<PAGE> 1
PENSION
INVESTMENT
OPTIONS
KEYNOTE
SERIES
ACCOUNT
CALVERT SERIES SUBACCOUNT
EQUITY GROWTH SUBACCOUNT
EQUITY INCOME SUBACCOUNT
BALANCED SUBACCOUNT
SEMI-ANNUAL REPORT
GOVERNMENT/CORPORATE BOND SUBACCOUNT JUNE 30, 1998
INTERMEDIATE GOVERNMENT BOND SUBACCOUNT
MONEY MARKET SUBACCOUNT
MUTUAL OF NEW YORK
<PAGE> 2
This report is not to be construed as an offering for
sale of any contracts participating in the Keynote
Series Account, or as a solicitation as an offer to buy
any contracts unless preceded by or accompanied
by a current prospectus which contains the complete
information of charges and expenses.
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<PAGE> 4
KEYNOTE SERIES ACCOUNT
CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Statements of Assets and Liabilities........................ 1
Statements of Operations.................................... 2
Statements of Changes in Net Assets......................... 3
Statements of Changes in Net Assets -- December 31, 1997.... 4
Notes to Financial Statements............................... 5-6
DIVERSIFIED INVESTORS PORTFOLIOS:
Economic Market Review...................................... 8-13
Statements of Assets and Liabilities........................ 14-15
Statements of Operations.................................... 16-17
Statements of Changes in Net Assets......................... 18-19
Statements of Changes in Net Assets -- December 31, 1997.... 20-21
PORTFOLIO OF INVESTMENTS:
Money Market Portfolio...................................... 22-23
High Quality Bond Portfolio................................. 24-26
Intermediate Government Bond Portfolio...................... 27-28
Government/Corporate Bond................................... 29-31
Balanced Portfolio.......................................... 32-34
Equity Income Portfolio..................................... 35-38
Equity Value Portfolio...................................... 39-41
Growth & Income Portfolio................................... 42-44
Equity Growth Portfolio..................................... 45-47
Special Equity Portfolio.................................... 48-53
Aggressive Equity Portfolio................................. 54
High Yield Bond Portfolio................................... 55-57
International Equity Portfolio.............................. 58-62
Notes to Financial Statements............................... 63-74
CALVERT SOCIAL BALANCED PORTFOLIO SEMI-ANNUAL REPORT........ 75-88
</TABLE>
<PAGE> 5
KEYNOTE SERIES ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES
FOR THE PERIOD ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT/
MONEY GOVERNMENT CORPORATE EQUITY EQUITY
MARKET BOND BOND BALANCED INCOME GROWTH CALVERT
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ------------ ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investment in the Funds, at
value (Notes 1 and 2)..... $622,648 $168,185 $645,065 $5,394,575 $16,722,129 $11,064,483 $776,947
Receivable from MONY........ 622 -- -- -- -- -- --
-------- -------- -------- ---------- ----------- ----------- --------
Total assets....... 623,270 168,185 645,065 5,394,575 16,722,129 11,064,483 776,947
-------- -------- -------- ---------- ----------- ----------- --------
LIABILITIES:
Accrued expenses............ 2,326 548 1,782 15,865 51,157 26,691 2,284
-------- -------- -------- ---------- ----------- ----------- --------
NET ASSETS
ATTRIBUTABLE TO
ANNUITY
CONTRACTHOLDERS... $620,944 $167,637 $643,283 $5,378,710 $16,670,972 $11,037,792 $774,663
======== ======== ======== ========== =========== =========== ========
Accumulation units.......... 38,621 10,776 28,557 167,076 448,376 246,103 31,520
======== ======== ======== ========== =========== =========== ========
Unit value.................. $ 16.08 $ 15.56 $ 22.53 $ 32.19 $ 37.18 $ 44.85 $ 24.58
======== ======== ======== ========== =========== =========== ========
</TABLE>
See notes to financial statements.
1
<PAGE> 6
KEYNOTE SERIES ACCOUNT
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT/
MONEY GOVERNMENT CORPORATE EQUITY EQUITY
MARKET BOND BOND BALANCED INCOME GROWTH CALVERT
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ------------ ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Allocated net investment
income from Portfolios
(Note 2).................. $19,119 $5,276 $17,927 $ 89,920 $ 175,957 $ 7,549 $ --
------- ------ ------- -------- ---------- ---------- -------
EXPENSES: (NOTE 3)
Mortality and expense
risk................... 3,203 849 2,619 22,813 74,182 37,524 3,218
Less expenses reimbursed
by MONY................ (622) -- -- -- -- -- --
------- ------ ------- -------- ---------- ---------- -------
Net expenses.............. 2,581 849 2,619 22,813 74,182 37,524 3,218
------- ------ ------- -------- ---------- ---------- -------
Net investment income
(loss).................... 16,538 4,427 15,308 67,107 101,775 (29,975) (3,218)
------- ------ ------- -------- ---------- ---------- -------
REALIZED AND UNREALIZED
GAINS (LOSSES) ON
INVESTMENTS (NOTE 2)
Net realized gains
(losses) on
investments............ (8) 178 2,344 238,885 1,023,478 1,116,183 6,268
Net change in unrealized
appreciation on
investments............ -- 745 5,534 200,338 341,524 577,186 62,312
------- ------ ------- -------- ---------- ---------- -------
Net realized and
unrealized gains
(losses) on
investments............ (8) 923 7,878 439,223 1,365,002 1,693,369 68,580
------- ------ ------- -------- ---------- ---------- -------
Net increase in net assets
resulting from
operations................ $16,530 $5,350 $23,186 $506,330 $1,466,777 $1,663,394 $65,362
======= ====== ======= ======== ========== ========== =======
</TABLE>
See notes to financial statements.
2
<PAGE> 7
KEYNOTE SERIES ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT/
MONEY GOVERNMENT CORPORATE EQUITY EQUITY
MARKET BOND BOND BALANCED INCOME GROWTH CALVERT
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ------------ ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income
(loss).............. $ 16,538 $ 4,427 $ 15,308 $ 67,107 $ 101,775 $ (29,975) $ (3,218)
Net realized gains
(losses) on
investments......... (8) 178 2,344 238,885 1,023,478 1,116,183 6,268
Net change in
unrealized
appreciation on
investments......... -- 745 5,534 200,338 341,524 577,186 62,312
-------- -------- -------- ---------- ----------- ----------- --------
Net increase in net
assets resulting
from operations..... 16,530 5,350 23,186 506,330 1,466,777 1,663,394 65,362
-------- -------- -------- ---------- ----------- ----------- --------
FROM UNIT TRANSACTIONS
(NOTE 4):
Net proceeds from the
issuance of units... 141,079 82,604 126,195 536,757 1,588,688 1,193,780 164,150
Net asset value of
units redeemed...... (275,385) (137,729) (85,895) (418,880) (2,513,143) (1,044,806) (42,420)
-------- -------- -------- ---------- ----------- ----------- --------
Net increase (decrease)
in net assets from
unit transactions... (134,306) (55,125) 40,300 117,877 (924,455) 148,974 121,730
-------- -------- -------- ---------- ----------- ----------- --------
Net increase (decrease)
in net assets.......... (117,776) (49,775) 63,486 624,207 542,322 1,812,368 187,092
NET ASSETS:
Beginning of period.... 738,720 217,412 579,797 4,754,503 16,128,650 9,225,424 587,571
-------- -------- -------- ---------- ----------- ----------- --------
End of period.......... $620,944 $167,637 $643,283 $5,378,710 $16,670,972 $11,037,792 $774,663
======== ======== ======== ========== =========== =========== ========
Units outstanding
beginning of period.... 47,018 14,366 26,763 163,289 474,554 242,846 26,219
Units issued during
period................. 8,846 5,368 5,709 17,541 43,834 28,760 7,074
Units redeemed during
period................. (17,243) (8,958) (3,915) (13,754) (70,012) (25,503) (1,773)
-------- -------- -------- ---------- ----------- ----------- --------
Units outstanding end of
period................. 38,621 10,776 28,557 167,076 448,376 246,103 31,520
======== ======== ======== ========== =========== =========== ========
</TABLE>
See notes to financial statements.
3
<PAGE> 8
KEYNOTE SERIES ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT/
MONEY GOVERNMENT CORPORATE EQUITY EQUITY
MARKET BOND BOND BALANCED INCOME GROWTH CALVERT
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ------------ ----------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income
(loss).................. $ 39,895 $ 20,657 $ 29,972 $ 116,340 $ 212,291 $ (27,057) $ 34,008
Net realized gains (losses)
on investments.......... (37) 259 1,205 572,644 1,582,134 534,416 40,353
Net change in unrealized
appreciation on
investments............. -- 6,041 9,083 29,539 2,039,795 1,430,034 20,130
-------- -------- -------- ---------- ----------- ---------- --------
Net increase in net assets
resulting from
operations.............. 39,858 26,957 40,260 718,523 3,834,220 1,937,393 94,491
-------- -------- -------- ---------- ----------- ---------- --------
FROM UNIT TRANSACTIONS (NOTE
4):
Net proceeds from the
issuance of units....... 506,259 85,917 115,346 978,238 3,308,282 1,840,578 241,043
Net asset value of units
redeemed................ (652,343) (575,998) (91,714) (789,215) (3,936,541) (1,705,189) (220,481)
-------- -------- -------- ---------- ----------- ---------- --------
Net increase (decrease) in
net assets from unit
transactions............ (146,084) (490,081) 23,632 189,023 (628,259) 135,389 20,562
-------- -------- -------- ---------- ----------- ---------- --------
Net increase (decrease) in
net assets................. (106,226) (463,124) 63,892 907,546 3,205,961 2,072,782 115,053
NET ASSETS:
Beginning of year.......... 844,946 680,536 515,905 3,846,957 12,922,689 7,152,642 472,518
-------- -------- -------- ---------- ----------- ---------- --------
End of year................ $738,720 $217,412 $579,797 $4,754,503 $16,128,650 $9,225,424 $587,571
======== ======== ======== ========== =========== ========== ========
Units outstanding beginning
of year.................... 56,311 47,901 25,670 156,241 489,820 237,959 25,095
Units issued during year..... 32,669 5,913 5,560 35,581 105,882 53,841 11,342
Units redeemed during year... (41,962) (39,448) (4,467) (28,533) (121,148) (48,954) (10,218)
-------- -------- -------- ---------- ----------- ---------- --------
Units outstanding end of
year....................... 47,018 14,366 26,763 163,289 474,554 242,846 26,219
======== ======== ======== ========== =========== ========== ========
</TABLE>
See notes to financial statements.
4
<PAGE> 9
KEYNOTE SERIES ACCOUNT
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BUSINESS
Keynote Series Account ("Keynote") is a separate investment account
established on December 16, 1987 by The Mutual Life Insurance Company of New
York ("MONY") under the laws of the State of New York.
Keynote operates as a unit investment trust under the Investment Company
Act of 1940, as amended (the "1940 Act"). Keynote holds assets that are
segregated from all of MONY's other assets and, at present, is used as an
investment vehicle under certain tax-deferred annuity contracts issued by MONY
to fund retirement plans maintained by certain not-for-profit and other
organizations ("Group Plans"). MONY is the legal holder of the assets in
Keynote.
There are currently seven subaccounts within Keynote which are available to
contractholders of Group Plans. Six of the subaccounts invest in a corresponding
portfolio of Diversified Investors Portfolios (the "Portfolios") and the seventh
subaccount invests in Calvert Social Balanced Portfolio (formerly, Calvert
Responsibly Invested Balanced Portfolio), a series of Calvert Variable Series,
Inc. (formerly, Acacia Capital Corporation), ("Calvert" and collectively, the
"Funds"). The respective financial statements of the Funds are contained
elsewhere in this report.
At June 30, 1998, each of the subaccounts' investment in the corresponding
Portfolios was as follows:
<TABLE>
<CAPTION>
PERCENTAGE INVESTMENT
SUBACCOUNT IN PORTFOLIO
---------- ---------------------
<S> <C>
Money Market.............................. 0.26%
Intermediate Government Bond.............. 0.13
Government/Corporate Bond................. 0.14
Balanced.................................. 1.14
Equity Income............................. 1.25
Equity Growth............................. 2.04
</TABLE>
2. SIGNIFICANT ACCOUNTING POLICIES
A. Investments:
The investment by Keynote in the Portfolios reflects Keynote's
proportionate interest in the net assets of each of the Portfolios. The
investment in shares of Calvert is stated at net asset value. The Keynote
subaccount which invests in Calvert records its security transactions at the
prior day's ending net asset value per share. Valuation of the securities held
in each of the Portfolios is discussed in Note 2A of the Portfolios' Notes to
Financial Statements which are included elsewhere in this report. A description
of the portfolio valuation for Calvert can be found in Note A of its financial
statements contained elsewhere in this report.
B. Investment Income:
Each Keynote subaccount earns income, net of expenses, daily on its
investment in the corresponding Portfolio. All of the net investment income
and realized and unrealized gains and losses from the security transactions
of the corresponding Portfolios are allocated pro rata among the investors
at the time of such determination. Dividend income is recorded on the
ex-dividend date. Realized gains and losses from investments sold are
determined on the basis of identified cost.
C. Federal Income Taxes:
The operations of Keynote form a part of, and are taxed with, the
operations of MONY. MONY does not expect, based upon current tax law, to incur
any income tax upon the earnings or realized capital gains
5
<PAGE> 10
KEYNOTE SERIES ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
C. Federal Income Taxes (Continued):
attributed to Keynote. Based upon this expectation, no charges are currently
being deducted from Keynote for federal income tax purposes.
D. Other:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. FEES AND TRANSACTIONS WITH AFFILIATES
Daily charges to Keynote for mortality and expense risks assumed by MONY
are computed at an annual rate of 0.90%; however, MONY reserves the right to
charge maximum fees of 1.25% upon notice.
MONY has voluntarily undertaken to waive expenses of the Money Market
Subaccount, to the extent necessary, to limit all expenses (other than mortality
and expense risk charges) to 0.10% of average net assets. MONY reserves the
right to raise this limit upon notice.
4. GROUP PLAN ASSUMPTIONS
On December 31, 1993, MONY entered into an agreement with AUSA Life
Insurance Company, Inc. ("AUSA"), a wholly owned subsidiary of AEGON, USA,
pursuant to which the Group Plans may be transferred through assumption
reinsurance to AUSA. Subject to receipt of any necessary state insurance
department approvals and authorizations, each Group Plan contractholder receives
materials relating to this assumption. The assumption reinsurance of any Group
Plan to AUSA will result in the transfer of the applicable assets out of Keynote
and into a corresponding separate account of AUSA. Assets transferred to AUSA
pursuant to this assumption reinsurance transaction for the year ended December
31, 1997, were as follows:
<TABLE>
<CAPTION>
SUBACCOUNTS 1997 AMOUNT
----------- -----------
<S> <C>
Money Market................................................ $ 148,490
Intermediate Government Bond................................ 3,406
Government/Corporate Bond................................... 22,700
Balanced.................................................... 236,206
Equity Income............................................... 2,986,640
Equity Growth............................................... 744,738
Calvert..................................................... 100,413
----------
$4,242,593
==========
</TABLE>
The amounts related to these assumptions are reflected as redemptions in the
Statements of Changes in Net Assets.
6
<PAGE> 11
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7
<PAGE> 12
SECOND QUARTER 1998
ECONOMIC OVERVIEW
After recording a 5.4% growth rate in the first quarter, it appears as
though economic activity is subsiding. The slowdown is largely attributable to a
decrease in inventory accumulation and deceleration in the manufacturing sector
due to export weakness. Export weakness is primarily a result of a strong dollar
relative to other major currencies and the Asian meltdown.
Despite early indications of a potential economic retracing, the consumer
remains upbeat. The Consumer Confidence Index remains at secular highs with a
strong labor market providing the major underpinning.
The inflation picture remains in check, with the Consumer, and Producer
Price Indices under control. The question remains whether the tightness in the
labor market will ultimately result in businesses raising prices. Other
prevalent counter-forces are keeping this in question.
The Federal Reserve has maintained its neutral policy, and kept the Fed
Funds Rate, at 5.5%. We do not anticipate a change in policy unless economic
fundamentals deteriorate.
FINANCIAL MARKETS
During the second quarter, bonds posted positive results, while stocks were
mixed.
Large capitalization stocks, as measured by the S&P 500 Index, returned
3.3% for the quarter, while the small capitalization stocks, as measured by the
Russell 2000 Index, continued their relative under-performance, falling 4.7%.
Over the past year, the S&P 500 outpaced the Russell 2000 by 13.8%. Small and
mid-cap stocks have fallen to their lowest levels in almost eight years relative
to the S&P 500. The equity advance has been focused on large cap stocks, a
pattern that is typical in a maturing bull market.
There was also a divergence of performance among large cap equity styles.
Growth stocks (Russell 1000 Growth Index) returned 4.5%. Value stocks, (Russell
1000 Value Index) returned 0.5%.
The growth sector was helped by technology, health care and consumer
discretionary stocks, while the value sector was hurt by the utility, industrial
and basic industry sectors.
International equity stocks as measured by the MSCI GDP EAFE Index returned
3.99% for the quarter. This result was buoyed by strong returns among European
bourses, with soaring economies in Germany and France. Troubled Asian markets
continued to post negative returns.
The bond market, as measured by the Lehman Brothers Government/Corporate
Index, returned 2.6% during the second quarter. The bond market was boosted by
US Treasury performance, as the interest rate on the 30-year US Treasury fell to
all time lows and closed at 5.62%.
Corporate bonds under-performed their Government counterparts, as troubles
in Asia and Russia, and decelerating corporate earnings detracted from returns.
OUTLOOK
Our outlook with respect to the economy and financial markets has not
changed from the first quarter. We believe that economic growth will slow over
the next few quarters, with a continued widening in the trade deficit, and a
slowdown in job and income growth. We continue to believe that the Federal
Reserve will leave interest rates unchanged for the foreseeable future.
As a result, we are reducing the top-end of the expected interest rate
range on the 30-year Treasury to 6.15% from 6.35%, and keeping the low end at
5.5%.
Stock valuation levels remain high relative to the projected earnings
growth rates. Analysts continue to reduce earnings estimates. As a result, we
continue to remain cautious on stocks. We continue to favor the large
capitalization stocks over small capitalization stocks; value over growth.
8
<PAGE> 13
SECOND QUARTER 1998 FUND COMMENTARIES
MONEY MARKET
The yield curve flattened significantly in the second quarter, particularly
in the term area two years and longer. Interest rates on the long bond dropped
30 basis at the end of the second quarter. The short end also rallied, albeit
modestly, as evidenced by the three month T-bill's four basis point drop in
yield from 5.13% at 3/31/98 to 5.09% at quarter end. With the Fed having
formally adopted a tightening bias during the second quarter, expectations are
that the Fed's next move will be an upward adjustment in the Fed Funds rate.
However, market sentiment on the timing of such a move is that the Fed is at
least several months away from carrying out a tightening The average maturity of
the portfolio will be extended selectively to capitalize on opportunities where
the portfolio will be rewarded for duration extention. Such opportunities have
become increasingly available toward the end of the second quarter as the yield
curve for short-term securities retreated from its long prevalent inverted
shape.
The portfolio continues to be invested in high quality short-term
instruments, principally commerical paper. Our investment strategy is to
emphasize purchases of 30-90 day maturities to provide flexibility to respond to
any changes in the market place without sacrificing current income.
HIGH QUALITY BOND
Several factors contributed to the portfolio's favorable performance during
the second quarter. First, the income component of total return offset the lower
prices resulting from spread widening. Second, the duration of the account was
slightly longer than that of the index. Since Treasury yields trended lower,
this resulted in slightly better performance for assets with longer maturities.
The "flight to quality" theme was recurrent throughout the period as news
regarding economic problems in Asia caused investors to periodically seek the
safety of US Treasuries. The combination of earnings uncertainty and increased
issuance caused spreads to widen up to 10 basis points in the corporate sector.
We were modestly active in this sector, purchasing a five year Ford Global note
at +54 basis points versus the comparable Treasury. We lengthened duration and
added yield by swapping into an Associates Corp. note with a longer maturity.
In general, spreads on asset backed securities widened modestly. We
purchased a Sears credit card securitization at a spread of 45 basis points
versus the comparable Treasury. We added Navistar and Compass Bank to the
portfolio at a spread of +43 and +53 basis points, respectively.
We continue to find value in selected agency, domestic corporate, and asset
backed sectors.
INTERMEDIATE GOVERNMENT
US Treasuries were the best performing sector in the bond market last
quarter, as international investors pulled capital from the troubled and
volatile Asian markets and moved to the safe haven of government securities.
Longer maturity bonds were favored, resulting in a very flat yield curve. By
quarter-end there was only a marginal increase in return for securities maturing
further in the future. The bond markets are now priced so as to expect no
Federal Reserve action to either raise or lower interest rates in the
foreseeable future.
This neutral outlook contrasts somewhat with the minutes of the May meeting
of the Fed, which reflected a "close call" on the decision to raise rates in
order to cool off a steaming domestic economy and nip an increase in inflation.
We see the economy cooling somewhat over the summer, especially in export
businesses, before picking up again in the fall. The portfolio remains
positioned defensively, slightly short of target duration, both in deference to
the Fed bias, as well as the absence of incremental yield in longer maturity
securities. It also holds a small position in Inflation Protected Treasury
securities.
9
<PAGE> 14
GOVERNMENT/CORPORATE BOND
The significant event in the bond market during the second quarter was the
re-emergence of Asian financial turbulence and its effect of driving global
investors to the safety of US Treasury securities. The focus this time was on
Japan, caught in a seeming never-ending recession and facing an attach on the
once almighty yen. The risk is that their economic downturn would continue to
spread, letting the air out of the worldwide economic growth. As a result, bond
prices rose and interest rates, especially for longer maturity Treasury
securities fell near recent record lows.
With a flight to quality of US Treasuries, virtually all other sectors of
the bond market lagged in performance. Corporate spreads -- incremental risk
premium paid to holders of corporate bonds -- increased by 10-15 basis points to
the widest levels in three years. As a result, corporate securities in the
portfolio under-performed.
Our belief is that, while slowed slightly, the US economy will not be
seriously impaired by overseas weakness. Corporate profits on the whole should
remain strong and longer-term the bias is towards somewhat higher interest
rates. Thus the portfolio remains over-weighted in corporate bonds, with a
slightly shorter than benchmark duration.
HIGH YIELD BOND
Second quarter market dynamics reflected a shift from the trends of the
prior twelve months. Elevated equity and treasury market volatility, plus a
heavy new issue calendar, led to spread widening in the high yield market.
BB-rated issues outperformed single B-paper during the period as new issuance
was heavily concentrated among B's. Returns consisted entirely of income during
the quarter, as prices eroded slightly with the rise in market yields.
Nevertheless, high yield credit quality remained excellent, and shows no sign of
deterioration. The second quarter can thus be best described as one in which
market technicals overwhelmed otherwise positive fundamentals.
We remain constructive on the outlook for the US economy. We continue to
believe that Asian economic weakness will keep global commodity prices low and
US economic activity at a moderate, sustainable level. Consequently,
inflationary pressures should remain subdued. The portfolio remains biased
toward single B issues with the balance in BB's. Core positions were established
in Aurora Foods (B1), a producer of branded foods such as Log Cabin Syrup and
Duncan Hines Cakes; P&L Coal (BA3), the nation's largest operation of coal
mines, and Octel (B+), the world's largest manufacturer of lead additives for
gasoline. We trimmed our already below market weightings in energy and autos,
given the state of energy prices and the GM strike, respectively.
BALANCED
The equity market continued its strong gains in the second quarter.
However, investors steered away from stocks that could be vulnerable to weaker
growth in Asia. With lower interest rates and oil prices buoying consumer
spending, domestic-oriented cyclicals such as autos and retailers were strong
performers, along with traditional growth sectors such as technology and health
care. There are building signs that US growth is about to slow, so over the
balance of the year there could continue to be downward pressure on earnings
estimates. The good news is that in such an environment, Federal Reserve policy
would be expected to remain in an accommodative posture, which historically has
been favorable for the financial markets.
The best performing stocks in the portfolio all took significant corporate
actions consistent with our restructuring theme. These included News
Corporation, Hoechst, and Philips Electronics. On the downside, the concerns
about building economic weakness negatively impacted Case and IMC Global.
The portfolio is currently allocated near its benchmark of 60% equity and
40% fixed income. The allocation balances the positives from accommodative Fed
policy with the negative trend in general earnings expectations.
10
<PAGE> 15
EQUITY INCOME
The major investment event of the second quarter was the resurgence of the
problems in Asia, this time centered on Japan. As happened last fall, the dollar
strengthened, projections for US economic growth and inflation were lowered and
US economic growth and inflation were lowered and US interest rates rose as
foreign investors sought a safe haven.
Investors also sought the safety in large cap growth stocks and in
technology stocks, many of which the portfolio cannot own due to little or no
dividend yield. To compound the problem, cyclicals, energy and telephone
stocks -- all high yield, value names -- sold off, creating a very difficult
quarter for income oriented funds.
The current outlook is for slowing economic growth. While commodity
inflation is very low, wage costs are beginning to rise. It is not easy to pass
on cost increases today and profit margins are coming under pressure creating
earnings uncertainty.
The market environment is thus becoming more risky with valuations high and
earnings growth questionable. Portfolio strategy emphasizes defensive sectors
which have lagged the market as investors moved into growth stocks.
International oils, natural gas, electric and telephone utilities, retailers and
selected financial and health care names are the main emphasis.
EQUITY VALUE
The second quarter was difficult from a performance standpoint for the
large cap value style. The market in effect became two-tiered, with large cap
growth significantly outperforming all other stocks and driving the S&P 500
performance in the process. The best performing sector was technology, followed
by consumer cyclicals and health care. The worst performing sectors were
transportation, communications and basic materials.
The most attractively valued sectors in the market are cyclically oriented
and economically sensitive ones such as basic materials, capital goods, energy
and consumer cyclicals. The first three sectors have been impacted by the
Pacific Rim/Japanese economic crisis, and at current levels, there would appear
to be little downside left. Our portfolio is heavily invested in these areas
based on the valuations and fundamentals. Purchases during the quarter include
3M, Dana Corp. and General Mills. Significant sales included Chrysler and Sears.
We have also increased our exposure in communications with the purchase of AT&T.
The financial sector markedly impacted performance and we added Banc One to
our holdings. Utilities contributed and health care was also positive, but
lagged a bit because of underweighting. Energy and capital goods were the
biggest detractors. We are overweighted in both because of attractive valuations
and strong fundamentals, but the growth stocks within these sectors were the
best performers.
Going forward, our portfolio would clearly benefit from ongoing economic
strength and a rebound in commodity prices. We will continue to avoid the
overvalued sectors of the market and focus on areas where the fundamentals and
valuations are more solid.
GROWTH & INCOME
During the second quarter, the portfolio was well positioned to benefit
from the large cap equity sector's general out-performance. The portfolio was
over-weighted in all three of the top performing sectors -- consumer cyclicals,
technology and health care. Perhaps more importantly, the portfolio benefited
from good stock selection, particularly in the technology and healthcare
sectors.
Significant performance came from the technology sector with strong returns
from Microsoft and BMC Software. The portfolio's low exposure to the
semiconductor and related equipment industries continued to be the correct
decision as these stocks under-performed.
11
<PAGE> 16
The only significant negative impact on performance came in the consumer
services industry, where Cendant Corp. shares fell sharply after the company
announced an accounting problem in one of its divisions.
We added stocks in the banking and the medical distribution industries, as
well as adding exposure to the networking industry. We further reduced holdings
from the already under-weighted energy sector.
Our strategy continues to focus on earnings growth from domestic sources,
such as retail, computer software and new drug introductions. We remain cautious
of exposure to Asian economies and to earnings derived from commodity cyclicals,
which are demonstrating little pricing power in this low-inflation economy.
EQUITY GROWTH
The portfolio turned in solid results for the second quarter aided by
strong performance from the multinational consumer, and health care sectors.
Stock selection in the technology sector also added significant value to the
portfolio.
Select technology stocks -- America Online (+54%), Cisco (+35%) and Nokia
(+35%) all contributed to performance. The portfolio also purchased Hewlett
Packard and made an additional commitment to Intel.
Health care was also a major positive, with significant contributions to
performance by Warner Lambert, and Eli Lilly, which rebounded after a
disappointing Evista launch. We remain committed to our overweight in health
care but continue to rotate into names that have either a better pipeline,
superior positioning, or more attractive relative valuations. We have been
buying American Home Products/Monsanto in advance of the merger, as well as
Amgen.
To fund purchases, the portfolio trimmed Eli Lilly and Smithkline Beecham.
Phillip Morris was also sold due to the continued uncertainty over litigation
and the proposed settlement. Cendant and Pioneer Hi-Bred were sold on the
announcement that they would restate earnings due to accounting irregularities,
and on valuation, respectively.
Our outlook remains cautious for the market as a whole, although more
positive for our style of high quality growth management. We continue to believe
that earnings in the US are slowing driven by ongoing margin pressure and the
Asia crisis.
SPECIAL EQUITY
In the second quarter, small companies continued to under-perform large
companies. The culprit remains a flight to safety by investors, worried about
financial disarray in Asia and Russia, and the direction of interest rates.
While generally a difficult quarter, performance bright spots could be
found in the service, consumer, telecommunications and financial sectors.
Stocks which added value include Nokia, Metzler Group, Chancellor Media,
Centennial Cellular, Fingerhut, Duane Reade, and several takeover stocks
including PMT Service, NSS Bancorp and Xtra Corp. Specific stocks which
detracted from performance include DT Industries, Amplicon, and Cendant. Stocks
impacted by Asian weakness faired poorly as well.
Our long-term outlook remains positive for the small cap sector. However,
we believe that the balance of the year is likely to be volatile. The portfolio
continues to focus on growth stocks with domestic exposure and earnings
predictability. On the value side, we expect increased investment attractively
priced, faster growing small cap companies.
12
<PAGE> 17
AGGRESSIVE EQUITY
The pullback that we anticipated at the end of the first quarter finally
came to fruition. We believe that positive, although more moderate, returns are
likely going forward. Prospects remain good for sustained economic growth,
steady to lower bond yields and low inflation, along with steady corporate
profits.
We continue to be quite positive on the prospects for quality growth
stocks. Companies that are able to provide above average earnings growth will
likely to continue to attract investors. As a result, the portfolio continues to
hold technology companies like Dell Computer, Cisco Systems, Microsoft and
Compuware; drug/medical device companies like Schering-Plough, Pfizer,
Bristol-Myers, and Boston Scientific; service companies like America Online and
Home Depot; financial companies including American Express and AIG.
During the second quarter, the portfolio reduced its holdings from 38 names
to the current 33 names. The reduction was designed to take advantage of the
consolidation in the market. The funds were reallocated into current positions
that present good values at reduced prices, including increased positions in
Home Depot, American Express, AIG and Gap Stores.
As we transition into the third quarter, the impact of Asia on our economy
in terms of interest rates and corporate profits will be determined. We remain
confident that second quarter earnings for our stocks will be solid. The key
will be to remain well-diversified in companies that can deliver consistent and
stable earnings growth in an otherwise turbulent global environment.
INTERNATIONAL EQUITY
The international equity markets again endured volatility, as the first
quarter's recovery in Asia dramatically reversed in the second quarter. Hong
Kong's equity market fell nearly 27%, with other Asian countries following suit.
Japan ended down 4.5% as their banking reform package was met with skepticism.
Enthusiasm in Europe continued, as many stock markets posted record highs.
The core EMU markets, France, Germany and Belgium, as well as Finland were among
the best performers.
The portfolio benefited from stock selection in Finland, Germany and
Canada. The most notable Finnish holdings were Nokia and UPM-Kymmene. German
stocks -- Mannesmann, Deutsche Telekom and SAP AG -- continue to add value to
the portfolio.
Exposure to Asia hurt performance, as well as underweighted positions in
France and Germany.
Going forward, we do not see Asian markets turning around soon. However, as
bottom-up investors, we seek to invest in world class companies and look for
opportunities to buy stocks at favorable prices.
13
<PAGE> 18
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT/
MONEY HIGH GOVERNMENT CORPORATE EQUITY
MARKET QUALITY BOND BOND BOND BALANCED INCOME
------------ ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Securities, at cost......... $248,960,792 $202,409,395 $141,604,234 $476,352,732 $565,911,134 $ 994,545,959
============ ============ ============ ============ ============ ==============
Securities, at market....... $248,960,792 $203,849,597 $143,098,593 $491,028,405 $603,285,937 $1,393,243,698
Repurchase agreement,
at value................... -- 6,804,256 5,000,000 -- 53,160,000 --
Cash........................ -- -- 117,686 414,825 -- 63,550
Foreign currency holding, at
value (Cost $1,452,165).... -- -- -- -- --
Receivable for securities
sold....................... -- -- -- 1,102,402 -- --
Receivable for foreign
currency forward
contracts.................. -- -- -- -- -- --
Interest receivable......... 923,852 2,393,572 1,489,286 7,172,806 3,213,749 8,980
Dividends receivable........ -- -- -- -- 618,648 2,087,936
Receivable from securities
lending.................... -- 1,360 449 18,858 29,520 7,533
Reimbursement from
advisor.................... -- -- 2,000 -- 14,531 1,087
------------ ------------ ------------ ------------ ------------ --------------
Total assets....... 249,884,644 213,048,785 149,708,014 499,737,296 660,322,385 1,395,412,784
------------ ------------ ------------ ------------ ------------ --------------
LIABILITIES:
Due to custodian............ 13,385,621 3,066 -- -- 1,102,498 --
Deposit for securities
loaned..................... -- -- 15,378,249 38,506,250 184,507,860 56,074,896
Payable for securities
purchased.................. -- -- -- -- 1,384,076 --
Payable for foreign currency
forward contracts.......... -- -- -- -- -- --
Payable to advisor.......... -- 2,464 -- 2,904 -- --
Accrued expenses:
Investment advisory fees... 199,395 240,767 154,277 505,880 696,362 2,042,938
Custody fees............... -- -- -- 9,733 -- 22,108
Professional fees.......... 10,110 10,005 9,095 5,175 7,799 18,540
Reports to shareholders.... 2,102 1,846 907 2,865 3,130 9,762
Miscellaneous fees......... 2,126 1,947 2,848 3,310 4,061 13,321
------------ ------------ ------------ ------------ ------------ --------------
Total
liabilities...... 13,599,354 260,095 15,545,376 39,036,117 187,705,786 58,181,565
------------ ------------ ------------ ------------ ------------ --------------
NET ASSETS......... $236,285,290 $212,788,690 $134,162,638 $460,701,179 $472,616,599 $1,337,231,219
============ ============ ============ ============ ============ ==============
NET ASSETS CONSIST OF:
Paid-in capital............. $236,285,290 $211,348,488 $132,668,279 $446,025,506 $435,241,796 $ 938,533,480
Net unrealized appreciation
on securities............ -- 1,440,202 1,494,359 14,675,673 37,374,803 398,697,739
Net unrealized appreciation
on translation of assets
and liabilities in
foreign currencies....... -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ --------------
NET ASSETS......... $236,285,290 $212,788,690 $134,162,638 $460,701,179 $472,616,599 $1,337,231,219
============ ============ ============ ============ ============ ==============
</TABLE>
See notes to financial statements
14
<PAGE> 19
<TABLE>
<CAPTION>
EQUITY GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH YIELD INTERNATIONAL
VALUE INCOME GROWTH EQUITY EQUITY BOND EQUITY
------------ ------------ ------------ ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$413,387,469 $462,517,787 $471,047,050 $741,523,441 $39,020,880 $80,375,946 $252,071,016
============ ============ ============ ============ =========== =========== ============
$420,378,514 $602,318,499 $579,468,699 $910,872,064 $47,871,213 $80,614,462 $284,997,120
11,567,698 10,606,060 13,035,205 51,801,861 1,561,012 124,454 16,085,695
-- -- -- -- -- -- --
-- -- -- -- -- -- 1,445,744
3,100,470 460,886 1,438,214 5,632,689 -- -- 100,350
-- -- -- -- -- -- 855,407
6,375 10,999 9,552 24,716 221 1,932,409 8,643
650,496 356,333 293,074 483,240 15,799 -- 694,380
4,088 3,776 5,605 38,413 -- -- 9,356
4,849 -- -- -- 16,914 7,759 6,191
------------ ------------ ------------ ------------ ----------- ----------- ------------
435,712,490 613,756,553 594,250,349 968,852,983 49,465,159 82,679,084 304,202,886
------------ ------------ ------------ ------------ ----------- ----------- ------------
-- -- -- 100 -- -- --
30,791,500 61,886,600 50,181,868 112,800,975 -- -- 19,367,625
2,851,422 -- 434,924 10,945,806 -- 1,400,000 2,878,977
-- -- -- -- -- -- 211,792
-- 6,298 -- 10,708 -- -- --
713,916 1,018,916 1,066,847 2,234,952 140,881 128,689 644,115
-- -- -- -- 8,423 -- --
6,976 6,198 5,885 4,350 7,734 14,627 16,182
1,690 2,658 3,376 6,440 286 315 1,582
9,014 3,585 4,053 7,709 7,538 6,296 7,527
------------ ------------ ------------ ------------ ----------- ----------- ------------
34,374,518 62,924,255 51,696,953 126,011,040 164,862 1,549,927 23,127,800
------------ ------------ ------------ ------------ ----------- ----------- ------------
$401,337,972 $550,832,298 $542,553,396 $842,841,943 $49,300,297 $81,129,157 $281,075,086
============ ============ ============ ============ =========== =========== ============
$394,346,927 $411,031,586 $434,131,747 $673,493,320 $40,449,964 $80,890,641 $247,513,824
6,991,045 139,800,712 108,421,649 169,348,623 8,850,333 238,516 32,926,104
-- -- -- -- -- -- 635,158
------------ ------------ ------------ ------------ ----------- ----------- ------------
$401,337,972 $550,832,298 $542,553,396 $842,841,943 $49,300,297 $81,129,157 $281,075,086
============ ============ ============ ============ =========== =========== ============
</TABLE>
15
<PAGE> 20
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT/
MONEY HIGH GOVERNMENT CORPORATE EQUITY
MARKET QUALITY BOND BOND BOND BALANCED INCOME
---------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income................... $6,694,912 $6,606,956 $4,000,206 $13,325,304 $ 5,929,281 $ 2,533,208
Dividend income................... -- -- -- -- 3,044,595 14,420,366
Less: withholding taxes........... -- -- -- -- (47,711) (54,488)
---------- ---------- ---------- ----------- ----------- ------------
Total income............... 6,694,912 6,606,956 4,000,206 13,325,304 8,926,165 16,899,086
---------- ---------- ---------- ----------- ----------- ------------
EXPENSES:
Investment advisory fees.......... 296,182 359,784 235,825 716,028 1,002,350 2,926,168
Custody fees...................... 19,658 18,209 12,260 26,553 30,311 69,967
Professional fees................. 9,152 9,534 8,850 10,096 10,458 14,874
Reports to shareholders........... 275 258 153 427 466 1,435
Miscellaneous fees................ 939 836 591 1,428 1,592 4,655
---------- ---------- ---------- ----------- ----------- ------------
Total expenses............. 326,206 388,621 257,679 754,532 1,045,177 3,017,099
Expenses reimbursed by the
advisor........................... -- -- -- -- -- --
---------- ---------- ---------- ----------- ----------- ------------
Net expenses............... 326,206 388,621 257,679 754,532 1,045,177 3,017,099
---------- ---------- ---------- ----------- ----------- ------------
Net investment income............... 6,368,706 6,218,335 3,742,527 12,570,772 7,880,988 13,881,987
---------- ---------- ---------- ----------- ----------- ------------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON SECURITIES AND FOREIGN
CURRENCIES:
Net realized gains (losses) on
securities...................... (2,703) 38,514 123,905 1,718,325 20,982,013 80,955,301
Net realized gains on foreign
currency transactions........... -- -- -- -- -- --
Net change in unrealized
appreciation (depreciation) on
securities...................... -- 314,885 417,567 3,887,622 17,330,078 24,752,859
Net change in unrealized
appreciation on translation of
assets and liabilities in
foreign currencies.............. -- -- -- -- -- --
---------- ---------- ---------- ----------- ----------- ------------
Net realized and unrealized gains
(losses) on securities and foreign
currencies........................ (2,703) 353,399 541,472 5,605,947 38,312,091 105,708,160
---------- ---------- ---------- ----------- ----------- ------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS................... $6,366,003 $6,571,734 $4,283,999 $18,176,719 $46,193,079 $119,590,147
========== ========== ========== =========== =========== ============
</TABLE>
See notes to financial statements.
16
<PAGE> 21
<TABLE>
<CAPTION>
EQUITY GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH YIELD INTERNATIONAL
VALUE INCOME GROWTH EQUITY EQUITY BOND EQUITY
----------- ----------- ----------- ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 374,658 $ 434,099 $ 414,152 $ 1,509,269 $ 83,436 $3,040,526 $ 397,315
3,073,274 1,800,936 1,557,785 2,255,871 83,310 -- 3,122,847
-- (563) (13,606) (34,841) -- -- (286,170)
----------- ----------- ----------- ----------- ---------- ---------- -----------
3,447,932 2,234,472 1,958,331 3,730,299 166,746 3,040,526 3,233,992
----------- ----------- ----------- ----------- ---------- ---------- -----------
997,444 1,392,296 1,513,093 3,167,343 185,436 180,208 950,628
30,796 26,719 27,000 77,339 15,699 16,914 94,122
9,398 10,173 10,629 12,288 8,199 9,502 11,299
278 444 503 878 30 47 242
1,083 1,699 1,597 3,072 94 53 1,245
----------- ----------- ----------- ----------- ---------- ---------- -----------
1,038,999 1,431,331 1,552,822 3,260,920 209,458 206,724 1,057,536
(4,849) -- -- -- (18,287) (10,796) --
----------- ----------- ----------- ----------- ---------- ---------- -----------
1,034,150 1,431,331 1,552,822 3,260,920 191,171 195,928 1,057,536
----------- ----------- ----------- ----------- ---------- ---------- -----------
2,413,782 803,141 405,509 469,379 (24,425) 2,844,598 2,176,456
----------- ----------- ----------- ----------- ---------- ---------- -----------
29,084,356 22,463,889 54,002,788 30,757,542 (528,572) 730,607 8,517,832
-- -- -- -- -- -- 1,920,127
1,336,719 71,046,109 29,741,327 21,789,261 6,856,559 (570,450) 19,021,807
-- -- -- -- -- -- (1,008,224)
----------- ----------- ----------- ----------- ---------- ---------- -----------
30,421,075 93,509,998 83,744,115 52,546,803 6,327,987 160,157 28,451,542
----------- ----------- ----------- ----------- ---------- ---------- -----------
$32,834,857 $94,313,139 $84,149,624 $53,016,182 $6,303,562 $3,004,755 $30,627,998
=========== =========== =========== =========== ========== ========== ===========
</TABLE>
17
<PAGE> 22
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT/
MONEY HIGH GOVERNMENT CORPORATE
MARKET QUALITY BOND BOND BOND BALANCED
------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income............ $ 6,368,706 $ 6,218,335 $ 3,742,527 $ 12,570,772 $ 7,880,988
Net realized gains (losses) on
securities..................... (2,703) 38,514 123,905 1,718,325 20,982,013
Net realized gains on foreign
currency transactions.......... -- -- -- -- --
Net change in unrealized
appreciation (depreciation) on
securities..................... -- 314,885 417,567 3,887,622 17,330,078
Net change in unrealized
appreciation on translation of
assets and liabilities in
foreign currencies............. -- -- -- -- --
------------- ------------- ------------ ------------ ------------
Net increase in net assets
resulting from operations...... 6,366,003 6,571,734 4,283,999 18,176,719 46,193,079
------------- ------------- ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from capital invested... 526,525,143 51,189,972 41,926,188 120,636,328 89,156,403
Value of capital withdrawn....... (528,918,314) (63,142,454) (41,233,946) (39,744,753) (57,502,796)
------------- ------------- ------------ ------------ ------------
Net increase (decrease) in net
assets resulting from capital
transactions..................... (2,393,171) (11,952,482) 692,242 80,891,575 31,653,607
------------- ------------- ------------ ------------ ------------
Net increase in net assets......... 3,972,832 (5,380,748) 4,976,241 99,068,294 77,846,686
NET ASSETS:
Beginning of period.............. 232,312,458 218,169,438 129,186,397 361,632,885 394,769,913
------------- ------------- ------------ ------------ ------------
End of period.................... $ 236,285,290 $ 212,788,690 $134,162,638 $460,701,179 $472,616,599
============= ============= ============ ============ ============
</TABLE>
See notes to financial statements.
18
<PAGE> 23
<TABLE>
<CAPTION>
EQUITY EQUITY GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH YIELD INTERNATIONAL
INCOME VALUE INCOME GROWTH EQUITY EQUITY BOND EQUITY
-------------- ------------ ------------ ------------ ------------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 13,881,987 $ 2,413,782 $ 803,141 $ 405,509 $ 469,379 $ (24,425) $ 2,844,598 $ 2,176,456
29,084,356 22,463,889 54,002,788 30,757,542 (528,572) 730,607 8,517,832
80,955,301
-- -- -- -- -- -- 1,920,127
--
1,336,719 71,046,109 29,741,327 21,789,261 6,856,559 (570,450) 19,021,807
24,752,859
-- -- -- -- -- -- (1,008,224)
--
-------------- ------------ ------------ ------------ ------------- ------------ ----------- ------------
119,590,147 32,834,857 94,313,139 84,149,624 53,016,182 6,303,562 3,004,755 30,627,998
-------------- ------------ ------------ ------------ ------------- ------------ ----------- ------------
177,639,841 226,785,170 179,041,256 123,832,448 190,487,158 40,897,157 46,547,607 127,745,727
(175,069,938) (93,265,770) (98,782,505) (91,740,864) (144,049,658) (23,758,072) (8,123,336) (82,604,707)
-------------- ------------ ------------ ------------ ------------- ------------ ----------- ------------
2,569,903 133,519,400 80,258,751 32,091,584 46,437,500 17,139,085 38,424,271 45,141,020
-------------- ------------ ------------ ------------ ------------- ------------ ----------- ------------
122,160,050 166,354,257 174,571,890 116,241,208 99,453,682 23,442,647 41,429,026 75,769,018
1,215,071,169 234,983,715 376,260,408 426,312,188 743,388,261 25,857,650 39,700,131 205,306,068
-------------- ------------ ------------ ------------ ------------- ------------ ----------- ------------
$1,337,231,219 $401,337,972 $550,832,298 $542,553,396 $ 842,841,943 $ 49,300,297 $81,129,157 $281,075,086
============== ============ ============ ============ ============= ============ =========== ============
</TABLE>
19
<PAGE> 24
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT/
MONEY HIGH GOVERNMENT CORPORATE
MARKET QUALITY BOND BOND BOND BALANCED
------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss)............... $ 11,798,211 $ 12,355,613 $ 5,479,071 $ 21,747,233 $ 12,233,394
Net realized gains (losses) on
securities............................... (8,941) (2,349,712) 43,123 747,528 44,754,963
Net realized gains on foreign currency
transactions............................. -- -- -- -- --
Net change in unrealized appreciation
(depreciation) on securities............. -- 1,093,124 1,403,813 5,790,454 1,725,897
Net change in unrealized appreciation on
translation of assets and liabilities in
foreign currencies....................... -- -- -- -- --
------------- ------------ ------------ ------------- ------------
Net increase in net assets resulting from
operations............................... 11,789,270 11,099,025 6,926,007 28,285,215 58,714,254
------------- ------------ ------------ ------------- ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from capital invested............. 902,776,832 102,876,345 68,807,286 123,824,256 170,812,434
Value of capital withdrawn................. (867,265,898) (93,100,595) (49,606,776) (113,152,603) (99,666,614)
------------- ------------ ------------ ------------- ------------
Net increase (decrease) in net assets
resulting from capital transactions........ 35,510,934 9,775,750 19,200,510 10,671,653 71,145,820
------------- ------------ ------------ ------------- ------------
Net increase in net assets................... 47,300,204 20,874,775 26,126,517 38,956,868 129,860,074
NET ASSETS:
Beginning of year.......................... 185,012,254 197,294,663 103,059,880 322,676,017 264,909,839
------------- ------------ ------------ ------------- ------------
End of year................................ $ 232,312,458 $218,169,438 $129,186,397 $ 361,632,885 $394,769,913
============= ============ ============ ============= ============
</TABLE>
See notes to financial statements.
20
<PAGE> 25
<TABLE>
<CAPTION>
EQUITY EQUITY GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH YIELD INTERNATIONAL
INCOME VALUE INCOME GROWTH EQUITY EQUITY BOND EQUITY
-------------- ------------ ------------- ------------- ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$24,964,071 $ 2,275,636 $ 1,812,221 $ 1,684,585 $ 2,573,992 $ (36,672) $ 2,857,257 $ 1,748,854
112,649,761 20,127,411 30,338,224 24,114,431 73,438,581 (1,923,753) 751,900 6,952,374
-- -- -- -- -- -- -- 1,289,424
145,312,803 4,086,494 46,717,933 64,960,988 69,900,579 1,758,315 436,636 1,832,462
-- -- -- -- -- -- -- 1,293,392
-------------- ------------ ------------- ------------- ------------- ------------ ------------ -------------
282,926,635 26,489,541 78,868,378 90,760,004 145,913,152 (202,110) 4,045,793 13,116,506
-------------- ------------ ------------- ------------- ------------- ------------ ------------ -------------
342,318,881 252,043,859 227,268,676 218,548,740 300,462,601 45,019,873 34,940,563 149,002,914
(366,995,016) (72,583,198) (137,489,072) (182,124,242) (210,251,735) (34,439,243) (14,658,911) (104,998,249)
-------------- ------------ ------------- ------------- ------------- ------------ ------------ -------------
(24,676,135) 179,460,661 89,779,604 36,424,498 90,210,866 10,580,630 20,281,652 44,004,665
-------------- ------------ ------------- ------------- ------------- ------------ ------------ -------------
258,250,500 205,950,202 168,647,982 127,184,502 236,124,018 10,378,520 24,327,445 57,121,171
956,820,669 29,033,513 207,612,426 299,127,686 507,264,243 15,479,130 15,372,686 148,184,897
-------------- ------------ ------------- ------------- ------------- ------------ ------------ -------------
$1,215,071,169 $234,983,715 $ 376,260,408 $ 426,312,188 $ 743,388,261 $ 25,857,650 $ 39,700,131 $ 205,306,068
============== ============ ============= ============= ============= ============ ============ =============
</TABLE>
21
<PAGE> 26
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- ------------
<C> <S> <C>
COMMERCIAL PAPER -- 81.54%
$ 4,200,000 Abbott Laboratories, 5.54%,
07/28/98..................... $ 4,182,549
2,200,000 American Crystal Sugar Company,
5.78%, 07/22/98.............. 2,192,582
500,000 American Express Credit
Company, 5.50%, 07/20/98..... 498,549
7,400,000 Associates Corp. of N.A.,
5.53%, 07/07/98.............. 7,393,180
900,000 Associates Corp. of N.A.,
5.52%, 07/23/98.............. 896,964
2,000,000 Avco Financial Services, Inc.,
5.56%, 08/24/98.............. 1,983,320
6,000,000 Avco Financial Services, Inc.,
5.57%, 09/01/98.............. 5,942,444
1,000,000 Avco Financial Services, Inc.,
5.55%, 10/19/98.............. 983,042
11,200,000 Bank of New York Company,
5.51%, 07/14/98.............. 11,177,715
1,800,000 Barclays US Funding Corp.,
5.54%, 07/24/98.............. 1,793,635
1,800,000 CIT Group Holdings, Inc.,
5.51%, 07/24/98.............. 1,793,663
3,600,000 CIT Group Holdings, Inc.,
5.53%, 07/27/98.............. 3,585,622
1,900,000 CSX Corp., 5.70%, 07/29/98..... 1,891,577
9,000,000 Commercial Credit Company,
5.50%, 07/24/98.............. 8,968,375
2,400,000 Conagra, Inc., 5.67%,
07/10/98..................... 2,396,598
2,400,000 Dominion Resources, 5.65%,
07/14/98..................... 2,395,103
2,834,000 Enterprise Funding Corp.,
5.54%, 07/21/98.............. 2,825,277
3,157,000 Enterprise Funding Corp.,
5.53%, 08/07/98.............. 3,139,057
2,000,000 Enterprise Funding Corp.,
5.52%, 08/19/98.............. 1,984,974
450,000 General Electric Capital Corp.,
5.52%, 07/08/98.............. 449,517
5,800,000 General Electric Capital Corp.,
5.52%, 07/20/98.............. 5,783,103
5,700,000 General Electric Capital Corp.,
5.53%, 07/29/98.............. 5,675,483
3,800,000 General Motors Acceptance
Corp., 5.52%, 08/28/98....... 3,766,205
7,000,000 General Motors Acceptance
Corp., 5.55%, 09/01/98....... 6,933,092
5,000,000 Heller Financial Inc., 5.68%,
07/23/98..................... 4,982,644
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- ------------
<C> <S> <C>
COMMERCIAL PAPER (CONTINUED)
$ 6,000,000 Heller Financial Inc., 5.70%,
07/24/98..................... $ 5,978,150
650,000 Household International Corp.,
5.57%, 07/15/98.............. 648,592
1,750,000 Houston Industries Finance
Company, 5.72%, 07/06/98..... 1,748,610
3,800,000 JHM Funding, Inc., 5.56%,
07/10/98..................... 3,794,718
2,410,000 JHM Funding, Inc., 5.56%,
07/10/98..................... 2,406,650
5,000,000 JHM Funding, Inc., 5.60%,
08/13/98..................... 4,966,556
1,000,000 Lehman Brothers Holdings Inc.,
5.53%, 07/16/98.............. 997,696
3,300,000 Lehman Brothers Holdings Inc.,
5.59%, 07/17/98.............. 3,291,801
4,400,000 Merrill Lynch and Company,
Inc., 5.56%, 07/30/98........ 4,380,293
2,800,000 Metlife Funding, Inc., 5.51%,
07/09/98..................... 2,796,572
10,000,000 Norwest Corp., 5.55%,
07/09/98..................... 9,987,667
5,000,000 Paccar Financial Group, 5.55%,
07/06/98..................... 4,996,146
4,000,000 Paccar Financial Group, 5.60%,
07/31/98..................... 3,981,333
3,200,000 Panasonic Finance America,
5.51%, 07/14/98.............. 3,193,633
7,400,000 Quebec Province -- Canada,
5.53%, 07/15/98.............. 7,384,086
3,000,000 Riverwood Funding Corp., 5.51%,
07/13/98..................... 2,994,490
10,000,000 Sanwa Business Credit, 5.62%,
07/06/98..................... 9,992,194
1,500,000 Sanwa Business Credit, 6.00%,
07/23/98..................... 1,494,500
6,400,000 Sears Roebuck Acceptance Corp.,
5.51%, 07/13/98.............. 6,388,246
300,000 Sears Roebuck & Company, 5.52%,
07/24/98..................... 298,942
1,500,000 Textron Inc., 5.70%,
07/01/98..................... 1,500,000
3,300,000 Transamerica Finance Corp.,
5.51%, 07/10/98.............. 3,295,454
3,000,000 Transamerica Finance Corp.,
5.55%, 08/05/98.............. 2,983,812
5,000,000 Transamerica Finance Group
Inc., 5.55%, 07/06/98........ 4,996,146
</TABLE>
See notes to financial statements.
22
<PAGE> 27
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- ------------
<C> <S> <C>
COMMERCIAL PAPER (CONTINUED)
$ 1,588,190 Union Bancal Corp., 5.53%,
07/20/98..................... $ 1,583,554
3,000,000 Union Bancal Corp., 5.51%,
08/25/98..................... 2,974,746
------------
TOTAL COMMERCIAL PAPER
(Cost $192,668,857)............ 192,668,857
------------
FEDERAL HOME LOAN BANK -- 4.23%
5,000,000 5.685%, 10/02/98............... 5,001,966
5,000,000 5.70%, 03/01/99................ 5,000,000
------------
TOTAL FEDERAL HOME LOAN BANK
(Cost $10,001,966)............. 10,001,966
------------
CERTIFICATES OF DEPOSIT --7.70%
7,300,000 Canadian Imperial Bank, 5.74%,
05/07/99..................... 7,300,000
7,000,000 National Westminster Bank,
5.86%, 08/10/98.............. 7,003,969
3,900,000 Royal Bank of Canada, 5.79%,
08/20/98..................... 3,900,000
------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $18,203,969)............. 18,203,969
------------
SHORT-TERM CORPORATE NOTES -- 11.89%
2,800,000 Banc One, Floating Rate, 5.63%,
07/02/98+.................... 2,800,000
5,286,000 Capital One Funding Corp.,
Floating Rate, 5.63%,
07/02/98+.................... 5,286,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- ------------
<C> <S> <C>
SHORT-TERM CORPORATE NOTES (CONTINUED)
$ 9,000,000 Goldman Sachs Group, 5.65%,
05/11/99..................... $ 9,000,000
6,000,000 Asset Backed Securities
Investment Trust, Series
1997-I, Class C, Floating
Rate, 5.67%,
07/15/98..................... 6,000,000
5,000,000 Asset Backed Securities
Investment Trust, Series
1997-E, Class N, Variable
Rate, 5.67%, 08/15/98........ 5,000,000
------------
TOTAL SHORT-TERM CORPORATE
NOTES
(Cost $28,086,000)............. 28,086,000
------------
Total Investments -- 105.36%
(Cost $248,960,792)............ 248,960,792
Other assets less
liabilities -- (5.36%)......... (12,675,502)
------------
NET ASSETS -- 100.00%.......... $236,285,290
============
</TABLE>
The aggregate cost of investments for federal income tax purposes at June 30,
1998, is $248,960,792.
- ---------------
+ This interest rate is subject to change weekly based on the greater of the 30
day or 90 day Federal composite rate. The rate shown was in effect as of June
30, 1998.
See notes to financial statements.
23
<PAGE> 28
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- ------------
<C> <S> <C>
CORPORATE BONDS AND NOTES -- 81.59%
BANKS -- 8.13%
$8,000,000 First Omni Bank, Series 96-A,
6.65%, 09/15/03............... $ 8,185,920
4,000,000 Norwest Corp., 6.75%,
05/12/00...................... 4,060,688
5,033,318 Union Acceptance Corp., 6.40%,
10/10/02...................... 5,047,008
------------
TOTAL BANKS..................... 17,293,616
------------
BROKERAGE -- 9.17%
5,500,000 Bear Stearns & Company, 6.50%,
06/15/00...................... 5,557,618
725,000 Lehman Brothers, Inc., Medium-
Term Note, 6.08%, 07/08/98.... 725,053
5,000,000 Lehman Brothers Holdings Inc.,
6.00%, 02/26/01............... 4,981,895
5,000,000 Merrill Lynch & Company, 6.00%,
02/12/03...................... 5,001,890
3,000,000 Morgan Stanley Dean Witter,
8.88%, 10/15/01............... 3,247,857
------------
TOTAL BROKERAGE................. 19,514,313
------------
FINANCE -- 32.15%
2,000,000 Associates Corp. of N.A., 6.15%,
01/13/03...................... 2,005,754
3,170,000 Associates Corp. of N.A., 6.01%,
02/07/03...................... 3,161,390
4,000,000 Associates Corp. of N.A., 6.00%,
04/15/03...................... 3,994,844
5,000,000 CIT Group Holdings, 6.13%,
11/15/99...................... 5,010,900
2,908,334 Copelco Capital Funding, 6.34%,
07/20/04...................... 2,920,171
5,000,000 Florida Windstorm Underwriting,
6.50%, 08/25/02............... 5,071,730
7,000,000 Ford Motor Credit Corp., 6.00%,
01/14/03...................... 6,974,933
3,000,000 General Motors Acceptance Corp.,
5.63%, 02/25/00............... 2,977,500
5,250,000 General Motors Acceptance Corp.,
9.38%, 04/01/00............... 5,539,396
200,000 Government Export Trust, 4.61%,
09/01/98...................... 199,618
6,500,000 Household Finance Company,
Medium-Term Note, 7.15%,
06/15/00...................... 6,617,247
5,000,000 International Lease Finance,
7.05%, 05/01/01............... 5,134,730
7,500,000 John Deere Capital, 6.30%,
06/01/99...................... 7,531,508
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- ------------
<C> <S> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCE (CONTINUED)
$ 660,275 Navistar Finance, 6.55%,
11/20/01...................... $ 661,516
5,000,000 Salomon, Inc., 7.25%,
05/01/01...................... 5,159,930
2,804,185 Textron Financial Corp., 6.05%,
03/15/09...................... 2,807,859
2,325,003 Travelers Mortgage, 12.00%,
03/01/14...................... 2,643,338
------------
TOTAL FINANCE................... 68,412,364
------------
PRIVATE ASSET BACKED: BANKS -- 4.16%
3,241,375 Banc One Auto Grantor Trust,
6.27%, 11/20/03............... 3,261,472
4,130,530 Banc One Auto Grantor Trust,
6.29%, 07/20/04............... 4,160,889
347,735 Western Finance Grantor Trust,
4.60%, 04/01/99............... 347,116
1,091,039 Western Finance Grantor Trust,
5.88%, 03/01/02............... 1,091,017
------------
TOTAL PRIVATE ASSET BACKED:
BANKS........................... 8,860,494
------------
PRIVATE ASSET BACKED: CONSTRUCTION -- 0.62%
1,315,488 Case Equipment Loan Trust,
Series 1994-C, Class A2,
8.10%, 06/15/01............... 1,316,856
------------
PRIVATE ASSET BACKED: CREDIT CARDS -- 8.25%
4,583,333 Discover Card Master Trust I,
Series 93-2A, 5.40%,
11/16/01...................... 4,577,329
862,500 MBNA Master Credit Card, 5.40%,
09/15/00...................... 859,938
5,000,000 Sears Credit Account Master
Trust, Series 96-1A, 6.20%,
02/16/06...................... 5,056,300
1,000,000 Signet Credit Card Master Trust,
5.20%, 02/15/02............... 998,840
6,000,000 Standard Credit Card Master
Trust, Series 91-3, 8.88%,
09/07/99...................... 6,052,860
------------
TOTAL PRIVATE ASSET BACKED:
CREDIT CARDS.................... 17,545,267
------------
PRIVATE ASSET BACKED: FINANCE -- 5.81%
2,310,270 Chase Manhattan Grantor Trust,
6.61%, 09/15/02............... 2,328,151
140,147 General Motors Acceptance Corp.,
Grantor Trust, Series 95-A,
Class A, 7.15%, 03/15/00...... 140,238
4,872,173 Navistar Financial Corp., Owner
Trust, Series 98-A, Class A,
5.94%, 11/15/04............... 4,880,547
</TABLE>
See notes to financial statements.
24
<PAGE> 29
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- ------------
<C> <S> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: FINANCE (CONTINUED)
$ 774,906 Pemex Exp Grantor Trust, 7.66%,
08/15/01...................... $ 796,758
4,222,356 USAA Auto Loan Grantor Trust,
6.07%, 05/15/04............... 4,220,794
------------
TOTAL PRIVATE ASSET BACKED:
FINANCE......................... 12,366,488
------------
PRIVATE ASSET BACKED: RECEIVABLES -- 11.57%
5,000,000 Capital Equipment Receivable
Trust, Series 96-1, 6.28%,
06/15/00...................... 5,019,900
1,453,417 Chevy Chase Auto Receivable
Trust, 6.00%, 12/15/01........ 1,455,292
1,911,871 Chevy Chase Auto Receivable
Trust, 6.60%, 12/15/02........ 1,924,891
5,000,000 Compass Auto Receivable Trust,
Series 1998-A, Class A3,
5.90%, 05/15/04............... 4,993,750
3,030,923 First Sierra Receivables II,
6.85%, 02/10/03............... 3,069,204
1,240,495 Heller Equipment Asset
Receivables Trust, Series
1997-1, Class A2, 6.39%,
05/25/05...................... 1,246,673
456,892 IBM Credit Receivable Lease
Asset Master Trust, Series
93-1A, 4.55%, 11/15/00........ 455,124
164,065 IBM Credit Receivable Lease
Asset Master Trust, 6.55%,
07/16/01...................... 164,131
5,000,000 Newcourt Receivables Asset
Trust, Series 1997-1, Class
A4, 6.19%, 05/02/05........... 5,040,800
1,250,028 Toyota Auto Receivable Trust,
Series 96-AA, 6.30%,
07/20/01...................... 1,253,578
------------
TOTAL PRIVATE ASSET BACKED:
RECEIVABLES..................... 24,623,343
------------
REAL ESTATE -- 1.73%
74,364 Daiwa Home Equity Loans, 7.88%,
11/25/19...................... 74,089
1,586,698 GE Home Equity Loan, Series
91-1A, 7.20%, 09/15/11........ 1,593,044
752,126 Merrill Lynch Mortgage
Investors, Inc., 10.10%,
11/15/07...................... 770,268
581,187 Merrill Lynch Mortgage
Investors, Inc., 10.35%,
05/15/09...................... 624,549
360,803 Merrill Lynch Mortgage
Investors, Inc., 9.40%,
09/15/09...................... 384,112
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- ------------
<C> <S> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
REAL ESTATE (CONTINUED)
$ 245,754 Merrill Lynch Mortgage
Investors, Inc., Series 91-DA,
9.00%, 07/15/11............... $ 245,233
------------
TOTAL REAL ESTATE............... 3,691,295
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $172,088,204)............. 173,624,036
------------
US TREASURY NOTES -- 2.82%
6,000,000 5.50%, 02/29/00
(Cost $6,000,402)............... 5,998,122
------------
US GOVERNMENT AGENCY SECURITIES -- 2.90%
FANNIE MAE -- 0.09%
53,321 PL# 6346, 6.75%, 02/01/03....... 53,499
136,487 PL# 137455, 7.00%, 04/01/04..... 136,483
------------
TOTAL FANNIE MAE................ 189,982
------------
FREDDIE MAC -- 1.24%
1,268,718 PL# 850082, 9.00%, 10/01/05..... 1,309,057
220,142 REMIC, Series MH-1, 10.15%,
04/15/06...................... 222,607
679,998 PL# D0677, 7.50%, 03/01/08...... 692,407
11,310 PL# 273991, 6.50%, 03/01/13..... 11,253
401,658 PL# 306816, 7.00%, 01/01/18..... 405,935
------------
TOTAL FREDDIE MAC............... 2,641,259
------------
OTHER AGENCIES -- 0.10%
215,499 Guaranteed Export Certificates,
4.81%, 12/15/98............... 214,896
------------
RESOLUTION TRUST CORP. -- 1.47%
2,078,079 Resolution Trust Corp., 7.94%,
08/25/21...................... 2,069,476
1,058,084 Resolution Trust Corp., 6.74%,
07/25/27...................... 1,054,106
------------
TOTAL RESOLUTION TRUST CORP. ... 3,123,582
------------
TOTAL US GOVERNMENT AGENCY
SECURITIES (Cost $6,256,552).... 6,169,719
------------
FOREIGN GOVERNMENT OBLIGATIONS -- 2.38%
5,000,000 Hydro Quebec, 6.36%, 01/15/02
(Cost $5,064,237)............. 5,057,720
------------
</TABLE>
See notes to financial statements.
25
<PAGE> 30
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- ------------
<C> <S> <C>
COMMERCIAL PAPER -- 6.11%
$5,000,000 British Petroleum Capital PLC,
6.25%, 07/01/98............... $ 5,000,000
8,000,000 Goldman Sachs Group, L.P.,
6.25%, 07/01/98............... 8,000,000
------------
TOTAL COMMERCIAL PAPER
(Cost $13,000,000).............. 13,000,000
------------
TOTAL SECURITIES
(Cost $202,409,395)............. 203,849,597
------------
REPURCHASE AGREEMENT -- 3.20%
6,804,256 With Investors Bank & Trust,
dated 06/30/98, 5.20%,
repurchase proceeds at
maturity $6,805,239, 07/01/98
(Collateralized by Freddie
Mac, 7.04%, due 12/01/25 with
a value of $7,144,843) (Cost
$6,804,256)................... 6,804,256
------------
Total Investments -- 99.00%
(Cost $209,213,651)............. 210,653,853
Other assets less
liabilities -- 1.00%.......... 2,134,837
------------
NET ASSETS -- 100.00%........... $212,788,690
============
</TABLE>
The aggregate cost of investments for federal income tax purposes at June 30,
1998, is $209,213,651.
The following amount is based on costs for federal income tax purposes:
<TABLE>
<S> <C>
Gross unrealized appreciation............ $1,635,446
Gross unrealized depreciation............ (195,244)
----------
Net unrealized appreciation.............. $1,440,202
==========
</TABLE>
See notes to financial statements.
26
<PAGE> 31
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
--------- ------------
<C> <S> <C>
US TREASURY NOTES -- 40.31%
$ 9,000,000 5.25%, 07/31/98................ $ 9,000,000
3,000,000 6.375%, 05/15/99(a)............ 3,020,625
5,000,000 6.00%, 08/15/99................ 5,023,435
7,000,000 7.75%, 12/31/99................ 7,218,750
2,500,000 8.875%, 05/15/00............... 2,647,655
7,000,000 6.25%, 10/31/01(a)............. 7,144,375
5,000,000 5.625%, 12/31/02(a)............ 5,020,310
8,000,000 5.50%, 01/31/03................ 7,992,496
2,000,000 5.50%, 02/28/03................ 1,998,750
3,000,000 5.50%, 03/31/03(a)............. 2,998,125
2,000,000 5.75%, 04/30/03................ 2,019,374
------------
TOTAL US TREASURY NOTES
(Cost $53,774,803)............. 54,083,895
------------
US GOVERNMENT AGENCY SECURITIES -- 53.19%
FEDERAL HOME LOAN BANK -- 5.39%
5,000,000 7.39%, 08/22/01................ 5,244,325
2,000,000 5.50%, 01/21/03................ 1,985,600
------------
TOTAL FEDERAL HOME LOAN BANK... 7,229,925
------------
FREDDIE MAC -- 7.93%
3,000,000 REMIC, Series 1574, 6.50%,
02/15/21..................... 3,047,178
5,300,000 REMIC, Series 1500, 7.00%,
06/15/22..................... 5,501,681
917,261 REMIC, Series 31 Floating Rate,
6.15%, 08/25/23.............. 920,306
1,166,425 REMIC, Series 1710, 6.25%,
02/15/24..................... 1,171,494
------------
TOTAL FREDDIE MAC.............. 10,640,659
------------
FANNIE MAE -- 7.71%
2,000,000 REMIC, Series 94-75, 7.00%,
01/25/03..................... 2,050,676
3,000,000 6.44%, 06/21/05................ 3,129,303
5,000,000 Series 96-M7, Class B, 6.86%,
06/17/11..................... 5,162,450
------------
TOTAL FANNIE MAE............... 10,342,429
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 15.20%
6,024 PL# 209631, 7.50%, 04/15/02.... 6,210
22,610 PL# 328000, 7.50%, 06/15/07.... 23,309
9,024 PL# 328084, 7.50%, 07/15/07.... 9,303
13,688 PL# 335542, 7.50%, 08/15/07.... 14,111
165,789 PL# 335995, 7.50%, 08/15/07.... 170,918
73,706 PL# 322072, 7.50%, 08/15/07.... 75,987
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
--------- ------------
<C> <S> <C>
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (CONTINUED)
$ 336,159 PL# 323189, 7.50%, 08/15/07.... $ 346,559
224,612 PL# 328188, 7.50%, 08/15/07.... 231,561
401,419 PL# 328192, 7.50%, 08/15/07.... 413,838
100,370 PL# 328200, 7.50%, 08/15/07.... 103,475
386,356 PL# 329060, 7.50%, 08/15/07.... 398,309
379,433 PL# 332267, 7.50%, 08/15/07.... 391,172
67,009 PL# 333320, 7.50%, 09/15/07.... 69,082
355,111 PL# 333709, 7.50%, 09/15/07.... 366,097
343,728 PL# 332704, 7.50%, 09/15/07.... 354,362
344,146 PL# 297619, 7.50%, 09/15/07.... 354,793
173,457 PL# 369749, 6.50%, 09/15/08.... 175,137
265,685 PL# 345975, 6.50%, 10/15/08.... 268,258
684,080 PL# 374726, 6.50%, 10/15/08.... 690,703
256,731 PL# 345973, 6.50%, 11/15/08.... 259,217
123,224 PL# 363874, 6.50%, 11/15/08.... 124,417
495,935 PL# 370448, 6.50%, 11/15/08.... 500,736
613,623 PL# 371094, 6.50%, 11/15/08.... 619,565
317,853 PL# 366531, 6.50%, 11/15/08.... 320,930
9,081,737 REMIC, Series 97-2, 7.00%,
06/20/19..................... 9,168,013
4,883,446 PL# 2483, 7.00%, 09/20/27...... 4,930,713
------------
TOTAL GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION........... 20,386,775
------------
US TREASURY INFLATION INDEX -- 7.48%
10,000,000 3.625%, 07/15/02............... 10,038,001
------------
HOUSING AND URBAN DEVELOPMENT -- 3.80%
5,000,000 6.23%, 08/01/02................ 5,099,415
------------
TENNESSEE VALLEY AUTHORITY -- 1.93%
2,500,000 6.375%, 06/15/05............... 2,595,520
------------
US GOVERNMENT GUARANTEED BOND -- 3.75%
5,000,000 6.12%, 04/01/08................ 5,032,530
------------
TOTAL US GOVERNMENT AGENCY
SECURITIES (Cost
$70,179,986)................... 71,365,254
------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 5.41%
FANNIE MAE -- 4.60%
900,000 5.46%, 07/13/98................ 898,362
500,000 5.41%, 07/15/98................ 498,948
100,000 5.43%, 07/17/98................ 99,759
600,000 5.38%, 07/27/98................ 597,669
500,000 5.40%, 07/27/98................ 498,050
</TABLE>
See notes to financial statements.
27
<PAGE> 32
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
--------- ------------
<C> <S> <C>
SHORT TERM US GOVERNMENT AGENCY SECURITIES
(CONTINUED)
FANNIE MAE (CONTINUED)
$ 300,000 5.44%, 07/27/98................ $ 298,821
100,000 5.42%, 07/29/98................ 99,578
700,000 5.44%, 07/29/98................ 697,038
2,500,000 5.44%, 08/05/98................ 2,486,778
------------
TOTAL FANNIE MAE............... 6,175,003
------------
FREDDIE MAC -- 0.81%
100,000 5.39%, 07/07/98................ 99,910
200,000 5.40%, 07/14/98................ 199,610
300,000 5.40%, 07/31/98................ 298,650
300,000 5.44%, 07/31/98................ 298,639
100,000 5.43%, 07/20/98................ 99,713
100,000 5.42%, 07/23/98................ 99,669
------------
TOTAL FREDDIE MAC.............. 1,096,191
------------
TOTAL SHORT TERM US GOVERNMENT
AGENCY SECURITIES
(Cost $7,271,194).............. 7,271,194
------------
<CAPTION>
SHARES
- -----------
<C> <S> <C>
REGULATED INVESTMENT COMPANY -- 1.34%
700,000 Janus Money Market Fund(b)..... 700,000
1,100,000 Merrimac Cash Fund -- Premium
Class(b)..................... 1,100,000
------------
TOTAL REGULATED INVESTMENT
COMPANY (Cost $1,800,000)...... 1,800,000
------------
<CAPTION>
PRINCIPAL
- -----------
SHORT TERM CORPORATE NOTES -- 3.73%
$5,000,000 Morgan Stanley Dean Witter,
Floating Rate, 6.60%,
07/07/98(b)
(Cost $5,000,000)............ 5,000,000
------------
TIME DEPOSITS -- 2.67%
1,555,162 BankBoston, N.A., 6.5800%,
10/03/98(b).................. 1,555,162
118,075 Bank of Montreal, 5.5938%,
08/04/98(b).................. 118,075
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C>
PRINCIPAL VALUE
--------- ------------
<C> <S> <C>
TIME DEPOSITS (CONTINUED)
$ 554,849 Bank of Montreal, 5.5800%,
08/14/98(b).................. $ 554,849
675,082 Toronto Dominion, 5.570%,
07/20/98(b).................. 675,082
675,082 Toronto Dominion, 5.580%,
07/24/98(b).................. 675,082
------------
TOTAL TIME DEPOSITS
(Cost $3,578,250).............. 3,578,250
------------
TOTAL SECURITIES
(Cost $141,604,234)............ 143,098,593
------------
REPURCHASE AGREEMENTS -- 3.73%
5,000,000 With Goldman Sachs & Company
dated 06/30/98, 6.60%,
repurchase proceeds at
maturity $5,000,917
(Collateralized by Hartford
Life, 7.10%, due 06/15/07,
with a value of $993,463 and
Household Finance Co.,
7.625%, due 01/15/03, with a
value of $5,157,890)(b)
(Cost $5,000,000)............ 5,000,000
------------
Total Investments -- 110.39%
(Cost $146,604,234)............ 148,098,593
Other assets less
liabilities -- (10.39)%........ (13,935,955)
------------
NET ASSETS -- 100.00%.......... $134,162,638
============
The aggregate cost of securities for federal income tax
purposes at June 30, 1998, is $146,605,234.
The following amount is based on costs for federal income
tax purposes:
</TABLE>
<TABLE>
<S> <C>
Gross unrealized appreciation............ $1,520,565
Gross unrealized depreciation............ (26,206)
----------
Net unrealized appreciation.............. $1,494,359
==========
</TABLE>
- ---------------
(a) All or part of this security is on loan.
(b) Collateral for securities on loan.
See notes to financial statements.
28
<PAGE> 33
GOVERNMENT/CORPORATE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- ------------
<C> <S> <C>
US TREASURY NOTES -- 21.26%
$ 5,000,000 5.625%, 12/31/02(a).......... $ 5,020,310
41,000,000 5.50%, 01/31/03(a)........... 40,961,542
16,000,000 5.50%, 03/31/03.............. 15,990,000
28,000,000 5.75%, 04/30/03.............. 28,271,236
7,000,000 6.375%, 08/15/27............. 7,689,060
------------
TOTAL US TREASURY NOTES
(Cost $97,565,437)........... 97,932,148
------------
US GOVERNMENT AGENCY SECURITIES -- 11.70%
FEDERAL HOME LOAN BANK -- 1.17%
5,000,000 6.64%, 12/13/16.............. 5,400,040
------------
FANNIE MAE -- 0.02%
110,899 PL#250510, 7.00%, 12/01/25... 112,458
------------
FREDDIE MAC -- 3.02%
2,542,159 Series 1377, 6.63%,
09/15/07................... 2,559,573
5,000,000 Series 1666, Class E, 6.00%,
12/15/19................... 4,997,840
2,751,782 Series 31, Floating Rate,
6.91%, 08/25/23............ 2,760,920
3,594,951 Series 1710, Floating Rate,
6.91%, 02/15/24............ 3,610,571
------------
TOTAL FREDDIE MAC............ 13,928,904
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 0.95%
855,593 PL# 413611, 7.00%,
01/15/26................... 868,965
908,435 PL# 292340, 7.00%,
02/15/26................... 922,633
872,748 PL# 373637, 7.00%,
03/15/26................... 886,389
733,331 PL# 373622, 7.00%,
03/15/26................... 744,793
919,982 PL# 428420, 7.00%,
04/15/26................... 934,361
------------
TOTAL GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION......... 4,357,141
------------
US TREASURY INFLATION INDEX -- 5.45%
25,000,000 3.625%, 07/15/02............. 25,095,002
------------
STUDENT LOAN MARKETING ASSOCIATION -- 1.09%
5,000,000 Series 1996-2 A2, Floating
Rate, 6.91%, 07/27/09...... 5,007,250
------------
TOTAL US GOVERNMENT AGENCY
SECURITIES (Cost
$52,662,635)................. 53,900,795
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- ------------
<C> <S> <C>
CORPORATE BONDS & NOTES -- 62.12%
AEROSPACE -- 2.51%
$ 5,000,000 Boeing Company, 8.625%,
11/15/31................... $ 6,451,295
5,000,000 Lockheed Martin Corp., 6.85%,
05/15/01................... 5,098,945
------------
TOTAL AEROSPACE.............. 11,550,240
------------
AUTOMOTIVE PRODUCTS -- 7.21%
4,000,000 BF Goodrich Company, 8.65%,
04/15/25................... 4,988,823
5,000,000 Ford Holdings, 9.30%,
03/01/30................... 6,739,570
10,000,000 Ford Motor Credit Company,
6.125%, 04/28/03........... 10,017,520
5,000,000 General Motors Corp., 6.75%,
05/01/28................... 5,099,230
5,000,000 General Motors Corp., 8.80%,
03/01/21................... 6,360,120
------------
TOTAL AUTOMOTIVE PRODUCTS.... 33,205,263
------------
BANKS -- 8.63%
4,000,000 Bank of New York Company,
6.50%, 12/01/03............ 4,070,991
5,000,000 BankAmerica Corp., 6.63%,
05/30/01................... 5,090,965
10,000,000 Bankers Trust Company of New
York, 6.75%, 10/03/01...... 10,187,120
5,000,000 Midland Bank PLC, Floating
Rate, 6.125%, 06/29/49..... 4,158,500
5,000,000 Republic New York Corp.,
7.00%, 03/22/11............ 5,262,390
5,000,000 Societe Generale, 7.85%,
04/29/49................... 5,343,050
5,000,000 Swiss Bank Corp., 7.75%,
09/01/26................... 5,650,820
------------
TOTAL BANKS.................. 39,763,836
------------
CONSUMER GOODS AND SERVICES -- 2.62%
5,200,000 Proctor & Gamble, 9.36%,
01/01/21................... 6,892,386
5,000,000 RJR Nabisco, 8.75%,
04/15/04................... 5,193,515
------------
TOTAL CONSUMER GOODS AND
SERVICES..................... 12,085,901
------------
FINANCE -- 19.37%
5,000,000 Abbey National PLC........... 5,021,295
10,000,000 Associates Corp., 6.45%,
09/15/00................... 10,087,976
5,000,000 BT Institutional Capital
Trust -- B, 7.75%,
12/01/26................... 5,230,385
</TABLE>
See notes to financial statements.
29
<PAGE> 34
GOVERNMENT/CORPORATE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- ------------
<C> <S> <C>
CORPORATE BONDS & NOTES (CONTINUED)
$ 5,000,000 Capital Equipment Receivables
Trust 96-1 Class B, 6.57%,
03/15/01................... $ 5,025,650
5,000,000 Cez Finance BV, 7.125%,
07/15/07................... 4,910,477
5,000,000 Chase Capital III Series C,
Floating Rate, 6.363%,
03/01/27................... 4,891,340
7,040,000 Discover Card Master Trust,
Series 1994-2 Class A,
Floating Rate,
6.0062%,10/16/04........... 7,097,446
6,000,000 Dow Capital BV, 9.20%,
06/01/10................... 7,333,598
5,000,000 General Electric Capital
Corp., 8.50%, 07/24/08..... 5,892,985
5,000,000 General Motors Acceptance
Corp., Putable Asset Trust,
6.375%, 09/30/98........... 5,005,120
5,000,000 General Motors Acceptance
Corp., 8.40%, 10/15/99..... 5,148,045
3,287,674 Structured Asset Securities
Corp., Series 1996-CFL,
Class A-1C, 5.944%,
02/25/28................... 3,273,044
10,000,000 World Financial Network
Credit Card Master Trust,
Series 96-A, Class A,
6.70%,05/15/06............. 10,251,600
10,000,000 Xexox Credit Corp., 6.78%,
05/21/01................... 10,069,580
------------
TOTAL FINANCE................ 89,238,541
------------
FOOD AND BEVERAGE -- 1.48%
5,000,000 Seagrams (Joseph) & Sons,
9.65%, 08/15/18............ 6,801,900
------------
FREIGHT -- 0.27%
1,000,000 United Parcel Service,
8.375%, 04/01/30........... 1,263,922
------------
INDUSTRIAL -- 4.46%
5,000,000 Celulosa Arauco Y
Constitucion, 6.75%,
12/15/03................... 5,013,210
5,000,000 ICI Wilmington Inc., 6.75%,
09/15/02................... 5,119,210
10,000,000 ICI Wilmington Inc., 6.95%,
09/15/04................... 10,406,670
------------
TOTAL INDUSTRIAL............. 20,539,090
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- ------------
<C> <S> <C>
CORPORATE BONDS & NOTES (CONTINUED)
INSURANCE -- 2.38%
$ 5,000,000 Aetna Services, 7.625%,
08/15/26................... $ 5,396,090
5,000,000 Prudential Insurance Company,
8.10%, 07/15/15............ 5,584,675
------------
TOTAL INSURANCE.............. 10,980,765
------------
OIL AND GAS -- 2.60%
5,000,000 Occidental Petroleum Corp.,
10.125%, 09/15/09.......... 6,414,805
4,000,000 Texaco Capital Inc., 9.75%,
03/15/20................... 5,551,267
------------
TOTAL OIL AND GAS............ 11,966,072
------------
PAPER AND FOREST PRODUCTS -- 1.87%
8,000,000 Westvaco, 10.125%,
06/01/19................... 8,602,872
------------
TELECOMMUNICATIONS -- 1.15%
5,000,000 GTE South Inc., 7.50%,
03/15/26................... 5,304,465
------------
TOBACCO -- 1.09%
5,000,000 Universal Corp., 6.50%,
02/15/06................... 5,015,115
------------
UTILITIES -- 6.49%
10,000,000 Commonwealth Edison Company,
8.125%, 01/15/07........... 10,220,640
5,000,000 Commonwealth Edison Company,
8.50%, 07/15/22............ 5,442,365
5,000,000 Korea Electric Power Corp.,
7.00%, 02/01/27............ 4,230,970
5,000,000 Long Island Lighting Company,
9.625%, 07/01/24........... 5,000,000
5,000,000 Philadelphia Electric
Company, 5.375%,
08/15/98................... 4,996,100
------------
TOTAL UTILITIES.............. 29,890,075
------------
TOTAL CORPORATE BONDS & NOTES
(Cost $273,137,255).......... 286,208,057
------------
COMMERCIAL PAPER -- 2.57%
400,000 American Express Company,
5.52%, 07/28/98............ 398,345
200,000 American Express Credit
Company, 5.52%, 07/27/98... 199,203
750,000 Bell Atlantic Network Fund,
5.50%, 07/08/98............ 749,198
3,000,000 CIT Group Holdings, 5.53%,
07/27/98................... 2,988,018
350,000 General Electric Capital,
5.51%, 07/14/98............ 349,304
</TABLE>
See notes to financial statements.
30
<PAGE> 35
GOVERNMENT/CORPORATE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- ------------
<C> <S> <C>
COMMERCIAL PAPER (CONTINUED)
$ 1,600,000 General Electric Capital
Corp., 5.53%, 07/29/98..... $ 1,593,118
700,000 Houston Industries, 5.72%,
07/06/98................... 699,443
1,100,000 Merrill Lynch & Company,
Inc., 5.54%, 07/31/98...... 1,094,921
2,100,000 Merrill Lynch & Company,
Inc., 5.53%, 07/31/98...... 2,100,000
163,000 Metlife Funding, Inc., 5.53%,
07/01/98................... 162,473
1,500,000 Paccar Financial Group,
5.55%, 07/06/98............ 1,498,844
------------
TOTAL COMMERCIAL PAPER
(Cost $11,832,867)........... 11,832,867
------------
SHORT TERM CORPORATE NOTE -- 0.39%
1,814,000 Capital One Funding Corp.,
5.63%, 04/02/98 (Cost
$1,814,000)................ 1,814,000
------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 0.18%
FANNIE MAE
100,000 5.46%, 07/13/98.............. 99,818
100,000 5.44%, 07/22/98.............. 99,683
------------
TOTAL FANNIE MAE............. 199,501
------------
FREDDIE MAC
640,000 5.43%, 08/24/98.............. 634,787
------------
TOTAL SHORT TERM US
GOVERNMENT AGENCY SECURITIES
(Cost $834,288).............. 834,288
------------
TIME DEPOSITS -- 1.78%
272,921 BankBoston, N.A., 6.58%,
10/03/98(b)................ 272,921
1,557,120 Bank of Montreal, 5.59%,
08/04/98(b)................ 1,557,120
213,537 Bank of Montreal, 5.58%,
08/14/98(b)................ 213,537
5,144,063 Toronto Dominion, 5.57%,
07/20/98(b)................ 5,144,063
1,018,609 Toronto Dominion, 5.58%,
07/24/98(b)................ 1,018,609
------------
TOTAL TIME DEPOSITS
(Cost $8,206,250)............ 8,206,250
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- ------------
<C> <S> <C>
SHORT TERM CORPORATE NOTES -- 5.97%
$15,000,000 Morgan Stanley Dean Witter,
6.60%, 07/07/98(b)......... $ 15,000,000
2,500,000 Prudential Securities, Inc.,
6.70%, 09/16/98(b)......... 2,500,000
10,000,000 JP Morgan Securities, Inc.,
6.605%, 01/15/99(b)........ 10,000,000
------------
TOTAL SHORT TERM CORPORATE
NOTES (Cost $27,500,000)..... 27,500,000
------------
SHARES
- -----------
REGULATED INVESTMENT COMPANIES -- 0.61%
2,000,000 Merrimac Cash Fund -- Premium
Class(b)................... 2,000,000
800,000 Janus Money Market Fund(b)... 800,000
------------
TOTAL REGULATED INVESTMENT
COMPANIES (Cost
$2,800,000).................. 2,800,000
------------
Total Investments -- 106.58%
(Cost $476,352,732).......... 491,028,405
Other assets less
liabilities -- (6.58)%....... (30,327,226)
------------
NET ASSETS -- 100.00%........ $460,701,179
============
The aggregate cost of securities for federal income tax
purposes at
June 30, 1998, is $476,352,732.
The following amount is based on costs for federal income
tax purposes:
Gross unrealized appreciation.......... $15,793,580
Gross unrealized depreciation.......... (1,117,907)
------------
Net unrealized appreciation............ $14,675,673
============
</TABLE>
- ---------------
(a) All or part of this security is on loan.
(b) Collateral for securities on loan.
See notes to financial statements.
31
<PAGE> 36
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30 ,1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ -------------
<S> <C> <C>
COMMON STOCK -- 59.91%
AEROSPACE -- 2.04%
74,900 Goodrich BF Company........... $ 3,716,912
57,600 Northrop Grumman Corp. ....... 5,940,000
-------------
TOTAL AEROSPACE............... 9,656,912
-------------
AUTOMOBILES -- 1.77%
125,300 General Motors Corp. ......... 8,371,606
-------------
BANKS -- 5.72%
55,400 Bankers Trust Corp. .......... 6,429,863
66,650 Citicorp...................... 9,947,513
139,400 NationsBank Corp. ............ 10,664,100
-------------
TOTAL BANKS................... 27,041,476
-------------
CHEMICALS -- 3.00%
59,650 Akzo N.V. (ADR)............... 6,613,694
101,350 Du Pont (E.I.) De Nemours..... 7,563,244
-------------
TOTAL CHEMICALS............... 14,176,938
-------------
COMPUTERS AND OFFICE EQUIPMENT -- 2.31%
70,050 International Business
Machines Corp. ............. 8,042,616
88,200 NCR Corp.(c).................. 2,866,500
-------------
TOTAL COMPUTERS AND OFFICE
EQUIPMENT..................... 10,909,116
-------------
COMPUTER SOFTWARE AND SERVICES -- 1.09%
154,600 First Data Corp. ............. 5,150,112
-------------
DEFENSE -- 1.72%
141,107 Raytheon Company, Class A..... 8,131,291
-------------
ELECTRONICS -- 0.30%
30,700 Circuit City Stores........... 1,439,062
-------------
ENVIRONMENTAL MANAGEMENT SERVICES -- 1.78%
170,200 USA Waste Services,
Inc.(a)(c).................. 8,403,625
-------------
FINANCE -- 1.33%
126,650 Household International,
Inc. ....................... 6,300,837
-------------
FOOD AND BEVERAGE -- 1.47%
170,200 Seagrams Company, Ltd. ....... 6,967,562
-------------
INSURANCE -- 1.39%
95,550 Cigna Corp. .................. 6,592,950
-------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ -------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
MACHINERY -- 0.98%
LEISURE AND RECREATION --2.20%
270,500 Host Marriott Corp.(c)........ $ 4,818,281
115,700 Starwood Hotels & Resorts..... 5,589,756
-------------
TOTAL LEISURE AND
RECREATION.................. 10,408,037
-------------
96,250 Case Corp. ................... 4,644,063
-------------
MANUFACTURING -- 4.37%
125,827 Hasbro, Inc. ................. 4,946,574
115,050 Philips Electronics N.V.
(ADR)(a).................... 9,779,250
105,950 Reynolds Metals Company....... 5,926,578
-------------
TOTAL MANUFACTURING........... 20,652,402
-------------
MEDIA -- 4.23%
175,600 Dun & Bradstreet Corp. ....... 6,343,550
482,800 News Corp., Ltd. (ADR)(a)..... 13,639,100
-------------
TOTAL MEDIA................... 19,982,650
-------------
MEDICAL AND OTHER HEALTH SERVICES -- 5.74%
204,550 American Home Products
Corp. ...................... 10,585,463
113,250 Baxter International, Inc. ... 6,094,266
92,900 Humana, Inc.(c)............... 2,897,319
52,600 St. Jude Medical, Inc.(c)..... 1,936,337
178,900 Tenet Healthcare Corp.(c)..... 5,590,625
-------------
TOTAL MEDICAL AND OTHER HEALTH
SERVICES...................... 27,104,010
-------------
OIL AND GAS -- 3.76%
106,700 Elf Aquitaine (ADR)........... 7,575,700
84,350 Schlumberger, Ltd.(a)......... 5,762,159
124,300 Unocal Corp. ................. 4,443,725
-------------
TOTAL OIL AND GAS............. 17,781,584
-------------
PAPER AND FOREST PRODUCTS -- 1.95%
133,200 Fort James Corp. ............. 5,927,400
118,800 UPM-Kymmene Corp. (ADR)(c).... 3,269,614
-------------
TOTAL PAPER AND FOREST
PRODUCTS.................... 9,197,014
-------------
PHARMACEUTICALS -- 2.99%
209,400 Hoechst AG (ADR).............. 10,391,475
123,792 IMC Global, Inc. ............. 3,729,234
-------------
TOTAL PHARMACEUTICALS......... 14,120,709
-------------
</TABLE>
See notes to financial statements.
32
<PAGE> 37
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30 ,1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ -------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
RETAIL -- 1.82%
55,900 Consolidated Stores
Corp.(c).................... $ 2,026,375
121,800 Federated Department Stores,
Inc.(c)..................... 6,554,362
-------------
TOTAL RETAIL.................. 8,580,737
-------------
TELECOMMUNICATIONS -- 1.26%
46,950 AT & T Corp. ................. 2,682,019
71,200 Bell Atlantic Corp. .......... 3,248,500
-------------
TOTAL TELECOMMUNICATIONS...... 5,930,519
-------------
TOBACCO -- 1.90%
228,200 Phillip Morris Companies,
Inc. ....................... 8,985,375
-------------
TRANSPORTATION -- 4.79%
68,900 AMR Corp.(c).................. 5,735,925
90,000 Burlington Northern Santa
Fe.......................... 8,836,875
283,700 Canadian Pacific.............. 8,049,987
-------------
TOTAL TRANSPORTATION.......... 22,622,787
-------------
TOTAL COMMON STOCK (Cost
$252,917,217)................. 283,151,374
-------------
<CAPTION>
PRINCIPAL
- -----------
<C> <S> <C>
US GOVERNMENT SECURITIES -- 39.94%
US TREASURY BONDS -- 8.99%
$11,975,000 7.25%, 05/15/16............... 14,033,203
25,350,000 7.88%, 11/15/04............... 28,471,219
-------------
TOTAL US TREASURY BONDS....... 42,504,422
-------------
US TREASURY NOTES -- 30.95%
10,650,000 8.50%, 02/15/00............... 11,132,573
29,480,000 7.50%, 05/15/02(a)............ 31,460,673
28,625,000 5.75%, 08/15/03(a)............ 28,929,141
27,550,000 6.50%, 05/15/05............... 29,082,469
41,810,000 7.00%, 07/15/06............... 45,677,425
-------------
TOTAL US TREASURY NOTES....... 146,282,281
-------------
TOTAL US GOVERNMENT SECURITIES
(Cost $181,646,057)........... 188,786,703
-------------
COMMERCIAL PAPER -- 2.12%
10,000,000 Lehman Brothers, Floating
Rate, 5.68%, 01/22/99(b)
(Cost $10,000,000).......... 10,000,000
-------------
<CAPTION>
SHARES
- -----------
REGULATED INVESTMENT COMPANIES -- 4.70%
3,400,000 Janus Money Market Fund(b).... 3,400,000
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C>
SHARES VALUE
------ -------------
<C> <S> <C>
REGULATED INVESTMENT COMPANIES (CONTINUED)
18,811,533 Merrimac Cash Fund -- Premium
Class(b).................... $ 18,811,533
-------------
TOTAL REGULATED INVESTMENT
COMPANIES (Cost
$22,211,533).................. 22,211,533
-------------
<CAPTION>
PRINCIPAL
- -----------
<C> <S> <C>
TIME DEPOSITS -- 6.59%
$ 5,072,739 BankBoston, N.A., 6.58%,
10/03/98(b)................. 5,072,739
5,589,888 Bank of Montreal, 5.59%,
08/04/98(b)................. 5,589,888
6,739,177 Bank of Montreal, 5.58%,
08/14/98(b)................. 6,739,177
5,015,171 Toronto Dominion, 5.58%,
07/24/98(b)................. 5,015,171
8,719,352 Toronto Dominion, 5.57%,
07/20/98(b)................. 8,719,352
-------------
TOTAL TIME DEPOSITS
(Cost $31,136,327)............ 31,136,327
-------------
SHORT TERM CORPORATE NOTES -- 14.39%
15,000,000 Bear Stearns and Company,
6.63%, 07/06/98(b).......... 15,000,000
25,000,000 JP Morgan Securities, Inc.,
6.61%, 01/15/99(b).......... 25,000,000
5,000,000 Morgan Stanley Dean Witter,
6.60%, 07/07/98(b).......... 5,000,000
18,000,000 Prudential Securities, Inc.,
6.70%, 09/16/98(b).......... 18,000,000
5,000,000 Republic New York Securities
Corp., 6.65%, 01/12/99(b)... 5,000,000
-------------
TOTAL SHORT TERM CORPORATE
NOTES (Cost $68,000,000)...... 68,000,000
-------------
TOTAL SECURITIES
(Cost $565,911,134)........... 603,285,937
-------------
REPURCHASE AGREEMENTS -- 11.25%
25,000,000 With Goldman Sachs Corporate
dated 06/30/98, 6.60%,
repurchase proceeds at
maturity $25,004,583,
07/01/98, (Collateralized by
Allstate Corp., 6.75%, due
05/15/18, with a value of
$977,083, J. Seagram & Sons,
9.00%, due 08/15/21, with a
value of $16,301,017, Socgen
Real Estate, LLC, 7.64%, due
09/03/49, with a value of
$9,103,416)(b).............. 25,000,000
</TABLE>
See notes to financial statements.
33
<PAGE> 38
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30 ,1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
--------- -------------
<C> <S> <C>
REPURCHASE AGREEMENTS (CONTINUED)
$28,160,000 With Morgan Stanley Dean
Witter dated 06/30/98,
6.60%, repurchase proceeds
at maturity $28,165,163,
07/01/98, (Collateralized by
Cargill, Inc., 7.50%, due
09/01/26, with a value of
$4,167,721, Comerica Bank,
7.88%, due 09/15/26, with a
value of $626,020, US
BanCorp, 8.00%, due
07/02/04, with a value of
$2,555,561, Hydro-Quebec,
8.40%, due 01/15/22, with a
value of $2,655,182, First
Union Corp., 7.88%, due
07/15/02, with a value of
$2,490,488, Morgan Stanley
Dean Witter, Convertible
2.00%, due 03/29/02, with a
value of $1,236,518, Morgan
Stanley Dean Witter, 8.33%,
due 01/15/07, with a value
of $3,718,207, Philip
Morris, 7.13%, due 08/15/02,
with a value of $1,566,507,
Quebec Province, 7.50%, due
07/15/02, with a value of
$6,234,703, Socgen Real
Estate, LLC, 7.64%, due
12/29/49, with a value of
$4,567,091)(b).............. $ 28,160,000
-------------
TOTAL REPURCHASE AGREEMENTS
(Cost $53,160,000)............ 53,160,000
-------------
Total Investments -- 138.90%
(Cost $619,071,134)........... 656,445,937
Other assets less
liabilities -- (38.90)%....... (183,829,338)
-------------
NET ASSETS -- 100.00%......... $ 472,616,599
=============
The aggregate cost of securities for federal
income tax purposes at June 30, 1998, is
$619,071,134.
Gross unrealized appreciation........... $42,390,674
Gross unrealized depreciation........... (5,015,871)
Net unrealized appreciation............. $37,374,803
===========
</TABLE>
- ---------------
(a) All or part of this security is on loan.
(b) Collateral for securities on loan.
(c) Non-income producing security.
(ADR) -- American Depository Receipt
See notes to financial statements.
34
<PAGE> 39
EQUITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ --------------
<C> <S> <C>
COMMON STOCK -- 92.23%
AEROSPACE -- 2.83%
70,000 Northrop Grumman Corp. ....... $ 7,218,750
220,000 Textron, Inc. ................ 15,771,250
160,000 United Technologies .......... 14,800,000
--------------
TOTAL AEROSPACE............... 37,790,000
--------------
AUTOMOBILES -- 2.55%
340,000 Ford Motor Company............ 20,060,000
210,000 General Motors Corp. ......... 14,030,625
--------------
TOTAL AUTOMOBILES............. 34,090,625
--------------
BANKS -- 10.76%
220,000 Bank of New York(c) .......... 13,351,250
150,000 BankAmerica Corp. ............ 12,965,625
300,000 BankBoston Corp. ............. 16,687,500
90,000 Bankers Trust New York
Corp. ...................... 10,445,625
190,000 Chase Manhattan Corp. ........ 14,345,000
210,000 First Union Corp. ............ 12,232,500
140,000 Fleet Financial Group,
Inc. ....................... 11,690,000
200,000 H. F. Ahmanson & Company...... 14,200,000
200,000 Mellon Bank Corp. ............ 13,925,000
170,000 NationsBank Corp. ............ 13,005,000
30,000 Wells Fargo & Company......... 11,070,000
--------------
TOTAL BANKS................... 143,917,500
--------------
CHEMICALS -- 2.87%
270,000 Du Pont (E.I.) de Nemours..... 20,148,750
250,000 Olin Corp. ................... 10,421,875
75,000 Rohm & Haas Company........... 7,795,313
--------------
TOTAL CHEMICALS............... 38,365,938
--------------
COMPUTERS AND OFFICE EQUIPMENT -- 5.02%
250,000 General Signal................ 9,000,000
300,000 Harris Corp., Inc. ........... 13,406,250
400,000 Pitney Bowes, Inc. ........... 19,250,000
250,000 Xerox Corp. .................. 25,406,250
--------------
TOTAL COMPUTERS AND OFFICE
EQUIPMENT..................... 67,062,500
--------------
CONSUMER GOODS AND SERVICES -- 8.10%
250,000 Avon Products, Inc. .......... 19,375,000
150,000 Colgate-Palmolive Company..... 13,200,000
300,000 Dana Corp.(a)................. 16,050,000
70,000 Eastman Kodak Company(a)...... 5,114,375
190,000 Fortune Brands, Inc. ......... 7,303,125
520,000 General Electric Company...... 47,320,000
--------------
TOTAL CONSUMER GOODS AND
SERVICES...................... 108,362,500
--------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ --------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
ELECTRONICS -- 4.74%
370,000 AMP, Inc. .................... $ 12,718,750
150,000 Eaton Corp. .................. 11,662,500
380,000 Edison International.......... 11,233,750
280,000 Emerson Electric.............. 16,905,000
220,000 Thomas & Betts Corp. ......... 10,835,000
--------------
TOTAL ELECTRONICS............. 63,355,000
--------------
FINANCE -- 2.87%
250,000 Fannie Mae.................... 15,187,500
90,000 J.P. Morgan & Company......... 10,541,250
290,000 Washington Mutual, Inc. ...... 12,596,875
--------------
TOTAL FINANCE................. 38,325,625
--------------
INDUSTRIAL -- 1.28%
140,000 Carpenter Technology.......... 7,035,000
220,000 Harsco Corp. ................. 10,078,750
--------------
TOTAL INDUSTRIAL.............. 17,113,750
--------------
INSURANCE -- 3.77%
270,000 CIGNA Corp. .................. 18,630,000
200,000 Lincoln National Corp. ....... 18,275,000
320,000 St. Paul Companies............ 13,460,000
--------------
TOTAL INSURANCE............... 50,365,000
--------------
MACHINERY -- 1.69%
200,000 Caterpiller Inc.(a)........... 10,575,000
220,000 Cooper Industries, Inc. ...... 12,086,250
--------------
TOTAL MACHINERY............... 22,661,250
--------------
MANUFACTURING -- 0.74%
120,000 Minnesota Mining &
Manufacturing............... 9,862,500
--------------
MEDICAL AND OTHER HEALTH SERVICES -- 0.89%
220,000 Baxter International, Inc. ... 11,838,750
--------------
METALS AND MINING -- 1.29%
120,000 Reynolds Metals Company....... 6,712,500
340,000 Timken Company................ 10,476,250
--------------
TOTAL METALS AND MINING....... 17,188,750
--------------
</TABLE>
See notes to financial statements.
35
<PAGE> 40
EQUITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ --------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
OIL AND GAS -- 12.62%
160,000 Amoco Corp. .................. $ 6,660,000
100,000 Atlantic Richfield Company.... 7,812,500
95,000 British Petroleum PLC (ADR)... 8,383,750
130,000 Chevron Corp. ................ 10,798,125
200,000 CMS Energy Corp. ............. 8,800,000
200,000 Consolidated Natural Gas...... 11,775,000
350,000 Dresser Industries, Inc. ..... 15,421,875
400,000 El Paso Natural Gas Company... 15,300,000
180,000 Exxon Corp. .................. 12,836,250
180,000 Mobil Corp. .................. 13,792,500
360,000 Questar Corp. ................ 7,065,000
190,000 Royal Dutch Petroleum(a)...... 10,414,375
120,000 Texaco, Inc. ................. 7,162,500
260,000 USX-Marathon Group............ 8,921,250
700,000 Williams Companies, Inc. ..... 23,625,000
--------------
TOTAL OIL AND GAS............. 168,768,125
--------------
PAPER AND FOREST PRODUCTS -- 2.68%
140,000 Georgia-Pacific Group......... 8,251,250
220,000 International Paper Company... 9,460,000
180,000 Union Camp Corp. ............. 8,932,500
200,000 Weyerhaeuser Company.......... 9,237,500
--------------
TOTAL PAPER AND FOREST
PRODUCTS...................... 35,881,250
--------------
PHARMACEUTICALS -- 7.15%
430,000 American Home Products
Corp. ...................... 22,252,500
170,000 Bristol-Myers Squibb
Company..................... 19,539,375
130,000 Eli Lilly & Company........... 8,588,125
70,000 Merck & Company, Inc. ........ 9,362,500
80,000 Schering-Plough Corp. ........ 7,330,000
230,000 SmithKline Beecham PLC
(ADR)....................... 13,915,000
210,000 Warner-Lambert Company........ 14,568,750
--------------
TOTAL PHARMACEUTICALS......... 95,556,250
--------------
PUBLISHING -- 1.34%
220,000 McGraw-Hill Companies,
Inc. ....................... 17,943,750
--------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ --------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS -- 3.64%
110,000 Avalon Bay Apartment
Communities................. $ 4,180,000
160,000 Crescent Real Estate Equity
Company..................... 5,380,000
100,000 Developers Diversified Realty
Corp. ...................... 3,918,750
220,000 Equity Office Properties...... 6,242,500
100,000 Equity Residential
Properties.................. 4,743,750
115,000 FelCor Suite Hotels,
Inc.(c)..................... 3,608,125
200,000 Health Care Property
Investment, Inc. ........... 7,212,500
125,000 Irvine Apartment
Communities................. 3,617,187
142,000 Public Storage, Inc. ......... 3,976,000
120,000 Starwood Hotels &
Resorts(c).................. 5,797,500
--------------
TOTAL REAL ESTATE INVESTMENT
TRUSTS........................ 48,676,312
--------------
RETAIL -- 2.12%
190,000 J.C. Penney Company, Inc. .... 13,739,375
240,000 Sears Roebuck................. 14,655,000
--------------
TOTAL RETAIL.................. 28,394,375
--------------
TELECOMMUNICATIONS -- 8.43%
300,000 Ameritech Corp. .............. 13,462,500
220,000 AT & T Corp. ................. 12,567,500
280,000 Bell Atlantic Corp. .......... 12,775,000
190,000 Bellsouth Corp. .............. 12,753,750
310,000 Frontier Corp. ............... 9,765,000
240,000 GTE Corp. .................... 13,350,000
330,000 SBC Communications, Inc. ..... 13,200,000
200,000 Sprint Corp. ................. 14,100,000
230,000 US West, Inc.(c).............. 10,810,000
--------------
TOTAL TELECOMMUNICATIONS...... 112,783,750
--------------
TOBACCO -- 0.74%
250,000 Philip Morris Companies,
Inc. ....................... 9,843,750
--------------
UTILITIES: ELECTRIC -- 4.11%
190,000 American Electric Power,
Inc. ....................... 8,621,250
200,000 Duke Energy Corp. ............ 11,850,000
200,000 Carolina Power & Light........ 8,675,000
280,000 Enron Corp. .................. 15,137,500
170,000 FPL Group, Inc. .............. 10,710,000
--------------
TOTAL UTILITIES: ELECTRIC..... 54,993,750
--------------
TOTAL COMMON STOCK
(Cost $833,420,496)........... 1,233,141,000
--------------
</TABLE>
See notes to financial statements.
36
<PAGE> 41
EQUITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ --------------
<C> <S> <C>
PREFERRED STOCK -- 0.53%
95,000 Aetna Inc, 6.25%, (Cost
$8,159,640)(a).............. $ 7,136,875
--------------
REGULATED INVESTMENT COMPANY -- 0.11%
600,000 Janus Money Market Fund(b).... 600,000
900,000 Merrimac Cash Fund -- Premium
Class(b).................... 900,000
--------------
TOTAL REGULATED INVESTMENT
COMPANY (Cost $1,500,000)..... 1,500,000
--------------
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C>
COMMERCIAL PAPER -- 7.13%
$5,100,000 Abbott Laboratories, 5.54%,
07/28/98.................... 5,078,809
3,400,000 American Crystal Sugar
Company, 5.78, 07/22/98..... 3,388,536
300,000 American Express Credit
Company, 5.52, 07/27/98..... 298,804
5,000,000 American Express Credit
Company, 5.51, 08/14/98..... 4,966,328
3,000,000 Avco Financial Services, Inc.,
5.56%, 08/24/98............. 2,974,980
1,000,000 Avco Financial Services, Inc.,
5.55%, 10/15/98............. 983,658
700,000 CIT Group Holdings, 5.53%,
07/27/98.................... 697,204
2,700,000 Chevron Oil Finance Company,
5.50%, 07/27/98............. 2,689,275
1,500,000 Enterprise Funding Corp.,
5.52%, 07/10/98............. 1,497,930
4,500,000 Enterprise Funding Corp.,
5.53%, 07/15/98............. 4,490,323
8,000,000 Enterprise Funding Corp.,
5.51%, 08/04/98............. 7,958,369
3,950,000 General Electric Capital,
5.51%, 07/14/98............. 3,942,141
6,400,000 General Electric Capital,
5.53%, 08/27/98............. 6,343,963
850,000 General Electric Capital Corp,
5.52%, 07/08/98............. 849,088
200,000 General Motors Acceptance,
5.52%, 07/10/98............. 199,724
3,700,000 General Motors Acceptance,
5.52%, 07/27/98............. 3,685,249
3,800,000 Houston Industries, 5.72%,
07/06/98.................... 3,796,981
4,100,000 Lehman Brothers, Inc., 5.59%,
07/17/98.................... 4,089,814
4,000,000 Merrill Lynch and Company,
Inc., 5.56%, 07/30/98....... 3,982,084
4,800,000 Merrill Lynch and Company,
Inc., 5.54%, 07/31/98....... 4,777,840
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- --------------
<C> <S> <C>
COMMERCIAL PAPER (CONTINUED)
$2,300,000 Metlife Funding, Inc., 5.54%,
07/22/98.................... $ 2,292,567
1,800,000 Panasonic Finance, 5.51%,
07/14/98.................... 1,796,419
4,600,000 Prudential Funding Corp.,
5.52%, 07/23/98............. 4,584,483
7,500,000 Sears Roebuck Acceptance,
5.52%, 07/17/98............. 7,481,600
10,000,000 Sears Roebuck and Company,
5.52%, 07/24/98............. 9,964,733
600,000 Transamerica Finance Corp.,
5.51%, 07/10/98............. 599,173
2,000,000 Union Bancal Corp., 5.51%,
08/25/98.................... 1,983,164
--------------
TOTAL COMMERCIAL PAPER (Cost
$95,393,239).................. 95,393,239
--------------
TIME DEPOSITS -- 1.39%
10,034,018 BankBoston, N.A., 6.58%,
10/03/98(b)................. 10,034,018
4,143,138 Bank of Montreal, 5.594%,
08/04/98(b)................. 4,143,138
2,008,679 Bank of Montreal, 5.80%,
08/14/98(b)................. 2,008,679
2,161,296 Toronto Dominion, 5.57%,
07/20/98(b)................. 2,161,296
227,765 Toronto Dominion, 5.58%,
07/24/98(b)................. 227,765
--------------
TOTAL TIME DEPOSITS (Cost
$18,574,896).................. 18,574,896
--------------
SHORT TERM CORPORATE NOTES -- 2.69%
10,000,000 Bear Stearns and Company Inc.,
Floating Rate, 6.63%,
07/06/98(b)................. 10,000,000
15,000,000 JP Morgan Securities, Inc.,
Floating Rate, 6.605%,
01/15/99(b)................. 15,000,000
11,000,000 Prudential Securities, Inc.,
Floating Rate, 6.70%,
09/16/98(b)................. 11,000,000
--------------
TOTAL SHORT TERM CORPORATE
NOTES (Cost $36,000,000)...... 36,000,000
--------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 0.11%
FANNIE MAE -- 0.02%
300,000 5.47%, 07/22/98............... 299,043
--------------
FREDDIE MAC -- 0.09%
700,000 5.42%, 07/02/98............... 699,895
200,000 5.40%, 07/14/98............... 199,610
</TABLE>
See notes to financial statements.
37
<PAGE> 42
EQUITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- --------------
<S> <C> <C>
FREDDIE MAC (CONTINUED)
$ 300,000 5.43%, 07/20/98............... $ 299,140
--------------
TOTAL FREDDIE MAC............. 1,198,645
--------------
TOTAL SHORT TERM US GOVERNMENT
AGENCY SECURITIES (Cost
$1,497,688)................... 1,497,688
--------------
Total Investments -- 104.19%
(Cost $994,545,959)........... 1,393,243,698
Other assets less
liabilities -- (4.19)%........ (56,012,479)
--------------
NET ASSETS -- 100.00%......... $1,337,231,219
==============
</TABLE>
<TABLE>
<Caption
The aggregate cost of securities for federal income tax
purposes at June 30, 1998, is $994,545,959.
The following amount is based on costs for federal income
tax purposes:
<S> <C>
Gross unrealized appreciation.......... $413,650,985
Gross unrealized depreciation.......... (14,953,246)
------------
Net unrealized appreciation............ $398,697,739
============
</TABLE>
- ---------------
(a) All or part of this security is on loan.
(b) Collateral for securities on loan.
(c) Non-income producing security.
(ADR) -- American Depository Receipts
See notes to financial statements.
38
<PAGE> 43
EQUITY VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<C> <S> <C>
COMMON STOCK -- 97.07%
AEROSPACE -- 1.64%
62,100 Lockheed Martin Corp. .......... $ 6,574,837
------------
BANKS -- 5.26%
88,000 Bank One Corp. ................. 4,911,500
65,100 Chase Manhattan Corp. .......... 4,915,050
99,000 First Union Corp. .............. 5,766,750
72,200 NationsBank Corp.(c)............ 5,523,300
------------
TOTAL BANKS..................... 21,116,600
------------
CHEMICALS -- 3.55%
10,800 Air Products & Chemicals........ 432,000
42,100 Hercules, Inc. ................. 1,731,362
63,200 PPG Industries, Inc. ........... 4,396,350
164,100 Praxair, Inc. .................. 7,681,931
------------
TOTAL CHEMICALS................. 14,241,643
------------
COMPUTERS AND OFFICE EQUIPMENT -- 5.45%
81,900 International Business
Machines...................... 9,403,143
242,300 Seagate Technology, Inc.(c)..... 5,769,768
154,600 Sun Microsystems, Inc.(c)....... 6,715,437
------------
TOTAL COMPUTERS AND OFFICE
EQUIPMENT....................... 21,888,348
------------
CONSUMER GOODS AND SERVICES -- 2.29%
69,200 Dana Corp....................... 5,997,350
112,100 Kimberly-Clark Corp............. 3,174,550
------------
TOTAL CONSUMER GOODS AND
SERVICES........................ 9,171,900
------------
DEFENSE -- 1.89%
65,100 Raytheon Company -- Class A..... 3,751,387
64,900 Raytheon Company -- Class
B(a).......................... 3,837,212
------------
TOTAL DEFENSE................... 7,588,599
------------
ELECTRIC -- INTEGRATED -- 0.57%
56,200 Dominion Resources Inc. ........ 2,290,150
------------
ELECTRONICS -- 3.03%
143,500 AMP, Inc. ...................... 4,932,812
120,000 Emerson Electric................ 7,245,000
------------
TOTAL ELECTRONICS............... 12,177,812
------------
FINANCE -- 1.85%
50,300 American General Corp. ......... 3,580,731
44,100 Loews Corp. .................... 3,842,212
------------
TOTAL FINANCE................... 7,422,943
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
FOOD AND BEVERAGE -- 6.99%
180,900 Anheuser Busch Companies,
Inc. ......................... $ 8,536,219
390,093 Archer Daniels Midland.......... 7,558,052
203,500 Conagra, Inc. .................. 6,448,406
80,600 General Mills, Inc. ............ 5,511,025
------------
TOTAL FOOD AND BEVERAGE......... 28,053,702
------------
INSURANCE -- 10.24%
96,100 Aetna, Inc. .................... 7,315,613
46,200 Allstate Corp. ................. 4,230,188
89,000 Chubb Corp. .................... 7,153,375
95,300 CIGNA Corp. .................... 6,575,700
28,700 General Re Corp. ............... 7,275,450
119,000 St. Paul Cos. .................. 5,005,438
63,600 UNUM Corp. ..................... 3,529,800
------------
TOTAL INSURANCE................. 41,085,564
------------
MACHINERY -- 2.09%
83,400 Crown Cork & Seal, Inc. ........ 3,961,500
83,600 Deere & Company................. 4,420,350
------------
TOTAL MACHINERY................. 8,381,850
------------
MANUFACTURING -- 3.57%
104,900 Corning, Inc. .................. 3,645,275
89,700 Masco Corp. .................... 5,426,850
63,900 Minnesota Mining & Mfg. ........ 5,251,781
------------
TOTAL MANUFACTURING............. 14,323,906
------------
MEDIA -- 1.82%
59,900 Gannett Company, Inc. .......... 4,256,644
74,600 Comcast Corp. Class A........... 3,028,290
------------
TOTAL MEDIA..................... 7,284,934
------------
MEDICAL AND OTHER HEALTH
SERVICES -- 2.78%
151,000 Baxter International, Inc. ..... 8,125,688
96,500 Tenet Healthcare Corp. ......... 3,015,625
------------
TOTAL MEDICAL AND OTHER HEALTH
SERVICES........................ 11,141,313
------------
METALS AND MINING -- 1.25%
54,200 Aluminum Company of America..... 3,573,813
61,000 Newmont Mining.................. 1,441,125
------------
TOTAL METALS AND MINING......... 5,014,938
------------
</TABLE>
See notes to financial statements.
39
<PAGE> 44
EQUITY VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
OIL AND GAS -- 14.30%
80,300 Amerada Hess Corp. ............. $ 4,361,294
122,100 Amoco Corp. .................... 5,082,413
94,300 Atlantic Richfield Company...... 7,367,188
123,800 Baker Hughes, Inc.(a)........... 4,278,838
95,300 Burlington Resources, Inc. ..... 4,103,856
28,000 Chevron Corp. .................. 2,325,750
87,700 Halliburton Company............. 3,908,131
213,900 Occidental Petroleum............ 5,775,300
99,500 Tenneco, Inc. .................. 3,787,219
75,700 Texaco, Inc. ................... 4,518,344
238,600 Union Pacific Resources Group... 4,190,413
215,700 Unocal Corp. ................... 7,711,275
------------
TOTAL OIL AND GAS............... 57,410,021
------------
PAPER AND FOREST
PRODUCTS -- 3.00%
63,100 Champion International.......... 3,103,731
158,800 Fort James Corp. ............... 7,066,600
40,800 Weyerhauser Company(c).......... 1,884,450
------------
TOTAL PAPER AND FOREST
PRODUCTS...................... 12,054,781
------------
PHARMACEUTICALS -- 1.53%
150,300 Abbott Laboratories............. 6,143,513
------------
RETAIL -- 6.37%
189,100 American Stores Company......... 4,573,856
112,900 Consolidated Stores Corp.(c).... 4,092,625
90,500 Dillards, Inc. Class A.......... 3,750,094
129,700 Federated Department
Stores(a)(c).................. 6,979,481
39,600 May Department Stores........... 2,593,800
186,700 Venator Group Inc. ............. 3,570,638
------------
TOTAL RETAIL.................... 25,560,494
------------
RETAIL -- TOY STORE -- 0.63%
106,900 Toys "R" Us, Inc.(c)............ 2,518,831
------------
SEMICONDUCTORS -- 0.62%
189,600 National Semiconductor
Corp.(c)...................... 2,500,350
------------
TELECOMMUNICATIONS -- 6.15%
84,000 AT & T Corp. ................... 4,798,500
74,300 GTE Corp. ...................... 4,132,938
135,002 Bell Atlantic Corp. ............ 6,159,466
77,100 Motorola, Inc. ................. 4,052,569
114,500 SBC Communications, Inc. ....... 4,580,000
19,900 Worldcom, Inc.(a)(c)............ 963,906
------------
TOTAL TELECOMMUNICATIONS........ 24,687,379
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
TIRE AND RUBBER -- 0.74%
45,900 Goodyear Tire & Rubber Company.. $ 2,957,681
------------
TRANSPORTATION -- 5.61%
178,400 Allied Signal, Inc.............. 7,916,500
80,700 Burlington Northern Santa Fe.... 7,923,730
147,000 CSX Corp........................ 6,688,500
------------
TOTAL TRANSPORTATION............ 22,528,730
------------
UTILITIES: ELECTRIC -- 3.85%
35,400 Consolidated Edison of N.Y. .... 1,630,613
149,200 Pacificorp...................... 3,375,650
140,100 Southern Company................ 3,879,019
158,100 Texas Utilities Company(a)...... 6,580,913
------------
TOTAL UTILITIES: ELECTRIC....... 15,466,195
------------
TOTAL COMMON STOCK
(Cost $382,595,969)............. 389,587,014
------------
REGULATED INVESTMENT COMPANY -- 2.42%
9,700,000 Janus Money Market Fund(b) (Cost
$9,700,000)................... 9,700,000
------------
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C>
SHORT TERM CORPORATE NOTES -- 1.25%
$5,000,000 Republic New York Securities
Corp., Floating Rate, 6.65%,
01/12/99(b)(Cost
$5,000,000)................... 5,000,000
------------
TIME DEPOSITS -- 4.01%
733,688 Totonto Dominion, 5.57%,
07/20/98(b)................... 733,688
816,753 Totonto Dominion, 5.58%,
07/24/98(b)................... 816,753
9,325,204 Bank of Montreal, 5.59%,
08/04/98(b)................... 9,325,204
104,702 Bank of Montreal, 5.58%,
08/14/98(b)................... 104,702
5,111,153 BankBoston, N.A., 6.58%,
10/03/98(b)................... 5,111,153
------------
TOTAL TIME DEPOSITS
(Cost $16,091,500).............. 16,091,500
------------
TOTAL SECURITIES
(Cost $413,387,469)............. 420,378,514
------------
</TABLE>
See notes to financial statements.
40
<PAGE> 45
EQUITY VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- ------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 2.88%
$11,567,698 With Investors Bank & Trust
dated 06/30/98, 5.20%,
repurchase proceeds at
maturity $11,569,369, 07/01/98
(Collateralized by various
Government National Mortgage
Association obligations,
7.00% -- 7.35%, due 08/20/23
to 07/20/25, with a total
value of $12,146,366 (Cost
$11,567,698).................. $ 11,567,698
------------
Total Investments -- 107.63%
(Cost $424,955,167)............. 431,946,212
Other assets less liabilities --
(7.63)%......................... (30,608,240)
------------
NET ASSETS -- 100.00%........... $401,337,972
============
</TABLE>
<TABLE>
<CAPTION>
The aggregate cost of securities for federal income tax
purposes at June 30, 1998, is $424,955,167.
The following amount is based on costs for federal income
tax purposes:
<S> <C>
Gross unrealized appreciation.......... $ 22,451,477
Gross unrealized depreciation.......... (15,460,432)
------------
Net unrealized appreciation............ $ 6,991,045
============
</TABLE>
- ---------------
(a) All or part of this security is on loan.
(b) Collateral for securities on loan.
(c) Non-income producing security.
See notes to financial statements.
41
<PAGE> 46
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<C> <S> <C>
COMMON STOCK -- 98.11%
ADVERTISING -- 0.90%
81,500 Interpublic Group, Inc. ..... $ 4,946,031
------------
APPAREL -- 2.73%
300,400 CVS Corp. ................... 11,696,825
91,000 Jones Apparel Group, Inc. ... 3,327,187
------------
TOTAL APPAREL................ 15,024,012
------------
BANKS -- 7.25%
35,700 Associates First Capital
Corp. ..................... 2,744,437
146,900 BankAmerica Corp. ........... 12,697,669
59,500 Chase Manhattan Corp. ....... 4,492,250
80,250 Comerica, Inc. .............. 5,316,562
65,350 Fifth Third Bancorp.......... 4,117,050
191,200 MBNA Corp. .................. 6,309,600
67,600 Norwest Corp. ............... 2,526,550
39,700 Southtrust Corp. ............ 1,726,950
------------
TOTAL BANKS.................. 39,931,068
------------
CHEMICALS -- 1.07%
44,300 Merck & Company, Inc. ....... 5,925,125
------------
COMPUTER SOFTWARE AND SERVICES -- 11.67%
39,700 America Online, Inc. ........ 4,208,200
178,000 BMC Software, Inc. .......... 9,244,875
78,600 Cisco Systems, Inc. ......... 7,236,112
134,800 Computer Associates
International, Inc. ....... 7,489,825
90,900 Compuware Corp. ............. 4,647,262
222,000 HBO & Company................ 7,825,500
150,800 Microsoft Corp. ............. 16,342,950
119,000 Parametric Technology
Corp. ..................... 3,227,875
88,000 Peoplesoft................... 4,136,000
------------
TOTAL COMPUTER SOFTWARE AND
SERVICES..................... 64,358,599
------------
COMPUTERS AND OFFICE EQUIPMENT -- 2.66%
35,900 Dell Computer Corp. ......... 3,331,969
149,300 EMC Corp. ................... 6,690,506
96,600 Pitney Bowes, Inc. .......... 4,648,875
------------
TOTAL COMPUTER AND OFFICE
EQUIPMENT.................... 14,671,350
------------
CONSUMER GOODS AND SERVICES -- 7.30%
330,700 Cendant Corp. ............... 6,903,362
32,200 Clorox Company............... 3,071,075
62,800 Colgate-Palmolive Company.... 5,526,400
176,000 General Electric Company..... 16,016,000
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
CONSUMER GOODS AND SERVICES (CONTINUED)
94,700 Proctor & Gamble Company..... $ 8,623,619
1,800 ServiceMaster Company........ 68,513
------------
TOTAL CONSUMER GOODS AND
SERVICES..................... 40,208,969
------------
ENVIRONMENTAL MANAGEMENT SERVICES -- 0.83%
92,300 USA Waste Services,
Inc.(a).................... 4,557,313
------------
FINANCIAL SERVICES -- 7.14%
104,600 American Express Company..... 11,924,400
78,500 Equitable Companies, Inc. ... 5,882,594
141,200 Freddie Mac.................. 6,645,225
18,100 J.P. Morgan & Company........ 2,119,962
86,700 Morgan Stanley Dean Witter... 7,922,212
83,900 SunAmerica Inc.(a)........... 4,819,006
------------
TOTAL FINANCE................ 39,313,399
------------
FOOD AND BEVERAGE -- 2.92%
164,600 Coca-Cola Enterprises,
Inc. ...................... 6,460,550
142,800 Safeway, Inc. ............... 5,810,175
68,200 Sara Lee Corp. .............. 3,814,937
------------
TOTAL FOOD AND BEVERAGE...... 16,085,662
------------
INSURANCE -- 5.36%
64,100 American International
Group...................... 9,358,600
97,000 Conseco, Inc.(a)............. 4,534,750
257,497 Travelers Group, Inc. ....... 15,610,756
------------
TOTAL INSURANCE.............. 29,504,106
------------
LEISURE AND RECREATION -- 1.80%
176,000 Carnival Corp., Class A...... 6,974,000
90,200 Marriott International, Inc.,
Class A.................... 2,920,225
------------
TOTAL LEISURE AND
RECREATION................... 9,894,225
------------
MACHINERY -- 1.22%
151,900 Ingersoll-Rand Company....... 6,693,094
------------
MANUFACTURING -- 4.84%
86,700 Masco Corp. ................. 5,245,350
62,400 Owens-Illinois, Inc. ........ 2,792,400
295,800 Tyco International Ltd.(a)... 18,635,400
------------
TOTAL MANUFACTURING.......... 26,673,150
------------
MEDIA -- 4.40%
261,500 CBS Corp. ................... 8,302,625
147,800 Gannett Company, Inc. ....... 10,503,037
63,300 Time Warner Inc. ............ 5,408,194
------------
TOTAL MEDIA.................. 24,213,856
------------
</TABLE>
See notes to financial statements.
42
<PAGE> 47
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
MEDICAL AND OTHER HEALTH SERVICES -- 2.48%
50,600 Cardinal Health, Inc.(a)..... $ 4,743,750
175,900 Healthsouth Corp............. 4,694,331
18,500 McKesson Corp.(a)............ 1,503,125
54,800 Quintiles Transnational
Corp. ..................... 2,695,475
------------
TOTAL MEDICAL AND OTHER
HEALTH SERVICES.............. 13,636,681
------------
OIL AND GAS -- 1.72%
39,400 Cooper Cameron Corp. ........ 2,009,400
68,200 Exxon Corp................... 4,863,512
30,700 Western Atlas, Inc. ......... 2,605,663
------------
TOTAL OIL AND GAS............ 9,478,575
------------
PHARMACEUTICALS -- 9.51%
92,000 Bristol-Myers Squibb
Company.................... 10,574,250
103,100 Eli Lilly & Company.......... 6,811,044
97,400 Pfizer, Inc. ................ 10,586,163
111,100 Schering-Plough Corp. ....... 10,179,538
205,300 Warner Lambert Company....... 14,242,688
------------
TOTAL PHARMACEUTICALS........ 52,393,683
------------
RETAIL -- 10.92%
167,900 Costco Companies, Inc. ...... 10,588,194
167,300 Dayton-Hudson Corp........... 8,114,050
53,800 Fred Meyer, Inc. ............ 2,286,500
64,700 Estee Lauder Companies, Class
A(a)....................... 4,508,781
76,300 Home Depot, Inc. ............ 6,337,669
76,700 Office Depot, Inc.(a)........ 2,420,844
246,000 TJX Companies, Inc. ......... 5,949,225
223,200 Wal-Mart Stores, Inc.(a)..... 13,559,400
155,200 Walgreen Company............. 6,411,700
------------
TOTAL RETAIL................. 60,176,363
------------
TELECOMMUNICATIONS -- 10.55%
82,200 Airtouch Communications,
Inc. ...................... 4,803,563
127,800 AT&T Corp.(a)................ 7,300,575
146,700 Lucent Technologies.......... 12,203,606
61,200 Northern Telecom Ltd. ....... 3,473,100
107,200 Sprint Corp. ................ 7,557,600
252,700 Tele-Communications TCI
Ventures Group............. 5,054,000
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
169,000 Tele-Communications TCI
Ventures Group, Class A.... $ 6,495,938
80,800 Tellabs, Inc.(a)............. 5,787,300
112,700 WorldCom, Inc. .............. 5,458,906
------------
TOTAL TELECOMMUNICATIONS..... 58,134,588
------------
TRANSPORTATION -- 0.84%
55,400 AMR Corp. ................... 4,612,050
------------
TOTAL COMMON STOCK (Cost
$400,631,187)................ 540,431,899
------------
REGULATED INVESTMENT COMPANIES -- 3.96%
10,300,000 Janus Money Market Fund(b)... 10,300,000
11,494,494 Merrimac Cash Fund -- Premium
Class(b)................... 11,494,494
------------
TOTAL REGULATED INVESTMENT
COMPANIES (Cost
$21,794,494)................. 21,794,494
------------
<CAPTION>
PRINCIPAL
-----------
<C> <S> <C>
TIME DEPOSITS -- 4.01%
$13,678,688 BankBoston, N.A., 6.58%,
10/03/98(b)................ 13,678,688
5,772,740 Bank of Montreal, 5.59%,
08/04/98(b)................ 5,772,740
1,623,950 Bank of Montreal, 5.58%,
08/14/98(b)................ 1,623,950
1,016,728 Toronto Dominion, 5.58%,
07/24/98(b)................ 1,016,728
------------
TOTAL TIME DEPOSITS (Cost
$40,092,106)................. 22,092,106
------------
SHORT TERM CORPORATE NOTES -- 3.27%
14,000,000 Morgan Stanley Dean Witter,
Floating Rate, 6.60%,
07/07/98(b)................ 14,000,000
4,000,000 Republic New York Securities
Corp., Floating Rate,
6.65%, 01/12/99(b)......... 4,000,000
------------
TOTAL SHORT TERM CORPORATE
NOTES........................ 18,000,000
------------
TOTAL SECURITIES (Cost
$462,517,787)................ 602,318,499
------------
</TABLE>
See notes to financial statements.
43
<PAGE> 48
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
----------- ------------
<S> <C> <C>
REPURCHASE AGREEMENTS -- 1.92%
$10,606,060 With Investors Bank & Trust,
dated 06/30/98, 5.20%,
repurchase proceeds at
maturity $10,607,592,
07/01/98. (Collateralized
by Government National
Mortgage Association,
7.50%, due 12/20/10 with a
value of $1,195,419 and
Government National
Mortgage Association,
Adjustable Rate Mortgage,
7.00%, due 08/20/24 with a
value of $9,941,458) (Cost
$10,606,060)................ $ 10,606,060
------------
Total Investments -- 111.27%
(Cost $473,123,847)........... 612,924,559
Other assets less
liabilities -- (11.27)%....... (62,092,261)
------------
NET ASSETS -- 100.00%......... $550,832,298
============
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
The aggregate cost of investments for federal income tax
purposes at June 30, 1998 is $473,123,847.
The following amount is based on costs for federal income
tax purposes:
Gross unrealized appreciation............. $147,001,689
Gross unrealized depreciation............. (7,200,977)
------------
Net unrealized appreciation............... $139,800,712
============
</TABLE>
- ---------------
(a) All or part of this security is on loan.
(b) Collateral for securities on loan.
(ADR) -- American Depository Receipt
See notes to financial statements.
44
<PAGE> 49
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<C> <S> <C>
COMMON STOCK -- 97.56%
ADVERTISING -- 0.94%
83,700 Interpublic Group, Inc. ....... $ 5,079,544
------------
APPAREL -- 0.29%
40,000 CVS Corp. ..................... 1,557,500
------------
BANKS -- 1.35%
35,000 Associates First Capital
Corp. ....................... 2,690,625
15,000 Bankamerica Corp. ............. 1,296,562
55,000 Bank of New York............... 3,337,812
------------
TOTAL BANKS.................... 7,324,999
------------
BUSINESS SERVICES -- 1.10%
62,000 Gartner Group, Inc., Class
A(c)......................... 2,170,000
133,400 Manpower, Inc. ................ 3,826,913
------------
TOTAL BUSINESS SERVICES........ 5,996,913
------------
CHEMICALS -- 0.72%
70,000 Monsanto Co. .................. 3,911,250
------------
COMPUTER SOFTWARE AND SERVICES -- 10.27%
60,000 America Online, Inc............ 6,360,000
194,100 Cisco Systems, Inc.(c)......... 17,869,331
69,000 Computer Associates
International, Inc. ......... 3,833,812
85,700 Electronic Arts(c)............. 4,627,800
178,200 Microsoft Corp.(c)............. 19,312,425
80,000 PeopleSoft, Inc.(c)............ 3,760,000
------------
TOTAL COMPUTER SOFTWARE AND
SERVICES....................... 55,763,368
------------
COMPUTERS AND OFFICE EQUIPMENT -- 3.72%
32,000 Dell Computer Corp.(c)......... 2,970,000
90,000 EMC Corp./Mass(c).............. 4,033,125
199,800 Hewlett-Packard Company........ 11,963,025
12,000 Xerox Corp. ................... 1,219,500
------------
TOTAL COMPUTER AND OFFICE
EQUIPMENT...................... 20,185,650
------------
CONSUMER GOODS AND SERVICES -- 12.00%
100,000 Cendant Corp.(c)............... 2,087,500
7,100 Clorox Company(c).............. 677,162
55,000 Colgate-Palmolive Company...... 4,840,000
191,200 General Electric Company....... 17,399,200
314,200 Gillette Company............... 17,811,213
244,500 Proctor & Gamble Company....... 22,264,781
------------
TOTAL CONSUMER GOODS AND
SERVICES....................... 65,079,856
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
ELECTRONICS -- 1.27%
37,000 General Motors Corp.,
Class H(c)................... $ 1,743,625
122,500 Solectron Corp.(c)............. 5,152,656
------------
TOTAL ELECTRONICS.............. 6,896,281
------------
FINANCE -- 3.73%
81,200 American Express Company....... 9,256,800
90,000 Amresco, Inc.(c)............... 2,621,250
37,000 Fannie Mae..................... 2,247,750
30,000 Freddie Mac.................... 1,411,875
40,000 Newcourt Credit Corp.(c)....... 1,967,500
45,000 Travelers Group, Inc. ......... 2,728,125
------------
TOTAL FINANCE.................. 20,233,300
------------
FOOD AND BEVERAGE -- 6.00%
227,900 Coca-Cola Company.............. 19,485,450
175,000 Coca-Cola Enterprises, Inc. ... 6,868,750
150,000 Pepsico, Inc. ................. 6,178,125
------------
TOTAL FOOD AND BEVERAGE........ 32,532,325
------------
INSURANCE -- 2.75%
93,200 American International Group... 13,607,200
30,000 Washington Mutual, Inc. ....... 1,303,125
------------
TOTAL INSURANCE................ 14,910,325
------------
LEISURE AND RECREATION -- 3.21%
217,000 Host Marriott Corp.(c)......... 3,865,313
146,400 Marriot International, Inc.,
Class A(a)................... 4,739,700
84,100 Walt Disney Company............ 8,835,756
------------
TOTAL LEISURE AND RECREATION... 17,440,769
------------
MANUFACTURING -- 3.78%
15,000 Honeywell, Inc. ............... 1,253,438
224,700 Mattel, Inc. .................. 9,507,619
155,000 Tyco International Ltd.(a)..... 9,765,000
------------
TOTAL MANUFACTURING............ 20,526,057
------------
MEDICAL AND OTHER HEALTH SERVICES -- 8.96%
35,000 Bausch & Lomb, Inc.(c)......... 1,754,375
155,400 Boston Scientific Corp.(c)..... 11,130,525
10,400 Centocor, Inc.(c).............. 377,000
199,600 Johnson & Johnson.............. 14,720,500
221,700 Medtronics, Inc. .............. 14,133,375
</TABLE>
See notes to financial statements.
45
<PAGE> 50
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
MEDICAL AND OTHER HEALTH SERVICES (CONTINUED)
50,000 Sofamor Danek Group, Inc.(c)... $ 4,328,125
70,000 Tenet Healthcare Corp.(c)...... 2,187,500
------------
TOTAL MEDICAL AND OTHER HEALTH
SERVICES....................... 48,631,400
------------
OIL AND GAS -- 2.14%
102,200 Baker Hughes, Inc.(a).......... 3,532,287
117,900 Schlumberger Ltd.(a)........... 8,054,044
------------
TOTAL OIL AND GAS.............. 11,586,331
------------
PHARMACEUTICALS -- 15.70%
83,000 Alza Corp.(c).................. 3,589,750
105,000 American Home Products
Corp. ....................... 5,433,750
91,200 Bristol-Myers Squibb Company... 10,482,300
312,100 Eli Lilly & Company............ 20,618,106
41,900 Merck & Company, Inc. ......... 5,604,125
69,600 Penederm, Inc.(c).............. 1,392,000
196,000 Pfizer, Inc. .................. 21,302,750
19,000 Sepracor, Inc.(c).............. 788,500
50,000 Smithkline Beecham PLC (ADR)... 3,025,000
165,000 Warner-Lambert Company......... 11,446,875
33,000 Zeneca Group PLC (ADR)(a)...... 1,447,875
------------
TOTAL PHARMACEUTICALS.......... 85,131,031
------------
RESTAURANTS -- 3.13%
94,800 Cracker Barrel Old Country
Store, Inc. ................. 3,009,900
202,500 McDonald's Corp. .............. 13,972,500
------------
TOTAL RESTAURANTS.............. 16,982,400
------------
RETAIL -- 5.60%
40,000 Dayton-Hudson Corp. ........... 1,940,000
90,000 Family Dollar Stores........... 1,665,000
122,500 Gap Stores..................... 7,549,062
186,100 Home Depot, Inc. .............. 15,457,931
20,000 Nordstrom Inc. ................ 1,545,000
70,000 Office Depot(a)(c)............. 2,209,375
------------
TOTAL RETAIL................... 30,366,368
------------
SEMICONDUCTORS -- 2.54%
40,000 Altera Corp.(c)................ 1,182,500
170,200 Intel Corp. ................... 12,616,075
------------
TOTAL SEMICONDUCTORS........... 13,798,575
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
TELECOMMUNICATIONS -- 6.36%
230,800 Ericsson L M Telephone (ADR)... $ 6,606,650
50,000 Intermedia Communications,
Inc.(c)...................... 2,096,875
75,000 Lucent Technologies............ 6,239,063
100,000 Nextel Communications, Inc.
Class A(a)(c)................ 2,487,500
60,000 Nokia Corp. (ADR).............. 4,353,750
45,000 SBC Communications, Inc. ...... 1,800,000
225,000 Worldcom, Inc.(c).............. 10,898,438
------------
TOTAL TELECOMMUNICATIONS....... 34,482,276
------------
THERAPEUTICS -- 1.50%
112,000 Amgen, Inc.(c)................. 7,322,000
26,500 SangStat Medical Corp.(c)...... 831,438
------------
TOTAL THERAPEUTICS............. 8,153,438
------------
TOBACCO -- 0.50%
69,000 Philip Morris Companies,
Inc. ........................ 2,716,875
------------
TOTAL COMMON STOCK (Cost
$420,865,182).................. 529,286,831
------------
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C>
REGULATED INVESTMENT COMPANIES -- 1.10%
5,000,000 Janus Money Market Fund(b)..... 5,000,000
988,851 Merrimac Cash Fund -- Premium
Class(b)..................... 988,851
------------
TOTAL REGULATED INVESTMENT
COMPANIES (Cost $5,988,851).... 5,988,851
------------
PRINCIPAL
- -----------
SHORT TERM CORPORATE NOTES -- 5.72%
$ 5,000,000 Morgan Stanley Dean Witter,
Floating Rate, 6.60%,
07/07/98(b).................. 10,000,000
6,000,000 Republic New York Securities
Corp., Floating Rate, 6.65%,
01/12/99(b).................. 6,000,000
15,000,000 JP Morgan Securities Inc.,
Floating Rate, 6.605%,
01/15/99(b).................. 15,000,000
------------
TOTAL SHORT TERM CORPORATE
NOTES (Cost $31,000,000)....... 31,000,000
------------
</TABLE>
See notes to financial statements.
46
<PAGE> 51
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
--------- ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
TIME DEPOSITS -- 2.43%
$ 2,370,371 BankBoston, N.A., 6.58%,
10/03/98(b).................. $ 2,370,371
1,184,687 Bank of Montreal, 5.59%,
08/04/98(b).................. 1,184,687
4,809,758 Bank of Montreal, 5.58%,
08/14/98(b).................. 4,809,758
3,078,397 Toronto Dominion, 5.57%,
07/20/98(b).................. 3,078,397
1,749,804 Toronto Dominion, 5.58%,
07/24/98(b).................. 1,749,804
------------
TOTAL TIME DEPOSITS (Cost
$13,193,017)................... 13,193,017
------------
TOTAL SECURITIES (Cost
$471,047,050).................. 579,468,699
------------
2,956,018 REPURCHASE AGREEMENTS -- 2.40%
With Investors Bank & Trust,
dated 06/30/98, 5.20%,
repurchase proceeds at
maturity $2,956,445, 07/01/98
(Collateralized by Fannie
Mae, 7.50%, due 06/01/13 with
a value of $3,103,826)....... 2,956,018
10,079,187 With Investors Bank & Trust,
dated 06/30/98, 5.20%,
repurchase proceeds at
maturity $10,080,643,
07/01/98 (Collateralized by
Fannie Mae, Floating rate,
6.74%, due 011/25/22 and
First Chicago Capital, 6.27%,
due 02/01/27 with a value of
$10,583,491)................. 10,079,187
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $13,035,205)............. 13,035,205
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
--------- ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
Total Investments -- 109.21%
(Cost $484,082,255)............ $592,503,904
Other assets less
liabilities -- (9.21)%......... (49,950,508)
------------
NET ASSETS -- 100.00%.......... $542,553,396
============
</TABLE>
<TABLE>
<S> <C>
The aggregate cost of securities for federal income tax
purposes at June 30, 1998, is $484,082,255.
The following amount is based on costs for federal income
tax purposes:
Gross unrealized appreciation.......... $115,048,383
Gross unrealized depreciation.......... (6,626,734)
------------
Net unrealized appreciation............ $108,421,649
============
</TABLE>
- ---------------
(a) All or part of this security is on loan.
(b) Collateral for securities on loan.
(c) Non-income producing security.
(ADR) -- American Depository Receipts
See notes to financial statements.
47
<PAGE> 52
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<C> <S> <C>
COMMON STOCK -- 94.69%
ADVERTISING -- 2.40%
83,600 Lamar Advertising Company(c)... $ 2,999,150
392,100 Snyder Communications,
Inc.(c)...................... 17,252,400
------------
TOTAL ADVERTISING.............. 20,251,550
------------
AEROSPACE -- 1.48%
219,900 AAR Corp....................... 6,500,794
123,000 Gulfstream Aerospace
Corp.(c)..................... 5,719,500
7,400 Kellstrom Industries,
Inc.(c)...................... 214,368
------------
TOTAL AEROSPACE................ 12,434,662
------------
AUTOMOTIVE PRODUCTIVES -- 0.31%
62,100 United Rentals, Inc.(a)(c)..... 2,608,200
------------
BANKS -- 3.84%
223,586 Charter One Financials,
Inc. ........................ 7,532,053
125,600 First Savings Bank of
Washington................... 3,171,400
163,079 HUBCO, Inc. ................... 5,840,267
68,455 Mercantile Bancorporation...... 3,448,421
59,500 NSS Bancorp, Inc.,(a).......... 3,332,000
165,000 Peoples Bank................... 5,713,125
145,400 Sterling Financial Corp.(c).... 3,307,850
------------
TOTAL BANKS.................... 32,345,116
------------
BUSINESS SERVICES -- 5.48%
48,400 Abacus Direct Corp.(c)......... 2,513,775
102,600 ABM Industries, Inc. .......... 2,859,975
125,100 Accustaff, Inc.(a)(c).......... 3,909,375
78,700 Alternative Resources
Corp.(c)..................... 973,912
117,700 Applied Graphics Technologies,
Inc.(c)...................... 5,384,775
86,200 Diamond Technology Partners,
Inc.(c)...................... 2,607,550
89,000 F.Y.I., Inc.(c)................ 2,536,500
48,500 Iron Mountain, Inc.(c)......... 2,170,375
51,600 Manpower, Inc. ................ 1,480,275
53,800 MARC, Inc. .................... 887,700
68,100 Metamor Worldwide, Inc.(c)..... 2,396,269
312,300 Metzler Group, Inc.(c)......... 11,437,987
80,700 Pre-Paid Legal Services,
Inc.(c)...................... 2,547,094
257,500 Protection One, Inc. .......... 2,816,406
60,000 Volt Information Sciences,
Inc.(c)...................... 1,627,500
------------
TOTAL BUSINESS SERVICES........ 46,149,468
------------
CHEMICALS -- 0.21%
52,400 Chemed Corp. .................. 1,784,875
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
COMMUNICATIONS -- 3.30%
82,000 American Tower Corp. -- Class
A(a)(c)...................... $ 2,044,875
302,900 Arch Communications Group,
Inc.(c)...................... 1,192,669
66,800 DSP Communications, Inc.(c).... 918,500
50,100 Jacor Communications,
Inc.(c)...................... 2,955,900
13,700 Jones Intercable, Inc.(c)...... 339,075
139,100 Jones Intercable, Inc. -- Class
A............................ 3,477,500
66,700 Iridium World Communication,
Inc.(a)(c)................... 3,547,606
109,000 Inter-Tel, Inc. ............... 1,744,000
68,800 Liberty Media Group -- Class
A(c)......................... 2,670,300
220,700 PMT Services, Inc.(c).......... 5,614,056
52,025 Qwest Communications
International, Inc.,(a)(c)... 1,814,360
107,718 Saga Communications, Inc.(c)... 1,508,052
------------
TOTAL COMMUNICATIONS........... 27,826,893
------------
COMPUTER AND SOFTWARE SERVICES -- 9.76%
84,200 Affiliated Computer Services,
Inc. -- Class A(c)........... 3,241,700
44,700 American Business Information,
Inc.(c)...................... 715,200
87,400 American Business Information,
Inc. -- Class A(c)........... 1,332,850
96,800 BEA Systems, Inc.(a)(c)........ 2,220,350
74,900 CACI International, Inc.(c).... 1,577,581
87,300 Computer Horizons Corp.(c)..... 3,235,556
40,800 Computer Management
Sciences(c).................. 969,000
107,181 Concord EFS, Inc.(a)........... 2,800,110
90,800 Dendrite International,
Inc.(c)...................... 3,416,350
78,500 Documentum, Inc.(a)(c)......... 3,768,000
60,500 Electric Arts, Inc.(c)......... 3,267,000
90,800 IDX Systems Corp.(c)........... 4,182,475
62,150 Information Management
Resources, Inc.(c)........... 2,101,447
59,800 International Network
Services(c).................. 2,451,800
31,400 Jack Henry & Associates,
Inc. ........................ 1,079,375
59,100 JDA Software Group, Inc.(c).... 2,585,625
45,900 Legato Systems, Inc.(c)........ 1,790,100
62,600 Microsoft Corp.(c)............. 6,784,275
17,000 National Computer System,
Inc. ........................ 408,000
117,100 Network Appliance, Inc.(c)..... 4,559,581
138,900 Parametric Technology
Corp.(c)..................... 3,767,662
44,700 Pegasystems, Inc.(a)(c)........ 1,212,488
</TABLE>
See notes to financial statements.
48
<PAGE> 53
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
COMPUTER AND SOFTWARE SERVICES (CONTINUED)
36,300 Pomeroy Computer Resources,
Inc.......................... $ 946,069
68,800 RWD Technologies, Inc.(c)...... 1,625,400
256,500 Sterling Commerce, Inc.(c)..... 12,440,250
48,750 Technology Solutions
Company(c)................... 1,544,766
12,200 Tecnomatix Technologies
Ltd.(a)(c)................... 244,000
104,925 Veritas Software Corp.(c)...... 4,341,272
66,650 Wind River Systems(c).......... 2,391,069
43,600 Xylan Corp.(a)(c).............. 1,299,825
------------
TOTAL COMPUTER AND SOFTWARE
SERVICES....................... 82,299,176
------------
COMPUTERS AND OFFICE EQUIPMENT -- 1.16%
72,500 Apex PC Solutions, Inc.(c)..... 2,020,937
102,400 CIBER, Inc.(c)................. 3,891,200
89,200 National Data Corp. ........... 3,902,500
------------
TOTAL COMPUTERS AND OFFICE
EQUIPMENT...................... 9,814,637
------------
CONSTRUCTION -- 1.06%
181,400 Michael Baker Corp.(c)......... 1,643,937
179,400 Lowe's Companies, Inc. ........ 7,276,912
------------
TOTAL CONSTRUCTION............. 8,920,849
------------
CONSUMER GOODS & SERVICES -- 0.72%
98,400 Carriage Services, Inc.(c)..... 2,472,300
36,700 Glacier Water Services,
Inc.(c)...................... 1,059,712
116,800 Helen of Troy Ltd.(c).......... 2,569,600
------------
TOTAL CONSUMER GOODS AND
SERVICES....................... 6,101,612
------------
EDUCATION -- 0.52%
136,825 ITT Educational Services,
Inc.(c)...................... 4,412,606
------------
ELECTRONICS -- 1.51%
52,950 Hughes Supply, Inc. ........... 1,939,294
19,000 Jaco Electronics, Inc.,(c)..... 114,000
45,100 LSI Industries Inc. ........... 902,000
50,030 Richardson Electronics,
Ltd. ........................ 675,405
105,000 Rogers Corp.(c)................ 3,465,000
309,300 Sensormatic Electronics
Corp.(a)(c).................. 4,330,200
60,700 Sipex Corp.(c)................. 1,305,050
------------
TOTAL ELECTRONICS.............. 12,730,949
------------
ENGINEERING -- 0.22%
107,900 URS Corp.(c)................... 1,834,300
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
ENVIRONMENTAL MANAGEMENT SERVICES -- 3.42%
176,500 American Disposal Services,
Inc.(c)...................... $ 8,273,438
95,293 BHA Group, Inc. ............... 1,572,334
189,000 Eastern Environmental Services,
Inc.(c)...................... 6,426,000
195,800 Superior Services, Inc.(c)..... 5,886,238
181,970 Tetra Tech, Inc.(c)............ 4,412,773
106,300 Waste Industries, Inc.(c)...... 2,212,369
------------
TOTAL ENVIRONMENTAL MANAGEMENT
SERVICES....................... 28,783,152
------------
EQUIPMENT RENTAL AND LEASING -- 2.07%
97,500 Aaron Rents, Inc. -- Class B... 1,950,000
140,000 Amplicon, Inc. ................ 1,820,000
135,000 Electro Rent Corp.(c).......... 3,029,063
53,700 Home Choice Holdings,
Inc.(c)...................... 647,756
154,400 Rental Service
Corporation(c)............... 5,191,700
79,000 XTRA Corp. .................... 4,779,500
------------
TOTAL EQUIPMENT RENTAL AND
LEASING........................ 17,418,019
------------
FINANCE -- 6.75%
311,690 Allied Capital Corp. .......... 7,636,405
98,000 American Express Company....... 11,172,000
63,200 Amresco, Inc.(c)............... 1,840,700
94,300 Cash American Investments,
Inc. ........................ 1,438,075
64,080 CCB Financial Corp. ........... 6,808,500
86,700 ContiFinancial Corp.(a)(c)..... 2,004,938
41,700 Countrywide Credit Industries,
Inc.......................... 2,116,275
37,100 HealthCare Financial Partners,
Inc.(c)...................... 2,274,694
106,400 Kansas City Southern
Industries, Inc. ............ 5,280,100
83,400 Merrill Lynch & Company........ 7,693,650
138,600 Sirrom Capital Corp.(a)........ 3,603,600
45,900 Waddell & Reed Financial,
Inc. ........................ 1,098,731
90,000 Washington Mutual, Inc. ....... 3,909,375
------------
TOTAL FINANCE.................. 56,877,043
------------
FOOD AND BEVERAGE -- 2.71%
128,700 Benihana, Inc.(c).............. 1,544,400
110,665 CKE Restaurants, Inc. ......... 4,564,931
50,200 Landry's Seafood
Restaurants(a)(c)............ 908,304
476,600 Ruby Tuesday, Inc. ............ 7,387,300
</TABLE>
See notes to financial statements.
49
<PAGE> 54
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
FOOD AND BEVERAGE (CONTINUED)
47,125 Suiza Foods Corporation(c)..... $ 2,812,773
82,200 Sylvan, Inc.(c)................ 1,294,650
71,400 Whole Foods Market, Inc.(c).... 4,319,700
------------
TOTAL FOOD AND BEVERAGE........ 22,832,058
------------
INSURANCE -- 1.30%
42,200 Allied Life Financial Corp. ... 1,218,525
38,600 National Western Life
Insurance -- Class A(c)...... 4,670,600
76,200 Penn Treaty American
Corp.(c)..................... 2,400,300
208,800 Willis Corroon Group (ADR)..... 2,623,050
------------
TOTAL INSURANCE................ 10,912,475
------------
LEISURE AND RECREATION -- 1.58%
72,200 Harveys Casinos Resorts........ 1,958,425
45,900 Premier Parks, Inc.(a)(c)...... 3,058,088
64,600 Royal Caribbean Cruises
Ltd.(a)...................... 5,135,700
173,400 Vistana, Inc.(c)............... 3,186,225
------------
TOTAL LEISURE AND RECREATION... 13,338,438
------------
MACHINERY -- 0.60%
207,600 JLG Industries, Inc. .......... 4,203,900
119,100 ITEQ, Inc.(c).................. 885,806
------------
TOTAL MACHINERY................ 5,089,706
------------
MANUFACTURING -- 5.55%
200,600 Alpha Industries, Inc.(c)...... 2,996,463
117,100 Blyth Industries, Inc.(c)...... 3,893,575
190,900 C&D Technologies, Inc.......... 11,072,200
81,300 Chase Industries, Inc.(c)...... 1,605,675
25,000 Cooper Cameron Corp.(c)........ 1,275,000
78,500 DT Industries, Inc. ........... 1,903,625
311,673 Lumen Technologies, Inc.(c).... 2,766,098
139,800 Lydall, Inc.(c)................ 2,035,837
261,000 Mail-Well, Inc.(c)............. 5,660,437
108,200 MotivePower Industries,
Inc.(c)...................... 2,650,900
87,500 Motorcar Parts and Accessories,
Inc.(c)...................... 1,290,625
95,800 Rock of Ages Corp.(c).......... 1,484,900
70,300 Scotsman Industries, Inc....... 1,950,825
55,700 Waters Corp.(c)................ 3,282,819
81,450 Watsco, Inc.................... 2,866,022
------------
TOTAL MANUFACTURING............ 46,735,001
------------
MEDIA -- 4.90%
248,200 Chancellor Media Corporation --
Class A(a)(c)................ 12,234,669
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
MEDIA (CONTINUED)
97,300 Consolidated Graphics,
Inc.(c)...................... $ 5,740,700
236,300 Emmis Broadcasting Corp. --
Class A(c)................... 11,298,094
165,900 Granite Broadcasting
Corp.(a)..................... 1,970,062
48,300 Gray Communications Systems,
Inc. ........................ 1,563,712
171,000 Houghton Mifflin Company....... 5,429,250
16,700 SportsLine USA, Inc.(a)(c)..... 610,594
83,400 USA Networks, Inc.(c).......... 2,095,425
28,900 VDI Media(c)................... 281,775
------------
TOTAL MEDIA.................... 41,314,281
------------
MEDICAL AND OTHER HEALTH SERVICES -- 8.36%
187,300 Advocat, Inc.(c)............... 1,287,688
123,000 Assisted Living Concepts,
Inc.(c)...................... 2,121,750
37,500 Boston Scientific Corp.(c)..... 2,685,938
108,700 Cyberonics, Inc.(c)............ 1,154,938
173,300 Daniel Industries.............. 3,292,700
74,600 DAOU Systems, Inc.(a)(c)....... 1,706,475
84,100 Horizon Health Corp.(c)........ 1,471,750
68,800 Immunex Corp.(c)............... 4,558,000
90,300 Lifeline Systems, Inc.(c)...... 1,670,550
50,400 Lunar Corp.(c)................. 926,100
105,500 Mariner Health Group,
Inc.(c)...................... 1,753,937
87,100 Medirisk, Inc.(c).............. 1,763,775
117,000 MedQuist, Inc.(c).............. 3,378,375
138,000 Morrison Health Care, Inc. .... 2,622,000
51,200 National Dentex Corp.(c)....... 1,203,200
93,300 National Surgery Centers,
Inc.(c)...................... 2,711,531
196,300 NBTY, Inc.(c).................. 3,607,012
86,700 Orthodontic Centers of America,
Inc.(a)(c)................... 1,815,281
81,900 Orthalliance, Inc.(c).......... 1,187,550
285,000 Owens & Minor Holding
Company...................... 2,850,000
116,000 PharMerica, Inc.(c)............ 1,399,250
141,300 Prime Medical Service,
Inc.(c)...................... 1,324,688
82,700 Quorum Health Group, Inc.(c)... 2,191,550
92,400 Res-Care, Inc.(a)(c)........... 1,703,625
53,600 Retirement Care Associates,
Inc.(c)...................... 388,600
57,600 Rural/Metro Corp.(c)........... 748,800
76,100 Sunrise Assisted Living,
Inc.(a)(c)................... 2,615,938
79,753 Total Renal Care Holdings,
Inc.(c)...................... 2,751,479
</TABLE>
See notes to financial statements.
50
<PAGE> 55
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
MEDICAL AND OTHER HEALTH SERVICES (CONTINUED)
232,800 Universal Health Services --
Class B(c)................... $ 13,589,700
------------
TOTAL MEDICAL AND OTHER HEALTH
SERVICES....................... 70,482,180
------------
METALS AND MINING -- 0.35%
101,500 Furon Company.................. 1,839,687
30,300 Wolverine Tube, Inc.(c)........ 1,151,400
------------
TOTAL METALS AND MINING........ 2,991,087
------------
OIL AND GAS -- 2.21%
110,200 Berry Petroleum................ 1,432,600
19,800 Gulfmark Offshore, Inc.(c)..... 450,450
112,700 Hanover Compressor
Company(c)................... 3,049,944
96,200 Petroleum Helicopters, Inc. ... 2,068,300
78,200 Pool Energy Services(c)........ 1,153,450
39,900 Pride International, Inc.(c)... 675,806
216,700 Tosco Corp. ................... 6,365,563
105,000 Varco International, Inc.(c)... 2,080,313
76,050 World Fuel Services Corp....... 1,316,616
------------
TOTAL OIL AND GAS.............. 18,593,042
------------
PHARMACEUTICALS -- 2.40%
52,600 Advance Paradigm, Inc.(c)...... 1,933,050
79,300 Alza Corp.(c).................. 3,429,725
74,000 Duane Reade, Inc.(c)........... 2,220,000
89,200 Jones Medical Industries,
Inc.......................... 2,954,750
103,100 NCS HealthCare, Inc. -- Class
A(c)......................... 2,938,350
136,400 Parexel International
Corp.(a)(c).................. 4,961,550
82,100 Vitalink Pharmacy
Services(c).................. 1,811,331
------------
TOTAL PHARMACEUTICALS.......... 20,248,756
------------
REAL ESTATE -- 0.54%
55,500 CB Commercial Real Estate
Services(c).................. 1,855,781
80,000 Trammel Crow Company(c)........ 2,675,000
------------
TOTAL REAL ESTATE.............. 4,530,781
------------
REAL ESTATE INVESTMENT TRUST -- 1.64%
67,269 Chateau Communities, Inc....... 1,933,984
131,200 Equity Inns, Inc. ............. 1,730,200
52,300 Health Care Property
Investments, Inc............. 1,886,069
46,900 National Health Investors,
Inc. ........................ 1,553,562
80,700 Pacific Gulf Properties,
Inc.......................... 1,719,919
105,300 RFS Hotel Investors, Inc. ..... 2,000,700
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
REAL ESTATE INVESTMENT TRUST (CONTINUED)
62,600 Sovran Self Storage, Inc. ..... $ 1,768,450
38,300 Sun Communities, Inc........... 1,268,688
------------
TOTAL REAL ESTATE INVESTMENT
TRUST.......................... 13,861,572
------------
RETAIL -- 4.24%
214,800 Best Buy Company, Inc.(c)...... 7,759,650
303,850 Consolidated Stores Corp.(c)... 11,014,563
64,500 Duckawall -- ALCO Stores,
Inc.(c)...................... 1,128,750
200,000 Fingerhut Companies, Inc....... 6,600,000
141,100 Michael Anthony Jewelers,
Inc.(c)...................... 361,569
20,900 N2K, Inc.(a)(c)................ 410,162
94,950 Pacific Sunwear of
California(a)(c)............. 3,323,250
204,400 Republic Industries, Inc. ..... 5,110,000
5,000 Uni-Marts, Inc.(c)............. 19,688
------------
TOTAL RETAIL................... 35,727,632
------------
SECURITY -- 1.72%
82,000 Borg-Warner Security
Corp.(c)..................... 1,855,250
83,400 ISS Group, Inc.(a)(c).......... 3,137,925
72,100 Kroll-O'Gara Company(c)........ 1,541,137
215,000 Pittston Brink's Group......... 7,928,125
------------
TOTAL SECURITY................. 14,462,437
------------
SEMICONDUCTORS -- 0.46%
27,900 Atmi, Inc.(c).................. 418,500
111,800 Vitesse Semiconductor
Corp.(c)..................... 3,451,825
------------
TOTAL SEMICONDUCTORS........... 3,870,325
------------
TELECOMMUNICATIONS -- 5.74%
133,500 Airtouch Communications,
Inc.(a)...................... 7,801,406
100,100 Alcatel Alsthom(a)(ADR)........ 4,072,819
60,775 Centennial Cellular Corp. --
Class A(c)................... 2,267,667
55,600 CFW Communications Company..... 1,292,700
123,300 Comdial Corp.(c)............... 1,495,012
107,000 Davel Communications
Group(c)..................... 2,608,125
50,400 Excel Switching Corp.(c)....... 1,253,700
83,400 Globalstar
Telecommunication(c)......... 2,251,800
143,190 Metrocall, Inc.(c)............. 868,089
375,400 Omnipoint Corp.(c)............. 8,610,737
295,800 Peoples Telephone Company,
Inc.(c)...................... 924,375
84,700 Rural Cellular Corp. --
Class A(c)................... 1,323,438
</TABLE>
See notes to financial statements.
51
<PAGE> 56
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
71,600 STAR Telecommunications,
Inc.(c)...................... $ 1,602,050
97,000 Tekelec(c)..................... 4,340,750
129,300 Teleport Communications Group,
Inc. -- Class A(c)........... 7,014,525
22,900 Teligent, Inc. -- Class
A(a)(c)...................... 674,119
------------
TOTAL TELECOMMUNICATIONS....... 48,401,312
------------
TRANSPORT SERVICES -- 0.34%
63,000 Coach USA, Inc.(c)............. 2,874,375
------------
TRANSPORTATION: FREIGHT -- 4.91%
185,700 Air Express International
Corp......................... 4,967,475
430,000 Airborne Freight Corp.......... 15,023,125
240,700 Circle International Group,
Inc. ........................ 6,739,600
148,700 CNF Transportation, Inc........ 6,319,750
115,474 Fritz Companies, Inc.(c)....... 1,544,465
277,750 Pittston BAX Group............. 4,322,484
65,000 Sea Containers Ltd............. 2,486,250
------------
TOTAL TRANSPORTATION:
FREIGHT........................ 41,403,149
------------
UTILITIES: ELECTRIC -- 0.93%
850,000 El Paso Electric Company(c).... 7,809,375
------------
TOTAL COMMON STOCK (Cost
$628,722,466).................. 798,071,089
------------
REGULATED INVESTMENT COMPANIES -- 1.58%
3,500,000 Janus Money Market Fund(b)..... 3,500,000
9,805,122 Merrimac Cash Fund -- Premium
Class(b)..................... 9,805,122
------------
TOTAL REGULATED INVESTMENT
COMPANIES (Cost $13,305,122)... 13,305,122
------------
<CAPTION>
PRINCIPAL
- -----------
<C> <S> <C>
TIME DEPOSITS -- 5.04%
$15,642,868 BankBoston, N.A., 6.58%,
10/03/98(b).................. 15,642,868
1,400,411 Bank of Montreal, 5.59%,
08/04/98(b).................. 1,400,411
10,074,313 Bank of Montreal, 5.58%,
08/14/98(b).................. 10,074,313
3,173,175 Toronto Dominion, 5.57%,
07/20/98(b).................. 3,173,175
12,205,086 Toronto Dominion, 5.58%,
07/24/98(b).................. 12,205,086
------------
TOTAL TIME DEPOSITS (Cost
$42,495,853)................... 42,495,853
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
--------- ------------
<C> <S> <C>
FLOATING RATE NOTES -- 6.76%
$20,000,000 JP Morgan Securities Inc.,
6.605%, 01/15/99(b).......... $ 20,000,000
26,000,000 Morgan Stanley Dean Witter,
6.60%, 07/07/98(b)........... 26,000,000
1,000,000 Prudential Securities, Inc.,
6.70%, 09/16/98(b)........... 1,000,000
10,000,000 Republic New York Securities
Corp., 6.65%, 01/12/99(b).... 10,000,000
------------
TOTAL FLOATING RATE NOTES (Cost
$57,000,000)................... 57,000,000
------------
TOTAL SECURITIES (Cost
$741,523,441).................. 910,872,064
------------
REPURCHASE AGREEMENTS -- 6.17%
13,348,362 With Investors Bank & Trust
dated 06/30/98, 5.20%,
repurchase proceeds at
maturity $13,350,290,
07/01/98 (Collateralized by
various Government National
Mortgage Association
Obligations, 7.00%, due
10/20/22 -- 06/20/26, with a
total value of
$14,016,021)................. 13,348,362
5,884,365 With Investors Bank & Trust
dated 06/30/98, 5.20%,
repurchase proceeds at
maturity $5,885,215, 07/01/98
(Collateralized by Government
National Mortgage
Association, 7.00%, due
12/20/23, with a value of
$6,179,010).................. 5,884,365
9,658,053 With Investors Bank & Trust
dated 06/30/98, 5.20%,
repurchase proceeds at
maturity $9,659,448, 07/01/98
(Collateralized by
Corestates, 6.26%, due
02/15/27, with a value of
$10,141,726)................. 9,658,053
4,711,081 With Investors Bank & Trust
dated 06/30/98, 5.20%,
repurchase proceeds at
maturity $4,711,761, 07/01/98
(Collateralized by Government
National Mortgage
Association, 7.375%, due
06/20/26, with a value of
$4,947,074).................. 4,711,081
18,200,000 With Morgan Stanley dated
06/30/98, 5.20%, repurchase
proceeds at maturity
$18,202,629, 07/01/98
(Collateralized by US
Treasury Bond, 10.625%, due
08/15/15, with a value of
$18,643,328)................. 18,200,000
TOTAL REPURCHASE AGREEMENTS
(Cost $51,801,861)............. 51,801,861
------------
</TABLE>
See notes to financial statements.
52
<PAGE> 57
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
--------- ------------
<C> <S> <C>
Total Investments -- 114.22%
(Cost $793,325,302)............ $962,673,925
Other assets less
liabilities -- (14.22)%........ (119,831,982)
------------
NET ASSETS -- 100.00%.......... $842,841,943
============
</TABLE>
<TABLE>
<S> <C>
The aggregate cost of securities for federal income tax
purposes at June 30, 1998, is $793,325,302.
The following amount is based on costs for federal income
tax purposes:
Gross unrealized appreciation.......... $193,333,232
Gross unrealized depreciation.......... (23,984,609)
------------
Net unrealized appreciation............ $169,348,623
============
</TABLE>
- ---------------
(a) All or part of this security is on loan.
(b) Collateral for securities on loan.
(c) Non-income producing security.
(ADR) -- American Depository Receipt
See notes to financial statements.
53
<PAGE> 58
AGGRESSIVE EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<C> <S> <C>
COMMON STOCK -- 97.10%
ADVERTISING -- 2.73%
22,200 Interpublic Group, Inc. ......... $ 1,347,263
-----------
COMPUTER SOFTWARE AND SERVICES -- 25.30%
15,000 America Online, Inc. ............ 1,590,000
30,000 BMC Software, Inc.(c)............ 1,558,125
21,010 Cisco Systems, Inc.(c)........... 1,934,233
31,335 Compuware Corp.(c)............... 1,602,002
22,270 Electronic Arts(c)............... 1,202,580
47,190 HBO & Company.................... 1,663,448
42,125 Infinium Software, Inc.(c)....... 584,484
9,685 Microsoft Corp.(c)............... 1,049,612
40,000 Siebel Systems, Inc. ............ 1,290,000
-----------
TOTAL COMPUTER SOFTWARE AND
SERVICES......................... 12,474,484
-----------
COMPUTERS AND OFFICE EQUIPMENT -- 3.77%
20,000 Dell Computer Corp.(c)........... 1,856,250
-----------
CONSUMER GOODS AND SERVICES -- 9.54%
18,000 General Electric Company......... 1,638,000
25,500 Gillette Company................. 1,445,531
17,830 Proctor & Gamble Company......... 1,623,644
-----------
TOTAL CONSUMER GOODS AND
SERVICES......................... 4,707,175
-----------
FINANCIAL SERVICES -- 5.98%
15,210 American Express Company......... 1,733,940
20,000 Travelers Group, Inc. ........... 1,212,500
-----------
TOTAL FINANCIAL SERVICES......... 2,946,440
-----------
INSURANCE -- 3.70%
12,500 American International Group..... 1,825,000
-----------
LEISURE AND RECREATION -- 5.63%
38,310 Marriott International,
Inc. -- Class A................ 1,240,286
14,610 Walt Disney Company.............. 1,534,963
-----------
TOTAL LEISURE AND RECREATION..... 2,775,249
-----------
MEDICAL AND OTHER HEALTH SERVICES -- 7.62%
15,905 Boston Scientific Corp.(c)....... 1,139,196
17,000 Guidant Corp. ................... 1,212,313
22,100 United Healthcare Corp. ......... 1,403,350
-----------
TOTAL MEDICAL AND OTHER HEALTH
SERVICES......................... 3,754,859
-----------
PHARMACEUTICALS -- 15.34%
21,555 American Home Products Corp. .... 1,115,471
14,020 Bristol-Myers Squibb Company..... 1,611,424
11,370 Merck & Company, Inc. ........... 1,520,738
15,000 Pfizer, Inc. .................... 1,630,313
18,410 Schering-Plough Corp. ........... 1,686,816
-----------
TOTAL PHARMACEUTICALS............ 7,564,762
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<C> <S> <C>
COMMON STOCK (CONTINUED)
RETAIL -- 7.34%
29,770 Gap Stores....................... $ 1,834,576
21,450 Home Depot Inc. ................. 1,781,690
-----------
TOTAL RETAIL..................... 3,616,266
-----------
RESTAURANTS -- 3.32%
23,720 McDonald's Corp. ................ 1,636,680
-----------
TELECOMMUNICATIONS -- 6.83%
39,290 Ericsson L M Telephone (ADR)..... 1,124,676
12,125 Lucent Technologies.............. 1,008,648
25,465 Worldcom, Inc.(c)................ 1,233,461
-----------
TOTAL TELECOMMUNICATIONS......... 3,366,785
-----------
TOTAL SECURITIES (Cost
$39,020,880)..................... 47,871,213
-----------
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C>
REPURCHASE AGREEMENT -- 3.17%
$1,561,012 With Investors Bank & Trust,
dated 06/30/98, 5.20%,
repurchase proceeds at maturity
$1,561,238, 07/01/98
(Collateralized by Government
National Mortgage Association,
6.875%, due 01/20/24 with a
value of $1,639,532) (Cost
$1,561,012).................... 1,561,012
-----------
Total Investments -- 100.27%
(Cost $40,581,892)............... 49,432,225
Other assets less
liabilities -- (0.27)%........... (131,928)
-----------
NET ASSETS -- 100.00%............ $49,300,297
===========
</TABLE>
<TABLE>
<S> <C>
The aggregate cost of securities for federal income tax
purposes at June 30, 1998, is $40,581,892.
The following amount is based on costs for federal income
tax purposes:
Gross unrealized appreciation............ $9,369,964
Gross unrealized depreciation............ (519,631)
----------
Net unrealized appreciation.............. $8,850,333
==========
</TABLE>
- ---------------
(c) Non-income producing security.
(ADR) -- American Depository Receipt
See notes to financial statements.
54
<PAGE> 59
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- -----------
<C> <S> <C>
CORPORATE BONDS AND NOTES -- 99.37%
AEROSPACE -- 2.73%
$1,000,000 BE Aerospace, 8.00%, 03/01/08.... $ 997,500
1,200,000 Compass Aerospace, 10.125%,
04/15/05....................... 1,218,000
-----------
2,215,500
-----------
APPAREL -- 0.53%
400,000 William Carter, 10.375%,
12/01/06....................... 426,000
-----------
AUTOMOTIVE PRODUCTS -- 0.87%
700,000 Venture Holdings Trust, 9.75%,
04/01/04....................... 701,750
-----------
BUSINESS SERVICES -- 8.38%
350,000 Atrium Companies, Inc., 10.50%,
11/15/06....................... 369,250
1,200,000 Axiohm Transaction Solutions,
9.75%, 10/1/07................. 1,215,000
1,250,000 Brand Scaffold Services, 10.25%,
02/15/08....................... 1,268,750
650,000 Denbury Management, Inc., 9.00%,
03/01/08....................... 620,750
1,600,000 Fisher Scientific, 9.00%,
02/01/08....................... 1,588,000
1,700,000 Les, Inc., 9.25%, 06/01/08....... 1,734,000
-----------
TOTAL BUSINESS SERVICES.......... 6,795,750
-----------
CHEMICALS -- 3.00%
1,300,000 Octel Developments, PLC.......... 1,326,000
625,000 PCI Chemicals Canada, Inc.,
9.25%, 10/15/07................ 610,938
500,000 Sterling Chemicals, Inc., 11.75%,
08/15/06....................... 500,000
-----------
TOTAL CHEMICALS.................. 2,436,938
-----------
CONSTRUCTION -- 0.47%
400,000 Ryland Group, 8.25%, 04/01/08.... 381,000
-----------
CONSUMER GOODS AND SERVICES -- 3.98%
1,350,000 Amscan Holdings, Inc., 9.875%,
12/15/07....................... 1,404,000
1,800,000 Huntsman Packaging Corp., 9.125%,
10/01/07....................... 1,827,000
-----------
TOTAL CONSUMER GOODS AND
SERVICES....................... 3,231,000
-----------
ELECTRONICS -- 1.16%
900,000 Insilco Corp., 10.25%,
08/15/07....................... 940,500
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- -----------
<C> <S> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES -- 2.55%
$ 600,000 Engle Homes Inc., 9.25%,
02/01/08....................... $ 591,000
1,000,000 Iridium LLC/Capital Corp.,
11.25%, 07/15/05............... 1,005,000
460,000 Muzak LP/Capital, 10.00%,
10/01/03....................... 476,100
-----------
TOTAL FINANCE.................... 2,072,100
-----------
FOOD AND BEVERAGE -- 4.22%
500,000 Ameriking, Inc., 10.75%,
12/01/06....................... 535,000
1,400,000 Aurora Foods, Inc., 8.75%,
07/01/08....................... 1,419,250
100,000 Cott Corp., 9.375%, 07/01/05..... 100,500
325,000 Delta Beverage Group, 9.75%,
12/15/03....................... 338,813
400,000 Eagle Family Foods, 8.75%,
01/15/08....................... 390,000
275,000 Flemming Companies, Inc., 10.50%,
12/01/04....................... 286,000
225,000 Pueblo Xtra International, 9.50%,
08/01/03....................... 219,375
125,000 Windy Hill Pet Food Company,
9.75%, 05/15/07................ 130,625
-----------
TOTAL FOOD AND BEVERAGE.......... 3,419,563
-----------
INDUSTRIAL -- 21.78%
800,000 AEI Holding Co., 10.00%,
11/15/07....................... 792,000
1,500,000 American Commercial Lines, LLC,
10.25%, 06/30/08............... 1,518,750
1,000,000 American Pacific Corp., 9.25%,
03/01/05....................... 1,035,000
1,700,000 Anker Coal Group, Inc., 9.75%,
10/01/07....................... 1,564,000
450,000 Burke Industries, Inc., 10.00%,
08/15/07....................... 452,250
1,600,000 CEX Holdings, Inc., 9.625%,
06/01/08....................... 1,644,000
250,000 Dyncorp, Inc., 9.50%, 03/01/07... 257,500
625,000 Environdyne Industries, Inc.,
10.25%, 12/01/01............... 628,125
1,125,000 Geologistics Corp., 9.75%,
10/15/07....................... 1,102,500
1,000,000 Henry Company Senior Notes,
10.00%, 04/15/08............... 1,015,000
750,000 Holt Group, 9.75%, 01/15/06...... 750,000
650,000 Hydrochem Industrial Service,
10.375%, 08/01/07.............. 666,250
1,000,000 Jackson Products, Inc., 9.50%,
04/15/05....................... 980,000
1,300,000 Numatics, Inc., 9.63%,
04/01/08....................... 1,313,000
</TABLE>
See notes to financial statements.
55
<PAGE> 60
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- -----------
<C> <S> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
INDUSTRIAL (CONTINUED)
$ 600,000 Outdoor Communications, 9.25%,
08/15/07....................... $ 615,000
1,125,000 P&L Coal Holdings Corp., 8.875%,
05/15/08....................... 1,157,344
625,000 Pronet, Inc., 11.875%,
06/15/05....................... 681,250
300,000 Scotsman Group, Inc., 8.625%,
12/15/07....................... 305,250
1,200,000 Simcala Inc., 9.63%, 04/15/06.... 1,191,000
-----------
TOTAL INDUSTRIAL................. 17,668,219
-----------
LEISURE AND RECREATION -- 6.10%
1,250,000 Alliance Gaming Corp., 10.00%,
08/01/07....................... 1,246,875
1,000,000 Bally Total Fitness Holding,
9.88%, 10/15/07................ 1,030,000
525,000 Cinemark USA, 9.625%, 08/01/08... 540,750
900,000 Riddell Sports, Inc., 10.50%,
07/15/07....................... 906,750
1,200,000 Six Flags Entertainment, 8.88%,
04/01/06....................... 1,222,500
-----------
TOTAL LEISURE AND RECREATION..... 4,946,875
-----------
MACHINERY -- 4.91%
1,975,000 Advance Lighting Techs, 8.00%,
03/15/08....................... 1,997,219
2,000,000 American Reefer Company Ltd.,
10.25%, 03/01/08............... 1,990,000
-----------
TOTAL MACHINERY.................. 3,987,219
-----------
MANUFACTURING -- 15.10%
625,000 Acetex Corp, 9.75%, 10/01/03..... 640,625
1,600,000 AEP Industries, 9.875%,
11/15/07....................... 1,644,000
1,075,000 Anchor Lamina, Inc., 9.88%,
02/01/08....................... 1,053,500
625,000 Chief Auto Parts, Inc., 10.50%,
05/15/05....................... 703,125
25,000 Derlan Manufacturing, 10.00%,
01/15/07....................... 26,000
25,000 Doman Industries Limited, 8.75%,
03/15/04....................... 24,437
250,000 DVI, Inc., 9.875%, 02/01/04...... 260,000
625,000 Dyersburg Corp., 9.75%,
09/01/07....................... 601,563
700,000 Fedders North America, 9.375%,
8/15/07........................ 693,000
1,500,000 Federal-Mogul Corp., 7.875%,
07/01/10....................... 1,506,312
1,000,000 Galey & Lord, Inc., 9.13%,
03/1/08........................ 965,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- -----------
<C> <S> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
MANUFACTURING (CONTINUED)
$1,250,000 Gaylord Container Corp., 9.75%,
6/15/07........................ $ 1,235,937
1,125,000 Keystone Consolidated Industries,
9.625%, 08/01/07............... 1,150,312
175,000 Portola Packaging, 10.75%,
10/01/05....................... 184,187
1,350,000 Revlon Worldwide, 0.00%,
03/15/01....................... 1,046,250
500,000 Safelite Glass, 9.875%,
12/15/06....................... 517,500
-----------
TOTAL MANUFACTURING.............. 12,251,748
-----------
MEDIA -- 0.24%
190,000 Rogers Cantel, 9.375%,
06/01/08....................... 197,125
-----------
MEDICAL AND OTHER HEALTH
SERVICES -- 0.09%
75,000 Paracelsus Healthcare, 10.00%,
08/15/06....................... 74,437
-----------
METALS AND MINING -- 2.41%
500,000 Renco Metals Senior Notes,
11.50%, 07/01/03............... 535,000
1,400,000 WHX Corp., 10.50%, 04/15/05...... 1,421,000
-----------
TOTAL METALS AND MINING.......... 1,956,000
-----------
OIL AND GAS -- 5.44%
200,000 Coho Energy, Inc., 8.875%,
10/15/07....................... 188,000
400,000 Dailey International, Inc.,
9.50%, 02/15/08................ 394,000
600,000 KCS Energy, Inc., 8.875%,
01/15/08....................... 570,000
700,000 Panaco, Inc., 10.625%,
10/01/04....................... 703,500
700,000 Rutherford-Moran Oil, 10.75%,
10/1/04........................ 746,375
1,800,000 Wainoco Oil Corp., 9.13%,
02/15/06....................... 1,813,500
-----------
TOTAL OIL AND GAS................ 4,415,375
-----------
PAPER AND FOREST PRODUCTS --0.96%
750,000 US Timberlands, 9.63%,
11/15/07....................... 776,250
-----------
SEMICONDUCTOR -- 0.79%
625,000 Fairchild Semiconductor, 10.13%,
03/15/07....................... 637,500
-----------
RETAIL -- 3.15%
1,200,000 Duane Reade, 9.25%, 02/15/08..... 1,224,000
1,250,000 Jitney-Jungle Stores, 10.38%,
09/15/07....................... 1,334,375
-----------
TOTAL RETAIL..................... 2,558,375
-----------
</TABLE>
See notes to financial statements.
56
<PAGE> 61
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- -----------
<C> <S> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS -- 5.67%
$ 700,000 Allbritton Communications, 9.75%,
11/30/07....................... $ 770,000
475,000 Jacor Communications, 9.75%,
12/15/06....................... 516,562
1,275,000 Metrocall, Inc., 10.38%,
10/01/07....................... 1,319,625
700,000 Nextlink Communications, 9.625%,
10/01/07....................... 717,500
625,000 Paging Network, 10.125%,
08/01/07....................... 648,438
625,000 Rogers Communications, 8.875%,
07/15/07....................... 629,688
-----------
TOTAL TELECOMMUNICATIONS......... 4,601,813
-----------
TEXTILES -- 0.72%
550,000 CMI Industries, 9.50%,
10/01/03....................... 583,000
-----------
TRANSPORTATION -- 2.55%
1,400,000 Morris Materials Handling, 9.50%,
04/01/08....................... 1,305,500
500,000 Oshkosh Truck Corp., 8.75%,
03/01/08....................... 505,000
248,000 Viking Star Shipping, 9.625%,
07/15/03....................... 257,300
-----------
TOTAL TRANSPORTATION............. 2,067,800
-----------
UTILITIES: ELECTRIC -- 1.57%
100,000 Calpine Corp., 9.25%, 02/01/04... 102,500
1,150,000 Prestolite Electric, Inc., 9.63%,
02/01/08....................... 1,170,125
-----------
TOTAL UTILITIES: ELECTRIC........ 1,272,625
-----------
TOTAL SECURITIES
(Cost $80,375,946)............... 80,614,462
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- -----------
<C> <S> <C>
REPURCHASE AGREEMENT -- 0.15%
$ 124,454 With Investors Bank & Trust,
dated 06/30/98, 5.20%,
repurchase proceeds at maturity
$124,472, 07/01/98
(Collateralized by Government
National Mortgage Association,
Adjustable rate, 7.375%, due
06/20/26 with a value of
$130,755) (Cost $124,454)...... $ 124,454
-----------
Total Investments -- 99.52% (Cost
$80,500,400)..................... 80,738,916
Other assets less
liabilities -- 0.48%............. 390,241
-----------
NET ASSETS -- 100.00%............ $81,129,157
===========
</TABLE>
<TABLE>
<S> <C>
The aggregate cost of investments for federal income tax
purposes at June 30, 1998, is $80,500,400.
The following amount is based on costs for federal income
tax purposes:
Gross unrealized appreciation............ $1,034,828
Gross unrealized depreciation............ (796,312)
----------
Net unrealized appreciation.............. $ 238,516
==========
</TABLE>
See notes to financial statements.
57
<PAGE> 62
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE COUNTRY
------ ------------ -------
<C> <S> <C> <C>
COMMON STOCKS -- 92.16%
APPAREL -- 0.53%
29,000 Gucci Group N.V.(c)....... $ 1,484,055 NET
------------
AUTOMOBILE -- 5.25%
36,000 Honda Motor Company,
Ltd.(c).................. 1,281,406 JPN
405,000 LucasVarity PLC(c)........ 1,608,255 UK
82,000 Mitsubishi Motor
Corp.(c)................. 196,743 JPN
3,800,000 Mitsubishi Motors Corp. --
Warrants (expire
6/23/99)................. 12,334 JPN
409,000 Nissan Motor Company,
Ltd.(c).................. 1,287,818 JPN
21,500 Peugeot SA(c)............. 4,622,868 FRA
151,000 Suzuki Motor Corp.(c)..... 1,370,884 JPN
32,000 Toyota Motor Company(c)... 827,754 JPN
20,187 Valeo SA(c)............... 2,063,430 FRA
1,550 Volkswagen AG(c).......... 1,496,730 GER
------------
TOTAL AUTOMOBILE.......... 14,768,222
------------
BANKS -- 9.37%
37,900 Allied Irish Banks
PLC(c)................... 547,939 UK
268,000 Australia & New Zealand
Bank Group, Ltd.(c)...... 1,848,771 AUS
49,000 Bank of Montreal(c)....... 2,716,297 CDA
210,000 Bank of Scotland(c)....... 2,351,076 UK
6,000 Credit Suisse Group(c).... 1,335,037 SWI
33,000 Deutsche Bank AG(c)....... 2,789,863 GER
47,400 Forenings Sparbanken --
Class A(c)............... 1,426,465 SWE
1,860 Holderbank Financial
Glaris -- Class B(c)..... 2,366,675 SWI
112,136 National Westminster
Bank(c).................. 2,003,825 UK
156,943 Royal Bank of Scotland
Group PLC(c)............. 2,723,338 UK
113,000 Sumitomo Bank(a)(c)....... 1,099,174 JPN
335,900 Thai Farmers Bank(c)...... 295,794 THA
60,000 Toronto-Dominion
Bank(c).................. 2,713,284 CDA
341,000 Westpac Banking
Corp.(c)................. 2,079,930 AUS
------------
TOTAL BANKS............... 26,297,468
------------
CHEMICALS -- 1.00%
63,400 Norsk Hydro ASA(c)........ 2,788,478 NOR
300 Norsk Hydro AS (ADR)...... 13,238 NOR
------------
TOTAL CHEMICALS........... 2,801,716
------------
COMPUTER EQUIPMENT -- 0.19%
8,000 Nidec Corporation(c)...... 546,456 JPN
------------
COMPUTER SOFTWARE AND SERVICES -- 0.20%
14,100 Softbank Corp.(c)......... 548,617 JPN
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE COUNTRY
------ ------------ -------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
CONSTRUCTION -- 1.14%
200,000 Okumura Corp.(c).......... $ 701,800 JPN
16,000 Rohm Company, Ltd.(c)..... 1,642,827 JPN
111,000 Sekisui House, Ltd.(c).... 859,773 JPN
------------
TOTAL CONSTRUCTION........ 3,204,400
------------
CONSUMER GOODS AND SERVICES -- 7.81%
87,700 Cifra SA (ADR)(c)......... 1,284,358 MEX
90,300 EMI Group PLC(c).......... 789,484 UK
22,000 Fuji Photo Film(c)........ 765,644 JPN
43,500 Hennes & Mauritz(c)....... 2,776,379 SWE
21,000 Hoya Corp.(c)............. 594,659 JPN
70,380 Koninklijke Ahold
Corp.(c)................. 2,259,247 NET
221,000 Nikon Corp.(c)............ 1,589,189 JPN
21,900 Nintendo Corp., Ltd.(c)... 2,027,703 JPN
48,000 Orkla Asa -- Class B(c)... 1,010,222 NOR
112,103 Reckitt and Colman
PLC(c)................... 2,139,777 UK
38,200 Sony Corp.(c)............. 3,289,184 JPN
380,000 Storehouse PLC(c)......... 1,578,710 UK
25,000 TDK Corp.(c).............. 1,846,380 JPN
------------
TOTAL CONSUMER GOODS AND
SERVICES.................. 21,950,936
------------
ELECTRONICS -- 3.35%
400,000 Caradon PLC(c)............ 1,228,000 UK
80,000 Electrocomponents
PLC(c)................... 627,352 UK
29,500 Kyocera Corp.(c).......... 1,441,149 JPN
54,000 Murata Manufacturing
Company, Ltd.(c)......... 1,750,907 JPN
144,000 NEC Corp.(c).............. 1,341,576 JPN
99,300 Tokyo Electron, Ltd.(c)... 3,040,854 JPN
------------
TOTAL ELECTRONICS......... 9,429,838
------------
ENGINEERING -- 0.13%
18,700 Chudenko Corp.(c)......... 390,075 JPN
------------
ENVIRONMENTAL MANAGEMENT SERVICES -- 0.01%
900 Kurita Water
Industries(c)............ 10,635 JPN
------------
FINANCE -- 5.92%
1,160 CIE Financial
Richemont(c)............. 1,518,053 SWI
74,000 De Beers Centenary AG
(ADR).................... 1,295,000 SOA
3,600 Fairfax Financial Holding
Company(c)............... 1,405,196 CDA
80,000 HSBC Holdings PLC(c)...... 1,938,128 UK
56,799 Lend Lease Corp.,
Ltd.(c).................. 1,148,385 AUS
85,000 Newcourt Credit Group,
Inc.(c).................. 4,176,178 CDA
111,000 Nomura Securities Company,
Ltd.(c).................. 1,291,674 JPN
730,500 PT Hm Sampoerna
International Finance
Company(c)............... 99,932 IDN
6,000 Shohkoh Fund(c)........... 1,474,222 JPN
</TABLE>
See notes to financial statements.
58
<PAGE> 63
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE COUNTRY
------ ------------ -------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
FINANCE (CONTINUED)
15,100 Takefuji Corporation(c)... $ 696,327 JPN
275,000 Toyo Trust &
Company(c)(a)............ 1,361,277 JPN
181,000 Wako Securities Company,
Ltd.(c).................. 249,092 JPN
------------
TOTAL FINANCE............. 16,653,464
------------
FOOD AND BEVERAGE -- 5.10%
216,988 Amatil, Ltd.(c)........... 1,452,717 AUS
172,000 Asahi Breweries,
Ltd.(c).................. 2,168,817 JPN
295,000 Fraser and Neave,
Ltd.(c).................. 792,724 SIN
39,375 Heineken N.V.(c).......... 1,546,567 NET
90,000 Jusco Company(c).......... 1,650,393 JPN
1,005 Nestle(c)................. 2,150,715 SWI
55,000 Panamerican Beverages,
Inc. -- Class A.......... 1,729,062 MEX
16,000 Seagrams Company, Ltd. ... 655,000 CDA
275,000 Tate & Lyle PLC(c)........ 2,180,613 UK
------------
TOTAL FOOD AND BEVERAGE... 14,326,608
------------
INDUSTRIAL -- 2.43%
35,322 Advantest Corp.(c)........ 1,898,635 JPN
4,900 Compagnie de Saint-
Gobain(c)................ 908,513 FRA
1,025 SGS Societe Generale de
Surveillance Holding
SA(a)(c)................. 1,737,378 SWI
15,600 Sidel(c).................. 1,135,290 FRA
384,236 Western Mining Corp.
Holding, Ltd.(c)......... 1,156,358 AUS
------------
TOTAL INDUSTRIAL.......... 6,836,174
------------
INSURANCE -- 3.04%
80,000 Assicurazione Generali,
Ltd.(c).................. 2,601,328 ITA
277,072 GIO Australian Holdings,
Ltd.(c).................. 710,994 AUS
24,000 Mapfre Vida Seguros(c).... 1,147,560 SPA
78,000 Siebe PLC(c).............. 1,557,808 UK
39,000 Sumitomo Marine & Fire
Company(c)............... 218,061 JPN
440 Swiss Re(c)............... 1,112,755 SWI
279,000 Yasuda Fire and Marine
Insurance(c)............. 1,186,057 JPN
------------
TOTAL INSURANCE........... 8,534,563
------------
INVESTMENT HOLDING COMPANIES -- 0.91%
275,000 Hutchison Whampoa(c)...... 1,451,533 HNG
750,000 Hysan Development
Company(c)............... 619,425 HNG
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE COUNTRY
------ ------------ -------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
INVESTMENT HOLDING COMPANIES (CONTINUED)
75,000 Hysan Development
Company -- Warrants
(expire 4/30/99)......... $ 620 HNG
691,000 Sime Darby Berhad(c)...... 476,445 MAL
------------
TOTAL INVESTMENT HOLDING
COMPANIES................. 2,548,023
------------
LEISURE AND RECREATION -- 1.06%
10,000 Accor SA(c)............... 2,798,530 FRA
132,120 San Miquel Corp. -- Class
B(c)..................... 174,253 PHI
------------
TOTAL LEISURE AND
RECREATION............... 2,972,783
------------
MACHINERY -- 0.43%
200,000 BPB Industries(c)......... 1,211,320 UK
------------
MANUFACTURING -- 8.21%
166,000 ABB AB -- Class A(c)...... 2,352,104 SWE
79,200 ASM Lithography Holding
N.V.(a)(c)............... 2,301,750 NET
78,000 Mannesmann AG(c).......... 8,015,912 GER
61,300 Metra Oy(c)............... 2,011,118 FIN
99,000 Morgan Crucible Company
PLC(c)................... 640,896 UK
24,800 Philips Electronics
N.V.(c).................. 2,084,728 NET
90,000 Scania AB -- Class B(c)... 2,183,706 SWE
29,000 Siemens AG(c)............. 1,769,687 GER
225,900 TI Group PLC(c)........... 1,714,942 UK
------------
TOTAL MANUFACTURING....... 23,074,843
------------
MEDIA -- 3.74%
44 Canal Plus(c)............. 8,224 FRA
17,100 Grupo Televisa
(GDR)(a)(c).............. 643,388 MEX
69,751 News Corp., Ltd.(c)....... 569,280 AUS
20,300 News Corp., Ltd. (ADR).... 652,138 AUS
433 Reuters Group PLC (ADR)... 29,661 UK
246,806 Reuters Holdings PLC(c)... 2,820,795 UK
53,000 Rogers Communications --
Class B(c)............... 472,135 CDA
113,564 Singapore Press Holdings,
Ltd.(c).................. 759,561 SIN
141,000 Thomson Corp.(c).......... 4,171,881 CDA
35,000 Tokyo Broadcasting(c)..... 390,890 JPN
------------
TOTAL MEDIA............... 10,517,953
------------
MEDICAL AND OTHER HEALTH
SERVICES -- 1.04%
17,400 Synthelabo(c)............. 2,935,479 FRA
------------
METALS AND MINING -- 1.42%
3,250 Broken Hill Proprietary
(ADR).................... 55,047 AUS
185,101 Broken Hill
Proprietary(c)........... 1,564,603 AUS
</TABLE>
See notes to financial statements.
59
<PAGE> 64
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE COUNTRY
------ ------------ -------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
METALS AND MINING (CONTINUED)
46,000 Inco, Ltd. ............... $ 626,750 CDA
43,663 Pechiney SA -- Class
A(c)..................... 1,758,497 FRA
------------
TOTAL METALS AND MINING... 4,004,897
------------
OIL AND GAS -- 4.51%
357,400 Eni Spa(c)................ 2,342,364 ITA
165,000 Sasol Beperk Limited(c)... 962,247 SOA
210,000 Shell Transport &
Trading(c)............... 1,478,610 UK
16,000 Suncor, Inc.(c)........... 544,016 CDA
40,000 Suncor, Inc. (ADR)........ 1,390,000 CDA
48,000 Talisman Energy,
Inc.(c).................. 1,374,182 CDA
20,000 Total S.A. -- Series
B(c)..................... 2,600,052 FRA
305,900 Woodside Petroleum,
Ltd.(c).................. 1,526,777 AUS
15,000 YPF Sociedad Anonima
(ADR).................... 450,938 ARG
------------
TOTAL OIL AND GAS......... 12,669,186
------------
PAPER AND FOREST PRODUCTS -- 1.10%
189,000 Sumitomo Forestry(c)...... 1,060,838 JPN
74,000 UPM-Kymmeme(c)............ 2,036,635 FIN
------------
TOTAL PAPER AND FOREST
PRODUCTS.................. 3,097,473
------------
PHARMACEUTICALS -- 6.42%
263,666 Astra AB(c)............... 5,389,069 SWE
21,333 Astra AB -- Class A
(ADR).................... 437,327 SWE
52,000 Banyu Pharmaceutical
Company(c)............... 562,016 JPN
167,600 BOC Group(c).............. 2,283,265 UK
27,000 Hoechst AG(c)............. 1,357,452 GER
1,275 Novartis AG(c)............ 2,121,622 SWI
14,000 Sankyo Company, Ltd.(c)... 318,766 JPN
127,200 Zeneca Group PLC(c)....... 5,458,635 UK
2,400 Zeneca Group PLC
(ADR)(a)................. 105,300 UK
------------
TOTAL PHARMACEUTICALS..... 18,033,452
------------
REAL ESTATE -- 0.77%
134,000 Mitsui Fudosan(c)......... 1,058,211 JPN
251,000 Sumitomo Realty &
Development(c)........... 1,106,810 JPN
------------
TOTAL REAL ESTATE......... 2,165,021
------------
REAL ESTATE INVESTMENT COMPANY -- 0.01%
3,915 Mandamus Fastigheter
AB(c).................... 24,545 SWE
------------
TELECOMMUNICATIONS -- 14.98%
87,336 Cable & Wireless PLC(c)... 1,060,835 UK
162,000 Deutsche Telekom AG(c).... 4,433,584 GER
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE COUNTRY
------ ------------ -------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
122,200 Ericsson AB -- Class
B(c)..................... $ 3,570,244 SWE
75,800 Ericsson L M Telephone
(ADR).................... 2,169,775 SWE
641,600 Hong Kong
Telecommunications(c).... 1,204,732 HNG
20,819 Hong Kong
Telecommunications, Ltd.
(ADR).................... 392,959 HNG
283 Nippon Telegraph and
Telephone Corp.(c)....... 2,344,994 JPN
16,600 Nokia AB -- K shares(c)... 1,222,348 FIN
43,600 Nokia AB -- Class A(c).... 3,206,531 FIN
11,200 Nokia Corp. (ADR)......... 812,700 FIN
40,000 Northern Telecom, Ltd. ... 2,270,000 CDA
2,200 Portugal Telecom
S.A.(c).................. 116,598 POR
24,300 Portugal Telecom S.A.
(ADR).................... 1,286,381 POR
31,200 Tele Danmark A/S (ADR).... 1,470,300 DEN
300 Tele Danmark -- Class
B(c)..................... 28,792 DEN
179,000 Telecom Italia
Mobile(c)................ 1,094,603 ITA
253,000 Telecom Italia Mobile
DRNC(c).................. 853,976 ITA
148,555 Telecom Italia Spa(c)..... 1,093,543 ITA
300,000 Telecom Italia Spa --
RNC(c)................... 1,452,270 ITA
20,500 Telecomunicacoes
Brasileiras (ADR)(a)..... 2,259,838 BRA
87,272 Telefonica(c)............. 4,041,793 SPA
30,000 Telefonica De Argentina
(ADR).................... 973,125 ARG
51,400 Telefonos De Mexico
(ADR)(a)(c).............. 2,470,413 MEX
18,000 Vodafone Group
PLC (ADR)................ 2,269,125 UK
------------
TOTAL
TELECOMMUNICATIONS....... 42,099,459
------------
TIRE AND RUBBER -- 0.49%
58,000 Bridgestone Corp.(c)...... 1,370,749 JPN
------------
TRANSPORTATION -- 1.25%
41,600 Bombardier Inc., Class B
(ADR)(c)................. 1,131,553 CDA
65,000 Bombardier Inc., Class
B(c)..................... 1,746,361 CDA
223,000 Citic Pacific, Ltd.(c).... 394,264 HNG
57,000 Kawasaki Kisen Kaisha
Ltd.(c).................. 98,564 JPN
446,000 Malaysian Airline System
BHD(c)................... 147,314 MAL
------------
TOTAL TRANSPORTATION...... 3,518,056
------------
</TABLE>
See notes to financial statements.
60
<PAGE> 65
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE COUNTRY
------ ------------ -------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
UTILITIES -- 0.35%
328,000 Hong Kong Electric
Holdings(c).............. $ 1,015,914 HNG
------------
TOTAL COMMON STOCK
(Cost $230,172,478)....... 259,042,380
------------
PREFERRED STOCK -- 2.10%
COMPUTER SOFTWARE AND SERVICES -- 1.59%
6,600 SAP AG Vorzug(c).......... 4,479,139 GER
------------
MEDIA -- 0.51%
200,948 News Corp., Ltd.(c)....... 1,423,537 AUS
------------
TOTAL PREFERRED STOCK
(Cost $1,837,643)......... 5,902,676
------------
PRINCIPAL
- -----------
NON-CONVERTIBLE BONDS AND NOTES -- 0.05%
$ 108,194 Sekisui House, 2.50%,
01/31/02................. 133,800 JPN
------------
TOTAL NON-CONVERTIBLE
BONDS AND NOTES (Cost
$169,259)................. 133,800
------------
CONVERTIBLE BONDS AND NOTES -- 0.20%
BANKS -- 0.01%
2,000 Ericson LM, 4.25%,
06/30/00................. 15,250 SWE
------------
FOOD AND BEVERAGE -- 0.19%
158,684 Asahi Breweries Series 8,
0.90%, 12/26/01.......... 233,794 JPN
36,065 Asahi Breweries Series 9,
0.95%, 12/26/02.......... 52,850 JPN
165,897 Asahi Breweries Series 10,
1.00%, 12/26/03.......... 248,745 JPN
------------
TOTAL FOOD AND BEVERAGE... 535,389
------------
TOTAL CONVERTIBLE BONDS
AND NOTES (Cost
$524,011)................. 550,639
------------
SHARES
- -----------
REGULATED INVESTMENT COMPANIES -- 3.88%
6,000,000 Janus Money Market
Fund(b).................. 6,000,000 USA
4,900,000 Merrimac Cash Fund --
Premium Class(b)......... 4,900,000 USA
------------
TOTAL REGULATED INVESTMENT
COMPANIES (Cost
$10,900,000).............. 10,900,000
------------
<CAPTION>
PRINCIPAL VALUE COUNTRY
- ----------- ------------ -------
<C> <S> <C> <C>
TIME DEPOSITS -- 3.01%
$ 908,737 Bank of Montreal, 5.5938%,
08/04/98(b).............. $ 908,737 USA
3,871,035 Bank of Montreal, 5.58%,
08/14/98(b).............. 3,871,035 USA
97,904 BankBoston, N.A., 6.58%,
10/03/98(b).............. 97,904 USA
1,314,947 Toronto Dominion, 5.57%,
07/20/98................. 1,314,947 USA
2,275,002 Toronto Dominion, 5.58%,
07/24/98................. 2,275,002 USA
------------
TOTAL TIME DEPOSITS
(Cost $8,467,625)......... 8,467,625
------------
TOTAL SECURITIES
(Cost $252,071,016)....... 284,997,120
------------
REPURCHASE AGREEMENT -- 5.72%
16,085,695 With Investors Bank and
Trust, dated 06/30/98,
5.20%, repurchase
proceeds at maturity
$16,088,019, 07/01/98
(Collateralized by
various Government
National Mortgage
Association Adjustable
Rate Mortgage
obligations,
6.875% -- 9.00%, due
11/15/21 through 12/20/23
with a value of
$16,890,356) (Cost
$16,085,695)............. 16,085,695 USA
------------
Total
Investments -- 107.12%
(Cost $268,156,711)....... 301,082,815
Other assets less
liabilities -- (7.12%).... (20,007,729)
------------
NET ASSETS -- 100.00%..... $281,075,086
============
</TABLE>
<TABLE>
<S> <C>
The aggregate cost of securities for federal income tax
purposes at June 30, 1998, is $268,156,711.
The following amount is based on costs for federal income
tax purposes:
Gross unrealized appreciation.......... $ 60,123,848
Gross unrealized depreciation.......... (27,197,744)
------------
Net unrealized appreciation............ $ 32,926,104
============
</TABLE>
- ---------------
(a) All or part of the security is on loan.
(b) Collateral for securities on loan.
(c) Non-income producing securities.
(ADR) -- American Depository Receipt.
(GDR) -- Global Depository Receipt.
See notes to financial statements.
61
<PAGE> 66
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENT OF TOTAL
COUNTRY COMPOSITION SECURITIES AT VALUE
------------------- -------------------
<S> <C>
Argentina (ARG)...................... 0.47%
Australia (AUS)...................... 4.71%
Brazil (BRA)......................... 0.75%
Canada (CDA)......................... 8.43%
Denmark (DEN)........................ 0.50%
Finland (FIN)........................ 3.09%
France (FRA)......................... 6.25%
Germany (GER)........................ 8.08%
Hong Kong (HNG)...................... 1.69%
Indonesia (IDN)...................... 0.03%
Italy (ITA).......................... 3.13%
Japan (JPN).......................... 16.49%
Malaysia (MAL)....................... 0.21%
Mexico (MEX)......................... 2.04%
Netherlands (NET).................... 3.21%
Norway (NOR)......................... 1.27%
Philippines (PHI).................... 0.06%
Portugal (POR)....................... 0.47%
Singapore (SIN)...................... 0.52%
South Africa (SOA)................... 0.75%
Spain (SPA).......................... 1.72%
Sweden (SWE)......................... 6.76%
Switzerland (SWI).................... 4.10%
Thailand (THA)....................... 0.09%
United Kingdom (UK).................. 13.40%
United States (USA).................. 11.78%
------
TOTAL PERCENTAGE..................... 100.00%
======
</TABLE>
See notes to financial statements.
62
<PAGE> 67
DIVERSIFIED INVESTORS PORTFOLIOS
Notes to Financial Statements
(Unaudited)
1. ORGANIZATION AND BUSINESS
Diversified Investors Portfolios (the "Series Portfolio"), a series trust
organized on September 1, 1993, under the laws of the State of New York, is
composed of thirteen different series that are, in effect, separate investment
funds: the Money Market Series, the High Quality Bond Series, the Intermediate
Government Bond Series, the Government/Corporate Bond Series, the Balanced
Series, the Equity Income Series, the Equity Value Series, the Growth & Income
Series, the Equity Growth Series, the Special Equity Series, the Aggressive
Equity Series, the High-Yield Bond Series, and the International Equity Series
(each a "Series"). The Declaration of Trust permits the Board of Trustees to
issue an unlimited number of beneficial interests in each Series. Investors in a
Series (e.g., investment companies, insurance company separate accounts and
common and commingled trust funds) will each be liable for all obligations of
that Series (and of no other Series).
2. SIGNIFICANT ACCOUNTING POLICIES
A. SECURITY VALUATION
Short-term securities having remaining maturities of 60 days or less
are valued at amortized cost which approximates value. The amortized cost
of a security is determined by valuing it at original cost and thereafter
amortizing any discount or premium at a constant rate until maturity.
Equity securities are valued at the last sale price on the exchange on
which they are primarily traded or at the bid price on the Nasdaq system
for unlisted national market issues, or at the last quoted bid price for
securities not reported on the Nasdaq system. Bonds are valued at the last
available price provided by an independent pricing service for securities
traded on a national securities exchange. Bonds that are listed on a
national securities exchange but are not traded and bonds that are
regularly traded in the over-the-counter market are valued at the mean of
the last available bid and asked prices by an independent pricing service.
All other securities will be valued at their fair value as determined by
the Board of Trustees.
B. REPURCHASE AGREEMENTS
Each Series, along with other affiliated entities of the investment
advisor, may enter into repurchase agreements with financial institutions
deemed to be creditworthy by the Series investment advisor, subject to the
seller's agreement to repurchase and the Series agreement to resell such
securities at a mutually agreed upon price. Securities purchased subject to
repurchase agreements are segregated at the custodian, and pursuant to the
terms of the repurchase agreement must have an aggregate market value
greater than or equal to 102% and 105% of domestic and international
securities, respectively, of the repurchase price plus accrued interest at
all times. If the value of the underlying securities falls below the value
of the repurchase price plus accrued interest, the Series will require the
seller to deposit additional collateral by the next business day. If the
request for additional collateral is not met or the seller defaults on its
repurchase obligation, the Series maintains the right to sell the
underlying securities at market value and may claim any resulting loss
against the seller. However, in the event of default or bankruptcy by the
seller, realization and/or retention of the collateral may be subject to
legal proceedings.
C. FOREIGN CURRENCY TRANSLATION
The accounting records of the International Equity Series are
maintained in U.S. dollars. The market values of foreign securities,
currency holdings and other assets and liabilities are translated to U.S.
dollars based on the prevailing exchange rates each business day. Income
and expenses denominated in foreign currencies are translated at prevailing
exchange rates when accrued or incurred. The Series does not isolate
realized gains and losses attributable to changes in exchange rates from
gains and losses that arise from changes in the market value of
investments. Such fluctuations are included with net realized and
unrealized gains or losses on investments. Net realized gains and losses on
foreign currency
63
<PAGE> 68
DIVERSIFIED INVESTORS PORTFOLIOS
Notes to Financial Statements (Continued)
(Unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
transactions represent net exchange gains and losses on disposition of
foreign currencies and foreign currency forward contracts, and the
difference between the amount of investment income receivable and foreign
withholding taxes receivable recorded on the Series' books and the U.S.
dollar equivalent of amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets
and liabilities other than investments in securities at fiscal year end and
foreign currency forward contracts, resulting from changes in the exchange
rates.
D. FOREIGN CURRENCY FORWARD CONTRACTS
Each Series may enter into foreign currency forward contracts and
forward cross currency contracts in connection with settling planned
purchases or sales of securities or to hedge the currency exposure
associated with some or all of the Series' portfolio securities. A foreign
currency forward contract is an agreement between two parties to buy and
sell a currency at a set price on a future date. The market value of a
foreign currency forward contract fluctuates with changes in forward
currency exchange rates. Foreign currency forward contracts are marked to
market daily and the change in value is recorded by the Series as an
unrealized gain or loss. When a foreign currency forward contract is
extinguished, through delivery or offset by entering into another foreign
currency forward contract, the Series records a realized gain or loss equal
to the difference between the value of the contract at the time it was
opened and the value of the contract at the time it was extinguished or
offset. These contracts may involve market risk in excess of the unrealized
gain or loss reflected in the Series' Statement of Assets and Liabilities
and Statement of Operations. In addition, the Series could be exposed to
risk if the counterparties are unable to meet the terms of the contracts or
if the value of the currency changes unfavorably to the U.S. dollar.
E. OPTIONS
Each Series, with the exception of the Money Market Series, may
purchase and write (sell) call and put options on securities indices for
the purpose of protecting against an anticipated decline in the value of
the securities held by that Series. Index options are marked to market
daily and the change in value is recorded by the Series as an unrealized
gain or loss. A realized gain or loss equal to the difference between the
exercise price and the value of the index is recorded by the Series upon
cash settlement of the option. The use of index options may expose the
Series to the risk that trading in such options may be interrupted if
trading in certain securities included in the index is interrupted or the
value of the securities in the index may not move in direct correlation
with the movements of the Series portfolio. In addition, there is the risk
the Series may not be able to enter into a closing transaction because of
an illiquid secondary market.
F. FEDERAL INCOME TAXES
It is the Series' policy to comply with the applicable provisions of
the Internal Revenue Code. Therefore, no federal income tax provision is
required.
G. SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on a trade date basis (the
date the order to buy or sell is executed). Dividend income is recorded on
the ex-dividend date. Interest income is recorded on the accrual basis and
includes amortization of premium and discount on investments. Realized
gains and losses from securities transactions are recorded on the
identified cost basis.
All of the net investment income and realized and unrealized gains and
losses from security transactions are determined on each valuation day and
allocated pro rata among the investors in a Series at the time of such
determination.
64
<PAGE> 69
DIVERSIFIED INVESTORS PORTFOLIOS
Notes to Financial Statements (Continued)
(Unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
H. OPERATING EXPENSES
The Series Portfolio accounts separately for the assets, liabilities
and operations of each Series. Expenses directly attributable to a Series
are charged to that Series, while expenses attributable to all Series are
allocated among them.
I. OTHER
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
3. FEES AND TRANSACTIONS WITH AFFILIATES
AUSA Life Insurance Company, Inc. ("AUSA") is an affiliate of Diversified
Investment Advisors, Inc. (the "Advisor"). AUSA has sub-accounts which invest in
the corresponding Portfolios as follows:
<TABLE>
<CAPTION>
PERCENTAGE INVESTMENT
AUSA SUB-ACCOUNT IN PORTFOLIO
---------------- -----------------------
<S> <C>
Money Market................................................ 31.92
High Quality Bond........................................... 46.78
Intermediate Government Bond................................ 48.49
Government/Corporate Bond................................... 27.27
Balanced.................................................... 66.22
Equity Income............................................... 61.71
Equity Value................................................ 23.05
Growth & Income............................................. 54.45
Equity Growth............................................... 69.40
Special Equity.............................................. 52.24
Aggressive Equity........................................... 38.63
High Yield Bond............................................. 33.22
International Equity........................................ 41.76
</TABLE>
The Advisor manages the assets of each Series of the Series Portfolio
pursuant to an Investment Advisory Agreement with the Series Portfolio. Subject
to such further policies as the Board of Trustees may determine, the Advisor
provides general investment advice to each Series. For its services, the Advisor
receives from each Series fees accrued daily and paid monthly at an annual rate
equal to the percentages specified in the table below of the corresponding
Series' average daily net assets. The Advisor is currently waiving a portion of
its investment advisory fee to certain Series.
For each Series, the Advisor has entered into Investment Subadvisory
Agreements with the subadvisors listed in the table below (each a "Subadvisor",
collectively the "Subadvisors"). It is the responsibility of a Subadvisor to
make the day-to-day investment decisions of the Series and to place the purchase
and sales orders for securities transactions of such Series, subject in all
cases to the general supervision of the Advisor.
65
<PAGE> 70
DIVERSIFIED INVESTORS PORTFOLIOS
Notes to Financial Statements (Continued)
(Unaudited)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
For its services the Subadvisors receive a fee from the Advisor at an annual
rate equal to the percentages specified in the table below of the corresponding
Series' average daily net assets.
<TABLE>
<CAPTION>
ADVISOR SUBADVISOR
PORTFOLIO SERIES PORTFOLIO SUBADVISORS FEE(%) FEE(%)
---------------- --------------------- ------- -----------
<S> <C> <C> <C>
Money Market Series....................... Capital Management Group 0.25 0.05
High Quality Bond Series.................. Merganser Capital Management
Corporation 0.35 (2)
Intermediate Government Bond Series....... Capital Management Group 0.35(1) 0.15
Government/Corporate Bond Series.......... Capital Management Group 0.35 0.15
Balanced Series........................... Institutional Capital Corporation 0.45 (3)
Equity Income Series...................... Asset Management Group 0.45 (4)
Equity Value Series....................... Ark Asset Management Company, Inc. 0.57(1) (5)
Growth & Income Series.................... Putnam Advisory Company, Inc 0.60 (6)
Equity Growth Series...................... (7) 0.62 (8)
Special Equity Series..................... (9) 0.80 0.50
Aggressive Equity Series.................. McKinley Capital Management 0.97(1) (10)
High-Yield Bond Series.................... Delaware Investment Advisors 0.55(1) (11)
International Equity Series............... Capital Guardian Trust Company 0.75(1) (12)
</TABLE>
- ---------------
(1) The Advisor is currently waiving a portion of its fee.
(2) 0.25% on the first $100,000,000 in average daily net assets, and 0.15% on
all average daily net assets in excess of $100,000,000.
(3) 0.35% on the first $500,000,000 in average daily net assets, 0.30% on the
next $500,000,000 in average daily net assets, and 0.25% on all average
daily net assets in excess of $1,000,000,000.
(4) 0.25% on the first $100,000,000 in average daily net assets, and 0.20% on
all average daily net assets in excess of $100,000,000.
(5) 0.45% on the first $100,000,000 in average daily net assets, 0.40% on the
next $50,000,000 in average daily net assets, and 0.35% on the next
$50,000,000 in average daily net assets; when average daily net assets
reach $200,000,000, 0.40% on the first $200,000,000 in average daily net
assets, and 0.35% on all average daily net assets in excess of
$200,000,000.
(6) 0.30% on the first $100,000,000 in average daily net assets, and 0.20% on
all average daily net assets in excess of $100,000,000.
(7) The Equity Growth Series changed subadvisors on January 25, 1998. Montag &
Caldwell, Inc. and Dresdner RCM Global Investors, Inc. replaced Chancellor
LGT Capital Management, Inc.
(8) 0.50% on the first $50,000,000 in average daily net assets, 0.25% on the
next $50,000,000 in average daily net assets, and 0.20% on all average
daily net assets in excess of $100,000,000.
(9) The Special Equity Series has four Subadvisors: Pilgrim Baxter &
Associates, Ltd., Ark Asset Management Co., Inc.; Liberty Investment
Management, Inc.; and Westport Asset Management, Inc.
(10) 0.90% on the first $10,000,000 in average daily net assets, 0.80% on the
next $15,000,000 in average daily net assets, 0.60% on the next $25,000,000
in average daily net assets, 0.40% on the next $50,000,000 in average daily
net assets, and 0.35% on all average daily net assets in excess of
$100,000,000.
(11) 0.40% on the first $20,000,000 in average daily net assets, 0.30% on the
next $20,000,000 in average daily net assets, and 0.20% on all average
daily net assets in excess of $40,000,000.
66
<PAGE> 71
DIVERSIFIED INVESTORS PORTFOLIOS
Notes to Financial Statements (Continued)
(Unaudited)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
(12) 0.75% on the first $25,000,000 in average daily net assets, 0.60% on the
next $25,000,000 in average daily net assets, 0.425% from $50,000,000 to
$250,000,000 in average daily net assets and 0.375% on all average daily
net assets in excess of $250,000,000.
For the period ended June 30, 1998, the Advisor has voluntarily undertaken
to waive fees in accordance with the following expense caps:
<TABLE>
<CAPTION>
FUND EXPENSE CAP
- ---- -----------------------
<S> <C>
Money Market Series......................................... 30 basis points (b.p.)
High Quality Bond Series.................................... 40 b.p.
Intermediate Government Bond Series......................... 40 b.p.
Government/Corporate Bond Series............................ 40 b.p.
Balanced Series............................................. 50 b.p.
Equity Income Series........................................ 50 b.p.
Equity Value Series......................................... 60 b.p.
Growth & Income Series...................................... 65 b.p.
Equity Growth Series........................................ 65 b.p.
Special Equity Series....................................... 85 b.p.
Aggressive Equity Series.................................... 100 b.p.
High-Yield Bond Series...................................... 60 b.p.
International Equity Series................................. 90 b.p.
</TABLE>
Certain trustees and officers of the Series Portfolio are also directors,
officers or employees of the Advisor or its affiliates. None of the trustees so
affiliated receive compensation for services as trustees of the Series
Portfolio. Similarly, none of the Series Portfolio officers receive compensation
from the Series Portfolio. Aggregate remuneration incurred to non-affiliated
trustees of the trust for the period ended June 30, 1998, amounted to $24,438.
4. SECURITIES LENDING
All but the High Yield Bond Series may lend its securities to certain
member firms of the New York Stock Exchange. The loans are collateralized at all
times with cash or securities with a market value at least equal to the market
value of the securities on loan. Any deficiencies or excess of collateral must
be delivered or transferred by the member firms no later than the close of
business on the next business day. As with other extensions of credit, the
Series may bear the risk of delay in recovery or even loss of rights in the
collateral should the borrower of the securities fail financially. The Series
receives compensation, net of related
67
<PAGE> 72
DIVERSIFIED INVESTORS PORTFOLIOS
Notes to Financial Statements (Continued)
(Unaudited)
4. SECURITIES LENDING (CONTINUED)
expenses, for lending its securities which is included in interest income on the
Statement of Operations. At June 30, 1998, the Series loaned securities having
market values as follows:
<TABLE>
<CAPTION>
MARKET VALUE COLLATERAL
------------ ------------
<S> <C> <C>
Intermediate Government Bond Series......................... $ 15,000,179 $ 15,378,249
Government Corporate Bond Series............................ 37,630,554 38,506,250
Balanced Series............................................. 179,739,815 184,507,860
Equity Income Series........................................ 54,427,950 56,074,896
Equity Value Series......................................... 29,738,906 30,791,500
Growth & Income Series...................................... 59,955,591 61,886,600
Equity Growth Series........................................ 48,485,624 50,181,868
Special Equity Series....................................... 108,502,888 112,800,975
International Equity Series................................. 18,499,461 19,367,625
</TABLE>
5. PURCHASE AND SALES OF INVESTMENTS
The aggregate cost of investments purchased and proceeds from sales or
maturities (excluding short-term securities) for the period ended June 30, 1998,
were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C> <C>
High Quality Bond Series............... Government Obligations $ 6,000,469 $ 23,162,959
Other 70,797,648 61,603,313
Intermediate Government Bond Series.... Government Obligations 48,272,190 25,754,726
Government/Corporate Bond Series....... Government Obligations 227,176,442 138,629,611
Other 40,104,345 22,003,226
Balanced Series........................ Government Obligations 29,977,195 13,206,237
Other 174,663,726 142,764,684
Equity Income Series................... Other 216,166,409 201,767,440
Equity Value Series.................... Other 291,628,667 157,542,137
Growth & Income Series................. Other 210,169,348 136,978,123
Equity Growth Series................... Other 465,180,112 425,320,986
Special Equity Series.................. Other 531,458,464 484,850,889
Aggressive Equity Series............... Other 44,180,187 22,512,506
High-Yield Bond Series................. Other 78,361,161 36,585,435
International Equity Series............ Other 84,426,729 40,069,175
</TABLE>
68
<PAGE> 73
DIVERSIFIED INVESTORS PORTFOLIOS
Notes to Financial Statements (Continued)
(Unaudited)
6. FOREIGN CURRENCY FORWARD CONTRACTS
At June 30, 1998, the International Equity Series had entered into Foreign
Currency Forward contracts which contractually obligate the Series to
deliver/receive currency at specified future dates. The open contracts were as
follows:
<TABLE>
<CAPTION>
FOREIGN IN EXCHANGE SETTLEMENT NET UNREALIZED
CONTRACT CURRENCY FOR DATE VALUE APPRECIATION/(DEPRECIATION)
-------- ----------- ----------- ---------- ---------- ---------------------------
<S> <C> <C> <C> <C> <C>
PURCHASES:
British Pound............. 39,999 $ 66,737 07/01/98 $ 66,731 $ (6)
British Pound............. 12,084 20,090 07/02/98 20,159 69
British Pound............. 12,561 20,883 07/06/98 20,951 68
Deutsche Mark............. 311,873 177,362 07/07/98 172,956 (4,406)
Finnish Markka............ 1,870,233 350,100 07/07/98 341,407 (8,693)
Finnish Markka............ 735,048 133,402 07/01/98 134,133 731
French Franc.............. 2,739,613 464,735 07/07/98 453,219 (11,516)
French Franc.............. 5,585,179 922,743 07/31/98 925,381 2,638
Japanese Yen.............. 4,368,574 30,629 07/01/98 31,515 886
Japanese Yen.............. 3,716,494 26,171 07/02/98 26,815 644
Japanese Yen.............. 158,205,960 1,182,044 01/08/99 1,174,378 (7,666)
Japanese Yen.............. 25,385,340 210,667 01/28/99 188,965 (21,702)
Japanese Yen.............. 464,122,746 3,501,994 03/15/99 3,477,217 (24,776)
Japanese Yen.............. 35,238,500 265,851 04/08/99 264,905 (946)
Netherland Guilder........ 479,233 241,878 07/07/98 235,716 (6,161)
Spanish Peseta............ 84,510,000 565,058 07/07/98 551,418 (13,639)
Swiss Franc............... 1,918,331 125,634 07/01/98 126,517 883
Swiss Franc............... 618,406 423,131 07/07/98 408,112 (15,019)
---------
TOTAL................ $(108,610)
=========
SELLS:
British Pound............. 12,571 $ 20,935 07/02/98 $ 20,971 $ (36)
British Pound............. 603,306 1,002,000 07/30/98 1,004,872 (2,872)
Deutsche Mark............. 311,873 169,000 07/07/98 172,956 (3,956)
Finnish Markka............ 1,870,233 334,000 07/07/98 341,407 (7,407)
French Franc.............. 91,106 14,987 07/01/98 15,066 (79)
French Franc.............. 1,679,818 272,000 07/07/98 277,895 (5,895)
French Franc.............. 2,739,613 444,000 07/07/98 453,219 (9,219)
Italian Lira.............. 10,703,291 6,040 07/02/98 6,023 17
Japanese Yen.............. 4,890,704 34,289 07/01/98 35,282 (992)
Japanese Yen.............. 121,285,950 930,000 07/30/98 878,890 51,110
Japanese Yen.............. 179,887,424 1,264,000 09/16/98 1,312,614 (48,614)
Japanese Yen.............. 239,796,445 1,813,000 09/24/98 1,751,783 61,217
Japanese Yen.............. 26,039,030 191,000 09/24/98 190,223 777
Japanese Yen.............. 58,400,525 425,000 09/25/98 426,695 (1,695)
Japanese Yen.............. 102,033,000 900,000 10/20/98 748,309 151,691
Japanese Yen.............. 74,327,220 582,000 10/28/98 545,780 36,220
</TABLE>
69
<PAGE> 74
DIVERSIFIED INVESTORS PORTFOLIOS
Notes to Financial Statements (Continued)
(Unaudited)
6. FOREIGN CURRENCY FORWARD CONTRACTS (CONTINUED)
<TABLE>
<CAPTION>
FOREIGN IN EXCHANGE SETTLEMENT NET UNREALIZED
CONTRACT CURRENCY FOR DATE VALUE APPRECIATION/(DEPRECIATION)
-------- ----------- ----------- ---------- ---------- ---------------------------
<S> <C> <C> <C> <C> <C>
Japanese Yen.............. 312,894,375 $2,375,000 11/27/98 $2,308,116 $ 66,884
Japanese Yen.............. 158,205,960 1,242,000 01/08/99 1,174,378 67,622
Japanese Yen.............. 25,385,340 213,000 01/28/99 188,965 24,035
Japanese Yen.............. 464,122,746 3,774,000 03/15/99 3,477,217 296,783
Japanese Yen.............. 35,238,500 275,000 04/08/99 264,905 10,095
Malaysian Ringgit......... 456,750 105,000 05/12/99 98,732 6,268
Netherland Guilder........ 479,233 231,000 07/07/98 235,716 (4,716)
Singapore Dollar.......... 365,274 213,000 05/17/99 212,270 730
Spanish Peseta............ 84,510,000 540,000 07/07/98 551,418 (11,418)
Swedish Krona............. 360,327 45,125 07/02/98 45,189 (63)
Swiss Franc............... 618,406 408,000 07/07/98 408,112 (112)
Swiss Franc............... 424,564 280,000 07/07/98 280,188 (188)
Swiss Franc............... 490,909 335,000 08/12/98 325,175 9,825
Swiss Franc............... 2,484,310 1,737,000 01/08/99 1,670,787 66,213
---------
TOTAL................ $ 752,226
=========
</TABLE>
70
<PAGE> 75
(This page intentionally left blank.)
71
<PAGE> 76
DIVERSIFIED INVESTORS PORTFOLIOS
Notes to Financial Statements
(Unaudited)
7. FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MONEY MARKET SERIES HIGH QUALITY BOND SERIES
---------------------------------------------- ----------------------------------------------
FOR THE FOR THE
PERIOD FOR THE YEAR ENDED PERIOD FOR THE YEAR ENDED
ENDED ----------------------------- ENDED -----------------------------
JUNE 30, 1998 1997 1996 1995 1994 JUNE 30, 1998 1997 1996 1995 1994
-------------- ----- ----- ----- ----- -------------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of expenses to
average net assets... 0.28% 0.28% 0.30% 0.31% 0.32% 0.38% 0.39% 0.40% 0.41% 0.41%
Ratio of expenses to
average net assets
(net of
reimbursements)...... 0.28% 0.28% 0.30% 0.30% 0.30% 0.38% 0.39% 0.40% 0.40% 0.40%
Ratio of net
investment income to
average net assets... 5.38% 5.33% 5.19% 5.70% 4.05% 6.05% 6.12% 6.14% 5.83% 5.77%
Ratio of net
investment income to
average net assets
(net of
reimbursements)...... 5.38% 5.33% 5.19% 5.69% 4.07% 6.05% 6.12% 6.14% 5.82% 5.79%
Portfolio turnover.... N/A N/A N/A N/A N/A 39% 62% 66% 25% 37%
Average commission
rate per share**..... N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
BALANCED SERIES EQUITY INCOME SERIES
-------------------------------------------------- --------------------------------------------------
FOR THE FOR THE
PERIOD FOR THE YEAR ENDED PERIOD FOR THE YEAR ENDED
ENDED --------------------------------- ENDED ---------------------------------
JUNE 30, 1998 1997 1996 1995 1994 JUNE 30, 1998 1997 1996 1995 1994
-------------- ------- ------- ----- ----- -------------- ------- ------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of expenses to
average net assets... 0.47% 0.48% 0.50% 0.54% 0.53% 0.46% 0.47% 0.48% 0.49% 0.49%
Ratio of expenses to
average net assets
(net of
reimbursements)...... 0.47% 0.48% 0.50% 0.50% 0.50% 0.46% 0.47% 0.48% 0.49% 0.49%
Ratio of net
investment income to
average net assets... 3.53% 3.55% 3.39% 4.19% 3.57% 2.13% 2.27% 2.97% 3.37% 3.43%
Ratio of net
investment income to
average net assets
(net of
reimbursements)...... 3.53% 3.55% 3.39% 4.15% 3.61% 2.13% 2.27% 2.97% 3.37% 3.43%
Portfolio turnover.... 36% 87% 113% 124% 118% 17% 33% 26% 23% 30%
Average commission
rate per share**..... N/A $0.0341 $0.0372 N/A N/A N/A $0.0600 $0.0620 N/A N/A
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Annualized (except for Portfolio turnover and Average
commission rate per share)
** For fiscal years beginning on or after September 1, 1995,
the Portfolios are required to disclose their average
commission rate per share for trades on which a commission
is charged.
+ Commencement of Operations, April 19, 1996.
++ Commencement of Operations, August 22, 1995.
+++ Commencement of Operations, September 29, 1995.
(1) For the period January 1, 1996 -- November 14, 1996, the
expense cap was 75 bp.
For the period November 15, 1996 -- December 31, 1996, the
expense cap was 65 bp.
</TABLE>
72
<PAGE> 77
DIVERSIFIED INVESTORS PORTFOLIOS
Notes to Financial Statements (Continued)
(Unaudited)
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT BOND SERIES GOVERNMENT/CORPORATE BOND SERIES
- ---------------------------------------------- ----------------------------------------------
FOR THE FOR THE
PERIOD FOR THE YEAR ENDED PERIOD FOR THE YEAR ENDED
ENDED ----------------------------- ENDED -----------------------------
JUNE 30, 1998 1997 1996 1995 1994 JUNE 30, 1998 1997 1996 1995 1994
- -------------- ----- ----- ----- ----- -------------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0.38% 0.41% 0.43% 0.45% 0.45% 0.37% 0.38% 0.39% 0.39% 0.40%
0.38% 0.39% 0.40% 0.40% 0.40% 0.37% 0.38% 0.39% 0.39% 0.40%
5.55% 5.61% 5.63% 5.57% 5.71% 6.14% 6.49% 6.30% 5.90% 5.71%
5.55% 5.62% 5.66% 5.52% 5.76% 6.14% 6.49% 6.30% 5.90% 5.72%
22% 45% 60% 59% 21% 42% 64% 146% 122% 122%
N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
EQUITY VALUE SERIES + GROWTH & INCOME SERIES
- ------------------------------------ --------------------------------------------------
FOR THE FOR THE
PERIOD FOR THE YEAR ENDED PERIOD FOR THE YEAR ENDED
ENDED ------------------- ENDED ---------------------------------
JUNE 30, 1998 1997 1996* JUNE 30, 1998 1997 1996 1995 1994
- -------------- -------- -------- -------------- ------- ------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
0.59% 0.63% 1.06% 0.62% 0.64% 0.67% 0.68% 0.67%
0.59% 0.60% 0.60% 0.62% 0.64% 0.65% 0.65% 0.65%
1.37% 1.43% 1.60% 0.35% 0.65% 1.02% 1.49% 1.35%
1.38% 1.46% 2.07% 0.35% 0.65% 1.04% 1.47% 1.37%
48% 120% 65% 30% 87% 142% 155% 21%
N/A $0.0549 $0.0600 N/A $0.0447 $0.0476 N/A N/A
</TABLE>
73
<PAGE> 78
DIVERSIFIED INVESTORS PORTFOLIOS
Notes to Financial Statements (Continued)
(Unaudited)
7. FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
EQUITY GROWTH SERIES SPECIAL EQUITY SERIES
-------------------------------------------------- --------------------------------------------------
FOR THE FOR THE
PERIOD FOR THE YEAR ENDED PERIOD FOR THE YEAR ENDED
ENDED --------------------------------- ENDED ---------------------------------
JUNE 30, 1998 1997 1996 1995 1994 JUNE 30, 1998 1997 1996 1995 1994
------------- ------- ------- ----- ----- -------------- ------- ------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of expenses to
average net assets... 0.64% 0.65% 0.73% 0.75% 0.76% 0.82% 0.84% 0.86% 0.88% 0.88%
Ratio of expenses to
average net assets
(net of
reimbursements)...... 0.64% 0.65% 0.73%(1) 0.75% 0.75% 0.82% 0.84% 0.85% 0.85% 0.85%
Ratio of net
investment income to
average net assets... 0.17% 0.43% (0.17%) 0.41% 0.08% 0.12% 0.41% 0.24% 0.33% 0.27%
Ratio of net
investment income to
average net assets
(net of
reimbursements)...... 0.17% 0.43% (0.17%) 0.41% 0.11% 0.12% 0.41% 0.25% 0.30% 0.30%
Portfolio turnover.... 89% 91% 133% 62% 75% 64% 146% 140% 155% 90%
Average commission
rate per share**..... N/A $0.0557 $0.0553 N/A N/A N/A $0.0522 $0.0507 N/A N/A
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE EQUITY SERIES + HIGH YIELD BOND SERIES ++
----------------------------------- --------------------------------------
FOR THE FOR THE
PERIOD FOR THE YEAR ENDED PERIOD FOR THE YEAR ENDED
ENDED ------------------ ENDED ---------------------
JUNE 30, 1998 1997 1996* JUNE 30, 1998 1997 1996 1995
-------------- ------- -------- -------------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of expenses to
average net assets... 1.09% 1.33% 1.59% 0.63% 0.74% 1.25% 1.32%
Ratio of expenses to
average net assets
(net of
reimbursements)...... 1.00% 1.00% 1.00% 0.60% 0.60% 0.60% 0.60%
Ratio of net
investment income to
average net assets... (0.22%) (0.52%) (0.72%) 8.62% 8.46% 8.34% 8.45%
Ratio of net
investment income to
average net assets
(net of
reimbursements)...... (0.13%) (0.19%) (0.13%) 8.65% 8.60% 9.00% 7.73%
Portfolio turnover.... 63% 243% 186% 59% 109% 107% 21%
Average commission
rate per share**..... N/A $0.0498 $ 0.0540 N/A N/A N/A N/A
<CAPTION>
INTERNATIONAL EQUITY SERIES +++
------------------------------------------
FOR THE
PERIOD FOR THE YEAR ENDED
ENDED -------------------------
JUNE 30, 1998 1997 1996 1995
-------------- ------- ------- -----
<S> <C> <C> <C> <C>
Ratio of expenses to
average net assets... 0.83% 0.88% 0.96% 0.83%
Ratio of expenses to
average net assets
(net of
reimbursements)...... 0.83% 0.87% 0.90% 0.80%
Ratio of net
investment income to
average net assets... 1.71% 0.90% 1.12% 0.53%
Ratio of net
investment income to
average net assets
(net of
reimbursements)...... 1.71% 0.91% 1.18% 0.50%
Portfolio turnover.... 17% 31% 29% 7%
Average commission
rate per share**..... N/A $0.0022 $0.0030 N/A
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Annualized (except for Portfolio turnover and Average
commission rate per share)
** For fiscal years beginning on or after September 1, 1995,
the Portfolios are required to disclose their average
commission rate per share for trades on which a commission
is charged.
+ Commencement of Operations, April 19, 1996.
++ Commencement of Operations, August 22, 1995.
+++ Commencement of Operations, September 29, 1995.
(1) For the period January 1, 1996 -- November 14, 1996, the
expense cap was 75 bp.
For the period November 15, 1996 -- December 31, 1996, the
expense cap was 65 bp.
</TABLE>
74
<PAGE> 79
-----------------
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
4 Manhattanville Road BULK RATE
Purchase, New York 10577 U.S. POSTAGE
(914) 697-8000 PAID
NEW YORK, N.Y.
DISTRIBUTOR: PERMIT NO. 8048
Diversified Investors Securities Corp. (DISC)
4 Manhattanville Road -----------------
Purchase, New York 10577
(914) 697-8000
