 16,000 544
Post Properties, Inc. 20,600 788
Smith (Charles E.) Residential 30,100 1,065
Realty, Inc.
Summit Properties, Inc. 14,500 259
Sun Communities, Inc. 5,500 177
--------
10,365
--------
HEALTH CARE - 4.4%
Health Care Property Investors, Inc. 41,800 998
Manor Care, Inc. (a) 37,200 595
Nationwide Health Properties, Inc. 60,700 835
--------
2,428
--------
HOTELS/LEISURE - 5.4%
Golf Trust of America, Inc. 4,800 81
Hospitality Properties Trust 20,700 395
Marriot International, Inc. Class A 10,600 335
Starwood Hotels & Resorts Worldwide, 86,700 2,037
Inc.
Wyndham International, Inc. Class A
(a) 38,900 114
--------
2,962
--------
LEASING - 0.9%
Entertainment Properties Trust 9,400 124
Franchise Finance Corp. of America 7,500 180
MeriStar Hospitality Corp. 11,200 179
--------
483
--------
OFFICE/INDUSTRIAL - 39.2%
AMB Property Corp. 68,000 1,356
Arden Realty Group, Inc. 66,900 1,342
Boston Properties, Inc. 42,000 1,307
Cabot Industrial Trust 8,500 156
CarrAmerica Realty Corp. 18,000 380
Cornerstone Properties, Inc. 28,400 415
Cousins Properties, Inc. 14,900 506
Crescent Real Estate Equities, Inc. 51,000 937
Duke-Weeks Realty Corp. 30,036 586
Equity Office Properties Trust 111,300 2,741
First Industrial Realty Trust, Inc. 17,900 491
Highwoods Properties, Inc. 39,500 918
Kilroy Realty Corp. 15,400 339
Liberty Property Trust 15,800 383
Mack-Cali Realty Corp. 60,900 1,587
Prentiss Properties Trust 17,000 357
ProLogis Trust 78,000 1,502
PS Business Parks, Inc. 17,800 405
Reckson Associates Realty Corp. 56,100 1,150
Reckson Services Industries, Inc. (a) 29,200 1,821
SL Green Realty Corp. 26,200 570
Spieker Properties, Inc. 57,200 2,083
Trizec Hahn Corp. 20,300 343
--------
21,675
--------
OUTLET CENTERS - 0.2%
Prime Retail, Inc. 17,900 101
--------
REGIONAL MALLS - 9.2%
General Growth Properties, Inc. 42,300 1,184
Macerich Co. (The) 47,100 980
Rouse Co. (The) 30,900 657
Simon Property Group, Inc. 70,000 1,606
Taubman Centers, Inc. 41,100 442
Urban Shopping Centers, Inc. 8,900 241
--------
5,110
--------
SELF STORAGE - 3.0%
Public Storage, Inc. 62,100 1,409
Shurgard Storage Centers, Inc. Class A 10,900 253
--------
1,662
--------
SHOPPING CENTER - 8.3%
Bradley Real Estate, Inc. 19,700 344
Developers Diversified Realty Corp. 20,900 269
Glimcher Realty Trust 13,500 174
JDN Realty Corp. 4,700 76
Kimco Realty Corp. 29,900 1,013
Philips International Realty Corp. 9,300 153
Regency Realty Corp. 12,400 248
Vornado Realty Trust 72,400 2,352
--------
4,629
--------
TOTAL COMMON STOCKS
(cost $54,333) 49,415
--------
58 Real Estate Securities Fund
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
December 31, 1999
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
$ $
---------- ----------
<S> <C> <C>
SHORT-TERM INVESTMENTS - 10.1%
Frank Russell Investment Company
Money Market Fund, due on demand (c) 5,594 5,594
--------
TOTAL SHORT-TERM INVESTMENTS
(cost $5,594) 5,594
--------
TOTAL INVESTMENTS - 99.4%
(identified cost $59,927) 55,009
OTHER ASSETS AND LIABILITIES,
NET - 0.6% 309
--------
NET ASSETS - 100.0% 55,318
--------
--------
</TABLE>
(a) Nonincome-producing security.
(b) All common stocks held are Real Estate Investment Trusts (REIT) with
the exception of the following:
Brookfield Properties Corp.
Manor Care, Inc.
Marriot International, Inc. Class A
Reckson Services Industries, Inc.
Starwood Hotels & Resorts Worldwide, Inc.
Trizec Hahn Corp.
Wyndham International, Inc. Class A
(c) At amortized cost, which approximates market.
See accompanying notes which are an integral part of the financial statements.
Real Estate Securities Fund 59
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
Amounts in thousands (EXCEPT PER SHARE AMOUNTS) December 31, 1999
<TABLE>
<S> <C> <C>
ASSETS
Investments at market (identified cost $59,927) ................................................................. $ 55,009
Receivables:
Dividends .................................................................................................... 412
Investments sold ............................................................................................. 9
Fund shares sold ............................................................................................. 14
-----------
Total assets .............................................................................................. 55,444
LIABILITIES
Payables:
Investments purchased ..................................................................... $ 44
Accrued fees to affiliates ................................................................ 40
Other accrued expenses .................................................................... 42
---------
Total liabilities ......................................................................................... 126
-----------
NET ASSETS ...................................................................................................... $ 55,318
-----------
-----------
NET ASSETS CONSIST OF:
Accumulated net realized gain (loss) ............................................................................ $ (703)
Unrealized appreciation (depreciation) on investments ........................................................... (4,918)
Shares of beneficial interest ................................................................................... 63
Additional paid-in capital ...................................................................................... 60,876
-----------
NET ASSETS ...................................................................................................... $ 55,318
-----------
-----------
NET ASSET VALUE, offering and redemption price per share:
($55,317,586 divided by 6,280,623 shares of $.01 par value
shares of beneficial interest outstanding) ................................................................ $ 8.81
-----------
-----------
</TABLE>
See accompanying notes which are an integral part of the financial statements.
60 Real Estate Securities Fund
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF OPERATIONS
Amounts in thousands For the Period April 30, 1999
(Commencement of Operations)
to December 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Dividends .................................................................................................... $ 2,211
Dividends from Money Market Fund ............................................................................. 145
Interest ..................................................................................................... 2
-----------
Total investment income ................................................................................... 2,358
EXPENSES
Management fees ........................................................................... $ 287
Custodian fees ............................................................................ 49
Transfer agent fees ....................................................................... 5
Professional fees ......................................................................... 17
Registration fees ......................................................................... 17
Trustees' fees ............................................................................ 5
Miscellaneous ............................................................................. 8
---------
Total expenses ............................................................................................ 388
-----------
Net investment income ........................................................................................... 1,970
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ............................................................................... (662)
Futures contracts ......................................................................... (41) (703)
---------
Net change in unrealized appreciation (depreciation) on investments ............................................. (4,918)
-----------
Net realized and unrealized gain (loss) ......................................................................... (5,621)
-----------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ........................................................... $ (3,651)
-----------
-----------
</TABLE>
See accompanying notes which are an integral part of the financial statements.
Real Estate Securities Fund 61
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
Amounts in thousands For the Period April 30, 1999
(Commencement of Operations)
to December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income .................................................................................... $ 1,970
Net realized gain (loss) ................................................................................. (703)
Net change in unrealized appreciation (depreciation) ..................................................... (4,918)
-----------
Net increase (decrease) in net assets from operations ................................................. (3,651)
-----------
DISTRIBUTIONS
From net investment income ............................................................................... (1,970)
Tax return of capital .................................................................................... (670)
-----------
Net decrease in net assets from distributions ......................................................... (2,640)
-----------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions ............................................ 61,609
-----------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ................................................................. 55,318
NET ASSETS
Beginning of period ...................................................................................... --
-----------
End of period ............................................................................................ $ 55,318
-----------
-----------
</TABLE>
See accompanying notes which are an integral part of the financial statements.
62 Real Estate Securities Fund
<PAGE>
REAL ESTATE SECURITIES FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1999*
----------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............................................................................ $ 10.00
---------
INCOME FROM OPERATIONS
Net investment income (a) .................................................................................... .35
Net realized and unrealized gain (loss) ...................................................................... (1.08)
---------
Total income from operations .............................................................................. (.73)
---------
DISTRIBUTIONS
From net investment income ................................................................................... (.34)
Tax return of capital ........................................................................................ (.12)
---------
Total distributions ....................................................................................... (.46)
---------
NET ASSET VALUE, END OF PERIOD .................................................................................. $ 8.81
---------
---------
TOTAL RETURN (%)(b) ............................................................................................. (7.26)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands) ..................................................................... 55,318
Ratios to average net assets (%)(c):
Operating expenses ........................................................................................ 1.15
Net investment income ..................................................................................... 5.84
Portfolio turnover rate (%) .................................................................................. 23.98
</TABLE>
* For the period April 30, 1999 (commencement of operations) to December 31,
1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Not annualized.
(c) Annualized.
Real Estate Securities Fund 63
<PAGE>
RUSSELL INSURANCE FUNDS
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
1. ORGANIZATION
Russell Insurance Funds (the "Investment Company") is a series mutual fund
with five 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.
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 and capital gains. Therefore, no federal
income tax provision was required for the Funds. From November 1, 1999 to
December 31, 1999, the Non-US, Core Bond and Real Estate Securities Funds
incurred net realized capital losses of $353,830, $189,912 and $481,589,
respectively. As permitted by tax regulations, these Funds have elected to
defer these losses and treat them as arising in the year ending December 31,
2000.
At December 31, 1999, the Core Bond Fund and the Real Estate Securities Fund
had net tax basis capital loss carryforwards of $1,192,480 and $54,901,
respectively. Their respective expiration dates are December 31, 2007.
64 Notes to Financial Statements
<PAGE>
RUSSELL INSURANCE FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1999
Capital loss carryforward of $570,615 for the Non-US Fund at December 31,
1998 was utilized in the current year.
The aggregate cost of investments and the compostion of gross unrealized
appreciation and depreciation of investment securities for federal income tax
purposes as of December 31, 1999 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 $ 266,081,779 $ 35,116,124 $ (15,666,903) $ 19,449,221
Aggressive Equity 90,732,704 14,573,302 (6,654,006) 7,919,296
Non-US 165,585,703 35,027,101 (6,468,804) 28,558,297
Core Bond 98,127,464 107,726 (2,537,190) (2,429,464)
Real Estate Securities 60,093,750 1,569,845 (6,654,595) (5,084,750)
</TABLE>
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: For all Funds, dividends and
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, capital gain
distributions, and return of capital 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.
The following reclassifications have been made to reflect activity for the
year ended December 31, 1999:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED ADDITIONAL
NET INVESTMENT NET REALIZED PAID-IN
INCOME GAIN (LOSS) CAPITAL
--------------- -------------- --------------
<S> <C> <C> <C>
Non-US $ 37,177 $ (37,177) $ --
Core Bond (296,781) 1,448,782 (1,152,001)
Real Estate Securities 669,672 -- (669,672)
</TABLE>
EXPENSES: The Funds will pay their own expenses other than those expressly
assumed by Frank Russell Investment Management Company ("FRIMCo" or
"Advisor"). 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, incurred
prior to the adoption of SOP 98-5 at June 30, 1998, 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
Funds are translated into U.S. dollars on the following basis:
(a) Market value of investment securities, other assets and liabilities at
the closing rate of exchange on the valuation date.
(b) Purchases and sales of investment securities and income at the closing
rate of exchange prevailing on the respective trade dates of such
transactions.
Notes to Financial Statements 65
<PAGE>
RUSSELL INSURANCE FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1999
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.
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 December 31, 1999 are presented on the Statement of Net Assets
for the Non-US 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.
OPTIONS: The Funds may purchase and sell (write) call and put options on
securities and securities indices, provided such options are traded on a
national securities exchange or in an over-the-counter market. These Funds
may also purchase and sell call and put options on foreign currencies. The
domestic equity Funds may utilize options to equitize liquidity reserve
balances.
66 Notes to Financial Statements
<PAGE>
RUSSELL INSURANCE FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1999
When a Fund writes a covered call or a put option, an amount equal to the
premium received by the Fund is included in the Fund's Statement of Assets
and Liabilities as an asset and as an equivalent liability. The amount of the
liability is subsequently marked-to-market to reflect the current market
value of the option written. The Fund receives a premium on the sale of a
call option but gives up the opportunity to profit from any increase in stock
value above the exercise price of the option, and when the Fund writes a put
option it is exposed to a decline in the price of the underlying security. If
an option which the Fund has written either expires on its stipulated
expiration date or the Fund enters into a closing purchase transaction, the
Fund realizes a gain (or loss, if the cost of a closing purchase transaction
exceeds the premium received when the option was sold) without regard to any
unrealized gain or loss on the underlying security, and the liability related
to such option is extinguished. If a call option which the Fund has written
is exercised, the Fund realizes a capital gain or loss from the sale of the
underlying security, and the proceeds from such sale are increased by the
premium originally received. When a put option which a Fund has written is
exercised, the amount of the premium originally received will reduce the cost
of the security which a Fund purchases upon exercise of the option. Realized
gains (losses) on purchased options are included in net realized gain (loss)
from investments.
The Funds' use of written options involves, to varying degrees, elements of
market risk in excess of the amount recognized in the Statement of Assets and
Liabilities. The face or contract amounts of these instruments reflect the
extent of the Funds' exposure to off balance sheet risk. The risks may be
caused by an imperfect correlation between movements in the price of the
instrument and the price of the underlying securities and interest rates.
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.
3. INVESTMENT TRANSACTIONS
SECURITIES: During year ended December 31, 1999, purchases and sales of
investment securities (excluding U.S. Government and Agency obligations,
short-term investments, options, futures and repurchase agreements) were
as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
-------------- -------------
<S> <C> <C>
Multi-Style Equity $ 284,131,905 $ 118,358,992
Aggressive Equity 126,683,310 66,039,126
Non-US 212,916,459 89,344,445
Core Bond 43,004,229 14,176,586
Real Estate Securities 65,616,302 10,621,512
</TABLE>
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 $ 174,660,822 $ 71,280,234
</TABLE>
Notes to Financial Statements 67
<PAGE>
RUSSELL INSURANCE FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1999
OPTIONS WRITTEN: Fund transactions in written options for the period ended
December 31, 1999 are as follows:
<TABLE>
<CAPTION>
WRITTEN OPTIONS
NUMBER OF PREMIUMS
CORE BOND CONTRACTS (1) RECEIVED
------------- --------------
<S> <C> <C>
Outstanding December 31, 1998 -- $ --
Opened 5,000 20,313
Closed -- --
Expired (5,000) (20,313)
-------- -----------
Outstanding December 31, 1999 -- $ --
-------- -----------
-------- -----------
</TABLE>
(1) Each contract represents $100,000 notional value.
4. RELATED PARTIES
ADVISOR: FRIMCo advises and administers all of the Funds which comprise the
Investment Company. FRIMCo is a wholly owned subsidiary of Frank Russell
Company, a wholly owned subsidiary of The Northwestern Mutual Life Insurance
Company. Frank Russell Company researches and recommends to FRIMCo, and to
the Investment Company, one or more investment management organizations to
manage the portfolio of each Fund.
The Funds are permitted to invest their cash reserves (i.e., monies awaiting
investment in portfolio securities suitable for the Funds' objectives) in the
Frank Russell Investment Company Money Market Fund. As of December 31, 1999,
$59,876,000 of the Money Market Fund's net assets represents investments by
the Funds.
For the year ended December 31, 1999, 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 $3,564,862 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% Core Bond 0.60%
Aggressive Equity 0.95 Real Estate Securities 0.85
Non-US 0.95
</TABLE>
FRIMCo calculates its management fee based on average daily net assets for
each Fund, less any management fee incurred on the Fund's assets invested in
the Frank Russell Investment Company Money Market Fund (see Note 5) thereby
eliminating any duplication of fees.
FRIMCo has contractually 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 contractually agreed to reimburse each Fund
for all remaining expenses, after fee waivers, that still exceed their
respective expense caps. There were no reimbursements for the year ended
December 31, 1999.
The expense caps and waivers as of December 31, 1999 were as follows:
<TABLE>
<CAPTION>
EXPENSE ADVISORY
CAP FEES WAIVED
------- -----------
<S> <C> <C>
Multi-Style Equity 0.92% $ 22,022
Aggressive Equity 1.25 51,002
Non-US 1.30 214,869
Core Bond 0.80 31,865
Real Estate Securities 1.15 --
</TABLE>
68 Notes to Financial Statements
<PAGE>
RUSSELL INSURANCE FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1999
ANALYTIC SERVICES: Fees for analytic services provided to the Funds are paid
or accrued to Russell/Mellon Analytical Services, an affiliate of the
Investment Company. Russell/Mellon Analytical Services provides its TruVP
System to the Funds, pursuant to a written Service Agreement. The TruVP
System provides analytics used by the investment department.
TRANSFER AGENT: The Funds have a contract with FRIMCo to provide transfer
agent services to the Investment Company. Total fees for the year ended
December 31, 1999 were $9,492.
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.
BROKERAGE COMMISSIONS: The Funds may effect portfolio transactions through
Frank Russell Securities, Inc., an affiliate of the Advisor, when a money
manager determines that the Fund will receive competitive execution, price
and commissions. Upon completion of such transactions, Frank Russell
Securities, Inc. will refund up to 70% of the commissions paid by the Fund
after reimbursment for research services provided to FRIMCo. Amounts retained
by Frank Russell Securities, Inc. for the year ended December 31, 1999 for
the Multi-Style Equity Fund were $72,965, for the Aggressive Equity Fund were
$17,898, and for the Non-US Fund were $76,410.
Additionally, the Funds paid brokerage commissions to non-affiliated brokers
who provided brokerage and research services to the Advisor.
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 for the year ended December 31, 1999 were
$41,000, and were allocated to each Fund, where appropriate, on a prorata
basis.
BENEFICIAL INTEREST: As of December 31, 1999, FRIMCo and the Funds had six
client relationships, the largest being Northwestern Mutual Life Insurance
Company, that represented more than 5% of the total outstanding shares of the
respective Funds.
<TABLE>
<CAPTION>
CLIENT RELATIONSHIP
PERCENTAGES
---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Multi-Style Equity 35.0% 19.6% 17.9% 9.5% 5.9% 5.4%
Aggressive Equity 43.7 17.4 12.6 9.5 5.9 --
Non-US 63.0 12.4 11.7 -- -- --
Core Bond 32.9 23.5 16.6 11.7 5.5 --
Real Estate Securities 82.8 12.2 -- -- -- --
</TABLE>
Notes to Financial Statements 69
<PAGE>
RUSSELL INSURANCE FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1999
5. FUND SHARE TRANSACTIONS
Share transactions for the years ended December 31, were as follows:
<TABLE>
<CAPTION>
SHARES DOLLARS (000)
----------------------------- -----------------------------
MULTI-STYLE EQUITY 1999 1998 1999 1998
----------- ---------- --------- --------
<S> <C> <C> <C> <C>
Proceeds from shares sold 11,745,128 2,867,999 $ 189,719 $ 40,821
Proceeds from reinvestment of distributions 939,137 63,764 14,695 858
Payments for shares redeemed (278,205) (162,445) (4,463) (2,378)
----------- ---------- --------- --------
Total net increase (decrease) 12,406,060 2,769,318 $ 199,951 $ 39,301
----------- ---------- --------- --------
----------- ---------- --------- --------
AGGRESSIVE EQUITY
Proceeds from shares sold 5,674,972 818,370 $ 69,088 $ 10,356
Proceeds from reinvestment of distributions 43,364 87,768 533 1,133
Payments for shares redeemed (234,243) (111,078) (2,837) (1,345)
----------- ---------- --------- --------
Total net increase (decrease) 5,484,093 795,060 $ 66,784 $ 10,144
----------- ---------- --------- --------
----------- ---------- --------- --------
NON-US
Proceeds from shares sold 11,717,694 1,311,652 $ 138,551 $ 13,934
Proceeds from reinvestment of distributions 421,468 17,903 5,606 188
Payments for shares redeemed (290,553) (83,398) (3,569) (891)
----------- ---------- --------- --------
Total net increase (decrease) 11,848,609 1,246,157 $ 140,588 $ 13,231
----------- ---------- --------- --------
----------- ---------- --------- --------
CORE BOND
Proceeds from shares sold 5,515,116 2,300,387 $ 55,881 $ 24,196
Proceeds from reinvestment of distributions 554,482 80,458 5,491 849
Payments for shares redeemed (419,365) (170,785) (4,222) (1,792)
----------- ---------- --------- --------
Total net increase (decrease) 5,650,233 2,210,060 $ 57,150 $ 23,253
----------- ---------- --------- --------
----------- ---------- --------- --------
REAL ESTATE SECURITIES*
Proceeds from shares sold 6,055,783 -- $ 59,679 $ --
Proceeds from reinvestment of distributions 301,212 -- 2,640 --
Payments for shares redeemed (76,372) -- (710) --
----------- ---------- --------- --------
Total net increase (decrease) 6,280,623 -- $ 61,609 $ --
----------- ---------- --------- --------
----------- ---------- --------- --------
</TABLE>
* Share transactions for the period ended December 31, 1999 are for the
period April 30, 1999 (commencement of operations) to December 31, 1999.
70 Notes to Financial Statements
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders
of Russell Insurance Funds:
In our opinion, the accompanying statements of assets and liabilities,
including the statements of net assets, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Multi-Style
Equity Fund, Aggressive Equity Fund, Non-U.S. Fund, Core Bond Fund and Real
Estate Securities Fund (constituting the Russell Insurance Funds, hereafter
referred to as the "Funds") at December 31, 1999, and the results of their
operations, the changes in their net assets and the financial highlights for
the periods indicated therein, in conformity with generally accepted
accounting principles in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Funds' management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these financial statements in accordance with generally
accepted auditing standards in the United States which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Seattle, Washington /s/ PRICEWATERHOUSECOOPERS LLP
January 26, 2000
Report of Independent Accountants 71
<PAGE>
RUSSELL INSURANCE FUNDS
TAX INFORMATION
December 31, 1999 (Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the
following amounts as long-term capital gain dividends for their taxable year
ended December 31, 1999:
<TABLE>
<CAPTION>
TOTAL LONG-TERM
CAPITAL GAINS
----------------
<S> <C>
Multi-Style Equity $ 7,474,755
Aggressive Equity 340,106
Non-US 1,339,937
Core Bond 76,545
</TABLE>
The Non-US Fund paid foreign taxes of $226,319 and recognized $1,870,028 of
foreign source income during the taxable year ended December 31, 1999.
Pursuant to Section 853 of the Internal Revenue Code, the Fund designates
$.0288 per share of foreign taxes paid and $.1357 of gross income earned from
foreign sources in the taxable year ended December 31, 1999.
Please consult a tax advisor for questions about federal or state income tax
laws.
72 Tax Information
<PAGE>
RUSSELL INSURANCE FUNDS
909 A Street, Tacoma, Washington 98402
(800) 832-6688
In Washington (253) 627-7001
TRUSTEES
Lynn L. Anderson, Chairman
Paul E. Anderson
Paul Anton, PhD
William E. Baxter
Lee C. Gingrich
Eleanor W. Palmer
TRUSTEES EMERITUS
George F. Russell, Jr.
OFFICERS
Lynn L. Anderson, Chairman of the Board and President
Peter 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
CUSTODIAN
State Street Bank and Trust Company
Allan Forbes Building
150 Newport Avenue AFB35
North Quincy, MA 02171
OFFICE OF SHAREHOLDER INQUIRIES
909 A Street
Tacoma, WA 98402
(800) RUSSEL4
(800) 787-7354
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1001 4th Avenue Plaza
Suite 4200
Seattle, WA 98154
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, LLC, New York, NY
Lincoln Capital Management Company, Chicago, IL
Peachtree Asset Management, Atlanta, GA
Sanford C. Bernstein & Co., Inc., New York, NY
Westpeak Investment Advisors, L.P., Boulder, CO
AGGRESSIVE EQUITY FUND
Geewax, Terker & Company, Phoenixville, PA
Rothschild Asset Management, Inc., New York, NY
Trinity Investment Management Corporation, Boston, MA
Westpeak Investment Advisors, L.P., Boulder, CO
NON-US FUND
J.P. Morgan Investment Management, Inc., New York, NY
Montgomery Asset Management, LLC, San Francisco, CA
Oechsle International Advisors, LLC, Boston, MA
The Boston Company Asset Management, Inc., Boston, MA
REAL ESTATE SECURITIES FUND
AEW Capital Management, L.P., Boston, MA
Cohen & Steers Capital Management, Inc., New York, NY
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 SOLICATION OF AN OFFER TO BUY SHARES OF FRANK RUSSELL
INVESTMENT COMPANY. SUCH OFFERING IS MADE ONLY BY PROSPECTUS, WHICH INCLUDES
DETAILS AS TO OFFERING PRICE AND OTHER MATERIAL INFORMATION.
Manager, Money Managers and Service Providers 73
