ANNUAL REPORT FOR THE PERIOD ENDED DECEMBER 31, 1993
VARIABLE
INSURANCE
PRODUCTS FUND II
(Registered trademark)
TABLE OF CONTENTS
VARIABLE INSURANCE PRODUCTS FUND II
PAGE
Performance Updates VIPFII-1
Portfolio Managers' Messages VIPFII-4
Schedule of Investments and Financial Statements:
Investment Grade Bond Portfolio VIPFII-7
Asset Manager Portfolio VIPFII-16
Index 500 Portfolio VIPFII-44
Notes to Financial Statements VIPFII-55
Report of Independent Accountants VIPFII-59
DISTRIBUTIONS
The Board of Trustees of Variable Insurance Products Fund II voted to pay
on February 4, 1994, to shareholders of record at the opening of business
on February 4, 1994, the following distributions derived from capital gains
realized from sales of portfolio securities, and dividends derived from net
investment income:
Portfolio Dividends Capital Gains
Investment Grade Bond $ 0.00 $ 0.03
Asset Manager $ 0.28 $ 0.46
Index 500 $ 0.00 $ 0.10
MARKET ENVIRONMENT
In 1993, investors could have put their money into just about any type of
stock or bond investment portfolio and not lost money. For the first time
since 1986, all 31 investment categories tracked by Lipper Analytical
Services produced positive total returns. Despite posting strong numbers,
U.S. stock and bond markets generally lagged many of their overseas
counterparts, which turned in unusually high returns.
U.S. STOCK MARKETS
The Standard & Poor's 500 Composite Stock Price Index - a broad measure
of U.S. stock performance - rose 10.08% in the 12 months ended December 31,
1993, in line with the market's long-term average annual return. The NASDAQ
Composite Index - a measure of small stock performance - rose 14.75%. It
was outpaced by the Dow Jones Industrial Average - an index of 30 blue-chip
stocks - which was up 17.04%. In mid-November, the Dow closed above 3700
for the first time and finished the year at 3754.
Low inflation, falling interest rates and a gradually improving economy
boosted U.S. stocks. Technology was one of the best performing sectors,
although semiconductors gave back part of their gains in the fall.
Communications stocks soared as traditional telephone utilities, cellular
companies and entertainment firms scrambled to form alliances. Investors
speculated about what role technology companies would play in the building
of the so-called information superhighway, which will link the technologies
of computers, telephones and
televisions. Financial stocks, notably securities dealers, were among the
market leaders before falling off somewhat late in the year. Also,
economically-sensitive sectors like autos and steel took off as the economy
showed steady growth. The entertainment sector, especially casinos, posted
impressive gains. Heavy machinery and precious metals stocks also performed
well.
Market laggards included the health-care and consumer non-durable sectors,
although both showed signs of life near year-end. In 1993, consumers
shunned familiar brand-name products for cheaper generic or off-
brand items, which hurt many traditional big-name growth stocks.
Uncertainty over President Clinton's health-care reform plan scared many
investors away from that sector. Drug company stocks suffered as investors
feared these companies would lose the ability to raise prices.
FOREIGN STOCK MARKETS
1993's rally in international stocks was a dramatic turnaround for many
foreign markets that had previously fallen out of favor. The Morgan Stanley
EAFE (Europe, Australia, Far East) index was up 33%. Slowly falling
interest rates and investors' hopes of economic recovery combined to lift
stock prices in Europe. The Morgan Stanley Europe index rose 29% in 1993.
Falling interest rates, a strengthening yen, and government spending aimed
at stimulating economic growth fueled a furious market rally in Japan
through late spring, before political instability dragged the market back
down. Still, the TOPIX, an index that includes stocks from Japan's larger,
better known companies, was up 24% for the year.
Emerging markets reaped the biggest international returns. The Morgan
Stanley Emerging Markets Index shot up 73% in 1993. Returns in markets like
Hong Kong up 117%, Malaysia up 110%, and Brazil up 78% reflected a
favorable outlook for increases in corporate profits as economic reforms
began to take hold in these areas.
U.S. BOND MARKETS
Most all bond markets around the world richly rewarded investors in 1993.
The U.S. bond market posted relatively strong numbers on a historical
basis. Falling interest rates through most of the year fueled gains. The
yield on the benchmark 30-year Treasury bond hit a three decade low in
mid-October, yielding 5.79%. By year-end, mild inflation fears, fueled by a
strengthening economy, had pushed up the yield on the 30-year bond to
6.35%, which slightly dampened overall 1993 results for investors. The
Lehman Brothers Aggregate Bond Index - a broad measure of taxable
bonds in the U.S. market - returned 9.75% for the year. Falling interest
rates and a strengthening economy helped high-yield issues post impressive
results. The Merrill Lynch High Yield Master Index rose 17.18%.
Mortgage-backed securities continued to be hurt by refinancings; the Lehman
Brothers mortgage index was up 6.84% in '93.
FOREIGN BOND MARKETS
In general, bond investors landed more impressive returns overseas than
here at home. Falling interest rates and low inflation fueled strong
returns in both developed nations and, more notably, in emerging markets.
The Salomon Brothers World Government Bond Index - which measures bond
market performance in developed nations including the United States - rose
13.27% for the year. That figure was dwarfed by the J.P. Morgan Emerging
Markets Bond Index, which was up 44.17%.
VARIABLE INSURANCE PRODUCTS FUND II: INVESTMENT GRADE BOND PORTFOLIO
PERFORMANCE UPDATE
$10,000 OVER LIFE OF FUND
VIP II: Invest. Grade Bond (227) LB Gov't/Corp Int. Bond Index
12/31/88 10000.00 10000.00
01/31/89 10086.91 10105.00
02/28/89 10109.24 10063.57
03/31/89 10172.01 10106.84
04/30/89 10285.31 10308.98
05/31/89 10399.90 10513.10
06/30/89 10600.00 10778.03
07/31/89 10765.35 10998.98
08/31/89 10679.56 10857.09
09/30/89 10721.68 10908.12
10/31/89 10887.68 11139.37
11/30/89 10981.36 11245.19
12/31/89 11026.20 11276.68
01/31/90 11001.10 11204.51
02/28/90 11063.51 11245.97
03/31/90 11097.10 11260.59
04/30/90 11101.81 11221.17
05/31/90 11276.10 11468.04
06/30/90 11364.06 11621.71
07/31/90 11476.87 11783.25
08/31/90 11475.77 11734.94
09/30/90 11520.64 11825.30
10/31/90 11521.36 11962.48
11/30/90 11590.75 12144.31
12/31/90 11711.41 12310.68
01/31/91 11735.02 12436.25
02/28/91 11853.08 12535.74
03/31/91 12053.78 12620.98
04/30/91 12230.87 12758.55
05/31/91 12325.32 12836.38
06/30/91 12348.93 12845.37
07/31/91 12455.18 12989.23
08/31/91 12714.91 13237.33
09/30/91 12951.03 13465.01
10/31/91 13092.70 13618.51
11/30/91 13234.37 13775.12
12/31/91 13629.41 14111.24
01/31/92 13494.10 13982.82
02/29/92 13567.95 14037.36
03/31/92 13543.25 13982.61
04/30/92 13642.02 14105.66
05/31/92 13851.90 14324.30
06/30/92 14012.39 14536.30
07/31/92 14296.34 14825.57
08/31/92 14382.76 14973.82
09/30/92 14555.60 15177.47
10/31/92 14370.42 14980.16
11/30/92 14333.38 14923.24
12/31/92 14536.35 15123.21
01/31/93 14841.12 15416.60
02/28/93 15093.06 15660.18
03/31/93 15159.37 15722.82
04/30/93 15252.21 15848.60
05/31/93 15278.73 15813.74
06/30/93 15570.52 16062.01
07/31/93 15676.62 16100.56
08/31/93 15955.14 16356.56
09/30/93 16034.71 16423.62
10/31/93 16114.29 16467.97
11/30/93 16034.71 16375.75
12/31/93 16129.92 16451.07
$10,000 OVER LIFE OF FUND: LET'S SAY $10,000 WAS INVESTED IN INVESTMENT
GRADE BOND PORTFOLIO ON DECEMBER 31, 1988, SHORTLY AFTER THE FUND STARTED.
BY DECEMBER 31, 1993, THE VALUE OF THE INVESTMENT WITH DIVIDENDS REINVESTED
WOULD HAVE GROWN TO $16,130 - A 61.30% INCREASE ON THE INITIAL INVESTMENT.
FOR COMPARISON, LOOK AT HOW A $10,000 INVESTMENT IN THE LEHMAN BROTHERS
INTERMEDIATE GOVERNMENT - CORPORATE BOND INDEX (WITH DIVIDENDS REINVESTED)
DID OVER THE SAME PERIOD. IT WOULD HAVE GROWN TO $16,451 - A 64.51%
INCREASE.
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED DECEMBER 31, 1993
One Year Five Years Life of
Fund
INVESTMENT GRADE BOND
PORTFOLIO 10.96% 10.03% 9.99%
LEHMAN BROTHERS
INTERMED. GOV'T/CORP 8.79% 10.47% n/a
BOND INDEX
THE CHARTS ABOVE SHOW INVESTMENT GRADE BOND PORTFOLIO'S TOTAL RETURNS,
WHICH INCLUDE CHANGES IN SHARE PRICE, AND REINVESTMENT OF DIVIDENDS AND
CAPITAL GAINS. FIGURES FOR THE LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND INDEX, A BROAD MEASURE OF THE PERFORMANCE OF THE
U.S. BOND MARKET, INCLUDE REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS.
FIGURES FOR MORE THAN ONE YEAR ASSUME A STEADY COMPOUNDED RATE OF RETURN
AND ARE NOT THE FUND'S YEAR-BY-YEAR RESULTS, WHICH FLUCTUATED OVER THE
PERIODS SHOWN. THE LIFE OF FUND FIGURES ARE FROM COMMENCEMENT OF
OPERATIONS, DECEMBER 5, 1988.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD BE LOWER.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. PRINCIPAL AND
INVESTMENT RETURN WILL VARY AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU
WITHDRAW YOUR MONEY.
VARIABLE INSURANCE PRODUCTS FUND II: ASSET MANAGER PORTFOLIO
PERFORMANCE UPDATE
$10,000 OVER LIFE OF FUND
VIP II: Asset Mgr (228) S&P 500 Fidelity Composite (Asset
Alloc.)
09/30/89 10000.00 10000.00
10000.00
10/31/89 10020.02 9768.00
10057.20
11/30/89 10060.06 9967.27
10176.98
12/31/89 10091.10 10206.48
10276.92
01/31/90 9868.42 9521.63
10029.14
02/28/90 9969.64 9644.46
10093.23
03/31/90 10050.61 9900.03
10192.55
04/30/90 9919.03 9652.53
10098.47
05/31/90 10425.10 10593.65
10527.96
06/30/90 10506.08 10521.62
10593.55
07/31/90 10485.83 10487.95
10658.17
08/31/90 10141.70 9539.84
10328.51
09/30/90 9929.15 9075.25
10236.17
10/31/90 9979.76 9036.22
10309.57
11/30/90 10465.59 9619.96
10618.75
12/31/90 10769.23 9888.36
10792.69
01/31/91 11284.56 10319.49
10998.50
02/28/91 11726.27 11057.34
11273.90
03/31/91 11915.57 11324.93
11396.34
04/30/91 12094.35 11352.11
11471.10
05/31/91 12367.79 11842.52
11653.26
06/30/91 12146.94 11300.13
11502.23
07/31/91 12451.93 11826.72
11733.43
08/31/91 12704.33 12107.01
11942.28
09/30/91 12777.95 11904.82
11999.01
10/31/91 12862.08 12064.35
12105.80
11/30/91 12651.75 11578.15
12022.39
12/31/91 13198.62 12902.69
12614.73
01/31/92 13366.89 12662.70
12476.86
02/29/92 13626.48 12827.32
12556.58
03/31/92 13593.27 12577.19
12465.80
04/30/92 13792.52 12946.96
12619.13
05/31/92 13936.42 13010.40
12743.05
06/30/92 13925.36 12816.54
12748.65
07/31/92 14157.81 13340.74
13094.91
08/31/92 14113.54 13067.25
13044.62
09/30/92 14202.09 13221.45
13188.90
10/31/92 14224.23 13267.72
13136.41
11/30/92 14534.17 13720.15
13311.65
12/31/92 14744.49 13888.91
13474.85
01/31/93 15010.16 14005.57
13643.28
02/28/93 15150.93 14196.05
13833.47
03/31/93 15579.84 14495.59
13975.40
04/30/93 15672.57 14144.79
13890.43
05/31/93 15939.19 14523.87
14039.61
06/30/93 16066.71 14565.99
14188.71
07/31/93 16263.77 14507.73
14206.88
08/31/93 16739.05 15057.57
14556.36
09/30/93 16750.64 14941.63
14541.52
10/31/93 17202.74 15250.92
14691.00
11/30/93 17179.55 15106.04
14577.88
12/31/93 17875.08 15288.82
14678.76
$10,000 OVER LIFE OF FUND: LET'S SAY $10,000 WAS INVESTED IN ASSET MANAGER
PORTFOLIO ON SEPTEMBER 30, 1989, SHORTLY AFTER THE FUND STARTED. BY
DECEMBER 31, 1993, THE VALUE OF THE INVESTMENT WITH DIVIDENDS REINVESTED
WOULD HAVE GROWN TO $17,875 - A 78.75% INCREASE ON THE INITIAL INVESTMENT.
FOR COMPARISON, LOOK AT HOW A $10,000 INVESTMENT IN THE S&P 500 (WITH
DIVIDENDS REINVESTED) DID OVER THE SAME PERIOD. IT WOULD HAVE GROWN TO
$15,289 - A 52.89% INCREASE. YOU CAN ALSO LOOK AT HOW THE ASSET ALLOCATION
COMPOSITE INDEX, A HYPOTHETICAL COMBINATION OF UNMANAGED INDICES, DID OVER
THE SAME PERIOD. REFLECTING THE FUND'S NEUTRAL MIX OF 40% STOCKS, 40%
BONDS, AND 20% SHORT-TERM INSTRUMENTS, THIS INDEX COMBINES RETURNS FROM THE
S&P 500 52.89%, LEHMAN BROTHERS TREASURY BOND INDEX 54.22%, AND THE
SALOMON BROTHERS 3-MONTH T-BILL TOTAL RATE OF RETURN INDEX 24.29%. WITH
DIVIDENDS AND INTEREST, IF ANY, REINVESTED, A $10,000 INVESTMENT IN THE
INDEX WOULD HAVE GROWN TO $14, 679 - A 46.79% INCREASE.
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED DECEMBER 31, 1993
One Year Life of
Fund
ASSET MANAGER PORTFOLIO 21.23% 14.35%
S&P 500(Registered trademark) 10.08% 10.12%
THE CHARTS ABOVE SHOW ASSET MANAGER PORTFOLIO'S TOTAL RETURNS, WHICH
INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL
GAINS. FIGURES FOR THE S&P 500, AN UNMANAGED INDEX OF COMMON STOCKS,
INCLUDE REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. S&P 500 IS A
REGISTERED TRADEMARK OF STANDARD & POOR'S CORPORATION.
FIGURES FOR MORE THAN ONE YEAR ASSUME A STEADY COMPOUNDED RATE OF RETURN
AND ARE NOT THE FUND'S YEAR-BY-YEAR RESULTS, WHICH FLUCTUATED OVER THE
PERIODS SHOWN. THE LIFE OF FUND FIGURES ARE FROM COMMENCEMENT OF
OPERATIONS, SEPTEMBER 6, 1989.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD BE LOWER.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. PRINCIPAL AND
INVESTMENT RETURN WILL VARY AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU
WITHDRAW YOUR MONEY.
VARIABLE INSURANCE PRODUCTS FUND II: INDEX 500 PORTFOLIO
PERFORMANCE UPDATE
$10,000 OVER LIFE OF FUND
VIP II: Index 500 (157) S&P 500
08/27/92 10000.00 10000.00
08/31/92 10014.00 10018.36
09/30/92 10130.00 10136.58
10/31/92 10152.00 10172.06
11/30/92 10498.00 10518.92
12/31/92 10630.67 10648.31
01/31/93 10707.47 10737.75
02/28/93 10856.71 10883.79
03/31/93 11095.85 11113.43
04/30/93 10822.26 10844.49
05/31/93 11103.96 11135.12
06/30/93 11132.33 11167.41
07/31/93 11081.67 11122.74
08/31/93 11501.18 11544.30
09/30/93 11407.96 11455.40
10/31/93 11641.02 11692.53
11/30/93 11527.53 11581.45
12/31/93 11666.05 11721.59
$10,000 OVER LIFE OF FUND: LET'S SAY $10,000 WAS INVESTED IN INDEX 500
PORTFOLIO ON AUGUST 27, 1992, WHEN THE FUND STARTED. BY DECEMBER 31, 1993,
THE VALUE OF THE INVESTMENT WITH DIVIDENDS REINVESTED WOULD HAVE GROWN TO
$11,666 - A 16.66% INCREASE ON THE INITIAL INVESTMENT. FOR COMPARISON,
LOOK AT HOW A $10,000 INVESTMENT IN THE S&P 500 (WITH DIVIDENDS
REINVESTED) DID OVER THE SAME PERIOD. IT WOULD HAVE GROWN TO $11,722 - A
17.22% INCREASE.
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED DECEMBER 31, 1993
One Year Life of
Fund
INDEX 500 PORTFOLIO 9.74% 12.11%
S&P 500(Registered trademark) 10.08% 12.51%
THE CHARTS ABOVE SHOW INDEX 500 PORTFOLIO'S TOTAL RETURNS, WHICH INCLUDE
CHANGES IN SHARE PRICE, AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS.
FIGURES FOR THE S&P 500 INDEX, A BROAD MEASURE OF THE PERFORMANCE OF
THE U.S. BOND MARKET, INCLUDE REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS.
FIGURES FOR MORE THAN ONE YEAR ASSUME A STEADY COMPOUNDED RATE OF RETURN
AND ARE NOT THE FUND'S YEAR-BY-YEAR RESULTS, WHICH FLUCTUATED OVER THE
PERIODS SHOWN. THE LIFE OF FUND FIGURES ARE FROM COMMENCEMENT OF
OPERATIONS, AUGUST 27, 1992.
THE ADVISER HAS VOLUNTARILY AGREED TO LIMIT THE EXPENSES OF THE FUND TO
.28% OF THE FUND'S AVERAGE NET ASSETS. IF EXPENSES HAD NOT BEEN LIMITED,
RETURNS WOULD HAVE BEEN LOWER.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD BE LOWER.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. PRINCIPAL AND
INVESTMENT RETURN WILL VARY AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU
WITHDRAW YOUR MONEY.
A MESSAGE FROM DONALD TAYLOR,
PORTFOLIO MANAGER OF
INVESTMENT GRADE
BOND PORTFOLIO
The fund finished well ahead of the average intermediate-term
investment-grade bond fund, which returned 9.52%, according to Lipper
Analytical Services. Several factors helped. First, when interest rates
fell in '93, the yields of intermediate- and longer-maturity bonds dropped
more than their shorter-term counterparts, which meant the longer bonds had
stronger price gains. This helped the fund, which had increased its
investment in bonds with maturities of 20 years or longer from 4.2% at the
end of June to 7.7% at the end of December. Second, as rates fell, the fund
benefited from a barbell structure. That meant balancing the longer bonds
with a heavy investment in short-term issues. The fund's stake in bonds
with maturities of three years or less was 40.5% on December 31.
Third, during the period, I increased the fund's stake in longer-term
Treasuries and reduced its investment in corporate bonds, from 53.7% at the
end of June to 47.2% by year's end. Banks and financial issues remained the
bulk of the corporates. Low interest rates and an improving economy helped
the balance sheets of banks. Corporate bonds were cheap relative to
Treasuries of comparable maturities through most of the year, but by
year-end, the disparity had lessened, and corporates were no longer as
attractive.
Mortgage-backed securities had disappointing results as homeowners took
advantage of low interest rates to refinance mortgages. That led to
prepayment of many mortgage bonds, which hurt investors. Now I think the
worst is over. As rates level out, possibly on the way back up,
refinancings have slowed. Plus, mortgage bonds are usually higher-yielding
than Treasury issues. Both of those reasons led me to increase the fund's
stake in mortgages from 13.7% on June 30 to 17.7% on December 31.
Overseas investments often offered better opportunities than those here at
home in '93. By year end, the fund's stake in foreign bonds was 26.6%: 9.7%
in dollar-denominated securities and 16.9% in non-dollar denominated
securities. The fund concentrated on government issues in Mexico, Europe
and Japan. Mexican Cetes - short-term issues that are the Mexican
equivalent of U.S. Treasury bills - provided double-digit returns for much
of the year. In Europe, bonds issued by the governments of France, Denmark
and Sweden, among others, had price gains when interest rates fell. Also,
10-year government issues from Japan helped the fund before I sold them in
late fall. Among the dollar-denominated investments, I bought a mix of
corporate and government issues. Because these bonds are issued by foreign
countries and companies in the U.S. bond market, they don't carry the same
currency risk as the non-dollar denominated issues.
I think the double-digit returns we've seen in the bond market this year
will be hard to repeat in '94. The bulk of the drop in interest rates
appears to be over. In the near term, short-term interest rates look like
they may be heading back up. But I don't see signs of a serious inflation
threat. Plus, long-term rates should move within a narrow range - 6 to 6.5%
- - and may again fall below 6%. Though it should be more difficult to
achieve the price gains we saw in '93 due to the falling rates, there are
reasons to remain optimistic about '94.
A MESSAGE FROM BOB BECKWITT, PORTFOLIO MANAGER OF
ASSET MANAGER PORTFOLIO
The fund enjoyed a strong year for three reasons. First was its large stake
in foreign stocks, 17% of investments at the end of December. The EAFE
index - which tracks stocks in Europe, Australia and the Far East - rose
32.56% during the year ended December 31, 1993, three times the growth in
the S&P 500. I emphasized Japan, where stocks were undervalued in the
wake of the 1991 and 1992 broad market decline; France, where the
government has been lowering taxes and the inflation outlook is good; and
the United Kingdom, which has led the rest of Europe in emerging from
recession. In August, I began taking profits in Japan and investing more
heavily in Korean companies like Korea Electric, a fast-growing utility. I
also invested heavily in Mexican stocks in anticipation of NAFTA's passage.
Second were emerging market bonds, about 14% of the fund at the end of
December. These are bonds issued by governments or corporations in
developing countries. In the fund's case, that means mainly Mexico and
Argentina, but sometimes also Brazil, Morocco and others. Lately these
bonds have outperformed comparable domestic bonds by a factor of three.
Third was the fund's low cash position, about 15% at the end of the period,
compared to 46% stocks and 38% bonds. Stocks and bonds easily outperformed
cash during the period.
Junk bonds - those rated BB or lower by one of the bond rating agencies -
also contributed to the fund's performance. Lately, 10-year Treasuries have
been yielding about 5.25%. If I can get 9.75% on a junk bond of comparable
maturity, and diversify among issuers, I can offset a good chunk of the
added credit risk. Finally, the fund's 6% stake in structured notes, which
are like customized bonds, helped.
As for U.S. stocks, I emphasized finance and technology. When interest
rates are low, banks profit because of the wide gap between the cost of
funds and the interest earned on loans. Among the fund's largest
investments was Citicorp - up more than 65% in 1993 - which stands to
profit from an improving economy. Technology, on the other hand, has
profited from the trend in industry to replace labor with capital. More and
more companies are laying off employees and seeking ways to produce more
goods or services at lower cost, often by investing in computers. The fund
has large stakes in Compaq, whose strong computer sales in the U.S. and the
Far East have offset weakness in Europe; Oracle Systems, a database
software company; and Cabletron and Cisco Systems, both computer
networkers. All made money for the fund in 1993.
Most of the fund's health stocks underperformed the broader market,
although at about 3% of the fund's investments during the period, the
damage was slight. I also missed a chance to profit from the gold rally
since the fund's stake in precious metals stocks was never more than 1%.
Looking ahead, I see moderate movement in the U.S. stock market over the
next few months. Stock prices probably can't fall far as long as interest
rates remain low, and will rise as corporate earnings improve. Returns are
likely to be more in line with the stock market's historical average of
10%. What happens with U.S. bonds depends on interest rates. I think rates
may have bottomed out, which limits the upside potential of bonds and
increases their risk. What's left, then, are foreign investments, which
could continue to grow.
A MESSAGE FROM JONATHAN WEED AND JENNIFER
FARRELLY, PORTFOLIO MANAGERS OF INDEX 500 PORTFOLIO
JENNIFER FARRELLY BEGAN MANAGING THE INDEX 500 PORTFOLIO ON JANUARY 1,
1994. SINCE JOINING FIDELITY IN 1988, SHE HAS MANAGED STOCK AND INDEXED
STOCK FUNDS FOR INSTITUTIONAL CLIENTS.
JONATHAN WEED: The fund closely tracked the performance of the S&P 500
Index, a broad measure of the performance of U.S. stocks, which was up
10.08% for 1993. Management expenses accounted for the slight difference
between the fund's and the index's performance.
Automobile companies were one of the biggest contributors to the index's
performance, posting gains of 54.8% during the year. The auto sector, which
made up 2.7% of the index at year end, benefited from improving consumer
confidence. Reassured that the U.S. economy had finally started showing
signs of recovery, consumers bumped auto sales up 8.5% over 1992. The
rising Japanese yen and improving U.S. quality also encouraged many drivers
to "buy American."
Semiconductor companies were up 45.5% during 1993, the group's best
performance in nearly five years. Semiconductor chip manufacturers - like
National Semiconductor - enjoyed a 29% jump in sales, driven mainly by
increased demand for personal computers. At year end, semiconductor stocks
made up 1.8% of the S&P 500.
The year's biggest S&P 500 gainers were gold and precious metal stocks
which were up 78.8% for 1993. The group - which includes companies such as
American Barrick, Newmont Mining and Placer Dome - made up 0.7% of index at
year end. Buoyed by rising gold prices, cost cutting by mining companies
and more political stability in South Africa, gold stocks turned in their
best performance in nearly a decade. Other precious metals benefited from a
sense that the economy was improving and that prices would rise.
The potential effects of health-care reform translated into big losses for
some groups. Investors abandoned tobacco stocks - down 32.8% for 1993 -
when talk surfaced that a tax on cigarettes might be used to fund
health-care reform. Tobacco stocks represented 1.9% of the Index on
December 31. Hospital supply companies - which make up about 0.5% of the
index and include companies such as Baxter International and Medtronic Inc.
- - were also down 35% for the year. Separately, Americans increased
recycling awareness hurt pollution control stocks, which made up about 0.5%
of the S&P 500. These stocks - like WMX Technologies - were the worst
performing group in the index, down 35.8% for 1993.
JENNIFER FARRELLY: There has been a lot of discussion lately about how high
the U.S. stock market is. As long as earnings remain strong, and interest
rates are stable, I believe stocks could continue to do well in the
near-term.
It's difficult to predict what will happen. On average, there's been a 10%
market correction every two years. We haven't seen a 10% drop in the market
since October 1990. I think it's important to remember that over any period
as short as a year, there are a wide range of possibilities. Diversifying
investments over a broad range of industries and stocks can help smooth out
some market volatility. History shows that over the long-term, stocks have
been one of the best performing asset classes.
VARIABLE INSURANCE PRODUCTS FUND II: INVESTMENT GRADE BOND PORTFOLIO
INVESTMENTS/DECEMBER 31, 1993
(Showing Percentage of Total Value of Investment in Securities)
MOODY'S MOODY'S
RATINGS PRINCIPAL VALUE RATINGS PRINCIPAL VALUE
(UNAUDITED)(B) AMOUNT (A) (NOTE 1) (UNAUDITED)(B) AMOUNT (A) (NOTE 1)
CORPORATE BONDS - 47.2%
CONVERTIBLE BONDS - 0.7%
ENERGY - 0.4%
ENERGY SERVICES - 0.4%
Halliburton Co. liquid yield option
0%, 3/31/06 A3 $ 1,000,000 $ 485,000 406216AJ
RETAIL AND WHOLESALE - 0.3%
DRUG STORES - 0.3%
Rite Aid Corp. liquid yield option
0%, 7/24/06 A3 1,000,000 427,500 767754AE
TOTAL CONVERTIBLE BONDS 912,500
NONCONVERTIBLE BONDS - 46.5%
BASIC INDUSTRIES - 1.2%
CHEMICALS AND PLASTICS - 0.8%
du Pont (E.I.) de Nemours & Co.
7 1/2%, 6/11/99 Aa2 950,000 1,017,260 263991AR
IRON AND STEEL - 0.4%
Pohang Iron & Steel Ltd.
6 5/8%, 7/1/03 (e) A2 500,000 488,635 730450AB
TOTAL BASIC INDUSTRIES 1,505,895
CONSTRUCTION AND REAL ESTATE - 0.4%
BUILDING MATERIALS - 0.4%
Westinghouse Credit Corp.:
8 3/4%, 10/20/94 Baa3 100,000 103,500 9603969D
9.15%, 7/12/95 Baa3 75,000 78,937 960396ER
8 3/4%, 11/15/96 Baa3 258,000 276,795 960396NF
459,232
ENERGY - 1.7%
ENERGY SERVICES - 1.1%
McDermott International, Inc.:
10 1/4%, 6/1/95 Baa3 305,000 324,371 580033AK
9 3/8%, 3/15/02 Baa3 450,000 506,884 580033AL
Petroliam Nasional Berhad
6 7/8%, 7/1/03 (e) A2 500,000 509,705 716708AA
1,340,960
OIL AND GAS - 0.6%
PDV America, Inc. 7 1/4%,
8/1/98 Baa3 260,000 262,275 69329RAA
Societe Nationale Elf Aquitaine
7 3/4%, 5/1/99 Aa3 500,000 542,920 833658AC
805,195
TOTAL ENERGY 2,146,155
FINANCE - 32.6%
ASSET-BACKED SECURITIES - 4.5%
Capital Auto Receivables Asset Trust:
4.70%, 5/15/97 A2 $ 500,000 $ 496,094 139732AR
5.85%, 1/15/98 Aaa 289,836 293,278 139732AE
Concord Leasing, Inc. 5.04%,
7/15/98 AAA 569,011 565,499 206993AC
Discover Card Trust:
8 3/8%, 6/16/96 Aaa 374,999 378,750 25466LAE
7 1/5%, 4/16/98 Aaa 500,000 521,250 25466LAJ
6 1/8%, 5/15/98 A2 200,000 203,720 25466LAT
Ford Credit Auto Loan Master Trust
7 3/8%, 4/15/99 Aaa 500,000 534,850 34527LAB
Ford Credit 1991-B Grantor Trust
6 1/2%, 11/15/96 Aaa 16,674 16,924 34527JAA
General Motors Acceptance Corp.
Grantor Trust 5.70%, 12/15/96 Aaa 17,051 17,232 36187LAA
Railcar Trust 7 3/4%, 6/1/04 Aaa 955,620 1,045,209 750755AA
Standard Credit Card Master Trust:
9%, 3/10/95 Aaa 1,000,000 1,054,060 853333AB
5 7/8%, 7/7/96 Aaa 500,000 511,562 85333JAS
5,638,428
BANKS - 16.9%
Bank of Boston Corp.:
9 1/2%, 8/15/97 Baa2 75,000 84,475 060716AM
3.55%, 8/26/98 (c) Baa2 450,000 439,591 060716AK
6 5/8%, 12/1/05 Baa2 1,000,000 990,000 060716BQ
Bank of New York, Inc. 7 5/8%,
7/15/02 Baa1 400,000 427,840 064057AG
BankAmerica Corp. 7 3/4%,
7/15/02 A3 500,000 538,830 066050BS
Chemical New York NV euro:
0%, 2/16/00 Baa1 1,800,000 1,219,500 1637229C
0%, 2/16/02 Baa1 1,100,000 639,375 1637229E
0%, 2/16/03 A3 946,000 508,475 165993AA
Citicorp:
9.47%, 5/22/96 Baa2 750,000 823,492 17303LFD
euro 5%, 1/30/98 (c) Baa2 500,000 500,000 71699DAB
Citizens & Southern Corp.
5 1/4%, 12/19/97 (c) A3 700,000 707,700 173124AC
Continental Bank Corp. 4 1/2%,
5/18/00 (c) Baa3 500,000 499,375 211113AC
Czech National Bank Prague euro
7%, 4/6/96 Baa3 175,000 178,937 232840AA
Export-Import Bank Korea 7.85%,
11/1/96 A1 275,000 293,645 30215MAA
First Bank System, Inc. euro
5 1/4%, 11/30/10 (c) Baa1 900,000 900,000 319279AK
MOODY'S MOODY'S
RATINGS PRINCIPAL VALUE RATINGS PRINCIPAL VALUE
(UNAUDITED)(B) AMOUNT (A) (NOTE 1) (UNAUDITED)(B) AMOUNT (A) (NOTE 1)
CORPORATE BONDS - CONTINUED
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
BANKS - CONTINUED
First Fidelity Bancorporation:
9 3/4%, 5/25/95 Baa1 $ 50,000 $ 53,463 320195AA
9 5/8%, 8/15/99 Baa1 500,000 581,165 320195AB
First Hawaiian Bank secured
6.93%, 12/1/03 (e) A1 800,000 801,040 320500AA
First Maryland Bancorp:
10 3/8%, 8/1/99 Baa1 500,000 602,075 320806AE
8 3/8%, 5/15/02 Baa1 300,000 336,000 320806AF
Kansallis-Osake-Pankki euro
10%, 3/7/96 A3 500,000 544,250 481992AB
KeyCorp 8.40%, 4/1/99 A3 310,000 341,787 493263AC
Korea Development Bank:
8.67%, 3/15/95 A1 225,000 236,333 50063HAC
8.68%, 3/15/95 A1 100,000 105,048 50063HAH
8.90%, 3/12/96 A1 200,000 215,646 50063HAG
7%, 7/15/99 A1 300,000 310,854 500630AE
MBNA American Bank, NA
7 1/4%, 9/15/02 A3 700,000 736,897 55262FLN
Marine Midland Banks, Inc.
8 5/8%, 3/1/97 Baa2 250,000 272,300 568287AE
Mellon Financial Co.:
6 1/8%, 11/15/95 A3 225,000 231,320 585510BY
6 1/2%, 12/1/97 A3 200,000 208,010 585510BZ
Mercantile Bancorporation, Inc.
7 5/8%, 10/15/02 Baa1 700,000 751,625 587342AC
Meridian Bancorp, Inc.
5 1/4%, 12/1/96 (c) Baa1 900,000 901,125 589580AA
Midland American Capital Corp.
gtd.12 3/4%, 11/15/03 A2 815,000 1,045,645 597418AA
Moore Financial Group, Inc.
5 1/4%, 11/30/97 (c) Baa1 250,000 250,000 615756AC
NCNB Corp. 9 1/8%, 10/15/01 A3 500,000 582,035 628855AP
National City Corp. 5 1/4%,
1/31/97 (c) A2 850,000 848,937 635405AE
Security Pacific Corp. 10.05%,
5/1/95 A2 300,000 322,632 81482E9A
Siam Commerce Bank Co. Ltd.
6 3/4%, 11/29/94 - THB 20,000,000 784,794 7885109M
Signet Banking Corp. 5 1/4%,
5/15/97 (c) Baa2 100,000 100,250 065446AP
Sovran Financial Corp. 9 3/4%,
6/15/99 A3 $ 550,000 $ 642,284 846104AE
Summit Bancorporation 11 7/8%,
2/1/95 Baa2 210,000 226,235 866008AA
Union Commerce Corp. 7 7/8%,
4/15/98 A3 98,000 98,000 906042AB
Wells Fargo & Co. euro 5 1/4%,
2/28/97 (c) Baa2 400,000 400,000 949740BA
21,280,985
CREDIT AND OTHER FINANCE - 7.6%
Aristar, Inc. 8.55%, 6/1/95 Baa1 125,000 131,750 040420AK
Associates Corp. North America
12 1/2%, 9/15/94 A1 800,000 845,264 046003BH
Beneficial Corp.:
9 3/8%, 6/2/95 A2 300,000 320,460 081990VN
9.40%, 2/7/96 A2 150,000 163,290 08172LHA
Caterpillar Financial Services Corp.
7.14%, 4/10/95 (e) A3 150,000 154,935 14912LHP
Chrysler Financial Corp.:
6%, 4/15/96 Baa2 500,000 505,440 171205CX
6.40%, 6/17/97 Baa3 1,000,000 1,030,770 17120QBA
Fleet Mortgage Group 6 1/2%,
9/15/99 A3 1,000,000 1,024,000 339012AB
Ford Motor Credit Co.:
6 1/2%, 1/17/95 A2 350,000 358,869 345401GN
euro 9 5/8%, 2/27/96 A2 250,000 273,125 3453979H
General Electric Capital Corp. Peso
13.31%, 10/29/96 (c)(e) Aaa 900,000 900,000 369995YN
General Motors Acceptance Corp.:
8.40%, 2/22/94 Baa1 350,000 352,005 37042LSU
6 1/4%, 2/25/94 Baa1 100,000 100,328 37042MGU
7.40%, 4/3/95 Baa1 200,000 207,006 37042MKU
8.60%, 4/5/95 Baa1 300,000 314,850 37042LWE
9.40%, 5/18/95 Baa1 200,000 212,732 37042KZN
Greyhound Financial Corp. 8 1/4%,
3/11/97 Baa2 460,000 492,384 398037AK
Household Finance Corp.:
9 1/4%, 2/15/95 A2 350,000 368,756 441812DQ
7.80%, 11/1/96 A2 350,000 374,955 441812EB
Industrial Finance Corp.
7 1/4%, 12/2/96 - THB 10,000,000 392,397 457998AB
Margaretten Financial Corp.
6 3/4%, 6/15/00 Baa3 975,000 998,107 566576AA
Maryland National Corp. 5 1/4%,
9/5/97 (c) A3 100,000 100,000 574162AE
9,621,423
MOODY'S MOODY'S
RATINGS PRINCIPAL VALUE RATINGS PRINCIPAL VALUE
(UNAUDITED)(B) AMOUNT (A) (NOTE 1) (UNAUDITED)(B) AMOUNT (A) (NOTE 1)
CORPORATE BONDS - CONTINUED
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
INSURANCE - 1.7%
ITT Hartford Group, Inc. 8 1/5%,
10/15/98 A1 $ 650,000 $ 716,241 45068HAA
Metropolitan Life Insurance Co.
6 3/10%, 11/1/03 (e) Aa3 1,000,000 989,500 592173AA
New York Life Insurance Co.
6 2/5%, 12/15/03 (e) Aa2 500,000 500,200 64952GAA
2,205,941
SAVINGS AND LOANS - 1.9%
Golden West Financial Corp.:
10 1/4%, 5/15/97 A3 350,000 397,838 381317AB
7 7/8%, 1/15/02 A3 500,000 545,050 381317AE
Great Western Bank F.S.B.
9 1/2%, 8/22/94 A3 100,000 103,492 391417XC
Household Bank 8.45%, 12/10/02 A3 1,000,000 1,119,900 441800GF
World Savings & Loan Association
(Oakland CA) 9.90%, 7/1/00 A2 200,000 234,930 981507AB
2,401,210
TOTAL FINANCE 41,147,987
MEDIA AND LEISURE - 2.3%
BROADCASTING - 1.4%
Telecommunications, Inc. 6.58%,
2/15/05 Baa3 700,000 735,000 87924FAU
Time Warner, Inc. 6.05%,
7/1/95 (e) Ba1 1,000,000 1,015,200 887315AR
1,750,200
PUBLISHING - 0.9%
News America Holdings, Inc.:
gtd. 9 1/8%, 10/15/99 Ba1 500,000 556,075 652478AD
8 5/8%, 2/1/03 Ba1 600,000 655,908 652478AG
1,211,983
TOTAL MEDIA AND LEISURE 2,962,183
NONDURABLES - 1.9%
BEVERAGES - 0.9%
Coca-Cola Enterprises, Inc.:
7 7/8%, 2/1/02 A3 500,000 552,840 191219AM
8 1/2%, 2/1/22 A3 500,000 571,250 191219AP
1,124,090
TOBACCO - 1.0%
Philip Morris Companies, Inc.:
8 7/8%, 7/1/96 A2 $ 100,000 $ 108,847 718154AY
8 5/8%, 3/1/99 A2 1,000,000 1,114,900 718154BL
1,223,747
TOTAL NONDURABLES 2,347,837
RETAIL AND WHOLESALE - 1.2%
GENERAL MERCHANDISE STORES - 0.5%
Dayton Hudson Corp. 8.94%,
6/30/94 A3 100,000 102,517 239992BV
Sears Roebuck & Company 9%,
9/15/96 Baa1 475,000 522,310 812387AU
624,827
GROCERY STORES - 0.7%
Great Atlantic & Pacific Tea, Inc.
9 1/8%, 1/15/98 Baa3 475,000 521,821 390064AA
Supervalu, Inc. 7.80%, 11/15/02 A3 400,000 430,472 868536AB
952,293
TOTAL RETAIL AND WHOLESALE 1,577,120
SERVICES - 0.2%
LEASING AND RENTAL - 0.2%
Ryder System, Inc. 9 1/4%,
5/15/01 Baa1 200,000 231,188 783549AY
TECHNOLOGY - 1.1%
COMPUTERS AND OFFICE EQUIPMENT - 0.8%
Comdisco, Inc.:
9 3/4%, 1/15/97 Baa2 200,000 222,640
7 3/4%, 1/29/97 Baa2 700,000 20033RBV 736,624 200336AF
959,264
ELECTRONICS - 0.3%
Toshiba Corp. euro 10 3/4%,
12/5/95 A1 400,000 438,500 8914939B
TOTAL TECHNOLOGY 1,397,764
TRANSPORTATION - 1.3%
AIR TRANSPORTATION - 1.3%
AMR Corp. (Del.) 9.76%, 1/11/96 Baa2 100,000 107,128 00176LAV
Delta Air Lines, Inc. 8.54%, 1/2/07 Baa3 480,000 472,464 247361XK
Qantas Airways Ltd. 6 5/8%,
6/30/98 (e) Baa2 500,000 505,180 74726MAA
Southwest Airlines Co. 8 3/4%,
10/15/03 Baa1 500,000 572,700 844741AE
1,657,472
MOODY'S MOODY'S
RATINGS PRINCIPAL VALUE RATINGS PRINCIPAL VALUE
(UNAUDITED)(B) AMOUNT (A) (NOTE 1) (UNAUDITED)(B) AMOUNT (A) (NOTE 1)
CORPORATE BONDS - CONTINUED
NONCONVERTIBLE BONDS - CONTINUED
UTILITIES - 2.6%
ELECTRIC UTILITY - 2.2%
Castle Peak Power Ltd. 6.87%,
8/1/03 (h) A3 $ 1,000,000 $ 995,000 537994AA
Iberdrola International BV gtd.
7 1/8%, 6/1/03 (e) A1 1,300,000 1,347,125 450733AB
Long Island Lighting Co. 10 1/4%,
6/15/94 Baa3 450,000 461,484 542671CB
2,803,609
GAS - 0.4%
Houston Natural Gas Corp.
12 1/8%, 4/15/95 Baa2 150,000 163,435 442272AL
Panhandle Eastern Pipe Line Co.
9 7/8%, 10/15/96 Baa2 250,000 264,000 698465AW
427,435
TOTAL UTILITIES 3,231,044
TOTAL NONCONVERTIBLE BONDS 58,663,877
TOTAL CORPORATE BONDS
(Cost $57,399,488) 59,576,377
U.S. TREASURY OBLIGATIONS - 9.2%
8%, 11/15/21 Aaa 7,500,000 8,878,125 912810EL
Stripped Coupon (d):
0%, 8/15/06 Aaa 3,300,000 1,478,664 912833CQ
0%, 5/15/11 Aaa 4,100,000 1,274,116 912833JW
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $11,121,715) 11,630,905
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES - 17.7%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 1.6%
7.95%, 1/15/17 Aaa 2,000,000 2,049,360 312905GJ
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 2.9%
7.00%, 6/1/19 Aaa 500,000 506,875 31358HQV
7.50%, 2/1/05 to 2/1/21 Aaa 3,000,000 3,068,440
12%, 3/1/17 Aaa 87,645 99,204 31362TU2
3,674,519
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 13.2%
7.50%, 2/15/23 to 12/15/23 Aaa 2,928,997 3,036,083 36203N3L
8.00%, 2/15/17 to 5/15/23 Aaa 3,111,103 3,275,406 36203AMK
9.50%, 12/15/20 (g) Aaa $ 2,700,000 $ 2,921,076 36216T9X
10.00%, 1/15/19 (g) Aaa 2,000,000 2,205,620 36216T9X
10.00%, 7/15/13 to 6/15/20 Aaa 4,656,193 5,131,969 3621033Y
16,570,154
TOTAL U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES
(Cost $22,368,848) 22,294,033
FOREIGN GOVERNMENT OBLIGATIONS - 18.0%
Alberta Province 9 1/4%, 4/1/00 Aa 1,400,000 1,647,394 013051BA
Bank Negara Malaysia:
0%, 3/9/94 - MYR 750,000 274,853 06399DAE
0%, 5/11/94 - MYR 1,600,000 579,378 06399DAF
0%, 6/22/94 - MYR 1,800,000 651,471 06399DAQ
0%, 6/24/94 - MYR 340,000 123,523 06399DAM
0%, 9/7/94 - MYR 880,000 313,645 06399DAP
Bank of Indonesia (SBI) 0%,
5/19/94 (f) - IDR 1,650,000 751,080 06099MAC
British Columbia Province 7%,
1/1/03 Aa1 500,000 528,160 110709BA
Canadian Government 8 1/4%,
3/1/97 Aaa CAD 590,000 485,213 136992JW
Danish Government Bullet:
8%, 5/15/03 Aa1 DKK 3,765,000 626,401 249998AG
7%, 12/15/04 Aa1 DKK 11,395,000 1,793,880 249998AV
French Government OAT:
8 1/2%, 11/25/02 Aaa FRF 1,800,000 365,048 3517779U
8 1/2%, 4/25/03 Aaa FRF 10,380,000 2,117,563 351996AQ
Government of New Zealand 8%,
4/15/04 Aa3 NZD 1,930,000 1,254,596 6501629K
Kingdom of Sweden 10 3/4%,
1/23/97 Aa2 SEK 4,500,000 602,236 8702009Q
Malaysian Government:
0%, 4/29/94 - MYR 700,000 256,105 5609049J
0%, 6/24/94 - MYR 600,000 217,981 5609049R
9 7/8%, 9/27/00 - 1,000,000 1,200,240 560904AC
Manitoba Province Canada
6 3/4%, 3/1/03 A1 500,000 514,500 563469DG
Mexican Government:
Adjustabanos 5.30%, 7/14/94 AA- MXN 2,533,300 1,074,450 597998SV
Bondes 8.627%, 9/29/94 (c) AA- MXN 330,000 106,632 597998SX
Cetes 0%, 1/6/94 to 10/13/95 - MXN 16,565,070 4,885,856 597998TC
Providence Quebec:
8.24%, 2/28/96 Aa3 500,000 534,565 74815HAH
7 1/2%, 7/15/02 Aa3 500,000 534,375 748148NS
MOODY'S
RATINGS PRINCIPAL VALUE
(UNAUDITED)(B) AMOUNT (A) (NOTE 1)
FOREIGN GOVERNMENT OBLIGATIONS - CONTINUED
United Kingdom Great Britain &
Northern Ireland 12%,
11/20/98 Aaa GBP 386,000 $ 717,997 9107689R
Victorian Public Authorities
Finance Agency 8.45%,
10/1/01 A1 500,000 565,715 926391AC
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $22,247,217) 22,722,857
COLLATERALIZED MORTGAGE OBLIGATIONS - 1.1%
MBNA Trust 9 1/2%, 10/25/20 Aaa 63,476 64,826 574112AA
Prudential Home Mortgage Securities
6 3/4%, 8/25/08 AAA 1,000,000 1,009,380 74434TQW
Ryland Mortgage Securities Corp.
7 1/2%, 8/1/23 Aaa 374,106 374,808 783766NT
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $1,480,713) 1,449,014
OTHER SECURITIES - 2.0%
COMMERCIAL PAPER - 2.0%
Bancomer 0%, 12/21/95 MXN 3,850,772 999,762 05999KBJ
Nacional Financiera SNC:
0%, 5/19/94 MXN 1,506,744 464,054 66299CAE
0%, 8/3/95 MXN 3,730,500 1,007,333 66299CAK
TOTAL OTHER SECURITIES
(Cost $2,472,835) 2,471,149
MATURITY
AMOUNT
REPURCHASE AGREEMENTS - 4.8%
Investments in repurchase agreements,
(U.S. Treasury obligations), in a
joint trading account at 3.23%
dated 12/31/93 due 1/3/94 $ 6,087,638 $ 6,086,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $123,176,816) $ 126,230,335
Forward Foreign Currency Contracts
SETTLEMENT UNREALIZED
CONTRACTS TO BUY DATE(S) VALUE GAIN/(LOSS)
1,210,132 FIM 2/17/94 $ 207,143 -
118,942,488 JPY 1/10/94 to 1/20/94 1,063,943 $ (41,757)
TOTAL CONTRACTS TO Buy
(Payable amount $1,312,843) $ 1,271,086 $ (41,757)
THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 1.0%
SETTLEMENT UNREALIZED
CONTRACTS TO SELL DATE(S) VALUE GAIN/(LOSS)
616,653 CAD 2/8/94 $ 466,255 $ 3,935
206,988 DEM 2/28/94 118,537 1,463
16,455,675 DKK 2/2/94 to 2/7/94 2,412,605 14,256
1,210,132 FIM 2/17/94 207,143 (1,339)
14,545,033 FRF 1/27/94 to 2/28/94 2,450,311 (2,560)
444,795 GBP 3/14/94 654,355 7,054
131,960,088 JPY 1/10/94 to 2/28/94 1,180,579 65,510
5,105,101 NOK 2/25/94 608,107 15,060
20,058,100 THB 2/17/94 784,684 5,316
TOTAL CONTRACTS TO SELL
(Receivable amount $8,991,271) $ 8,882,576 $ 108,695
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 7.0%
CURRENCY TYPE ABBREVIATIONS:
GBP - British pound
CAD - Canadian dollar
DKK - Danish krone
FIM - Finnish markka
FRF - French franc
DEM - German Deutsche mark
IDR - Indonesian rupiah
JPY - Japanese yen
MYR - Malaysian ringgit
MXN - Mexican peso
NZD - New Zealand dollar
NOK - Norwegian krone
SEK - Swedish krona
THB - Thai baht
LEGEND:
(a) Principal amount is stated in United States dollars unless otherwise
noted.
(b) Standard & Poor's Corporation credit ratings are used in the
absence of a rating by Moody's Investors Service, Inc.
(c) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(d) Interest Only Strips represent the right to receive the monthly
interest payments on an underlying pool of mortgage loans. These securities
are subject to the risk of accelerated principal paydowns. The principal
amount represents the notional amount on which current interest is
calculated.
(e) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $7,211,520 or 5.9% of net
assets.
(f) Principal amount in thousands.
(g) Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
(h) Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
Castle Peak Power Ltd.
6.87%, 8/1/03 6/29/93 $1,000,000
OTHER INFORMATION:
Purchases and sales of securities, other than short-term securities,
aggregated $104,301,896 and $62,153,336, respectively, of which U.S.
government and government agency obligations aggregated $57,465,563 and
$38,480,206, respectively.
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S S&P
RATINGS RATINGS
Aaa, Aa, A 62.7% AAA, AA, A 67.0%
Baa 18.2% BBB 16.0%
Ba 3.2% BB 1.3%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 0.9%.
Distribution of investments by country, as a percentage of total value of
investment in securities, is as follows:
United States 71.8%
Mexico 9.3
Canada 3.5
Malaysia 3.1
France 2.5
Denmark 2.0
Korea 1.3
New Zealand 1.0
Australia 1.0
Others (individually less than 1%) 4.5
TOTAL 100.0%
INCOME TAX INFORMATION:
At December 31, 1993, the aggregate cost of investment securities for
income tax purposes was $123,212,675. Net unrealized appreciation
aggregated $3,017,660, of which $3,728,849 related to appreciated
investment securities and $711,189 related to depreciated investment
securities.
The fund hereby designates $201,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
INVESTMENT GRADE BOND PORTFOLIO
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, 1993
ASSETS
Investment in securities, at value (including repurchase agreements of $6,086,000)
(cost $123,176,816) (Notes 1 and 2) - $ 126,230,335
See accompanying schedule
Long foreign currency contracts held, at value (cost $1,312,843) (Notes 2 and 7) 1,271,086
Short foreign currency contracts (Notes 2 and 7) $ (8,882,576)
Contracts held, at value
Receivable for contracts held 8,991,271 108,695
Cash 2,077
Receivable for investments sold 853,533
Receivable for fund shares sold 221,919
Interest receivable 1,693,645
Total assets 130,381,290
LIABILITIES
Payable for foreign currency contracts held (Notes 1 and 7) 1,312,843
Payable for investments purchased 996,717
Regular delivery
Delayed delivery (Note 2) 5,139,509
Net payable for closed foreign currency contracts 2,805
Payable for fund shares redeemed 470,765
Accrued management fee 46,379
Other payables and accrued expenses 35,867
Total liabilities 8,004,885
NET ASSETS $ 122,376,405
Net Assets consist of:
Paid in capital $ 119,095,668
Distribution in excess of net investment income (Note 1) (90,327)
Accumulated undistributed net realized gain (loss) on investments 250,607
Net unrealized appreciation (depreciation) on:
Investment securities 3,053,519
Foreign currency contracts 66,938
NET ASSETS, for 10,659,715 shares outstanding $ 122,376,405
NET ASSET VALUE, offering price and redemption price per share ($122,376,405 (divided by) 10,659,715 shares) $11.48
</TABLE>
Statement of Operations
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended December 31, 1993
INVESTMENT INCOME $ 7,455,839
Interest
EXPENSES
Management fee (Note 3) $ 460,983
Transfer agent fees (Note 3) 71,119
Accounting fees and expenses (Note 3) 46,426
Non-interested trustees' compensation 683
Custodian fees and expenses 40,454
Registration fees 12,251
Audit 32,536
Legal 1,018
Miscellaneous 11,622
Total expenses 677,092
Net investment income 6,778,747
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTES 1 AND 3)
Net realized gain (loss) on:
Investment securities 365,358
Foreign currency contracts 100,775 466,133
Change in net unrealized appreciation (depreciation) on:
Investment securities 2,362,561
Foreign currency contracts (36,225) 2,326,336
Net gain (loss) 2,792,469
Net increase (decrease) in net assets resulting from operations $ 9,571,216
</TABLE>
Statement of Changes in Net Assets
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED DECEMBER 31,
1993 1992
INCREASE (DECREASE) IN NET ASSETS
Operations $ 6,778,747 $ 4,110,300
Net investment income
Net realized gain (loss) on investments 466,133 638,655
Change in net unrealized appreciation (depreciation) on investments 2,326,336 (1,077,703)
Net increase (decrease) in net assets resulting from operations 9,571,216 3,671,252
Distributions to shareholders: (6,271,862) (4,178,712)
From net investment income
In excess of net investment income (20,655) -
From net realized gain (466,133) (893,630)
In excess of net realized gain (136,034) -
Total distributions (6,894,684) (5,072,342)
Share transactions 79,979,898 55,197,425
Net proceeds from sales of shares
Reinvestment of distributions from: 6,292,517 4,178,712
Net investment income
Net realized gain 602,167 893,630
Cost of shares redeemed (40,773,056) (30,105,535)
Net increase (decrease) in net assets resulting from share transactions 46,101,526 30,164,232
Total increase (decrease) in net assets 48,778,058 28,763,142
NET ASSETS
Beginning of period 73,598,347 44,835,205
End of period (including distributions in excess of net investment
income of $(90,327) and $(89,383), respectively) $ 122,376,405 $ 73,598,347
OTHER INFORMATION
Shares
Sold 6,824,727 4,856,508
Issued in reinvestment of distributions from: 549,679 383,017
Net investment income
Net realized gain 52,591 81,818
Redeemed (3,478,667) (2,655,787)
Net increase (decrease) 3,948,330 2,665,556
</TABLE>
Financial Highlights
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1993 1992 1991 1990 1989
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.970 $ 11.080 $ 9.920 $ 10.140 $ 10.000
Income from Investment Operations .641 .672 .455 .826 .827
Net investment income
Net realized and unrealized gain
(loss) on investments .559 .058(dagger)(dagger) 1.165 (.220) .160
Total from investment operations 1.200 .730 1.620 .606 .987
Less Distributions (.628) (.680) (.460) (.826) (.827)
From net interest income
In excess of net investment income (.002) - - - -
From net realized gain on investments (.050) (.160) - - (.020)
In excess of net realized gain on investments(.010) - - - -
Total distributions (.690) (.840) (.460) (.826) (.847)
Net asset value, end of period $ 11.480 $ 10.970 $ 11.080 $ 9.920 $ 10.140
TOTAL RETURN 10.96% 6.65% 16.38%# 6.21%# 10.26%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 122,376 $ 73,598 $ 44,835 $ 14,348 $ 6,053
Ratio of expenses to average net assets * .68% .76% .80% .80% .80%
Ratio of expenses to average net assets
before expense reductions * .68% .76% 1.16% 2.20% 3.53%
Ratio of net interest income to average
net assets 6.85% 7.11% 7.73% 8.26% 8.19%
Portfolio turnover rate 70% 119% 128% 122% 67%
</TABLE>
# THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
* SEE NOTE 4 OF NOTES TO FINANCIAL STATEMENTS.
(dagger)(dagger) THE AMOUNT SHOWN FOR THE FISCAL YEAR ENDED DECEMBER 31,
1992 FOR A SHARE OUTSTANDING THROUGHOUT THAT YEAR DOES NOT ACCORD WITH THE
AGGREGATE NET LOSSES ON INVESTMENTS FOR THAT YEAR BECAUSE OF THE TIMING OF
SALES AND PUCHASES OF THE FUND SHARES IN RELATION TO FLUCTUATING MARKET
VALUES OF THE INVESTMENTS OF THE FUND.
VARIABLE INSURANCE PRODUCTS FUND II: ASSET MANAGER PORTFOLIO
INVESTMENTS/DECEMBER 31, 1993
(Showing Percentage of Total Value of Investment in Securities)
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - 42.4%
AEROSPACE & DEFENSE - 0.5%
AEROSPACE & DEFENSE - 0.2%
Aviall, Inc. (b) 825 $ 12,581 05366B10
Boeing Co. 4,800 207,600 09702310
British Aerospace PLC 28,453 173,984 11042010
Flightsafety International, Inc. 41,300 1,414,525 33942310
Martin Marietta Corp. 43,000 1,913,500 57290010
McDonnell Douglas Corp. 1,500 160,500 58016910
Oerlikon-Buhrle Holding Ltd. (Reg.) (b) 1,100 103,495 67199092
Rolls Royce Ltd. Ord. 406,027 971,517 77577910
Samsung Aerospace Industries (b) 4,500 192,343 80399C22
Sundstrand Corp. 8,300 348,600 86732310
Wyman-Gordon Co. (b) 7,600 35,150 98308510
5,533,795
DEFENSE ELECTRONICS - 0.3%
E-Systems, Inc. 27,300 1,184,138 26915730
Loral Corp. 107,000 4,039,250 54385910
Raytheon Co. 38,400 2,534,400 75511110
Watkins-Johnson Co. 4,100 81,488 94248610
7,839,276
TOTAL AEROSPACE & DEFENSE 13,373,071
BASIC INDUSTRIES - 2.9%
CHEMICALS & PLASTICS - 1.0%
Airgas, Inc. (b) 88,300 1,920,525 00936310
Akzo NV Ord. 20,500 1,980,473 01019910
BOC Group 35,825 347,642 09676210
Bayer AG 5,400 1,149,465 07273010
Cabot Corp. 14,800 797,350 12705510
Dongsung Chemical Industry Co. (b) 6,165 161,925 25799V22
Ferro Corp. 15,000 480,000 31540510
GEON 16,400 387,450 37246W10
Georgia Gulf Corp. (b) 40,700 910,663 37320020
Grace (W.R.) & Co. 65,400 2,656,875 38388310
Han Wha 3,000 40,513 40999B22
Hanyang Chemical Corp. (b) 4,500 53,243 41199E22
Hercules, Inc. 8,800 994,400 42705610
Hoechst AG Ord. 2,500 457,370 43439010
IMC Fertilizer Group, Inc. 83,700 3,797,888 44966910
Imperial Chemical Industries Ord. 54,353 641,432 45270440
Lucky Co. Ltd. (b) 64,320 1,243,129 54999E22
Lyondell Petrochemical Co. 21,200 450,500 55207810
Monsanto Co. 21,100 1,548,213 61166210
Oriental Chemical Industry Co. (b) 22,386 668,404 68999C22
Perez Companc Class B (b) 95,600 598,667 71399723
Union Carbide Corp. 63,900 1,429,763 90558110
Vigoro Corp. 37,000 1,119,250 92675410
23,835,140
IRON & STEEL - 0.6%
Allegheny Ludlum Industries, Inc. 57,600 $ 1,375,200 01690010
Bethlehem Steel Corp. (b) 38,400 782,400 08750910
British Steel PLC:
ADR 33,100 612,350 11101530
Ord. 1,800,765 3,364,558 11101510
Dongkuk Steel Mill Co. (b) 1,500 51,477 25799S22
Geneva Steel Co.:
Class A (b) 30,500 518,500 37225210
(warrants) (b) 22,640 203,760 37225212
Hyundai Pipe Co. Ltd. (b) 20,850 410,723 42399D22
Inland Steel Industries, Inc. (b) 46,100 1,527,063 45747210
LTV Corp. (b) 101,200 1,631,850 50192110
Oregon Steel Mills, Inc. 1,000 25,125 68607910
Steel of West Virginia, Inc. (b) 25,100 320,025 85815410
Thyssen AG Ord. 2,000 316,995 88629110
USX-U.S. Steel Group 50,400 2,186,100 90337T10
Wheeling Pittsburgh Corp. (b) 52,100 892,213 96314210
14,218,339
METALS & MINING - 0.7%
Alcan Aluminium Ltd. 132,600 2,783,922 01371610
Alumax, Inc. 40,650 873,975 02219710
Aluminum Co. of America 25,900 1,796,813 02224910
Cyprus Amax Minerals Co. 28,500 737,438 23280910
Dae Chang Industrial Co. (b) 6,300 167,032 23399M22
De Beers Consolidated Mines Ltd. ADR 45,900 1,113,075 24025330
Iljin Corp. (b) 7,190 222,697 45199E22
Korea Tungsten Mining Co. (b) 9,682 331,070 50599S22
Noranda, Inc. 204,000 3,993,569 65542210
Poong San Corp. 14,250 259,524 73299522
RTZ Corp. PLC Ord. (b) 80,093 960,575 74974K50
Reynolds Metals Co. 103,200 4,682,700 76176310
Sam Sun Industry (b) 3,360 34,967 81799G22
17,957,357
PACKAGING & CONTAINERS - 0.1%
Caradon PLC 44,643 272,982 14091092
Carnaudmetalbox SA (b) 30,500 1,019,758 20999092
Owens-Illinois, Inc. (b) 133,100 1,647,113 69076840
2,939,853
PAPER & FOREST PRODUCTS - 0.5%
Arjo Wiggins Appleton PLC 61,208 214,258 04199592
Bowater, Inc. 6,900 158,700 10218310
Bowater PLC Ord. 37,556 251,558 10220010
Champion International Corp. 21,000 700,875 15852510
Chesapeake Corp. 2,900 73,950 16515910
Eagon Industrial Co. Ltd. (b) 4,050 101,357 27099922
Georgia-Pacific Corp. 13,600 935,000 37329810
International Paper Co. 39,000 2,642,250 46014610
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - CONTINUED
Kimberly Clark de Mexico Class A 229,800 $ 4,305,976 49499392
Repola OY 49,900 775,672 75999A92
Stone Consolidated Corp. (b) 40,000 453,944 86158K10
Sung Chang Enterprise Co. (b) 4,070 206,740 82699B22
Temple-Inland, Inc. 10,100 508,788 87986810
11,329,068
TOTAL BASIC INDUSTRIES 70,279,757
CONGLOMERATES - 1.4%
Alexander & Baldwin, Inc. 19,100 510,925 01448210
Allied-Signal, Inc. 15,100 1,192,900 01951210
America Group Ltd. Class A 25,000 457,192 02351210
Brierley Investments Ltd. 3,581,200 2,761,451 10901410
Canadian Pacific Ltd. Ord. 521,800 8,537,112 13644030
Cydsa SA Class A 26,100 113,357 23299892
Dial Corp. (The) 14,400 581,400 25247010
Grupo Carso SA de CV Class A-1 (b) 880,100 9,605,728 40099594
Hanson Trust PLC:
Ord. 381,439 1,512,692 41135210
sponsored ADR 108,300 2,166,000 41135230
Litton Industries, Inc. (b) 52,900 3,405,438 53802110
Mark IV Industries, Inc. 15,148 272,680 57038710
Suncor, Inc. 69,400 1,621,127 86722910
Textron, Inc. 23,600 1,374,700 88320310
Tomkins PLC Ord. 96,088 333,517 89003010
United Technologies Corp. 12,500 775,000 91301710
35,221,219
CONSTRUCTION & REAL ESTATE - 1.9%
BUILDING MATERIALS - 1.3%
Armstrong World Industries, Inc. 46,600 2,481,450 04247610
Blue Circle Industries plc 52,086 257,719 09534210
Carlisle Companies, Inc. 16,000 534,000 14233910
Cementos Apasco SA de CV Class A (b) 635,700 6,610,791 15299392
Cemex SA (b):
A (Reg.) 20,200 569,060 15299292
Series B 226,400 6,749,722 15299293
Chosun Refractories Co. (b) 2,200 80,679 28099322
Elcor Corp. (b) 12,100 223,850 28444310
Florida Rock Industries, Inc. 19,200 568,800 34114010
Holderbank Financiere AG PC (Bearer) 730 456,250 43479593
Interceramic SA de CV Class A-2 (b) 13,800 82,196 46399593
Lafarge Corp. 133,600 3,056,100 50586210
Medusa Corp. 56,150 1,817,856 58507230
RMC Industries, Inc. (b) 14,816 203,842 74960910
Redland PLC Ord. (b) 38,842 335,612 75799095
Southdown, Inc. (b) 2,300 $ 56,350 84129710
Tecumseh Products Co. Class A 15,800 730,750 87889520
Texas Industries, Inc. 9,300 299,925 88249110
Tolmex B2 SA (b) 506,200 7,048,663 94399492
Williams Holdings Ord. (b) 36,878 203,713 96991091
Wolseley Ord. 20,010 249,738 97799092
32,617,066
CONSTRUCTION - 0.3%
Bufete Industrial SA sponsored ADR
representing 3 Ord. Certificate Banco 12,500 512,500 11942H10
Centex Corp. 24,500 1,029,000 15231210
DR Horton, Inc. (b) 29,190 510,825 23331A10
Daelim Industrial Co. 33,900 688,794 23699F22
Dongbu Construction Co. 2,300 53,001 25799M22
Grupo Mexicano de Desarrollo (b):
Class B ADR 17,800 427,200 40048G10
Class L ADR 17,800 438,325 40048G20
Lennar Corp. 14,300 487,988 52605710
Lucky Development Co. Ltd. (b) 3,470 74,374 54999822
Pulte Corp. 33,900 1,228,875 74586710
Redman Industries (b) 10,300 208,575 75764210
Samsung Construction Co. Ltd. 1,575 51,739 90499J22
Schuler Homes, Inc. (b) 19,900 557,200 80818810
Standard Pacific Corp. 40,900 455,013 85375C10
Taylor Woodrow PLC 440,926 941,055 87667410
Webb (Del E.) Corp. 5,000 80,000 94742310
7,744,464
ENGINEERING - 0.1%
EG&G, Inc. 28,000 514,500 26845710
Hanil Development Co. 27,871 576,670 41099822
Kyonghyang Construction Co. (b) 4,500 97,565 74799J22
Rust International, Inc. (b) 9,900 225,225 78307510
Stone & Webster, Inc. 9,700 267,963 86157210
1,681,923
REAL ESTATE - 0.1%
Fondo Opcion SA de CV Class 2, Series B (b) 130,800 366,375 34499892
Hwa Sung Industrial Co. (b) 1,100 43,883 44899G22
Hwa Sung Industrial Co. (New) (b) 2,850 112,990 44899G24
Immeubles de France, Ste Des (b) 2,500 470,941 44999C22
Land Securities 38,092 443,344 51499010
MEPC PLC 30,863 248,436 62949999
Mundicenter Soc Imobil SA 1,300 26,073 62699592
1,712,042
REAL ESTATE INVESTMENT TRUSTS - 0.1%
Banyan Strategic Land Trust (SBI) 3,900 16,088 06683M10
Crown American Realty Trust (SBI) 32,700 490,500 22818610
Developers Diversified Realty 40,000 1,170,000 25159110
Federal Realty Investment Trust 12,500 312,500 31374720
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE INVESTMENT TRUSTS - CONTINUED
General Growth Properties, Inc. 2,500 $ 53,750 37002110
Health Care Property Investors, Inc. 1,700 46,113 42191510
Kimco Realty Corporation 5,900 207,238 49446R10
Lend Lease Corp. Ltd. 31,400 377,403 52599292
Vornado Realty Trust 11,400 381,900 92904210
3,055,492
TOTAL CONSTRUCTION & REAL ESTATE 46,810,987
DURABLES - 2.9%
AUTOS, TIRES, & ACCESSORIES - 1.9%
Asia Motors Co., Inc. (b) 16,830 333,618 04499B22
Automotive Industries Holding, Inc. (b) 6,800 198,050 05329E10
Brilliance China Auto Holding Ltd. (b) 1,800 35,325 10999592
Chrysler Corp. 154,500 8,227,125 17119610
Cooper Tire & Rubber Co. 7,200 180,662 21683110
Discount Auto Parts, Inc. (b) 36,900 1,014,750 25464210
Donnelly Corp. Class A 5,300 102,025 25787010
Federal-Mogul Corp. 16,700 484,300 31354910
Ford Motor Co. 43,300 2,792,850 34537010
General Motors Corp. 193,100 10,596,363 37044210
Goodyear Tire & Rubber Co. 61,300 2,804,475 38255010
Grupo Dina (Consorcio G) ADR (b) 183,700 5,120,638 21030610
Heung-ah Tire & Rubber Co. (b) 3,000 75,822 42899D22
Hyundai Motor Service Co. (b) 1,200 66,456 42199422
Johnson Controls, Inc. 13,600 722,500 47836610
Kia Precision Works Co. (b) 17,544 378,202 48599K22
Lonrho Ltd. Ord. 784,712 1,495,135 54337410
Magna International, Inc. Class A 36,900 1,821,619 55922240
Monro Muffler Brake, Inc. (b) 7,500 123,750 61023610
NACCO Industries, Inc. Class A 9,200 473,800 62957910
Pirelli Tyre Holdings NV Ord. (b) 24,600 183,299 72499092
Raymond Corp. (The) (b) 17,000 284,750 75468810
Smith (A.O.) Corp.:
Class A 900 32,288 83186510
Class B 26,600 950,950 83186520
Snap-on Tools Corp. 13,100 496,163 83303410
Spartan Motors, Inc. 16,400 278,800 84681910
Standard Products Co. 10,125 354,375 85383610
Suzuki Motor Corp. 147,000 1,380,281 86958592
TRW, Inc. 7,700 533,225 87264910
Toyota Motor Corporation 130,000 2,069,305 89399999
Vickers PLC Ord. 604,300 1,561,964 92549310
Volkswagen AG (b) 1,700 430,330 92866210
45,603,195
CONSUMER DURABLES - 0.0%
Sankyo Co. Ltd. 1,000 $ 57,232 82299792
Syratech Corp. (b) 2,700 50,625 87182410
107,857
CONSUMER ELECTRONICS - 0.4%
Aktiebolaget Electrolux (b) 12,900 439,102 01019810
BIC 1,724 384,470 08899292
Fedders USA, Inc. (b) 59,200 377,400 31313510
Fossil, Inc. 200 3,800 34988210
Harman International Industries, Inc. (b) 41,700 1,198,875 41308610
Jeewon Industrial Co. (b) 3,000 81,397 47299G22
Matsushita Electric Industrial Co. Ltd. 225,000 2,997,988 57687910
Newell Co. 2,500 100,938 65119210
Pioneer Electronic Corp. 17,000 427,185 72365710
Sony Corp. 49,300 2,429,180 83569999
Universal Electronics, Inc. (b) 5,900 116,525 91348310
Whirlpool Corp. 29,400 1,955,100 96332010
10,511,960
HOME FURNISHINGS - 0.2%
Chromcraft Revington, Inc. (b) 11,300 248,600 17111710
LADD Furniture, Inc. 105,500 1,055,000 50573910
Leggett & Platt, Inc. 22,300 1,115,000 52466010
Miller (Herman), Inc. 88,700 2,716,438 60054410
5,135,038
TEXTILES & APPAREL - 0.4%
Burlington Industries Equity, Inc. (b) 42,500 658,750 12169010
Coats Viyella PLC (b) 50,516 192,126 19099110
Courtaulds PLC Ord. (b) 30,256 217,631 22268710
Fruit of the Loom, Inc. Class A (b) 28,400 685,150 35941610
Interface, Inc. Class A 2,600 39,650 45866510
Justin Industries, Inc. 50,700 747,825 48217110
Korea Moolsan Co. (b) 15,140 371,396 50599P22
Mohawk Industries, Inc. (b) 23,800 815,150 60819010
Nam Yeung Corp. (b) 700 113,176 62999D22
Reebok International Ltd. 8,100 243,000 75811010
Shaw Industries, Inc. 20,200 512,575 82028610
Shu Kwang Corp. (b) 2,351 42,239 82599J22
Stride Rite Corp. 41,600 681,200 86331410
Timberland Co. Class A (b) 8,000 427,000 88710010
Tokyo Style Co. Ltd. 72,000 1,036,620 88999410
Unifi, Inc. 121,900 3,276,063 90467710
VF Corp. 5,100 235,238 91820410
Westpoint Stevens, Inc. Class A (b) 8,100 151,875 96123810
Youngone Corp. (b) 416 7,782 99599C22
10,454,446
TOTAL DURABLES 71,812,496
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
ENERGY - 2.7%
COAL - 0.0%
Pittston Co. Minerals Group 2,600 $ 62,075 72570120
ENERGY SERVICES - 0.4%
BJ Services Co. (b) 24,300 467,775 05548210
Baker Hughes, Inc. 20,500 410,000 05722410
Commercial Del Plata (b) 101,700 713,291 20199392
Enterra Corp. (b) 17,600 360,800 29380510
Global Marine, Inc. (b) 45,000 185,625 37935240
Halliburton Co. 56,100 1,788,188 40621610
Helmerich & Payne, Inc. 8,800 245,300 42345210
Marine Drilling Cos., Inc. (b) 12,500 71,875 56824020
Schlumberger Ltd. 100,600 5,947,975 80685710
Smith International, Inc. (b) 8,300 72,625 83211010
Tidewater, Inc. 9,300 186,000 88642310
Tuboscope Vetco Corp. (b) 15,000 91,875 89860010
Weatherford International, Inc. (b) 19,500 207,188 94707610
Wheatley TXT Corp. 8,000 91,000 96271810
10,839,517
INDEPENDENT POWER - 0.0%
Thermo Electron Corp. 9,650 405,300 88355610
OIL & GAS - 2.3%
Amerada Hess Corp. 61,500 2,775,188 02355110
American Exploration Co. (b) 5,000 6,563 02576210
Ampolex Ltd. Ord. 125,600 473,352 03212792
Anadarko Petroleum Corp. 14,300 648,863 03251110
Apache Corp. 12,300 287,513 03741110
British Petroleum PLC:
ADR 254,700 16,300,800 11088940
Ord. 1,248,660 6,648,603 11088910
Burlington Resources, Inc. 53,000 2,245,875 12201410
Burmah Oil 14,673 180,528 12216910
Cabot Oil & Gas Corp. Class A 7,013 148,150 12709710
Chauvco Resources Ltd. Class A (b) 17,800 232,306 16260010
Chevron Corp. 32,600 2,840,275 16675110
Cosmo Oil Company Ltd. 89,000 635,913 22199092
Enron Oil & Gas Co. 5,200 202,800 29356210
Enterprise Oil PLC 37,039 245,086 29399110
Exxon Corp. 2,700 170,100 30229010
Isu Chemical Co. (b) 32,331 524,742 46599E22
Kerr-McGee Corp. 29,400 1,326,675 49238610
Louisiana Land & Exploration Co. 40,300 1,617,038 54626810
Mesa, Inc. (b) 18,000 101,250 59091110
Mobil Corp. 21,100 1,666,900 60705910
Morrison Petroleums Ltd. 65,300 487,867 61847310
Murphy Oil Corp. 31,000 1,240,000 62671710
Newfield Exploration Co. (b) 8,400 148,050 65129010
Noble Affiliates, Inc. 20,200 $ 535,300 65489410
Occidental Petroleum Corp. 13,500 231,188 67459910
Petroleum Heat & Power, Inc. Class A 13,000 113,750 71660030
Renaissance Energy Ltd. (b) 109,000 2,329,677 75966610
Repsol SA sponsored ADR 27,100 836,713 76026T20
Royal Dutch Petroleum Co. 17,400 1,816,125 78025770
Shell Transport & Trading PLC 249,579 2,676,241 82270310
Snyder Oil Corp. 2,600 46,150 83348210
Tide West Oil Co. 3,900 40,950 88635540
Tosco Corp. 67,300 1,960,113 89149030
Total Compagnie Francaise des Petroles
Class B (b) 27,688 1,509,531 20434510
Total SA sponsored ADR (b) 23,800 645,575 89151E10
Unocal Corp. 55,500 1,547,063 91528910
Western Gas Resources, Inc. 6,200 203,050 95825910
YPF Sociedad Anonima sponsored ADR
representing Class D shares 17,000 442,000 98424510
Yukong Ltd. 3,500 128,353 98899K22
56,216,216
TOTAL ENERGY 67,523,108
FINANCE - 7.5%
BANKS - 3.9%
ABN-AMRO Holdings NV 36,874 1,354,826 00399192
Akita Bank 165,000 1,049,095 00999692
BHF Bank (Bank Berlin Hand) 2,600 785,295 05549991
BNP CI Ord. 21,200 1,029,735 05599996
Banacci SA de CV:
Class C 490,000 4,259,496 06399893
Class L Ord. (b) 14,100 108,496 06399895
Banc One Corp. 13,300 520,363 05943810
Banco Bilbao Vizcaya SA Ord. (Reg.) 28,600 632,337 05945891
Banco de Galicia Y Buenos Aires SA
sponsored ADR representing Class B
shares 78,695 3,167,474 05953820
Banco Frances Del Rio PL (Reg.) 149,706 1,904,980 21199692
Banco Intercontinental Espanol 5,500 449,913 24699592
Bank of Boston Corp. 231,940 5,334,620 06071610
Bank of Ireland U.S. Holdings, Inc. 9,800 41,976 06278793
Bank of New York Co., Inc. 50,504 2,878,728 06405710
Bank of Scotland 87,411 289,198 06405810
Bank International Indonesia Ord.
(For. Reg.) (b) 151,500 742,612 06199B92
BankAmerica Corp. 43,500 2,017,313 06605010
BanPonce Corp. 11,960 376,740 06670410
Barclays PLC Ord. 320,691 3,007,745 06738E10
Bayerische Vereinsbank AG Ord. 1,400 469,566 07276110
Boram Bank (b) 28,520 501,746 09999322
C.S. Holdings (Bearer) (b) 4,500 2,228,831 17599792
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
FINANCE - CONTINUED
BANKS - CONTINUED
Centura Banks, Inc. 2,700 $ 54,338 15640T10
Chemical Banking Corp. 79,900 3,206,653 16372210
Cho Hing Bank Co. Ltd. 55,750 718,330 17099E22
Citicorp (b) 352,000 12,936,000 17303410
Comerica, Inc. 40,800 1,086,300 20034010
Deutsche Bank AG 2,100 1,071,022 25152592
Fidelity NY F.S.B. Garden City (b) 19,000 306,375 31633610
Financiere Bank de Suez Cie 11,014 664,115 31799110
First Chicago Corp. 26,600 1,150,450 31945510
First Fidelity Bancorporation 10,000 455,000 32019510
First Interstate Bancorp 38,200 2,449,575 32054810
First Union Corp. 81,167 3,348,173 33735810
Grupo Financiero Bancomer SA de CV
sponsored ADR, Series C (b)(f) 229,600 9,585,800 40048610
HSBC Holdings PLC:
Ord. 61,797 888,554 42199194
(Reg.) 128,520 1,879,258 42199195
KeyCorp. 11,900 420,963 49326310
Kyung Nam Bank 13,500 190,671 61499222
Kyungki Bank Ltd. (b) 20,000 292,387 61999922
Lloyds Bank PLC 96,658 939,386 53999192
Mellon Bank Corp. 8,672 459,616 58550910
Mercantile Bancorporation, Inc. 3,700 166,963 58734210
Midlantic Corp. (b) 9,600 244,800 59780E10
National Westminster Bank PLC Ord. 314,257 2,877,777 63853930
NationsBank Corp. 27,100 1,327,900 63858510
North Fork Bancorporation, Inc. (b) 2,700 34,763 65942410
Panin Bank (For. Reg.) 298,000 628,038 69899823
Paribas SA (Cie Financiere) Class A (b) 1,912 160,189 73999192
Peoples Heritage Financial Group, Inc. (b) 37,900 454,800 71114710
Royal Bank of Scotland Ord. 59,780 401,743 78009792
Safra Republic Holdings SA Ord. 2,600 239,200 78510099
Shawmut National Corp. 223,700 4,865,475 82048410
Signet Banking Corp. 25,263 877,889 82668110
Societe Generale Class A 10,139 1,312,126 83357799
Standard Chartered Bank 17,904 327,379 85256810
Swiss Bank Corp. (Bearer) (b) 4,800 1,535,484 87083610
TR Financial Corp. (b) 15,900 204,713 87263010
TSB Group PLC 114,276 406,773 87199010
West One Bancorp 2,500 71,250 95482810
Westpac Banking Corp. 1,449,068 4,555,870 96121410
95,947,183
CLOSED END INVESTMENT COMPANY - 0.1%
ASA Ltd. 20,700 $ 1,019,475 00205010
Free State Consolidated Gold Mines Ltd. ADR 66,000 1,122,000 35614220
Jardine Strategic Holdings Ord. 165,500 776,367 47199020
2,917,842
CREDIT & OTHER FINANCE - 0.5%
Abbey National PLC Ord. 98,693 744,882 00281099
American Express Co. 95,600 2,951,650 02581610
Argentaria Corp. Bancaria de Espana SA 17,400 734,167 21991392
Argentaria Corp. Bancaria de Espana SA
sponsored ADR 26,900 568,263 21991310
Beneficial Corp. 31,700 1,212,525 08172110
Central Invest & Finance 6,000 124,884 15499422
Credit Foncier de France 1,184 234,440 22532792
Dean Witter Discover & Co. 14,150 489,944 24240V10
GFC Financial Corp. 12,000 348,000 36160910
Granite Industries BHD 59,000 339,471 38799522
Green Tree Acceptance, Inc. 26,700 1,281,600 39350510
Grupo Financiero Serfin sponsored ADR CV 15,000 442,500 40049A10
Guangdong Investments Co. Ltd. Ord. 552,000 414,315 40199492
Household International, Inc. 77 2,512 44181510
Korea Investment & Finance 4,500 114,291 50599092
Primerica Corp. 20,600 800,825 74158910
Pusan Invest & Finance 1,440 86,527 74699B22
Schroders PLC:
(non-vtg.) 2,106 39,038 80799193
Ord. 7,604 153,529 80799192
Shin Han Securities Co. 4,500 100,911 82499G92
11,184,274
FEDERAL SPONSORED CREDIT - 1.0%
Federal Home Loan Mortgage Corporation 102,200 5,097,225 31340030
Federal National Mortgage Association 262,100 20,574,850 31358610
25,672,075
INSURANCE - 0.9%
ACE Ltd. 11,700 364,163 00499G92
Aegon NV Ord. 19,300 1,046,326 00792493
Allstate Corp. (b) 105,900 3,124,050 02000210
American Bankers Insurance Group, Inc. 53,500 1,404,375 02445610
American Reinsurance Corp. (b) 1,800 51,075 02916310
Assicurazioni Generali Spa 52,600 1,202,767 04542910
Assurances Generales (Reg.) 16,300 1,963,491 04557510
Axa SA 3,543 957,729 05299792
Capital Holding Corp. 8,400 311,850 14018610
Commercial Union PLC (b) 41,858 400,003 20299993
Corporacion Mapfre International Reas
(Reg.) (b) 19,500 1,021,656 16899192
Exel Ltd. 6,100 270,688 30161610
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
FINANCE - CONTINUED
INSURANCE - CONTINUED
GAN (Groupe Des Assur Natl.) 11,300 $ 1,029,008 36599792
General Accident Fire & Life 33,951 358,541 36871110
Guardian Royal Exchange Assurance 65,349 222,480 36809992
International Nederlanden Groep CVA 17,387 830,037 46099892
Kemper Corp. 67 2,429 48839610
Legal & General Group Ltd. Ord. (b) 36,807 273,451 52439810
Loews Corp. 6,200 576,600 54042410
MBIA, Inc. 7,500 471,563 55262C10
Mutual Assurance, Inc. 689 15,004 62823T10
Penncorp. Financial Group, Inc. 2,300 45,138 70809410
Progressive Corp. (Ohio) 6,300 255,150 74331510
Prudential Corp. 142,372 759,123 74399992
Royale Insurance Co. Ltd. 323,255 1,620,936 78074910
St. Paul Companies, Inc. (The) 17,200 1,545,850 79286010
Sun Alliance 60,744 346,315 86599020
Swiss Reinsurance Corp. (b):
A (warrants) 2,350 18,162 87099D22
B (warrants) 2,350 16,188 87099399
(Bearer) 2,350 1,231,855 87099392
Tokio Marine & Fire Insurance Co. Ltd. (The) 36,000 392,756 88909099
Torchmark Corp. 11,900 535,500 89102710
22,664,259
SAVINGS & LOANS - 0.5%
Ahmanson (H.F.) & Co. 136,674 2,682,227 00867710
Anchor Bancorp Inc. 37,500 464,063 03283710
Bay View Capital, Inc. 22,200 468,975 07262L10
Charter One Financial Corp. 33,850 668,538 16090310
Coast Savings Financial, Inc. (b) 24,800 353,400 19039M10
Crossland Federal Savings Bank, Brooklyn (b) 25,000 700,000 22764B10
D&N Financial Corp. (b) 2,500 19,375 23286410
Dime Savings Bank of New York, FSB (b) 25,000 203,125 25432R10
Eastern Bancorp 4,500 79,875 27626910
FirstFed Financial Corp. (b) 1,400 22,400 33790710
FirstFed Michigan Corp. 5,100 130,050 33761R10
Golden West Financial Corp. 95,700 3,732,300 38131710
Great Western Financial Corp. 10,502 210,040 39144210
Metropolitan Financial Corp. 15,700 259,050 59190810
North Side Savings Bank (Bronx, NY) 2,500 46,250 66248810
Standard Federal Bank 40,000 1,200,000 85338910
11,239,668
SECURITIES INDUSTRY - 0.6%
Boram Securities Co. Ltd. (b) 15,060 343,312 18599622
Coryo Securities 11,200 244,217 22199822
Daehan Korean Blue-Chip Investment
Trust (b) 475,000 7,552,500 23699E22
Daiwa Securities 94,000 $ 1,050,749 23499010
Hyundai Securities Co. Ltd. (b) 4,800 141,535 42699A22
Korea First Securities Co. (b) 24,400 583,435 50099K22
Merrill Lynch & Co., Inc. 32,900 1,381,800 59018810
Midland Walwyn, Inc. (b) 4,100 43,427 59780110
Morgan Stanley Group, Inc. 22,100 1,563,575 61744610
Nomura Securities Co. Ltd. 82,000 1,312,586 65536130
Paine Webber Group, Inc. 11,800 318,600 69562910
Seoul Securities Co. (b) 15,060 333,982 83599P22
Sunkyong Securities Co. (b) 25,800 594,536 96199D22
Warburg (SG) Group PLC Ord. 46,333 637,119 81799099
16,101,373
TOTAL FINANCE 185,726,674
HEALTH - 3.0%
DRUGS & PHARMACEUTICALS - 1.4%
Allergan, Inc. 115,200 2,606,400 01849010
American Cyanamid Co. 10,200 512,550 02532110
Amgen, Inc. (b) 52,300 2,588,850 03116210
Biogen, Inc. (b) 30,600 1,220,175 09059710
Bristol-Myers Squibb Co. 19,800 1,150,875 11012210
Cellpro, Inc. (b) 4,100 142,475 15115610
Celtrix Laboratories, Inc. (b) 12,200 134,200 15118610
Cephalon, Inc. (b) 6,400 104,800 15670810
Chiron Corp. (b) 6,000 504,000 17004010
Creative Biomolecules, Inc. (b) 2,300 23,863 22527010
Elan PLC (b):
ADR 35,300 1,495,838 28413120
(1 Advanced Therapeutic System Common
& 1 ADR warrant) 3,762 121,325 28413140
Genentech, Inc. (b) 7,300 368,650 36871020
Glaxo Holdings PLC Ord. 228,944 2,448,208 37732710
IMCERA Group, Inc. 73,100 2,457,988 45245410
Korea Green Cross Corp. (b) 3,005 232,729 50099J22
Mylan Laboratories, Inc. 36,300 921,113 62853010
Nature's Bounty, Inc. (b) 2,300 47,725 63901730
Pfizer, Inc. 66,300 4,574,700 71708110
Rhone Poulenc Rorer, Inc. 21,200 777,226 76242T92
Rhone Poulenc Rorer, Inc. Free shares 17,600 642,400 76242T10
Schering 2,100 1,388,160 80658510
Schering-Plough Corp. 45,900 3,144,150 80660510
Smithkline Beecham PLC:
Ord. A 103,137 608,139 83237810
(5 Ord. B & 1 participating pfd. $2.25) 98,621 528,108 83237850
Upjohn Co. 12,500 364,063 91530210
Warner-Lambert Co. 65,100 4,394,250 93448810
Wellcome PLC 65,277 635,369 94947810
Zeneca Group PLC Ord. (b) 71,150 882,744 98934D92
35,021,073
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES - 0.6%
Ballard Medical Products 18,400 $ 239,200 05856610
Bergen Brunswig Corp. Class A 53,300 939,413 08373910
Boston Scientific Corp. (b) 77,000 962,500 10113710
Cardinal Distribution, Inc. 29,300 1,391,750 14148710
Cordis Corp. (b) 22,500 1,110,938 21852510
Johnson & Johnson 38,100 1,704,975 47816010
Kendall International, Inc. (b) 15,600 717,600 48875110
McKesson Corp. 8,800 475,200 58155610
Medtronic, Inc. 38,280 3,143,745 58505510
Mentor Corp. 9,600 127,200 58718810
Owens & Minor, Inc. 37,050 852,150 69073010
Smith & Nephew PLC 77,683 170,386 83113610
Sofamor/Danek Group, Inc. (b) 37,700 1,253,525 83400510
Spacelabs Medical, Inc. (b) 11,900 288,575 84624710
Steris Corporation (b) 3,900 73,125 85915210
Thermedics, Inc. (b) 9,650 145,956 88390110
Utah Medical Products, Inc. 29,100 229,163 91748810
Zoll Medical Corp. (b) 300 9,000 98992210
13,834,401
MEDICAL FACILITIES MANAGEMENT - 1.0%
Columbia Healthcare Corp. 165,850 5,514,513 19767910
HCA - Hospital Corporation of America
Class A (b) 385,700 13,162,013 40412010
HEALTHSOUTH Rehabilitation Corp. (b) 49,000 1,237,250 42192410
Health Management Associates, Inc.
Class A (b) 29,700 868,725 42193310
Homedco Group, Inc. (b) 15,300 470,475 43739A10
Lincare Holdings, Inc. (b) 57,600 1,432,800 53279110
National Medical Enterprises, Inc. 18,900 264,600 63688610
U.S. Healthcare, Inc. 12,500 720,313 91191010
United HealthCare Corp. 12,500 948,438 91058110
24,619,127
TOTAL HEALTH 73,474,601
INDUSTRIAL MACHINERY & EQUIPMENT - 1.8%
ELECTRICAL EQUIPMENT - 1.1%
AMETEK, Inc. 23,000 293,250 03110510
Alcatel Alsthom CGE 47,609 6,772,559 01390492
Avid Technology, Inc. (b) 300 6,413 05367P10
General Electric Co. 57,300 6,009,338 36960410
General Electric PLC Ord. 205,918 1,038,642 36963940
ICOM, Inc. 15,000 162,307 44999A92
Il Jin Electric & Machinery (b) 3,000 78,424 45099G22
Itel Corp. 18,900 529,200 46564210
Murata Manufacturing Co. (b) 143,000 4,897,741 62699110
Philips Electronics (b) 71,900 $ 1,477,903 71833799
Philips NV 167,200 3,448,500 71833750
Roper Industries, Inc. 20,300 659,750 77669610
Siebe PLC (b) 32,219 270,297 82619999
Star Paging International Holdings Ltd. 690,000 294,664 85599692
Westinghouse Electric Corp. 42,100 594,663 96040210
Yurtec Corp. (b) 900 20,604 97299492
26,554,255
INDUSTRIAL MACHINERY & EQUIPMENT - 0.6%
Briggs & Stratton Corp. 4,500 371,250 10904310
Caterpillar, Inc. 56,900 5,064,100 14912310
CMI Corp. Oklahoma Class A 3,900 26,813 12576130
Cincinnati Milacron, Inc. 18,800 413,600 17217210
Deere & Co. 30,900 2,286,600 24419910
Duerr Beteiligungs AG 1,150 390,346 26499292
Finning Ltd. 94,000 1,351,239 31807140
Flow International Corp. (b) 2,600 20,963 34346810
Indresco, Inc. (b) 30,000 465,000 45590510
Joy Technologies, Inc. Class A (b) 40,400 484,800 48120610
Korea Machinery Co. Ltd. (b) 15,000 183,981 50599H22
Manitowoc Co., Inc. 26,800 864,300 56357110
Parker-Hannifin Corp. 12,500 471,875 70109410
Regal-Beloit Corp. 27,400 722,675 75875010
SKF AB Ord. (b) 58,800 951,410 78437530
TI Group PLC Ord. (b) 35,004 207,321 87247250
TRINOVA Corp. 39,600 1,242,450 89667810
Tenneco, Inc. 8,900 468,363 88037010
15,987,086
POLLUTION CONTROL - 0.1%
American Ecology Corp. (b) 3,700 31,450 02553310
Attwoods PLC:
ADR 50,000 500,000 04987020
Ord. 100,000 202,349 04987010
Envirotest Systems Corp. (b) 3,900 83,850 29409W10
Harding Associates, Inc. (b) 2,500 22,500 41226410
OHM Corp. 3,700 43,013 67083910
Thermo Instrument Systems, Inc. (b) 3,900 136,013 88355910
United Waste Systems, Inc. (b) 4,100 63,550 91317410
Wheelabrator Technologies, Inc. 76,700 1,361,425 96290130
Zurn Industries, Inc. 10,500 287,438 98982410
2,731,588
TOTAL INDUSTRIAL MACHINERY &
EQUIPMENT 45,272,929
MEDIA & LEISURE - 1.7%
BROADCASTING - 0.3%
BET Holdings, Inc. Class A (b) 3,700 73,075 08658510
CBS, Inc. 3,400 980,900 12484510
Capital Cities/ABC, Inc. 1,900 1,177,050 13985910
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Carlton Communications 14,976 $ 209,583 14399999
Grupo Televisa GDS (b)(f) 9,500 665,000 40049J20
Home Shopping Network, Inc. 73,010 1,086,024 43735110
Multimedia, Inc. (b) 300 10,275 62545K10
Scandinavian Broadcasting Corp. (b) 16,300 342,300 80699E92
SFX Broadcasting, Inc. 4,800 62,400 78417410
Tele-Communications, Inc. Class A (b) 82,200 2,486,550 87924010
TF-1 5,700 472,833 90399999
7,565,990
ENTERTAINMENT - 0.1%
Carnival Cruise Lines, Inc. Class A 28,600 1,354,925 14365810
Cedar Fair LP 1,200 42,150 15018510
Granada Group 35,236 270,627 38480310
Rank Organization PLC 24,615 357,019 75304110
Royal Carribean Cruises Ltd. 27,600 738,300 78015392
Sega Enterprises 7,600 589,242 81599792
3,352,263
LEISURE DURABLES & TOYS - 0.2%
Brunswick Corp. 6,000 108,000 11704310
Callaway Golf Co. 21,100 1,126,213 13119310
Fleetwood Enterprises, Inc. 9,100 216,125 33909910
Mattel, Inc. 12,500 345,313 57708110
Outboard Marine Corp. 49,600 1,109,800 69002010
Salomon SA 1,500 499,240 93099292
Samick Musical Instruments (b) 3,065 74,048 79599L22
Thor Industries, Inc. 12,900 332,175 88516010
3,810,914
LODGING & GAMING - 0.5%
Bally Manufacturing Corp. (b) 14,435 122,698 05873210
Caesars World, Inc. (b) 1,300 69,550 12769510
Forte PLC (b) 64,885 250,609 34999592
Four Seasons Hotels, Inc. 60,400 594,061 35100E10
Grupo Posadas SA de CV Class L (b) 129,200 124,790 40048992
Grupo Situr SA de CV Class B (b) 1,498,333 4,563,503 40049292
Host Marriott Corp. 44,841 409,174 44107810
La Quinta Motor Inns, Inc. 31,200 1,099,800 50419510
Ladbroke Group PLC Ord. 494,994 1,184,392 50572799
Marriott International, Inc. 44,841 1,300,389 57190010
Mirage Resorts, Inc. (b) 20,000 477,500 60462E10
President Riverboat Casinos, Inc. (b) 26,550 584,100 74084810
Promus Companies, Inc. (b) 20,100 919,575 74342A10
Trump Plaza Holding Associates (warrants) (b) 60 47,400 89817E11
Video Lottery Technologies, Inc. (b) 53,800 914,600 92656M10
12,662,141
PUBLISHING - 0.5%
American Greetings Corp. Class A 25,200 $ 856,800 02637510
Central Newspapers, Inc. Class A 13,400 371,850 15464710
Dow Jones & Co., Inc. 6,000 214,500 26056110
Enquirer/Star Group, Inc. Class A 25,900 492,100 29355410
Gannett Co., Inc. 35,500 2,032,375 36473010
MaClean Hunter Ltd. 154,400 1,474,787 55474980
Meredith Corp. 18,800 752,000 58943310
Mirror Group Newspaper PLC (b) 97,900 242,925 60499792
Pearson PLC 41,394 369,891 70509991
Reed International (b) 42,233 558,908 75821210
Scripps (E.W.) Co. Class A 13,600 374,000 81103910
Thomson Corp. 44,600 548,326 88490310
Times Mirror Co., Series A 37,700 1,258,238 88736010
Torstar Corp. Class B 69,400 1,260,148 89147420
VNU Ord. (b) 9,400 839,044 92399010
11,645,892
RESTAURANTS - 0.1%
Bertucci's, Inc. (b) 13,400 328,300 08606310
McDonald's Corp. 41,300 2,354,100 58013510
Morrison Restaurants, Inc. 12,500 328,125 61847710
Ryan's Family Steak Houses, Inc. (b) 23,200 208,800 78351910
Uno Restaurant Corp. (b) 2,700 26,325 91490010
3,245,650
TOTAL MEDIA & LEISURE 42,282,850
NONDURABLES - 2.3%
AGRICULTURE - 0.1%
Delta & Pine Land Co. (b) 12,800 224,000 24735710
Molinos Rio de La Plata (Reg.) 68,369 876,833 60899C22
Pioneer Hi-Bred International, Inc. 10,300 401,700 72368610
1,502,533
BEVERAGES - 0.5%
Allied Lyons PLC 66,616 666,113 01925510
Bass PLC Ord. 104,849 830,835 06990492
Cadbury-Schweppes PLC Ord. 62,404 468,227 12720910
Coca-Cola Femsa SA de CV sponsored ADR (b) 12,000 393,000 19124110
Comp Cervecerias Unidas SA ADR 14,000 404,250 20442910
Dr. Pepper/Seven-Up Companies, Inc. (b) 29,400 705,600 25613130
Fomento Economico Mexicano SA
(FEMSA) B 511,900 3,370,365 34441892
Grupo Embotellador de Mexico Class B ADS (f) 52,300 1,895,875 40048J10
Guinness PLC Ord. 151,172 1,065,051 40203310
Panamerican Beverages, Inc. Class A 19,300 738,225 69829W10
Scottish & Newcastle Brewers PLC 39,895 314,070 80987810
South African Breweries, Inc. ADR 17,500 380,625 83621620
Whitbread Class A 173,645 1,488,830 96341499
12,721,066
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
NONDURABLES - CONTINUED
FOODS - 0.5%
ConAgra, Inc. 84,600 $ 2,231,325 20588710
Dole Food, Inc. 32,100 858,675 25660510
Grand Metropolitan PLC 155,991 1,095,547 38559099
Grupo Ind Maseca SA de CV Class B 751,000 1,165,432 57899894
Herdez SA de CV Class A (b) 1,166,800 1,296,023 42799F22
IBP, Inc. 146,993 3,803,444 44922310
Miwon Co. Ltd. (b) 13,287 246,924 61299693
Miwon Co. Ltd. (New) 3,501 56,387 61299695
Samyang Foods Co. 3,000 102,211 84699F22
United Biscuits 39,520 210,428 90960210
Viscofan Envolturas Celulo SA 29,100 460,436 92899999
Weston George Ltd. 33,500 988,462 96114850
12,515,294
HOUSEHOLD PRODUCTS - 0.3%
Avon Products, Inc. 27,100 1,317,738 05430310
BTR PLC Ord 261,931 1,441,100 05586510
Hartstone Group PLC Ord. (b) 747,500 607,232 41722610
Premark International, Inc. 11,200 898,800 74045910
Procter & Gamble Co. 40,900 2,331,300 74271810
Reckitt & Colman Ltd. Ord. 28,221 300,113 75621410
Stanhome, Inc. 8,000 271,000 85442510
Unilever PLC Ord. 61,047 1,083,800 90476710
8,251,083
TOBACCO - 0.9%
B.A.T. Industries PLC Ord. 231,729 1,894,431 05527010
Philip Morris Companies, Inc. 275,900 15,381,425 71815410
RJR Nabisco Holdings Corp. (b) 452,900 2,887,238 74960K10
UST, Inc. 46,600 1,293,150 90291110
21,456,244
TOTAL NONDURABLES 56,446,220
PRECIOUS METALS - 0.1%
Hecla Mining Co. (b) 6,700 77,888 42270410
Homestake Mining Co. 85,800 1,887,600 43761410
Placer Dome, Inc. 32,500 808,351 72590610
2,773,839
RETAIL & WHOLESALE - 3.2%
APPAREL STORES - 0.3%
Burton Group PLC Ord. 1,267,800 1,301,422 12304910
Charming Shoppes, Inc. 28,500 338,438 16113310
Claire's Stores, Inc. 28,400 514,750 17958410
Gap, Inc. 39,500 1,555,313 36476010
Limited, Inc. (The) 55,000 941,875 53271610
Ross Stores, Inc. (b) 35,500 $ 461,500 77829610
Sportmart, Inc. (b) 2,700 47,925 84892210
TJX Companies, Inc. 35,400 1,031,025 87254010
6,192,248
DRUG STORES - 0.1%
General Nutrition Companies, Inc. (b) 44,600 1,271,100 37047F10
GENERAL MERCHANDISE STORES - 1.9%
Aoyama Trading Co. Ord. 37,000 2,117,594 03799092
Cifra SA Class C (b) 1,961,100 5,884,555 17178594
Controladora Commercial Mexicana SA
B-1 (b) 1,892,400 3,972,450 21299692
Dayton Hudson Corp. 83,600 5,580,300 23975310
Dillard Department Stores, Inc. Class A 36,300 1,379,400 25406310
Federared Department Stores, Inc. (b) 277,700 5,762,275 31410J10
Hudsons Bay Co. Ord. 50,800 1,518,139 44420410
Keum Kang Dev. Industries Co. (b) 2,250 37,075 49299F22
Marks & Spencer Ltd. Ord. (b) 208,399 1,394,358 57069710
May Department Stores Co. (The) 12,500 492,188 57777810
Midopa Co. (b) 17,267 348,699 59899E22
Penney (J.C.) Co., Inc. 55,700 2,917,288 70816010
Proffitts, Inc. (b) 18,100 395,938 74292510
Sears PLC 113,687 214,093 81213310
Sears Roebuck de Mexico SA (b) 229,200 4,412,801 81240K92
Sears Roebuck de Mexico SA de CV ADR
representing Series B-1 (b)(f) 30,600 1,170,450 81240K10
Sears, Roebuck & Co. 95,800 5,053,450 81238710
Service Merchandise Co., Inc. (b) 6,400 64,000 81758710
Value City Department Stores, Inc. (b) 30,800 450,450 92038710
Wal-Mart Stores, Inc. 109,100 2,727,500 93114210
Woolworth Holdings PLC Ord. 50,051 572,182 98088610
46,465,185
GROCERY STORES - 0.5%
American Stores Co. 12,600 541,800 03009610
Argyll 84,466 343,080 04099210
Asda Group PLC (b) 218,252 180,521 04399110
Associated British Foods Ltd. Ord. (b) 33,790 280,981 04551910
Bruno's, Inc. 107,400 953,175 11688110
Comptoirs Modernes 839 251,798 20470099
Food Lion, Inc. Class A 258,200 1,678,300 34477520
Giant Food, Inc. Class A 14,000 360,500 37447810
Great Atlantic & Pacific Tea Co., Inc. 18,800 507,600 39006410
Kroger Co. (The) (b) 16,000 322,000 50104410
Loblaw Companies, Ltd. 32,000 553,811 53948110
Penn Traffic Co. (b) 2,500 90,625 70783210
Rykoff-Sexton, Inc. 3,900 85,313 78375910
Safeway, Inc. (b) 85,000 1,806,250 78651420
Sainsbury J PLC Ord. 134,393 881,333 78710310
Stop & Shop Companies, Inc. (b) 103,600 2,097,900 86209910
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - CONTINUED
Tae Gu Department Store Co. (b) 1,480 $ 44,557 90599G22
Tesco PLC Ord. (b) 283,280 891,202 88157510
Whole Foods Market, Inc. (b) 17,400 391,500 96683710
12,262,246
RETAIL & WHOLESALE, MISC - 0.4%
Amway Asia Pacific Ltd. (b) 4,000 142,500 03299H22
Barnes & Noble, Inc. 17,500 435,313 06777410
Best Buy Co., Inc. (b) 11,200 520,800 08651610
Boots Co. plc. (The) 78,219 689,711 09999410
CML Group, Inc. 12,500 295,313 12582010
Duty Free International, Inc. 2,700 53,663 26708410
Futures Shops Ltd. 4,100 96,160 36091310
Good Guys, Inc. (b) 44,100 573,300 38209110
Great Universal Stores PLC Ord. Class A 75,738 726,004 39133420
Grupo Casa Autrey SA sponsored ADR (b) 26,000 633,750 40048P10
Hancock Fabrics, Inc. 8,900 84,550 40990010
Little Switzerland, Inc. (b) 32,400 299,700 53752810
Lowe's Companies, Inc. 56,200 3,329,850 54866110
Micro Wharehouse, Inc. (b) 4,100 170,663 59501B10
North West Company, Inc. 26,800 364,971 66329F10
Pinault Printemps SA 1,700 288,360 72199393
Redoute 10,710 1,845,616 75799492
Sotheby's Holdings, Inc. Class A 41,100 631,913 83589810
Spiegel, Inc. Class A 3,700 83,250 84845710
Toys "R" Us, Inc. (b) 20,200 825,675 89233510
Williams-Sonoma, Inc. (b) 300 12,375 96990410
12,103,437
TRADING COMPANIES - 0.0%
Hyundai Corp. (b) 12,000 334,510 40999922
Inchcape Berhad Ord. 39,449 322,212 45325010
Nam Sung Corp. (b) 4,711 102,145 63299D22
Sunkyong Ltd. (b) 7,030 243,870 96199C22
1,002,737
TOTAL RETAIL & WHOLESALE 79,296,953
SERVICES - 0.4%
LEASING & RENTAL - 0.1%
Blockbuster Entertainment Corp. 44,600 1,365,875 09367610
GATX Corp. 7,200 293,400 36144810
Orix Corp. 36,000 981,891 68616710
Thorn EMI PLC Ord. 31,987 468,196 88519991
3,109,362
PRINTING - 0.1%
Cadmus Communications Corp. 5,300 74,200 12758710
Moore Corporation Ltd. 15,800 304,823 61578510
Reynolds & Reynolds Co. Class A 34,900 $ 1,592,313 76169510
Wallace Computer Services, Inc. 2,700 91,463 93227010
2,062,799
SERVICES - 0.2%
Borg Warner Securities Corp. (b) 26,100 535,050 09973310
CPI Corp. 23,200 400,200 12590210
Chemed Corp. 6,100 186,050 16359610
Craig (Jenny), Inc. 15,300 174,038 22420610
Ecolab, Inc. 10,700 481,500 27886510
Pinkertons, Inc. (b) 17,100 333,450 72342910
Rentokil Group PLC (b) 73,399 262,353 76099692
Robert Half International, Inc. (b) 3,400 89,250 77032310
Service Corp. International 44,700 1,173,375 81756510
Supercuts, Inc. (b) 15,100 224,613 86805710
Zebra Technologies Corp. Class A (b) 9,300 526,613 98920710
4,386,492
TOTAL SERVICES 9,558,653
TECHNOLOGY - 4.4%
COMMUNICATIONS EQUIPMENT - 1.0%
Cabletron Systems, Inc. (b) 55,100 6,198,750 12692010
Cisco Systems, Inc. (b) 119,200 7,703,300 17275R10
DSC Communications Corp. (b) 23,800 1,463,700 23331110
Daewoo Telecommunication 6,592 145,373 27999192
Ericsson (L.M.) Telephone Co. Class B ADR 24,300 981,113 29482140
Network General Corp. (b) 47,300 845,488 64121010
Newbridge Networks Corp. (b) 15,400 843,150 65090110
Wellfleet Communications, Inc. (b) 74,700 4,818,150 94949710
3Com Corp. (b) 23,800 1,118,600 88553510
24,117,624
COMPUTER SERVICES & SOFTWARE - 0.9%
ACT Group PLC 189,907 398,300 00499592
Adobe Systems, Inc. 23,900 531,775 00724F10
Ceridian Corp. (b) 60,000 1,140,000 15677T10
Cerner Corp. 6,300 274,050 15678210
Cheyenne Software, Inc. (b) 12,500 345,313 16688810
CompUSA, Inc. (b) 66,800 1,336,000 20493210
ECI Telecom Ltd. 8,100 207,563 26825810
Electronic Information Systems, Inc. (b) 4,700 62,275 28573810
Fourth Dimension Software (b) 21,100 503,763 35199792
Informix Corp. (b) 139,400 2,962,250 45677910
Intelligent Electronics, Inc. 24,400 667,950 45815710
MDL Information Systems, Inc. (b) 2,500 22,188 55267R10
Micrografx, Inc. (b) 32,400 293,625 59507710
Microsoft Corp. (b) 79,900 6,441,938 59491810
Oracle Systems Corp. (b) 100,100 2,877,875 68389X10
Recognition Equipment, Inc. (b) 1,700 25,500 75623110
Reuters Holdings PLC Ord. (b) 31,309 826,138 76132410
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE - CONTINUED
Systems Software Associates, Inc. 65,300 $ 995,825 87183910
Viewlogic Systems, Inc. (b) 73,000 1,660,750 92672110
Wall Data, Inc. (b) 6,300 252,788 93204510
21,825,866
COMPUTERS & OFFICE EQUIPMENT - 1.5%
Amdahl Corp. 64,500 387,000 02390510
Canon, Inc. 79,000 1,087,950 13780199
Cherry Corp. (b) 33,600 705,600 16454110
Compaq Computer Corp. (b) 180,600 13,364,400 20449310
Diebold, Inc. 22,800 1,373,700 25365110
Guilbert 2,625 784,972 40199792
Hewlett-Packard Co. 14,800 1,169,200 42823610
International Business Machines Corp. (b) 129,900 7,339,350 45920010
International Imaging Materials, Inc. 5,600 111,300 45968C10
Media Vision Technology, Inc. 12,700 555,625 58445H10
Merisel, Inc. (b) 63,800 1,172,325 58984910
Netframe Systems, Inc. (b) 56,400 972,900 64110610
SCI Systems, Inc. (b) 68,200 1,202,025 78389010
Stratus Computer, Inc. (b) 34,600 1,085,575 86315510
Sun Microsystems, Inc. (b) 9,100 267,313 86681010
Supermac Technology, Inc. (b) 2,500 26,875 86843310
SynOptics Communications, Inc. (b) 20,700 577,013 87160910
Tandem Computers, Inc. (b) 49,600 539,400 87537010
Tech Data Corp. (b) 2,700 97,200 87823710
Tricord Systems, Inc. (b) 32,400 858,600 89612110
Xerox Corp. 38,600 3,449,875 98412110
37,128,198
ELECTRONIC INSTRUMENTS - 0.1%
Kulicke & Soffa Industries, Inc. (b) 16,600 232,400 50124210
Lam Research Corp. (b) 18,900 614,250 51280710
Megatest Corp. (b) 15,900 204,713 58495810
Teradyne, Inc. (b) 13,730 381,008 88077010
Varian Associates, Inc. 7,000 420,000 92220410
1,852,371
ELECTRONICS - 0.8%
AMP, Inc. 13,300 839,563 03189710
Advanced Micro Devices, Inc. (b) 6,100 109,800 00790310
Anthem Electronics, Inc. (b) 46,800 1,351,350 03673210
Daewoo Electronics Components Co. (b) 4,665 101,721 23799E22
GTI Corp. (b) 6,300 174,038 36236010
Hitachi Ltd. (b) 283,000 2,080,268 43357810
Integrated Device Technology, Inc. (b) 22,300 381,888 45811810
Intel Corp. 21,200 1,314,400 45814010
LSI Logic Corp. (b) 48,100 769,600 50216110
Maxim Integrated Products, Inc. (b) 33,500 $ 1,603,813 57772K10
Methode Electronics, Inc. Class A 15,900 228,563 59152020
Molex, Inc. 40,000 1,350,000 60855420
Motorola, Inc. 15,500 1,431,813 62007610
Samsung Electronics Co. Ltd.:
GDR (New) (b)(f) 950 32,072 79605030
GDR reprsenting shares (non-vtg.) (b)(f) 18,800 949,400 79605040
sponsored NV GDR (f) 1,500 76,500 79605050
Solectron Corp. (b) 80,700 2,289,863 83418210
Texas Instruments, Inc. 60,100 3,816,350 88250810
Toshiba Corp. (b) 243,000 1,477,666 89149310
20,378,668
PHOTOGRAPHIC EQUIPMENT - 0.1%
Eastman Kodak Co. 13,000 728,000 27746110
Fuji Photo Film Co. Ltd. 21,000 463,850 35958610
Polaroid Corp. 38,200 1,289,250 73109510
2,481,100
TOTAL TECHNOLOGY 107,783,827
TRANSPORTATION - 1.7%
AIR TRANSPORTATION - 0.6%
AMR Corp. (b) 66,300 4,442,100 00176510
BAA PLC Ord. 38,395 599,986 10999999
British Airways PLC Ord. (b) 71,668 475,812 11041910
Comair Holdings, Inc. 40,800 933,300 19978910
Korean Air (b) 24,468 539,590 52299522
UAL Corp. (b) 52,300 7,635,800 90254910
14,626,588
RAILROADS - 0.9%
Burlington Northern, Inc. 30,300 1,753,613 12189710
CSX Corp. 49,100 3,977,100 12640810
Chicago & North Western Holdings Corp. (b) 115,900 2,897,500
16715510
Conrail, Inc. 16,100 1,076,688 20836810
Illinois Central Corp., Series A 68,000 2,439,500 45184110
Santa Fe Pacific Corp. 304,000 6,764,000 80218310
Southern Pacific Rail Corp. (b) 89,100 1,759,725 84358410
Trinity Industries, Inc. 5,600 241,500 89652210
Union Pacific Corp. 7,000 438,375 90781810
Wisconsin Central Transportation Corp. (b) 7,600 454,100 97659210
21,802,101
SHIPPING - 0.1%
Han Jin Transportation Co. (b) 10,500 262,776 40999722
Ned Lloyd (b) 29,100 882,271 63983210
Overseas Shipholding Group, Inc. 11,000 259,875 69036810
Peninsular & Oriental Steam Navigation Co. 44,946 428,185 70719030
Transportacion Maritima Mexicana SA de CV
ADR representing L shares (b) 64,000 712,000 89386820
2,545,107
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
TRANSPORTATION - CONTINUED
TRUCKING & FREIGHT - 0.1%
Airborne Freight Corp. 2,700 $ 94,838 00926610
Arkansas Best Corp. 1,400 21,875 04079010
Federal Express Corp. (b) 21,900 1,552,163 31330910
MS Carriers, Inc. (b) 2,700 57,375 55353310
Werner Enterprises, Inc. 2,700 82,350 95075510
Yellow Corp. 10,300 256,213 98550910
2,064,814
TOTAL TRANSPORTATION 41,038,610
UTILITIES - 4.0%
CELLULAR - 0.4%
IDB Communications Group, Inc. (b) 5,300 291,500 44935510
Nextel Communications, Inc. Class A (b) 22,600 841,850 65332V10
Pactel Corp. (b) 2,600 64,675 69525210
Rogers Cantel Mobile Communications, Inc.
Class B (non-vtg.) (b) 28,000 752,033 77510210
Vodafone Group PLC 258,518 2,266,169 92857T92
Vodafone Group PLC sponsored ADR 65,800 5,872,650 92857T10
10,088,877
ELECTRIC UTILITY - 1.8%
American Electric Power Co., Inc. 38,100 1,414,463 02553710
Baltimore Gas & Electric Co. 42,700 1,083,513 05916510
Carolina Power & Light Co. 24,200 729,025 14414110
Central & South West Corp. 31,500 952,875 15235710
Central Costanera SA ADR (f) 4,300 131,150 15324M10
Central Puerto SA ADR (f) 1,500 51,375 15503810
Commonwealth Edison Co. 38,000 1,073,500 20279510
Consolidated Edison Co. of New York, Inc. 25,600 822,400 20911110
Detroit Edison Company 23,200 696,000 25084710
Dominion Resources, Inc. 13,100 594,413 25747010
Duke Power Co. 16,500 699,188 26439910
Eastern Electric PLC Ord. 20,313 202,516 27637D95
Entergy Corp. 153,200 5,515,200 29364F10
FPL Group, Inc. 14,900 582,963 30257110
General Public Utilities Corp. 36,700 1,133,113 37055010
Hong Kong Electric Holdings Ord. 758,500 3,165,531 43858010
Houston Industries, Inc. 23,100 1,100,138 44216110
Iberdrola SA 124,000 887,880 45499892
Illinois Power Co. 34,400 761,100 45209210
Korea Electric Power Corp. 89,200 2,420,219 50099B92
Long Island Lighting Co. 21,700 528,938 54267110
NIPSCO Industries, Inc. 41,900 1,377,463 62914010
National Power PLC 96,212 689,210 63719496
Niagara Mohawk Power Corp. 34,800 704,700 65352210
Northern States Power Co. (Minn.) 15,000 646,875 66577210
Ohio Edison Co. 33,500 $ 762,125 67734710
PSI Resources, Inc. 57,300 1,518,450 69363210
Pacific Gas & Electric Co. 28,700 1,008,088 69430810
PacifiCorp. 61,100 1,176,175 69511410
Philadelphia Electric Co. 68,800 2,081,200 71753710
Powergen PLC Ord. 59,012 474,590 73890594
Public Service Enterprise Group, Inc. 30,300 969,600 74457310
Rhein West Electric 1,200 369,348 78349910
SCEcorp 50,100 1,002,000 78388210
Scottish Hydro-Electric PLC Ord. 28,899 190,797 81013395
Scottish Power PLC 61,350 412,293 81013T96
Southern Co. 24,500 1,081,063 84258710
Southern Electric PLC 20,403 213,357 84280994
Texas Utilities Co. 34,100 1,474,825 88284810
Union Electric Co. 10,200 400,350 90654810
Veba Vereinigte Elektrizetaets & Bergwerks
AG Ord. 8,200 2,462,547 92239110
Verbund Gesellschaft 5,100 310,371 92299999
43,870,927
GAS - 0.4%
Arkla, Inc. 44,600 351,225 04123710
British Gas PLC Ord. 325,780 1,645,626 11090199
Coastal Corp. (The) 18,700 525,938 19044110
Columbia Gas System, Inc. (The) (b) 68,000 1,521,500 19764810
Consolidated Natural Gas Co. 17,100 803,700 20961510
ENSERCH Corp. 13,000 211,250 29356710
Enron Corp. 10,000 290,000 29356110
Pacific Enterprises 9,000 213,750 69423210
Panhandle Eastern Corp. 56,800 1,341,900 69846210
Sonat, Inc. 49,100 1,417,763 83541510
Westcoat Energy, Inc. 43,100 717,382 95751D10
Williams Companies, Inc. 46,800 1,140,750 96945710
10,180,784
TELEPHONE SERVICES - 1.3%
Ameritech Corp. 19,900 1,527,325 03095410
British Telecommunications PLC Ord. 467,331 3,257,970 11102110
Cable & Wireless PLC Ord. 164,274 1,264,116 12699910
LDDS Communications, Inc. (b) 23,603 1,138,845 50182L10
Premier Page Co. 25,000 250,000 74058E10
SIP Spa 568,600 1,191,194 78401792
Southwestern Bell Corp. 58,700 2,436,050 84533310
Sprint Corporation 86,600 3,009,350 85206110
Telebras PN (Pfd. Reg.) 89,999,000 3,068,066 95499792
Telecom Argentina Stet France (b) 501,900 3,158,090 90899992
Telefonica Argentina Class B 216,300 1,588,576 87999D92
Telefonos de Mexico SA sponsored ADR
representing shares Ord. Class L 137,500 9,281,250 87940378
31,170,832
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
UTILITIES - CONTINUED
WATER - 0.1%
Anglian Water Ord. 22,277 $ 194,787 03499595
Generale des Eaux 3,914 1,932,864 37099210
North West Water Ord. 28,078 242,607 67299195
Severn Trent PLC Ord. (b) 27,025 243,088 82999895
Thames Water PLC Ord. 29,506 251,459 88399595
2,864,805
TOTAL UTILITIES 98,176,225
TOTAL COMMON STOCKS
(Cost $926,513,879) 1,046,852,019
PREFERRED STOCKS - 0.9%
CONVERTIBLE PREFERRED STOCKS - 0.5%
BASIC INDUSTRIES - 0.0%
METALS & MINING - 0.0%
Alumax, Inc., Series A, $4.00 100 9,850 02219720
Cyprus Amax Minerals Co., Series A, $4.00 1,600 104,000 23280920
113,850
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Chrysler Corp., Series A, $4.625 (f) 10,000 1,500,000 17119670
Ford Motor Co. (Del.), Series A, $4.20 12,800 1,388,800 34537020
2,888,800
ENERGY - 0.1%
ENERGY SERVICES - 0.0%
Chiles Offshore Corp. $1.50 (b) 27,400 623,350 16888720
OIL & GAS - 0.1%
Unocal Corp. $3.50 (b)(f) 25,000 1,412,500 91528920
TOTAL ENERGY 2,035,850
FINANCE - 0.0%
BANKS - 0.0%
ABN-AMRO Holdings NV 6% 3,151 115,774 00399194
MEDIA & LEISURE - 0.0%
LODGING & GAMING - 0.0%
Bally Manufacturing Corp., Series D, $4.00
exchangeable 895 38,038 05873220
NONDURABLES - 0.1%
TOBACCO - 0.1%
RJR Nabisco Holdings Corp., Series A,
depositary shares representing 1/4 shares 304,400 2,130,800 74960K40
RETAIL & WHOLESALE - 0.0%
APPAREL STORES - 0.0%
Lamonts Apparel, Inc., Series A (b) 22,958 45,916 51362830
TECHNOLOGY - 0.0%
COMPUTER SERVICES & SOFTWARE - 0.0%
Ceridian Corp. depositary shares
representing 1/100 (b) 7,500 $ 378,750 15677T40
TRANSPORTATION - 0.2%
AIR TRANSPORTATION - 0.2%
AMR Corp. $3.00 (f) 44,000 2,354,000 00176588
UAL, Inc. cumulative 6 1/4% (b)(f) 15,200 1,673,900 90254930
4,027,900
TOTAL CONVERTIBLE PREFERRED STOCKS 11,775,678
NONCONVERTIBLE PREFERRED STOCKS - 0.4%
BASIC INDUSTRIES - 0.1%
CHEMICALS & PLASTICS - 0.0%
Henkel KGAA 2,500 913,301 42509392
IRON & STEEL - 0.1%
Danieli & C Spa N/C Risp (b) 40,200 135,577 23599610
Dongbu Steel Co. Ltd. (b) 10,500 318,714 25799L23
Geneva Steel Co., Series B, 14%
exchangeable (b) 8,000 988,000 37225240
1,442,291
TOTAL BASIC INDUSTRIES 2,355,592
CONSTRUCTION & REAL ESTATE - 0.0%
CONSTRUCTION - 0.0%
Dongbu Construction (b) 800 14,867 25799M23
DURABLES - 0.0%
AUTOS, TIRES, & ACCESSORIES - 0.0%
Hyundai Motor Service Co. (b) 1,900 94,629 42199424
FINANCE - 0.0%
CREDIT & OTHER FINANCE - 0.0%
Tong Yang Securities (b) 24,400 526,000 93999B23
UTILITIES - 0.3%
ELECTRIC UTILITY - 0.1%
Long Island Lighting Co. $7.95 43,000 1,139,500 54267177
Public Service Co. of New Hampshire Co.,
Series A 6,000 168,750 74448283
1,308,250
TELEPHONE SERVICES - 0.2%
Stet Societa Finanziaria Telefonica Spa 2,802,100 5,656,431 85982592
TOTAL UTILITIES 6,964,681
TOTAL NONCONVERTIBLE PREFERRED STOCKS 9,955,769
TOTAL PREFERRED STOCKS
(Cost $19,821,641) 21,731,447
MOODY'S MOODY'S
RATINGS PRINCIPAL VALUE RATINGS PRINCIPAL VALUE
(UNAUDITED)(B) AMOUNT (A) (NOTE 1) (UNAUDITED)(B) AMOUNT (A) (NOTE 1)
CORPORATE BONDS - 12.2%
CONVERTIBLE BONDS - 0.1%
BASIC INDUSTRIES - 0.0%
PAPER & FOREST PRODUCTS - 0.0%
Stone Consolidated Corp.
8%, 12/31/03 - $ 560,000 $ 493,588 86158KAA
DURABLES - 0.1%
TEXTILES & APPAREL - 0.1%
Alpargatas SAIC 9%,
3/15/98 (f) - 1,350,000 1,289,250 020545AA
Shinwon Corp. euro 0.50%,
12/31/08 - 120,000 138,000 98499DAA
1,427,250
NONDURABLES - 0.0%
BEVERAGES - 0.0%
Jinro Ltd. euro 0.25%, 9/30/09 - 120,000 137,400 732994AA
RETAIL & WHOLESALE - 0.0%
TRADING COMPANIES - 0.0%
Daewoo Corp. euro 0.25%,
12/31/08 - 90,000 112,950 23799BAB
TECHNOLOGY - 0.0%
COMMUNICATIONS EQUIPMENT - 0.0%
Ericsson (L.M.) Telephone Co.
4 1/4%, 6/30/00 - 27,800 43,090 294821AA
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Tae Il Media Co. Ltd. 0.50%,
12/31/98 - 50,000 38,138 90799KAA
Unisys Corp. 8 1/4%, 8/1/00 B2 350,000 479,500 909214AX
517,638
TOTAL TECHNOLOGY 560,728
TOTAL CONVERTIBLE BONDS 2,731,916
NONCONVERTIBLE BONDS - 12.1%
AEROSPACE & DEFENSE - 0.0%
DEFENSE ELECTRONICS - 0.0%
Trancor, Inc. 10 7/8%, 8/15/01 B2 470,000 492,325 892349AC
BASIC INDUSTRIES - 1.1%
CHEMICALS & PLASTICS - 0.8%
Agricultural Mineral & Chemicals Corp.
10 3/4%, 9/30/03 B2 480,000 504,000 008522AA
Desc (Soc. De Fomento Indust.):
euro 11%, 12/15/97 - $ 1,450,000 $ 1,645,750 252996AB
11%, 12/15/97 (f) - 1,400,000 1,589,000 252996AA
G-I Holdings, Inc. 0%, 10/1/98 Ba3 7,480,000 4,787,200 36172FAB
Harris Chemical Corp. 10 3/4%,
10/15/03 B3 320,000 335,200 413868AB
IMC Fertilizer Group, Inc.:
9 1/4, 10/1/00 B3 1,600,000 1,608,000 449669AH
10 1/8, 6/15/01 B3 1,920,000 1,996,800 449669AF
Methanex Corp. 8 7/8%,
11/15/01 Ba3 700,000 721,000 59151KAA
NL Industires, Inc. 11 3/4%,
10/15/03 B1 580,000 603,200 629156AE
OSI Specialties, Inc. 9 1/4%,
10/1/02 B1 370,000 379,250 671042AA
UCC Corp. 9%, 9/1/00 B1 3,300,000 3,366,000 90915TAA
UCC Investors Holding, Inc.
10 1/2%, 5/1/02 B2 950,000 1,035,500 90263EAB
18,570,900
IRON & STEEL - 0.1%
Acindar euro 9 1/2%, 10/23/95 - 1,400,000 1,372,000 0045149G
Acindar Industria Argentina de
Aceros 10 1/2%, 12/10/94 (f) - 500,000 490,000 004514AA
WCI Steel, Inc. 10 1/2%, 3/1/02 B1 640,000 667,200 92923JAB
2,529,200
PAPER & FOREST PRODUCTS - 0.2%
Container Corp. America:
14%, 12/1/01 B3 3,000,000 3,341,250 210741AG
9 3/4%, 4/1/03 B2 1,125,000 1,161,562 210741AJ
Valcor, Inc. 9 5/8%, 11/1/03 B1 310,000 311,550 918884AA
4,814,362
TOTAL BASIC INDUSTRIES 25,914,462
CONGLOMERATES - 0.1%
American Standard, Inc.:
9 7/8%, 6/1/01 B1 358,000 373,215 029717AH
12 3/4%, 12/31/03 B3 1,600,000 1,636,000 029717AK
Sequa Corp. 9 3/8%, 12/15/03 B3 440,000 441,650 817320AG
2,450,865
CONSTRUCTION & REAL ESTATE - 2.1%
BUILDING MATERIALS - 1.8%
Adience, Inc. 11%, 6/15/02 - 1,000,000 810,000 006905AA
Cemex SA and Tolmex SA de CV:
euro 8 7/8%, 6/10/98 Ba2 4,760,000 5,122,950 1512909F
10%, 11/5/99 Ba2 1,030,000 1,165,187 1512909D
Cemex SA 8 7/8%, 6/10/98 (f) Ba2 12,800,000 13,776,000 151290AG
Tolmex SA de CV 8 3/8%, 11/1/03 Ba2 7,480,000 7,854,000 889557AA
MOODY'S MOODY'S
RATINGS PRINCIPAL VALUE RATINGS PRINCIPAL VALUE
(UNAUDITED)(B) AMOUNT (A) (NOTE 1) (UNAUDITED)(B) AMOUNT (A) (NOTE 1)
CORPORATE BONDS - CONTINUED
NONCONVERTIBLE BONDS - CONTINUED
CONSTRUCTION & REAL ESTATE - CONTINUED
BUILDING MATERIALS - CONTINUED
Triangle Pacific Corp. 10 1/2%,
8/1/03 B2 $ 1,580,000 $ 1,659,000 895912AC
USG Corp.:
8%, 12/15/95 B3 2,240,000 2,240,000 903293AH
8%, 12/15/96 B3 2,590,000 2,590,000 903293AA
8%, 3/15/97 B3 2,590,000 2,590,000 903293AD
9%, 12/15/98 B3 1,920,000 1,920,000 903293AJ
10 1/4%, 12/15/02 B2 3,988,000 4,087,700 903293AL
43,814,837
CONSTRUCTION - 0.3%
Blount, Inc. 9%, 6/15/03 B2 925,000 953,906 095173AB
Empresas ICA Sociedad
Controladora SA de CV:
euro 9 3/4%, 2/11/98 - 2,253,000 2,489,565 2924489A
9 3/4%, 2/11/98 (f) - 990,000 1,093,950 292448AA
Kaufman & Broad Home Corp.
9 3/8%, 5/1/03 Ba3 306,000 313,650 486168AC
MDC Holdings, Inc. 11 1/8%,
12/15/03 - 510,000 512,550 552676AH
Ryland Group, Inc. 9 5/8%, 6/1/04 Ba3 900,000 907,875 783764AC
US Home Corp. 9 3/4%, 6/15/03 Ba3 1,615,000 1,659,412 911920AB
7,930,908
REAL ESTATE - 0.0%
Baldwin Co. 10 3/8%, 8/1/03 (f) B2 90,000 86,400 057826AA
TOTAL CONSTRUCTION & REAL ESTATE 51,832,145
DURABLES - 0.3%
AUTOS, TIRES, & ACCESSORIES - 0.2%
Grupo Dina (Consorcio G):
euro 10 1/2%, 11/18/97 - 500,000 550,000 210996AB
10 1/2%, 11/18/97 (f) - 2,120,000 2,332,000 210996AA
Grupo Imsa SA de CV euro 8 3/4%,
7/7/98 (f) - 750,000 770,625 40048TAA
Navistar Financial Corp. 8 7/8%,
11/15/98 B2 1,410,000 1,424,100 638902AH
5,076,725
TEXTILES & APPAREL - 0.1%
Westpoint Stevens, Inc.:
8 3/4%, 12/15/01 B3 1,120,000 1,128,400 961238AA
9 3/8%, 12/15/05 B3 770,000 777,700 961238AB
1,906,100
TOTAL DURABLES 6,982,825
ENERGY - 0.3%
ENERGY SERVICES - 0.2%
Baroid Corp. 8%, 4/15/03 Ba1 $ 1,200,000 $ 1,281,000 068277AA
TransTexas Gas Corp. 10 1/2%,
9/1/00 B1 2,860,000 3,031,600 893895AA
4,312,600
INDEPENDENT POWER - 0.0%
Consolidated Hydro, Inc. 0%,
7/15/03 (e)(f) - 1,585,000 935,150 209349AB
OIL & GAS - 0.1%
HS Resources, Inc. 9 7/8%,
12/1/03 B1 710,000 710,000 404297AA
Mesa Capital Corp. secured 0%,
6/30/98 (e) - 240,000 202,800 590910AF
Oryx Energy Co. deb. 9 3/4%,
9/15/1998 Ba2 540,000 561,600 68763FAA
1,474,400
TOTAL ENERGY 6,722,150
FINANCE - 2.3%
BANKS - 1.0%
Bancomer SA:
euro 8%, 7/7/98 (f) Ba2 8,000,000 8,400,000 059682AB
9%, 6/1/00 (f) - 5,000,000 5,375,000 059682AA
Bancomer SNC euro 8%, 7/7/98 - 3,850,000 4,042,500 05999KAT
Banco Nacional de Comercio
Exterior SNC:
euro 7 1/2%, 7/1/00 Ba2 1,675,000 1,695,938
8%, 4/14/00 Ba2 1,300,000 1,335,750 0596129A
8%, 8/5/03 Ba2 2,915,000 2,995,162 0596129C
Midlantic Corp. 9 1/4%, 9/1/99 Baa3 340,000 384,183 59780EAC
Signet Banking Corp. 9 5/8%,
6/01/99 Baa2 790,000 915,705 826681AA
25,144,238
CREDIT & OTHER FINANCE - 0.2%
Lomas Mortgage USA, Inc.
10 1/4%, 10/1/02 Ba1 4,930,000 5,127,200 54154LAB
INSURANCE - 1.0%
American Annuity Group, Inc.:
9 1/2%, 8/15/01 Ba3 2,680,000 2,740,300 023840AB
11 1/8%, 2/01/03 B2 3,850,000 4,129,125 023840AA
American Financial Corp. s.f. 12%,
9/3/99 - 3,170,000 3,233,400 026087AR
Americo Life, Inc. 9 1/4%, 6/1/05 BB+ 1,600,000 1,588,000 03060NAB
Conseco, Inc. 8 1/8%, 2/15/03 Ba1 1,875,000 1,945,331 208464AD
Nacolah, Inc. 9 1/2%, 12/1/03 B1 760,000 769,500 629667AA
Penncorp Financial Group, Inc.
9 1/4%, 12/15/03 B1 930,000 939,300 708094AA
MOODY'S MOODY'S
RATINGS PRINCIPAL VALUE RATINGS PRINCIPAL VALUE
(UNAUDITED)(B) AMOUNT (A) (NOTE 1) (UNAUDITED)(B) AMOUNT (A) (NOTE 1)
CORPORATE BONDS - CONTINUED
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
INSURANCE - CONTINUED
Reliance Financial Services:
9.273%, 11/1/00 BBB $ 1,930,000 $ 1,775,600 759462AD
10.36%, 12/1/00 BBB 4,030,000 4,100,525 759462AF
Reliance Group 9%, 11/15/00 Ba3 2,230,000 2,246,725 759464AG
23,467,806
SAVINGS & LOANS - 0.1%
Gentra, Inc. euro 9 1/8%, 12/29/95 B3 32,000 32,080 37245E9A
Webster Financial Corp. 8 3/4%,
6/30/00 B1 800,000 828,400 947890AA
Western Financial Savings Bank
(Orange, CA) 8 1/2%, 7/1/03 Ba3 1,600,000 1,600,256 958202FK
2,460,736
TOTAL FINANCE 56,199,980
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT - 0.2%
American Medical International, Inc.
9 1/2%, 4/15/06 B 1,280,000 1,337,600 027429AZ
HealthTrust, Inc. - The Hospital Co.
8 3/4%, 3/15/05 B1 2,245,000 2,312,350 42221HAG
Hospital Corp. America 8%,
4/15/96 Ba2 1,000,000 1,050,000 441065AS
4,699,950
INDUSTRIAL MACHINERY & EQUIPMENT MENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Panamasat LP/Panamasat Capital
Corp. secured 9 3/4%, 8/1/00 Ba3 495,000 524,700 69830CAA
Specialty Equipment Cos., Inc.
11 3/8%, 12/1/03 B3 1,780,000 1,806,700 847497AB
2,331,400
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
Rexnord Corp. 10 3/4%, 7/1/02 Ba3 480,000 585,600 76168RAB
TOTAL INDUSTRIAL MACHINERY
& EQUIPMENT 2,917,000
MEDIA & LEISURE - 2.7%
BROADCASTING - 0.7%
Act III Broadcasting, Inc.
9 5/8%, 12/15/03 B3 400,000 405,000 00503KAA
Continental Cablevision, Inc.:
8 5/8%, 8/15/03 Ba2 400,000 431,000 211177AF
9%, 9/1/08 Ba2 576,000 633,600 211177AG
Cook Inlet Communications Corp.
10 3/4%, 9/10/98 (f) - $ 3,110,000 $ 3,110,000 2161719C
Great America TV 9 1/2%,
12/31/99 - 2,980,000 2,831,000 389990AA
Helicon Group LP/Helicon Capital
Corp. secured 9 1/2%, 11/1/03 Caa 1,120,000 1,089,200 423265AB
SCI Television, Inc. secured:
7 1/2%, 6/30/98 (g) - 1,088,174 1,063,690 783895AK
11%, 6/30/05 - 5,048,000 5,237,300 783895AJ
SPI Holding, Inc. pay-in-kind
11 1/2%, 12/1/02 B- 1,820,000 1,851,850 78462GAF
16,652,640
LEISURE DURABLES & TOYS - 0.1%
Coleman Holdings 0%, 5/27/98 B 2,299,000 1,494,350 193551AC
LODGING & GAMING - 1.5%
Bally's Grand, Inc. 1st mtg. 12%,
8/20/01 D 2,610,000 2,694,825 05873JAC
Ballys Casino Holdings, Inc. 0%,
6/15/98 (f) B3 4,450,000 2,848,000 05873EAA
California Hotel Finance Corp. gtd.
11%, 12/1/02 B2 9,265,000 9,844,063 13032RAG
Embassy Suites, Inc.:
gtd. 8 3/4%, 3/15/00 (f) B1 4,900,000 5,022,500 290807AH
10 7/8%, 4/15/02 B1 4,750,000 5,320,000 290807AF
First Mexican Acceptance Corp.
euro 10 3/4%, 9/15/96 - 600,000 625,968 321998AA
GNS Finance Corporation 9 1/4%,
3/15/03 B2 480,000 499,200 361916AK
Grand Casino Resorts, Inc. gtd.
1st mtg. 12 1/2%, 2/1/00 - 1,920,000 2,073,600 385268AA
Host Marriott Hospitality, Inc.:
10 5/8%, 2/1/00 B1 430,000 441,825 441080AC
9 1/8%, 12/1/00 B1 180,000 183,150 441080AD
11 1/4%, 7/18/05 B1 694,000 714,820 441080AG
10 1/2%, 5/1/06 B1 3,061,000 3,145,177 441080AH
11%, 5/1/07 B1 530,000 544,575 441080AJ
Ocean Showboat Financial 9 1/4%,
5/1/08 - 1,120,000 1,136,800 6750219A
Red Roof Inns 9 5/8%,
12/15/03 (f) B3 720,000 732,600 757005AA
Resorts International, Inc. secured
pay-in-kind 15%, 4/15/94 Ca 577,275 361,761 761185AH
Showboat, Inc. 9 1/4%, 5/1/08 Ba3 200,000 206,000 825390AB
Trump Plaza Holding Association
pay-in-kind 12 1/2%, 6/15/03 Caa 300,000 283,332 89817EAB
36,678,196
MOODY'S MOODY'S
RATINGS PRINCIPAL VALUE RATINGS PRINCIPAL VALUE
(UNAUDITED)(B) AMOUNT (A) (NOTE 1) (UNAUDITED)(B) AMOUNT (A) (NOTE 1)
CORPORATE BONDS - CONTINUED
NONCONVERTIBLE BONDS - CONTINUED
PUBLISHING - 0.3%
Marvel Parent Holdings, Inc. 0%,
4/15/98 B3 $ 870,000 $ 565,500 573845AA
News America Holdings, Inc.
8 1/2%, 2/15/05 Ba1 6,000,000 6,571,800 652478AJ
7,137,300
RESTAURANTS - 0.1%
American Restaurant Group, Inc.
12%, 9/15/98 B2 125,000 124,375 029309AB
Restaurant Enterprises Group, Inc.
12 1/4%, 12/15/96 (c) - 3,590,000 3,518,200 761255AA
3,642,575
TOTAL MEDIA & LEISURE 65,605,061
NONDURABLES - 1.1%
BEVERAGES - 0.2%
Canandaigua Wine, Inc. 8 3/4%,
12/15/03 B1 1,140,000 1,145,700 137219AB
Dr. Pepper/Seven-Up Companies, Inc.
0%, 11/1/02 (e) B3 800,000 616,000 256131AD
Fomento Economico Mexicano SA
de CV euro 9 1/2%, 7/22/97 - 1,780,000 1,935,750 3444189A
Grupo Embotellador de Mexico SA
de CV:
euro 10 3/4%, 11/19/97 Ba2 1,620,000 1,814,400 40048J9A
10 3/4%, 11/19/97 (f) Ba2 200,000 224,000 40048JAA
5,735,850
FOODS - 0.0%
Doskocil Cos., Inc. 9 3/4%,
7/15/00 B2 1,069,000 1,058,310 258486AD
Specialty Foods Corp. 10 1/4%,
8/15/01 (f) B2 800,000 814,000 847499AC
1,872,310
HOUSEHOLD PRODUCTS - 0.7%
Revlon Consumer Products Corp.:
9 1/2%, 6/1/99 B2 2,235,000 2,207,062 761519AG
9 3/8%, 4/1/01 B2 4,295,000 4,155,412 761519AF
10 1/2%, 2/15/03 B3 3,460,000 3,356,200 761519AE
Revlon World Wide secured 0%,
3/15/98 B3 13,390,000 6,795,425 76154KAB
16,514,099
TOBACCO - 0.2%
Empresas La Moderna SA
10 1/4%, 11/12/97 (f) - 3,430,000 3,738,700 292449AA
TOTAL NONDURABLES 27,860,959
RETAIL & WHOLESALE - 1.3%
APPAREL STORES - 0.2%
AnnTaylor, Inc. 8 3/4%, 6/15/00 B1 $ 760,000 $ 760,000 036117AC
Apparel Retailers, Inc. 12 3/4%,
8/15/05 (f) Baa 1,920,000 1,094,400 037795AB
Lamonts Apparel, Inc. 11 1/2%,
11/1/99 - 2,645,000 2,559,037 5136289A
4,413,437
DRUG STORES - 0.0%
Eckerd Jack Corp. 9 1/4%,
2/15/04 B2 350,000 357,000 278763AE
GENERAL MERCHANDISE STORES - 0.3%
Controladora Comercial Mexicana
SA de CV:
euro 8 3/4%, 4/21/98 - 1,000,000 1,051,250 212996AA
8 3/4%, 4/21/98 (f) - 1,900,000 1,997,375 21238AAA
Hills Stores Co. 10 1/4%, 9/30/03 - 900,000 933,750 431692AA
Parisian, Inc. 9 7/8%, 7/15/03 B3 1,820,000 1,820,000 700147AB
Service Merchandise, Inc. 9%,
12/15/04 Ba3 1,875,000 1,884,375 817587AC
7,686,750
GROCERY STORES - 0.6%
General Nutrition, Inc. 11 3/8%,
3/1/00 B3 2,220,000 2,453,100 370471AC
Grand Union Company 11 1/4%,
7/15/00 B2 1,210,000 1,264,450 386532AC
Penn Traffic Co. 9 5/8%, 4/15/05 B2 1,975,000 2,034,250 707832AD
Ralph's Grocery Co. 9%, 4/1/03 B2 625,000 625,000 751253AD
Rykoff Sexton, Inc. 8 7/8%,
11/1/03 Ba2 160,000 164,000 783759AC
Secured Finance, Inc. 11.18%,
12/15/04 - 8,000,000 8,680,000 81371F9A
15,220,800
RETAIL & WHOLESALE, MISCELLANEOUS - 0.2%
Color Tile, Inc. 10 3/4%, 12/15/01 B2 630,000 633,150 196267AD
Finlay Fine Jewelry Corp. 10 5/8%,
5/1/03 B1 1,025,000 1,058,312 317887AA
Musicland Group, Inc. 9%,
6/15/03 B1 390,000 395,850 627578AA
Sifto Canada, Inc. 8 1/2%, 7/15/00 B1 1,600,000 1,610,000 826549AA
Trinidad & Tobago 9 3/4%,
11/3/00 (f) Ba2 750,000 774,375 896292AB
4,471,687
TOTAL RETAIL & WHOLESALE 32,149,674
MOODY'S MOODY'S
RATINGS PRINCIPAL VALUE RATINGS PRINCIPAL VALUE
(UNAUDITED)(B) AMOUNT (A) (NOTE 1) (UNAUDITED)(B) AMOUNT (A) (NOTE 1)
CORPORATE BONDS - CONTINUED
NONCONVERTIBLE BONDS - CONTINUED
SERVICES - 0.0%
ADVERTISING - 0.0%
Outdoor Systems, Inc. 10 3/4%,
8/15/03 B2 $ 910,000 $ 948,675 690057AA
TECHNOLOGY - 0.2%
COMPUTER SERVICES & SOFTWARE - 0.0%
Computervision Corp. 11 3/8%,
8/15/99 B3 1,000,000 840,000 20557TAB
COMPUTERS & OFFICE EQUIPMENT - 0.1%
Unisys Corp. 9 3/4%, 9/15/96 Ba3 2,725,000 2,847,625 909214AY
ELECTRONICS - 0.1%
Berg Electronics 11 3/8%, 5/1/03 B3 430,000 449,350 083727AB
Grupo Condumex SA de CV
7 3/8%, 7/27/98 (f) - 1,000,000 1,010,000 399904AC
1,459,350
TOTAL TECHNOLOGY 5,146,975
TRANSPORTATION - 0.1%
RAILROADS - 0.1%
Southern Pacific Rail Corp. 9 3/8%,
8/15/05 Ba3 2,350,000 2,496,875 843584AA
SHIPPING - 0.0%
Eletson Holdings, Inc. 9 1/4%,
11/15/03 Ba2 300,000 306,000 286204AA
International Shipholding Corp.
9%, 7/1/03 B1 300,000 303,750 460321AA
609,750
TOTAL TRANSPORTATION 3,106,625
UTILITIES - 0.2%
CELLULAR - 0.0%
Centennial Cell Corp. 8 7/8%,
11/1/01 B 810,000 810,000 15133VAA
ELECTRIC UTILITY - 0.2%
AES Corp. 9 3/4%, 6/15/00 Ba2 2,025,000 2,100,937 00130HAB
Midland Funding Corp. 10.33%,
7/23/02 (f) Ba3 1,280,000 1,324,800 597519AB
Texas New Mexico Power Company
1st mtg. 9 1/4%, 9/15/00 Ba3 320,000 337,600 882587AT
Toledo Edison Co. 8.70%, 9/1/08 Ba3 1,130,000 1,100,688 889175BB
4,864,025
TOTAL UTILITIES 5,674,025
TOTAL NONCONVERTIBLE BONDS 298,703,696
TOTAL CORPORATE BONDS
(Cost $292,098,617) 301,435,612
U.S. TREASURY OBLIGATIONS - 5.2%
3.13%, 2/24/94 Aaa $ 75,000,000 $ 74,616,750 99399H5H
3.13%, 3/3/94 Aaa 50,000,000 49,799,500
3.00% - 3.08%, 3/17/94 Aaa 2,250,000 2,236,305 99399H5Q
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $126,642,634) 126,652,555
U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES - 0.0%
Federal National Mortgage Association (h)
8 1/2%, 4/1/17 Aaa 663,271 104,047 31364HBX
8 1/2%, 8/1/22 Aaa 3,478,404 620,652 31364HRJ
724,699
Government National Mortgage Association
8 1/2%, 12/15/16 Aaa 212,279 225,414 36217F3L
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $2,034,101) 950,113
FOREIGN GOVERNMENT OBLIGATIONS - 22.5%
Argentina Republic:
BOCON 3 1/4%, 4/1/01 (g) B1 45,688,310 39,593,490 039995AF
Brady:
euro 4%, 3/31/23 (g) B1 27,750,000 19,043,437 039995AD
4%, 3/31/23 (g) - 1,655,000 1,135,744 0401149Y
4%, 3/31/23 (e)(f) - 3,500,000 2,410,625 0401149G
4.1875%, 3/31/05 (f)(g) - 837,114 734,568 039995AT
4.1875%, 3/31/05 (g) B1 4,500,000 3,948,750 039995AS
Bank Negara Malaysia:
0%, 5/11/94 - MYR 5,000,000 1,810,557 06399DAF
0%, 6/8/94 - MYR 5,000,000 1,802,571 06399DAA
Brazil Federative Republic IDU euro
8 3/4%, 1/1/01 B2 30,500,000 25,353,125 1057569E
Danish Government Bullet:
9%, 11/15/96 Aa1 DKK 7,000,000 1,118,471 249998AK
9%, 11/15/98 Aa1 DKK 26,000,000 4,341,051 249998AQ
9%, 11/15/00 Aa1 DKK 45,300,000 7,780,116 2485059A
8%, 5/15/03 Aa1 DKK 364,000,000 60,560,427 249998AG
7%, 12/15/04 Aa1 DKK 388,450,000 61,152,479 249998AV
Ecuador Republic amortizing loan
participating 0%, 8/15/06 - 2,000,000 1,310,000 88399HAA
French Government OAT:
8 1/2%, 4/25/03 Aaa FRF 332,200,000 67,770,162 351996AQ
6 3/4%, 10/25/03 Aaa FRF 104,650,000 19,138,978 351996BC
MOODY'S
RATINGS PRINCIPAL VALUE PRINCIPAL VALUE
(UNAUDITED)(D) AMOUNT (A) (NOTE 1) AMOUNT (A) (NOTE 1)
FOREIGN GOVERNMENT OBLIGATIONS - CONTINUED
Government of New Zealand
8%, 4/15/04 Aa3 NZD 21,000,000 $ 13,651,046 6501629K
Mexican Government:
Adjustabanos:
4.80%, 9/1/94 - MXN 3,000,000 1,251,858 597998SD
7 1/4%, 2/17/94 - MXN 87,500 39,320 597998SA
6.70%, 5/4/94 - MXN 3,512,500 1,527,870 597998RV
Brady:
4.1875%, 12/31/19 (g) Ba3 15,300,000 14,668,875 597998QD
4.3125%, 12/31/19 (g) Ba3 77,050,000 73,871,687 597998RJ
6 1/4%, 12/31/19 Ba3 89,000,000 74,315,000 597998MM
Cetes 0%, 1/20/94 to 3/30/94 - MXN 148,170,430 46,762,727 597998TG
Mexico Value Recovery
(rights 6/30/03) - 206,198,000 2,062 59304893
Morocco Trust 4.3125%,
1/3/09 (f)(g) - 3,500,000 2,830,625 617727AA
Siderurgica Brasileiras SA inflation
indexed 6%, 8/15/99 - BRC 22,372,700 3,484,427 82599PAA
United Kingdom Treasury 9 3/4%,
8/27/02 Aaa GBP 2,800,000 5,098,419 467991AR
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $531,021,579) 556,508,467
OTHER SECURITIES - 8.7%
INDEXED SECURITIES - 5.9%
AIG Matched Funding Corp. (g)(i):
note 3.586%, 9/14/94 (coupon
inversely indexed to HELIBOR
and principal indexed to value
of 2-year Finnish securities,
both multiplied by 6) 2,875,000 3,174,575 012994AK
note 4.4655%, 9/16/94 (coupon
inversely indexed to HELIBOR
and principal indexed to value
of 3-year Finnish securities,
both multiplied by 4) 950,000 1,022,485 012994AJ
Bankers Trust Company notes (g):
4.2075%, 8/31/94 (coupon
inversely indexed to 6-month
HELIBOR rate, multiplied
by 6) 850,000 933,300 0669918F
22.8887%, 8/31/94 (coupon
inversely indexed to 6-month
HELIBOR rate, multiplied
by 6) $ 7,100,000 $ 8,448,290 0669918E
4.2715%, 9/2/94 (coupon
inversely indexed to HELIBOR
and principal indexed to value of
3-year Finnish securities, both
multiplied by 4) (i) 1,000,000 1,077,200 0669918H
2.0186%, 11/3/94 (coupon
inversely indexed to HELIBOR
and principal indexed to value
of 2-year Finnish securities,
both multiplied by 8) (i) 1,700,000 1,832,600 0669918V
0%, 11/3/94 (coupon inversely
indexed to ITL LIBOR and
principal indexed to value of
2-year Italian securities, both
multiplied by 8) (i) 1,700,000 1,712,920 0669918X
2.482%, 11/4/94 (coupon
inversely indexed to HELIBOR
and principal indexed to value of
2-year Finnish securities, both
multiplied by 8) (i) 800,000 861,840 0669918Y
2.322%, 11/9/94 (coupon
inversely indexed to HELIBOR
and principal indexed to value of
2-year Finnish securities, both
multiplied by 8) (i) 1,250,000 1,323,250 0669919B
1.1386%, 11/14/94 (coupon
inversely indexed to HELIBOR
and principal indexed to value of
2-year Finnish securities, both
multiplied by 8) (i) 700,000 722,540 0669919C
0%, 11/16/94 (coupon inversely
indexed to HELIBOR and
principal indexed to value of
2-year Finnish securities, both
multiplied by 8) (i) 2,400,000 2,477,280 0669919F
0%, 11/16/94 (coupon inversely
indexed to ITL LIBOR and
principal indexed to value of
2-year Italian securities, both
multiplied by 8.50) (i) 5,000,000 5,367,500 0669919D
PRINCIPAL VALUE PRINCIPAL VALUE
AMOUNT (A) (NOTE 1) AMOUNT (A) (NOTE 1)
OTHER SECURITIES - CONTINUED
INDEXED SECURITIES - CONTINUED
Bankers Trust Company notes (g) - CONTINUED
0%, 12/5/94 (coupon inversely
indexed to ITL LIBOR and
principal indexed to value of
2-year Italian securities, both
multiplied by 8) (i) $ 1,700,000 $ 1,926,270 0669919G
3.282%, 12/5/94 (coupon
inversely indexed to HELIBOR
and principal indexed to value of
2-year Finnish securities, both
multiplied by 8) (i) 1,500,000 1,534,500 0669919H
2.77%, 12/6/94 (coupon
inversely indexed to HELIBOR
and principal indexed to value of
2-year Finnish securities, both
multiplied by 8) (i) 700,000 716,660 0669919J
0%, 12/7/94 (coupon inversely
indexed to CAD Banker's
Acceptance rate and principal
indexed to value of 1-year
Canadian securities, both
multiplied by 13) (i) 1,100,000 1,193,830 0669919L
3.09%, 12/7/94 (coupon
inversely indexed to HELIBOR
and principal indexed to value of
2-year Finnish securities, both
multiplied by 8) (i) 2,800,000 2,873,640 0669919K
0%, 12/8/94 (coupon inversely
indexed to CAD Banker's
Acceptance rate and principal
indexed to value of 1-year
Canadian securities, both
multiplied by 13) (i) 900,000 960,750 0669919P
3.3125%, 12/8/94 (coupon
inversely indexed to HELIBOR
and principal indexed to value of
2-year Finnish securities, both
multiplied by 8) (i) 3,800,000 3,898,040 0669919M
5.781%, 12/8/94 (coupon inversely
indexed to GBP LIBOR and
principal indexed to value of
3-year United Kingdom securities,
both multiplied by 10) (i) 4,100,000 4,235,710 0669919Q
0%, 12/8/94 (coupon inversely
indexed to ITL LIBOR and
principal indexed to value of
2-year Italian securities, both
multiplied by 8.50) (i) $ 1,900,000 $ 2,234,590 0669919N
Citibank Nassau:
0%, 8/30/94 ( coupon inversely
indexed to CAD Banker's
Acceptance rate and principal
indexed to value of 1-year
Canadian securities, both
multiplied by 11) (g)(i) 2,500,000 2,995,000 223991AL
22.01337%, 8/31/94 (coupon
inversely indexed to CAD
Banker's Acceptance rate and
principal indexed to value of
1-year Canadian securities,
both multiplied by 11) (g)(i) 7,250,000 8,613,000 223991AM
0%, 11/3/94 (coupon inversely
indexed to ITL LIBOR and
principal indexed to value of
2-year Italian securities, both
multiplied by 8) (g)(i) 4,250,000 4,299,300 223991AV
0%, 11/4/94 (coupon inversely
indexed to ITL LIBOR and
principal indexed to value of
2-year Italian securities, both
multiplied by 8) (g)(i) 2,400,000 2,490,480 223991AW
0%, 11/15/94 (coupon inversely
indexed to ITL LIBOR and
principal indexed to value of
2-year Italian securities, both
multiplied by 8.50) (g)(i) 5,000,000 5,391,500 223991BA
0%, 12/8/94 (coupon inversely
indexed to ITL LIBOR and
principal indexed to value of
2-year Italian securities, both
multiplied by 8.50) (g)(i) 2,800,000 3,248,280 223991BJ
7.315%, 12/8/94 (coupon inversely
indexed to GBP LIBOR and
principal indexed to value of
3-year United Kingdom securities,
both multiplied by 10) (g)(i) 3,600,000 3,711,600 223991BL
17.647%, 12/8/94 (coupon
inversely indexed to CAD
Banker's Acceptance rate and
principal indexed to value of
1-year Canadian securities,
both multiplied by 11) (g)(i) 700,000 756,210 223991BK
PRINCIPAL VALUE PRINCIPAL VALUE
AMOUNT (A) (NOTE 1) AMOUNT (A) (NOTE 1)
OTHER SECURITIES - CONTINUED
INDEXED SECURITIES - CONTINUED
Citibank Nassau - CONTINUED
4 5/8%, 7/30/96 (inversely
indexed to 1-year SEK swap
rate, multiplied by 10) $ 7,350,000 $ 7,697,655 223991AH
Disney Corp. note 6.9386%,
12/9/94 (inversely indexed to
6 month GBP swap rate,
multiplied by 10) (g) 4,400,000 4,583,920 25469HBF
Emerson Electric Company (g)(i):
22.353%, 8/30/94 (coupon
inversely indexed to CAD Banker's
Acceptance rate and principal
indexed to 1-year Canadian
securities, both multiplied
by 11) 4,250,000 4,897,700 29101LAQ
6.115%, 10/24/94 (coupon
inversely indexed to LIBOR and
principal indexed to 2-year United
Kingdom securities, both multiplied
by 10) 4,700,000 5,315,230 29101LAR
Goldman Sachs Group, L.P. notes:
3.50%, 8/27/94 (inversely indexed
to 1-month and 12-month
CAD Banker's Acceptance rates,
multiplied by 11) (g)(i) 4,900,000 5,897,640 38142T9F
25.657%, 9/27/94 (inversely
indexed to CAD Banker's
Acceptance rate and principal
indexed to value of 1-year
Canadian securities, both
multiplied by 13) (g)(i) 3,400,000 4,064,700 38142T9H
3.0747%, 3/28/94 (indexed to
silver price) 225,000 224,887 540992AD
3.1273%, 3/28/94 (indexed to
silver price) 90,000 90,873 540992AA
3.0812%, 4/20/94 (indexed to
cocoa price) 225,000 221,130 540992AB
3.1859%, 4/20/94 (indexed to
cocoa price) 90,000 82,017 38142T9U
3.18%, 4/20/94 (indexed to
coffee price) 260,000 242,632 540992AN
3.1859%, 4/20/94 (indexed to
coffee price) $ 350,000 $ 326,620 38142T9T
3.21%, 7/5/94 (indexed to
soybean price) 2,800,000 2,863,000 38142T9K
3.2576%, 7/5/94 (indexed to
soybean price) 2,175,000 2,186,527 540992AH
3.29%, 7/5/94 (indexed to
soybean price) 900,000 898,020 540992AM
3.2235%, 8/19/94 (indexed to
alminum price) 850,000 836,910 38142T9L
3.327%, 8/19/94 (indexed to
aluminum price) 425,000 410,847 38142T9V
3.37%, 8/19/94 (indexed to
aluminum price) 425,000 419,645 540992AQ
3.2235%, 8/19/94 (indexed to
cattle price) 1,750,000 1,721,125 38142T9J
3.269%, 8/19/94 (indexed to
cattle price) 1,400,000 1,400,000 540992AR
3.327%, 8/19/94 (indexed to
cattle price) 2,450,000 2,403,450 38142T9S
3.2198%, 8/19/94 (indexed to
gold price) 1,500,000 1,503,900 540992AE
3.2235%, 8/19/94 (indexed to
gold price) 600,000 607,260 38142T9R
3.2235%, 8/19/94 (indexed to
lead price) 250,000 250,925 38142T9M
3.27%, 8/19/94 (indexed to
lead price) 245,000 249,900 540992AL
3.327%, 8/19/94 (indexed to
lead price) 125,000 124,337 38142T9W
3.2198%, 8/19/94 (indexed to
nickel price) 250,000 253,825 540992AG
3.37%, 8/19/94 (indexed to
nickel price) 250,000 248,725 540992AP
3.219%, 8/19/94 (indexed to
platinum price) 225,000 227,812 540992AC
3.223%, 8/19/94 (indexed to
platinum price) 90,000 92,286 38142T9P
3.2235%, 8/19/94 (indexed to
zinc price) 350,000 339,535 38142T9N
3.2717%, 8/19/94 (indexed to
zinc price) 875,000 873,162 540992AJ
3.327%, 8/19/94 (indexed to
zinc price) 175,000 168,945 38142T9X
PRINCIPAL VALUE PRINCIPAL VALUE
AMOUNT (A) (NOTE 1) AMOUNT (A) (NOTE 1)
OTHER SECURITIES - CONTINUED
INDEXED SECURITIES - CONTINUED
Goldman Sachs Group, L.P. notes - CONTINUED
3.27%, 8/24/94 (indexed to
oil price) $ 3,500,000 $ 3,427,550 540992AK
3.26%, 8/24/94 (indexed to
oil price) 2,200,000 2,200,000 540992AS
3.26%, 8/24/94 (indexed to
oil price) 4,700,000 4,664,750 540992AF
Morgan Guaranty Trust Co. cert .
of dep. 0%, 6/6/94 (indexed to
$482 par of Westport Investments
Ltd. sr. notes, collateralized by
Mexican gov't. securities, per
$100 par) 930,528 892,376 61799FAE
Sara Lee Corp. 0%, 11/4/94
(inversely indexed to ITL LIBOR
and principal indexed to 2-year
Italian securities, both multiplied
by 8) (g)(i) 1,350,000 1,406,700 8031119V
144,349,656
COMMERCIAL PAPER - 2.8%
Banca Serfin SA 0%, 3/24/94 MXN 9,362,685 2,935,862 065997BM
Banco Nacional de Mexico SA 0%,
12/8/94 MXN 66,600,000 19,274,972 0596179M
Bancomer:
0%, 3/17/94 MXN 4,490,070 1,411,452 05999KBH
0%, 2/24/94 MXN 74,475,809 23,572,577 05999KBG
0%, 9/7/94 MXN 22,500,000 8,019,342 06399DAP
Citibank Mexico:
0%, 3/24/94 MXN 3,875,697 1,215,304 17699AAJ
0%, 4/27/94 MXN 10,454,315 3,242,016 17699AAH
Nacional Financiera:
0%, 2/17/94 MXN 11,791,160 3,739,460 66299CAJ
0%, 3/17/94 MXN 21,137,237 6,644,424 66299CAF
70,055,409
TOTAL OTHER SECURITIES
(Cost $195,369,344) 214,405,065
MUNICIPAL SECURITIES - 0.0%
Louisiana Housing financial
Agency mortgage Revenue
8.61%, 8/1/96 (c) $ 320,000 $ 255,600 546265PL
Louisiana State Agricultural Financial
Auth. Agricultural Revenue,
8 1/4%, 10/1/96 (c) 1,183,000 934,570 546418AB
TOTAL MUNICIPAL SECURITIES
(Cost $1,166,303) 1,190,170
MATURITY
AMOUNT
Repurchase Agreements - 8.1%
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account at 3.23%
dated 12/31/93 due 1/3/94 $ 200,150,859 200,097,000
Put Option - 0.0%
1,910 S&P 500 Futures Index
(Cost $2,165,673) 924,440 85399987
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $2,296,930,771) $ 2,470,746,888
Futures Contracts
EXPIRATION UNDERLYING FACE UNREALIZED
PURCHASED DATE AMOUNT AT VALUE GAIN/(LOSS)
240 Midcap 400
Stock Index Futures
Contracts March 1994 $ 21,516,000 $ 332,600
210 S&P 500 Futures
Contracts March 1994 49,029,750 (301,250)
$ 70,545,750 $ 31,350
THE VALUE OF FUTURES CONTRACTS PURCHASED AS A PERCENTAGE OF TOTAL
INVESTMENT IN SECURITIES - 2.9%
Forward Foreign Currency Contracts
SETTLEMENT UNREALIZED
CONTRACTS TO BUY DATE(S) VALUE GAIN/(LOSS)
891,090,410 ESP 2/23/94 $ 6,166,345 $ (459,354)
6,958,459 FRF 1/21/94 1,173,057 118
1,451,692,696 JPY 1/21/94 12,978,133 (731,050)
6,748,750 MYR 1/18/94 2,500,000 -
TOTAL CONTRACTS TO BUY
(Payable amount $24,007,821) $ 22,817,535 $ (1,190,286)
THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.9%
SETTLEMENT UNREALIZED
CONTRACTS TO SELL DATE(S) VALUE GAIN/(LOSS)
919,344,960 DKK 1/12/94 to 3/1/94 $ 134,944,634 $ 2,513,404
1,894,428,562 ESP 2/23/94 13,114,104 905,511
718,481,939 FRF 1/21/94 to 2/22/94 121,049,349 2,141,067
30,916,179 GBP 2/15/94 45,539,017 468,476
4,570,022,894 JPY 1/21/94 to 2/10/94 40,896,408 2,634,302
3,896,000 NOK 1/19/94 465,839 12,738
TOTAL CONTRACTS TO SELL
(Receivable amount $364,684,849) $ 356,009,351 $ 8,675,498
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 14.4%
CURRENCY TYPE ABBREVIATIONS:
BRC - Brazilian cruzeiro
GBP - British pound
CAD - Canadian dollar
DKK - Danish krone
FRF - French franc
ITL - Italian lira
JPY - Japanese yen
MYR - Malaysian ringgit
MXN - Mexican peso
NZD - New Zealand dollar
NOK - Norwegian krone
ESP - Spanish peseta
SEK - Swedish krona
LEGEND:
(a) Principal amount is stated in United States dollars unless otherwise
noted.
(b) Non-income producing
(c) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(d) Standard & Poor's Corporation credit ratings are used in the
absence of a rating by Moody's Investors Service, Inc.
(e) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
(f) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $86,301,965 or 3.7% of net
assets.
(g) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(h) Interest Only Strips represent the right to receive the monthly
interest payments on an underlying pool of mortgage loans. These securities
are subject to the risk of accelerated principal paydowns. The principal
amount represents the notional amount on which current interest is
calculated.
(i) Inverse floating rate security is a security where the coupon is
inversely indexed to a floating interest rate multiplied by a specified
factor. If the floating rate is high enough, the coupon rate may be zero or
be a negative amount that is carried forward to reduce future interest
and/or principal payments. The price may be considerably more volatile than
the price of a comparable fixed rate security.
OTHER INFORMATION:
Purchases and sales of securities, other than short-term securities,
aggregated $2,524,936,415 and $1,280,769,573, respectively, of which U.S.
government and government agency obligations aggregated $461,221,851 and
$261,377,446, respectively.
The face value of futures contracts opened and closed amounted to
$253,118,554 and $182,604,154, respectively.
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S S&P
RATINGS RATINGS
Aaa, Aa, A 9.6% AAA, AA, A 9.5%
Baa 0.1% BBB 0.6%
Ba 9.6% BB 5.1%
B 7.8% B 4.1%
Caa 0.1% CCC 0.1%
Ca, C 0.0% CC, C 0.0%
D 0.2%
The percentage not rated by either S&P or Moody's amounted to 3.4%.
Distribution of investments by country, as a percentage of total value of
investment in securities, is as follows:
United States 53.5%
Mexico 18.5
Denmark 5.6
United Kingdom 4.7
France 4.7
Argentina 3.4
Canada 1.5
Brazil 1.3
Japan 1.2
Korea 1.2
Others (individually less than 1%) 4.4
TOTAL 100.0%
INCOME TAX INFORMATION:
At December 31, 1993, the aggregate cost of investment securities for
income tax purposes was $2,297,359,117. Net unrealized appreciation
aggregated $173,387,771 of which $201,346,085 related to appreciated
investment securities and $27,958,314 related to depreciated investment
securities.
The fund hereby designates $23,290,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
ASSET MANAGER PORTFOLIO
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, 1993
ASSETS
Investment in securities, at value (including repurchase agreements of $200,097,000)
(cost $2,296,930,771) $ 2,470,746,888
(Notes 1 and 2) - See accompanying schedule
Long foreign currency contracts held, at value (cost $24,007,821) (Note 2) 22,817,535
Short foreign currency contracts (Note 2) $ (356,009,351)
Contracts held, at value
Receivable for contracts held 364,684,849 8,675,498
Cash 1,985,418
Receivable for investments sold 10,606,776
Net receivable for closed foreign currency contracts 333,139
Receivable for fund shares sold 18,472,164
Dividends receivable 1,381,072
Interest receivable 18,484,803
Other receivables 41,966
Total assets 2,553,545,259
LIABILITIES
Payable for foreign currency contracts held (Notes 1 and 2) 24,007,821
Payable for investments purchased 100,269,636
Payable for fund shares redeemed 4,183,532
Accrued management fee 1,375,813
Payable for daily variation on futures contracts 262,389
Other payables and accrued expenses 753,685
Total liabilities 130,852,876
NET ASSETS $ 2,422,692,383
Net Assets consist of:
Paid in capital $ 2,119,072,914
Undistributed net investment income 51,341,945
Accumulated undistributed net realized gain (loss) on investments 70,944,845
Net unrealized appreciation (depreciation) on:
Investment securities 173,816,117
Foreign currency contracts 7,485,212
Futures contracts 31,350
NET ASSETS, for 157,096,490 shares outstanding $ 2,422,692,383
NET ASSET VALUE, offering price and redemption price per share ($2,422,692,383 (divided by) 157,096,490 shares) $15.42
</TABLE>
Statement of Operations
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended December 31, 1993
INVESTMENT INCOME $ 11,039,965
Dividends
Interest 53,681,337
Total income 64,721,302
EXPENSES
Management fee (Note 3) $ 10,365,454
Transfer agent fees (Note 3) 115,600
Accounting fees and expenses (Note 3) 583,404
Non-interested trustees' compensation 10,778
Custodian fees and expenses 829,525
Registration fees 572,294
Audit 89,341
Legal 14,418
Miscellaneous 27,259
Total expenses before reductions 12,608,073
Expense reductions (Note 4) (53,319) 12,554,754
Net investment income 52,166,548
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTES 1 AND 2)
Net realized gain (loss) on:
Investment securities 79,338,494
Foreign currency contracts (8,556,499)
Futures contracts 845,172 71,627,167
Change in net unrealized appreciation (depreciation) on:
Investment securities 157,984,897
Foreign currency contracts 6,860,349
Futures contracts 31,350 164,876,596
Net gain (loss) 236,503,763
Net increase (decrease) in net assets resulting from operations $ 288,670,311
</TABLE>
Statement of Changes in Net Assets
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED DECEMBER 31,
1993 1992
INCREASE (DECREASE) IN NET ASSETS
Operations $ 52,166,548 $ 20,447,414
Net investment income
Net realized gain (loss) on investments 71,627,167 17,133,983
Change in net unrealized appreciation (depreciation) on investments 164,876,596 10,321,532
Net increase (decrease) in net assets resulting from operations 288,670,311 47,902,929
Distributions to shareholders: (20,492,703) (5,424,840)
From net investment income
In excess of net investment income (2,321,789) -
From net realized gain (15,415,197) (5,774,830)
Total distributions (38,229,689) (11,199,670)
Share transactions 1,430,436,639 504,822,611
Net proceeds from sales of shares
Reinvestment of distributions from: 22,814,492 5,424,840
Net investment income
Net realized gain 15,415,197 5,774,830
Cost of shares redeemed (28,138,506) (14,519,348)
Net increase (decrease) in net assets resulting from share transactions 1,440,527,822 501,502,933
Total increase (decrease) in net assets 1,690,968,444 538,206,192
NET ASSETS
Beginning of period 731,723,939 193,517,747
End of period (including undistributed net investment income of $51,341,945 and
$20,572,046, respectively) $ 2,422,692,383 $ 731,723,939
OTHER INFORMATION
Shares
Sold 101,223,825 39,717,498
Issued in reinvestment of distributions from: 1,737,585 445,389
Net investment income
Net realized gain 1,174,044 474,124
Redeemed (1,958,476) (1,140,784)
Net increase (decrease) 102,176,978 39,496,227
</TABLE>
FINANCIAL HIGHLIGHTS
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SEPTEMBER 6, 1989
(COMMENCEMENT
OF
OPERATIONS) TO
YEARS ENDED DECEMBER 31, DECEMBER 31,
1993 1992 1991 1990 1989
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 13.32 $ 12.55 $ 10.24 $ 9.97 $ 10.00
Income from Investment Operations
Net investment income .33 .32 .35 .41 .09
Net realized and unrealized gain
(loss) on investments 2.39 1.09 1.96 .26 (.01)
Total from investment operations 2.72 1.41 2.31 .67 .08
Less Distributions
From net investment income (.33) (.31) - (.40) (.09)
In excess of net investment income (.04) - - - -
From net realized gain (.25) (.33) - - (.02)
Total distributions (.62) (.64) - (.40) (.11)
Net asset value, end of period $ 15.42 $ 13.32 $ 12.55 $ 10.24 $ 9.97
TOTAL RETURN (double dagger) 21.23% 11.71% 22.56% 6.72%# .81%#
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 2,422,692 $ 731,724 $ 193,518 $ 35,858 $ 7,271
Ratio of expenses to average net assets
(dagger) .88% .91% 1.08% 1.25% 2.50%*
Ratio of expenses to average net assets
before expense reductions (dagger) .88% .91% 1.08% 1.54% 4.39%*
Ratio of net investment income to
average net assets 3.64% 4.89% 5.89% 5.92% 4.77%*
Portfolio turnover rate 113% 92% 110% 117% 158%*
</TABLE>
* ANNUALIZED
(double dagger) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
# THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
(dagger) SEE NOTE 4 OF NOTES TO FINANCIAL STATEMENTS.
VARIABLE INSURANCE PRODUCTS FUND II: INDEX 500 PORTFOLIO
INVESTMENTS/DECEMBER 31, 1993
(Showing Percentage of Total Value of Investment in Securities)
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - 95.1%
AEROSPACE AND DEFENSE - 1.5%
AEROSPACE AND DEFENSE - 1.1%
Aviall, Inc. (a) 100 $ 1,525 05366B10
Boeing Co. 2,500 108,125 09702310
Grumman Corp. 200 7,900 40018110
Lockheed Corp. 500 34,125 53982110
Martin Marietta Corp. 600 26,700 57290010
McDonnell Douglas Corp. 200 21,400 58016910
Northrop Corp. 300 11,213 66680710
Rockwell International Corp. 1,500 55,688 77434710
266,676
DEFENSE ELECTRONICS - 0.3%
E-Systems, Inc. 200 8,675 26915730
Loral Corp. 500 18,875 54385910
Raytheon Co. 900 59,400 75511110
86,950
SHIP BUILDING AND REPAIR - 0.1%
General Dynamics Corp. 300 27,675 36955010
TOTAL AEROSPACE AND DEFENSE 381,301
BASIC INDUSTRIES - 6.7%
CHEMICALS AND PLASTICS - 3.8%
Air Products & Chemicals, Inc. 900 39,825 00915810
Avery Dennison Corp. 500 14,688 05361110
Dow Chemical Co. 1,900 107,825 26054310
du Pont (E.I.) de Nemours & Co. 4,800 231,600 26353410
Engelhard Corp. 600 14,625 29284510
Ethyl Corp. 800 14,000 29765910
FMC Corp. (a) 200 9,425 30249130
First Mississippi Corp. 100 1,313 32089110
Goodrich (B.F.) Company 100 4,025 38238810
Grace (W.R.) & Co. 600 24,375 38388310
Great Lakes Chemical Corp. 600 44,775 39056810
Hercules, Inc. 400 45,200 42705610
Minnesota Mining & Manufacturing Co. 1,500 163,125 60405910
Monsanto Co. 800 58,700 61166210
Morton International, Inc. 300 28,050 61933110
NL Industries, Inc. (a) 300 1,350 62915640
Nalco Chemical Co. 400 15,000 62985310
PPG Industries, Inc. 700 53,113 69350610
Praxair, Inc. 900 14,963 74005P10
Raychem Corp. 300 11,250 75460310
Rohm & Haas Co. 400 23,800 77537110
Union Carbide Corp. 1,000 22,375 90558110
943,402
IRON AND STEEL - 0.3%
Armco, Inc. (a) 700 $ 4,200 04217010
Bethlehem Steel Corp. (a) 600 12,225 08750910
Inland Steel Industries, Inc. (a) 200 6,625 45747210
Nucor Corp. 700 37,100 67034610
USX-U.S. Steel Group 400 17,350 90337T10
Worthington Industries, Inc. 550 11,275 98181110
88,775
METALS AND MINING - 0.7%
ASARCO, Inc. 200 4,575 04341310
Alcan Aluminium Ltd. 1,513 31,765 01371610
Alumax, Inc. 250 5,375 02219710
Aluminum Co. of America 700 48,563 02224910
Cyprus Amax Minerals Co. 750 19,406 23280910
Inco Ltd. 707 18,989 45325840
Phelps Dodge Corp. 600 29,250 71726510
Reynolds Metals Co. 500 22,688 76176310
180,611
PACKAGING AND CONTAINERS - 0.2%
Ball Corp. 300 9,075 05849810
Bemis Co., Inc. 300 7,088 08143710
Crown Cork & Seal Co., Inc. (a) 700 29,313 22825510
45,476
PAPER AND FOREST PRODUCTS - 1.7%
Boise Cascade Corp. 200 4,700 09738310
Champion International Corp. 600 20,025 15852510
Federal Paper Board Co., Inc. 400 8,500 31369310
Georgia-Pacific Corp. 700 48,125 37329810
International Paper Co. 800 54,200 46014610
James River Corp. of Virginia 500 9,625 47034910
Kimberly-Clark Corp. 1,100 57,063 49436810
Louisiana-Pacific Corp. 700 28,875 54634710
Mead Corp. 500 22,500 58283410
Potlatch Corp. 300 14,138 73762810
Scott Paper Co. 600 24,675 80987710
Stone Container Corp. (a) 600 5,775 86158910
Temple-Inland, Inc. 300 15,113 87986810
Union Camp Corp. 600 28,575 90553010
Westvaco Corp. 400 14,250 96154810
Weyerhaeuser Co. 1,400 62,475 96216610
418,614
TOTAL BASIC INDUSTRIES 1,676,878
CONGLOMERATES - 1.4%
Allied-Signal, Inc. 1,100 86,900 01951210
Crane Co. 300 7,425 22439910
Dial Corp. (The) 400 16,150 25247010
Hanson Trust PLC sponsored ADR 117 2,340 41135230
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
CONGLOMERATES - CONTINUED
Harris Corp. 200 $ 9,100 41387510
ITT Corp. 800 73,000 45067910
Litton Industries, Inc. (a) 400 25,750 53802110
Teledyne, Inc. 300 7,800 87933510
Textron, Inc. 700 40,775 88320310
Tyco Laboratories, Inc. 400 20,650 90212010
United Technologies Corp. 800 49,600 91301710
Whitman Corp. 700 11,375 96647K10
350,865
CONSTRUCTION AND REAL ESTATE - 0.6%
BUILDING MATERIALS - 0.4%
Armstrong World Industries, Inc. 200 10,650 04247610
Masco Corp. 1,000 37,000 57459910
Owens-Corning Fiberglas Corp. (a) 400 17,750 69073420
Sherwin-Williams Co. 700 25,025 82434810
90,425
CONSTRUCTION - 0.1%
Centex Corp. 300 12,600 15231210
Kaufman & Broad Home Corp. (a) 300 7,125 48616810
Morrison-Knudsen Corp. 300 7,538 61844710
Pulte Corp. 200 7,250 74586710
34,513
ENGINEERING - 0.1%
EG & G, Inc. 500 9,188 26845710
Fluor Corp. 500 20,250 34386110
Foster Wheeler Corp. 200 6,700 35024410
36,138
TOTAL CONSTRUCTION AND REAL ESTATE 161,076
DURABLES - 4.5%
AUTOS, TIRES, AND ACCESSORIES - 3.7%
Chrysler Corp. 2,600 138,450 17119610
Cooper Tire & Rubber Co. 600 15,000 21683110
Cummins Engine Co., Inc. 200 10,750 23102110
Dana Corp. 400 23,950 23581110
Eaton Corp. 600 30,300 27805810
Echlin, Inc. 500 16,625 27874910
Ford Motor Co. 3,500 225,750 34537010
General Motors Corp. 5,200 285,350 37044210
Genuine Parts Company 800 30,100 37246010
Goodyear Tire & Rubber Co. 1,000 45,750 38255010
Johnson Controls, Inc. 200 10,625 47836610
Navistar International Corp. (a) 470 11,104 63934E10
PACCAR, Inc. 300 18,375 69371810
Pep Boys - Manny, Moe & Jack 400 10,500 71327810
SPX Corp. 100 $ 1,775 78463510
Snap-on Tools Corp. 400 15,150 83303410
TRW, Inc. 400 27,700 87264910
917,254
CONSUMER ELECTRONICS - 0.4%
Black & Decker Corp. 700 13,825 09179710
Fedders USA, Inc. (a) 100 638 31313510
Maytag Co. 700 12,600 57859210
Newell Co. 500 20,188 65119210
Stanley Works 400 17,800 85461610
Whirlpool Corp. 600 39,900 96332010
104,951
HOME FURNISHINGS - 0.0%
Bassett Furniture Industries, Inc. 125 4,375 07020310
TEXTILES AND APPAREL - 0.4%
Hartmarx Corp. (a) 200 1,400 41711910
Liz Claiborne, Inc. 500 11,375 53932010
NIKE, Inc. Class B 500 23,188 65410610
Oshkosh B'Gosh, Inc. Class A 200 3,900 68822220
Reebok International Ltd. 700 21,000 75811010
Russell Corp. 200 5,650 78235210
Springs Industries, Inc. Class A 200 7,550 85178310
Stride Rite Corp. 300 4,913 86331410
VF Corp. 400 18,450 91820410
97,426
TOTAL DURABLES 1,124,006
ENERGY - 9.5%
COAL - 0.0%
Eastern Enterprises Co. 100 2,550
Pittston Co. Minerals Group 40 955 27637F10 3,505
ENERGY SERVICES - 0.8%
Baker Hughes, Inc. 1,100 22,000 05722410
Dresser Industries, Inc. 900 18,675 26159710
Halliburton Co. 900 28,688 40621610
Helmerich & Payne, Inc. 200 5,575 42345210
McDermott International, Inc. 300 7,950 58003710
Rowan Companies, Inc. (a) 700 6,300 77938210
Schlumberger Ltd. 1,800 106,425 80685710
195,613
OIL AND GAS - 8.7%
Amerada Hess Corp. 600 27,075 02355110
Amoco Corp. 3,500 185,063 03190510
Ashland Oil, Inc. 500 17,063 04454010
Atlantic Richfield Co. 1,200 126,300 04882510
Burlington Resources, Inc. 1,000 42,375 12201410
Chevron Corp. 2,400 209,100 16675110
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
ENERGY - CONTINUED
OIL AND GAS - CONTINUED
Exxon Corp. 9,000 $ 567,000 30229010
Kerr-McGee Corp. 300 13,538 49238610
Louisiana Land & Exploration Co. 300 12,038 54626810
Maxus Energy Corp. (a) 900 4,950 57773010
Mobil Corp. 2,800 221,200 60705910
Occidental Petroleum Corp. 2,100 35,963 67459910
Oryx Energy Co. 600 10,350 68763F10
Pennzoil Co. 400 21,300 70990310
Phillips Petroleum Co. 1,800 52,200 71850710
Royal Dutch Petroleum Co. 3,800 396,625 78025770
Santa Fe Energy Resources, Inc. 600 5,400 80201210
Sun Company, Inc. 700 20,563 86676210
Texaco, Inc. 1,800 116,325 88169410
USX-Marathon Group 2,000 33,000 90290582
Unocal Corp. 1,800 50,175 91528910
2,167,603
TOTAL ENERGY 2,366,721
FINANCE - 10.6%
BANKS - 4.9%
Banc One Corp. 2,400 93,900 05943810
Bank of Boston Corp. 700 16,100 06071610
Bankers Trust New York Corp. 500 39,563 06636510
BankAmerica Corp. 2,500 115,938 06605010
Barnett Banks, Inc. 600 24,900 06805510
Boatmen's Bancshares, Inc. 800 23,900 09665010
Chase Manhattan Corp. 1,400 47,425 16161010
Chemical Banking Corp. 1,900 76,238 16372210
Citicorp (a) 2,700 99,225 17303410
CoreStates Financial Corp. 800 20,900 21869510
First Chicago Corp. 500 21,625 31945510
First Fidelity Bancorporation 500 22,750 32019510
First Interstate Bancorp 500 32,063 32054810
First Union Corp. 1,300 53,625 33735810
Fleet Financial Group, Inc. 900 30,038 33891510
Mellon Bank Corp. 400 21,200 58550910
Morgan (J.P.) & Co., Inc. 1,300 90,188 61688010
NBD Bancorp, Inc. 1,100 32,450 62890010
NationsBank Corp. 2,000 98,000 63858510
Norwest Corp. 2,000 48,750 66938010
PNC Financial Corp. 1,600 46,400 69347510
Shawmut National Corp. 600 13,050 82048410
SunTrust Banks, Inc. 800 36,000 86791410
U.S. Bancorp 800 20,000 91159610
Wachovia Corp. 1,300 $ 43,550 92977110
Wells Fargo & Co. 400 51,750 94974010
1,219,528
CREDIT AND OTHER FINANCE - 1.2%
American Express Co. 3,400 104,975 02581610
Beneficial Corp. 400 15,300 08172110
Dean Witter Discover & Co. 1,158 40,096 24240V10
Household International, Inc. 600 19,575 44181510
MBNA Corp. 800 26,700 55262L10
Primerica Corp. 1,633 63,483 74158910
Transamerica Corporation 500 28,375 89348510
298,504
FEDERAL SPONSORED CREDIT - 0.8%
Federal Home Loan Mortgage Corporation 1,200 59,850 31340030
Federal National Mortgage Association 1,900 149,150 31358610
209,000
INSURANCE - 3.1%
Aetna Life & Casualty Co. 900 54,338 00814010
Alexander & Alexander Services, Inc. 200 3,900 01447610
American General Corp. 1,500 42,938 02635110
American International Group, Inc. 2,350 206,213 02687410
CIGNA Corp. 600 37,650 12550910
CNA Financial Corp. (a) 500 38,750 12611710
Capital Holding Corp. 800 29,700 14018610
Chubb Corp. (The) 700 54,513 17123210
Continental Corp. 300 8,288 21132710
General Re Corp. 700 74,900 37056310
Jefferson Pilot Corp. 300 14,063 47507010
Lincoln National Corp. 600 26,100 53418710
Marsh & McLennan Companies, Inc. 600 48,750 57174810
SAFECO Corp. 400 22,000 78642910
St. Paul Companies, Inc. (The) 400 35,950 79286010
Torchmark Corp. 600 27,000 89102710
Travelers Corp. (The) 1,100 34,238 89418010
USF&G Corp. 700 10,325 90329010
USLIFE Corp. 250 9,594 91731810
779,210
SAVINGS AND LOANS - 0.2%
Ahmanson (H.F.) & Co. 700 13,738 00867710
Golden West Financial Corp. 400 15,600 38131710
Great Western Financial Corp. 900 18,000 39144210
47,338
SECURITIES INDUSTRY - 0.4%
Merrill Lynch & Co., Inc. 1,600 67,200 59018810
Salomon, Inc. 700 33,338 79549B10
100,538
TOTAL FINANCE 2,654,118
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
HEALTH - 7.8%
DRUGS AND PHARMACEUTICALS - 5.2%
ALZA Corp. Class A (a) 500 $ 14,000 02261510
Allergan, Inc. 400 9,050 01849010
American Cyanamid Co. 600 30,150 02532110
American Home Products Corp. 2,300 148,925 02660910
Amgen, Inc. (a) 900 44,550 03116210
Bristol-Myers Squibb Co. 3,800 220,875 11012210
IMCERA Group, Inc. 500 16,813 45245410
Lilly (Eli) & Co. 2,200 130,625 53245710
Merck & Co., Inc. 9,300 319,688 58933110
Pfizer, Inc. 2,200 151,800 71708110
Schering-Plough Corp. 1,300 89,050 80660510
Syntex Corporation 1,500 23,813 87161610
Upjohn Co. 1,200 34,950 91530210
Warner-Lambert Co. 900 60,750 93448810
1,295,039
MEDICAL EQUIPMENT AND SUPPLIES - 2.3%
Abbott Laboratories 5,900 174,050 00282410
Bard (C.R.), Inc. 300 7,575 06738310
Bausch & Lomb, Inc. 500 25,625 07170710
Baxter International, Inc. 1,900 46,313 07181310
Becton Dickinson & Co. 500 17,938 07588710
Biomet, Inc. (a) 900 9,225 09061310
Johnson & Johnson 4,600 205,850 47816010
McKesson Corp. 200 10,800 58155610
Medtronic, Inc. 500 41,063 58505510
Millipore Corp. 200 8,000 60107310
Pall Corp. 800 14,700 69642930
St. Jude Medical, Inc. 400 10,600 79084910
U.S. Surgical Corp. 500 11,250 91270710
582,989
MEDICAL FACILITIES MANAGEMENT - 0.3%
Beverly Enterprises, Inc. (a) 500 6,625 08785110
Columbia Healthcare Corp. 975 32,419 19767910
Community Psychiatric Centers 400 5,600 20401510
Manor Care, Inc. 500 12,188 56405410
National Medical Enterprises, Inc. 1,100 15,400 63688610
72,232
TOTAL HEALTH 1,950,260
INDUSTRIAL MACHINERY AND EQUIPMENT - 5.8%
ELECTRICAL EQUIPMENT - 3.6%
Corning, Inc. 1,400 39,200 21935010
Emerson Electric Co. 1,700 102,425 29101110
General Electric Co. 6,200 650,225 36960410
General Signal Corp. 400 13,750 37083810
Grainger (W.W.), Inc. 300 $ 17,250 38480210
Honeywell, Inc. 900 30,825 43850610
Scientific-Atlanta, Inc. 200 6,600 80865510
Westinghouse Electric Corp. 2,600 36,725 96040210
Zenith Electronics Corp. (a) 200 1,400 98934910
898,400
INDUSTRIAL MACHINERY AND EQUIPMENT -1.6%
Briggs & Stratton Corp. 200 16,500 10904310
Caterpillar, Inc. 800 71,200 14912310
Cincinnati Milacron, Inc. 300 6,600 17217210
Clark Equipment Co. (a) 200 10,475 18139610
Cooper Industries, Inc. 900 44,325 21666910
Deere & Co. 700 51,800 24419910
Dover Corp. 500 30,375 26000310
Giddings & Lewis, Inc. 200 5,150 37504810
Harnischfeger Industries, Inc. 200 4,500 41334510
Illinois Tool Works, Inc. 900 35,100 45230810
Ingersoll-Rand Co. 700 26,775 45686610
Parker-Hannifin Corp. 300 11,325 70109410
TRINOVA Corp. 300 9,413 89667810
Tenneco, Inc. 1,300 68,413 88037010
Timken Co. 300 10,088 88738910
Varity Corp. (a) 200 8,950 92224R60
410,989
POLLUTION CONTROL - 0.6%
Browning-Ferris Industries, Inc. 1,200 30,900 11588510
Ogden Corp. 400 9,100 67634610
Rollins Environmental Services, Inc. 400 2,300 77570910
Safety Kleen Corp. 500 8,125 78648410
WMX Technologies, Inc. 3,400 89,675 92929Q10
Zurn Industries, Inc. 100 2,738 98982410
142,838
TOTAL INDUSTRIAL MACHINERY
AND EQUIPMENT 1,452,227
MEDIA AND LEISURE - 5.2%
BROADCASTING - 1.7%
CBS, Inc. 200 57,700 12484510
Capital Cities/ABC, Inc. 200 123,900 13985910
Comcast Corp.:
Class A 800 29,100 20030010
Class A (Special) 300 10,800 20030020
Tele-Communications, Inc. Class A (a) 3,300 99,825 87924010
Time Warner, Inc. 2,600 115,050 88731510
436,375
ENTERTAINMENT - 0.8%
Disney (Walt) Co. 3,900 166,238 25468710
GC Cos., Inc. (a) 40 1,385 36155Q10
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
MEDIA AND LEISURE - CONTINUED
BROADCASTING - CONTINUED
King World Productions, Inc. 200 $ 7,675 49566710
Paramount Communications, Inc. 200 15,475 69921610
190,773
LEISURE DURABLES AND TOYS - 0.3%
Brunswick Corp. 600 10,800 11704310
Fleetwood Enterprises, Inc. 400 9,500 33909910
Hasbro, Inc. 700 25,375 41805610
Mattel, Inc. 900 24,863 57708110
Outboard Marine Corp. 200 4,475 69002010
75,013
LODGING AND GAMING - 0.4%
Bally Manufacturing Corp. (a) 300 2,550 05873210
Hilton Hotels Corp. 400 24,300 43284810
Host Marriott Corp. 600 5,475 44107810
Marriott INTL, Inc. 900 26,100 57190010
Promus Companies, Inc. (a) 800 36,600 74342A10
95,025
PUBLISHING - 1.3%
American Greetings Corp. Class A 600 20,400 02637510
Dow Jones & Co Inc. 800 28,600 26056110
Dun & Bradstreet Corp. 1,200 73,950 26483010
Gannett Co., Inc. 1,000 57,250 36473010
Harcourt Genenal, Inc. 500 18,125 41163G10
Knight-Ridder, Inc. 300 17,925 49904010
McGraw-Hill, Inc. 300 20,288 58064510
Meredith Corp. 200 8,000 58943310
New York Times Co. (The) Class A 700 18,375 65011110
Times Mirror Co., Series A 1,000 33,375 88736010
Tribune Co. 400 24,050 89604710
320,338
RESTAURANTS - 0.7%
Luby's Cafeterias, Inc. 100 2,250 54928210
McDonald's Corp. 2,600 148,200 58013510
Ryan's Family Steak Houses, Inc. (a) 300 2,700 78351910
Shoney's, Inc. (a) 200 4,625 82503910
Wendy's International, Inc. 800 13,900 95059010
171,675
TOTAL MEDIA AND LEISURE 1,289,199
NONDURABLES - 11.1%
AGRICULTURE - 0.1%
Pioneer Hi-Bred International, Inc. 600 23,400 72368610
BEVERAGES - 3.4%
Anheuser-Busch Companies, Inc. 2,000 $ 98,250 03522910
Brown-Forman Corp. Class B 200 17,450 11563720
Coca-Cola Company (The) 9,400 421,825 19121610
Coors (Adolph) Co. Class B 200 3,250 21701610
PepsiCo, Inc. 5,600 228,900 71344810
Seagram Co. Ltd. 2,600 68,356 81185010
838,031
FOODS - 3.0%
Archer-Daniels-Midland Co. 2,300 52,325 03948310
Borden, Inc. 1,100 18,700 09959910
CPC International, Inc. 1,000 47,625 12614910
Campbell Soup Co. 1,900 77,900 13442910
ConAgra, Inc. 1,900 50,113 20588710
General Mills, Inc. 1,200 72,900 37033410
Gerber Products Co. 400 11,350 37371210
Heinz (H.J.) Co. 1,900 68,163 42307410
Hershey Foods Corp. 600 29,400 42786610
Kellogg Co. 1,700 96,475 48783610
Pet, Inc. 700 12,250 71582510
Quaker Oats Co. 400 28,400 74740210
Ralston Continental Baking Group 120 1,005 75126210
Ralston Purina Co. 700 27,825 75127730
SYSCO Corp. 1,400 40,950 87182910
Sara Lee Corp. 3,400 85,000 80311110
Wrigley (Wm.) Jr. Company 900 39,713 98252610
760,094
HOUSEHOLD PRODUCTS - 2.9%
Alberto Culver Co. Class B cv 300 6,938 01306810
Avon Products, Inc. 600 29,175 05430310
Clorox Co. 300 16,275 18905410
Colgate-Palmolive Co. 1,200 74,850 19416210
Gillette Company 1,500 89,438 37576610
International Flavors & Fragrances, Inc. 200 22,750 45950610
Premark International, Inc. 300 24,075 74045910
Procter & Gamble Co. 5,000 285,000 74271810
Rubbermaid, Inc. 1,100 38,225 78108810
Unilever NV ADR 1,100 127,050 90478450
713,776
TOBACCO - 1.7%
American Brands, Inc. 1,400 46,550 02470310
Philip Morris Companies, Inc. 6,200 345,650 71815410
UST, Inc. 1,400 38,850 90291110
431,050
TOTAL NONDURABLES 2,766,351
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
PRECIOUS METALS - 0.6%
Amax Gold, Inc. 122 $ 839 02312010
American Barrick Resources Corp. 2,000 56,932 02451E10
Echo Bay Mines Ltd. 900 11,661 27875110
Homestake Mining Co. 900 19,800 43761410
Newmont Mining Corp. 400 23,050 65163910
Placer Dome, Inc. 1,800 44,770 72590610
157,052
RETAIL AND WHOLESALE - 6.3%
APPAREL STORES - 0.6%
Brown Group, Inc. 200 6,925 11565710
Charming Shoppes, Inc. 700 8,313 16113310
Gap, Inc. 1,100 43,313 36476010
Genesco, Inc. (a) 100 525 37153210
Limited, Inc. (The) 2,700 46,238 53271610
Melville Corp. 700 28,438 58574510
TJX Companies, Inc. 600 17,475 87254010
151,227
DRUG STORES - 0.2%
Long Drug Stores, Inc. 100 3,288 54316210
Rite Aid Corporation 600 9,525 76775410
Walgreen Co. 800 32,700 93142210
45,513
GENERAL MERCHANDISE STORES - 3.7%
Dayton Hudson Corp. 600 40,050 23975310
Dillard Department Stores, Inc Class A 900 34,200 25406310
K mart Corp. 3,000 63,750 48258410
May Department Stores Co. (The) 1,700 66,938 57777810
Mercantile Stores Co., Inc. 200 7,250 58753310
Nordstrom, Inc. 500 16,500 65566410
Penney (J.C.) Co., Inc. 1,600 83,800 70816010
Price/Costco, Inc. 1,639 31,551 74143W10
Sears, Roebuck & Co. 2,600 137,150 81238710
Wal-Mart Stores, Inc. 16,600 415,000 93114210
Woolworth Corp. 900 22,838 98088310
919,027
GROCERY STORES - 0.7%
Albertson's, Inc. 1,900 50,825 01310410
American Stores Co. 600 25,800 03009610
Bruno's, Inc. 500 4,438 11688110
Fleming Companies, Inc. 200 4,950 33913010
Giant Food, Inc. Class A 500 12,875 37447810
Great Atlantic & Pacific Tea Co., Inc. 200 5,400 39006410
Kroger Co. (The) (a) 700 14,088 50104410
Supervalue, Inc. 600 21,750 86853610
Winn-Dixie Stores, Inc. 600 32,175 97428010
172,301
RETAIL AND WHOLESALE, MISCELLANEOUS - 1.1%
Circuit City Stores, Inc. 600 $ 13,050 17273710
Handleman Co. (Del.) 200 2,650 41025210
Home Depot, Inc. (The) 3,300 130,350 43707610
Lowe's Companies, Inc. 600 35,550 54866110
Tandy Corp. 400 19,800 87538210
Toys "R" Us, Inc. (a) 2,000 81,750 89233510
283,150
TOTAL RETAIL AND WHOLESALE 1,571,218
SERVICES - 1.1%
ADVERTISING - 0.1%
Interpublic Group of Companies, Inc. 500 16,000 46069010
LEASING AND RENTAL - 0.3%
Blockbuster Entertainment Corp. 1,700 52,063 09367610
Ryder Systems, Inc. 500 13,250 78354910
65,313
PRINTING - 0.4%
Alco Standard Corp. 300 16,425 01378810
Deluxe Corp. 500 18,125 24801910
Donnelley (R.R.) & Sons Co. 1,200 37,350 25786710
Harland (John H.) Co. 300 6,488 41269310
Moore Corporation Ltd. 800 15,434 61578510
93,822
SERVICES - 0.3%
Block (H&R), Inc. 700 28,525 09367110
Ecolab, Inc. 300 13,500 27886510
Jostens, Inc. 400 7,900 48108810
National Education Corp. (a) 200 1,250 63577110
National Service Industries, Inc. 300 7,688 63765710
Pittston Company Services Group 200 5,775 72570110
Service Corp. International 700 18,375 81756510
83,013
TOTAL SERVICES 258,148
TECHNOLOGY - 6.6%
COMMUNICATIONS EQUIPMENT - 0.5%
Andrew Corp. (a) 200 7,700 03442510
Cisco Systems, Inc. (a) 500 32,313 17275R10
DSC Communications Corp. (a) 300 18,450 23331110
M/A-Com, Inc. (a) 100 863 55261810
Northern Telecom Ltd. 1,900 58,757 66581510
118,083
COMPUTER SERVICES AND SOFTWARE - 1.0%
Autodesk, Inc. 100 4,500 05276910
Automatic Data Processing, Inc. 1,100 60,775 05301510
Ceridian Corp. (a) 400 7,600 15677T10
Computer Associates International, Inc. 1,100 44,000 20491210
Computer Sciences Corp. (a) 200 19,900 20536310
VALUE VALUE
SHARES (NOTE 1) SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
TECHNOLOGY - CONTINUED
COMPUTER SERVICES AND SOFTWARE - CONTINUED
Lotus Development Corp. (a) 200 $ 11,000 54570010
Novell, Inc. (a) 2,200 45,650 67000610
Oracle Systems Corp. (a) 2,000 57,500 68389X10
Shared Medical Systems Corp. 100 2,488 81948610
253,413
COMPUTERS AND OFFICE EQUIPMENT - 2.6%
Amdahl Corp. 900 5,400 02390510
Apple Computer, Inc. 900 26,550 03783310
Compaq Computer Corp. (a) 500 37,000 20449310
Cray Research, Inc. (a) 100 2,563 22522410
Data General Corp. (a) 200 1,875 23768810
Digital Equipment Corp. (a) 900 30,825 25384910
Hewlett-Packard Co. 1,900 150,100 42823610
Intergraph Corp. (a) 300 3,188 45868310
International Business Machines Corp. 4,100 231,650 45920010
Pitney Bowes, Inc. 1,200 49,650 72447910
Sun Microsystems, Inc. (a) 800 23,300 86681010
Tandem Computers, Inc. (a) 900 9,788 87537010
Unisys Corp. (a) 1,100 13,888 90921410
Xerox Corp. 700 62,563 98412110
648,340
ELECTRONIC INSTRUMENTS - 0.1%
Perkin-Elmer Corp. 400 15,400 71404110
Tektronix, Inc. 300 7,050 87913110
22,450
ELECTRONICS - 1.9%
AMP, Inc. 700 44,188 03189710
Advanced Micro Devices, Inc. (a) 600 10,650 00790310
Intel Corp. 2,900 179,800 45814010
Motorola, Inc. 1,900 175,513 62007610
National Semiconductor Corp. (a) 700 11,288 63764010
Texas Instruments, Inc. 600 38,100 88250810
Thomas & Betts Corp. 200 11,700 88431510
471,239
PHOTOGRAPHIC EQUIPMENT - 0.5%
Eastman Kodak Co. 2,300 128,800 27746110
Polaroid Corp. 400 13,500 73109510
142,300
TOTAL TECHNOLOGY 1,655,825
TRANSPORTATION - 1.8%
AIR TRANSPORTATION - 0.4%
AMR Corp. (a) 600 40,200 00176510
Delta Air Lines, Inc. 300 16,388 24736110
UAL Corp. (a) 200 $ 29,200 90254910
USAir Group, Inc. (a) 400 5,150 91190510
90,938
RAILROADS - 1.2%
Burlington Northern, Inc. 700 40,513 12189710
CSX Corp. 700 56,700 12640810
Conrail, Inc. 500 33,438 20836810
Norfolk Southern Corp. 900 63,450 65584410
Santa Fe Pacific Corp. 1,400 31,150 80218310
Union Pacific Corp. 1,400 87,675 90781810
312,926
TRUCKING AND FREIGHT - 0.2%
Consolidated Freightways, Inc. (a) 200 4,725 20923710
Federal Express Corp. (a) 300 21,263 31330910
Roadway Services, Inc. 200 12,000 76974810
Yellow Corp. 300 7,463 98550910
45,451
TOTAL TRANSPORTATION 449,315
UTILITIES - 14.0%
CELLULAR - 0.3%
McCaw Cellular Communications, Inc.
Class A (a) 1,400 70,700 57946810
ELECTRIC UTILITY - 4.6%
American Electric Power Co., Inc. 1,400 51,975 02553710
Baltimore Gas & Electric Co. 1,100 27,913 05916510
Carolina Power & Light Co. 1,100 33,138 14414110
Central & South West Corp. 1,300 39,325 15235710
Commonwealth Edison Co. 1,600 45,200 20279510
Consolidated Edison Co. of New York, Inc. 1,600 51,400 20911110
Detroit Edison Company 1,000 30,000 25084710
Dominion Resources, Inc. (Va.) 1,300 58,988 25747010
Duke Power Co. 1,400 59,325 26439910
Entergy Corp. 1,200 43,200 29364F10
FPL Group, Inc. 1,300 50,863 30257110
Houston Industries, Inc. 1,000 47,625 44216110
Niagara Mohawk Power Corp. 1,100 22,275 65352210
Northern States Power Co. (Minn.) 400 17,250 66577210
Ohio Edison Co. 1,000 22,750 67734710
PSI Resources, Inc. 500 13,250 69363210
Pacific Gas & Electric Co. 3,200 112,400 69430810
PacifiCorp. 2,100 40,425 69511410
Philadelphia Electric Co. 1,500 45,375 71753710
Public Service Enterprise Group, Inc. 1,800 57,600 74457310
SCE Corp. 3,300 66,000 78388210
Southern Co. 2,200 97,075 84258710
Texas Utilities Co. 1,700 73,525 88284810
Union Electric Co. 800 31,400 90654810
1,138,277
VALUE
SHARES (NOTE 1)
COMMON STOCKS - CONTINUED
UTILITIES - CONTINUED
GAS - 0.8%
Arkla, Inc. 800 $ 6,300 04123710
Coastal Corp. (The) 700 19,688 19044110
Columbia Gas System, Inc. (The) (a) 300 6,713 19764810
Consolidated Natural Gas Co. 600 28,200 20961510
ENSERCH Corp. 400 6,500 29356710
Enron Corp. 1,800 52,200 29356110
NICOR, Inc. 300 8,400 65408610
ONEOK, Inc. 100 1,888 68267810
Pacific Enterprises 700 16,625 69423210
Panhandle Eastern Corp. 800 18,900 69846210
Peoples Energy Corp. 200 6,100 71103010
Sonat, Inc. 700 20,213 83541510
Transco Energy Co. 200 2,825 89353210
Williams Companies, Inc. 700 17,063 96945710
211,615
TELEPHONE SERVICES - 8.3%
American Telephone & Telegraph Co. 9,800 514,500 03017710
Ameritech Corp. 1,900 145,825 03095410
Bell Atlantic Corp. 3,200 188,800 07785310
BellSouth Corp. 3,500 202,563 07986010
GTE Corp. 6,700 234,500 36232010
MCI Communications Corp. 3,800 107,350 55267310
NYNEX Corp. 2,900 116,363 67076810
Pacific Telesis Group 2,900 156,600 69489010
Southwestern Bell Corp. 4,400 182,600 84533310
Sprint Corporation 2,400 83,400 85206110
U.S. West, Inc. 3,100 142,213 91288910
2,074,714
TOTAL UTILITIES 3,495,306
TOTAL COMMON STOCKS
(Cost $22,094,415) 23,759,866
PREFERRED STOCKS - 0.0%
FINANCE - 0.0%
CREDIT AND OTHER FINANCE - 0.0%
National Intergroup, Inc., Series A, $4.20
exchangeable (Cost $1,377) 50 1,550 63654030
PRINCIPAL
AMOUNT
U.S. treasury OBLIGATIONS - 1.1%
8 1/2%, 5/15/95 (b) $ 50,000 53,000 912827YQ
8 5/8%, 10/15/95 (b) 100,000 107,594 912827WT
8 1/2%, 11/15/95 (b) 100,000 107,558 912827ZG
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $274,719) 268,152
MATURITY VALUE
AMOUNT (NOTE 1)
REPURCHASE AGREEMENTS - 3.8%
Investments in repurchase agreements,
(U.S. Treasury obligations), in a
joint trading account at 3.23%
dated 12/31/93 due 1/3/94 $ 942,254 $ 942,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $23,312,511) $ 24,971,568
Futures Contracts
EXPIRATION UNDERLYING FACE UNREALIZED
PURCHASED DATE AMOUNT AT VALUE GAIN/(LOSS)
5 S&P 500 Stock
Index Futures March 1994 $ 1,167,375 $ 3,625
THE VALUE OF FUTURES CONTRACTS PURCHASED AS A PERCENTAGE OF TOTAL
INVESTMENT IN SECURITIES - 4.7%
LEGEND:
(a) Non-income producing
(b) Securities were pledged to cover margin requirements for futures
contracts. At the period end, the value of securities pledged amounted to
$268,152.
OTHER INFORMATION:
Purchases and sales of securities, other than short-term securities,
aggregated $10,177,619 and $1,828,704, respectively.
The market value of futures contracts opened and closed amounted to
$7,082,085 and $9,598,680, respectively.
INCOME TAX INFORMATION:
At December 31, 1993, the aggregate cost of investment securities for
income tax purposes was $23,312,511. Net unrealized appreciation aggregated
$1,659,057, of which $2,696,500 related to appreciated investment
securities and $1,037,443 related to depreciated investment securities.
The fund hereby designates $28,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
INDEX 500 PORTFOLIO
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
DRAFT
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December 31, 1993
ASSETS
Investment in securities, at value (including repurchase agreements of $942,000)
(cost $23,312,511) (Notes 1 $ 24,971,568
and 2) - See accompanying schedule
Cash 22,724
Receivable for fund shares sold 206,100
Dividends receivable 51,659
Interest receivable 3,445
Receivable from investment adviser for expense reductions (Note 4) 12,422
Total assets 25,267,918
LIABILITIES
Payable for investments purchased $ 32,813
Payable for fund shares redeemed 51,928
Accrued management fee 5,702
Payable for daily variation on futures contracts 7,000
Other payables and accrued expenses 17,797
Total liabilities 115,240
NET ASSETS $ 25,152,678
Net Assets consist of:
Paid in capital $ 23,448,999
Undistributed net investment income 1,165
Accumulated undistributed net realized gain (loss) on investments 39,832
Net unrealized appreciation (depreciation) on:
Investment securities 1,659,057
Futures contracts 3,625
NET ASSETS, for 451,252 shares outstanding $ 25,152,678
NET ASSET VALUE, offering price and redemption price per share ($25,152,678 (divided by) 451,252 shares) $55.74
</TABLE>
Statement of Operations
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Year Ended December 31, 1993
INVESTMENT INCOME $ 535,722
Dividends
Interest 75,187
Total income 610,909
EXPENSES
Management fee (Note 3) $ 58,243
Transfer agent fees (Note 3) 33,911
Accounting fees and expenses (Note 3) 45,074
Non-interested trustees' compensation 137
Custodian fees and expenses 15,022
Registration fees 1,611
Audit 41,994
Legal 243
Miscellaneous 656
Total expenses before reductions 196,891
Expense reductions (Note 4) (138,597) 58,294
Net investment income 552,615
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTES 1 AND 2)
Net realized gain (loss) on:
Investment securities 86,278
Futures contracts 228,480 314,758
Change in net unrealized appreciation (depreciation) on:
Investment securities 1,080,816
Futures contracts (36,055) 1,044,761
Net gain (loss) 1,359,519
Net increase (decrease) in net assets resulting from operations $ 1,912,134
</TABLE>
Statement of Changes in Net Assets
DRAFT
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YEAR ENDED AUGUST 27, 1992
DECEMBER 31, (COMMENCEMENT OF
1993 OPERATIONS) TO
DECEMBER 31,
1992
INCREASE (DECREASE) IN NET ASSETS
Operations $ 552,615 $ 123,025
Net investment income
Net realized gain (loss) on investments 314,758 47,155
Change in net unrealized appreciation (depreciation) on investments 1,044,761 617,921
Net increase (decrease) in net assets resulting from operations 1,912,134 788,101
Distributions to shareholders (551,427) (132,173)
From net investment income
From net realized gain (250,780) (22,498)
In excess of net realized gain (39,680) -
Total distributions (841,887) (154,671)
Share transactions 21,442,174 17,818,136
Net proceeds from sales of shares
Reinvestment of distributions from: 551,427 132,173
Net investment income
Net realized gain 290,460 22,498
Cost of shares redeemed (16,162,443) (645,424)
Net increase (decrease) in net assets resulting from share transactions 6,121,618 17,327,383
Total increase (decrease) in net assets 7,191,865 17,960,813
NET ASSETS
Beginning of period 17,960,813 -
End of period (including under (over) distributions of net investment income of
$1,165 and $(9,148), respectively) $ 25,152,678 $ 17,960,813
OTHER INFORMATION
Shares
Sold 392,103 350,950
Issued in reinvestment of distributions from: 9,912 2,528
Net investment income
Net realized gain 5,250 430
Redeemed (297,446) (12,475)
Net increase (decrease) 109,819 341,433
</TABLE>
Financial Highlights
DRAFT
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<CAPTION>
<S> <C> <C>
YEAR ENDED AUGUST 27, 1992
DECEMBER 31, (COMMENCEMENT OF
OPERATIONS) TO
DECEMBER 31,
1993 1992
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 52.60 $ 50.00
Income from Investment Operations
Net investment income 1.31 .44
Net realized and unrealized gain (loss) on investments 3.80 2.71
Total from investment operations 5.11 3.15
Less Distributions
From net investment income (1.28) (.47)
From net realized gain (.60) (.08)
In excess of net realized gain (.09) -
Total distributions (1.97) (.55)
Net asset value, end of period $ 55.74 $ 52.60
TOTAL RETURN (double dagger)(dagger) 9.74% 6.31%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 25,153 $ 17,961
Ratio of expenses to average net assets (diamond) .28% .28%*
Ratio of expenses to average net assets before expense reductions (diamond) .95% 1.77%*
Ratio of net investment income to average net assets 2.65% 2.89%*
Portfolio turnover rate 9% -%
</TABLE>
* ANNUALIZED
(double dagger) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
(dagger) THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
(diamond) SEE NOTE 4 OF NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED DECEMBER 31, 1993
1. SIGNIFICANT ACCOUNTING POLICIES.
Investment Grade Bond Portfolio, Asset Manager Portfolio, and Index 500
Portfolio (the funds) are Portfolios of Variable Insurance Products Fund II
(the trust). The trust is registered under the Investment Company Act of
1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust. Each fund is
authorized to issue an unlimited number of shares. Shares of each fund may
only be purchased by insurance companies for the purpose of funding
variable annuity or variable life insurance contracts. The following
summarizes the significant accounting policies of the funds:
SECURITY VALUATION.
INVESTMENT GRADE BOND PORTFOLIO. Securities are valued based upon a
computerized matrix system and/or appraisals by a pricing service, both of
which consider market transactions and dealer-supplied valuations.
Short-term securities maturing within sixty days are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities (including restricted securities) for
which market quotations are not readily available are valued at their fair
value as determined in good faith under consistently applied procedures
under the general supervision of the Board of Trustees.
ASSET MANAGER PORTFOLIO AND INDEX 500 PORTFOLIO. Securities for which
exchange quotations are readily available are valued at the last sale
price, or if no sale price, at the closing bid price. Securities for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange), are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities maturing within sixty days
are valued at amortized cost or original cost plus accrued interest, both
of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the funds are
maintained in U.S. dollars. Investment securities, other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the current exchange rate. Purchases and sales of securities,
income receipts and expense payments are translated into U.S. dollars at
the exchange rate on the dates of the transactions.
It is not practical to identify the portion of each amount shown in the
fund's Statement of Operations under the caption "Realized and Unrealized
Gain (Loss) on Investments" that arises from changes in foreign currency
exchange rates. Investment income includes net realized and unrealized
currency gains and losses recognized between accrual and payment dates.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, each fund is not subject to income taxes to
the extent that it distributes all of its taxable income for the fiscal
year. The schedules of investments include information regarding income
taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the funds are informed of the
ex-dividend date. Interest income, which includes accretion of original
issue discount, is accrued as earned. Investment income is recorded net of
foreign taxes where recovery of such taxes is not assured.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
mortgage-backed securities, futures and options transactions, foreign
currency transactions, market discount, non-taxable dividends, expiring
capital loss carryforwards and losses deferred due to wash sales and excise
tax regulations. The funds also utilized earnings and profits distributed
to shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes. Permanent book and tax basis differences
relating to shareholder distributions will result in reclassifications to
paid in capital.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective January
1, 1993, the funds adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies. As a result,
the funds changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, amounts as of December 31, 1992 have been restated to reflect
a decrease in paid in capital of $6,410, an increase in distributions in
excess of net investment income of $38,372 and a decrease in accumulated
net realized loss on investments of $44,782 for Investment Grade Bond; an
increase in paid in capital of $97,837, a decrease in undistributed net
investment income of $645,325 and an increase in accumulated net realized
gain of $547,488 for Asset Manager; a decrease in paid in capital and a
decrease in distributions in excess of net investment income of $17 for
Index 500.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The funds may enter into forward
foreign currency contracts. These contracts involve market risk in excess
of the amount reflected in the fund's Statement of Assets and Liabilities.
The face or contract amount in U.S. dollars reflects the total exposure the
funds have in that particular currency contract. The U.S. dollar value of
forward foreign currency contracts is determined using forward currency
exchange rates supplied by a quotation service. Losses may arise due to
changes in the value of the foreign currency or if the counterparty does
not perform under the contract.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and presented net on the Statement of
Assets and Liabilities. Gain (loss) on the purchase or sale of forward
foreign currency contracts having the same settlement date and broker is
recognized on the date of offset, otherwise gain (loss) is recognized on
settlement date.
REPURCHASE AGREEMENTS. The funds, through their custodian, receive delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The funds' investment
adviser, Fidelity Management & Research Company (FMR), is responsible
for determining that the value of these underlying securities remains at
least equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the funds, along with other
registered investment companies having management contracts with FMR, may
transfer uninvested cash balances into a joint trading account. These
balances are invested in one or more repurchase agreements that are
collateralized by U.S. Treasury or Federal Agency obligations.
DELAYED DELIVERY TRANSACTIONS. Each fund may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. Each fund
identifies securities as segregated in its custodial records with a value
at least equal to the amount of the purchase commitment.
2. OPERATING POLICIES - CONTINUED
FUTURES CONTRACTS AND OPTIONS. Each fund may invest in futures contracts
and write options. These investments involve, to varying degrees, elements
of market risk and risks in excess of the amount recognized in the
Statement of Assets and Liabilities. The face or contract amounts reflect
the extent of the involvement the funds have in the particular classes of
instruments. Risks may be caused by an imperfect correlation between
movements in the price of the instruments and the price of the underlying
securities and interest rates. Risks also may arise if there is an illiquid
secondary market for the instruments, or due to the inability of
counterparties to perform.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Options traded
on an exchange are valued using the last sale price or, in the absence of a
sale, the last offering price. Options traded over-the-counter are valued
using dealer-supplied valuations.
RESTRICTED SECURITIES. The funds are permitted to invest in privately
placed restricted securities. These securities may be resold in
transactions exempt from registration or to the public if the securities
are registered. Disposal of these securities may involve time-consuming
negotiations and expense, and prompt sale at an acceptable price may be
difficult. At the end of the period, restricted securities (excluding 144A
issues) amounted to $995,000 or 0.8% of net assets of Investment Grade Bond
Portfolio.
INDEXED SECURITIES. The funds may invest in indexed securities whose value
is linked either directly or inversely to changes in foreign currencies,
interest rates, commodities, indices, or other reference instruments.
Indexed securities may be more volatile than the reference instrument
itself, but any loss is limited to the amount of the original investment.
3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE.
INVESTMENT GRADE BOND PORTFOLIO AND ASSET MANAGER PORTFOLIO. As each fund's
investment adviser, FMR receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of each fund. The group fee rate is the weighted
average of a series of rates based on the monthly average net assets of all
the mutual funds advised by FMR. The group fee rates range from .14% to
.37% for the Investment Grade Bond Portfolio and .30% to .52% for the Asset
Manager Portfolio. The annual individual fund fee rate is .30% and .40% for
the Investment Grade Bond Portfolio and the Asset Manager Portfolio,
respectively. For the period, the management fees were equivalent to annual
rates of .47% and .72% of average net assets, respectively.
INDEX 500 PORTFOLIO. As the fund's investment adviser, FMR receives a fee
that is computed daily at an annual rate of .28% of the fund's average net
assets.
The Board of Trustees approved a new group fee rate schedule with rates
ranging from .1325% to .3700% for Investment Grade Bond Portfolio and
.2850% to .5200% for Asset Manager Portfolio. Effective November 1, 1993,
FMR has voluntarily agreed to implement this new group fee rate schedule as
it results in the same or a lower management fee.
TRANSFER AGENT FEE. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the funds' transfer, dividend disbursing
and shareholder servicing agent. FIIOC receives fees based on the type,
size, number of accounts and the number of transactions made by
shareholders. FIIOC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements.
ACCOUNTING FEE. Fidelity Service Co. (FSC), an affiliate of FMR, maintains
the funds' accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
BROKERAGE COMMISSIONS. The Asset Manager Portfolio and Index 500 Portfolio
each placed a portion of its portfolio transactions with brokerage firms
which are affiliates of FMR. The commissions paid to these affiliated firms
were $398,687 and $123 for the Asset Manager Portfolio and the Index 500
Portfolio, respectively.
4. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the funds' for total operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of .80%, 1.25% and .28% of average net
assets for Investment Grade Bond Portfolio, the Asset Manager Portfolio and
the Index 500 Portfolio, respectively. For the period, the reimbursement
reduced expenses by $138,597 for the Index 500 Portfolio.
For the period ended December 31, 1993, FMR directed certain portfolio
trades to brokers who paid a portion of Asset Manager Portfolio's expenses.
For the period, the expenses of Asset Manager Portfolio were reduced by
$53,319 under this arrangement.
5. BENEFICIAL INTEREST.
At the end of the period, FMR and Fidelity Investments Life Insurance
Company (FILI), an affiliate of FMR, were record owners of more than 5% of
the outstanding shares of the funds and certain unaffiliated insurance
companies were record owners of more than 10% of the outstanding shares of
the following funds:
FMR FILI UNAFFILIATED INSURANCE COMPANIES
PORTFOLIO % OF OWNERSHIP % OF OWNERSHIP # OF % OF OWNERSHIP
Investment Grade Bond 0% 47% 2 28%
Asset Manager 0% 34% 2 36%
Index 500 0% 70% 0 0%
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL INFORMATION OF THE
SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS
PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. NEITHER THE FUNDS NOR
FIDELITY DISTRIBUTORS CORPORATION IS A
BANK AND FUND SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED BY
THE FDIC.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and the Shareholders of Variable Insurance Products Fund
II:
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments (except for Moody's and Standard
& Poor's ratings), and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the three portfolios
constituting Variable Insurance Products Fund II (the "Trust") at December
31, 1993, the results of their operations for the year then ended, and the
changes in their net assets and the financial highlights for the periods
indicated in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the trust's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of securities owned at
December 31, 1993 by correspondence with the custodian and brokers, and the
application of alternative auditing procedures where confirmations from
brokers were not received, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE
Boston, Massachusetts
February 10, 1994
DISTRIBUTIONS
The Board of Trustees of Variable Insurance Products Fund II voted to pay
on February 4, 1994, to shareholders of record at the opening of business
on February 4, 1994, the following distributions derived from capital gains
realized from sales of portfolio securities, and dividends derived from net
investment income:
Portfolio Dividends Capital Gains
Investment Grade Bond $ 0.00 $ 0.03
Asset Manager $ 0.28 $ 0.46
Index 500 $ 0.00 $ 0.10
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, PRESIDENT
J. Gary Burkhead, SENIOR VICE PRESIDENT
Gary L. French, TREASURER
John H. Costello, ASSISTANT TREASURER
Arthur S. Loring, SECRETARY
Robert H. Morrison, MANAGER, SECURITY TRANSACTIONS
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox
Phyllis Burke Davis
Richard J. Flynn
Edward C. Johnson 3d
E. Bradley Jones
Donald J. Kirk
Peter S. Lynch
Edward H. Malone
Marvin L. Mann
Gerald C. McDonough
Thomas R. Williams
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Co.
Boston, MA
CUSTODIAN
INVESTMENT GRADE BOND PORTFOLIO:
The Bank of New York
New York, NY
ASSET MANAGER PORTFOLIO:
The Chase Manhattan Bank, N.A.
New York, NY
INDEX 500 PORTFOLIO:
Brown Brothers Harriman & Co.
Boston, MA
VIP II-2-94A
